0001558370-24-015707 | 10-Q | XBRL Viewer

Acquisition of Naples Wax, LLC	9 Months Ended
Sep. 30, 2024
Acquisition of Naples Wax, LLC
Acquisition of Naples Wax, LLC	Note 8. Acquisition of Naples Wax, LLC On September 12, 2023, the Company acquired all of the equity interests in Naples Wax, LLC, d/b/a Naples Wax Centers, a Florida limited liability company, for an aggregate purchase price of $1,624, of which $1,574 was paid in cash at closing. The remaining $50 was held for six months as a holdback to cover any potential indemnification claims. $14 was paid in the quarter ended March 31, 2024. The remaining $36 was offset by operating expenses. The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts. While the company uses its best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. As of September 30, 2024, no impairment of the Company’s goodwill was required. The purchase accounting for the acquisition remains incomplete as management continues to gather and evaluate information about circumstances that existed as of the acquisition date. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the unaudited condensed consolidated statements of operations. Accounting for business combinations requires management to make estimates and assumptions, especially at the acquisition date, including estimates for intangible assets. Although the Company believes the assumptions and estimates that have been made are reasonable and appropriate, they are based in part on historical experience and information obtained from the acquired companies and are inherently uncertain. Estimates in valuing certain of the intangible assets the Company has acquired include future expected cash flows, and discount rates. For income tax purposes, this acquisition of 100% of the units is treated as an asset acquisition. As a result of the acquisition of Naples Wax, the company generated tax deductible goodwill of $1,371.

Acquisition of Naples Wax, LLC

9 Months Ended

Sep. 30, 2024

Note 8. Acquisition of Naples Wax, LLC

On September 12, 2023, the Company acquired all of the equity interests in Naples Wax, LLC, d/b/a Naples Wax Centers, a Florida limited liability company, for an aggregate purchase price of $1,624, of which $1,574 was paid in cash at closing. The remaining $50 was held for six months as a holdback to cover any potential indemnification claims. $14 was paid in the quarter ended March 31, 2024. The remaining $36 was offset by operating expenses.

The Company applies the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts.

While the company uses its best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. As of September 30, 2024, no impairment of the Company’s goodwill was required. The purchase accounting for the acquisition remains incomplete as management continues to gather and evaluate information about circumstances that existed as of the acquisition date. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the unaudited condensed consolidated statements of operations.

Accounting for business combinations requires management to make estimates and assumptions, especially at the acquisition date, including estimates for intangible assets. Although the Company believes the assumptions and estimates that have been made are reasonable and appropriate, they are based in part on historical experience and information obtained from the acquired companies and are inherently uncertain. Estimates in valuing certain of the intangible assets the Company has acquired include future expected cash flows, and discount rates.

For income tax purposes, this acquisition of 100% of the units is treated as an asset acquisition. As a result of the acquisition of Naples Wax, the company generated tax deductible goodwill of $1,371.

Accounting and Reporting Policies (Policies)	9 Months Ended
Accounting and Reporting Policies (Policies)	Sep. 30, 2024
Accounting and Reporting Policies
Use of estimates	Use of estimates The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from such estimates. Significant items subject to such estimates and assumptions include the Company’s long-lived assets, intangibles assets, the useful lives of the Company’s intangible assets, the valuation of stock-based compensation, deferred tax assets and liabilities, income tax uncertainties, and other contingencies.
Revenue Recognition Policy	Revenue Recognition Policy XpresSpa, Treat and Naples Wax Center The Company recognizes revenue from the sale of products and services when the services are rendered at XpresSpa, Treat, and Naples Wax Centers locations and from the sale of products at the time products are purchased at the Company’s stores or online usually by credit card, net of discounts and applicable sales taxes. Accordingly, the Company recognizes revenue for the Company’s single performance obligation related to both in-store and online sales at the point at which the service has been performed or the control of the merchandise has passed to the customer. The Company recognizes revenue from Priority Pass services when an invoice is generated to Priority Pass detailing the number of services performed multiplied by the agreed upon price. XpresTest During the third quarter of 2022, XpresTest, in partnership with Ginkgo BioWorks in continuation of their support to the CDC’s traveler-based SARS-CoV-2 genomic surveillance program was awarded a new contract. The partnership is expected to support public health and biosecurity services totaling approximately $16,000, with an overall potential to exceed $61,000 based on CDC program options and public health priorities. As COVID-19 sub-variants and other biological threats continue to emerge, the partners plan to expand the program footprint and incorporate innovative modalities and offerings, such as monitoring of wastewater from aircraft lavatories. The current contract with Ginkgo BioWorks related to the above partnership contains fixed pricing for which the Company is entitled to $14,730 for the sample collection (passenger and aircraft wastewater) and $370 for the traveler enrollment initiatives, which represents the amount of consideration that we are entitled. The Company recognizes revenue over time for both sample collection performance obligations, using the input method based on time elapsed to measure progress towards satisfying each of the performance obligations. We recognized the revenue for the traveler enrollment initiative performance obligation in the second quarter of 2023. The Company recognizes revenue ratably (straight line basis) over the term of the contract (one year). The Company recorded $2,542 and $9,289 in revenue for the three and nine months ended September 30, 2024, respectively, and $1,603 and $5,531 in revenue for the three and nine months ended September 30, 2023, respectively related to sample collection performance obligations because the Company’s efforts towards satisfying each of the performance obligations are expended evenly throughout the period of performance. HyperPointe The Company’s HyperPointe business provides a broad range of service and support options for HyperPointe’s customers, including technical support services and advanced services. Technical support services represent the majority of these offerings which are distinct performance obligations that are satisfied over time with revenue recognized ratably over the contract term. Advanced services are distinct performance obligations that are satisfied over time with revenue recognized as services are delivered. Revenues billed in advance are treated as deferred revenue, which was $112 and $72 as of September 30, 2024, and December 31, 2023, respectively. Deferred revenue recognized in the three and nine months ended September 30, 2024, were $0 and $72, respectively. Deferred revenue recognized in the three and nine months ended September 30, 2023, were $111 and $321, respectively. The Company excludes all sales taxes assessed to our customers from revenue. Sales taxes assessed on revenues are included in Accrued expenses and other current liabilities on the Company’s condensed consolidated balance sheets until remitted to state agencies.
Gift cards, customer rewards and prepaid packages	Gift cards, customer rewards and prepaid packages XWELL offers no-fee, non-expiring gift cards to its customers. No revenue is recognized upon the issuance of a gift card and a liability is established for the gift card’s cash value. The liability is relieved, and revenue is recognized upon redemption by the customer. As the gift cards have no expiration date, there is no provision for the reduction in the value of unused card balances. In addition, XWELL maintains a rewards program in which customers earn loyalty points, which can be redeemed for future services. Loyalty points are rewarded upon joining the loyalty program, for customer birthdays, and based upon customer spending. When a customer redeems loyalty points, the Company recognizes revenue for the redeemed cash value and reduces the related loyalty program liability. In 2023, the Company adopted a formal expiration policy whereby any loyalty members with inactivity for an 18-month period will forfeit any unused loyalty rewards. The costs associated with gift cards and reward points are accrued as the rewards are earned by the cardholder and are included in Accrued expenses and other current liabilities in the condensed consolidated balance sheets until used. Naples Wax Center offers prepaid wax packages that are either unlimited for one year or a set number of services. When the packages are purchased, the sales are recorded as deferred revenue. As services related to prepaid packages are used, revenue is recognized as income. The deferred revenue as of September 30, 2024, was $828 and for the year ended December 31, 2023, deferred revenue was $778.
Translation into United States dollars	Translation into United States dollars The Company conducts certain transactions in foreign currencies, which are recorded at the exchange rate as of the transaction date. All exchange gains and losses occurring from the remeasurement of monetary balance sheet items denominated in non-dollar currencies are deemed non-operating income in the condensed consolidated statements of operations and comprehensive loss. During the three and nine months ended September 30, 2024, the Company recorded $69 and $210, respectively, in exchange gains occurring from the remeasurement of monetary balance sheet items denominated in non-dollar currencies. During the three and nine months ended September 30, 2023, the Company recorded $366 in exchange losses and $690 in exchange gains respectively, occurring from the remeasurement of monetary balance sheet items denominated in non-dollar currencies. Accounts of the foreign subsidiaries of XpresSpa are translated into United States dollars. Assets and liabilities have been translated primarily at period end exchange rates and revenues and expenses have been translated at average monthly rates for the three and nine months ended September 30, 2024. The translation adjustments arising from the use of different exchange rates are included as foreign currency translation within the condensed consolidated statements of operations and comprehensive loss and condensed consolidated statements of changes in stockholders’ equity.
Business Combinations	Business Combinations The Company uses the provisions of ASC Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts. While the Company uses its best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the condensed consolidated statements of operations. Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets. Although the Company believes the assumptions and estimates that have been made are reasonable and appropriate, they are based in part on historical experience and information obtained from the acquired companies and are inherently uncertain. Estimates in valuing certain of the intangible assets the Company has acquired include future expected cash flows, and discount rates.
Intangible assets	Intangible assets Intangible assets include customer relationships, trade names, and technology, which were primarily acquired as part of the acquisition of XpresSpa in December 2016, HyperPointe in 2022 and Naples Wax Center in 2023 and were recorded based on the estimated fair value in purchase price allocation. In addition, intangible assets include software and website development costs that were capitalized as part of the Company’s development of a mobile application and website for the Treat brand. The Company accounts for these costs in accordance with ASC 350-40, Internal-Use Software. The intangible assets are amortized over their estimated useful lives, which are periodically evaluated for reasonableness. The Company’s intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value is then compared to the carrying value and an impairment charge is recognized by the amount in which the carrying value exceeds the fair value of the asset. In assessing the recoverability of the Company’s intangible assets, the Company must make estimates and assumptions regarding future cash flows and other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is recognized and the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. During the three and nine months ended September 30, 2024, the Company did not record any intangible impairment loss. During the three and nine months ended September 30, 2023, the Company recorded $2,758 of intangible impairment loss.
Goodwill	Goodwill Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. Goodwill is not amortized and is reviewed for impairment annually, or more frequently if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the company performs a quantitative test to identify and measure the amount of goodwill impairment loss. The Company compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds fair value, goodwill of the reporting unit is considered impaired, and that excess is recognized as a goodwill impairment loss. During the three and nine months ended September 30, 2024, the Company did not record any goodwill impairment loss. During the three and nine months ended September 30, 2023, the Company recorded $4,024 of goodwill impairment loss.
Reclassification	Reclassification Certain balances in the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2023, have been reclassified to conform to the presentation in the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024, primarily the presentation of revenue, general and administrative expense, the realized and unrealized gain on investments and other operating expenses. The above separation affected revenue classifications, general and administrative expenses, the realized and unrealized gain on investments and other operating expense in the comparative 2023 financial statements. Such reclassifications did not have a material impact on the unaudited condensed consolidated financial statements.
Impairment of Long-Lived Assets	Impairment of Long-Lived Assets Long-lived assets are tested for impairment at the lowest level at which there are identifiable operating cash flows. The Company’s long-lived assets consist primarily of leasehold improvements and right to use lease assets for each of its locations (considered the asset group). The Company reviews its long-lived assets for recoverability yearly or sooner if events or changes in circumstances indicate that the carrying value of long-lived assets may not be recoverable. If indicators are present, the Company performs a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the asset group in question to its carrying amount. An impairment loss is recognized if it is determined that the long-lived asset group is not recoverable and is calculated based on the excess of the carrying amount of the long-lived asset group over the long-lived asset group’s fair value. The Company estimates the fair value of long-lived assets using present value income approach. Future cash flows are calculated based on forecasts over the estimated remaining useful life of the asset group, which for each of the Company’s locations, is the remaining term of the operating lease. The estimates used to calculate future cash flows are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated fair value of each asset group. The Company will calculate the future cash flow using what it believes to be the most predictable of several scenarios. Typically, the changes in assumptions run under different business scenarios would not result in a material change in the assessment of the potential impairment or the impairment amount of a locations long-lived asset group. But if these estimates or related assumptions were to change materially, the Company may be required to record an impairment charge. During the three and nine months ended September 30, 2024, the Company recorded impairment of long-lived assets of $0 and $652, respectively compared to $1,096 for the three and nine months ended September 30, 2023, respectively.
Recently Issued Accounting Standards	Recently Issued Accounting Standards ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures In November 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This guidance will be effective for the annual periods beginning the year ended December 31, 2024, and for interim periods beginning January 1, 2025. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating segment expense disclosures related to its Annual Report on Form 10-K for fiscal year 2024. ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The Company is currently evaluating income tax disclosures related to its Annual Report on Form 10-K for fiscal year 2025.

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended	9 Months Ended
Income Taxes (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2024
Income Taxes
Annual effective tax rate for continuing operations (in %)	0.00%	0.00%
Income tax expense (benefit) attributable to state taxing jurisdictions	$ 0	$ 0

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (Parenthetical)	Sep. 28, 2023
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Reverse stock split, conversion ratio	0.05

Segment Information

9 Months Ended

Sep. 30, 2024

Segment Information

Segment Information

Note 14. Segment Information

As a result of the Company’s transition to a pure-play wellness services company, the Company currently has four reportable operating segments: XpresSpa, XpresTest, Naples Wax Center, and Treat. The Company analyzes the results of the Company’s business through the four reportable segments. The XpresSpa segment provides travelers premium spa services, including massage, nail and skin care, as well as spa and travel products. The XpresTest segment provided diagnostic COVID-19 tests at XpresCheck Wellness Centers in airports, to airport employees and to the traveling public but has transitioned to the CDC’s bio-surveillance program. XpresTest’s HyperPointe business provides a broad range of service and support options for its customers, including technical support services and advanced services. The Treat segment is a wellness brand that provides access to wellness services for travelers at on-site centers. The Naples Wax Center segment operates three high-performing locations with core products and service offerings from face and body waxing to a range of skincare and cosmetic products. The Treat segment is a wellness brand that provides access to wellness services for travelers at on-site centers.

The chief operating decision maker evaluates the operating results and performance of the Company’s segments through operating income. Expenses that can be specifically identified with a segment have been included as deductions in determining operating income. Any remaining expenses and other charges are included in Corporate and Other.


	For the three months ended
	September 30,
	2024		2023
Revenue
XpresSpa	$	4,711	$	4,955
XpresTest		3,144		2,322
Naples Wax		429		—
Treat		138		191
Corporate and other		—		—
Total revenue	$	8,422	$	7,468

Operating (loss)	2024		2023
XpresSpa	$	(2,438)	$	(2,947)
XpresTest		1,138		(5,267)
Naples Wax		(66)		—
Treat		81		(1,585)
Corporate and other		(3,484)		(2,290)
Total operating (loss)	$	(4,769)	$	(12,089)

Depreciation & Amortization	2024		2023
XpresSpa	$	187	$	421
XpresTest		16		91
Naples Wax		34		—
Treat		1		66
Corporate and other		14		12
Total Depreciation & Amortization	$	252	$	590

Impairment/loss on disposal of assets	2024		2023
XpresSpa	$	137	$	1,460
XpresTest		—		5,338
Naples Wax		—		—
Treat		15		1,613
Corporate and other		—		—
Total Impairment/loss on disposal of assets	$	152	$	8,411



	For the nine months ended
	September 30,
	2024		2023
Revenue
XpresSpa	$	13,870	$	14,682
XpresTest		10,630		7,541
Naples Wax		1,594		—
Treat		336		483
Total revenue	$	26,430	$	22,706

	2024		2023
Operating loss
XpresSpa	$	(6,620)	$	(8,901)
XpresTest		4,450		(5,067)
Naples Wax		(177)		—
Treat		39		(2,389)
Corporate and other		(6,732)		(6,744)
Total operating loss	$	(9,040)	$	(23,101)

		For the nine months ended
		September 30,
	2024		2023
Depreciation & amortization
XpresSpa	$	473	$	1,275
XpresTest		72		260
Naples Wax		97		—
Treat		20		198
Corporate and other		43		37
Total depreciation & amortization	$	705	$	1,770

	2024		2023
Impairment/loss on disposal of assets
XpresSpa	$	156	$	1,468
XpresTest		—		5,348
Naples Wax		—		—
Treat		667		1,613
Corporate and other		—		—
Total Impairment/loss on disposal of assets	$	823	$	8,429

	2024		2023
Capital expenditures
XpresSpa	$	861	$	1,596
XpresTest		44		80
Naples Wax		668		—
Treat		4		56
Corporate and other		10		28
Total capital expenditures	$	1,587	$	1,760


	September 30, 2024		December 31, 2023
Long-lived Assets
XpresSpa	$	8,173	$	8,268
XpresTest		26		92
Naples Wax		4,441		1,371
Treat		27		669
Corporate and other		298		438
Total long-lived Assets	$	12,965	$	10,838

	September 30, 2024		December 31, 2023
Assets
XpresSpa	$	18,933	$	18,453
XpresTest		1,395		2,408
Naples Wax		5,573		2,951
Treat		328		848
Corporate and other		7,556		14,333
Total assets	$	33,785	$	38,993

- Definition

The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
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-Paragraph 22
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Reference 2: http://www.xbrl.org/2003/role/disclosureRef
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Reference 3: http://www.xbrl.org/2003/role/disclosureRef
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Reference 4: http://www.xbrl.org/2003/role/disclosureRef
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Reference 5: http://www.xbrl.org/2003/role/disclosureRef
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-URI https://asc.fasb.org//1943274/2147482810/280-10-50-42

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
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Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 40
-Publisher FASB
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Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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Reference 9: http://www.xbrl.org/2003/role/disclosureRef
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Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 34
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-34

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Name Accounting Standards Codification
-Section 50
-Paragraph 41
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-41

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Paragraph 21
-Subparagraph (a)
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Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
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-Paragraph 21
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Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 280
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
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-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

+ Details

Commitments and Contingencies (Details) - USD ($) $ / shares in Units, $ in Thousands	May 09, 2022	Sep. 30, 2024	Aug. 06, 2024	Jun. 30, 2024	Dec. 31, 2023
Loss Contingencies [Line Items]
Settlement agreement, number of shares reserved for issuance			416,000
Fair market value			$ 2.26
OTG Management PHL B
Loss Contingencies [Line Items]
Sublease contractual term (in years)	12 years
CPC Pain & Wellness SPV, LLC
Loss Contingencies [Line Items]
Stake ownership				9.42%
Accrued expenses and other current liabilities
Loss Contingencies [Line Items]
Estimated litigation liability - current		$ 0			$ 449
Minimum \| OTG Management PHL B
Loss Contingencies [Line Items]
Loss contingency damages sought	$ 864
Maximum \| OTG Management PHL B
Loss Contingencies [Line Items]
Loss contingency damages sought	$ 2,250

Business, Basis of Presentation and Liquidity (Details) $ / shares in Units, $ in Thousands			9 Months Ended
	Sep. 28, 2023	Sep. 12, 2023 USD ($) location	Sep. 30, 2024 USD ($) segment location $ / shares	Dec. 31, 2023 USD ($) $ / shares	Oct. 25, 2022 $ / shares
Common stock, par value \| $ / shares			$ 0.01	$ 0.01	$ 0.01
Number of operating segments \| segment			4
Reverse stock split, conversion ratio	0.05
Reverse stock split, multiplying factor for price per share	20
Cash and cash equivalents \| $			$ 4,365	$ 8,437
Marketable securities \| $			11,660	14,613
Total current assets \| $			19,513	26,566
Total current liabilities \| $			9,850	9,330
Working capital \| $			$ 9,663	$ 17,236
XpresSpa \| United States
Number of operating locations			19
Number of operating locations, company-owned			17
Number of operating locations, franchises			2
XpresSpa \| Non-US
Number of operating locations			10
Naples Wax LLC
Consideration paid \| $		$ 1,624
Number of operating locations		3
Dubai International Airport \| XpresSpa \| Non-US
Number of operating locations			2
Zayad International Airport \| XpresSpa \| Non-US
Number of operating locations			1
Schiphol Amsterdam Airport \| XpresSpa \| Non-US
Number of operating locations			3
Istanbul Airport \| XpresSpa \| Non-US
Number of operating locations			4

Stockholders' Equity

9 Months Ended

Sep. 30, 2024

Stockholders' Equity

Stockholders' Equity

Note 11. Stockholders’ Equity

August 2024 Registered Direct Offering

On August 6, 2024, the Company entered into a securities purchase agreement with certain institutional and accredited investors, pursuant to which the Company agreed to sell and issue in a registered direct offering (the “August 2024 Offering”), an aggregate of 652,705 shares (the “August 2024 Shares”) of the Company’s common stock. The gross proceeds to the Company from the August 2024 Offering, prior to deducting estimated fees and expenses of $.1 million, were approximately $1.4 million. The August 2024 Offering closed on August 8, 2024.

The August 2024 Shares were offered and sold by the Company pursuant to a shelf registration statement on Form S-3 (File No. 333-273726), previously filed with the SEC on August 4, 2023, and declared effective by the SEC on September 29, 2023, and the base prospectus included therein.

Stock-based Compensation

The Company has a stock-based compensation plan available to grant stock options and RSUs to the Company’s directors, employees and consultants.

In September 2020, the Board of Directors approved a new stock-based compensation plan available to grant stock options, restricted stock and Restricted Stock Units (“RSUs”) aggregating to 250,000 shares of Common Stock, to the Company’s directors, employees and consultants. Shareholder approval of the plan was subsequently obtained on October 28, 2020. On October 4, 2022, shareholders approved the amendment to the Company’s 2020 Equity Incentive Plan to increase the number of shares authorized for issuance under the Plan by 375,000 shares of Common Stock to an aggregate of 625,000 shares. Under the 2020 Equity Incentive Plan (the “2020 Plan”), a maximum of 117,775 shares of Common Stock remained available for issuance as of September 30, 2024.

The Company’s previous Employee, Director and Consultant Equity Incentive Plan (the “2012 Plan”) was terminated upon receipt of shareholder approval of the 2020 Plan. Awards granted under the 2012 Plan remain in effect pursuant to their terms. Generally, stock options are granted with exercise prices equal to the fair market value on the date of grant, vest in four equal quarterly installments, and expire 10 years from the date of grant. RSU’s granted generally vest over a period of one year.

In September 2020, XpresTest created a stock-based compensation plan available to grant stock options, restricted stock and RSU’s to the XpresTest’s directors, employees and consultants. Under the XpresTest 2020 Equity Incentive Plan (the “XpresTest Plan”), a maximum of 200 shares of XpresTest common stock may be awarded, which would represent 20% of the total number of shares of common stock of XpresTest as of September 30, 2024. Certain named executive officers, consultants, and directors of the Company are eligible to participate in the XpresTest Plan. The XpresTest Plan RSAs vest

upon satisfaction of certain service and performance-based conditions. The fair value of the XpresTest Plan RSAs is determined based on the weighted average of (i) Fair Value of XpresTest under the Indirect Valuation Method developing assumptions for XpresSpa Net Market Cap and XpresSpa standalone Fair Value, and (ii) Direct Valuation Method developing assumptions for XpresTest Representative Forecasted Revenue for 2021 and Peer companies Revenue’s Multiples.

As of September 30, 2024, and 2023, there was $27 and $120, respectively of unrecognized stock-based compensation related to the XpresTest Plan.

The fair value of stock options is estimated as of the date of grant using the Black-Scholes-Merton (“Black-Scholes”) option-pricing model. The Company uses the simplified method to estimate the expected term of options due to insufficient history and high turnover in the past.

The following variables were used as inputs in the model:


Share price of the Company’s Common Stock on the grant date:	$	1.50 - 1.80
Exercise price:	$	1.50 - 1.80
Expected volatility:		121.04	%
Expected dividend yield:		0	%
Annual average risk-free rate:		4.05 - 4.14	%
Expected term:		6.32	years

Total stock-based compensation for the three and nine months ended September 30, 2024, was $232 and $818 respectively. Total stock-based compensation for the three and nine months ended September 30, 2023, was $594 and $1,832, respectively. The Company had $368 and $1,319 of unrecognized stock-based compensation related to the XWELL Stock Options, as of September 30, 2024 and December 31, 2023 respectively.

The following tables summarize information about stock options and RSU activity for the nine months ended September 30, 2024:


	RSUs			XpresTest RSAs			Stock options
		Weighted			Weighted			Weighted
		average			average			average		Exercise
	No. of	grant date		No. of	grant date		No. of	exercise		price
	RSUs	fair value		RSAs	fair value		options	price		range
Outstanding as of December 31, 2023	11,944	$	6.08	5	$	47,570	341,205	$	26.85	$	4.60 - 49,200
Granted	30,000		1.80	—		—	180,000	$	1.55	$	1.50 - 1.80
Exercised/Vested	(4,236)		5.67	—		—	(3,000)	$	1.50	$	1.50
Forfeited	(2,500)		5.09	—		—	(29,439)	$	17.47	$	1.50 - 34.40
Expired	—		—	—		—	(49,279)	$	31.18	$	8.00 - 49,200
Outstanding as of September 30, 2024	35,208	$	2.61	5	$	47,570	439,487	$	16.80	$	1.50 - 7,080
Exercisable as of September 30, 2024							375,421	$	15.68	$	1.50 - 7,080

- Definition

The entire disclosure for equity.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (h)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 235
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481062/946-235-50-2

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 505
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481004/946-505-50-6

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 815
-SubTopic 40
-Name Accounting Standards Codification
-Section 50
-Paragraph 6
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480237/815-40-50-6

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.3-04)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480008/505-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(e)(1))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Topic 505
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//505/tableOfContent

Reference 11: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 12: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (g)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Subparagraph (i)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-13

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 15: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-14

Reference 16: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 16
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-16

Reference 17: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

Reference 18: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

Reference 19: http://www.xbrl.org/2003/role/disclosureRef
-Topic 505
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 18
-Subparagraph (d)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147481112/505-10-50-18

+ Details

Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Intangible Assets
Impairment of intangible assets	$ 0	$ 2,758	$ 0	$ 2,758
Amortization expense - intangibles	$ 78	$ 396	$ 237	$ 1,155

Accrued expenses and other current liabilities

9 Months Ended

Sep. 30, 2024

Accrued expenses and other current liabilities

Accrued expenses and other current liabilities

Note 7. Accrued expenses and other current liabilities

As of September 30, 2024, and December 31, 2023, accrued expenses and other current liabilities consisted of the following:



	September 30, 2024		December 31, 2023
Litigation accrual	$	-	$	449
Accrued compensation		1,596		2,098
Tax-related liabilities		488		501
Common area maintenance accruals		439		8
Accounts payable accruals		110		913
Gift certificates		507		509
Credit card processing fees		6		8
Other miscellaneous accruals		546		482
Total accrued expenses and other current liabilities	$	3,692	$	4,968

Stockholders' Equity - Stock Options and RSU Activity (Details)	9 Months Ended
	Sep. 30, 2024 $ / shares shares
Stockholders Equity [Line Items]
No. of options, Outstanding, Beginning balance \| shares	341,205
No. of options, Granted \| shares	180,000
No. of options, Exercised/Vested \| shares	(3,000)
No. of options, Forfeited \| shares	(29,439)
No. of options, Expired \| shares	(49,279)
No. of options, Outstanding, Ending balance \| shares	439,487
No. of options, Exercisable \| shares	375,421
Weighted average grant date fair value, Beginning balance	$ 26.85
Weighted average grant date fair value, Granted	1.55
Weighted average grant date fair value, Exercised/Vested	1.50
Weighted average grant date fair value, Forfeited	17.47
Weighted average grant date fair value, Expired	31.18
Weighted average grant date fair value, Ending balance	16.80
Weighted average grant date fair value, Exercisable	15.68
Exercise price range, Exercised/Vested	$ 1.50
RSUs
Stockholders Equity [Line Items]
RSUs and RSAs Outstanding, Beginning \| shares	11,944
No. of RSUs and RSAs, Granted \| shares	30,000
No. of RSUs and RSAs, Exercised/Vested \| shares	(4,236)
No. of RSUs and RSAs, Forfeited \| shares	(2,500)
RSUs and RSAs Outstanding, Ending \| shares	35,208
Weighted average grant date fair value, RSUs and RSAs, Beginning	$ 6.08
Weighted average grant date fair value, RSUs and RSAs granted	1.80
Weighted average grant date fair value, RSUs and RSAs exercised/vested	5.67
Weighted average grant date fair value, RSUs and RSAs forfeited	5.09
Weighted average grant date fair value, RSUs and RSAs, Ending	$ 2.61
XpresTest RSAs
Stockholders Equity [Line Items]
RSUs and RSAs Outstanding, Beginning \| shares	5
RSUs and RSAs Outstanding, Ending \| shares	5
Weighted average grant date fair value, RSUs and RSAs, Beginning	$ 47,570
Weighted average grant date fair value, RSUs and RSAs, Ending	47,570
Minimum
Stockholders Equity [Line Items]
Exercise price range, Outstanding, Beginning balance	4.60
Exercise price range, Granted	1.50
Exercise price range, Forfeited	1.50
Exercise price range, Expired	8.00
Exercise price range, Outstanding, Ending balance	1.50
Exercise price range, Exercisable	1.50
Maximum
Stockholders Equity [Line Items]
Exercise price range, Outstanding, Beginning balance	49,200
Exercise price range, Granted	1.80
Exercise price range, Forfeited	34.40
Exercise price range, Expired	49,200
Exercise price range, Outstanding, Ending balance	7,080
Exercise price range, Exercisable	$ 7,080

Leases (Tables)

9 Months Ended

Sep. 30, 2024

Leases

Schedule of supplemental cash flow information related to leases


	Nine months ended September 30,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(2,585)	$	(2,668)
Leased assets obtained in exchange for new and modified operating lease liabilities	$	3,091	$	174

Schedule of future minimum commitments


Calendar Years ending December 31,	Amount
Remaining 2024	$	914
2025		2,982
2026		2,184
2027		2,058
2028		1,676
2029		1,421
Thereafter		2,915
Total future lease payments		14,150
Less: interest expense at incremental borrowing rate		(2,534)
Net present value of lease liabilities	$	11,616

Schedule of other assumptions and pertinent information


Weighted average remaining lease term:	5.75	years
Weighted average discount rate used to determine present value of operating lease liability:	7.10	%

Other current assets (Tables)

9 Months Ended

Sep. 30, 2024

Other current assets

Schedule of other current assets


	September 30, 2024		December 31, 2023
Prepaid expenses	$	1,814	$	894
Other		91		55
Total other current assets	$	1,905	$	949

Accounting and Reporting Policies

9 Months Ended

Sep. 30, 2024

Accounting and Reporting Policies

Accounting and Reporting Policies

Note 2. Accounting and Reporting Policies

Use of estimates

The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses for the periods presented. Actual results may differ from such estimates. Significant items subject to such estimates and assumptions include the Company’s long-lived assets, intangibles assets, the useful lives of the Company’s intangible assets, the valuation of stock-based compensation, deferred tax assets and liabilities, income tax uncertainties, and other contingencies.

Revenue Recognition Policy

XpresSpa, Treat and Naples Wax Center

The Company recognizes revenue from the sale of products and services when the services are rendered at XpresSpa, Treat, and Naples Wax Centers locations and from the sale of products at the time products are purchased at the Company’s stores or online usually by credit card, net of discounts and applicable sales taxes. Accordingly, the Company recognizes revenue for the Company’s single performance obligation related to both in-store and online sales at the point at which the service has been performed or the control of the merchandise has passed to the customer. The Company recognizes revenue from Priority Pass services when an invoice is generated to Priority Pass detailing the number of services performed multiplied by the agreed upon price.

XpresTest

During the third quarter of 2022, XpresTest, in partnership with Ginkgo BioWorks in continuation of their support to the CDC’s traveler-based SARS-CoV-2 genomic surveillance program was awarded a new contract. The partnership is expected to support public health and biosecurity services totaling approximately $16,000, with an overall potential to exceed $61,000 based on CDC program options and public health priorities. As COVID-19 sub-variants and other biological threats continue to emerge, the partners plan to expand the program footprint and incorporate innovative modalities and offerings, such as monitoring of wastewater from aircraft lavatories. The current contract with Ginkgo BioWorks related to the above partnership contains fixed pricing for which the Company is entitled to $14,730 for the sample collection (passenger and aircraft wastewater) and $370 for the traveler enrollment initiatives, which represents the amount of consideration that we are entitled. The Company recognizes revenue over time for both sample collection performance obligations, using the input method based on time elapsed to measure progress towards satisfying each of the performance obligations. We recognized the revenue for the traveler enrollment initiative performance obligation in the second quarter of 2023. The Company recognizes revenue ratably (straight line basis) over the term of the contract (one year). The Company recorded $2,542 and $9,289 in revenue for the three and nine months ended September 30, 2024,

respectively, and $1,603 and $5,531 in revenue for the three and nine months ended September 30, 2023, respectively related to sample collection performance obligations because the Company’s efforts towards satisfying each of the performance obligations are expended evenly throughout the period of performance.

HyperPointe

The Company’s HyperPointe business provides a broad range of service and support options for HyperPointe’s customers, including technical support services and advanced services. Technical support services represent the majority of these offerings which are distinct performance obligations that are satisfied over time with revenue recognized ratably over the contract term. Advanced services are distinct performance obligations that are satisfied over time with revenue recognized as services are delivered. Revenues billed in advance are treated as deferred revenue, which was $112 and $72 as of September 30, 2024, and December 31, 2023, respectively. Deferred revenue recognized in the three and nine months ended September 30, 2024, were $0 and $72, respectively. Deferred revenue recognized in the three and nine months ended September 30, 2023, were $111 and $321, respectively.

The Company excludes all sales taxes assessed to our customers from revenue. Sales taxes assessed on revenues are included in Accrued expenses and other current liabilities on the Company’s condensed consolidated balance sheets until remitted to state agencies.

Gift cards, customer rewards and prepaid packages

XWELL offers no-fee, non-expiring gift cards to its customers. No revenue is recognized upon the issuance of a gift card and a liability is established for the gift card’s cash value. The liability is relieved, and revenue is recognized upon redemption by the customer. As the gift cards have no expiration date, there is no provision for the reduction in the value of unused card balances.

In addition, XWELL maintains a rewards program in which customers earn loyalty points, which can be redeemed for future services. Loyalty points are rewarded upon joining the loyalty program, for customer birthdays, and based upon customer spending. When a customer redeems loyalty points, the Company recognizes revenue for the redeemed cash value and reduces the related loyalty program liability. In 2023, the Company adopted a formal expiration policy whereby any loyalty members with inactivity for an 18-month period will forfeit any unused loyalty rewards.

The costs associated with gift cards and reward points are accrued as the rewards are earned by the cardholder and are included in Accrued expenses and other current liabilities in the condensed consolidated balance sheets until used.

Naples Wax Center offers prepaid wax packages that are either unlimited for one year or a set number of services. When the packages are purchased, the sales are recorded as deferred revenue. As services related to prepaid packages are used, revenue is recognized as income. The deferred revenue as of September 30, 2024, was $828 and for the year ended December 31, 2023, deferred revenue was $778.

Translation into United States dollars

The Company conducts certain transactions in foreign currencies, which are recorded at the exchange rate as of the transaction date. All exchange gains and losses occurring from the remeasurement of monetary balance sheet items denominated in non-dollar currencies are deemed non-operating income in the condensed consolidated statements of operations and comprehensive loss. During the three and nine months ended September 30, 2024, the Company recorded $69 and $210, respectively, in exchange gains occurring from the remeasurement of monetary balance sheet items denominated in non-dollar currencies. During the three and nine months ended September 30, 2023, the Company recorded $366 in exchange losses and $690 in exchange gains respectively, occurring from the remeasurement of monetary balance sheet items denominated in non-dollar currencies.

Accounts of the foreign subsidiaries of XpresSpa are translated into United States dollars. Assets and liabilities have been translated primarily at period end exchange rates and revenues and expenses have been translated at average monthly rates

for the three and nine months ended September 30, 2024. The translation adjustments arising from the use of different exchange rates are included as foreign currency translation within the condensed consolidated statements of operations and comprehensive loss and condensed consolidated statements of changes in stockholders’ equity.

Business Combinations

The Company uses the provisions of ASC Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts.

While the Company uses its best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the condensed consolidated statements of operations.

Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets. Although the Company believes the assumptions and estimates that have been made are reasonable and appropriate, they are based in part on historical experience and information obtained from the acquired companies and are inherently uncertain. Estimates in valuing certain of the intangible assets the Company has acquired include future expected cash flows, and discount rates.

Intangible assets

Intangible assets include customer relationships, trade names, and technology, which were primarily acquired as part of the acquisition of XpresSpa in December 2016, HyperPointe in 2022 and Naples Wax Center in 2023 and were recorded based on the estimated fair value in purchase price allocation. In addition, intangible assets include software and website development costs that were capitalized as part of the Company’s development of a mobile application and website for the Treat brand. The Company accounts for these costs in accordance with ASC 350-40, Internal-Use Software. The intangible assets are amortized over their estimated useful lives, which are periodically evaluated for reasonableness.

The Company’s intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The fair value is then compared to the carrying value and an impairment charge is recognized by the amount in which the carrying value exceeds the fair value of the asset. In assessing the recoverability of the Company’s intangible assets, the Company must make estimates and assumptions regarding future cash flows and other factors to determine the fair value of the respective assets. These estimates and assumptions could have a significant impact on whether an impairment charge is recognized and the magnitude of any such charge. Fair value estimates are made at a specific point in time, based on relevant information. During the three and nine months ended September 30, 2024, the Company did not record any intangible impairment loss. During the three and nine months ended September 30, 2023, the Company recorded $2,758 of intangible impairment loss.

Goodwill

Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. Goodwill is not amortized and is reviewed for impairment annually, or more frequently if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the company performs a quantitative test to identify and measure the amount of goodwill impairment loss. The Company compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds fair value, goodwill of the reporting unit is considered impaired,

and that excess is recognized as a goodwill impairment loss. During the three and nine months ended September 30, 2024, the Company did not record any goodwill impairment loss. During the three and nine months ended September 30, 2023, the Company recorded $4,024 of goodwill impairment loss.

Reclassification

Certain balances in the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2023, have been reclassified to conform to the presentation in the unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2024, primarily the presentation of revenue, general and administrative expense, the realized and unrealized gain on investments and other operating expenses. The above separation affected revenue classifications, general and administrative expenses, the realized and unrealized gain on investments and other operating expense in the comparative 2023 financial statements. Such reclassifications did not have a material impact on the unaudited condensed consolidated financial statements.

Impairment of Long-Lived Assets

Long-lived assets are tested for impairment at the lowest level at which there are identifiable operating cash flows. The Company’s long-lived assets consist primarily of leasehold improvements and right to use lease assets for each of its locations (considered the asset group). The Company reviews its long-lived assets for recoverability yearly or sooner if events or changes in circumstances indicate that the carrying value of long-lived assets may not be recoverable. If indicators are present, the Company performs a recoverability test by comparing the sum of the estimated undiscounted future cash flows attributable to the asset group in question to its carrying amount. An impairment loss is recognized if it is determined that the long-lived asset group is not recoverable and is calculated based on the excess of the carrying amount of the long-lived asset group over the long-lived asset group’s fair value. The Company estimates the fair value of long-lived assets using present value income approach. Future cash flows are calculated based on forecasts over the estimated remaining useful life of the asset group, which for each of the Company’s locations, is the remaining term of the operating lease.

The estimates used to calculate future cash flows are subjective in nature and involve uncertainties and matters of significant judgments and therefore cannot be determined with precision. Changes in assumptions could significantly affect the estimated fair value of each asset group. The Company will calculate the future cash flow using what it believes to be the most predictable of several scenarios. Typically, the changes in assumptions run under different business scenarios would not result in a material change in the assessment of the potential impairment or the impairment amount of a locations long-lived asset group. But if these estimates or related assumptions were to change materially, the Company may be required to record an impairment charge.

During the three and nine months ended September 30, 2024, the Company recorded impairment of long-lived assets of $0 and $652, respectively compared to $1,096 for the three and nine months ended September 30, 2023, respectively.

Recently Issued Accounting Standards

ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures

In November 2023, the Financial Accounting Standards Board (FASB) issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (ASU 2023-07), which requires an enhanced disclosure of significant segment expenses on an annual and interim basis. This guidance will be effective for the annual periods beginning the year ended December 31, 2024, and for interim periods beginning January 1, 2025. Early adoption is permitted. Upon adoption, the guidance should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating segment expense disclosures related to its Annual Report on Form 10-K for fiscal year 2024.

ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures

In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures (ASU 2023-09), which improves the transparency of income tax disclosures by requiring consistent categories and greater disaggregation of information in the effective tax rate reconciliation and income taxes paid disaggregated by jurisdiction. It also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for the annual periods beginning the year ended December 31, 2025. Early adoption is permitted. Upon adoption, the guidance can be applied prospectively or retrospectively. The Company is currently evaluating income tax disclosures related to its Annual Report on Form 10-K for fiscal year 2025.

Acquisition of Naples Wax, LLC (Details) - USD ($) $ in Thousands		3 Months Ended			9 Months Ended
	Sep. 12, 2023	Sep. 30, 2024	Mar. 31, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Acquisition of Naples Wax, LLC
Impairment of goodwill		$ 0		$ 4,024	$ 0	$ 4,024
Naples Wax LLC
Acquisition of Naples Wax, LLC
Consideration paid	$ 1,624
Aggregate purchase price paid in cash	1,574		$ 14
Consideration held back to cover potential indemnification claims	$ 50
Consideration held back term	6 months
Operating expenses					36
Impairment of goodwill					$ 0
Percentage of acquired ownership interests	100.00%
Deductible goodwill acquired	$ 1,371

Accounting and Reporting Policies (Details) - USD ($) $ in Thousands	3 Months Ended			9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2024	Sep. 30, 2023	Dec. 31, 2023
Foreign currency remeasurement gain/(loss)	$ (69)	$ 366		$ (210)	$ (690)
Impairment of intangible assets	0	2,758		0	2,758
Impairment of operating lease right-of-use assets		517			517
Deferred revenue	946			946		$ 861
Impairment loss on goodwill	0	4,024		0	4,024
Impairment of long-lived assets		7,878		652	7,878
Land Improvements
Impairment of long-lived assets	0	1,096		652	1,096
Foreign Currency Gain (Loss)
Foreign currency remeasurement gain/(loss)	69	(366)		$ 210	690
Naples Wax LLC
Deferred revenue, period earned				1 year
Deferred revenue, inactivity period				18 months
Deferred revenue	828			$ 828		778
Impairment loss on goodwill				$ 0
XpresTest
Revenue Contract, Term				1 year
XpresTest \| CDC Program Options and Public Health Services
Unrecognized revenue contract amount			$ 16,000
XpresTest \| Traveler Enrollment Initiatives \| CDC Program Options and Public Health Services
Revenue recognized			370
XpresTest \| Passenger and Aircraft Wastewater Sample Collection \| CDC Program Options and Public Health Services
Revenue recognized	2,542	1,603		$ 9,289	5,531
Unrecognized revenue contract amount			14,730
HyperPointe
Recognized revenue	0	$ 111		72	$ 321
Deferred revenue	$ 112			$ 112		$ 72
Minimum \| XpresTest \| CDC Program Options and Public Health Services
Unrecognized revenue contract amount			$ 61,000

Intangible Assets - Amortization Maturity (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Finite-Lived Intangible Assets, Amortization Expense, Maturity Schedule [Abstract]
Remaining 2024	$ 79
2025	303
2026	228
2027	122
2028	122
Thereafter	253
Total	$ 1,107	$ 1,353

Intangible Assets (Tables)

9 Months Ended

Sep. 30, 2024

Intangible Assets

Schedule of carrying amounts for intangible assets subject to amortization


	September 30, 2024						December 31, 2023
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Trade names	$	200	$	(23)	$	177	$	200	$	(6)	$	194
Customer relationships		1,012		(416)		596		1,012		(341)		671
Software		2,584		(2,257)		327		2,593		(2,120)		473
Licenses		30		(23)		7		35		(20)		15
Total intangible assets	$	3,826	$	(2,719)	$	1,107	$	3,840	$	(2,487)	$	1,353

Schedule of future estimated amortization expense for intangible assets subject to amortization


Calendar Years ending December 31,	Amount
Remaining 2024	$	79
2025		303
2026		228
2027		122
2028		122
Thereafter		253
Total	$	1,107

Other current assets

9 Months Ended

Sep. 30, 2024

Other current assets

Other current assets

Note 5. Other current assets

As of September 30, 2024, and December 31, 2023, other current assets consisted of the following:


	September 30, 2024		December 31, 2023
Prepaid expenses	$	1,814	$	894
Other		91		55
Total other current assets	$	1,905	$	949

Other Assets (Tables)

9 Months Ended

Sep. 30, 2024

Other Assets

Schedule of other assets


	September 30, 2024		December 31, 2023
Equity investments	$	42	$	50
Lease deposits		1,589		1,556
Other		201		236
Other assets	$	1,832	$	1,842

Leases (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Leases (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Leases
Cash paid for minimum annual rental	$ 433	$ 503	$ 1,202	$ 1,762
Variable lease payments	$ 330	$ 302	$ 1,030	$ 1,013

Pay vs Performance Disclosure - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
Pay vs Performance Disclosure - USD ($) $ in Thousands	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Pay vs Performance Disclosure
Net Income (Loss)	$ (4,750)	$ (11,531)	$ (9,258)	$ (22,770)

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References

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+ Details

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Sep. 30, 2024	Dec. 31, 2023
CONDENSED CONSOLIDATED BALANCE SHEETS
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	150,000,000	150,000,000
Common stock, issued	5,256,024	4,179,631
Common stock, outstanding	5,256,024	4,179,631

Stockholders' Equity - Stockholders' Equity - Stock-based Compensation (Details) $ in Thousands		1 Months Ended	3 Months Ended		9 Months Ended
	Oct. 04, 2022 shares	Sep. 30, 2020 shares	Sep. 30, 2024 USD ($) installment shares	Sep. 30, 2023 USD ($)	Sep. 30, 2024 USD ($) installment shares	Sep. 30, 2023 USD ($)	Dec. 31, 2023 USD ($)
Stockholders Equity [Line Items]
Total stock-based compensation \| $			$ 232	$ 594	$ 818	$ 1,832
Employee Stock Option
Stockholders Equity [Line Items]
Unrecognized stock-based compensation \| $			$ 368		$ 368		$ 1,319
Equity incentive plan 2020
Stockholders Equity [Line Items]
Number of shares authorized (in shares)	625,000	250,000
Number of additional shares authorized (in shares)	375,000
Equity incentive plan 2020 \| Employee Stock Option
Stockholders Equity [Line Items]
Number of equal quarterly vesting installments \| installment			4		4
Options expiration period (in years)					10 years
Equity incentive plan 2020 \| RSUs
Stockholders Equity [Line Items]
Award vesting period (in years)					1 year
Equity incentive plan 2020 \| Maximum
Stockholders Equity [Line Items]
Number of shares available for issuance (in shares)			117,775		117,775
XpresTest 2020 Plan
Stockholders Equity [Line Items]
Number of shares authorized (in shares)		200
Percentage of shares authorized for issuance (in %)		20.00%
Unrecognized stock-based compensation \| $			$ 27	$ 120	$ 27	$ 120

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Revenue, net
Total revenue, net	$ 8,422	$ 7,468	$ 26,430	$ 22,706
Cost of sales
Labor	4,426	4,462	13,235	13,609
Occupancy	919	1,063	2,564	3,237
Products and other operating costs	1,024	852	2,834	3,057
Total cost of sales	6,369	6,377	18,633	19,903
Gross Profit	2,053	1,091	7,797	2,803
Depreciation and amortization	252	590	705	1,770
Impairment of long-lived assets		7,878	652	7,878
Impairment of operating lease right-of-use assets		517		517
Loss on disposal of assets	152	16	171	34
General and administrative	4,525	3,001	9,682	10,282
Salaries and benefits	1,893	1,178	5,627	5,423
Total operating expenses	6,822	13,180	16,837	25,904
Operating loss	(4,769)	(12,089)	(9,040)	(23,101)
Interest income, net	100	105	308	334
Gain on investments, realized and unrealized	106	205	293	650
Foreign exchange gain (loss)	(69)	366	(210)	(690)
Other non-operating expense, net	(73)	(178)	(205)	(292)
Loss before income taxes	(4,705)	(11,591)	(8,854)	(23,099)
Income tax expense
Net loss	(4,705)	(11,591)	(8,854)	(23,099)
Net loss (income) attributable to noncontrolling interests	(45)	60	(404)	329
Net loss attributable to XWELL, Inc.	(4,750)	(11,531)	(9,258)	(22,770)
Net loss	(4,705)	(11,591)	(8,854)	(23,099)
Other comprehensive loss from operations	(247)	(514)	(487)	(1,108)
Comprehensive loss	$ (4,952)	$ (12,105)	$ (9,341)	$ (24,207)
Loss per share
Basic loss per share (in dollars per share)	$ (0.99)	$ (2.76)	$ (2.11)	$ (5.46)
Diluted loss per share (in dollars per share)	$ (0.99)	$ (2.76)	$ (2.11)	$ (5.46)
Weighted-average number of shares outstanding during the period
Basic (in shares)	4,818,681	4,173,894	4,394,106	4,170,629
Diluted (in shares)	4,818,681	4,173,894	4,394,106	4,170,629
Services
Revenue, net
Total revenue, net	$ 7,486	$ 6,721	$ 23,924	$ 20,662
Products
Revenue, net
Total revenue, net	$ 936	$ 747	$ 2,506	$ 2,044

Leases - Other Assumptions and Pertinent Information (Details)	Sep. 30, 2024
Leases
Weighted average remaining lease term (years):	5 years 9 months
Weighted average discount rate used to determine present value of operating lease liability:	7.10%

Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2024

Stockholders' Equity

Schedule of variables used as inputs in calculation of fair value of stock options


Share price of the Company’s Common Stock on the grant date:	$	1.50 - 1.80
Exercise price:	$	1.50 - 1.80
Expected volatility:		121.04	%
Expected dividend yield:		0	%
Annual average risk-free rate:		4.05 - 4.14	%
Expected term:		6.32	years

Schedule of stock options and restricted stock units activity


	RSUs			XpresTest RSAs			Stock options
		Weighted			Weighted			Weighted
		average			average			average		Exercise
	No. of	grant date		No. of	grant date		No. of	exercise		price
	RSUs	fair value		RSAs	fair value		options	price		range
Outstanding as of December 31, 2023	11,944	$	6.08	5	$	47,570	341,205	$	26.85	$	4.60 - 49,200
Granted	30,000		1.80	—		—	180,000	$	1.55	$	1.50 - 1.80
Exercised/Vested	(4,236)		5.67	—		—	(3,000)	$	1.50	$	1.50
Forfeited	(2,500)		5.09	—		—	(29,439)	$	17.47	$	1.50 - 34.40
Expired	—		—	—		—	(49,279)	$	31.18	$	8.00 - 49,200
Outstanding as of September 30, 2024	35,208	$	2.61	5	$	47,570	439,487	$	16.80	$	1.50 - 7,080
Exercisable as of September 30, 2024							375,421	$	15.68	$	1.50 - 7,080

Cash, Cash Equivalents, and Restricted Cash - Summary of Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023	Sep. 30, 2023	Dec. 31, 2022
Cash, Cash Equivalents, and Restricted Cash
Cash denominated in United States dollars	$ 1,777	$ 5,726
Cash denominated in currency other than United States dollars	2,305	2,395
Restricted cash	751	751
Credit and debit card receivables	283	316
Total cash, cash equivalents and restricted cash	$ 5,116	$ 9,188	$ 5,578	$ 19,789

- Definition

Amount of currency on hand as well as demand deposits with banks or financial institutions. Includes other kinds of accounts that have the general characteristics of demand deposits. Excludes cash and cash equivalents within disposal group and discontinued operation.

+ References + Details

Stockholders' Equity - August 2024 Registered Direct Offering (Details) - USD ($) $ in Thousands		9 Months Ended
	Aug. 06, 2024	Sep. 30, 2024
Warrants [Line Items]
Gross proceeds		$ 1,355
August 2024 Registered Direct Offering
Warrants [Line Items]
Aggregate shares	652,705
Estimated fees and expenses	$ 100
Gross proceeds	$ 1,400

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2024	Nov. 14, 2024
Document and Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2024
Document Transition Report	false
Entity File Number	001-34785
Entity Registrant Name	XWELL, Inc.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	20-4988129
Entity Address, Address Line One	254 West 31st Street
Entity Address, Address Line Two	11th Floor
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10001
City Area Code	212
Local Phone Number	750-9595
Title of 12(b) Security	Common Stock, par value $0.01 per share
Trading Symbol	XWEL
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		5,256,024
Entity Central Index Key	0001410428
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q3
Amendment Flag	false

Commitments and Contingencies

9 Months Ended

Sep. 30, 2024

Commitments and Contingencies

Commitments and Contingencies

Note 13. Commitments and Contingencies

Certain of the Company’s outstanding legal matters include speculative claims for substantial or indeterminate amounts of damages. The Company regularly evaluates developments in its legal matters that could affect the amount of any potential liability and adjusts as appropriate. A significant judgment is required to determine both the likelihood of there being any potential liability and the estimated amount of a loss related to the Company’s legal matters.

With respect to the Company’s outstanding legal matters, based on its current knowledge, the Company’s management believes that the amount or range of a potential loss will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations or cash flows. However, the outcome of such legal matters is inherently unpredictable and subject to significant uncertainties. The Company evaluated the outstanding legal matters and assessed the probability and likelihood of the occurrence of liability. Based on management’s estimates, the Company has recorded accruals of $0 and $449 as of September 30, 2024 and December 31, 2023, respectively, which is included in Accrued expenses and other current liabilities in the condensed consolidated balance sheets.

The Company expenses legal fees in the period in which they are incurred.

OTG Management PHL B v. XpresSpa Philadelphia Terminal B et al.

On May 9, 2022, a lawsuit was filed in the Philadelphia Court of Common Pleas by OTG Management at Philadelphia International Airport, claiming that XWELL improperly backed out of its sublease for space at Terminal B and now owes between $864 and $2,250 in accelerated rent for the 12-year contract. They claim that by refusing to complete the project, failing to commence and maintain operations, refusing to pay rent and improperly purporting to terminate the lease (among other acts and omissions), XWELL breached the lease. On June 20, 2024, an Order to Settle, Discontinue and End with Prejudice was filed as to all claims.

CPC Pain & Wellness SPV, LLC

On July 19, 2024, CPC Pain & Wellness SPV, LLC (“CPC”), a recently formed special purpose vehicle that announced it had acquired a 9.42% stake in XWELL in June 2024, filed suit in the Court of Chancery of the State of Delaware against the Company, Chairman Bruce T. Bernstein, and directors Michael Lebowitz, Robert Weinstein, Gaëlle Wizenberg, and Scott R. Milford (the “Action”). In the Action, CPC alleged, in pertinent part, that the Board of Directors breached their fiduciary duties and that the Company and Board of Directors engaged in an unlawful, unenforceable, and inequitable application of the Company’s Third Amended and Restated Bylaws to reject CPC’s notice of intent to propose its own slate of directors for election at the 2024 annual meeting of stockholders. On August 2, 2024, the Court set the Action for trial on September 18-19, 2024. The Company has vigorously defended these

claims. As a result of the Company’s efforts, on August 9, 2024, CPC dismissed all claims in the Action, agreed to irrevocably withdraw its nominations, and agreed not assert any claims related to the 2024 annual meeting.

Settlement Agreement

On August 5, 2024, the Company, XpresSpa Middle East B.V., and certain parties thereto (such parties, the “Settlor Parties” entered into a Settlement Agreement (the “Settlement Agreement”), pursuant to which the Company agreed to issue an aggregate of 416,000 shares of common stock (the “Settlement Shares”) which were issued on August 6, 2024, and have a fair market value of $2.26 per share to the Settlor Parties in consideration for their entry into the Settlement Agreement. The Settlement Shares were not registered under the Securities Act of 1933, as amended (the “Securities Act”), and were issued in reliance on one or more exemptions from registration under the Securities Act, including pursuant to Rule 903 of Regulation S under the Securities Act.

In addition to those matters specifically set forth herein, the Company and its subsidiaries are involved in various other claims and legal actions that arise in the ordinary course of business. The Company does not believe that the ultimate resolution of these actions will have a material adverse effect on the Company’s financial position, results of operations, liquidity, or capital resources. However, a significant increase in the number of these claims, or one or more successful claims under which the Company incurs greater liabilities than the Company currently anticipates, could materially adversely affect the Company’s business, financial condition, results of operations and cash flows.

In the event that an action is brought against the Company or one of its subsidiaries, the Company will investigate the allegation and vigorously defend itself.

Leases

XWELL is contingently liable to a surety company under certain general indemnity agreements required by various airports relating to its lease agreements. XWELL agrees to indemnify the surety for any payments made on contracts of suretyship, guaranty, or indemnity. The Company believes that all contingent liabilities will be satisfied by its performance under the specified lease agreements.

Leases

9 Months Ended

Sep. 30, 2024

Leases

Leases

Note 9. Leases

The Company leases spa and clinic locations at various domestic and international airports. Additionally, the Company leases its corporate office in New York City and other off airport locations in various US cities. Certain leases entered into

by the Company are accounted for in accordance with ASC 842. The Company determines if an arrangement is a lease at inception and if it qualifies under ASC 842. The Company’s lease arrangements generally contain fixed payments throughout the term of the lease and most also contain a variable component to determine the lease obligation where a certain percentage of sales is used to calculate the lease payments. The Company enters into leases that expire, are amended and extended, or are extended on a month-to-month basis. Leases are not included in the calculation of the total lease liability and the right of use asset when they are month-to-month.

All qualifying leases held by the Company are classified as operating leases. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company records its operating lease assets and liabilities based on required guaranteed payments under each lease agreement. The Company uses its incremental borrowing rate, which approximates the rate at which the Company can borrow funds on a secured basis, using the information available at commencement date of the lease in determining the present value of guaranteed lease payments. The interest rate implicit in the lease is generally not determinable in transactions where a company is the lessee.

The Company reviews all of its existing lease agreements to determine whether there were any modifications to lease agreements and to assess if any agreements should be accounted for pursuant to the guidance in ASC 842.

The following is a summary of the activity in the Company’s current and long-term operating lease liabilities for the nine months ended September 30, 2024 and 2023:


	Nine months ended September 30,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(2,585)	$	(2,668)
Leased assets obtained in exchange for new and modified operating lease liabilities	$	3,091	$	174

As of September 30, 2024, operating leases contain the following future minimum commitments:


Calendar Years ending December 31,	Amount
Remaining 2024	$	914
2025		2,982
2026		2,184
2027		2,058
2028		1,676
2029		1,421
Thereafter		2,915
Total future lease payments		14,150
Less: interest expense at incremental borrowing rate		(2,534)
Net present value of lease liabilities	$	11,616

Other assumptions and pertinent information related to the Company’s accounting for operating leases are:


Weighted average remaining lease term:	5.75	years
Weighted average discount rate used to determine present value of operating lease liability:	7.10	%

Cash paid for minimum annual rental obligations for the three and nine months ended September 30, 2024, was $433 and $1,202 respectively. Cash paid for minimum annual rental obligations for the three and nine months ended September 30, 2023, was $503 and $1,762 respectively.

Variable lease payments calculated monthly as a percentage of product and services revenue were $330 and $1,030 for the three and nine months ended September 30, 2024, respectively. Variable lease payments calculated monthly as a percentage of product and services revenue were $302 and $1,013 for the three and nine months ended September 30, 2023, respectively.

Insider Trading Arrangements	3 Months Ended
Insider Trading Arrangements	Sep. 30, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

Segment Information (Details) $ in Thousands	3 Months Ended		9 Months Ended
Segment Information (Details) $ in Thousands	Sep. 30, 2024 USD ($) location	Sep. 30, 2023 USD ($)	Sep. 30, 2024 USD ($) segment location	Sep. 30, 2023 USD ($)	Dec. 31, 2023 USD ($)
Revenue
Total revenue	$ 8,422	$ 7,468	$ 26,430	$ 22,706
Operating (loss)
Total operating (loss)	(4,769)	(12,089)	(9,040)	(23,101)
Total Depreciation & Amortization	252	590	705	1,770
Total Impairment/loss on disposal of assets	152	8,411	823	8,429
Total capital expenditures	1,587	1,760	1,587	1,760
Assets
Total long-lived Assets	12,965		12,965		$ 10,838
Total assets	33,785		$ 33,785		38,993
Number of operating segments \| segment			4
Number of reportable segments \| segment			4
XpresSpa
Revenue
Total revenue	4,711	4,955	$ 13,870	14,682
Operating (loss)
Total operating (loss)	(2,438)	(2,947)	(6,620)	(8,901)
Total Depreciation & Amortization	187	421	473	1,275
Total Impairment/loss on disposal of assets	137	1,460	156	1,468
Total capital expenditures	861	1,596	861	1,596
Assets
Total long-lived Assets	8,173		8,173		8,268
Total assets	18,933		18,933		18,453
XpresTest
Revenue
Total revenue	3,144	2,322	10,630	7,541
Operating (loss)
Total operating (loss)	1,138	(5,267)	4,450	(5,067)
Total Depreciation & Amortization	16	91	72	260
Total Impairment/loss on disposal of assets		5,338		5,348
Total capital expenditures	44	80	44	80
Assets
Total long-lived Assets	26		26		92
Total assets	1,395		1,395		2,408
Naples Wax
Revenue
Total revenue	429		1,594
Operating (loss)
Total operating (loss)	(66)		(177)
Total Depreciation & Amortization	34		97
Total capital expenditures	668		668
Assets
Total long-lived Assets	4,441		4,441		1,371
Total assets	$ 5,573		$ 5,573		2,951
Number of High- Performing Locations \| location	3		3
Treat
Revenue
Total revenue	$ 138	191	$ 336	483
Operating (loss)
Total operating (loss)	81	(1,585)	39	(2,389)
Total Depreciation & Amortization	1	66	20	198
Total Impairment/loss on disposal of assets	15	1,613	667	1,613
Total capital expenditures	4	56	4	56
Assets
Total long-lived Assets	27		27		669
Total assets	328		328		848
Corporate and Other
Operating (loss)
Total operating (loss)	(3,484)	(2,290)	(6,732)	(6,744)
Total Depreciation & Amortization	14	12	43	37
Total capital expenditures	10	$ 28	10	$ 28
Assets
Total long-lived Assets	298		298		438
Total assets	$ 7,556		$ 7,556		$ 14,333

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Cash flows from operating activities
Net loss	$ (8,854)	$ (23,099)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	705	1,770
Impairment/loss on disposal of fixed assets	569	8,429
Impairment of operating lease right-of-use assets	254
Unrealized gain on marketable securities	(301)	(668)
Gain on Lease Termination	(655)	(821)
Foreign currency remeasurement loss	210	690
Amortization of operating lease right of use asset	928	1,163
Stock-based compensation	818	1,832
(Gain) loss on equity investment	8	53
Changes in assets and liabilities:
Decrease in inventory	231	192
Decrease in accounts receivable	746	1,665
(Increase) in other assets, current and non-current	(1,233)	(336)
Increase (decrease) in deferred revenue	85	(266)
(Decrease) in other liabilities, current and non-current	(2,143)	(3,226)
Increase (decrease) in accounts payable	1,091	(251)
Net cash used in operating activities	(7,541)	(12,873)
Cash flows from investing activities
Acquisition of property and equipment	(1,054)	(1,639)
Investment in marketable securities	(238)	(1,991)
Acquisition of Naples Wax net of cash assumed		(1,574)
Sale of marketable securities	3,492	4,500
Acquisition of intangibles	(9)	(468)
Net cash provided by (used in) investing activities	2,191	(1,172)
Cash flows from financing activities
Contributions from noncontrolling interests		150
Net proceeds from stock sale	1,355
Payments for shares withheld on vesting		(22)
Stock options exercised	4
Distributions to noncontrolling interests		(120)
Net cash provided by financing activities	1,359	8
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(81)	(174)
Decrease in cash, cash equivalents and restricted cash	(4,072)	(14,211)
Cash, cash equivalents, and restricted cash at beginning of the period	9,188	19,789
Cash, cash equivalents, and restricted cash at end of the period	5,116	5,578
Cash paid for
Income taxes	36	142
Non-cash investing and financing transactions
Issuance of shares of Common Stock for legal settlement	940
Capital expenditures included in Accounts payable, accrued expenses and other current liabilities	$ 521	$ 197

Other Assets - Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Other Assets
Equity investments	$ 42	$ 50
Lease deposits	1,589	1,556
Other	201	236
Other assets	$ 1,832	$ 1,842

Leases - Supplemental Cash Flow Information Related to Leases (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023
Leases
Operating cash flows from operating leases	$ (2,585)	$ (2,668)
Leased assets obtained in exchange for new and modified operating lease liabilities	$ 3,091	$ 174

Potentially Dilutive Securities (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2024	Sep. 30, 2023	Sep. 30, 2024	Sep. 30, 2023
Earnings Per Share Disclosure.
Net loss attributable to XWELL, Inc	$ (4,750)	$ (11,531)	$ (9,258)	$ (22,770)
Basic weighted average shares outstanding	4,818,681	4,173,894	4,394,106	4,170,629
Basic net (loss) per share (in dollars per share)	$ (0.99)	$ (2.76)	$ (2.11)	$ (5.46)
Total number of potentially dilutive securities excluded from the calculation of earnings/(loss) per share attributable to common shareholders	474,695	392,361	474,695	392,361
Both vested and unvested options to purchase an equal number of shares of Common Stock
Earnings Per Share Disclosure.
Total number of potentially dilutive securities excluded from the calculation of earnings/(loss) per share attributable to common shareholders	439,487	377,717	439,487	377,717
Unvested RSUs to issue an equal number of shares of Common Stock
Earnings Per Share Disclosure.
Total number of potentially dilutive securities excluded from the calculation of earnings/(loss) per share attributable to common shareholders	35,208	14,444	35,208	14,444
Warrants to purchase an equal number of shares of Common Stock
Earnings Per Share Disclosure.
Total number of potentially dilutive securities excluded from the calculation of earnings/(loss) per share attributable to common shareholders		200		200

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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Amount, after deduction of tax, noncontrolling interests, dividends on preferred stock and participating securities; of income (loss) available to common shareholders.

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-Name Accounting Standards Codification
-Section 50
-Paragraph 32
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482810/280-10-50-32

Reference 13: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 45
-Paragraph 11
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482689/260-10-45-11

Reference 14: http://www.xbrl.org/2003/role/disclosureRef
-Topic 260
-SubTopic 10
-Name Accounting Standards Codification
-Section 45
-Paragraph 60B
-Subparagraph (c)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482689/260-10-45-60B

+ Details

Segment Information (Tables)

9 Months Ended

Sep. 30, 2024

Segment Information

Schedule of segment reporting information, by segment


	For the three months ended
	September 30,
	2024		2023
Revenue
XpresSpa	$	4,711	$	4,955
XpresTest		3,144		2,322
Naples Wax		429		—
Treat		138		191
Corporate and other		—		—
Total revenue	$	8,422	$	7,468

Operating (loss)	2024		2023
XpresSpa	$	(2,438)	$	(2,947)
XpresTest		1,138		(5,267)
Naples Wax		(66)		—
Treat		81		(1,585)
Corporate and other		(3,484)		(2,290)
Total operating (loss)	$	(4,769)	$	(12,089)

Depreciation & Amortization	2024		2023
XpresSpa	$	187	$	421
XpresTest		16		91
Naples Wax		34		—
Treat		1		66
Corporate and other		14		12
Total Depreciation & Amortization	$	252	$	590

Impairment/loss on disposal of assets	2024		2023
XpresSpa	$	137	$	1,460
XpresTest		—		5,338
Naples Wax		—		—
Treat		15		1,613
Corporate and other		—		—
Total Impairment/loss on disposal of assets	$	152	$	8,411



	For the nine months ended
	September 30,
	2024		2023
Revenue
XpresSpa	$	13,870	$	14,682
XpresTest		10,630		7,541
Naples Wax		1,594		—
Treat		336		483
Total revenue	$	26,430	$	22,706

	2024		2023
Operating loss
XpresSpa	$	(6,620)	$	(8,901)
XpresTest		4,450		(5,067)
Naples Wax		(177)		—
Treat		39		(2,389)
Corporate and other		(6,732)		(6,744)
Total operating loss	$	(9,040)	$	(23,101)

		For the nine months ended
		September 30,
	2024		2023
Depreciation & amortization
XpresSpa	$	473	$	1,275
XpresTest		72		260
Naples Wax		97		—
Treat		20		198
Corporate and other		43		37
Total depreciation & amortization	$	705	$	1,770

	2024		2023
Impairment/loss on disposal of assets
XpresSpa	$	156	$	1,468
XpresTest		—		5,348
Naples Wax		—		—
Treat		667		1,613
Corporate and other		—		—
Total Impairment/loss on disposal of assets	$	823	$	8,429

	2024		2023
Capital expenditures
XpresSpa	$	861	$	1,596
XpresTest		44		80
Naples Wax		668		—
Treat		4		56
Corporate and other		10		28
Total capital expenditures	$	1,587	$	1,760


	September 30, 2024		December 31, 2023
Long-lived Assets
XpresSpa	$	8,173	$	8,268
XpresTest		26		92
Naples Wax		4,441		1,371
Treat		27		669
Corporate and other		298		438
Total long-lived Assets	$	12,965	$	10,838

	September 30, 2024		December 31, 2023
Assets
XpresSpa	$	18,933	$	18,453
XpresTest		1,395		2,408
Naples Wax		5,573		2,951
Treat		328		848
Corporate and other		7,556		14,333
Total assets	$	33,785	$	38,993

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Current assets
Cash and cash equivalents	$ 4,365	$ 8,437
Marketable securities	11,660	14,613
Accounts receivable	914	1,667
Inventory	669	900
Other current assets	1,905	949
Total current assets	19,513	26,566
Restricted cash	751	751
Property and equipment, net	2,959	2,454
Intangible assets, net	1,107	1,353
Operating lease right of use assets, net	6,234	4,656
Goodwill	1,389	1,371
Other assets	1,832	1,842
Total assets	33,785	38,993
Current liabilities
Accounts payable	2,704	1,099
Accrued expenses and other current liabilities	3,692	4,968
Current portion of operating lease liabilities	2,508	2,402
Deferred revenue	946	861
Total current liabilities	9,850	9,330
Long-term liabilities
Operating lease liabilities	9,108	8,692
Total liabilities	18,958	18,022
Commitments and contingencies (see Note 13)
Equity
Common Stock, $0.01 par value per share, 150,000,000 shares authorized; 5,256,024 and 4,179,631 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively	53	42
Additional paid-in capital	473,773	470,737
Accumulated deficit	(465,111)	(455,853)
Accumulated other comprehensive loss	(2,411)	(1,924)
Total equity attributable to XWELL, Inc.	6,304	13,002
Noncontrolling interests	8,523	7,969
Total equity	14,827	20,971
Total liabilities and equity	$ 33,785	$ 38,993

Accrued expenses and other current liabilities - Schedule of Accrued Expenses and Other Current Liabilities (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Accrued expenses and other current liabilities
Litigation accrual		$ 449
Accrued compensation	$ 1,596	2,098
Tax-related liabilities	488	501
Common area maintenance accruals	439	8
Accounts payable accruals	110	913
Gift certificates	507	509
Credit card processing fees	6	8
Other miscellaneous accruals	546	482
Total accrued expenses and other current liabilities	$ 3,692	$ 4,968

Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Cash, Cash Equivalents, and Restricted Cash
Deposits in excess of FDIC limits	$ 2,048	$ 4,195
Amount of cash in overseas accounts	$ 2,305	$ 2,395

Leases - Future Minimum Commitments (Details) $ in Thousands	Sep. 30, 2024 USD ($)
Leases
Remaining 2024	$ 914
2025	2,982
2026	2,184
2027	2,058
2028	1,676
2029	1,421
Thereafter	2,915
Total future lease payments	14,150
Less: interest expense at incremental borrowing rate	(2,534)
Net present value of lease liabilities	$ 11,616

Intangible Assets

9 Months Ended

Sep. 30, 2024

Intangible Assets

Intangible Assets

Note 6. Intangible Assets

The following tables provides information regarding the Company’s intangible assets subject to amortization, which consist of the following:


	September 30, 2024						December 31, 2023
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Trade names	$	200	$	(23)	$	177	$	200	$	(6)	$	194
Customer relationships		1,012		(416)		596		1,012		(341)		671
Software		2,584		(2,257)		327		2,593		(2,120)		473
Licenses		30		(23)		7		35		(20)		15
Total intangible assets	$	3,826	$	(2,719)	$	1,107	$	3,840	$	(2,487)	$	1,353

The Company’s intangible assets are amortized over their expected useful lives. The Company recorded amortization expense of $78 and $396 during the three months ended September 30, 2024 and 2023, respectively, and $237 and $1,155 during the nine months ended September 30, 2024 and 2023, respectively.

Based on the intangible assets balance as of September 30, 2024, the estimated amortization expense for the remainder of the calendar year and each of the succeeding calendar years is as follows:


Calendar Years ending December 31,	Amount
Remaining 2024	$	79
2025		303
2026		228
2027		122
2028		122
Thereafter		253
Total	$	1,107

Stockholders' Equity - Variables Used in Estimating Fair Value of Stock Options (Details) - $ / shares	9 Months Ended
	Sep. 30, 2024	Aug. 06, 2024
Stockholders Equity [Line Items]
Share price of the Company's Common Stock on the grant date:		$ 2.26
Employee Stock Option
Stockholders Equity [Line Items]
Expected volatility:	121.04%
Expected dividend yield:	0.00%
Expected term:	6 years 3 months 25 days
Minimum \| Employee Stock Option
Stockholders Equity [Line Items]
Share price of the Company's Common Stock on the grant date:	$ 1.50
Exercise price:	$ 1.50
Annual average risk-free rate:	4.05%
Maximum \| Employee Stock Option
Stockholders Equity [Line Items]
Share price of the Company's Common Stock on the grant date:	$ 1.80
Exercise price:	$ 1.80
Annual average risk-free rate:	4.14%

Cash, Cash Equivalents, and Restricted Cash (Tables)

9 Months Ended

Sep. 30, 2024

Cash, Cash Equivalents, and Restricted Cash

Schedule of cash, cash equivalents, and restricted cash


	September 30, 2024		December 31, 2023
Cash denominated in United States dollars	$	1,777	$	5,726
Cash denominated in currency other than United States dollars		2,305		2,395
Restricted cash		751		751
Credit and debit card receivables		283		316
Total cash, cash equivalents and restricted cash	$	5,116	$	9,188

Other current assets - Schedule of Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Other current assets
Prepaid expenses	$ 1,814	$ 894
Other	91	55
Total other current assets	$ 1,905	$ 949

Intangible Assets - Schedule of Finite-Lived Intangible Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2024	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 3,826	$ 3,840
Accumulated Amortization	(2,719)	(2,487)
Net Carrying Amount	1,107	1,353
Trade names
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	200	200
Accumulated Amortization	(23)	(6)
Net Carrying Amount	177	194
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	1,012	1,012
Accumulated Amortization	(416)	(341)
Net Carrying Amount	596	671
Software
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	2,584	2,593
Accumulated Amortization	(2,257)	(2,120)
Net Carrying Amount	327	473
Licenses
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	30	35
Accumulated Amortization	(23)	(20)
Net Carrying Amount	$ 7	$ 15

Business, Basis of Presentation and Liquidity

9 Months Ended

Sep. 30, 2024

Business, Basis of Presentation and Liquidity

Business, Basis of Presentation and Liquidity

Note 1. Business, Basis of Presentation and Liquidity

Overview

XWELL is a global wellness company operating multiple brands and focused on bringing restorative, regenerative and reinvigorating products and services to travelers. XWELL currently has four reportable operating segments: XpresSpa®, XpresTest®, Naples Wax Center and Treat™.

On October 25, 2022, the Company changed its name to XWELL, Inc. (“XWELL” or the “Company”) from XpresSpa Group, Inc. The Company’s common stock, par value $0.01 per share, which had previously been listed under the trading symbol “XSPA” on the Nasdaq Capital Market, now trades under the trading symbol “XWEL”. The Company filed an amended and restated certificate of incorporation with the Delaware Secretary of State on October 24, 2022 (the “Amended and Restated Certificate”) reflecting the name change. Rebranding to XWELL aligned the Company’s corporate strategy to build a pure-play wellness services company, in both the airport and off-airport marketplaces.

XpresSpa

XWELL’s subsidiary, XpresSpa Holdings, LLC (“XpresSpa”) has been a global airport retailer of spa services through its XpresSpa spa locations, offering travelers premium spa services, including massage, nail and skin care, as well as spa and travel products.

As of September 30, 2024, there were 19 domestic XpresSpa locations in total, 17 Company-owned locations and two franchises. The Company also had 10 international locations operating as of September 30, 2024, including two XpresSpa locations in Dubai International Airport in the United Arab Emirates, one XpresSpa location in Zayad International Airport in Abu Dhabi, UAE, three XpresSpa locations in Schiphol Amsterdam Airport in the Netherlands and four XpresSpa locations in the Istanbul Airport in Turkey.

XpresTest

The Company, in partnership with certain COVID-19 testing partners, successfully launched its XpresCheck Wellness Centers, in June of 2020, through its XpresTest, Inc. subsidiary (“XpresTest”), which offered COVID-19 and other medical diagnostic testing services to the traveling public, as well as airline, airport and concessionaire employees, and TSA and U.S. Customs and Border Protection agents during the pandemic. During 2022 and 2023, as countries continued to relax their testing requirements resulting in rapid decline of testing volumes at the Company’s XpresCheck Wellness locations, the Company started to close XpresCheck Wellness Centers. As of December 31, 2023, we have closed all XpresCheck Wellness locations.

XpresTest, Inc began conducting bio surveillance monitoring with the Centers for Disease Control and Prevention (CDC) in collaboration with Concentric by Ginkgo BioWorks in 2021. The program was extended in January 2022 and renewed in August of 2022 and 2023. In March 2024, the program funding and scope were expanded. The program was renewed in August of 2024.

HyperPointe

XWELL’s subsidiary, gcg Connect, LLC, operating as HyperPointe, provides direct to business marketing support across a number of health and health-related channels. From the creation of marketing campaigns for the pharmaceutical industry, to learning management systems to website and health related content creation, HyperPointe is a complementary service provider to XWELL’s health-focused brands as well as providing the majority of services to the external community.

For reporting purposes, the former HyperPointe segment has been consolidated into the XpresTest segment.

Treat

Treat, which is operating through XWELL’s subsidiary Treat, Inc. (“Treat”) is a wellness brand that provides access to wellness services for travelers at on-site centers (currently located in JFK International Airport). In April 2024, the decision was made to close the location in the Salt Lake City International Airport.

Treat offers a full retail product offering and a suite of wellness and spa services. Travelers can purchase time blocks to use our wellness rooms to engage in interactive services like self-guided yoga, meditation and low impact weight exercises or to relax and unplug from the hectic pace of the airport and renew themselves before or after their trip.

Naples Wax Center

XWELL’s subsidiary Naples Wax, LLC, d/b/a Naples Wax Centers (“Naples Wax Center” or “Naples Wax”) which was acquired on September 12, 2023, for a purchase price of $1,624 operates three high-performing locations with core products and service offerings from face and body waxing to a range of skincare and cosmetic products. The acquisition of Naples Wax Center is intended to enable the Company to move beyond its airport client base with a business that can be adapted to a larger wellness platform while also growing its retail footprint to serve long-term financial goals.

XWELL Studios

The Company plans to open its first XWELL Studios location in Jacksonville, Florida in 2025. XWELL Studios is an out-of-airport concept providing leased space to established wellness service providers. Revenue will be derived from both lease payments received from the wellness practitioners and the sale of retail at the wellness center.

Basis of Presentation and Principles of Consolidation

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Article 8-03 of Regulation S-X and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as amended. The consolidated balance sheet as of December 31, 2023 was derived from the audited annual financial statements but does not include all information required by GAAP for annual financial statements. The financial statements include the accounts of the Company, all entities that are wholly owned by the Company, and all entities in which the Company has a controlling financial interest. All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected by the Company. Such adjustments are of a normal, recurring nature. The results of operations for the three and nine months ended September 30, 2024, are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period. All significant intercompany balances and transactions have been eliminated in consolidation.

Reverse Stock Split

On September 28, 2023, the Company effected a 1-for-20 reverse stock split (the “Reverse Stock Split”) whereby every twenty shares of its Common Stock were reduced to one share of its Common Stock and the price per share of its Common Stock was multiplied by 20. All references to shares and per share amounts have been adjusted to reflect the Reverse Stock Split.

Liquidity and Financial Condition

As of September 30, 2024, the Company had cash and cash equivalents of $4,365 (excluding restricted cash), $11,660 in marketable securities, and total current assets of $19,513. The Company’s total current liabilities balance, which includes accounts payable, deferred revenue, accrued expenses, and operating lease liabilities was $9,850 as of September 30, 2024, and $9,330 as of December 31, 2023. The working capital surplus was $9,663 as of September 30, 2024, compared to a working capital surplus of $17,236 as of December 31, 2023.

The Company has significantly reduced operating and overhead expenses, while it continues to focus on returning to overall profitability.

The Company has taken actions to improve its overall cash position, right sizing its corporate structure and streamlining its operations. The Company is pursuing strategic partnerships that the Company expects will further strengthen the long-term profitability of the business.

Potentially Dilutive Securities (Tables)

9 Months Ended

Sep. 30, 2024

Potentially Dilutive Securities

Schedule of computation of basic and diluted net loss per share of Common Stock


	Three months ended				Nine months ended
	September 30,				September 30,
	2024		2023		2024		2023
Basic numerator:
Net loss attributable to XWELL, Inc.	$	(4,750)	$	(11,531)	$	(9,258)	$	(22,770)
Basic denominator:
Basic weighted average shares outstanding		4,818,681		4,173,894		4,394,106		4,170,629
Basic net (loss) per share	$	(0.99)	$	(2.76)	$	(2.11)	$	(5.46)

Net loss per share data presented above excludes from the calculation of diluted net (loss) income, the following potentially dilutive securities, having an anti-dilutive impact, in case of net loss
Both vested and unvested options to purchase an equal number of shares of Common Stock		439,487		377,717		439,487		377,717
Unvested RSUs to issue an equal number of shares of Common Stock		35,208		14,444		35,208		14,444
Warrants to purchase an equal number of shares of Common Stock		—		200		—		200
Total number of potentially dilutive securities excluded from the calculation of earnings/(loss) per share attributable to common shareholders		474,695		392,361		474,695		392,361

Income Taxes

9 Months Ended

Sep. 30, 2024

Income Taxes

Income Taxes

Note 12. Income Taxes

The Company’s provision for income taxes consists of federal, state, local, and foreign taxes in amounts necessary to align the Company’s year-to-date provision for income taxes with the effective tax rate that the Company expects to achieve for the full year. Each quarter, the Company updates its estimate of the annual effective tax rate and records cumulative adjustments as deemed necessary. The income tax provision for the three and nine months ended September 30, 2024, reflects an estimated global annual effective tax rate of approximately 0% from continuing operations.

As of September 30, 2024, deferred tax assets generated from the Company’s U.S. activities were offset by a valuation allowance because realization depends on generating future taxable income, which, in the Company’s estimation, is not more likely than not to be generated before such net operating loss carryforwards expire. Net operating loss carryforwards generated after December 31, 2017, do not expire. The Company expects its effective tax rate for its current fiscal year to be significantly lower than the statutory rate as a result of a full valuation allowance; therefore, any loss before income taxes does not generate a corresponding income tax benefit. Income tax expense/(benefit) for the three and nine months ended September 30, 2024 was $0, which was attributed to state taxing jurisdictions in which a measure of income is utilized to determine a tax liability. The final annual tax rate cannot be determined until the end of the fiscal year; therefore, the actual tax rate could differ from current estimates.

- Definition

The entire disclosure for income taxes. Disclosures may include net deferred tax liability or asset recognized in an enterprise's statement of financial position, net change during the year in the total valuation allowance, approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of deferred tax liabilities and deferred tax assets, utilization of a tax carryback, and tax uncertainties information.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Topic 946
-SubTopic 20
-Name Accounting Standards Codification
-Section 50
-Paragraph 13
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480990/946-20-50-13

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Topic 235
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08(h)(2))
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-Name Accounting Standards Codification
-Publisher FASB
-URI https://asc.fasb.org//740/tableOfContent

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 14
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-14

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 21
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-21

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 270
-Name Accounting Standards Codification
-Section 50
-Paragraph 1
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482526/740-270-50-1

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section 50
-Paragraph 17
-Subparagraph (b)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482685/740-10-50-17

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 1
-Subparagraph (SAB TOPIC 6.I.5.Q1)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-1

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 10
-Name Accounting Standards Codification
-Section S99
-Paragraph 2
-Subparagraph (SAB Topic 11.C)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147479360/740-10-S99-2

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Topic 740
-SubTopic 30
-Name Accounting Standards Codification
-Section 50
-Paragraph 2
-Subparagraph (a)
-Publisher FASB
-URI https://asc.fasb.org//1943274/2147482603/740-30-50-2

+ Details

Accrued expenses and other current liabilities (Tables)

9 Months Ended

Sep. 30, 2024

Accrued expenses and other current liabilities

Schedule of accrued expenses and other current liabilities



	September 30, 2024		December 31, 2023
Litigation accrual	$	-	$	449
Accrued compensation		1,596		2,098
Tax-related liabilities		488		501
Common area maintenance accruals		439		8
Accounts payable accruals		110		913
Gift certificates		507		509
Credit card processing fees		6		8
Other miscellaneous accruals		546		482
Total accrued expenses and other current liabilities	$	3,692	$	4,968

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) - USD ($) $ in Thousands	Common stock	Additional paid-in capital	Accumulated deficit	Accumulated other comprehensive loss	Total Company equity	Non-controlling interests	Total
Balance Beginning at Dec. 31, 2022	$ 42	$ 468,530	$ (428,112)	$ (534)	$ 39,926	$ 8,023	$ 47,949
Common Stock, Shares, Outstanding, Beginning Balance at Dec. 31, 2022	4,161,613
Issuance of restricted stock units (in shares)	6,015
Value of shares Withheld to fund payroll taxes		(22)			(22)		(22)
Stock-based compensation		589			589	23	612
Foreign currency translation				(130)	(130)	11	(119)
Net loss for the period			(5,509)		(5,509)	(320)	(5,829)
Balance Ending at Mar. 31, 2023	$ 42	469,097	(433,621)	(664)	34,854	7,737	42,591
Common Stock, Shares, Outstanding, Ending Balance at Mar. 31, 2023	4,167,628
Balance Beginning at Dec. 31, 2022	$ 42	468,530	(428,112)	(534)	39,926	8,023	47,949
Common Stock, Shares, Outstanding, Beginning Balance at Dec. 31, 2022	4,161,613
Net loss for the period							(23,099)
Balance Ending at Sep. 30, 2023	$ 42	470,270	(450,882)	(1,642)	17,788	7,869	25,657
Common Stock, Shares, Outstanding, Ending Balance at Sep. 30, 2023	4,174,381
Balance Beginning at Mar. 31, 2023	$ 42	469,097	(433,621)	(664)	34,854	7,737	42,591
Common Stock, Shares, Outstanding, Beginning Balance at Mar. 31, 2023	4,167,628
Issuance of restricted stock units (in shares)	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)
Balance Ending at Jun. 30, 2023	$ 42	469,700	(439,351)	(1,128)	29,263	7,737	37,000
Common Stock, Shares, Outstanding, Ending Balance at Jun. 30, 2023	4,170,925
Issuance of restricted stock units (in shares)	3,456
Stock-based compensation		567			567	24	591
Grant of stock for services		3			3		3
Distributions to noncontrolling interests						150	150
Foreign currency translation				(514)	(514)	18	(496)
Net loss for the period			(11,531)		(11,531)	(60)	(11,591)
Balance Ending at Sep. 30, 2023	$ 42	470,270	(450,882)	(1,642)	17,788	7,869	25,657
Common Stock, Shares, Outstanding, Ending Balance at Sep. 30, 2023	4,174,381
Balance Beginning at Dec. 31, 2023	$ 42	470,737	(455,853)	(1,924)	13,002	7,969	$ 20,971
Common Stock, Shares, Outstanding, Beginning Balance at Dec. 31, 2023	4,179,631						4,179,631
Issuance of restricted stock units (in shares)	2,986
Stock-based compensation		259			259	23	$ 282
Foreign currency translation				(175)	(175)	45	(130)
Net loss for the period			(2,512)		(2,512)	154	(2,358)
Balance Ending at Mar. 31, 2024	$ 42	470,996	(458,365)	(2,099)	10,574	8,191	18,765
Common Stock, Shares, Outstanding, Ending Balance at Mar. 31, 2024	4,182,617
Balance Beginning at Dec. 31, 2023	$ 42	470,737	(455,853)	(1,924)	13,002	7,969	$ 20,971
Common Stock, Shares, Outstanding, Beginning Balance at Dec. 31, 2023	4,179,631						4,179,631
Net loss for the period							$ (8,854)
Balance Ending at Sep. 30, 2024	$ 53	473,773	(465,111)	(2,411)	6,304	8,523	$ 14,827
Common Stock, Shares, Outstanding, Ending Balance at Sep. 30, 2024	5,256,024						5,256,024
Balance Beginning at Mar. 31, 2024	$ 42	470,996	(458,365)	(2,099)	10,574	8,191	$ 18,765
Common Stock, Shares, Outstanding, Beginning Balance at Mar. 31, 2024	4,182,617
Issuance of restricted stock units (in shares)	818
Exercise of stock options		4			4		4
Exercise of stock options (in shares)	3,000
Stock-based compensation		281			281	23	304
Foreign currency translation				(65)	(65)	11	(54)
Net loss for the period			(1,996)		(1,996)	205	(1,791)
Balance Ending at Jun. 30, 2024	$ 42	471,281	(460,361)	(2,164)	8,798	8,430	17,228
Common Stock, Shares, Outstanding, Ending Balance at Jun. 30, 2024	4,186,435
Issuance of restricted stock units (in shares)	884
Stock issued related to legal settlement	$ 4	936			940		940
Stock issued related to legal settlement (in shares)	416,000
Stock-based compensation		208			208	24	232
Proceeds from registered offering	$ 7	1,348			1,355		1,355
Proceeds from registered offering (in shares)	652,705
Foreign currency translation				(247)	(247)	24	(223)
Net loss for the period			(4,750)		(4,750)	45	(4,705)
Balance Ending at Sep. 30, 2024	$ 53	$ 473,773	$ (465,111)	$ (2,411)	$ 6,304	$ 8,523	$ 14,827
Common Stock, Shares, Outstanding, Ending Balance at Sep. 30, 2024	5,256,024						5,256,024

Potentially Dilutive Securities

9 Months Ended

Sep. 30, 2024

Potentially Dilutive Securities

Potentially Dilutive Securities

Note 3. Potentially Dilutive Securities

The table below presents the computation of basic and diluted net loss per share of Common Stock:


	Three months ended				Nine months ended
	September 30,				September 30,
	2024		2023		2024		2023
Basic numerator:
Net loss attributable to XWELL, Inc.	$	(4,750)	$	(11,531)	$	(9,258)	$	(22,770)
Basic denominator:
Basic weighted average shares outstanding		4,818,681		4,173,894		4,394,106		4,170,629
Basic net (loss) per share	$	(0.99)	$	(2.76)	$	(2.11)	$	(5.46)

Net loss per share data presented above excludes from the calculation of diluted net (loss) income, the following potentially dilutive securities, having an anti-dilutive impact, in case of net loss
Both vested and unvested options to purchase an equal number of shares of Common Stock		439,487		377,717		439,487		377,717
Unvested RSUs to issue an equal number of shares of Common Stock		35,208		14,444		35,208		14,444
Warrants to purchase an equal number of shares of Common Stock		—		200		—		200
Total number of potentially dilutive securities excluded from the calculation of earnings/(loss) per share attributable to common shareholders		474,695		392,361		474,695		392,361

Other Assets

9 Months Ended

Sep. 30, 2024

Other Assets

Other Assets

Note 10. Other Assets

As of September 30, 2024 and December 31, 2023, assets consisted of the following:


	September 30, 2024		December 31, 2023
Equity investments	$	42	$	50
Lease deposits		1,589		1,556
Other		201		236
Other assets	$	1,832	$	1,842

Cash, Cash Equivalents, and Restricted Cash

9 Months Ended

Sep. 30, 2024

Cash, Cash Equivalents, and Restricted Cash

Cash, Cash Equivalents, and Restricted Cash

Note 4. Cash, Cash Equivalents, and Restricted Cash

A reconciliation of the Company’s cash and cash equivalents in the Unaudited Condensed Consolidated Balance Sheets to cash, cash equivalents and restricted cash in the Unaudited Condensed Consolidated Statements of Cash Flows as of September 30, 2024, and December 31, 2023 is as follows:


	September 30, 2024		December 31, 2023
Cash denominated in United States dollars	$	1,777	$	5,726
Cash denominated in currency other than United States dollars		2,305		2,395
Restricted cash		751		751
Credit and debit card receivables		283		316
Total cash, cash equivalents and restricted cash	$	5,116	$	9,188

The Company places its cash and temporary cash investments with credit quality institutions. At times, such cash denominated in United States dollars may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance

limit. As of September 30, 2024, and December 31, 2023, deposits in excess of FDIC limits were $2,048 and $4,195, respectively. As of September 30, 2024, and December 31, 2023, the Company held cash balances in overseas accounts, totaling $2,305 and $2,395 respectively, which are not insured by the FDIC. If the Company were to distribute the amounts held overseas, the Company would need to follow an approval and distribution process as defined in its operating and partnership agreements, which may delay and/or reduce the availability of that cash to the Company.