10-Q: XWELL Reports Deepening Losses, Going Concern Doubt

XWELL, Inc. reported a significant increase in net loss and revenue decline for the second quarter and first half of 2025, raising substantial doubt about its ability to continue as a going concern despite regaining Nasdaq compliance.

Summary

• XWELL, Inc. reported a net loss attributable to common stockholders of $3.041 million for the three months ended June 30, 2025, compared to $1.996 million for the same period in 2024, representing a 52.3% increase in loss.
• For the six months ended June 30, 2025, the net loss attributable to common stockholders was $8.327 million, up from $4.508 million in the prior year, an 84.7% increase.
• Total revenue for the three months ended June 30, 2025, decreased by 17% to $7.689 million from $9.282 million in the prior year period.
• Total revenue for the six months ended June 30, 2025, decreased by 18% to $14.712 million from $18.008 million in the prior year period.
• The company reported a basic and diluted loss per share of $0.56 for Q2 2025, compared to $0.48 for Q2 2024.
• Basic and diluted loss per share for the six months ended June 30, 2025, was $1.56, compared to $1.08 for the same period in 2024.
• Net cash used in operating activities for the six months ended June 30, 2025, increased to $6.564 million from $4.125 million in the prior year.
• Working capital surplus significantly decreased to $2.357 million as of June 30, 2025, from $6.113 million as of December 31, 2024.
• The company successfully regained compliance with the Nasdaq minimum bid price rule on August 7, 2025, after its common stock traded at or above $1.00 per share for 16 consecutive business days.
• The XpresTest bio-surveillance program contract with Ginkgo Bioworks was extended through a three-year agreement with a total base value of $22.2 million and a maximum ceiling value of $24.8 million.
• A private placement on January 14, 2025, generated gross proceeds of $4 million ($3.745 million net) through the issuance of Series G Convertible Preferred Stock and warrants.
• All Treat locations have been converted to XWELL locations by Q2 2025.

Sentiment

Score: 3

Explanation: The company faces severe financial challenges, including recurring losses, negative cash flow, and an explicit 'going concern' warning. While there are efforts to remediate issues and some positive developments like Nasdaq compliance and a contract extension, the overall financial deterioration and internal control weaknesses indicate a highly precarious situation.

Positives

• Regained compliance with the Nasdaq minimum bid price requirement as of August 7, 2025.
• Extended the XpresTest bio-surveillance program contract with Ginkgo Bioworks for three years, with a base value of $22.2 million and a maximum ceiling of $24.8 million, providing future revenue stability.
• Cash and cash equivalents increased to $5.263 million as of June 30, 2025, from $4.550 million as of December 31, 2024.
• Successfully completed a private placement on January 14, 2025, raising $3.745 million in net proceeds for general corporate purposes.

Negatives

• Suffered recurring losses and negative cash flows from operations, leading management to conclude that substantial doubt exists about the company's ability to continue as a going concern.
• Total revenue decreased by 17% for the three months ended June 30, 2025, and 18% for the six months ended June 30, 2025, primarily due to less CDC revenue for XpresTest and reduced Priority Pass revenue for XpresSpa.
• Net loss attributable to XWELL, Inc. increased to $2.269 million for Q2 2025 from $1.996 million for Q2 2024, and to $6.988 million for YTD Q2 2025 from $4.508 million for YTD Q2 2024.
• Basic and diluted loss per share worsened to $0.56 for Q2 2025 from $0.48 for Q2 2024, and to $1.56 for YTD Q2 2025 from $1.08 for YTD Q2 2024.
• Net cash used in operating activities increased significantly to $6.564 million for the six months ended June 30, 2025, from $4.125 million in the prior year.
• Working capital surplus decreased substantially to $2.357 million as of June 30, 2025, from $6.113 million as of December 31, 2024.
• Experienced a significant increase in foreign exchange loss, primarily due to the fluctuation of the Turkish Lira on lease liability, with a loss of $543 thousand in Q2 2025 compared to a gain of $25 thousand in Q2 2024.

Risks

• Substantial doubt exists about the company's ability to continue as a going concern due to recurring losses and insufficient liquidity.
• Inability to raise sufficient additional equity or debt capital could force delays, reductions, or elimination of operations, asset sales, or mergers.
• The company's ability to operate depends on a large number of airplane travelers with a propensity for health and wellness services, which is volatile and subject to various conditions.
• Ongoing geopolitical conflicts (Russia/Ukraine, Israel/Palestine) could adversely impact macroeconomic conditions, market volatility, and business operations.
• Failure to maintain compliance with Nasdaq listing requirements in the future could result in delisting of common stock, negatively affecting price, liquidity, and ability to raise capital.
• Material weaknesses in internal control over financial reporting were identified as of June 30, 2025, including issues with accounting for leases, entity-level monitoring, controls over service organizations/IT vendors, revenue process controls, and foreign subsidiaries.
• The company is involved in an arbitration proceeding related to XpresSpa locations in Hartsfield-Jackson Atlanta International Airport, with an arbitration hearing scheduled for March 2026.

Future Outlook

Management is focused on returning to overall profitability through various strategic initiatives, including cost reduction efforts, capital spending controls, and exploration of additional financing options. The company plans to expand its retail strategy by adding more products aligned with service offerings and building capabilities for health and wellness services outside of airports. International expansion is also a strategic goal to broaden the reach of its brands, including bio-surveillance outside the U.S. The company is aggressively pursuing strategic partnerships to strengthen long-term profitability and its position for future capital raises.

Management Comments

• Management has concluded that substantial doubt exists about the company's ability to continue as a going concern for at least one year from the date of issuance of these unaudited condensed consolidated financial statements due to recurring losses and negative cash flows from operations and insufficient liquidity.
• The company has significantly reduced operating and overhead expenses and continues to focus on returning to overall profitability.
• Management is implementing various strategic initiatives to reduce operating expenses, improve working capital, and enhance cash flow, including cost reduction efforts, capital spending controls, and exploration of additional financing options.
• The company is aggressively trying to get the company to profitability, which is believed to strengthen the company's stock price and put it in a stronger position to raise capital in 2025 and beyond.
• Aggressively pursuing strategic partnerships is expected to further strengthen the long-term profitability of the business, positioning the company for strength in raising more capital.

Industry Context

XWELL operates within the global wellness industry, specifically targeting travelers through its airport-based XpresSpa services and bio-surveillance programs via XpresTest. The company is expanding its footprint beyond airports with Naples Wax Center and its HyperPointe subsidiary, which provides marketing support to the pharmaceutical industry and health-related content. This diversification aims to leverage its wellness platform across various channels and scale its brands, aligning with broader trends of health and wellness integration into daily life and travel.

Corporate Governance

Legal Proceedings

• XpresSpa Holdings, LLC is party to an arbitration proceeding (Arbitration Case No. 2126399) requested by the City of Atlanta, relating to alleged breaches of contract and improper conduct concerning XpresSpa locations in Hartsfield-Jackson Atlanta International Airport. An arbitration hearing is scheduled for March 2026.

Related Party Transactions

• On January 30, 2025, the company entered into a consulting agreement with XWEL INV I, LLC and Jason Aintabi (a greater than 5% beneficial owner of the company's securities). This agreement was extended on May 12, 2025, for a total period of twelve months, with a total amount of $530,000. For the six months ended June 30, 2025, $346,000 of this contract was recognized in general and administrative expenses.

Stakeholder Impact

• Shareholders face significant risk of value erosion due to recurring losses, negative cash flow, and the explicit 'going concern' warning. Potential future capital raises could lead to further dilution.
• Employees may face uncertainty regarding job security and company stability given the financial challenges and ongoing cost reduction efforts.
• Customers of XpresSpa, XpresTest, and Naples Wax Center may experience potential disruptions or changes in service offerings if the company's financial condition does not improve.
• Creditors and suppliers face increased risk due to the company's liquidity issues and the substantial doubt about its ability to continue as a going concern.

Next Steps

• Redeem Series G Preferred Stock in six equal quarterly installments, commencing on July 1, 2025.
• Continue implementing strategic initiatives to reduce operating expenses, improve working capital, and enhance cash flow.
• Explore additional financing options to secure sufficient liquidity for future operations.
• Expand retail strategy by adding more products and aligning them with service offerings.
• Build capability for delivering health and wellness services outside of the airport.
• Further expand internationally to advance the ability to expand other brands, including bio-surveillance outside the U.S.
• Aggressively pursue strategic partnerships to strengthen long-term profitability.
• Remediate identified material weaknesses in internal control over financial reporting, including turning on multi-currency features in accounting systems, engaging outside service providers for valuation/accounting/reporting, contracting an independent consulting firm for financial statements/GAAP research, and reviewing complementary user entity controls.
• Participate in an arbitration hearing scheduled for March 2026 regarding XpresSpa locations in Atlanta.

Key Dates

Recommendation

The company's financial health is severely distressed, marked by recurring and increasing net losses, negative cash flow from operations, and a significant decline in working capital. Management has explicitly stated 'substantial doubt' about the company's ability to continue as a going concern. While regaining Nasdaq compliance and extending a key contract are minor positives, they are heavily outweighed by the fundamental financial deterioration and identified material weaknesses in internal controls. The need for further capital raises in a challenging financial environment, coupled with a declining stock price, suggests a high probability of further shareholder value destruction. A seasoned investor would likely view this as a high-risk investment with significant downside potential.

Keywords

XWELL, XWEL, SEC filing, 10-Q, financial results, Q2 2025, XpresSpa, XpresTest, Naples Wax Center, wellness services, airport retail, bio-surveillance, Nasdaq compliance, going concern, preferred stock, warrants, financial reporting, liquidity