XWEL

XWELL, Inc. (XWEL) - Q1 2026 10-Q Summary

Business Context and Reporting Period

This report covers the quarterly period ended March 31, 2026. XWELL, Inc. is a global wellness organization operating three reportable segments: XpresSpa (airport spa services), XpresTest (bio-surveillance and public health), and Naples Wax Center (hair removal and skincare). The company is classified as a non-accelerated filer and a smaller reporting company.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased by 5.5% ($0.39 million) primarily due to the cessation of the HyperPointe segment operations in late 2025 and reduced surge billing in the XpresTest segment compared to Q1 2025.
• Cost Reduction: Cost of sales decreased by 24.9% ($1.42 million), driven by the elimination of HyperPointe costs and reduced labor/operating expenses.
• Increased Operating Expenses: General and administrative (G&A) expenses surged 76.2% to $7.60 million. This increase was driven by higher franchise taxes, stock-based compensation ($0.89 million vs $0.08 million), and related-party consulting fees.
• Non-Operating Losses: A significant non-cash loss of $5.58 million was recorded due to the change in fair value of derivative liabilities associated with convertible notes prior to their repurchase.
• Liquidity Improvement: Cash balances increased from $2.62 million to $16.80 million, transforming a working capital deficit into a surplus of $11.36 million.

Guidance, Outlook, and Material Events

• Capital Raise (February 2026): The company completed a private placement of Series H Convertible Preferred Stock and warrants, generating net proceeds of $28.27 million. This was the primary driver of improved liquidity.
• Debt Restructuring: Using proceeds from the capital raise, the company repurchased all outstanding Series G Preferred Stock, convertible notes, and related warrants for an aggregate cash price of $9.00 million. This eliminated the convertible senior secured note and derivative liabilities from the balance sheet.
• Going Concern: Management believes the company has sufficient liquidity to fund operations for at least the next twelve months, alleviating previous substantial doubt about its ability to continue as a going concern.
• Internal Control Weaknesses: Management concluded that disclosure controls and procedures were not effective as of March 31, 2026. Material weaknesses were identified in lease accounting (ASC 842), entity-level monitoring, service organization controls, revenue processes, and controls over foreign subsidiaries.
• Legal Proceedings: An employment litigation matter initiated in November 2025 was settled for a de minimis amount. An arbitration regarding XpresSpa operations in Atlanta is pending a final decision.

Investor Verification Checklist

• Capital Structure Dilution: Verify the impact of the 66.7 million Series H Conversion Shares and 66.7 million Series H Warrants on future earnings per share.
• Derivative Accounting: Confirm the valuation methodology used for the $5.58 million derivative loss and ensure no similar liabilities remain post-repurchase.
• Internal Control Remediation: Monitor the progress of the remediation plan for the five identified material weaknesses in internal controls over financial reporting.
• Segment Performance: Analyze the sustainability of XpresTest revenue, which relies heavily on government contracts (CDC/Ginkgo Bioworks), versus the organic growth of XpresSpa and Naples Wax.
• Related Party Transactions: Review the $0.56 million in consulting fees paid to a related party (Jason Aintabi/XWEL INV I) included in G&A expenses.