XWEL

XWELL, Inc. (XWEL) - 10-Q Summary for Period Ended June 30, 2026

Business Context and Reporting Period

This Quarterly Report on Form 10-Q covers the three and six months ended June 30, 2026. XWELL, Inc. is a global wellness organization operating three reportable segments: XpresSpa (airport spa services), XpresTest (bio-surveillance and public health support), and Naples Wax Center (non-airport hair removal and skincare). The Company is classified as a non-accelerated filer and a smaller reporting company.

Key Financial Metrics

Note: The Company reported a net loss attributable to common stockholders of $(2,240) for the quarter and $(13,418) for the six-month period.

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased by 7% ($544k) for the quarter and 6% ($928k) for the six months compared to the prior year periods. This was primarily driven by the cessation of HyperPointe operations in late 2025 and a slight decrease in Naples Wax revenue.
• Cost Reduction: Cost of sales decreased significantly by 29% ($1.7M) for the quarter and 27% ($3.1M) for the six months, largely due to the elimination of HyperPointe labor costs and reduced workforce.
• Capital Structure Simplification: In Q1 2026, the Company repurchased all outstanding Series G Preferred Stock, convertible notes, and related warrants for $9.0 million. Consequently, derivative liabilities and warrant liabilities were extinguished, eliminating the volatility associated with their fair value changes seen in the prior year.
• Liquidity Improvement: Cash and cash equivalents increased from $2.6M (Dec 31, 2025) to $11.8M (June 30, 2026). Working capital shifted from a deficit of $6.98M to a surplus of $8.47M.
• Segment Performance: XpresTest generated significant operating income ($1.5M for the quarter) due to CDC bio-surveillance contracts, while XpresSpa reported an operating loss of $42k for the quarter.

Guidance, Outlook, and Risks

• Strategic Sale Proposal: On July 6, 2026, the Company entered into a Securities Purchase Agreement to sell substantially all of its airport-based operations (XpresSpa and XpresTest) to Express Wellness Group, LLC for approximately $13.0 million. The transaction is subject to shareholder approval and is expected to close in Q4 2026. Post-sale, the Company intends to focus on non-airport wellness businesses, primarily Naples Wax Center.
• Liquidity Outlook: Management believes it has sufficient liquidity to fund operations for at least the next twelve months, bolstered by net proceeds of $28.3M from a February 2026 private placement of Series H Convertible Preferred Stock.
• Internal Control Weaknesses: The Company identified material weaknesses in internal controls over financial reporting as of June 30, 2026, specifically regarding lease accounting (ASC 842), revenue processes, and monitoring controls over foreign subsidiaries. A remediation plan is underway.
• Risks: Risks include the failure to obtain shareholder approval for the asset sale, geopolitical instability affecting travel volumes, and the inability to raise additional capital if needed.

Investor Verification Checklist

• Asset Sale Approval: Verify the status of the shareholder vote required to approve the $13.0 million sale of airport operations.
• Series H Preferred Stock Terms: Review the conversion price ($0.47) and dilution impact of the 31,333 shares of Series H Preferred Stock and associated warrants issued in February 2026.
• Internal Control Remediation: Monitor progress on fixing material weaknesses in lease accounting and revenue recognition to ensure future financial statement reliability.
• Post-Sale Business Model: Assess the financial viability of the remaining non-airport business (Naples Wax Center) once the primary revenue drivers (XpresSpa/XpresTest) are divested.
• Legal Contingencies: Review the final judgment in the XpresSpa v. Cordial arbitration (approx. $118k payable) and any potential appeals.