XpresSpa Group, Inc. — FY2020 Form 10-K Summary
Reporting period: Fiscal year ended December 31, 2020. The filing is an annual report, not a standalone fourth-quarter report; it does not provide a clear standalone Q4 financial results breakdown. Dollar amounts below are in millions unless stated otherwise. The company is now known as XWELL, Inc.; this filing was submitted under the name XpresSpa Group, Inc.
Business context
The company operated two reportable segments: XpresSpa, its airport spa and retail business, and XpresTest, which launched XpresCheck airport diagnostic-testing centers in 2020. At year-end it reported 45 XpresSpa locations and five XpresCheck locations. Effective March 24, 2020, it closed its global spa locations in response to COVID-19 restrictions; substantially all remained closed at year-end.
Financial performance and liquidity
| Metric | FY2020 | FY2019 |
|---|---|---|
| Revenue | $8.385 | $48.515 |
| Cost of sales | $11.983 | $37.854 |
| Gross profit (loss), calculated | $(3.598) | $10.661 |
| Operating loss | $(40.104) | $(15.872) |
| Net loss | $(92.232) | $(20.530) |
| Net loss attributable to common shareholders | $(90.488) | $(21.223) |
| Adjusted EBITDA loss (non-GAAP) | $(18.210) | $(3.323) |
- Revenue declined 83% year over year. Services were 84% of 2020 revenue, products 12%, and other revenue 4%.
- Calculated gross margin was approximately negative 42.9%, compared with approximately 22.0% in 2019. The company reported an 83.7% decline in comparable-store sales.
- The $15.356 million impairment/disposal charge included $4.954 million for property and equipment, $6.341 million for lease right-of-use assets, and $3.934 million for the XpresSpa trade name.
- The $51.147 million loss on revaluation of warrants and conversion options was a major driver of the net loss; it reflected fair-value changes in financing instruments and was not equivalent to operating cash outflow.
- Operating cash used was $25.012 million; investing cash used was $4.349 million; financing cash provided was $117.225 million. Capital expenditures were $3.969 million.
- Year-end cash and cash equivalents were $89.801 million, current assets $91.779 million, current liabilities $13.477 million, and working capital $78.302 million, versus a $12.287 million working-capital deficit at year-end 2019. Total assets were $103.133 million and total liabilities $22.762 million.
- Debt reported at year-end was $5.653 million, consisting of the PPP promissory note; the B3D senior secured note and Calm convertible note had been converted into common shares during 2020. Operating lease liabilities totaled $9.727 million.
- The company raised $110.619 million net from direct stock offerings and warrants during 2020. Common shares outstanding rose from 5.157 million at year-end 2019 to 94.059 million at year-end 2020, following a 1-for-3 reverse split and substantial equity issuance. It reported 105.282 million shares outstanding as of March 26, 2021.
Material changes, outlook, and risks
- Business transition: XpresCheck opened centers at JFK, Newark, Boston Logan, Phoenix, and Denver during 2020. The company also described plans for a broader travel health and wellness offering combining airport services with digital and telemedicine access; no quantified launch targets or financial guidance were provided.
- XpresCheck revenue uncertainty: The company initially recorded $80,000 in management-fee revenue but concluded that collection criteria were not met for further MSA fees. It recorded $886,000 of payments received as a deposit contract liability.
- Cash needs: Despite year-end liquidity, the company reported continuing operating cash outflows and expected near-term losses. It said additional funding could be needed to expand XpresCheck and develop its new concept; further equity financing could dilute shareholders.
- COVID-19 and operations: Reopening XpresSpa depended on restrictions easing and airport traffic returning to economically support operations. The company received $2.562 million in minimum-rent concessions in 2020, but concessions and lease terms may change. COVID-19 duration, travel demand, testing demand, and testing economics remained uncertain.
- Controls and audit: Management concluded internal control over financial reporting and disclosure controls were ineffective at December 31, 2020 because of an unremediated material weakness in the financial close/reporting process and insufficient experienced accounting personnel. Management described remediation steps, but had not established that they were effective. The 2020 financial statements received an unqualified audit opinion; the auditor identified long-lived asset and intangible-asset valuation as critical audit matters.
- Other risks and contingencies: Risks include testing regulation and accuracy, dependence on physician and supplier partners, privacy and cybersecurity, airport leases and concession requirements, and the company’s ability to retain staff and secure capital. A $2.221 million litigation accrual was recorded. In one contract dispute, a court awarded plaintiffs $750,000 plus prejudgment interest, with another $150,000 claim still scheduled for trial as of the filing; the company stated it intended to appeal unfavorable rulings.
- Financing and dilution: The PPP loan was $5.653 million at 1% interest, due May 2, 2022, and forgiveness was not assured. At year-end, 48.044 million warrants were outstanding. Subsequent to year-end, warrant exercises generated approximately $19.161 million gross proceeds, alongside additional placement-agent warrants.
Important facts for investors to verify
- Current XpresSpa reopening status, operating location count, and the airport traffic or unit-economics thresholds management expects to require.
- XpresCheck center-level revenue, margins, cash burn, MSA collectability, and the durability of testing demand; these are not clearly quantified in the filing.
- Cash runway and expected funding requirements after year-end, including the effect of warrant exercises, outstanding warrants, and future dilution.
- PPP loan forgiveness status and current debt, lease, and rent-concession obligations.
- Progress and independent validation of the material-weakness remediation plan.
- Updates on the $750,000 court award, remaining litigation exposure, and any settlement or appeal outcomes.