XWEL

XWELL, Inc. (XWEL) 2025 Annual Report Summary

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2025. XWELL, Inc. is a global wellness organization operating through three reportable segments: XpresSpa (airport spa services), XpresTest (bio-surveillance monitoring for the CDC), and Naples Wax Center (off-airport hair removal and skincare). The company operates 35 locations across the U.S., Netherlands, Turkey, and the United Arab Emirates. The filing notes a strategic shift toward off-airport expansion and international growth, though the company previously faced substantial doubt regarding its ability to continue as a going concern.

Key Financial Metrics (Year Ended Dec 31, 2025)

Note: All figures in thousands unless otherwise noted. The company recorded significant non-cash impairment charges totaling approximately $6.3 million in 2025, including a full goodwill impairment of $1.4 million related to Naples Wax.

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 14% to $29.2 million, primarily driven by a significant drop in XpresTest revenue due to reduced testing volumes, partially offset by growth in Naples Wax.
• Cost Reductions: Cost of sales decreased 13% to $21.7 million, and General and Administrative (G&A) expenses dropped 20% to $16.0 million due to cost-optimization and the closure of underperforming locations (including the "Treat" brand).
• Impairments: The company recognized $3.1 million in long-lived asset impairments and $1.7 million in operating lease right-of-use asset impairments, largely attributed to the Naples Wax segment and underperforming spa locations.
• Capital Structure: The company issued Series G Convertible Preferred Stock in January 2025 and subsequently exchanged portions for senior secured convertible notes in November 2025. These transactions resulted in significant non-cash "deemed dividends" and losses on issuance.

Guidance, Outlook, Risks, and Unusual Items

Going Concern & Liquidity: As of December 31, 2025, the company had a working capital deficit. However, management concluded that substantial doubt about its ability to continue as a going concern has been alleviated following a February 2026 Private Placement of Series H Convertible Preferred Stock and warrants, raising approximately $31.3 million in gross proceeds. Proceeds were used to repurchase notes and redeem preferred stock.

Internal Controls: The company identified material weaknesses in internal controls over financial reporting, specifically regarding lease accounting (ASC 842), revenue processes, and controls over foreign subsidiaries. Remediation efforts are underway.

Key Risks:

• Geopolitical Conflict: Operations in the United Arab Emirates (Dubai and Abu Dhabi) face risks from military conflict in the Middle East, including potential airport closures and reduced passenger traffic.
• Regulatory & Compliance: Risks related to ACDBE (Airport Concession Disadvantaged Business Enterprise) participation goals and potential loss of concessions if not met.
• Market Volatility: The company recently regained compliance with Nasdaq's minimum bid price rule ($1.00) after a period of non-compliance.

Investor Verification Checklist

• Capital Raise Execution: Verify the closing of the February 2026 Series H Private Placement and the specific use of proceeds to retire debt and preferred equity.
• Internal Control Remediation: Monitor progress on fixing material weaknesses in lease and revenue accounting to ensure future financial statement reliability.
• Geopolitical Exposure: Assess the impact of ongoing Middle East conflicts on revenue from UAE locations (approx. 20% of total revenue).
• Naples Wax Performance: Review the operational turnaround of the Naples Wax segment, which triggered significant goodwill and asset impairments in 2025.
• Dilution Impact: Analyze the dilutive effect of the Series H Preferred Stock and associated warrants (convertible into ~66.7 million shares) on existing common shareholders.