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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___ to ___

Commission file number: 001-34785

XpresSpa Group, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

 

20-4988129

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

 

 

254 West 31st Street, 11th Floor, New York, NY

 

10001

(Address of principal executive offices)

 

(Zip Code)

(Registrant’s Telephone Number, Including Area Code): (212) 309-7549

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock, par value $0.01 per share

 

XSPA

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes      No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  

As of November 5, 2021, 105,662,421 shares of the registrant’s common stock were outstanding.

PART I - FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial Statements (Unaudited)

XpresSpa Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

    

September 30, 

    

December 31, 

2021

2020

Current assets

 

  

 

  

Cash and cash equivalents (including $1,080 of variable interest entities (see note 3) as of September 30, 2021)

$

109,161

$

89,801

Accounts receivable, net

64

-

Inventory

 

2,040

 

657

Other current assets

 

1,835

 

1,321

Total current assets

 

113,100

 

91,779

Restricted cash

 

751

 

701

Property and equipment, net

 

4,532

 

4,161

Intangible assets, net

 

2,725

 

870

Operating lease right of use assets

 

5,667

 

3,034

Other assets

 

2,502

 

2,588

Total assets

$

129,277

$

103,133

Current liabilities

 

  

 

  

Accounts payable, accrued expenses and other

$

8,724

$

6,468

Current portion of operating lease liabilities

2,797

2,797

Deferred revenue

24

914

Current portion of promissory note, unsecured

5,653

3,298

Total current liabilities

 

17,198

 

13,477

Long-term liabilities

 

 

Promissory note, unsecured

-

2,355

Operating lease liabilities

 

8,156

 

6,930

Total liabilities

25,354

 

22,762

Commitments and contingencies (see Note 14)

 

  

 

  

Equity

 

  

 

  

Series A Convertible Preferred Stock, $0.01 par value per share; 6,968 shares authorized; none issued and outstanding

 

-

 

-

Series C Junior Preferred Stock, $0.01 par value per share; 300,000 shares authorized; none issued and outstanding

 

-

 

-

Series D Convertible Preferred Stock, $0.01 par value per share; 500,000 shares authorized; none issued and outstanding

 

-

 

-

Series E Convertible Preferred Stock, $0.01 par value per share, 2,397,060 shares authorized; none issued and outstanding

 

-

 

-

Series F Convertible Preferred Stock, $0.01 par value per share, 9,000 shares authorized; none issued and outstanding

-

-

Common Stock, $0.01 par value per share, 150,000,000 shares authorized; 105,327,379 and 94,058,853 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

1,053

941

Additional paid-in capital

 

493,814

 

475,709

Accumulated deficit

 

(398,550)

 

(398,624)

Accumulated other comprehensive loss

 

(283)

 

(220)

Total equity attributable to XpresSpa Group, Inc.

 

96,034

 

77,806

Noncontrolling interests

 

7,889

 

2,565

Total equity

 

103,923

 

80,371

Total liabilities and equity

$

129,277

$

103,133

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

3

XpresSpa Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

Three months ended September 30, 

Nine months ended September 30, 

    

2021

    

2020

    

2021

    

2020

    

Revenue, net

 

  

 

  

 

  

 

  

 

Managed services fees

$

-

$

-

$

16,843

$

-

Patient services revenue

25,351

-

25,351

-

Services

1,158

93

1,761

6,779

Products

 

258

 

45

 

402

 

936

 

Other

-

63

14

347

Total revenue, net

 

26,767

 

201

 

44,371

 

8,062

 

Cost of sales

 

  

 

  

 

  

 

  

 

Labor

 

4,277

 

514

 

7,419

 

5,480

 

Occupancy

 

587

 

468

 

1,511

 

2,334

 

Products and other operating costs

 

8,798

 

423

 

16,592

 

1,737

 

Total cost of sales

 

13,662

 

1,405

 

25,522

 

9,551

 

Depreciation and amortization

 

852

 

1,424

 

2,542

 

3,875

 

Impairment/disposal of assets

-

2,227

22

6,319

General and administrative

 

5,196

 

4,368

 

14,350

 

10,972

 

Total operating expenses

 

19,710

 

9,424

 

42,436

 

30,717

 

Operating income (loss)

 

7,057

 

(9,223)

 

1,935

 

(22,655)

 

Interest income (expense), net

 

6

 

(120)

 

31

 

(1,856)

 

Gain (loss) on revaluation of warrants and conversion options

-

2,750

-

(50,917)

Other non-operating expense, net

 

(381)

 

(47)

 

(830)

 

(389)

 

Income (loss) before income taxes

 

6,682

 

(6,640)

 

1,136

 

(75,817)

 

Income tax expense

 

(87)

 

(3)

 

(79)

 

(22)

 

Net income (loss)

6,595

(6,643)

1,057

(75,839)

Net (income) loss attributable to noncontrolling interests

 

(998)

 

533

 

(983)

 

1,034

 

Net income (loss) attributable to XpresSpa Group, Inc.

$

5,597

$

(6,110)

$

74

$

(74,805)

Net income (loss)

$

6,595

$

(6,643)

$

1,057

$

(75,839)

Other comprehensive (loss) income from operations

 

(52)

 

18

 

(63)

 

33

Comprehensive income (loss)

$

6,543

$

(6,625)

$

994

$

(75,806)

Earnings / Loss per share

 

  

 

  

 

  

 

  

Basic and diluted net earnings / loss per share

$

0.05

$

(0.10)

$

-

$

(2.15)

Weighted-average number of shares outstanding during the period

 

  

 

  

 

  

 

  

Basic

 

105,531,418

 

61,106,894

 

103,950,731

 

35,309,004

Diluted

 

105,957,317

 

61,106,894

 

104,301,344

 

35,309,004

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

4

XpresSpa Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share and per share data)

    

    

    

    

Accumulated

    

    

    

Series E

Series F

Additional

other

Total

Non-

Preferred stock

Preferred stock

Common stock

paid- 

Accumulated

comprehensive

Company

controlling

Total

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares

    

Amount

    

in capital

    

deficit

    

loss

    

equity

    

interests

    

equity

December 31, 2020

$

$

94,058,853

$

941

$

475,709

$

(398,624)

$

(220)

$

77,806

$

2,565

$

80,371

Warrant exercises, net of costs

11,223,529

112

16,895

17,007

17,007

Stock-based compensation

264

264

741

1,005

Net loss for the period

(1,056)

(1,056)

248

(808)

Foreign currency translation

(16)

(16)

(16)

Contributions from noncontrolling interests

333

333

March 31, 2021

$

$

105,282,382

$

1,053

$

492,868

$

(399,680)

$

(236)

$

94,005

$

3,887

$

97,892

Issuance of Common Stock for services

223,637

2

318

320

320

Issuance of restricted stock

27,983

`

Stock-based compensation

267

267

61

328

Net loss for the period

(4,467)

(4,467)

(263)

(4,730)

Foreign currency translation

5

5

5

Redemptions of certain noncontrolling interests

(133)

(133)

June 30, 2021

$

$

105,534,002

$

1,055

$

493,453

$

(404,147)

$

(231)

$

90,130

$

3,552

$

93,682

Stock-based compensation

767

767

23

790

Stock Grant for services

29

29

29

Consolidation of Variable Interest Entities

4,307

4,307

Issuance of restricted stock

35,043

Net income for the period

5,597

5,597

998

6,595

Foreign currency translation

(52)

(52)

(52)

Repurchase and retirement of common stock

(250,000)

(2)

(448)

(450)

(450)

Distributions to noncontrolling interests

(991)

(991)

Stock option exercises

8,334

13

13

13

September 30, 2021

$

$

105,327,379

$

1,053

$

493,814

$

(398,550)

$

(283)

$

96,034

$

7,889

$

103,923

The accompanying notes form an integral part of these unaudited condensed consolidated financial statements.

5

XpresSpa Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT) (Continued)

(Unaudited)

(In thousands, except share and per share data)

    

    

    

    

Accumulated

    

    

    

Series E

Series F

Additional

other

Total

Non-

Preferred stock

Preferred stock

Common stock

paid- 

Accumulated

comprehensive

Company

controlling

Total

    

Shares

    

Amount

    

Shares

    

Amount

    

Shares *

    

Amount *

    

in capital *

    

deficit

    

loss

    

equity (deficit)

    

interests

    

equity (deficit)

December 31, 2019

977,865

$

10

8,996

$

5,157,390

$

52

$

302,118

$

(308,136)

$

(283)

$

(6,239)

$

3,703

$

(2,536)

Issuances of Common Stock for payment of interest on B3D Note

236,077

2

418

420

420

Issuance of Series E Preferred Stock for payment of interest on Calm Note

10,123

63

63

63

Conversion of Series F Preferred Stock into Common Stock

(7,465)

930,326

9

(9)

0

0

Direct offerings of Common Stock and pre-funded warrants, net of costs

-

8,210,239

82

4,176

4,258

4,258

Exercise of May 2018 Class A Warrants into Common Stock

2,578,455

26

3,096

3,122

3,122

Conversion of B3D Note to Common Stock

1,430,647

14

1,321

1,335

1,335

Issuance of Common Stock for services

58,333

1

134

135

135

Stock-based compensation

72

72

72

Net loss for the period

(10,617)

(10,617)

(108)

(10,725)

Foreign currency translation

Contributions from noncontrolling interests

117

117

March 31, 2020

987,988

$

10

1,531

$

18,601,467

$

186

$

311,389

$

(318,753)

$

(283)

$

(7,451)

$

3,712

$

(3,739)

Issuance of Common Stock for payment of interest on B3D Note

88,508

1

41

42

42

Conversion of Series E Preferred Stock into Common Stock

(987,988)

(10)

510,460

5

5

Conversion of Series F Preferred Stock into Common Stock

(1,531)

291,619

3

(3)

Exercise of May 2018 Class A Warrants into Common Stock

2,382,835

24

5,891

5,915

5,915

Exercise of Calm Warrants into Common Stock

1,622,149

16

4,092

4,108

4,108

Exercise of March 2020 pre-funded warrants into Common Stock

201,667

2

4

6

6

March Warrant Exchange for Common Stock - Class A Warrant

2,385,528

24

6,410

6,434

6,434

March Warrant Exchange for Common Stock - Class D Warrant

527,669

5

(5)

June Warrant Exchange for Common Stock - Calm Warrant

2,062,126

21

11,734

11,755

11,755

Conversion of B3D Note to Common Stock

-

-

-

10,789,591

108

14,197

14,305

14,305

Conversion of Calm Note to Common Stock

4,761,906

48

10,551

10,599

10,599

Direct offerings of Common Stock and pre-funded warrants, net of costs

12,235,911

122

38,275

38,397

38,397

Stock-based compensation

424

424

424

Issuance of restricted stock

12,500

Fractional shares retired in reverse stock split

(23)

Foreign currency translation

15

15

15

Net loss for the period

(58,078)

(58,078)

(393)

(58,471)

Distributions to noncontrolling interests

(129)

(129)

June 30, 2020

$

$

56,473,913

$

565

$

403,005

$

(376,831)

$

(268)

$

26,471

$

3,190

$

29,661

Conversion of B3D Note to Common Stock

1,276,270

13

3,350

3,363

3,363

Stock-based compensation

470

470

470

Stock option exercises

4,167

5

5

5

Issuance of Common Stock for payment of interest on Calm Note

47,305

35