Quarterly Report (10-q)

0.080.040.120.0595352025105398359984581531032404060.080.040.120.050001410428--12-312022Q2false000010126934995360271000000P3M0.3333P3Y0001410428us-gaap:CommonStockMember2022-04-012022-06-3000014104282022-05-012022-05-310001410428srt:MinimumMemberus-gaap:WarrantMember2022-06-300001410428srt:MaximumMemberus-gaap:WarrantMember2022-06-300001410428srt:MinimumMemberus-gaap:WarrantMember2021-12-310001410428srt:MaximumMemberus-gaap:WarrantMember2021-12-310001410428srt:MinimumMemberus-gaap:WarrantMember2022-01-012022-06-300001410428srt:MaximumMemberus-gaap:WarrantMember2022-01-012022-06-300001410428xspa:DirectorsEmployeesAndConsultantsMemberxspa:XpresTest2020EquityIncentivePlanMember2020-09-012020-09-3000014104282021-01-012021-12-310001410428xspa:XprestestMember2021-06-300001410428xspa:XpresspaMember2021-06-300001410428us-gaap:CorporateAndOtherMember2021-06-300001410428xspa:OrlandoInternationalAirportMember2022-03-012022-03-310001410428xspa:DenverInternationalAirportMember2022-02-012022-02-280001410428us-gaap:NonUsMemberxspa:SchipholAmsterdamAirportMember2022-06-300001410428us-gaap:NonUsMemberxspa:DubaiInternationalAirportMember2022-06-300001410428country:USxspa:XpresspaMember2022-06-300001410428xspa:IstanbulAirportMember2022-01-012022-06-300001410428country:US2022-01-012022-06-300001410428xspa:AustinBergstromInternationalAirportMember2022-01-012022-06-300001410428xspa:KyleCollinsMember2022-05-262022-05-260001410428us-gaap:NonUsMemberxspa:XpresspaMember2022-06-300001410428xspa:PaycheckProtectionProgramMember2020-05-012020-05-010001410428us-gaap:SeniorNotesMemberus-gaap:ParentMember2021-01-012021-03-310001410428us-gaap:SeniorNotesMemberus-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001410428us-gaap:SeniorNotesMember2021-01-012021-03-310001410428us-gaap:SeniorNotesMemberus-gaap:CommonStockMember2021-01-012021-03-310001410428us-gaap:AccountsReceivableMemberxspa:HyperPointeSegmentMember2022-06-300001410428us-gaap:TreasuryStockCommonMember2022-04-012022-06-3000014104282021-08-3100014104282022-08-032022-08-030001410428us-gaap:SeniorNotesMemberus-gaap:ParentMember2021-04-012021-06-300001410428us-gaap:SeniorNotesMemberus-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001410428us-gaap:SeniorNotesMember2021-04-012021-06-300001410428xspa:ExecutiveOfficersAndDirectorsMemberus-gaap:RestrictedStockMemberxspa:XpresTest2020EquityIncentivePlanMember2022-07-012022-07-010001410428us-gaap:CommonStockMember2021-04-012021-06-300001410428us-gaap:SeniorNotesMemberus-gaap:CommonStockMember2021-04-012021-06-300001410428us-gaap:CommonStockMember2022-01-012022-03-310001410428us-gaap:TreasuryStockCommonMember2022-06-300001410428us-gaap:RetainedEarningsMember2022-06-300001410428us-gaap:ParentMember2022-06-300001410428us-gaap:NoncontrollingInterestMember2022-06-300001410428us-gaap:AdditionalPaidInCapitalMember2022-06-300001410428us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300001410428us-gaap:RetainedEarningsMember2022-03-310001410428us-gaap:ParentMember2022-03-310001410428us-gaap:NoncontrollingInterestMember2022-03-310001410428us-gaap:AdditionalPaidInCapitalMember2022-03-310001410428us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-3100014104282022-03-310001410428us-gaap:RetainedEarningsMember2021-12-310001410428us-gaap:ParentMember2021-12-310001410428us-gaap:NoncontrollingInterestMember2021-12-310001410428us-gaap:AdditionalPaidInCapitalMember2021-12-310001410428us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001410428us-gaap:RetainedEarningsMember2021-06-300001410428us-gaap:ParentMember2021-06-300001410428us-gaap:NoncontrollingInterestMember2021-06-300001410428us-gaap:AdditionalPaidInCapitalMember2021-06-300001410428us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300001410428us-gaap:RetainedEarningsMember2021-03-310001410428us-gaap:ParentMember2021-03-310001410428us-gaap:NoncontrollingInterestMember2021-03-310001410428us-gaap:AdditionalPaidInCapitalMember2021-03-310001410428us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-03-3100014104282021-03-310001410428us-gaap:RetainedEarningsMember2020-12-310001410428us-gaap:ParentMember2020-12-310001410428us-gaap:NoncontrollingInterestMember2020-12-310001410428us-gaap:AdditionalPaidInCapitalMember2020-12-310001410428us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310001410428srt:MinimumMember2022-01-012022-06-300001410428srt:MaximumMember2022-01-012022-06-300001410428srt:MinimumMember2021-12-310001410428srt:MaximumMember2021-12-310001410428us-gaap:RestrictedStockUnitsRSUMember2022-06-300001410428us-gaap:RestrictedStockMember2022-06-300001410428us-gaap:RestrictedStockUnitsRSUMember2021-12-310001410428us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-06-300001410428us-gaap:RestrictedStockMember2022-01-012022-06-300001410428srt:MinimumMember2022-06-300001410428srt:MaximumMember2022-06-300001410428xspa:DirectorsEmployeesAndConsultantsMemberxspa:XpresTest2020EquityIncentivePlanMember2020-09-300001410428srt:MaximumMemberxspa:TwoThousandTwentyStockOptionPlanMember2020-09-300001410428srt:MinimumMemberus-gaap:EmployeeStockOptionMember2022-01-012022-06-300001410428srt:MaximumMemberus-gaap:EmployeeStockOptionMember2022-01-012022-06-300001410428us-gaap:EmployeeStockOptionMember2022-01-012022-06-300001410428srt:MinimumMemberus-gaap:EmployeeStockOptionMember2022-06-300001410428srt:MaximumMemberus-gaap:EmployeeStockOptionMember2022-06-300001410428us-gaap:WarrantMember2022-06-300001410428us-gaap:WarrantMember2021-12-310001410428xspa:EzraT.ErnstMemberus-gaap:EmployeeStockOptionMemberxspa:GcgConnectLlcDBAHyperpointeMember2022-01-142022-01-140001410428us-gaap:StockCompensationPlanMember2022-01-012022-06-300001410428us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-04-012022-06-300001410428us-gaap:ServiceMember2022-04-012022-06-300001410428us-gaap:ProductMember2022-04-012022-06-300001410428us-gaap:ProductAndServiceOtherMember2022-04-012022-06-300001410428us-gaap:HealthCarePatientServiceMember2022-04-012022-06-300001410428us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-01-012022-06-300001410428us-gaap:ServiceMember2022-01-012022-06-300001410428us-gaap:ProductMember2022-01-012022-06-300001410428us-gaap:ProductAndServiceOtherMember2022-01-012022-06-300001410428us-gaap:HealthCarePatientServiceMember2022-01-012022-06-300001410428us-gaap:ServiceMember2021-04-012021-06-300001410428us-gaap:ProductMember2021-04-012021-06-300001410428us-gaap:ProductAndServiceOtherMember2021-04-012021-06-300001410428us-gaap:AdministrativeServiceMember2021-04-012021-06-300001410428us-gaap:ServiceMember2021-01-012021-06-300001410428us-gaap:ProductMember2021-01-012021-06-300001410428us-gaap:ProductAndServiceOtherMember2021-01-012021-06-300001410428us-gaap:AdministrativeServiceMember2021-01-012021-06-300001410428xspa:PaycheckProtectionProgramMember2020-05-022020-05-020001410428us-gaap:RetainedEarningsMember2022-04-012022-06-300001410428us-gaap:RetainedEarningsMember2022-01-012022-03-310001410428us-gaap:RetainedEarningsMember2021-04-012021-06-300001410428us-gaap:RetainedEarningsMember2021-01-012021-03-310001410428xspa:SeriesFConvertiblePreferredStockMember2022-06-300001410428xspa:SeriesEConvertiblePreferredStockMember2022-06-300001410428xspa:SeriesDConvertiblePreferredStockMember2022-06-300001410428xspa:SeriesCJuniorPreferredStockMember2022-06-300001410428xspa:SeriesaConvertiblePreferredStockMember2022-06-300001410428xspa:SeriesFConvertiblePreferredStockMember2021-12-310001410428xspa:SeriesEConvertiblePreferredStockMember2021-12-310001410428xspa:SeriesDConvertiblePreferredStockMember2021-12-310001410428xspa:SeriesCJuniorPreferredStockMember2021-12-310001410428xspa:SeriesaConvertiblePreferredStockMember2021-12-310001410428us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-04-012022-06-300001410428us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001410428us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-04-012021-06-300001410428us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-03-310001410428us-gaap:CorporateAndOtherMember2022-04-012022-06-300001410428xspa:TreattmMember2021-04-012021-06-300001410428xspa:TreattmMember2021-01-012021-06-300001410428us-gaap:NoncontrollingInterestMember2022-01-012022-03-310001410428xspa:TgManagementPhlbbMembersrt:MinimumMember2022-01-012022-06-300001410428xspa:TgManagementPhlbbMembersrt:MaximumMember2022-01-012022-06-300001410428xspa:AccountsPayableAccruedExpensesAndOtherMember2022-06-300001410428xspa:AccountsPayableAccruedExpensesAndOtherMember2021-12-310001410428xspa:TgManagementPhlbbMember2022-06-300001410428xspa:Route1IncMember2022-06-300001410428us-gaap:TradeNamesMember2022-06-300001410428us-gaap:LicenseMember2022-06-300001410428us-gaap:CustomerRelationshipsMember2022-06-300001410428us-gaap:ComputerSoftwareIntangibleAssetMember2022-06-300001410428us-gaap:TradeNamesMember2021-12-310001410428us-gaap:LicenseMember2021-12-310001410428us-gaap:ComputerSoftwareIntangibleAssetMember2021-12-310001410428us-gaap:OtherNonoperatingIncomeExpenseMember2022-04-012022-06-300001410428us-gaap:OtherNonoperatingIncomeExpenseMember2022-01-012022-06-300001410428us-gaap:OtherNonoperatingIncomeExpenseMember2021-04-012021-06-300001410428us-gaap:OtherNonoperatingIncomeExpenseMember2021-01-012021-06-300001410428us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberxspa:Route1IncMember2022-06-300001410428us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberxspa:Route1IncMember2022-06-300001410428us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberxspa:Route1IncMember2022-06-300001410428us-gaap:FairValueMeasurementsRecurringMemberxspa:Route1IncMember2022-06-300001410428us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMemberxspa:Route1IncMember2021-12-310001410428us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMemberxspa:Route1IncMember2021-12-310001410428us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMemberxspa:Route1IncMember2021-12-310001410428us-gaap:FairValueMeasurementsRecurringMemberxspa:Route1IncMember2021-12-310001410428us-gaap:RestrictedStockUnitsRSUMemberxspa:XpresTest2020EquityIncentivePlanMember2022-06-300001410428xspa:GcgConnectLlcDBAHyperpointeMemberxspa:HyperPointeSegmentMember2022-06-300001410428xspa:XprestestMember2022-04-012022-06-300001410428xspa:XpresspaMember2022-04-012022-06-300001410428xspa:TreattmMember2022-04-012022-06-300001410428xspa:HyperpointeMember2022-04-012022-06-300001410428xspa:XprestestMember2022-01-012022-06-300001410428xspa:XpresspaMember2022-01-012022-06-300001410428xspa:TreattmMember2022-01-012022-06-300001410428xspa:HyperpointeMember2022-01-012022-06-300001410428us-gaap:CorporateAndOtherMember2022-01-012022-06-300001410428xspa:XprestestMember2021-04-012021-06-300001410428xspa:XpresspaMember2021-04-012021-06-300001410428us-gaap:CorporateAndOtherMember2021-04-012021-06-300001410428xspa:XprestestMember2021-01-012021-06-300001410428xspa:XpresspaMember2021-01-012021-06-300001410428us-gaap:CorporateAndOtherMember2021-01-012021-06-300001410428us-gaap:SubsequentEventMember2022-07-012022-09-300001410428xspa:PaycheckProtectionProgramMember2020-05-010001410428xspa:CentersForDiseaseControlAndPreventionMember2022-01-012022-06-300001410428xspa:CentersForDiseaseControlAndPreventionMember2021-10-012021-12-310001410428xspa:CentersForDiseaseControlAndPreventionMember2022-01-310001410428us-gaap:CommonStockMember2022-06-300001410428us-gaap:CommonStockMember2022-03-310001410428us-gaap:CommonStockMember2021-12-310001410428us-gaap:CommonStockMember2021-06-300001410428us-gaap:CommonStockMember2021-03-310001410428us-gaap:CommonStockMember2020-12-3100014104282021-06-3000014104282020-12-310001410428xspa:GcgConnectLlcDBAHyperpointeMemberus-gaap:TradeNamesMember2022-01-140001410428xspa:GcgConnectLlcDBAHyperpointeMemberus-gaap:CustomerRelationshipsMember2022-01-140001410428xspa:GcgConnectLlcDBAHyperpointeMemberus-gaap:ComputerSoftwareIntangibleAssetMember2022-01-140001410428xspa:GcgConnectLlcDBAHyperpointeMember2022-06-300001410428srt:MaximumMemberxspa:GcgConnectLlcDBAHyperpointeMember2022-01-140001410428xspa:GcgConnectLlcDBAHyperpointeMember2022-01-142022-01-140001410428xspa:GcgConnectLlcDBAHyperpointeMember2022-01-140001410428us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001410428us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001410428us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300001410428us-gaap:FairValueMeasurementsRecurringMember2022-06-300001410428us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001410428us-gaap:FairValueInputsLevel2Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001410428us-gaap:FairValueInputsLevel1Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310001410428us-gaap:FairValueMeasurementsRecurringMember2021-12-310001410428xspa:XprestestMember2022-06-300001410428xspa:XpresspaMember2022-06-300001410428xspa:TreattmMember2022-06-300001410428xspa:HyperpointeMember2022-06-300001410428us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2022-06-300001410428us-gaap:CorporateAndOtherMember2022-06-300001410428xspa:XprestestMember2021-12-310001410428xspa:XpresspaMember2021-12-310001410428xspa:TreattmMember2021-12-310001410428us-gaap:VariableInterestEntityPrimaryBeneficiaryMember2021-12-310001410428us-gaap:CorporateAndOtherMember2021-12-310001410428xspa:VestedAndUnvestedStockOptionMember2022-04-012022-06-300001410428xspa:UnvestedRestrictedStockUnitsMember2022-04-012022-06-300001410428us-gaap:WarrantMember2022-04-012022-06-300001410428xspa:VestedAndUnvestedStockOptionMember2022-01-012022-06-300001410428xspa:UnvestedRestrictedStockUnitsMember2022-01-012022-06-300001410428us-gaap:WarrantMember2022-01-012022-06-300001410428xspa:VestedAndUnvestedStockOptionMember2021-04-012021-06-300001410428xspa:UnvestedRestrictedStockUnitsMember2021-04-012021-06-300001410428us-gaap:WarrantMember2021-04-012021-06-300001410428xspa:VestedAndUnvestedStockOptionMember2021-01-012021-06-300001410428xspa:UnvestedRestrictedStockUnitsMember2021-01-012021-06-300001410428us-gaap:WarrantMember2021-01-012021-06-3000014104282021-01-012021-06-300001410428us-gaap:ParentMember2022-04-012022-06-300001410428us-gaap:NoncontrollingInterestMember2022-04-012022-06-300001410428us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000014104282022-04-012022-06-300001410428us-gaap:ParentMember2021-04-012021-06-300001410428us-gaap:NoncontrollingInterestMember2021-04-012021-06-300001410428us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-3000014104282021-04-012021-06-300001410428us-gaap:ParentMember2021-01-012021-03-310001410428us-gaap:NoncontrollingInterestMember2021-01-012021-03-310001410428us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-3100014104282021-01-012021-03-310001410428us-gaap:ParentMember2022-01-012022-03-310001410428us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100014104282022-01-012022-03-3100014104282022-06-3000014104282021-12-3100014104282022-08-1200014104282022-01-012022-06-30xbrli:sharesiso4217:USDiso4217:USDxbrli:sharesxbrli:purexspa:segmentxspa:itemxspa:locationxspa:employee

Table of Contents

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 June 30, 2022

☐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 31^st 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 August 12, 2022, 94,278,118 shares of the registrant’s common stock were outstanding.

Table of Contents

XpresSpa Group, Inc. and Subsidiaries

Table of Contents

		Page
PART I. FINANCIAL INFORMATION		3

Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	36

PART II. OTHER INFORMATION		38

Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Defaults Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39

Table of Contents

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)


	June 30,		December 31,
	2022		2021
Current assets
Cash and cash equivalents	$	71,108	$	105,506
Accounts receivable		832		615
Inventory		1,065		1,763
Other current assets		1,362		1,095
Total current assets		74,367		108,979

Restricted cash		751		751
Property and equipment, net		8,020		6,658
Intangible assets, net		4,986		3,732
Operating lease right of use assets, net		6,782		4,336
Goodwill		4,024		-
Other assets		2,435		2,810
Total assets	$	101,365	$	127,266

Current liabilities
Accounts payable, accrued expenses and other	$	9,289	$	12,958
Current portion of operating lease liabilities		3,007		2,736
Deferred revenue		245		549
Current portion of promissory note, unsecured		-		3,584
Total current liabilities		12,541		19,827

Long-term liabilities
Operating lease liabilities		8,885		7,504
Total liabilities		21,426		27,331
Commitments and contingencies (see Note 15)

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; 95,360,271 and 101,269,349 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively		954		1,013
Treasury stock, at cost; 1,338,404 and 0 shares as of June 30, 2022 and December 31, 2021, respectively		(1,021)		-
Additional paid-in capital		479,432		487,306
Accumulated deficit		(407,476)		(395,275)
Accumulated other comprehensive loss		(458)		(312)
Total equity attributable to XpresSpa Group, Inc.		71,431		92,732
Noncontrolling interests		8,508		7,203
Total equity		79,939		99,935
Total liabilities and equity	$	101,365	$	127,266

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

Table of Contents

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 June 30,				Six months ended June 30,
	2022		2021		2022		2021

Revenue, net
Managed services fees	$	-	$	8,669	$	-	$	16,843
Patient services revenue		7,732		-		27,121		-
Services		4,787		338		8,564		603
Products		421		79		766		144
Other		657		6		1,194		14
Total revenue, net		13,597		9,092		37,645		17,604

Cost of sales
Labor		5,477		1,927		10,939		3,142
Occupancy		1,262		443		2,330		924
Products and other operating costs		5,618		5,331		14,135		7,794
Total cost of sales		12,357		7,701		27,404		11,860
Depreciation and amortization		1,501		946		2,765		1,690
(Gain)/impairment on disposal of assets		(52)		-		(52)		22
General and administrative		7,558		4,646		17,746		9,154
Total operating expenses		21,364		13,293		47,863		22,726
Operating loss		(7,767)		(4,201)		(10,218)		(5,122)
Interest income, net		38		13		45		25
Other non-operating expense, net		(196)		(551)		(514)		(449)
Loss before income taxes		(7,925)		(4,739)		(10,687)		(5,546)
Income tax (expense) benefit		(2)		9		(2)		8
Net loss		(7,927)		(4,730)		(10,689)		(5,538)
Net loss (income) attributable to noncontrolling interests		9		263		(1,512)		15
Net loss attributable to XpresSpa Group, Inc.	$	(7,918)	$	(4,467)	$	(12,201)	$	(5,523)

Net loss	$	(7,927)	$	(4,730)	$	(10,689)	$	(5,538)
Other comprehensive (loss) income from operations		(105)		5		(146)		(11)
Comprehensive loss	$	(8,032)	$	(4,725)	$	(10,835)	$	(5,549)
Loss per share
Basic and diluted loss per share	$	(0.08)	$	(0.04)	$	(0.12)	$	(0.05)
Weighted-average number of shares outstanding during the period
Basic and diluted		95,352,025		105,398,359		98,458,153		103,240,406

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

Table of Contents

XpresSpa Group, Inc. and Subsidiaries

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

(Unaudited)

(In thousands, except share and per share data)


											Accumulated
							Additional				other		Total		Non-
	Common stock			Treasury Stock			paid-		Accumulated		comprehensive		Company		controlling		Total
	Shares	Amount		Shares		Amount	in capital		deficit		loss		equity		interests		equity
December 31, 2021	101,269,349	$	1,013	—	$	—	$	487,306	$	(395,275)	$	(312)	$	92,732	$	7,203	$	99,935
Issuance of Common Stock for acquisition	552,487		5	—		—		901		—		—		906		—		906
Vesting of restricted stock units	391,820		4	—		—		(4)		—		—		—		—		—
Value of Shares Withheld to fund payroll taxes	—		—	—		—		(73)		—		—		(73)		—		(73)
Stock-based compensation	—		—	—		—		1,543		—		—		1,543		—		1,543
Net loss for the period	—		—	—		—		—		(4,283)		—		(4,283)		1,521		(2,762)
Repurchase and retirement of common stock	(7,142,446)		(71)	—		—		(11,024)		—		—		(11,095)		—		(11,095)
Foreign currency translation	—		—	—		—		—		—		(41)		(41)		—		(41)
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		(824)		(824)
Contributions from noncontrolling interests	—		—	—		—		—		—		—		—		200		200
March 31, 2022	95,071,210	$	951	—	$	—	$	478,649	$	(399,558)	$	(353)	$	79,689	$	8,100	$	87,789
Vesting of restricted stock units	289,061		3	—		—		(3)		—		—		—		—		—
Grant of stock options for services	—		—	—		—		15		—		—	`	15		—		15
Stock-based compensation	—		—	—		—		771		—		—		771		549		1,320
Net loss for the period	—		—	—		—		—		(7,918)		—		(7,918)		(9)		(7,927)
Repurchase of common stock	—		—	(1,338,404)		(1,021)		—		—		—		(1,021)		—		(1,021)
Foreign currency translation	—		—	—		—		—		—		(105)		(105)		—		(105)
Distributions to noncontrolling interests	—		—	—		—		—		—		—		—		(132)		(132)
June 30, 2022	95,360,271	$	954	(1,338,404)	$	(1,021)	$	479,432	$	(407,476)	$	(458)	$	71,431	$	8,508	$	79,939

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

Table of Contents

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
							Additional				other		Total		Non-
	Common stock			Treasury Stock			paid-		Accumulated		comprehensive		Company		controlling		Total
	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		—	—		—		—		—		—		—		—		—
Foreign currency translation	—		—	—		—		—		—		5		5		—		5
Net loss for the period	—		—	—		—		—		(4,467)		—		(4,467)		(263)		(4,730)
Stock-based compensation	—		—	—		—		267		—		—		267		61		328
Redemption 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

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

Table of Contents

XpresSpa Group, Inc. and Subsidiaries

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	Six months ended June 30,
	2022		2021
Cash flows from operating activities
Net loss	$	(10,689)	$	(5,538)
Adjustments to reconcile net loss to net cash used in operating activities:
Items included in net loss not affecting operating cash flows:
Depreciation and amortization		2,765		1,690
(Gain)/loss on disposal of assets		(52)		22
Amortization of operating lease right of use asset		828		627
Non-employee stock based compensation		15		320
Stock-based compensation		2,863		1,333
Loss (gain) on equity investment		430		414
Changes in assets and liabilities:
Decrease (increase) in inventory		684		(674)
Decrease (increase) in accounts receivable		186		(546)
(Decrease) increase in deferred revenue		(1,027)		2,253
Other assets, current and non-current		(295)		(2,478)
Other liabilities, current and non-current		(2,803)		(1,518)
(Decrease) increase in accounts payable		(1,520)		2,281
Net cash used in operating activities		(8,615)		(1,814)
Cash flows from investing activities
Acquisition of property and equipment		(4,062)		(2,131)
Acquisition of HyperPointe net of cash assumed		(4,853)		—
Acquisition of software		(283)		(523)
Net cash used in investing activities		(9,198)		(2,654)
Cash flows from financing activities
Proceeds from direct offerings of Common Stock and warrants exercises, net of costs		—		17,007
Redemption of non-controlling interests		—		(133)
Repurchase of Common Stock		(12,116)		—
Contributions from noncontrolling interests		200		333
Payments for shares withheld on vesting		(73)		—
Repayment of Paycheck Protection Program		(3,584)		—
Distributions to noncontrolling interests		(956)		—
Net cash (used in) provided by financing activities		(16,529)		17,207
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(56)		7
(Decrease)/ Increase in cash, cash equivalents and restricted cash		(34,398)		12,746
Cash, cash equivalents, and restricted cash at beginning of the period		106,257		90,502
Cash, cash equivalents, and restricted cash at end of the period	$	71,859	$	103,248
Cash paid for
Interest	$	10	$	—
Income taxes		2	$	—
Non-cash investing and financing transactions
Capital expenditures included in Accounts payable, accrued expenses and other	$	231	$	—
Issuance of Common Stock on acquisition of gcg Connect, LLC, d/b/a HyperPointe	$	906	$	—

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

Table of Contents

XpresSpa Group, Inc. and Subsidiaries

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands, except for share and per share data)

Note 1. General

Overview

XpresSpa Group, Inc. (“XpresSpa Group” or the “Company”) is a leading global travel health and wellness services holding company. XpresSpa Group currently has four reportable operating segments: XpresSpa^®, XpresTest^®, Treat^™, and HyperPointe which was acquired in January 2022.

XpresSpa Group’s subsidiary, XpresSpa Holdings, LLC (“XpresSpa”) has been a global airport retailer of spa services through its XpresSpa spa locations, offering travelers premium spa services, including massage, nail and skin care, as well as spa and travel products (“XpresSpa”).

Through XpresSpa Group’s XpresTest, Inc. subsidiary (“XpresTest”), the company launched XpresCheck Wellness Centers, also in airports. XpresCheck offers COVID-19 and other medical diagnostic testing services to the traveling public, as well as airline, airport and concessionaire employees, and TSA and U.S. Customs and Border Protection agents. XpresTest has entered into managed services agreements (“MSAs”) with professional medical services companies that provide health care services to patients. The medical services companies pay XpresTest a monthly fee to operate in the XpresCheck Wellness Centers. Under the terms of the MSAs, XpresTest provides office space, equipment, supplies, non-licensed staff, and management services in return for a management fee. Effective July 1, 2021, the Company determined that the PLLCs are variable interest entities (“VIEs”) due to their equity holders having sufficient capital at risk; and the Company having a variable interest in and being a primary beneficiary of the PLLCs.

The Treat segment, which is operating through XpresSpa Group’s subsidiary Treat, Inc. (“Treat”) is a travel health and wellness brand that provides access to health and wellness services for travelers at on-site centers (currently located in JFK International Airport and Phoenix Sky Harbor International Airport and opening later this year in Salt Lake City International Airport).

The Company’s HyperPointe segment, which the Company acquired in January 2022 (see Note 7. Acquisition of HyperPointe), provides a broad range of service and support options for our customers, including technical support services and advanced services.

Basis of Presentation and Principles of Consolidation

The unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Article 8-03 of Regulation S-X, and should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as amended. The condensed consolidated balance sheet as of December 31, 2021 was derived from the audited annual financial statements but does not include all information required by GAAP for annual financial statements. The financial statements include the accounts of the Company, all entities that are wholly owned by the Company, and all entities in which the Company has a controlling financial interest as well as variable interest entities in which we are the primary beneficiaries. All adjustments that, in the opinion of management, are necessary for a fair presentation for the periods presented have been reflected by the Company. Such adjustments are of a normal, recurring nature. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the entire fiscal year or for any other interim period. All significant intercompany balances and transactions have been eliminated in consolidation.

Table of Contents

Recent Developments

XpresCheck Wellness Centers

XpresCheck’s business has MSAs with state licensed physicians and nurse practitioners, under which we administer COVID-19 testing options, including a Polymerase Chain Reaction (PCR) test and a rapid PCR test. As of the date of this report, there are 15 operating XpresCheck locations operating in 12 airports, including the following locations opened since December 31, 2021:

●

In February 2022, a second XpresCheck Wellness Center opened at Denver International Airport, pre-security in the Great Hall. It contains six separate testing rooms to provide diagnostic COVID-19 testing.

●

In March 2022, we opened an XpresCheck Wellness Center in Orlando International Airport, pre-security, in the South Walk area of the Main Terminal. It contains five separate testing rooms to provide diagnostic COVID-19 testing.

During 2021, XpresCheck initiated a $2,001 eight-week pilot program with the Centers for Disease Control and Prevention (CDC) in collaboration with Concentric by Ginkgo. Under this program, XpresCheck is conducting biosurveillance monitoring at four major U.S. airports (JFK International Airport, Newark Liberty International Airport, San Francisco International Airport, and Hartsfield-Jackson Atlanta International Airport) aimed at identifying existing and new SARS-CoV-2 variants. On January 31, 2022, the Company announced the extension of the program, bringing the total contract to $5,534. Approximately $3,291 and $1,368 of the full $5,534 amount was recognized during the first half of 2022 and the fourth quarter of 2021, respectively. The Company anticipates that the remaining $875 of the full $5,534 amount will be realized in the third quarter of 2022.

XpresSpa

There are currently eighteen operating XpresSpa domestic locations and the Company expects to re-open four additional domestic locations in the near-term. During 2022, the Company sold its two franchise locations in Austin-Bergstrom International Airport. A significant number of the domestic XpresSpa locations are operating approximately eight hours per day during the busiest hours (compared to up to sixteen hours per day pre-pandemic) improving labor productivity. Additionally, XpresSpa implemented a price increase in mid-October 2021 in its efforts to return to profitability. As passenger airport volumes improve, the Company will continue to review operating hours to optimize revenue opportunity.

During the fourth quarter of 2021, the Company began testing several new services to take advantage of a growing interest in non-traditional spa services and expansion of its retail offering to align more closely with the services the Company provides. The Company is evaluating the success of these new initiatives at each airport on an on-going basis and will incorporate changes to its approach as more of the portfolio is reactivated.

The Company also has six international locations operating, including three XpresSpa locations in Dubai International Airport in the United Arab Emirates and three XpresSpa locations in Schiphol Amsterdam Airport in the Netherlands. The Company also signed for an additional five locations at Istanbul Airport and expects to open the first store later in 2022.

Treat

Treat is the Company’s new travel, health and wellness brand transforming the way we access care through a suite of health and wellness services supported by an integrated digital platform and a relevant retail offering to the traveling public.

Treat’s on-site centers (currently located in JFK International Airport and in Phoenix Sky Harbor International Airport and opening later this year in Salt Lake City International Airport) provide access to health and wellness services for travelers. The Treat teams provide travel-related diagnostic testing for virus, cold, flu and other illnesses as well as hydration therapy, IV drips, and vitamin injections. Travelers can purchase time blocks to use the Company’s wellness rooms to engage in

Table of Contents

interactive services like self-guided yoga, meditation and low impact weight exercises or to relax and unplug from the hectic pace of the airport and renew themselves before or after their trip.

Treat offers a website (www.treat.com) and mobile app to complement the offering with relevant health and wellness content designed to help people on the go with information that could impact their travel. The platform provides travelers access to a comprehensive online marketplace of services including global illness tracker tools such as the COVID-19 Requirements Map, on-demand chat care by licensed providers, a health wallet to store personal and family health records (including COVID-19 testing results), and a scheduler to arrange for direct care at one of the Company’s on-site locations. The information on the Treat website is not incorporated by reference into this Quarterly Report on Form 10-Q and does not constitute a part of this Form 10-Q.

HyperPointe Acquisition

In January 2022, the Company announced and closed on the acquisition of gcg Connect, LLC d/b/a HyperPointe.

The purchase price in the transaction consisted of $7,121 in cash and $906 in common stock, offset by the settlement of intercompany accounts payable of $770 as well as potential additional earn-out payments of up to $7,500 over a three-year timeframe based upon future performance; these earn-out payments may be satisfied in cash or common stock or a combination thereof subject to various terms and conditions. As of the acquisition date, and as of June 30, 2022, the Company believes that the fair value of the potential earnout payment is $0.

HyperPointe currently operates as a new operating segment within the XpresSpa Group. The chief executive officer of HyperPointe before the Company’s acquisition, continues to serve as the chief executive officer of HyperPointe, as well as serving as the chief executive officer of XpresCheck. See Note 7. Acquisition of HyperPointe for related discussion.

Liquidity and Financial Condition

As of June 30, 2022, the Company had cash and cash equivalents, excluding restricted cash, of $71,108, total current assets of $74,367, total current liabilities of $12,541 and positive working capital of $61,826 compared to a positive working capital of $89,152 as of December 31, 2021.

Note 2. Significant Accounting and Reporting Policies

(a) Revenue Recognition Policy

XpresSpa

The Company recognizes revenue from the sale of XpresSpa products and services when the services are rendered at XpresSpa stores and from the sale of products at the time products are purchased at the Company’s stores or online usually by credit card, net of discounts and applicable sales taxes. Accordingly, the Company recognizes revenue for the Company’s single performance obligation related to both in-store and online sales at the point at which the service has been performed or the control of the merchandise has passed to the customer. Revenues from the XpresSpa retail and e-commerce businesses are recorded at the time goods are shipped.

The Company has also entered into collaborative agreements with marketing partners whereby it sells certain of its partners’ products in its XpresSpa. The Company acts as an agent for revenue recognition purposes and therefore records revenue net of the revenue share payable to the partners. Upon receipt of the non-recurring, non-refundable initial collaboration fee, management records a deferred revenue liability and recognizes revenue on a straight-line basis over the life of the collaboration agreement.

Table of Contents

XpresCheck

Through its XpresCheck Wellness Centers and under the terms of the Managed Services Agreement (“MSA”) with Professional Limited Liability Companies (“PLLCs”) that in turn contract with physicians and Nurse Practitioners, the Company offers testing services to airline employees, contractors, concessionaire employees, TSA officers and U.S. Customs and Border Protection agents, as well as the traveling public. The Company has entered into MSAs with PLLCs that provide healthcare services to patients. Under the terms of the MSAs which may be modified for commercial reasonableness and fair market value, XpresTest provides office space, equipment, supplies, non-licensed staff, and management services to be used for the purpose of COVID-19 and other medical diagnostic testing in return for a management fee which was deemed a performance obligation for recognizing revenue prior to July 1, 2021.

Effective, July 1, 2021 (see Note 3. Variable Interest Entities), the Company determined that the PLLCs are variable interest entities due to their equity holders having insufficient capital at risk, and the Company having a variable interest and being the primary beneficiary of the PLLCs. As a result of this determination, the total revenue of the PLLCs is designated as revenue for the Company. The performance obligation for this revenue is the PLLCs administering COVID-19 tests to airline employees, contractors, concessionaire employees, TSA officers and U.S. Customs and Border Protection agents, as well as the traveling public, with revenue being recognized at the point in time at which the service is performed.

Treat

The Company recognizes revenue from the sale of Treat products and services when the services are rendered at Treat Centers and from the sale of products at the time products are purchased at the Treat Centers or online usually by credit card, net of discounts and applicable sales taxes. Accordingly, the Company recognizes revenue for the Company’s single performance obligation related to both in-centers and online sales at the point at which the service has been performed or the control of the merchandise has passed to the customer. Revenues from the Treat retail and e-commerce businesses are recorded at the time goods are shipped. Also, under the terms of Treat’s contracts with PLLCs, whereby the PLLCs as their performance obligations provide travel-related diagnostic testing for virus, cold, flu and other illnesses as well as hydration therapy, IV drips, and vitamin injections. The Company determined that these PLLCs are variable interest entities due to their equity holders having insufficient capital at risk, and the Company having a variable interest and being the primary beneficiary of the PLLCs. As a result of this determination, the total revenue of the PLLCs is designated as revenue for the Company. This revenue is recognized at the point in time at which the service is performed by the PLLCs.

HyperPointe

The Company’s HyperPointe segment which we acquired in January 2022 (see Note 7. Acquisition of HyperPointe) provides broad range of service and support options for its customers, including technical support services and advanced services. Technical support services represent the majority of these offerings which are distinct performance obligations that are satisfied over time with revenue recognized ratably over the contract term. Advanced services are distinct performance obligations that are satisfied over time with revenue recognized as services are delivered. Revenue billed in advance are treated as deferred revenue which was $191 as of June 30, 2022. HyperPointe had unbilled receivables of $60 included in Accounts Receivable as of June 30, 2022.

The Company excludes all sales taxes assessed to its customers from revenue. Sales taxes assessed on revenues are included in Accounts payable, accrued expenses and other on the Company’s condensed consolidated balance sheets until remitted to state agencies.

(b) Variable Interest Entities

The Company evaluates its ownership, contractual, pecuniary, and other interests in entities to determine if it has any variable interest in a variable interest entity (“VIE”). These evaluations are complex and involve judgment. If the Company determines that an entity in which it holds a contractual or ownership interest is a VIE and that the Company is the primary

Table of Contents

beneficiary, the Company consolidates such entity in its consolidated financial statements. The primary beneficiary of a VIE is the party that meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the VIE; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the VIE. Management performs ongoing reassessments of whether changes in the facts and circumstances regarding the Company’s involvement with a VIE will cause the consolidation conclusion to change. Changes in consolidation status are applied prospectively.

The Company applies the provisions of ASC Topic 805, Business Combinations (“ASC 805”) in the accounting for acquisitions of businesses. ASC 805 requires the Company to use the acquisition method of accounting by recognizing the identifiable tangible and intangible assets acquired and liabilities assumed, and any non-controlling interest in the acquired business, measured at their acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the aforementioned amounts.

While the Company uses its best estimates and assumptions to accurately apply preliminary values to assets acquired and liabilities assumed at the acquisition date, these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of the assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations.

Accounting for business combinations requires management to make significant estimates and assumptions, especially at the acquisition date, including estimates for intangible assets. Although the Company believes the assumptions and estimates that have been made are reasonable and appropriate, they are based in part on historical experience and information obtained from the acquired companies and are inherently uncertain. Critical estimates in valuing certain of the intangible assets the Company has acquired include future expected cash flows, and discount rates.

(d) Goodwill

The Company accounts for goodwill under ASC 350-30, Intangibles-Goodwill and Other. Goodwill represents the cost of a business acquisition in excess of the fair value of the net assets acquired. Goodwill is not amortized and is reviewed for impairment annually, or more frequently if facts and circumstances indicate that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, including goodwill. If it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the company performs a quantitative test to identify and measure the amount of goodwill impairment loss. The Company compares the fair value of the reporting unit with its carrying amount. If the carrying amount exceeds fair value, goodwill of the reporting unit is considered impaired, and that excess is recognized as a goodwill impairment loss.

Table of Contents

Recently adopted accounting pronouncements

Accounting Standards Update No. 2020-06—Debt--Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40)

Issued in August 2020, this update is intended to reduce the unnecessary complexity of the current guidance thus resulting in more accurate accounting for convertible instruments and consistent treatment from one entity to the next. Under current GAAP, there are five accounting models for convertible debt instruments. Except for the traditional convertible debt model that recognizes a convertible debt instrument as a single debt instrument, the other four models, with their different measurement guidance, require that a convertible debt instrument be separated (using different separation approaches) into a debt component and an equity or a derivative component. Convertible preferred stock also is required to be assessed under similar models. The Financial Accounting Standard Board (“FASB”) decided to simplify the accounting for convertible instruments by removing certain separation models currently included in other accounting guidance that were being applied to current accounting for convertible instruments. Under the amendments in this update, an embedded conversion feature no longer needs to be separated from the host contract for convertible instruments with conversion features that are not required to be accounted for as derivatives. Consequently, a convertible debt instrument will be accounted for as a single liability measured at its amortized cost and a convertible preferred stock will be accounted for as a single equity instrument measured at its historical cost, as long as no other features require bifurcation and recognition as derivatives. The FASB also decided to add additional disclosure requirements in an attempt to improve the usefulness and relevance of the information being provided. The new standard is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. The Company adopted ASU 2020-06 as of the reporting period beginning January 1, 2022. The adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.

ASU 2021-04: Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options

In May 2021, the FASB issued ASU 2021-04, "Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity Classified Written Call Options'" ("ASU 2021-04"), which introduces a new way for companies to account for warrants either as stock compensation or derivatives. Under the new guidance, if the modification does not change the instrument's classification as equity, the company accounts for the modification as an exchange of the original instrument for a new instrument. In general, if the fair value of the "new" instrument is greater than the fair value of the "original" instrument, the excess is recognized based on the substance of the transaction, as if the issuer has paid cash. The effective date of the standard is for interim and annual reporting periods beginning after December 15, 2021 for all entities. The Company adopted ASU 2021-04 as of the reporting period beginning January 1, 2022. The adoption of this update did not have a material impact on the Company’s condensed consolidated financial statements.

Note 3. Variable Interest Entities

Through its XpresCheck Wellness Centers, the Company provides services pursuant to contracts with PLLCs which in turn contracts with physicians and other medical professional providers to render COVID-19 and other medical diagnostic testing services to airline employees, contractors, concessionaire employees, TSA officers and U.S. Customs and Border Protection agents, and the traveling public. The PLLCs collectively represent the Company’s affiliated medical group. The PLLCs were designed and structured to comply with the relevant laws and regulations governing professional medical practice, which generally prohibits the practice of medicine by lay persons or entities. All of the issued and outstanding equity interests of the PLLCs are owned by a licensed medical professional nominated by the Company (the “Nominee Shareholder”). Upon formation of the PLLCs, and initial issuance of equity interests, the Nominee Shareholder contributes a nominal amount of capital in exchange for their interest in the PLLC. The Company then executes with each PLLC a MSA, which provides for various administrative services, management services and day-to-day activities of the practice to be rendered by the Company through its XpresCheck Wellness Centers.

Table of Contents

The Company also has exclusive responsibility for the provision of all nonmedical services including contracting with customers who access the PLLCs for a medical visit, handling all financial transactions and day-to-day operations of each PLLC, overseeing the establishment of COVID-19 and other medical diagnostic testing services policies, and making recommendations to the PLLC in establishing the guidelines for the employment and compensation of the physicians and other employees of the PLLCs. Until June 30, 2021, MSA fees were commensurate with the expected level of activity required to be billed by XpresCheck Wellness Centers. Therefore, these PLLCs were assessed not to be variable interest entities prior to July 1, 2021.

Effective, July 1, 2021, contractual arrangements between the Company, the Company’s affiliated medical group and nominated shareholders were modified in a manner that changes the characteristics or adequacy of the nominee shareholders’ equity investment at risk and residual returns. Therefore, due to reassessment triggered by the development on July 1, 2021, the Company determined that the PLLCs are variable interest entities. Notwithstanding their legal form of ownership of equity interests in the PLLC, the primary beneficiary of the affiliated medical group is the Company as it meets both of the following criteria: (i) has the power to make decisions that most significantly affect the economic performance of the affiliated medical group; and (ii) has the obligation to absorb losses or the right to receive benefits that in either case could potentially be significant to the affiliated medical group. The Company consolidated the PLLCs under the VIE model since the Company has the power to direct activities that most significantly impact the PLLCs economic performance and the right to receive benefits or the obligation to absorb losses that could potentially be significant to the PLLCs.

The aggregate carrying value of total assets and total liabilities included on the consolidated balance sheets for the PLLCs after elimination of intercompany transactions were $1,638, included in Cash and Cash Equivalents, and $324 included in Accounts payable, accrued expenses and other, respectively, as of June 30, 2022. The aggregate carrying value of total assets and total liabilities included on the consolidated balance sheets for the PLLCs after elimination of intercompany transactions were $3,033, included in Cash and Cash Equivalents, and $683, included in Accounts payable, accrued expenses and other, respectively, as of December 31, 2021. The total revenue included on the consolidated statements of operations and comprehensive income (loss) for the PLLCs after elimination of intercompany transactions was $7,732 and $27,121 for the three months and six months ended June 30, 2022, respectively.

Table of Contents

Note 4. Potentially Dilutive Securities

The table below presents the computation of basic and diluted net loss per share of Common Stock:


	Three months ended				Six months ended
	June 30,				June 30,
	2022		2021		2022		2021
Basic and diluted numerator:
Net loss attributable to XpresSpa Group, Inc.	$	(7,918)	$	(4,467)	$	(12,201)	$	(5,523)
Net loss attributable to common shareholders	$	(7,918)	$	(4,467)	$	(12,201)	$	(5,523)
Basic and diluted denominator:
Basic and diluted weighted average shares outstanding		95,352,025		105,398,359		98,458,153		103,240,406
Basic and diluted loss per share	$	(0.08)	$	(0.04)	$	(0.12)	$	(0.05)

Net loss per share data presented above excludes from the calculation of diluted net loss, the following potentially dilutive securities, having an anti-dilutive impact, in case of net loss
Both vested and unvested options to purchase an equal number of shares of Common Stock		4,756,973		2,838,955		4,756,973		2,838,955
Unvested RSUs to issue an equal number of shares of Common Stock		78,125		70,082		78,125		70,082
Warrants to purchase an equal number of shares of Common Stock		29,460,560		37,988,662		29,460,560		37,988,662
Total number of potentially dilutive securities excluded from the calculation of earnings/(loss) per share attributable to common shareholders		34,295,658		40,897,699		34,295,658		40,897,699

Note 5. Cash, Cash Equivalents, and Restricted Cash

A reconciliation of the Company’s cash and cash equivalents in the Condensed Consolidated Balance Sheets to cash, cash equivalents and restricted cash in the Condensed Consolidated Statements of Cash Flows as of June 30, 2022 and December 31, 2021 is as follows:


	June 30, 2022		December 31, 2021
Cash denominated in United States dollars	$	69,280	$	102,560
Cash denominated in currency other than United States dollars		1,721		2,133
Restricted cash		751		751
Credit and debit card receivables		107		813
Total cash, cash equivalents and restricted cash	$	71,859	$	106,257

The Company places its cash and temporary cash investments with credit quality institutions. At times, such cash denominated in United States dollars may be in excess of the Federal Deposit Insurance Corporation (“FDIC”) insurance limit. As of June 30, 2022 and December 31, 2021, deposits in excess of FDIC limits were $68,885 and $103,339 respectively. As of June 30, 2022 and December 31, 2021, the Company held cash balances in overseas accounts, totaling $1,721 and $2,133 respectively, which are not insured by the FDIC. If the Company were to distribute the amounts held overseas, the Company would need to follow an approval and distribution process as defined in its operating and partnership agreements, which may delay and/or reduce the availability of that cash to the Company.

Table of Contents

Note 6. Other current assets


	June 30, 2022		December 31, 2021
Prepaid expenses	$	1,315	$	1,047
Other		47		48
Total other current assets	$	1,362	$	1,095

Note 7. Acquisition of HyperPointe

On January 14, 2022, the Company acquired all of the equity interests in gcg Connect, LLC, d/b/a HyperPointe, a New Jersey limited liability company (“HyperPointe”), for an aggregate initial purchase price of approximately $7,257, which consisted of (i) $7,121 in cash offset by settlement of intercompany accounts payable of $770, and (ii) the issuance of 552,487 shares of common stock of the Company to the equity owners of HyperPointe, plus additional consideration in the form of a potential earnout of up to $7,500 (the “Acquisition”). The portion of the initial consideration for the Acquisition comprising the 552,487 shares of Company common stock was valued at $906 based upon a closing reference price of $1.64 as contemplated by the acquisition agreement.

XpresSpa Group also agreed pursuant to an earnout provision to issue up to an additional $7,500 in cash or stock if certain earnout performance targets are met during an earnout period ending on the third anniversary of the date of the acquisition agreement. For purposes of the earnout, the Common Stock will also be valued on a per share basis. The earnout payments may be satisfied in (i) cash, (ii) shares of Common Stock (priced at $1.81), or (iii) any combination thereof, at the election of the equity owners of HyperPointe, provided that in the event (and to the extent) XpresSpa Group does not have sufficient authorized shares of Common Stock that are unissued and not duly reserved for issuance upon options, warrants or other convertible securities, then XpresSpa Group shall be permitted to settle any earnout payments in cash. As a result, XpresSpa Group may issue up to an additional 4,143,647 shares of Common Stock; however, the actual number of shares that will be issued under the earnout, if any, will depend on (i) the extent of fulfillment of the earnout performance targets at the time of calculation of the earnout and (ii) the elections and conditions described in the previous sentence.

XpresSpa Group granted an equity award to the previous Chief Executive Officer of HyperPointe and who was offered employment with the Company in connection with XpresSpa’s acquisition of the equity interests of HyperPointe, as an inducement material to such new employee entering into employment with the Company. The equity award was approved on January 7, 2022, in accordance with Nasdaq Listing Rule 5635(c)(4).

The employee received stock options to purchase 1,000,000 shares of XpresSpa common stock. The stock options were issued upon the closing of the acquisition of HyperPointe and employee’s hire date in connection therewith (the "Grant Date"), and all stock options included within the equity inducement award have an exercise price of $1.64 per share, resulting in the fair value of $1,457 which would be charged to expense per the option terms. One-third of the options will vest on each of the first three anniversaries of the Grant Date, subject to the employee's continued employment with XpresSpa or its subsidiaries on such vesting dates. The stock options have a ten-year term.

The Company has recognized the assets and liabilities based on the acquisition date fair values. The acquisition did not result in the creation of any contingent consideration as of the Acquisition date and as of June 30, 2022.

Determination of the fair values of the acquired assets and assumed liabilities (and the related determination of estimated lives of depreciable tangible and identifiable intangible assets) requires significant judgment.

The fair value of intangible assets other than Goodwill was determined primarily using income approaches. This included estimated multi-period excess earnings valuation method for Customer relationships and the relief-from-royalty valuation for the tradename.

Table of Contents

The adjustments set forth in the following condensed unaudited consolidated Balance Sheet reflect the effect of the consummation of the acquisition:


Consideration paid	$	7,257

Fair value of assets acquired and liabilities assumed

Cash and cash equivalents	$	2,269
Accounts receivable		346
Unbilled Receivables		56
Prepaid expenses and other current assets		19
Other long-term assets		16
Property and equipment		68
Customer relationships		1,198
Trade name		302
Software		335

Accounts payable		(653)
Deferred revenue		(723)
		3,233
Goodwill	$	4,024

Note 8. Accounts payable, accrued expenses and other



	June 30, 2022		December 31, 2021
Accounts payable	$	4,674	$	5,966
Litigation accrual		845		845
Accrued compensation		1,799		2,862
Tax-related liabilities		557		603
Gift certificates and loyalty reward program liabilities		494		494
Construction Accrual		53		930
Credit card processing fees		119		501
Other miscellaneous accruals		748		757
Total accounts payable, accrued expenses and other current liabilities	$	9,289	$	12,958

Table of Contents

Note 9. Intangible Assets

The following table provides information regarding the Company’s intangible assets subject to amortization, which consist of the following:


	June 30, 2022						December 31, 2021
	Gross				Net		Gross				Net
	Carrying		Accumulated		Carrying		Carrying		Accumulated		Carrying
	Amount		Amortization		Amount		Amount		Amortization		Amount
Trade names	$	1,641	$	(1,240)	$	401	$	1,339	$	(1,118)	$	221
Customer Relationships		1,510		(422)		1,088		—		—		—
Software		4,502		(1,103)		3,399		3,886		(484)		3,402
Licenses		116		(18)		98		116		(7)		109
Total intangible assets	$	7,769	$	(2,783)	$	4,986	$	5,341	$	(1,609)	$	3,732

The Company’s intangible assets are amortized over their expected useful lives. The Company recorded amortization expense of $471 and $106 during the three months ended June 30, 2022 and 2021, respectively, and $864 and $205 during the six months ended June 30, 2022 and 2021, respectively.

Based on the intangible assets balance as of June 30, 2022, the estimated amortization expense for the remainder of the calendar year and each of the succeeding calendar years is as follows:


Calendar Years ending December 31,	Amount
Remaining 2022	$	946
2023		1,555
2024		1,450
2025		397
2026		323
Thereafter		315
Total	$	4,986

Note 10. Leases

The Company leases its retail and diagnostic testing locations at various domestic and international airports. Additionally, the Company leases its corporate office in New York City. Certain leases entered into by the Company fall under ASU No. 2016-02, Leases (“ASC 842”). At inception, the Company determines if a lease qualifies under ASC 842. Certain of the Company’s lease arrangements contain fixed payments throughout the term of the lease, while others involve a variable component to determine the lease obligation wherein a certain percentage of sales is used to calculate the lease payment.

All qualifying leases held by the Company are classified as operating leases. Operating lease right of use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease right of use assets and operating lease liabilities are recognized as of the commencement date based on the present value of lease payments over the lease term. The Company records its operating lease right of use assets and operating lease liabilities based on required guaranteed payments under each lease agreement. The Company uses its incremental borrowing rate as of the commencement date of the lease, which approximates the rate at which the Company can borrow funds on a secured basis, in determining the present value of the guaranteed lease payments.

The Company reviews all of its existing lease agreements on a quarterly basis to determine whether there were any modifications to existing lease agreements and to assess if any leases should be accounted for pursuant to the guidance in

Table of Contents

ASC 842. The Company recalculates the right of use asset and lease liability based on the modified lease terms and adjusts both balances accordingly.

The Company has received rent concessions from landlords on a majority of its leases, allowing for the relief of minimum guaranteed payments in exchange for percentage-of-revenue rent or providing relief from rent through payment deferrals. Currently, the periods of relief from these payments, which began in March 2020, range from three to thirty-four months and are still in effect for some of the affected leases. The Company received minimum guaranteed payment concessions of approximately $110 and $511 in the three months ended June 30, 2022 and 2021, respectively, $431 and $983 in the six months ended June 30, 2022 and 2021, respectively. The Company expects to realize additional rent concessions while some of its spas remain closed.

The Financial Accounting Standards Board (“FASB”) issued a Q&A in March 2020 that focused on the application of lease guidance in ASC 842 for lease concessions related to the effects of COVID-19. The FASB staff has said that entities can elect to not evaluate whether concessions granted by lessors related to COVID-19 are lease modifications. Entities that make this election can then apply the lease modification guidance in ASC 842 or account for the concession as if it were contemplated as part of the existing contract. XpresSpa has elected to not treat the concessions as lease modifications and will instead account for the lease concessions as if they were contemplated as part of the existing leases.

When a lessor grants a concession that contractually releases a lessee from certain lease payments or defers lease payments, a lessee may account for the concession as a negative variable lease payment and recognize negative variable lease expense in the period when the rent concession becomes accruable. The Company has recorded negative variable lease expense and adjusted lease liabilities at the point in which the rent concession has become accruable.

Supplemental cash flow information related to leases for the six months ended June 30, 2022 and 2021 were as follows:


	Six months ended June 30,
	2022		2021
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases	$	(2,031)	$	(2,149)
Leased assets obtained in exchange for new and modified operating lease liabilities	$	3,273	$	656
Leased assets surrendered in exchange for termination of operating lease liabilities	$	—	$	9

Table of Contents

As of June 30, 2022, operating leases contain the following future minimum commitments:


Calendar Years ending December 31,

Market Data

News

Tools

Markets

Discover

XSPA XpresSpa Group Inc

Trending Now

Toplists

Market Data

News

Tools

Markets

Discover

XSPA XpresSpa Group Inc