XWELL (XWEL) risk factors, FY2024 10-K

Risks Related to our Financial Condition and Capital Requirements

1. 01Our consolidated financial statements have been prepared on a going concern basis; we must raise additional capital to fund our operations in order to continue as a going concern
2. 02Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited
3. 03Global economic and market conditions may adversely affect our business, financial condition, and operating results
4. 04Increasing inflation could adversely affect our business, financial condition, results of operations or cash flows
5. 05Our business requires substantial capital expenditures, and we may not have access to the capital required to maintain and grow our operations
6. 06The bio surveillance monitoring activities conducted by XpresTest are funded partially by government contract awards, which may not be available to us in the future, and such contract awards are subject to guidelines regulating certain aspects of our operations
7. 07Our ability to obtain funding for our bio surveillance monitoring activities from the CDC may be impacted by possible reductions in federal spending
8. 08We operate globally and changes in tax laws could adversely affect our results

Risks Related to our Business Operations

1. 09We use potentially hazardous materials, chemicals, and patient samples in our XpresTest diagnostic testing and bio surveillance business and any disputes relating to improper handling, storage or disposal of these materials could be time consuming and costly
2. 10U.S. Food and Drug Administration (“FDA”) regulation of diagnostic products could result in increased costs and the imposition of fines or penalties and could have a material adverse effect upon our business
3. 11If we fail to comply with the complex federal, state, local and foreign laws and regulations that apply to our businesses, we could suffer severe consequences that could materially and adversely affect our operating results and financial condition
4. 12The Company did not properly design or maintain effective entity level monitoring controls over the financial close and reporting process
5. 13The Company did not design, implement, and consistently operate effective controls over its’ foreign subsidiaries
6. 14We cannot assure you that any of our remedial measures will be effective in resolving our material weaknesses
7. 15The Company has contracted an independent consulting firm to assist with the preparation of the Financial Statements and U.S. GAAP accounting research
8. 16We depend on third parties to provide services critical to our XpresTest bio surveillance business, and we depend on them to comply with applicable laws and regulations. Additionally, any breaches of the information technology systems of third parties could have a material adverse effect on our operations
9. 17Our business operations and reputation may be materially impaired if we do not comply with privacy laws or information security policies
10. 18Hardware and software failures or delays in our information technology systems, including failures resulting from our systems conversions or otherwise, could disrupt our operations and cause the loss of confidential information, customers and business opportunities or otherwise adversely impact our business
11. 19We must comply with complex and overlapping laws protecting the privacy and security of personal data
12. 20Our capital expenditures in Naples Wax locations may not generate a positive return and we will incur significant additional costs
13. 21We rely on international and domestic airplane travel, and the time that airline passengers spend in United States airports post-security. A decrease in the desire of customers to buy spa services and products, or decreased time spent in airports would negatively impact our operations
14. 22We rely on a limited number of distributors and suppliers for certain of our products, and events outside our control may disrupt our supply chain, which could result in an inability to perform our obligations under our concession agreements and cause us to lose our concessions
15. 23Our operating results may fluctuate significantly due to certain factors, some of which are beyond our control
16. 24Our expansion into new airports or off-airport locations may present increased risks due to unfamiliarity with those areas
17. 25Our growth strategy is dependent in part on our ability to successfully identify and open new locations
18. 26If the estimates and assumptions we use to determine the size of our market are inaccurate, our future growth rate may be impacted
19. 27We currently rely on a skilled, licensed labor force to provide our services, and the supply of this labor force is finite. If we cannot hire adequate staff for our locations, we will not be able to operate
20. 28Our business is subject to various laws and regulations, and changes in such laws and regulations, or failure to comply with existing or future laws and regulations, could adversely affect us
21. 29Our labor force could unionize, putting upward pressure on labor costs
22. 30We compete for new locations in airports and may not be able to secure new locations
23. 31We may not be able to predict accurately or fulfill customer preferences or demands
24. 32We have stores and kiosks in several airports and off airport locations in which the landlord, with prior written notice to us, can terminate our lease, including for convenience or as necessary for operations. If a landlord elects to terminate a lease, we may have to shut down one or more affected locations
25. 33Our ability to operate depends on the traffic patterns of the terminals in which we operate, and the cessation or disruption of air traveler traffic in these terminals would negatively impact XpresSpa’s and XpresTest’s addressable market
26. 34We are dependent on our local partners
27. 35Failure to comply with minimum airport concession disadvantaged business enterprise participation goals and requirements could lead to lost business opportunities or the loss of existing business
28. 36Information technology systems failure or disruption, or changes to information technology related to payment systems, could impact our day-to-day operations
29. 37If we are unable to protect our customers’ credit card data and other personal information, we could be exposed to data loss, litigation and liability, and our reputation could be significantly harmed
30. 38Negative social media regarding XWELL, XpresSpa, XpresTest, Naples Wax Center or HyperPointe could result in decreased revenues and impact our ability to recruit workers
31. 39We source, develop, and sell products that may result in product liability defense costs and product liability payments
32. 40We and our subsidiaries have been, are, and may again become involved in litigation that could divert management’s attention and harm our businesses
33. 41New legislation, regulations or court rulings related to enforcing patents could harm our business and operating results
34. 42Our failure or inability to protect the trademarks or other proprietary rights we use or claims of infringement by us of the rights of third parties, could adversely affect our competitive position or the value of our brands
35. 43Any future acquisitions or business opportunities could involve unknown risks that could harm our business and adversely affect our financial condition and the results of operations
36. 44Risks associated with international operations could result in additional costs and inefficiencies

Risks Related to our Capital Stock

1. 45Stock prices can be volatile, and this volatility may depress the price of our common stock
2. 46We have no current plans to pay dividends on our common stock, and our investors may not receive funds without selling their stock
3. 47Our failure to meet the continued listing requirements of Nasdaq could result in a delisting of our common stock
4. 48The Series G Preferred Stock and certain of our outstanding warrants contain certain anti-dilution provisions, which may dilute the interests of our stockholders, depress the price of our common stock, and make it difficult for us to raise additional capital
5. 49The Series G Certificate of Designations contains restrictive covenants and terms that may make it difficult to procure additional financing and that may affect our financial condition and results of operations
6. 50Under the January 2025 Purchase Agreement, we are subject to certain restrictive covenants that may make it difficult to procure additional financing
7. 51Substantial future sales or other issuances of our common stock could depress the market for our common stock
8. 52You may experience future dilution as a result of future equity offerings and other issuances of our securities
9. 53Any additional capital raised through the sale of equity or equity-backed securities may dilute our stockholders’ ownership percentages and could also result in a decrease in the market value of our equity securities
10. 54Anti-takeover provisions of Delaware law, provisions in our charter and bylaws, and our stockholder rights plan could prevent or frustrate attempts by stockholders to change our Board of Directors or current management and could delay, discourage, or make more difficult a third-party acquisition of control of us
11. 55If securities analysts do not publish research or reports about our business, or if they publish negative evaluations, the price of our common stock could decline
12. 56Having availed ourselves of scaled disclosure available to smaller reporting companies, we cannot be certain if such reduced disclosure will make our common stock less attractive to investors
13. 57Our confidential information may be disclosed by other parties
14. 58We may fail to meet publicly announced financial guidance or other expectations about our business, which would cause our stock to decline in value