General | Note 1. General Overview On January 5, 2018, the Company changed its name to XpresSpa Group, Inc. (“XpresSpa Group” or the “Company”) from FORM Holdings Corp. The Company’s common stock, par value $0.01 per share (the “Common Stock”), which had previously been listed under the trading symbol “FH” on the Nasdaq Capital Market, has been listed under the trading symbol “XSPA” since January 8, 2018. Rebranding to XpresSpa Group aligned the Company’s corporate strategy to build a pure-play health and wellness services company, which the Company commenced following its acquisition of XpresSpa Holdings, LLC (“XpresSpa”) on December 23, 2016. As a result of the transition to a pure-play health and wellness services company, the Company currently has one operating segment that is also its sole reporting unit, XpresSpa, a leading airport retailer of spa services. XpresSpa is a well-recognized airport spa brand with 55 locations, consisting of 50 domestic and 5 international locations as of March 31, 2019. XpresSpa offers travelers premium spa services, including massage, nail and skin care, as well as spa and travel products. During the first three months of 2019 and 2018, XpresSpa generated $12,230 and $12,600 of revenue, respectively. As of March 31, 2019 and 2018, approximately 79% and 87%, respectively, of XpresSpa’s total revenue was generated by services, primarily massage and nailcare, and 21% and 13%, respectively, was generated by retail products, primarily travel accessories and other revenue. XpresSpa is a leading airport retailer of spa services and related products. As of March 31, 2019, XpresSpa operated 55 total locations in 24 airports, and one off-airport location in New York City, in three countries including the United States, Netherlands and United Arab Emirates. Services and products include: • massage services for the neck, back, feet and whole body; • nail care, such as pedicures, manicures and polish changes; • travel products, such as neck pillows, blankets and massage tools; and • new offerings, such as cryotherapy services, NormaTec compression services, and Dermalogica personal care services and retail products. For over 15 years, increased security requirements have led travelers to spend more time at the airport. In addition, in anticipation of the long and often stressful security lines, travelers allow for more time to get through security and, as a result, often experience increased downtime prior to boarding. Consequently, travelers at large airport hubs have idle time in the terminal after passing through security. XpresSpa was developed to address the stress and idle time spent at the airport, allowing travelers to spend this time productively, by relaxing and focusing on personal care and wellness. XpresSpa is well positioned to benefit from consumers’ growing interest in health and wellness and increasing demand for spa services and related wellness products. In addition, a confluence of microeconomic events has created favorable conditions for the expansion of retail concepts at airports, in particular retail concepts that attract higher spending from air travelers. The competition for airplane landings has forced airports to lower landing fees, which in turn has necessitated augmenting their retail offerings to offset budget shortfalls. Infrastructure projects at airports across the country, intended to make an airport more desirable to airlines, require funding from bond issuances that in turn rely upon, in part, the expected minimum rent guarantees and expected income from concessionaires. The Company owns certain patent portfolios, which it looks to monetize through sales and licensing agreements. During the year ended December 31, 2018, the Company determined that its former intellectual property operating segment would no longer be an area of focus and, as such, will no longer operate as a separate operating segment, as it is not expected to generate any material revenues or operating costs. In October 2017, the Company completed the sale of FLI Charge, Inc. (“FLI Charge”) and in March 2018, the Company completed the sale of Group Mobile Int’l LLC (“Group Mobile”). These two entities previously comprised the Company’s technology operating segment. The results of operations for FLI Charge and Group Mobile are presented in the statements of operations and comprehensive loss as consolidated net loss from discontinued operations. The carrying amounts of assets and liabilities belonging to Group Mobile as of December 31, 2018, are presented in the consolidated balance sheets as assets held for disposal and liabilities held for disposal, respectively. Liquidity and Going Concern As of March 31, 2019, the Company had approximately $2,884 of cash and cash equivalents, $2,003 of inventory and prepaid expenses and $109 of assets held for disposal, which amount to total current assets of $4,996. The Company’s total current liabilities balance, which includes accounts payable, accrued expenses, debt, and the current portion of Convertible Notes (as defined below), was $17,030 as of March 31, 2019. The working capital deficiency of $12,034 as of March 31, 2019 includes $1,695 of Convertible Notes classified as short-term for which principal repayments may be made in shares of Common Stock at the Company’s election, subject to certain conditions. The Company has aggressively reduced operating and overhead expenses and generated positive cash flows for the three months ended March 31, 2019. While the Company continues to focus on its overall profitability, the Company expects to incur net losses in the foreseeable future. The report of the Company’s independent registered public accounting firm on its financial statements for the years ended December 31, 2018 and 2017 includes an explanatory paragraph indicating that there is substantial doubt about the Company’s ability to continue as a going concern. The receipt of this explanatory paragraph with respect to the Company’s financial statements for the years ended December 31, 2018 and 2017 resulted in a breach of a covenant under the Senior Secured Note which constitutes an event of default under the Senior Secured Note. Upon the occurrence of an event of default under the Senior Secured Note, Rockmore may, among other things, declare the Senior Secured Note and all accrued and unpaid interest thereon and all other amounts owing under the Senior Secured Note to be due and payable. If the maturity date of the Senior Secured Note is accelerated as a result of the event of default referenced above, an event of default under the Convertible Notes would be triggered. If an event of default under the Convertible Notes occurs, the outstanding principal amount of the Convertible Notes, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the holder’s election, immediately due and payable in cash. The Company has taken actions to improve its overall cash position and access to liquidity by exploring valuable strategic partnerships, right-sizing its corporate structure, and stream-lining operations. In addition, the Company expects to generate additional liquidity through the monetization of certain investments and other assets. The Company expects that these actions will be executed in alignment with the anticipated timing of its liquidity needs. There can be no assurance, however, that any such opportunities will materialize The Company’s historical operating results indicate that there is substantial doubt related to the Company's ability to continue as a going concern. The Company believes it is probable that the actions discussed above will transpire and will successfully mitigate the substantial doubt raised by its historical operating results and will satisfy its liquidity needs 12 months from the issuance of the financial statements. However, the Company cannot reasonably predict with any certainty that the results of its planned actions will generate the expected liquidity required to satisfy its liquidity needs. If the Company continues to experience operating losses, and the Company is not able to generate additional liquidity through the actions described above or through some combination of other actions, while not expected, the Company may not be able to access additional funds and the Company might need to secure additional sources of funds, which may or may not be available. Additionally, a failure to generate additional liquidity could negatively impact its access to inventory or services that are important to the operation of the business. Recent Developments CEO Transition On February 8, 2019, Edward Jankowski resigned as Chief Executive Officer of the Company and as a director of the Company. Mr. Jankowski’s resignation was not as a result of any disagreement with the Company on any matters related to the Company’s operations, policies or practices. Mr. Jankowski will receive termination benefits including $375 payable in equal installments over a twelve-month term commencing on February 13, 2019 and COBRA continuation coverage paid in full by the Company for up to a maximum of twelve months. Effective as of February 11, 2019, Douglas Satzman was appointed by the Company’s board of directors as the Chief Executive Officer of the Company and as a director of the Company. Reverse Stock Split On February 22, 2019, The Company filed a certificate of amendment to its amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a 1-for-20 reverse stock split of the Company’s shares of Common Stock. Such amendment and ratio were previously approved by the Company’s stockholders and board of directors, respectively. As a result of the reverse stock split, every twenty (20) shares of the Company’s pre-reverse split Common Stock were combined and reclassified into one (1) share of Common Stock. Proportionate voting rights and other rights of Common Stock holders were affected by the reverse stock split. Stockholders who would have otherwise held a fractional share of Common Stock received payment in cash in lieu of any such resulting fractional shares of Common Stock as the post-reverse split amounts of Common Stock were rounded down to the nearest full share. Such cash payment in lieu of a fractional share of Common Stock was calculated by multiplying such fractional interest in one share of Common Stock by the closing trading price of the Company’s Common Stock on February 22, 2019, and rounded to the nearest cent. No fractional shares were issued in connection with the reverse stock split. The Company’s Common Stock began trading on the Nasdaq Capital Market on a post-reverse split basis at the open of business on February 25, 2019. Dispositions On October 20, 2017, the Company sold FLI Charge to a group of private investors and FLI Charge management, who now own and operate FLI Charge. In February 2019, the Company entered into an agreement to release FLI Charge’s obligation to pay any royalties on FLI Charge’s perpetual gross revenues with regard to conductive wireless charging, power, or accessories, and to cancel its warrants exercisable in FLI Charge in exchange for cash proceeds of $1,100, which were received in full on February 15, 2019. On March 22, 2018, the Company sold Group Mobile to a third party. The Company has not provided any continued management or financing support to FLI Charge or Group Mobile. Rebranding On January 5, 2018, the Company changed its name to XpresSpa Group, Inc. from FORM Holdings Corp, which aligned the Company’s corporate strategy to build a pure-play health and wellness services company. The Company’s Common Stock, par value $0.01 per share, which had previously been listed under the trading symbol “FH” on the Nasdaq Capital Market, has been listed under the trading symbol “XSPA” since January 8, 2018. Sale of Patents In January 2018, the Company sold certain patents to Crypto Currency Patent Holdings Company LLC, a unit of Marathon Patent Group, Inc. (“Marathon”), for approximately $1,250, comprised of $250 in cash and 250,000 shares of Marathon Common Stock valued at approximately $1,000 at the time of the transaction. The Marathon Common Stock was subject to a lockup period (the “Lockup Period”) which commenced on the transaction date and ended on July 11, 2018, subject to a leak-out provision. The Marathon Common Stock is recognized as a cost method investment and, as such, was required to be measured at cost on the date of acquisition, which, as of the transaction date, approximated fair value. The fair value of the Marathon Common Stock was estimated by multiplying the number of shares as they become tradeable by the price per share as of the transaction date; however, due to the fact that the Marathon Common Stock is restricted during the Lockup Period, the Company applied a discount on the lack of marketability to estimate the fair value at the measurement date. The fair value of the consideration as of the Transaction Date was determined to be $450. Collaboration Agreement On November 12, 2018, the Company entered into a Product Sale and Marketing Agreement (the “Collaboration Agreement”) with Calm.com, Inc. (“Calm”) primarily related to the display, marketing, promotion, offer for sale and sale of Calm’s products in each of the Company’s branded stores throughout the United States. The Collaboration Agreement will remain in effect until July 31, 2019, unless terminated earlier in accordance with its terms, and automatically renew for successive terms of six months unless either party provides written notice of termination no later than thirty days prior to any such automatic renewal. Financings Secured Convertible Notes On May 15, 2018, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with certain institutional investors (the “Investors”), pursuant to which the Company agreed to sell up to (i) an aggregate principal amount of $4,438 in 5% Secured Convertible Notes due on November 16, 2019, which included $88 of convertible notes issued to Palladium Capital Advisors as Placement Agent (the “Convertible Notes”), convertible into shares of its Common Stock at a conversion price of $12.40 per share, (ii) Class A Warrants (the “Class A Warrants”) to purchase 357,862 shares of Common Stock at an exercise price of $12.40 per share and (iii) Class B Warrants (the “Class B Warrants,” and together with the Class A Warrants, the “Warrants”) to purchase 178,931 shares of Common Stock at an exercise price of $12.40 per share. The Convertible Notes bear interest at a rate of 5% per annum. The Convertible Notes are senior secured obligations of the Company and are secured by certain of its personal property. Unless earlier converted or redeemed, the Convertible Notes will mature on November 16, 2019. The transaction closed on May 17, 2018, at which time the Company received $4,350 in gross proceeds from the Investors. The principal amount of the outstanding Convertible Notes was originally to be repaid monthly in the amount of approximately $296, beginning on September 17, 2018, and the Company may make such payments and related interest payments in cash or, subject to certain conditions, in registered shares of its Common Stock (or a combination thereof), at its election. If the Company chooses to repay the Convertible Notes in shares of its Common Stock, the shares will be issued at a 10% discount to the volume weighted average price of its Common Stock for the five (5) trading days commencing eight (8) days prior to the relevant repayment date and ending on the fourth (4 th On August 14, 2018, the Company entered into an Amendment Agreement (the “First Amendment Agreement”) whereby the initial monthly principal repayment and accrued interest due on the Convertible Notes of $351 was settled in 103,350 shares of Common Stock on August 15, 2018. All other material terms of the Securities Purchase Agreement remained unchanged. During the year ended December 31, 2018, several of the Investors converted their monthly principal payments and accrued interest due on the Convertible Notes into shares of Common Stock pursuant to the First Amendment Agreement, resulting in the issuance of an additional 377,109 shares of Common Stock. On December 11, 2018, the Company entered into a Second Amendment Agreement (the “Second Amendment Agreement”) whereby each Holder waived the Company’s obligation to make any monthly payments for the months of January, February and March 2019. Pursuant to the Second Amendment Agreement, each Holder was permitted to convert its pro-rata share of the Convertible Notes, at a conversion price of $4.00 per share of Common Stock, such that the maximum number of shares to be issued pursuant to the Second Amendment Agreement shall not exceed 250,000 shares of Common Stock. All other material terms of the Securities Purchase Agreement remained unchanged. Collaboration Agreement and Series E Preferred Stock Financing In connection with the entry into the Collaboration Agreement, the Company entered into a stock purchase agreement (the “Purchase Agreement”) with Calm, pursuant to which the Company issued to Calm an aggregate of 32,258 shares of the Company’s newly designated Series E Convertible Preferred Stock, par value $0.01 per share (the “Series E Preferred Stock”), which are initially convertible into 161,290 shares of Common Stock, par value $0.01 per share, at a conversion price of $12.40 per share, subject to certain adjustments. The purchase price per share of the Series E Preferred Stock was $62.00 per share for gross proceeds to the Company of $2,000. In addition, on December 28, 2018, in satisfaction of the conditions under the Purchase Agreement, the Company sold, and Calm purchased, 16,129 additional shares of Series E Preferred Stock (the “Additional Series E Shares”), which are initially convertible into 80,645 shares of Common Stock at a conversion price of $12.40 per share, subject to certain adjustments, for gross proceeds to the Company of $1,000. The sale of Additional Series E Shares were on the same terms and conditions as those contained in the Purchase Agreement. |