XpresSpa Group (XSPA), A cash-strapped airport spa chain snagged $5.6 million in federal coronavirus aid weeks after warning investors that its independent auditor had raised “substantial doubt” about its ability to continue operating amid hefty losses, The Post has learned.
New York-based XpresSpa told investors it had obtained the Payroll Protection Program loan in a May 7 regulatory filing — just days after its board cut ties with an auditor critical of its business.
XpresSpa didn’t say why it fired CohnReznick, but on April 20 the company revealed the auditor had issued a warning about the state of the company’s financials before the pandemic forced it to shutter its US operations.
“The report of our independent registered public accounting firm on our financial statements for the years ended December 31, 2019 and 2018 included an explanatory paragraph indicating that there is substantial doubt about our ability to continue as a going concern,” the company said in the April regulatory filing.
“Our auditors’ doubts are based on our recurring losses from operations and working-capital deficiency.”
XpresSpa operates 51 stores across 25 airports that offer passengers chair massages and mani-pedis. It also sells head pillows and eye masks, according to its Web site.
“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,” the company said in its annual report.
CEO Doug Satzman says XpresSpa cut ties with CohnReznick because it decided to switch to a less expensive accounting firm, not because of any disagreements. He also said the coronavirus pandemic slammed the company just as it was starting to turn around, noting that comparable store sales rose 2.9 percent last year after dropping 3.2 percent in 2018.
Should you buy XpresSpa Group (XSPA)
Innovation is obviously one of the shining points of penny stocks. When you discuss “emerging growth potential” you almost expect some “off the wall” ideas from start-ups. XpresSpa Group (XSPA), while not necessarily a start-up, has taken COVID-19 in stride. With less air travel, what would a company with a massive airport footprint do besides shut down in a time like this? The easy answer is to use the situation to its advantage. I don’t know how long you’ve been a reader but for a while, we’ve discussed XSPA stock. It began as just an idea but has become more of a mainstay in recent weeks.
The company decided to start a whole new business directive to address COVID-19. Since we first began looking at the penny stock, the company has been developing a division specifically for coronavirus testing. What’s crazy (or not) is that on May 22, the company reported a contract with JFK International Air Terminal LLC for COVID-19 screening and testing. Where has the recent surge of momentum come into play?
Well, we can look at a few things right now. First, the economy could be set to reopen once again with travel as a possible option. The current model for spa services availabe in airports would likely benefit from higher foot traffic in airports. But now with the XpresTest service and COVID not going anywhere right now, that could be another option. Furthermore, the company recently won approval from its shareholders to effect a reverse stock split.
As was said in a previous article today, reverse splits can be good or bad. They can be good if the company does it to attract quality investors that can give it capital that isn’t increasingly dilutive. It can be bad if the company simply boosts its price via the reverse just to use it as grounds for “cheap paper” or less than ideal debt terms. We’ll have to see what happens next. With XSPA stock back above $1, this is territory that hasn’t been seen since the beginning of 2020.
XpresSpa Group (XSPA) could partner with 5 more airports
The five airports that XpresSpa Group is more likely to partner up with:
- Hartsfield–Jackson Atlanta International Airport
- Los Angeles International Airport
- O’Hare International Airport
- Dallas/Fort Worth International Airport
- Denver International Airport
These are the 5 most busiest airports in the United States right now and it would be logical for a partnership to be created between these entities.
