CPC Issues Letter to Fellow XWELL, Inc. Shareholders Revealing Intention Behind Recent Schedule 13D Filing & Lawsuit Against Entrenched Board of Directors

• The sole focus of CPC's position and lawsuit against XWELL's entrenched Board of Directors (the "Entrenched Directors") is to provide shareholders with an opportunity to elect a competing slate of directors to XWELL's existing Board at the next annual shareholder meeting.
• Under the leadership of the incumbent Board, led by Chairman Bruce Bernstein, XWELL has reported a combined net operating loss of $207.3 million from 2018 through 2023.
• Since February 2016, XWELL's common stock has declined in value by approximately 99%—from $1,788 per share (accounting for subsequent reverse stock splits) to $1.85 per share as of July 23, 2024.
• During the period of XWELL's near complete loss of value, the Entrenched Directors have regularly awarded and paid themselves large compensation packages at the expense of shareholders.
• CPC aims to provide shareholders with an opportunity to replace the Entrenched Directors with directors who will put shareholders' interests ahead of personal financial gain; to improve XWELL's financial health by stopping the existing cash burn and preserving cash on the balance sheet; and to explore a strategy that would use Company cash to acquire high-demand, high-margin businesses with significant positive cash flow in the health and wellness space.
  
  

NEW YORK, July 24, 2024 (GLOBE NEWSWIRE) --  Today, CPC Pain & Wellness SPV, LLC ("CPC"), a significant XWELL, Inc. (NASDAQ:XWEL) ("XWELL" or the "Company") shareholder that beneficially owns 394,200 or 9.42% of XWELL's outstanding shares, issued the below letter to its fellow shareholders. The letter informs shareholders of CPC's recent lawsuit filing against the incumbent members of XWELL's Board of Directors for breach of their fiduciary duties and for the Board's wrongful and inequitable efforts to prevent CPC from nominating a competing slate of directors and consequently denying shareholders the opportunity to choose who they elect to XWELL's Board at the upcoming annual shareholder meeting. In its letter, CPC details how current Board members have personally benefited from XWELL while overseeing an astounding decline in XWELL shareholder value and substantial net losses. CPC also shares in the below letter its vision for restoring and maximizing shareholder value.

The full text of CPC's letter to fellow XWELL shareholders is below.

July 24, 2024

Dear Fellow Shareholders:

On Friday, July 19, 2024, CPC Pain & Wellness SPV, LLC ("CPC") filed suit against incumbent members of XWELL's Board of Directors (the "Board"), Chairman Bruce T. Bernstein and directors Michael Lebowitz, Robert Weinstein, Gaëlle Wizenberg, and Scott R. Milford (collectively, the "Entrenched Directors"), for, among other reasons, breach of their fiduciary duties and unlawful, unenforceable, and inequitable application of XWELL's bylaws to reject CPC's notice of intent to propose its own slate of directors for election at the 2024 annual shareholder meeting. This rejection by the Entrenched Directors prohibits you, our fellow shareholders, from having any other choice beyond the slate of incumbent directors, who through negligence, self-interest and complacency have decimated the value of the Company in which you are invested.

CPC—which beneficially owns 394,200 XWELL shares or, based on the most recent practicable information on XWELL's outstanding share numbers, 9.42% of outstanding XWELL shares—was compelled to file suit when the named Entrenched Directors improperly and inequitably invoked an advance notice bylaw provision included in XWELL's Third Amended and Restated Bylaws (the "Bylaws") to prevent any reasonable opportunity for CPC to nominate individuals to stand for election to the Board at the not yet scheduled 2024 XWELL annual shareholder meeting. At 9:00 p.m. (EDT) on June 21, 2024, the Entrenched Directors used the Bylaws as a sword to unlawfully and inequitably reject CPC's director nomination notice, demanding a response—with less than 48 hours' notice—by "close of business" on Sunday, June 23, 2024. CPC provided a thorough response by the suggested deadline only to then have XWELL once again unreasonably reject CPC's nominations—citing pretextual, inaccurate and nonexistent deficiencies—and, this time, disallowing CPC to further respond to correct any perceived deficiencies. Through these actions, it is evident that the Entrenched Directors intend to embed themselves in office at all costs by preventing XWELL's shareholders from nominating a competing slate of director candidates—ultimately denying XWELL shareholders the opportunity to choose who they elect to the Board at the annual meeting of shareholders later this year.

The Entrenched Directors have good reason to want to insulate themselves from shareholder opinions and votes, having personally benefited while overseeing an astounding decline in XWELL shareholder value and substantial net losses. On February 8, 2016—the day Bernstein joined the Board—the closing price of XWELL's common stock was $1,788 per share (accounting for subsequent reverse stock splits) on the Nasdaq exchange. Since February 2016, XWELL's common stock has declined in value by approximately 99%. As of July 23, 2024, XWELL's stock closed at approximately $1.85 per share.

Along with its staggering loss in market value, XWELL has reported a combined net operating loss of $207.3 million from 2018 through 2023. XWELL's Annual Report on Form 10-K for the fiscal year ended December 31, 2023, discloses revenue decreased from $55.9 million in 2022 to $30.1 million in 2023 and its shareholder equity dropped from $39.9 million to $13 million in the same period. XWELL is also burning through its cash, going from cash and cash equivalents of more than $109.1 million in the third quarter of 2021 to approximately $19.1 million in the first quarter of 2024, and is failing to generate revenue that will slow its cash depletion or return the Company to profitability. Our proposed slate of directors is looking to heighten the focus on cost efficiencies and controls, driving the core business towards profitability and being cash flow positive.

The aforementioned failings of XWELL have come during the reign of Chairman Bernstein, who has never worked in the healthcare, medical, pharmaceutical or wellness industries; who has no experience operating spas or wellness centers—XWELL's core businesses; and who has earned no degrees in business or the natural sciences. Bernstein currently serves as a director for several other public companies, and on average those entities have lost 79.9% of their value since he joined their boards. Based on available SEC filings, Bernstein has earned compensation in excess of $2.3 million from those other public companies. Bernstein yields significant control of XWELL, serving on every committee of the XWELL Board and chairing all but one of them. Bernstein received cash and stock valued at $1,605,554 million for his services to XWELL and its affiliates in 2021 and $424,022 and $338,450 for his services in 2022 and 2023, respectively. Berstein owns or has options to purchase 1.9% of the issued and outstanding shares of XWELL's common stock.

The Entrenched Directors have not done anything meaningful to reverse the near complete loss of XWELL's value. For example, under the reign of Chairman Bernstein, the Entrenched Directors have: (i) failed to increase XWELL's revenue streams or decrease its costs such that the Company returns to profitability; (ii) failed to explain to XWELL's shareholders their strategic plan, if any, to improve XWELL's financial condition; (iii) struggled to expand the Company from an airport-based studio model to both an airport and off-airport based service model; and (iv) regularly awarded and paid themselves large compensation packages at the expense of shareholders.

Shareholders have not had an opportunity to alter the strategic direction of XWELL; at every annual shareholder meeting since 2016, candidates nominated by the Board have run unopposed. On June 17, 2024, CPC sought to change this and delivered to XWELL its director nomination notice, which nominated four highly experienced individuals—the CPC Nominees—for election to the Board at this year's not yet scheduled annual shareholder meeting. However, as noted above, the Entrenched Directors took every measure to obstruct CPC's efforts to nominate a competing slate of directors for election at the annual shareholder meeting.

CPC's vision is clear:

1. Position XWELL for sustained shareholder value creation by replacing the current Board of Directors with directors who will put the shareholders' interests ahead of their own personal financial gain;
2. Improve the health of XWELL's current business by containing cost and eliminating non-profitable sites, services and products in order to stop the existing cash burn and preserve cash on the balance sheet; and
3. Explore a strategy to use the Company's cash to acquire high-demand, high-margin businesses with significant positive cash flow in the health and wellness space.
   
   

XWELL shareholders deserve the opportunity to elect directors to the Board who possess the leadership, appropriate background and expertise needed to successfully navigate a course to profitability; who bring knowledge and integrity to the table; and whose dedication to creating shareholder value eclipses a propensity for self-gain.

Sincerely,

Richard Waldo

Managing Member, CPC Pain & Wellness SPV, LLC

Contact:

MZ North America

[email protected]