What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-03-10 compared with 2022-03-11 · 217 added, 282 removed, 378 unchanged (57% of the section changed)

4 unchanged sentences

Consolidated Statements of Operations

Consolidated Statement of Changes in Member ’ s /Stockholder s ’ Equity

Consolidated Statements of Other Comprehensive Income/(Loss)

Consolidated Statements of Changes in Member’s/Stockholders’ Equity

Consolidated Statements of Cash Flows

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December 31, 2022 and 2021

($000s) 2021 2020

($000s) December 31,

2022 December 31,

Current assets

Cash and cash equivalents $ 9,616 $ 25,347

Taxes receivable 2,831 —

Prepaid expenses and other current assets 4,229 4,093

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Total assets $ 200,759 $ 200,554

Liabilities and Member’s/Stockholders’ Equity

Liabilities and Stockholders' Equity

Current liabilities

4 unchanged sentences

Accrued and other current liabilities 6,644 4,103

Current right of use operating lease liabilities 3,473 2,890

Current operating lease liabilities 4,356 3,473

Total current liabilities 22,318 16,415

Long-term debt, net 81,420 81,755

Deferred tax liability 4,351 —

Long-term right of use operating lease liability 14,505 14,358

Deferred tax liability, net 5,485 4,351

Long-term operating lease liabilities 19,745 14,505

Other long-term liabilities 1,025 —

Total liabilities 129,993 117,026

Commitments and contingent liabilities (Note 10)

Member’s equity — 123,676

Stockholders' equity

Common stock, $ 0.001 par value;

shares authorized - 450,000,000 ;

shares issued and outstanding - 55,640,154 and zero , respectively

shares issued and outstanding - 56,181,689 and 55,640,154 , respectively

Additional paid-in capital 85,858 83,865

Accumulated other comprehensive loss ( 76 ) —

Accumulated deficit ( 15,072 ) ( 393 )

Total member’s/stockholders’ equity 83,528 123,676

Total liabilities and member’s/stockholders’ equity $ 200,554 $ 179,610

Total stockholders' equity 70,766 83,528

Total liabilities and stockholders' equity $ 200,759 $ 200,554

The accompanying notes are an integral part of these consolidated financial statements.

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For the years ended December 31, 2022, 2021 and 2020

($000s) 2021 2020 2019

(in $000s, except for shares and per share figures) 2022 2021 2020

Revenue $ 168,794 $ 133,315 $ 62,766

Operating expenses:

Cost of service (exclusive of depreciation and amortization shown below) 44,536 23,471 15,488

Cost of service (exclusive of depreciation and amortization) 62,781 44,536 23,471

Selling, general and administrative 101,418 65,732 23,621

1 unchanged sentence

Depreciation and amortization 8,061 6,597 5,641

Loss on disposal of long-lived assets 147 — —

Total operating expenses 173,339 117,547 52,733

Income from operations 15,768 10,033 663

(Loss)/income from operations ( 4,545 ) 15,768 10,033

Interest expense, net 6,751 4,888 2,456

Pre-tax net income (loss) 10,880 7,577 ( 2,212 )

Pre-tax net (loss)/income ( 11,296 ) 10,880 7,577

Income tax expense 3,383 329 —

Net income (loss) $ 10,551 $ 7,577 $ ( 2,212 )

Earnings (loss) per share of common stock (1)

Basic $ ( 0.01 ) N/A N/A

Diluted $ ( 0.01 ) N/A N/A

Net (loss)/income $ ( 14,679 ) $ 10,551 $ 7,577

Loss per share of common stock (1)

Basic $ ( 0.26 ) $ ( 0.01 ) N/A

Diluted $ ( 0.26 ) $ ( 0.01 ) N/A

Weighted average shares outstanding (1)

Basic 55,640,154 N/A N/A

Diluted 55,640,154 N/A N/A

Basic 55,684,701 55,640,154 N/A

Diluted 55,684,701 55,640,154 N/A

The accompanying notes are an integral part of these consolidated financial statements.

(1) Basic and diluted weighted average shares outstanding and loss per share represent only the period from October 28, 2021 to December 31, 2021 (see Note 8).

(1) In 2021, basic and diluted weighted average shares outstanding and loss per share represent only the period from October 28, 2021 to December 31, 2021 (see Note 7).

AirSculpt Technologies, Inc.

and Subsidiaries

Consolidated Statement of Changes in Member’s/Stockholders’ Equity

Consolidated Statements of Other Comprehensive Income/(Loss)

For the years ended December 31, 2022, 2021 and 2020

($000s) Member’s Equity Shares Amount Additional

Paid-in Capital Accumulated Deficit Total

Balance at December 31, 2018

$ 122,548 — $ — $ — $ — $ 122,548

Distributions ( 283 ) — — — — ( 283 )

Equity-based compensation 341 — — — — 341

Net loss ( 2,212 ) — — — — ( 2,212 )

Other ( 3 ) — — — — ( 3 )

($000s) 2022 2021 2020

Net (loss)/income $ ( 14,679 ) $ 10,551 $ 7,577

Other comprehensive loss:

Change in foreign currency translation adjustment ( 76 ) — —

Total other comprehensive loss ( 76 ) — —

Comprehensive (loss)/income $ ( 14,755 ) $ 10,551 $ 7,577

The accompanying notes are an integral part of these consolidated financial statements.

AirSculpt Technologies, Inc.

and Subsidiaries

Consolidated Statements of Changes in Member's/Stockholders' Equity

For the years ended December 31, 2022, 2021 and 2020

Common Stock Additional

Paid-in Capital Accumulated Other Comprehensive Loss

($000s) Member’s Equity Shares Amount Accumulated Deficit Total

Balance at December 31, 2019 $ 120,391 — $ — $ — $ — $ — $ 120,391

120,391 — — — — 120,391

Distributions ( 4,617 ) — — — — — ( 4,617 )

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Balance at December 31, 2020 123,676 — — — — — 123,676

123,676 — — — — 123,676

Activity prior to Reorganization and IPO

8 unchanged sentences

Activity subsequent to IPO

Share-based compensation — — — 4,725 — 4,725

Equity-based compensation — — — 4,725 — — 4,725

Net loss — — — — — ( 393 ) ( 393 )

1 unchanged sentence

— 55,640,154 56 83,865 — ( 393 ) 83,528

Issuance of common stock through unit vesting — 541,535 — — — — —

Distributions — — — ( 732 ) — — ( 732 )

Dividends — — — ( 24,701 ) — — ( 24,701 )

Equity-based compensation — — — 29,457 — — 29,457

Payment of taxes withheld through vested equity-based compensation — — — ( 2,031 ) — — ( 2,031 )

Net loss — — — — — ( 14,679 ) ( 14,679 )

Other comprehensive loss — — — — ( 76 ) — ( 76 )

Balance at December 31, 2022

$ — 56,181,689 $ 56 $ 85,858 $ ( 76 ) $ ( 15,072 ) $ 70,766

The accompanying notes are an integral part of these consolidated financial statements.

5 unchanged sentences

Cash flows from operating activities

Net income (loss) $ 10,551 $ 7,577 $ ( 2,212 )

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Net (loss)/ income $ ( 14,679 ) $ 10,551 $ 7,577

Adjustments to reconcile net (loss)/income to net cash provided by operating activities:

Depreciation and amortization 8,061 6,597 5,641

Equity-based compensation 29,457 7,185 325

Loss on debt modification 682 — —

Non-cash interest expense;

amortization of debt costs 921 639 211

Loss on debt modification 932 682 —

Deferred income taxes 1,134 208 —

Loss on disposal of long-lived assets 147 — —

Changes in assets and liabilities

Taxes receivable ( 2,831 ) — —

Prepaid expense and other current assets ( 5 ) ( 3,845 ) 275

9 unchanged sentences

Payment on term loan ( 84,263 ) ( 838 ) ( 2,900 )

Borrowings on term loan 49,603 2,500 —

Borrowings on term loan, net 83,503 49,603 2,500

Proceeds from IPO — 13,542 —

Distributions to member ( 66,856 ) ( 4,617 ) ( 283 )

Distribution to member ( 1,159 ) ( 66,856 ) ( 4,617 )

Dividends paid to shareholders ( 23,160 ) — —

Payment of taxes withheld through vested equity-based compensation ( 2,031 ) — —

Other financing activity ( 147 ) — —

Net cash used in financing activities ( 27,257 ) ( 4,549 ) ( 5,017 )

Net increase (decrease) in cash and cash equivalents 14,968 5,251 ( 284 )

Net (decrease)/increase in cash and cash equivalents ( 15,731 ) 14,968 5,251

Cash and cash equivalents

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Cash paid for interest $ 5,830 $ 4,255 $ 2,293

Supplemental disclosure of non-cash investing and financing information:

Cash paid for taxes $ 4,932 $ — $ —

Supplemental disclosure of non-cash investing information:

Property and equipment included in accounts payable and accrued expenses $ 1,113 $ 255 $ —

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On October 28, 2021, AirSculpt completed an initial public offering (“IPO”) of 8,050,000 shares of common stock at an initial public offering price of $ 11.00 per share.

Of the 8,050,000 shares, AirSculpt offered 2,173,913 , while 5,876,087 shares were offered by AirSculpt stockholders.

The 8,050,000 shares, includes 1,050,000 shares purchased from AirSculpt stockholders upon the full execution of the underwriter's option to purchase additional shares.

Immediately following the IPO, AirSculpt’s total outstanding shares were 55,640,154 .

Pursuant to a reorganization (the “Reorganization”) among entities under common control immediately prior to the IPO, AirSculpt became a holding company with its principal asset being 100% of the ownership interests in EBS Intermediate Parent LLC (“EBS Intermediate”).

The operations of the Company prior to the IPO represent the operations of EBS Intermediate, the predecessor to AirSculpt.

The Company and its consolidated subsidiaries are referred to collectively in these consolidated financial statements as “we,” “our,” and “us.” Solely for convenience, some of the copyrights, trade names and trademarks referred to in these consolidated financial statements are listed without their ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade names and trademarks.

EBS Intermediate was formed as a limited liability company under the laws of the state of Delaware pursuant to an agreement effective October 2, 2018 to facilitate the acquisition of EBS Enterprises, LLC f/k/a Rollins Enterprises, LLC.

Prior to the Reorganization, EBS Intermediate was a wholly-owned subsidiary of EBS Parent, LLC (the “Parent”).

Pursuant to a reorganization (the “Reorganization”) among entities under common control immediately prior to the IPO, AirSculpt became a holding company with its principal asset being 100 % of the ownership interests in EBS Intermediate Parent LLC.

The Company's revenues are concentrated in the specialty, minimally invasive liposuction market.

The Company, through its wholly-owned subsidiaries, is a provider of practice management services to professional associations (“PAs”) located throughout the United States.

The operations of the Company prior to the IPO represent the predecessor to AirSculpt.

The Company and its consolidated subsidiaries are referred to collectively in these consolidated financial statements as “we,” “our,” and “us.” Solely for convenience, some of the copyrights, trade names and trademarks referred to in these consolidated financial statements are listed without their © , ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade names and trademarks.

The Company, through its wholly-owned subsidiaries, is a provider of practice management services to professional associations (“PAs”) located throughout the United States and Canada.

The Company owns and operates non-clinical assets and provides its management services to the PAs through management services agreements (“MSAs”).

Management services provide for the administration of the non-clinical aspects of the medical operations and include, but are not limited to, financial, administrative, technical, marketing, and personnel services.

At December 31, 2021 and 2020, the Company is providing management services to eighteen and fourteen medical practices, respectively.

Pursuant to the MSA, the PA is responsible for all clinical aspects of the medical operations of the practice.

Impact of COVID-19

The COVID-19 global pandemic has significantly affected the Company’s centers, employees, customers, communities, business operations and financial performance, as well as the U.S.

economy and financial markets.

The COVID-19 pandemic materially impacted the Company’s financial performance for the year ended December 31, 2020.

The Company’s facilities were shutdown for two to three months during 2020.

The Company’s operating structure allows for some flexibility in the cost structure according to the volume of cases performed, including much of cost of services.

As a result of this flexibility and the return of volumes in the second half of 2020, the Company did not request or receive any proceeds from the CARES Act and other governmental assistance programs.

Other than the temporary decrease in revenue and cost of service, the Company did not incur any significant costs attributable to the pandemic.

The Company did not experience any facility shutdowns during the year ended December 31, 2021 due to COVID-19.

However, the Company will continue to monitor the current COVID-19 situation in each market the Company operates in and will react accordingly should events require us to temporarily close.

Principles of Consolidation

These consolidated financial statements present the financial position and results of operations of the Company, its wholly-owned subsidiaries, and the PAs, which are considered variable interest entities in which the Company is the primary beneficiary.

These consolidated financial statements present the financial position and results of operations of the Company, its wholly-owned subsidiaries, and the PAs, which are under the control of the Company and are considered variable interest entities in which the Company is the primary beneficiary.

All intercompany accounts and transactions have been eliminated in consolidation.

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Variable Interest Entities

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Revenue Recognition

Revenues consist primarily of revenues earned for the provision of the Company’s patented AirSculpt ® procedures.

Revenue consists primarily of revenue earned for the provision of the Company’s patented AirSculpt® procedures.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition.

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The Company has arrangements with various financing companies to facilitate this option.

There is a financing transaction fee based on a set percentage of the amount financed and the Company recognizes revenue based on the expected transaction price which is reduced for financing fees.

There is a financing transaction fee based on a set percentage of the amount financed and are not contingent upon any criteria.

The Company recognizes revenue based on the expected transaction price which is reduced for financing fees.

Revenue for services is recognized when the service is performed.

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The Company’s policy is to require payment for services in advance.

Payments received for services that have yet to be performed as of December 31, 2021 and 2020 are included in deferred revenue and patient deposits.

Payments received for services that have yet to be performed as of December 31, 2022 and December 31, 2021 are included in deferred revenue and patient deposits.

Cost of Service

Cost of service is comprised of all service and product costs related to the delivery of procedures, including but not limited to compensation to doctors, nurses and clinical staff, supply costs, and facility rent expense.

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Deferred Financing Costs, Net

Loan costs are capitalized in the period in which they are incurred and amortized on the straight-line basis over the term of the respective financing agreement which approximates the effective interest method.

Loan costs and discounts are capitalized in the period in which they are incurred and amortized on the straight-line basis over the term of the respective financing agreement which approximates the effective interest method.

These costs are included as a reduction of long-term debt on the consolidated balance sheets.

Total amortization of deferred financing costs was approximately $ 0.6 million, $ 0.2 million and $ 0.2 million for the years ended December 31, 2021, 2020 and 2019, respectively, and is included as a component of interest expense.

Total amortization of deferred financing costs was approximately $ 0.9 million, $ 0.6 million and $ 0.2 million for the twelve months ended December 31, 2022, 2021 and 2020, respectively.

Amortization of loan costs and discounts is included as a component of interest expense.

Property and Equipment, Net

2 unchanged sentences

Depreciation of leasehold improvements is based on the shorter of the estimated useful life of the improvement or the remaining lease term.

On January 1, 2019, the Company adopted the Accounting Standards Codification (“ASC”) 842 - Leases using the modified retrospective transition approach by applying the new standard to all leases existing at that date.

Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under the new guidance.

The Company determines if an arrangement is a lease at inception.

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Goodwill represents the excess of the fair value of the consideration conveyed in the acquisition over the fair value of net assets acquired.

Goodwill is not amortized and is evaluated annually for impairment or sooner if factors occur that would trigger an impairment review.

Goodwill is not amortized but is evaluated annually for impairment or sooner if factors occur that would trigger an impairment review.

Judgments regarding the existence of impairment indicators are based on market conditions and operational performance.

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However, if the Company were to believe the fair value was more likely than not lower than the carrying value, then the Company is required to perform a quantitative analysis.

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The quantitative analysis involves comparing the estimated fair value of a reporting unit with its respective book value, including goodwill.

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Long-Lived Assets

The Company accounts for impairment of long-lived assets in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) ASC Topic 350, Intangibles— Goodwill and Other .

The Company accounts for impairment of long-lived assets in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 360, Impairment or Disposal of Long-Lived Assets .

This standard requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

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Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell.

No impairment charges were recognized for the years ended December 31, 2021, 2020 or 2019.

No impairment charges were recognized for the twelve months ended December 31, 2022, 2021 and 2020.

ASC Topic 820, Fair Value Measurements and Disclosure s, defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosure requirements about fair value measurements.

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Borrowings bear interest at what is estimated to be current market rates of interest, accordingly, carrying value approximates fair value.

Equity-Based Compensation

Unit-based Compensation

Prior to the IPO and Reorganization, EBS Parent, LLC had outstanding Profit Interest Units (“PIUs”) under the Parent’s 2018 incentive unit plan.

In conjunction with the IPO and Reorganization, all of the outstanding PIUs were settled.

Share-based Compensation

Subsequent to the IPO and Reorganization, the Company established the 2021 Equity Incentive Plan.

Under the 2021 Equity Incentive Plan, 3,950,450 stock units were awarded to AirSculpt’s executive officers and directors and 728,880 stock units were awarded to employees on November 4, 2021 and November 10, 2021, respectively.

These stock units were granted in the form of Restricted Stock Units (“RSUs”) and Performance Stock Units (“PSUs”).

See “Note 6 - Equity-based Compensation” for further discussion of the Company’s share-base award structure.

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The Company recognizes share-based compensation expense for employees and non-employees based on the grant-date fair value of RSU and PSU awards over the applicable service period.

For awards that vest based on continued service, share-based compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards.

For PSUs vesting based on the achievement of a specified performance condition, share-based compensation cost is recognized on a graded vesting basis over the requisite service period when it is probable the performance condition will be achieved.

The performance conditions represent a combination of the Company’s actual financial performance and market based conditions.

Once it is probable that the performance condition will be achieved, the Company recognizes unit-based compensation cost over the remaining requisite service period under a graded vesting model, with a cumulative adjustment for the portion of the service period that occurred for the period prior to the performance condition becoming probable of being achieved.

The grant date fair value of RSUs and PSUs based on the Company’s financial performance, are based on the underlying value of the Company’s stock on the grant date.

Determining the fair value of PSUs with market-based vesting conditions requires judgment.

The Company uses a Monte Carlo simulation model to estimate the fair value of PSUs that have market-based vesting conditions.

See “Note 6—Equity-Based Compensation” for further discussion.

The determination of share-based compensation cost is inherently uncertain and subjective and involves the application of valuation models and assumptions requiring the use of judgment.

If factors change and different assumptions are used, share-based compensation expense or results of operations could be significantly different.

Earnings Per Share

Basic earnings per share of common stock is computed by dividing net income/(loss) attributable to AirSculpt Technologies, Inc.

for the twelve months ended December 31, 2022 and 2021 by the weighted-average number of shares of common stock outstanding during the same period.

Diluted earnings per share of common stock is computed by dividing net income/(loss) attributable to AirSculpt Technologies, Inc.

for the twelve months ended December 31, 2022 and 2021 by the weighted-average number of shares of common stock adjusted to give effect to potentially dilutive securities.

Where the inclusion of potentially dilutive shares would be antidilutive, diluted loss per share equals basic loss per share.

Prior to the IPO, the EBS Intermediate Parent, LLC structure included only LLC common units.

As a result, the Company does not believe earnings per share to be a meaningful presentation in the accompanying consolidated financial statements for the periods of 2021 prior to the IPO and for the twelve months ended December 31, 2020.

Advertising Costs

Advertising costs are expensed in the period when the costs are incurred and are included as a component of selling, general and administrative costs.

Advertising costs were approximately $ 14.8 million, $ 7.0 million and $ 7.2 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Prior to the Reorganization, EBS Intermediate was organized as a limited liability company and elected to be treated as a partnership for federal and state income tax purposes.

Accordingly, the tax consequences of EBS Intermediate’s profits and losses were passed through to the members of EBS Intermediate and were reported in their respective income tax returns.

Therefore, prior to the Reorganization no provision for income taxes was provided.

As of October 28, 2021 and pursuant the Reorganization, the Company became a Corporation and is now subject to being taxed as a C corporation.

Income taxes consist of U.S.

federal, state and international taxes for jurisdictions in which we conduct business.

Deferred income taxes arise from temporary differences between the financial statement carrying amount and the tax basis of assets and liabilities.

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

In evaluating our ability to recover our deferred tax assets within the jurisdiction from which they arise, we consider all available positive and negative evidence including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

If based upon all available positive and negative evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is established.

The valuation allowance may be reversed in a subsequent reporting period if the Company determines that it is more likely than not that all or part of the deferred tax asset will become realizable.

In accordance with ASC 740 , Income Taxes , the Company evaluated the technical merits of its income tax positions and has established income tax reserves for uncertain tax positions for the fiscal year ended December 31, 2021.

See “Note 9 - Income Taxes” for further information.

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No.

2014-09, Revenue from Contracts with Customers (“Topic 606”) which outlines a single comprehensive model for recognizing revenue and supersedes most existing revenue recognition guidance.

On January 1, 2019, the Company adopted the standard using the modified retrospective approach.

Under the modified retrospective approach, the Company was required to recognize the cumulative effect of initially applying Topic 606 as an adjustment to the opening balance of member’s equity as of January 1, 2019, the date of initial application.

The cumulative effect of initially applying Topic 606 had no impact on the consolidated financial statements.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes Topic 840, Leases (“ASU 2016-02”).

ASU 2016- 02 requires a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term.

The Company adopted ASU 2016-02 effective January 1, 2019, using a modified retrospective transition approach.

The most prominent of the changes resulting from ASU 2016-02 is the recognition of right-of-use assets and lease liabilities by lessees for those leases classified as operating leases.

Upon adoption of ASU 2016-02 , the Company recorded $ 14.3 million of operating lease liabilities and $ 14.2 million in right-of-use assets on January 1, 2019.

The cumulative effect of the accounting change recognized upon adoption had an immaterial impact to the consolidated balance sheets.

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Advertising costs are expensed in the period when the costs are incurred and are included as a component of selling, general and administrative expenses.

Advertising expenses were approximately $ 20.6 million, $ 14.8 million and $ 7.0 million for the twelve months ended December 31, 2022, 2021 and 2020, respectively.

Prior to the Reorganization, the Company was organized as a limited liability company and had elected to be treated as a partnership for federal and state income tax purposes.

Accordingly, the tax consequences of the Company’s profits and losses were passed through to the members of the Company and were reported in their respective income tax returns.

Therefore, historically no provision for income taxes has been provided in the accompanying consolidated financial statements for the periods prior to the Reorganization.

As a result of the Reorganization, the Company became subject to taxation as a C corporation for periods after October 28, 2021.

The Company applies the provisions of ASC 740-10, Accounting for Uncertain Tax Positions (“ASC 740-10”).

Under these provisions, companies must determine and assess all material positions existing as of the reporting date, including all significant uncertain positions, for all tax years that are open to assessment or challenge under tax statutes.

Additionally, those positions that have only timing consequences are analyzed and separated based on ASC 740-10’s recognition and measurement model.

ASC 740-10 provides guidance related to uncertain tax positions for pass-through entities and tax-exempt not-for profit entities.

ASC 740-10 also modifies disclosure requirements related to uncertain tax positions for nonpublic entities and provides that all entities are subject to ASC 740-10 even if the only tax position in question is the entity’s status as a pass-through.

As required by the uncertain tax position guidance, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit.

For tax positions meeting the more-likely-than-not threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

The Company applied the uncertain tax position guidance to all tax positions for which the statute of limitations remained open and determined that there are no uncertain tax positions as of December 31, 2022 or December 31, 2021.

The Company is not subject to U.S.

federal tax examination prior to 2021, when it was formed.

The Company has effective tax rates of approximately ( 29.9 )% and 3.0 % for the twelve months ended December 31, 2022 and 2021, respectively, inclusive of all applicable U.S.

federal and state income taxes.

Prior to the Reorganization, the Company was not subject to federal taxation.

NOTE 2 – GOODWILL AND INTANGIBLES, NET

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The resulting excess consideration over fair value of identifiable net assets was recorded to goodwill in the amount of $ 81.7 million.

The annual review of goodwill impairment was performed in October 2021 and 2020 using a qualitative analysis and the Company determined that a quantitative analysis was not required.

There were no triggering events during the years ended December 31, 2021, 2020 or 2019.

The Company had goodwill of $ 81.7 million at December 31, 2021 and 2020.

Intangible assets consisted of the following at December 31, 2021 and 2020 (in 000’s):

The annual review of goodwill impairment was performed in October 2022 using a qualitative analysis and the Company determined that a quantitative analysis was not required.

There were no triggering events during the years ended December 31, 2022, 2021 and 2020.

The Company had goodwill of $ 81.7 million at December 31, 2022 and December 31, 2021.

Intangible assets consisted of the following at December 31, 2022 and December 31, 2021 (in 000’s):

2022 December 31,

2021 Useful Life

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Accumulated amortization of tradenames and trademarks ( 5,015 ) ( 3,835 )

Total intangible assets, net $ 55,852 $ 60,608

Aggregate amortization expense on intangible assets was approximately $ 4.8 million for all of the years ended December 31, 2021, 2020 and 2019.

Total intangible assets $ 51,099 $ 55,852

Aggregate amortization expense on intangible assets was approximately $ 4.8 million for each of the years ended December 31, 2022, 2021, and 2020.

The estimated aggregate amortization expense on intangible assets for each of the next five years and thereafter is estimated to be as follows (in 000’s):

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NOTE 3 – PROPERTY AND EQUIPMENT, NET

As of December 31, 2021 and 2020 property and equipment consists of the following:

As of December 31, 2022 and December 31, 2021 property and equipment consists of the following:

2022 December 31,

Medical equipment $ 8,906 $ 3,753

3 unchanged sentences

Construction in progress 2,854 2,873

Accumulated depreciation and amortization ( 2,908 ) ( 1,099 )

Accumulated depreciation ( 6,176 ) ( 2,908 )

Property and equipment, net $ 24,206 $ 13,627

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Depreciation expense was approximately $ 3.3 million, $ 1.8 million, and $ 0.9 million for the years ended December 31, 2022, 2021, and 2020 respectively.

NOTE 4 – DEBT

In October 2018, the Company entered into a credit agreement (the “Credit Agreement”) with a lender.

Under the terms of the Credit Agreement, the Company obtained a $ 34 million term loan and a $ 5 million revolving credit facility.

In May 2021, the Company amended the Credit Agreement by adding an incremental $ 52.0 million senior secured term loan.

The proceeds from this loan plus excess cash on the balance sheet were used to pay a distribution to the Parent of approximately $ 59.7 million and the related fees for this transaction.

Under the terms of the Credit Agreement, we obtained a $ 34.0 million term loan.

In May 2021, the Company amended the Credit Agreement by adding an incremental $ 52.0 million senior secured term loan, resulting in an $ 85.0 million term loan in aggregate.

The proceeds from this loan plus excess cash on the balance sheet were used to pay a distribution to EBS Parent, LLC (the "Parent") of approximately $ 59.7 million and the related fees for this transaction.

Beginning on June 30, 2021, the quarterly principal payments increased from $ 100,000 to $ 212,500 .

As a result of the amendment, the Company recognized a loss on debt modification of $ 682,000 in its consolidated statements of operations for the twelve months ended December 31, 2021.

Under the Credit Agreement, the Company is obligated to make interest payments on the last day of each month.

All outstanding loans bear interest based on either a base rate or LIBOR plus an applicable per annum margin of 4.5 % (base rate) or 5.5 % (LIBOR) if the Company’s total leverage is equal to or greater than 2.5 x and less than 4.25 x.

If the Company’s total leverage ratio is equal to or greater than 4.25 x, the interest is based on either a base rate or LIBOR plus an applicable per annum margin of 5.0 % (base rate) or 6.0 % (LIBOR).

If the Company’s total leverage ratio is below 2.5 x, the interest is based on either a base rate or LIBOR plus an applicable per annum margin of 4.0 % (base rate) or 5.0 % (LIBOR).

At December 31, 2021, the applicable per annum margins under the Credit Agreement were 4.0 % (base rate) and 5.0 % (LIBOR).

At December 31, 2021, the borrowings under the Credit Agreement bore interest at approximately 6.0 %.

Additionally, the Company is required to pay an unused credit facility fee equal to 0.5 % per annum on the unused amount of the revolving line of credit.

Total borrowings as of December 31, 2021 and 2020 were as follows (in 000’s):

On August 11, 2022 the Company amended the Credit Agreement to provide for (i) the payment of cash dividends in an amount not to exceed $ 23.0 million on or prior to September 30, 2022 and (ii) the payment of cash dividends in an amount not to exceed $ 2.0 million with respect to securities that are not vested at the time such cash dividend is paid.

In doing so, the Company incurred an amendment fee of $ 0.2 million.

On November 7, 2022, the Company entered into a new credit agreement with a syndicate of lenders (the "new Credit Agreement") maturing November 7, 2027.

Pursuant to the new Credit Agreement, there is (i) an $ 85.0 million aggregate principal amount of term loans and (ii) a revolving loan facility in an aggregate principal amount of up to $ 5.0 million.

The proceeds were used, in part, to pay off the Company’s $ 83.6 million outstanding principal balance under its existing credit facility.

In doing so, the Company recognized a loss on debt extinguishment of $ 0.9 million.

Under the new Credit Agreement, all outstanding loans bear interest based on either a base rate or SOFR plus an applicable per annum margin.

The applicable per annum margin is 2.0 % or 3.0 % for base rate or SOFR, respectively, if the Company's total leverage ratio is equal to or greater than 2.0 x.

If the Company's total leverage ratio is equal to or greater than 1.0 x and less than 2.0 x, the applicable per annum margin is 1.5 % or 2.5 % for base rate or SOFR, respectively.

If the Company's total leverage ratio is below 1.0 x, the applicable per annum margin is 1.0 % or 2.0 % for base rate or SOFR, respectively.

Total borrowings as of December 31, 2022 and December 31, 2021 were as follows (in 000’s):

2022 December 31,

Term loan $ 85,000 $ 84,262

Unamortized debt issuance costs ( 1,657 ) ( 581 )

Unamortized debt discounts and issuance costs ( 1,455 ) ( 1,657 )

Total debt, net 83,545 82,605

1 unchanged sentence

Long-term debt, net $ 81,420 $ 81,755

As of December 31, 2021, the Company had $ 5.0 million available on the revolving credit facility.

As of December 31, 2022 and 2021, the Company had $ 5.0 million available on the revolving credit facility.

The scheduled future maturities of long-term debt as of December 31, 2022 is as follows (in 000’s):

Total maturities $ 85,000

All borrowings under the Credit Agreement are cross collateralized by substantially all assets of the Company and are subject to certain restrictive covenants including quarterly total leverage ratio and fixed charge ratio requirements, a limit on capital expenditures and excess cash flow.

The Company is in compliance with all covenants and has no letters of credit outstanding as of December 31, 2021.

All borrowings under the new Credit Agreement are cross collateralized by substantially all assets of the Company and are subject to certain restrictive covenants including quarterly total leverage ratio and fixed charge ratio requirements.

The Company is in compliance with all covenants and has no letter of credit outstanding as of December 31, 2022 and 2021.

NOTE 5 – LEASES

The Company’s operating leases are primarily for real estate, including suites in medical office buildings and corporate offices.

The Company incurred rent expense of $ 3.3 million, $ 2.8 million and $ 1.5 million for its suites in medical office buildings for the years ended December 31, 2021, 2020 and 2019, respectively.

The Company incurred rent expense of $ 92,000 , $ 143,000 and $ 78,000 related to the corporate offices for the years ended December 31, 2021, 2020 and 2019, respectively.

Rent expense related to suites in medical office buildings is included in cost of services while rent expense for the corporate offices is included in selling, general and administrative on the consolidated statements of operations.

The Company’s operating leases are primarily for real estate, including medical office suites and corporate offices.

For the twelve months ended December 31, 2022, 2021, and 2020, the Company incurred rent expense of $ 4.5 million, $ 3.3 million, and $ 2.8 million, respectively, related to its medical office suites.

The Company’s rent expense related to its medical office suites is classified in cost of services within the Company’s consolidated statements of operations.

The Company incurred rent expense of $ 323,000 , $ 92,000 , and $ 143,000 for the twelve months ended December 31, 2022, 2021, and 2020, respectively, related to the corporate offices which is classified in selling, general and administrative expenses.

The Company currently does not have any finance leases.

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The following table presents the weighted-average lease terms and discount rates at December 31, 2022, 2021, and 2020:

2021 2020 2019

2022 December 31,

2021 December 31,

Weighted-average remaining lease term 4.5 years 4.9 years 5.0 years

Weight average discount rate 5.1 % 4.6 % 4.6 %

The following table presents supplemental cash flow information for the years ended December 31, 2021, 2020 and 2019 (in 000’s):

2021 2020 2019

The following table presents supplemental cash flow information for the twelve months ended December 31, 2022, 2021, and 2020 (in 000’s):

2022 December 31,

2021 December 31,

Cash paid for amounts included in the measurement of lease liabilities:

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Future minimum rental payments under all non-cancellable operating lease agreements for the succeeding five years are as follows, excluding common area maintenance charges that may be required by the agreements (in 000’s):

Year ending December 31,

Year ended December 31,

Thereafter 5,874

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Total lease obligations $ 24,101

NOTE 6— EQUITY-BASED COMPENSATION

Subsequent to the IPO and Reorganization, the Company established the 2021 Equity Incentive Plan (the “2021 Plan”).

Prior to the IPO and Reorganization, EBS Parent, LLC had outstanding PIUs under the Parent’s 2018 incentive unit plan.

In conjunction with the IPO and Reorganization, all of the outstanding PIUs were settled.

Profit Interest Awards

Under the legacy Parent 2018 incentive unit plan, the Parent was authorized to issue approximately 14,000 PIUs (the “Class B units”) that represent non-voting interest in the Parent and that may only be issued in return for services provided to the Parent or its subsidiaries.

Immediately prior to the Reorganization and IPO, Parent had approximately 12,000 PIUs outstanding that had been granted to employees and directors under the 2018 incentive unit plan.

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The Company recognizes unit-based compensation expense based on the grant-date fair value of Profit Interest Unit (“PIU”) awards over the applicable service period.

Half of the PIUs had time-based vesting, and the remainder vest upon achievement of a specified return for the Parent's initial investors.

Vesting of these PIUs is generally subject to continuing service over the vesting periods.

For awards that vest based on continued service, unit-based compensation cost is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the awards.

The vesting period is five years .

For awards with performance vesting conditions, unit-based compensation cost is recognized on a graded vesting basis over the requisite service period when it is probable the performance condition will be achieved.

The grant date fair value of PIU awards that contain service or performance conditions was estimated using the Black-Scholes pricing model.

In connection with the IPO and Reorganization, the PIUs outstanding under the Parent’s 2018 incentive unit plan were settled with either vested shares or restricted stock awards of AirSculpt.

A summary of the Company’s profit interest unit activity for the years ended December 31, 2021 and 2020 follows:

Weighted Average

Fair Value of

Unvested at December 31, 2019

12,016 $ 278.99

Vested ( 1,167 ) 278.99

Unvested at December 31, 2020

10,849 $ 278.99

Settled ( 9,255 ) 278.99

Converted to share-based awards ( 1,594 ) 278.99

Unvested at December 31, 2021

The Company converted 1,594 units held by an officer into 578,051 restricted stock awards (“RSAs”) in connection with the Reorganization and IPO.

These RSAs are subject to continuing service of the officer over the ratable vesting periods beginning six months from the date of grant to one year after the date of grant.

The exchange of these PIUs for RSAs was recognized as a modification.

The Company will recognize the share-based compensation, including the previously unrecognized compensation costs and any incremental fair value, over the new requisite service period of the modified award.

There was no incremental fair value recognized in this transaction as the fair value of both the predecessor awards immediately before modification and the RSAs immediately after modification was the same.

The fair value in both instances was based on the underlying price of AirSculpt shares on the date of modification.

Share-based Awards

Subsequent to the IPO and Reorganization, the Company established the 2021 Equity Incentive Plan.

NOTE 6 – STOCKHOLDERS' EQUITY AND EQUITY-BASED COMPENSATION

Subsequent to the IPO and Reorganization, AirSculpt established the 2021 Equity Incentive Plan.

The Company may issue a maximum of 5,564,015 shares under the 2021 Equity Incentive Plan.

This amount will automatically increase on January 1 of each year for a period of ten years starting on January 1, 2023, in an amount equal to the lesser of (i) four percent of the total Common Stock outstanding on December 31 of the preceding year and (ii) such smaller number of shares as determined by the Company’s Board.

Under the 2021 Equity Incentive Plan, 3,950,450 stock units were awarded to

AirSculpt’s executive officers and directors and 728,880 stock units were awarded to employees on November 4, 2021 and November 10, 2021, respectively.

These stock units were granted in the form of RSUs and PSUs.

During the year ended December 31, 2021, the Company granted 2,367,485 RSUs to certain officers, employees and non-employee directors in connection with the IPO and in accordance with the 2021 Plan.

During the twelve months ended December 31, 2022, the Company granted 216,421 RSUs to certain officers, employees and non-employee directors in accordance with the 2021 Plan.

Vesting and payment of these RSUs are generally subject to continuing service of the employee or non-employee director over the ratable vesting periods beginning one year from the date of grant to one or three years after the date of grant.

The fair values of these RSUs were

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.

The fair values of these RSUs were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.

These RSUs are not considered outstanding until vested.

During the year ended December 31, 2021, the Company granted 2,311,845 PSUs subject to the achievement of a combination of performance conditions.

During the twelve months ended December 31, 2022, the Company granted 38,775 PSUs subject to the achievement of a combination of performance conditions.

In addition to the achievement of the performance conditions, these PSUs are generally subject to the continuing service of the employee over the ratable vesting period from the earned date continuing through the settlement of the shares.

For these PSUs, the shares settle in the first quarter of the year following the year in which the vesting criteria is met.

The performance criteria is based on the Company’s actual performance and/or market condition results as compared to the targets.

The performance criteria is based on the Company’s actual performance condition results as compared to the targets.

These PSUs are not considered outstanding until settled.

Of the 2,311,845 total PSUs granted, 973,703 PSUs have a market-based vesting condition (“market-based PSUs”).

During the twelve months ended December 31, 2021, the Company granted 973,703 PSUs subject to the achievement of certain market-based conditions.

The vesting is based on achievement of a specified 60 -day volume weighted average share price (“VWAP”) in relation to a specified base price in the award agreement.

These awards are structured with one-third vesting at 120 % VWAP, one-third vesting at 145 % VWAP and the final one-third vesting at 175 % VWAP.

During the twelve months ended December 31, 2022, the Company granted 103,936 PSUs subject to the achievement of market-based conditions ("market-based PSUs").

The vesting is based on achievement of a total shareholder return relative to a specified peer group (“rTSR”).

Based on the rTSR, the awards can settle in shares in a range from 0 % to 200 %.

Determining the fair value of the market-based PSU awards requires judgment.

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The Company does not anticipate paying any cash dividends in the foreseeable future.

The following table sets forth the assumptions that were used to calculate the fair value of the market-based PSU awards granted on November 4, 2021.

The following table sets forth the assumptions that were used to calculate the fair value of the market-based PSU awards granted during the twelve months ended December 31, 2022 and 2021.

Expected volatility 82.4 % 66.0 %

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The fair values of the PSUs not subject to a market conditions were determined based on the closing price of the Company’s common stock on the trading date immediately prior to the grant date.

Restricted and Performance Share-Based Activity

A summary of the Company’s RSU and PSU activity for the years ended December 31, 2021 follows:

Restricted and Performance Equity-Based Activity

A summary of the Company’s RSU and PSU activity for the twelve months ended December 31, 2022 and 2021 follows:

Weighted Average

4 unchanged sentences

Outstanding at December 31, 2021 4,673,766 $ 14.27

4,673,766 $ 14.27

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Granted 359,132 15.10

Forfeitures ( 503,693 ) 14.13

Vestings ( 1,002,571 ) 14.76

Outstanding at December 31, 2022 3,526,634 $ 14.23

Other information pertaining to equity-based compensation

At December 31, 2021, unrecognized compensation cost related to unvested time-based shares was approximately $ 33.2 million.

Unrecognized compensation cost will be expensed annually based on the number of shares that vest during the year.

Further the Company has unrecognized compensation cost of $ 29.1 million related to the PSUs, which will be recognized on a graded vesting basis over the requisite service period when it is probable the performance condition will be achieved.

The Company recorded equity-based compensation expense of $ 7.2 million, $ 0.3 million and $ 0.3 million for the years ended December 31, 2021, 2020 and 2019, respectively, in selling, general and administrative expenses on the consolidated statements of operations.

On December 30, 2022, Ronald Zelhof, the Chief Operating Officer, entered into a Separation and General Release Agreement (“Separation Agreement”) with the Company.

In connection with confirming that certain restrictive covenants remain in effect, Mr.

Zelhof was entitled to remain eligible to earn PSUs through March 31, 2024 and a partial accelerated vesting for 176,388 RSUs.

In connection with the Separation Agreement, the Company recognized an additional $ 2.1 million in stock compensation during the twelve months ended December 31, 2022.

The Company recorded equity-based compensation expense of $ 29.5 million, $ 7.2 million, and $ 0.3 million for the twelve months ended December 31, 2022, 2021, and 2020, respectively, in selling, general and administrative expenses on the consolidated statements of operations.

Forfeitures are recognized as incurred.

NOTE 7— EQUITY

Prior to the Reorganization and IPO, the Parent had approximately 124,785 Class A units outstanding.

The rights of all such units are governed by the amended and restated limited liability agreements of the Company and the Parent both dated October 2, 2018.

The Company paid distributions to the Parent of approximately $ 66.9 million, $ 4.6 million and $ 0.3 million for the twelve months ended December 31, 2021, 2020 and 2019, respectively.

In conjunction with the IPO and Reorganization, AirSculpt filed an Amended and Restated Certificate of Incorporation authorizing 450,000,000 shares of $ 0.001 par value common stock and 50,000,000 shares of $ 0.001 par value preferred stock.

On October 28, 2021, AirSculpt completed an initial public offering of 8,050,000 shares of common stock at an initial public offering price of $ 11.00 per share.

Of the 8,050,000 shares, AirSculpt offered 2,173,913 , while 5,876,087 shares were offered by AirSculpt stockholders.

The 8,050,000 shares, includes 1,050,000 shares purchased from AirSculpt stockholders upon the full execution of the underwriter’s option to purchase additional shares.

Pursuant to the Reorganization among entities under common control immediately prior to the IPO, AirSculpt became a holding company with its principal asset being 100% of the ownership interests in EBS Intermediate Parent LLC (the “Company”).

Immediately following the IPO, AirSculpt's total outstanding shares were 55,640,154 .

AirSculpt’s common stock began trading on the NASDAQ Exchange on October 29, 2021 under the symbol “AIRS”.

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Unrecognized compensation cost related to unvested time-based shares was approximately $ 17.6 million and $ 33.2 million for the twelve months ended December 31, 2022 and 2021, respectively.

Unrecognized compensation cost will be expensed annually based on the number of shares that vest during the year.

Further, the Company has unrecognized compensation cost of $ 12.1 million and $ 29.1 million related to the PSUs for the twelve months ended December 31, 2022 and 2021, respectively, which will be recognized on a graded vesting basis over the requisite service period when it is probable the performance condition will be achieved.

On August 10, 2022, the board of directors of the Company approved a $ 0.41 per share special cash dividend.

The dividend was paid on September 14, 2022, to shareholders of record at the close of business on August 26, 2022.

Cash dividends paid totaled $ 23.2 million for the twelve months ended December 31, 2022.

The Company's unvested stock units participate in dividends and as such, the Company had $ 1.5 million in dividends payable as of December 31, 2022, of which $ 0.5 million is current.

The Company recognized distributions to the Parent of approximately $ 1.2 million, $ 66.9 million, and $ 4.6 million for the twelve months ended December 31, 2022, 2021, and 2020, respectively.

NOTE 7 – EARNINGS PER SHARE

Basic earnings per share of common stock is computed by dividing net loss attributable to AirSculpt Technologies, Inc.

for the period subsequent to the IPO by the weighted-average number of shares of common stock outstanding during the same period.

Diluted earnings per share of common stock is computed by dividing net loss attributable to AirSculpt Technologies, Inc.

for the period subsequent to the IPO by the weighted-average number of shares of common stock adjusted to give effect to potentially dilutive securities.

Diluted loss per share for the period subsequent to the IPO is the same as basic loss per share as the inclusion of potentially dilutive shares would be antidilutive.

Basic earnings per share of common stock is computed by dividing net income/loss attributable to AirSculpt Technologies, Inc.

for the twelve months ended December 31, 2022 by the weighted-average number of shares of common stock outstanding during the same period.

Diluted earnings per share of common stock is computed by dividing net income/loss attributable to AirSculpt Technologies, Inc.

for the twelve months ended December 31, 2022 by the weighted-average number of shares of common stock adjusted to give effect to potentially dilutive securities.

Where the inclusion of potentially dilutive shares would be antidilutive, diluted loss per share equals basic loss per share.

Prior to the IPO, the EBS Intermediate Parent, LLC structure included only LLC common units issued and outstanding to pre-IPO LLC members.

3 unchanged sentences

A reconciliation of the numerator and denominator used in the calculation of basic and diluted net loss per share of common stock is as follows (in 000’s except for shares and per share figures):

Fiscal Year Ended December 31, 2021

Net income $ 10,551

Fiscal Year Ended

Net (loss)/income $ ( 14,679 ) $ 10,551

Net income attributable to EBS Intermediate Parent, LLC prior to Reorganization — 10,944

Net loss attributable to AirSculpt Technologies, Inc.

( 14,679 ) ( 393 )

Weighted average shares of common stock outstanding - basic (1)

55,684,701 55,640,154

Effect of dilutive securities (1)

Weighted average shares of common stock outstanding - diluted (1)

55,684,701 55,640,154

Loss per share of common stock outstanding - basic and diluted $ ( 0.26 ) $ ( 0.01 )

(1) Basic and diluted weighted average shares outstanding and loss per share represent only the period from October 28, 2021 to December 31, 2021.

(1) Basic and diluted weighted average shares outstanding and loss per share for 2021 represent only the period from October 28, 2021 to December 31, 2021

The following number of potentially dilutive shares were excluded from the calculation of diluted loss per share because the effect of including such potentially dilutive shares would have been antidilutive.

Fiscal Year Ended December 31, 2021

Fiscal Year Ended

Restricted stock units 1,367,558 2,364,703

Performance stock units 2,309,063

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

Performance and market-based stock units 2,159,076 2,309,063

NOTE 8 – INCOME TAXES

3 unchanged sentences

federal and state taxes.

Significant components of income tax expense (benefit) were as follows (in 000’s):

Significant components of income tax expense were as follows (in 000’s):

Fiscal Year Ended December 31,

Federal $ 1,235 $ —

State and Local 1,014 121

Total current income tax expense 2,249 121

Federal 1,109 243

State and Local 25 ( 35 )

Total deferred income tax (benefit) expense 1,134 208

Total $ 3,383 $ 329

A reconciliation of income taxes computed at the U.S.

federal statutory income tax rate of 21% to the Company’s income tax (expense) benefit was as follows:

federal statutory income tax rate of 21% to the Company’s income tax (expense) was as follows:

Fiscal Year Ended December 31,

3 unchanged sentences

Nondeductible Reorganization and IPO costs — % 0.6 %

Nondeductible officer compensation ( 38.8 ) % — %

Valuation allowance and other nondeductible expenses ( 4.8 ) % 2.8 %

The effective tax rate for the fiscal year ended December 31, 2021, was 3.0 %.

The most significant items impacting the effective tax rate during fiscal year 2021 are due to the Reorganization and the items below.

Total ( 29.9 ) % 3.0 %

The effective tax rates for the fiscal years ended December 31, 2022 and 2021 were ( 29.9 )% and 3.0 %.

The most significant items impacting the effective tax rate during fiscal years 2022 and 2021 are due to the Reorganization, non-deductible officer compensation expense, and the items below.

Pass-through income

4 unchanged sentences

The tax impact of the pre-tax book income attributable to EBS Intermediate Parent, LLC prior to the execution of the reorganization and IPO was $( 2.4 ) million for the fiscal year ended December 31, 2021.

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

The Company’s deferred tax assets (liabilities) consisted of the following (in 000’s):

4 unchanged sentences

Equity-based compensation 1,231 964

State bonus depreciation 558 —

163(j) limitation 912 —

Total deferred tax assets 8,988 6,063

8 unchanged sentences

Net deferred tax liabilities $ ( 5,484 ) $ ( 4,351 )

As of December 31, 2021, the Company had US federal net operating loss carryforwards in the amount of $ 37.5 thousand.

These carryforwards do not have an expiration date.

As of December 31, 2022, we had foreign net operating loss carryforwards in the amount of $ 2.1 million.

These carryforwards were generated by the Company’s Canadian based subsidiary and begin to expire in 2039.

Of the total carryforwards, $ 1.7 million were generated by the Company’s Canadian based subsidiary and $ 0.4 million were generated by the Company's British subsidiary.

The Canadian-based net operating losses begin to expire in 2039 and the British based net operating losses carry forward indefinitely.

The Company recognizes deferred tax assets to the extent it believes these assets are more likely than not to be realized.

1 unchanged sentence

In making such a determination, the Company considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations.

After considering all of those factors, management recorded a $ 0.2 million valuation allowance for the deferred tax assets related to the foreign net operating losses which are not more likely than not to be realized as of December 31, 2021.

After considering all of those factors, management recorded a $ 0.6 million and $ 0.2 million valuation allowance for the deferred tax assets related to the foreign net operating losses which are not more likely than not to be realized as of December 31, 2022 and 2021.

Uncertain Tax Positions

ASC 740 prescribes a recognition threshold of more-likely-than not to be sustained upon examination as it relates to the accounting for uncertainty in income tax benefits recognized in an enterprise’s financial statements.

As of December 31, 2021, the Company had no unrecognized tax positions.

The Company will begin filing income tax returns for the period ended December 31, 2021 in federal and in many state and local jurisdictions as well.

However, no such income tax returns have been filed to date.

AirSculpt Technologies, Inc.

and Subsidiaries

Notes to Consolidated Financial Statements (Continued)

As of December 31, 2022 and 2021, the Company had no uncertain tax positions.

NOTE 9 – RELATED PARTY TRANSACTIONS

EBS Intermediate entered into a professional services agreements, effective October 2, 2018, with Vesey Street Capital Partners, L.L.C., JCBI II, LLC, and Dr.

Aaron Rollins (collectively the “Advisors”), where the Advisors provide certain managerial and advisory services to the Company.

Each of the Advisors has an ownership interest in the Parent.

Under the professional services agreements, EBS Intermediate agreed to pay the Advisors an aggregate annual fee of the greater of $ 500,000 or 2 % of consolidated earnings before interest, tax, depreciation and amortization, payable in advance quarterly installments, and the fee is allocated between the Advisors based on the outstanding Parent Class A Units held.

Under the agreements, EBS Intermediate also reimbursed the Advisors for any out-of-pocket expenses incurred related to providing their services.

During the years ended December 31, 2021, 2020 and 2019, the Company incurred management fees of approximately $ 1.6 million, $ 0.5 million and $ 0.5 million, respectively.

Management fees for the year ended December 31, 2021 included a $ 1.0 million fee paid by the Company related to the termination of this management and advisory agreement in connection with the IPO and Reorganization.

The Company entered into professional services agreements, effective October 2, 2018, with Vesey Street Capital Partners, LLC, JCBI II, LLC, and Dr.

Aaron Rollins (collectively the “Advisors”), where the Advisors provided certain managerial and advisory services to the Company.

Each of the Advisors had an ownership interest in the Parent.

Under the professional services agreements, the Company agreed to pay the Advisors an aggregate annual fee (also referred to as the sponsor management fee) of the greater of $ 500,000 or 2 % of consolidated earnings before interest, tax, depreciation and amortization, payable in advance quarterly installments, and the fee was allocated between the Advisors based on the outstanding Parent Class A Units held.

Under the agreements, the Company also reimbursed the Advisors for any out-of-pocket expenses incurred related to providing their services.

In conjunction with the IPO and Reorganization, the professional services agreements with the Advisors were terminated.

During the twelve months ended December 31, 2022,

2021, and 2020, the Company incurred sponsor management fees of approximately $ — million , $ 1.6 million, and $ 0.5 million, respectively.

NOTE 10 – COMMITMENTS AND CONTINGENCIES

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This committee reviews financial information presented on a consolidated basis for purposes of making operating decisions, assessing financial performance and allocating resources.

The Company’s CODM reviews revenue, gross profit and EBITDA.

Gross profit is defined as revenues less cost of service incurred and EBITDA as net income excluding other income (net), interest expense, sponsor management fee, depreciation and amortization, unit-based compensation, pre-opening de novo costs and other non-ordinary course items.

The Company’s CODM reviews revenue, gross profit and Adjusted EBITDA.

Gross profit is defined as revenues less cost of service incurred and Adjusted EBITDA as net income/loss excluding depreciation and amortization, net interest expense, income tax expense/(benefit), loss on debt modification, sponsor management fee, pre-opening de novo and relocation costs, restructuring and related severance costs, IPO related costs, (gain)/loss on disposal of long-lived assets, and equity-based compensation.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosures

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data