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Item 1A. Risk Factors

2025-03-14 compared with 2024-02-27 · 119 added, 100 removed, 876 unchanged (20% of the section changed)

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Risks Related to Our Business

• Our operating results could be adversely affected if we are unable to successfully implement certain cost savings initiatives and revenue growth strategies.

• Macroeconomic trends including inflation and rising interest rates may adversely affect our financial condition and results of operations.

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readily adopted by patients and healthcare providers, our commercial opportunities may be reduced or eliminated.

• Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

• Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy resulting from the ongoing military conflict between Russia and Ukraine.

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• We are a holding company with no operations of our own.

• Our variable rate debt exposes us to risks associated with rising interest rates, including as a result of the phase out

of LIBOR, which could adversely affect our cash flows.

• Our variable rate debt exposes us to risks associated with rising interest rates, which could adversely affect our cash flows.

• If there is a change in accounting standards by the Financial Accounting Standards Board or the interpretation thereof affecting consolidation of entities, it could have a material adverse effect on our consolidation of total revenue derived from the Professional Associations.

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Risks Related to Our Business

Our operating results could be adversely affected if we are unable to successfully implement certain cost savings initiatives and revenue growth strategies.

In response to the decline in revenue we experienced during the 2024 fiscal year, we are in the process of implementing certain cost-savings initiatives and revenue growth strategies, which are discussed in further detail under the captions “Our Company,” “National and International Footprint Fueled by Attractive Unit Economics,” “Our Growth Strategies,” and “Our Marketing and Sales Efforts and Third-Party Financing” included in Item 1 of this Annual Report on Form 10-K.

We may not realize in full or in part, or within the time periods expected, the anticipated savings or benefits from one or more of the various strategies and cost-savings initiatives undertaken as part of these efforts.

We also may not realize the increase in sales we expect in connection with these strategies.

Our ability to improve operating results depends upon a significant number of factors, some of which are beyond our control.

Other events and circumstances, such as financial and strategic difficulties and delays, unexpected costs, the impact of non-surgical methods of fat reduction, including weight-loss drugs, on the demand for our procedures, or inflationary pressures, may occur which could result in not realizing targets or in offsetting the financial benefits of reaching those targets.

We may also experience a decline in revenue in the short-term, as part of the implementation of our cost-savings initiatives and revenue growth strategies, with the goal of progressing toward positive revenue and profit growth in the long-term.

We are also subject to the risks of labor unrest, negative publicity and business disruption in connection with these initiatives, and the failure to realize anticipated savings or benefits from such initiatives or to implement our growth strategies could have a material adverse effect on our business, prospects, financial condition, liquidity, results of operations and cash flows.

Macroeconomic trends including inflation and rising interest rates may adversely affect our financial condition and results of operations.

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As a result, our historical revenue growth should not be considered indicative of our future performance.

In particular, we have experienced periods of high revenue growth, including most recently, during the global pandemic, that we do not expect to continue as the business, and the body contouring market, matures.

Estimates of future revenue growth and future growth rates are subject to many risks and uncertainties and our future revenue may differ materially from our projections.

In particular, we have experienced periods of high revenue growth, including during the global pandemic, that we do not expect to continue as the business, and the body contouring market, mature.

Estimates of future revenue trends are subject to many risks and uncertainties and our future revenue may differ materially from our projections.

We have encountered, and will continue to encounter, risks and difficulties frequently experienced by growing companies in rapidly changing industries, including market acceptance of our procedures, attracting new patients, hiring surgeons and responding to increasing competition and expenses as we expand our business.

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We have grown rapidly in recent years and have limited operating experience at our current scale of operations.

If we are unable to manage our growth effectively, our brand, company culture, and financial performance may suffer.

If we are unable to manage and capitalize on our scale effectively, our brand, company culture, and financial performance may suffer.

We have expanded rapidly and have limited operating experience at our current size.

To effectively manage and capitalize on our growth, we must continue to expand our marketing, focus on innovation and upgrade our management information systems and other processes.

Our continued growth could strain our existing resources and we could experience ongoing operating difficulties in managing our business across numerous jurisdictions, including difficulties in hiring, training, and managing surgeons and other staff in our centers through the Professional Associations.

Failure to scale and preserve our high-performance, results-driven culture during this period of growth could harm our future success.

If we do not adapt to meet these evolving challenges or if our management team does not effectively scale with our growth, we may experience erosion to our brand and our company culture may be harmed.

Our growth strategy contemplates expanding our footprint by opening new centers around the world.

To effectively manage and capitalize on our scale, we must focus on innovation and upgrade our management information systems and other processes.

Future growth could strain our existing resources and we could experience ongoing operating difficulties in managing our

business across numerous jurisdictions, including difficulties in hiring, training, and managing surgeons and other staff in our centers through the Professional Associations.

Failure to scale and preserve our high-performance, client-focused culture could delay or prevent future success.

If we do not adapt to meet these evolving challenges or if our management team does not effectively scale, we may experience erosion to our brand and our company culture may be harmed.

While we do not expect to open new centers in the next year, our long-term growth strategy contemplates expanding our footprint opportunistically by opening new centers.

Many of our centers are relatively new and we cannot assure you that these centers or that future centers will generate revenue comparable with those generated by our more mature locations, especially as we move to new geographic markets.

Further, many of our centers are leased pursuant to multi-year leases, and our ability to negotiate favorable terms on an expiring lease or for a lease renewal option may depend on factors that are not within our control.

Expanding internationally will require significant additional investment.

Successful implementation of our growth strategy will require significant expenditures before any substantial associated revenue is generated and we cannot guarantee that these increased investments will result in corresponding and offsetting revenue growth.

Our planned expansion will place increased demands on our existing operational, managerial, and administrative resources.

Opportunistically expanding our footprint will require significant expenditures before any substantial associated revenue is generated and we cannot guarantee that these investments will result in corresponding and offsetting revenue growth.

Our opportunistic expansions, if and when they occur, could place increased demands on our existing operational, managerial, and administrative resources.

These increased demands could strain our resources and cause us to operate our business less effectively, which in turn could cause the performance of our new and existing centers to suffer.

Opening new centers may result in inadvertent oversaturation, temporarily or permanently divert customers from our existing centers to new centers and reduce comparable centers revenue, thus adversely affecting our overall financial performance.

In addition, oversaturation or the risk of oversaturation may reduce or adversely affect the number or location of centers we plan to open, and could thereby materially and adversely affect our growth plans overall or in particular markets.

Because we have a limited history operating our business at its current scale, it is difficult to evaluate our current business and future prospects, including our ability to plan for and model future growth.

Opening new centers could result in inadvertent oversaturation, temporarily or permanently divert customers from our existing centers to new centers and reduce comparable centers revenue, thus adversely affecting our overall financial performance.

In addition, oversaturation or the risk of oversaturation could reduce or adversely affect the number or location of centers we plan to open, and could thereby materially and adversely affect our long-term growth plans overall or in particular markets.

Our limited operating experience at this scale, combined with the rapidly evolving nature of the body contouring market, substantial uncertainty concerning how these markets may develop, and other economic factors beyond our control, reduces our ability to accurately forecast quarterly or annual revenue.

Failure to manage our future growth effectively and profitably could have an adverse effect on our business, financial condition, and operating results.

Failure to manage our long-term future growth effectively and profitably could have an adverse effect on our business, financial condition, and operating results.

We are dependent upon the success of the AirSculpt ® body sculpting procedure.

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If patients are not satisfied with the aesthetic benefits of the AirSculpt ® procedure, or feel that it is too expensive for the results obtained, our reputation and future sales will suffer.

If we fail to open and operate new centers in a timely and cost-effective manner or fail to successfully enter new markets, our financial performance could be materially and adversely affected.

Our growth strategy depends, in large part, on growing and expanding our operations, both in existing and new geographic regions, particularly in densely populated and affluent metropolitan and suburban regions, and operating our new centers successfully.

We cannot assure you that our contemplated expansion will be successful.

Our ability to successfully open and operate new centers depends on many factors, including, among others, our ability to:

If we fail to operate new centers in a cost-effective manner, our financial performance could be materially and adversely affected.

Our long-term growth strategy depends, in large part, on growing and operating our new centers, including five opened in 2024, both in existing and new geographic regions, particularly in densely populated and affluent metropolitan and suburban regions.

Our ability to successfully operate new centers depends on many factors, including, among others, our ability to:

• recruit qualified surgeons through our affiliated Professional Associations for our new centers;

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• successfully integrate new centers into our existing management structure with affiliated Professional Associations and operations, including information system integration;

• negotiate acceptable lease terms at suitable locations;

• source sufficient levels of medical supplies at acceptable costs;

• obtain and maintain necessary permits and licenses through our affiliated Professional Associations;

• construct and open our centers on a timely basis;

• generate sufficient levels of cash or obtain financing on acceptable terms to support our expansion;

• achieve and maintain brand awareness in new and existing markets;

• achieve and maintain brand awareness in new markets;

• identify and satisfy the needs and preferences of our patients.

Our failure to effectively address challenges such as these could adversely affect our ability to successfully open and operate new centers in a timely and cost-effective manner.

Our failure to effectively address challenges such as these could adversely affect our ability to successfully operate new centers in a cost-effective manner.

In addition, there can be no assurance that newly-opened centers will achieve net sales or profitability levels comparable to those of our existing centers in the time periods estimated by us, or at all.

If our centers fail to achieve, or are unable to sustain, profitability levels, our business may be materially harmed and we may incur significant costs associated with closing those centers.

Our plans to accelerate the growth of new centers may increase this risk.

Accordingly, we cannot assure you that we will achieve our planned growth or, even if we are able to grow our centers as planned, that our new centers will perform as expected.

Our failure to implement our growth strategy and to successfully open and operate new centers in the time frames and at the costs estimated by us could have a material adverse effect on our business, financial condition and results of operations.

If we cannot maintain our high-performance and results-driven culture as we grow, we could lose the innovation and passion that we believe contribute to our success and our business may be harmed.

Our failure to implement our growth strategy and to successfully operate new centers at the costs estimated by us could have a material adverse effect on our business, financial condition and results of operations.

If we cannot maintain our high-performance and client-focused culture as we grow, we could lose the innovation and passion that we believe contribute to our success and our business may be harmed.

We believe that a critical component of our success has been our corporate culture.

We have invested substantial time and resources in building our high-performance, results-driven culture.

As we continue to grow, including geographically, we will need to maintain our high-performance, results-driven culture among a larger number of surgeons and other employees, dispersed across various geographic regions.

We have invested substantial time and resources in building our high-performance, client-focused culture.

We will need to maintain our high-performance, client-focused culture among a larger number of surgeons and other employees, dispersed across various geographic regions.

Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit surgeons and other personnel on behalf of our affiliated Professional Associations and to effectively focus on and pursue our corporate objectives.

To successfully continue to expand in markets outside of North America, we must address many issues with which we have limited experience.

Continued international expansion is subject to a number of risks, including:

To successfully continue to grow in markets outside of North America, we must address many issues with which we have limited experience.

Continued international operation is subject to a number of risks, including:

• difficulties in staffing and managing our international operations;

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As a result, we face even greater competition in these markets than in the United States.

Further, our patent protection is limited to the United States, and therefore we may face increased competition from competitors using procedures similar to the AirSculpt® procedure in other countries.

Further, our patent protection of AirSculpt® is limited to the United States, and therefore we may face increased competition from competitors using procedures similar to the AirSculpt® procedure in other countries.

Many of our competitors are large, experienced companies that have substantially greater resources and brand recognition than we do.

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We have significant exposure to the weight loss and obesity solutions market, which is highly competitive, subject to rapid change and significantly affected by new product introductions, results of clinical research, corporate combinations, and other factors relating to the weight loss industry.

Because of the market opportunity and the high growth potential of the market for weight loss and obesity solutions, existing and potential competitors have historically dedicated, and will continue to dedicate, significant resources to aggressively develop and commercialize their products.

For example, in 2023, certain drugs initially approved for use in diabetes patients gained market acceptance for use in weight loss following FDA approvals for weight loss indications.

As of the date of this report, it is difficult to predict the long-term market impact of weight-loss drugs, including their long-term efficacy and potential drawbacks.

As a result, we cannot be certain that our procedures will continue to be competitive with current or future medical advances in the weight loss and obesity solutions market.

Because of the market opportunity and the high growth potential of the market for weight loss and obesity solutions, existing and potential competitors have historically dedicated, and will

continue to dedicate, significant resources to aggressively develop and commercialize their products.

For example, in 2023, certain drugs initially approved for use in diabetes patients gained market acceptance for use in weight loss treatment following FDA approvals for weight loss indications.

As of the date of this report, it is difficult to predict the long-term market impact of weight-loss drugs, including their long-term efficacy as weight loss drugs and potential drawbacks.

As a result, we cannot be certain that our procedures will continue to be competitive with current or future technologies and medical advances in the weight loss and obesity solutions market.

Our success depends on our ability to enhance our current procedures and technologies, and develop and market new procedures, to keep pace with technological developments and evolving industry standards, while responding to changes in patient expectations.

If our competitors are able to develop and market solutions that are safer, more effective, easier to use or more readily adopted by patients and healthcare providers, our commercial opportunities may be reduced or eliminated.

Competing in the body contouring market and the spread of non-surgical weight loss and obesity solutions could result in price-cutting, reduced profit margins, and reduced market share, any of which would harm our business, financial condition, and results of operations.

Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance (“ESG”) practices and disclosure.

Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, diversity, labor conditions and human rights.

Increased ESG related compliance costs could result in increases to our overall operational costs.

Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation, ability to do business with certain partners, and our stock price.

New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure.

Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy resulting from the ongoing military conflict between Russia and Ukraine.

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If we are unable to successfully deliver emails or other messages to potential customers, or if potential customers decline to open or read our messages, our business, financial condition and results of operations may be materially adversely affected.

Changes in how web and mail services block, organize and prioritize email may reduce the number of subscribers who receive or open our emails.

Changes in how web and mail services block, organize and prioritize email may reduce the number of subscribers who receive or open our

For example, Google’s Gmail service has a feature that organizes incoming emails into categories (for example, primary, social and promotions).

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In addition, a few states have imposed different, and, in some cases, additional, standards regarding the provision of virtual medical consultations and telehealth, generally.

The unpredictability of this regulatory landscape means that sudden

changes in policy regarding standards of care and what is permissible are possible.

The unpredictability of this regulatory landscape means that sudden changes in policy regarding standards of care and what is permissible are possible.

If a successful legal challenge or an adverse change in the relevant laws or regulations were to occur, and we were unable to adapt our business model accordingly, our operations in the affected jurisdictions or ability to reach patients in such jurisdictions would be disrupted, which could have a material adverse effect on our business, financial condition and results of operations.

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Our success depends, in part, on our continuing ability to identify, hire, develop and retain highly qualified personnel, including surgeons and nurses, through our affiliated Professional Associations.

The demand for medical professionals has increased significantly as a result of the COVID-19 pandemic.

The demand for medical professionals increased significantly during the COVID-19 pandemic and in the following years.

Further, even before the COVID-19 pandemic, the demand for medical professionals had been increasing as more consumers began gravitating to health and wellness treatments, such as medspa and cosmetic services.

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The handpieces that our surgeons use for AirSculpt ® procedures are currently manufactured by Euromi.

We have not qualified alternate suppliers and rely upon purchase orders, rather than long-term supply agreements.

We do not have qualified alternate suppliers and rely upon purchase orders, rather than long-term supply agreements.

A supply interruption or an increase in demand beyond Euromi’s capabilities could harm our ability to perform AirSculpt ® procedures until new sources of supply are identified and qualified.

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Therefore, there can be no assurance that our non-compete agreements related to employed or otherwise contracted surgeons will be enforceable if challenged in certain states.

In such event, we would be unable to prevent former employed or otherwise contracted surgeons from competing with us, potentially resulting in the loss of some of our business.

In such event, we would be unable to prevent formerly employed or otherwise contracted surgeons from competing with us, potentially resulting in the loss of some of our business.

We may become involved in litigation which could negatively impact the value of our business.

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We, the Professional Associations and their surgeons maintain liability insurance in amounts that we believe are customary for the industry and appropriate in light of the risks attendant to our business.

Currently, our affiliated Professional Associations maintain professional and general liability insurance that provides coverage on a claims-made basis of $2.0 million per occurrence with a retention of $25,000 per occurrence and $4.0 million in annual aggregate coverage.

As of the date of this Annual Report on Form 10-K, our affiliated Professional Associations maintain professional and general liability insurance that provides coverage on a claims-made basis in a range of $0.5 million to $2.0 million per occurrence with a retention of $50,000 per occurrence and a range of $1.0 million to $4.0 million in annual aggregate coverage.

We also maintain business interruption insurance and property damage insurance, as well as an additional umbrella insurance policy in the aggregate of $6.0 million.

Coverage under certain of these policies is contingent upon the policy being in effect when a claim is made regardless of when the events which caused the claim occurred.

In addition, surgeons who provide

professional services in our centers are required to maintain separate malpractice coverage with similar minimum coverage limits.

In addition, surgeons who provide professional services in our centers are required to maintain separate malpractice coverage with similar minimum coverage limits.

We also maintain a directors’ and officers’ insurance policy, which insures our directors and officers against unindemnified losses arising from certain wrongful acts in their capacities as directors and officers and reimburses us for those losses for which we have lawfully indemnified the directors and officers.

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Insurance coverage may not continue to be available at a cost allowing us to maintain adequate levels of insurance.

If one or more successful claims against us, our affiliated Professional Associations or surgeons were not covered by or exceeded the coverage of our insurance, our financial condition and results of operations could be adversely affected.

If one or more successful claims against us, our affiliated

Professional Associations or surgeons were not covered by or exceeded the coverage of our insurance, our financial condition and results of operations could be adversely affected.

Our business, profitability and growth prospects could suffer if we face negative publicity or we pay damages or defense costs in connection with a claim that is outside the scope or limits of coverage of any applicable insurance coverage, including claims related to adverse patient events, contractual disputes, professional and general liability, and directors’ and officers’ duties.

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The health of the economy may affect consumer purchases of discretionary services, such as cosmetic services, which could have a material adverse effect on our business, financial condition and results of operations.

Our results of operations may be materially affected by conditions in the capital and credit markets and the economy generally.

The results of our operations may be materially affected by conditions in the capital and credit markets and the economy generally.

We appeal to a wide demographic customer profile for cosmetic services.

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Our revenue is particularly sensitive to regulatory, economic and other conditions in the states and jurisdictions in which we have centers.

As of the date of this Annual Report on Form 10-K, we operate through our arrangements with our affiliated Professional Associations twenty-two centers in Arizona, California, Colorado, Florida, Georgia, Illinois, Massachusetts, Minnesota, Nevada, New York, North Carolina, Pennsylvania, Tennessee, Texas, Utah, Washington, and Virginia as well as Toronto, Canada.

In addition, our centers located in California represented 20% of our revenue in 2023 and 2022.

If there were an adverse regulatory, economic or other development in any of the states and jurisdictions in which we have a higher concentration of centers there could be unanticipated adverse impacts on our business in those states and jurisdictions, which could have a material adverse effect on our business, prospects, results of operations and financial condition.

As of the date of this Annual Report on Form 10-K, we operate through our arrangements with our affiliated Professional Associations thirty-two centers in Arizona, California, Colorado, Florida, Georgia, Illinois, Kansas, Massachusetts, Michigan, Minnesota, Nevada, New York, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, Utah, Washington, and Virginia as well as Toronto, Canada and London, United Kingdom.

In addition, our five centers located in California represented 20% of our revenue in 2024 and 2023.

As a result, our business, financial condition and results of operations could be adversely affected by disruptions in the Southern California economy resulting from recent wildfires.

We expect that disruptions in the Southern California economy resulting from recent wildfires may impact the demand for our procedures at our five centers located in California, in particular at our center located in Beverly Hills.

In the event of any other adverse regulatory, economic or other developments in any of the states and jurisdictions in which we have a higher concentration of centers there could be unanticipated adverse impacts on

our business in those states and jurisdictions, which could have a material adverse effect on our business, prospects, results of operations and financial condition.

We depend on our senior management, and we may be adversely affected if we lose any member of our senior management.

Because our senior management has been key to our growth and success, we are highly dependent on Dr.

Because our senior management has been key to our success, we are highly dependent on Dr.

Aaron Rollins, our founder and Executive Chairman of our board of directors.

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Competition for senior management generally, and within the cosmetic surgery and healthcare industry specifically, is intense and we may not be able to recruit and retain the personnel we need if we were to lose an existing member of senior management.

Because our senior management has contributed greatly to our growth since inception, the loss of key management personnel, without adequate replacements, or our inability to attract, retain and motivate sufficient numbers of qualified management personnel could have a material adverse effect on our financial condition and results of operations.

We rely on Vesey Street Capital Partners, L.L.C., our private equity sponsor (“Sponsor”) and the interests of our Sponsor may conflict with the interests of the Company and its other stockholders.

Because our senior management is instrumental to our future success, the loss of key management personnel, without adequate replacements, or our inability to attract, retain and motivate sufficient numbers of qualified management personnel could have a material adverse effect on our financial condition and results of operations.

We rely on Vesey Street Capital Partners, L.L.C., our private equity sponsor and the interests of our Sponsor may conflict with the interests of the Company and its other stockholders.

We have in recent years depended on our relationship with our Sponsor to help guide our business plan.

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Daniel Sollof and Adam Feinstein remain on our board of directors and hold contractual rights to seats on our board of directors for as long as our Sponsor maintains certain levels of ownership of our common stock.

Currently, affiliates of our Sponsor beneficially own 51.1% of our common stock.

We have entered into, and may in the future enter into, agreements with our Sponsor which constitute related-party transactions as defined under Item 404 of Regulation S-K, as disclosed in further detail in this Annual Report on Form 10-K under the caption “Certain Relationships and Related Transactions, and Director Independence.” As of the date of this Annual Report on Form 10-K, affiliates of our Sponsor beneficially own 50.1% of our common stock.

Affiliates of our Sponsor may elect to reduce their ownership in our Company, which could reduce or eliminate the benefits we have historically achieved through our relationship with it.

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Our leverage could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, expose us to interest rate risk to the extent of our variable rate debt and prevent us from meeting our obligations under our outstanding indebtedness.

As of December 31, 2023, total outstanding indebtedness under our senior credit facility was approximately $72.9 million, consisting of $72.9 million in term loans (the “Term Loan”) and $5.0 million revolving credit facility (the “Revolver”), of which approximately $5.0 million was undrawn (the “Term Loan and Revolving Facility”).

As of December 31, 2024, total outstanding indebtedness under our senior credit facility was approximately $75.8 million, consisting of $70.8 million in term loans (the “Term Loan”) and $5.0 million drawn on the revolving credit facility (the “Revolver”) (the “Term Loan and Revolving Credit Facility”).

Our leverage could have important consequences, including:

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Our ability to pay or to refinance our indebtedness will depend upon our future operating performance, which will be affected by general economic, financial, competitive, legislative, regulatory, business and other factors beyond our control.

On March 12, 2025, the Company, EBS Intermediate Parent LLC, a Delaware limited liability company and wholly-owned subsidiary of the Company (“EBS Parent”), EBS Enterprises LLC, a Delaware limited liability company (“Borrower”), Silicon Valley Bank, a division of First-Citizens Bank & Trust Company, as the administrative agent (“SVB”), and the lenders a party thereto entered into a Third Amendment to Credit Agreement (the “Third Amendment”) in connection with that certain Credit Agreement, dated as of November 7, 2022 (as amended by that certain First Amendment and Limited Waiver to Credit Agreement, dated as of March 9, 2023, by that certain Second Amendment to Credit Agreement, dated as of September 13, 2024, and by the Third Amendment, collectively, the “Credit Agreement”), among the Company, EBS Parent, Borrower, the several banks and other financial institutions or entities from time to time party thereto (each a “Lender” and, collectively, the “Lenders”) and SVB, the form of which was attached as Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the U.S.

Securities and Exchange Commission (the “SEC”) on November 9, 2022.

Under the terms of the Third Amendment, the parties thereto agreed to modify certain financial condition covenants made by the Company under the Term Loan and Revolving Credit Facility, such that (i) the Consolidated Fixed Charge Coverage Ratio (as defined in the Credit Agreement) of the Company and its subsidiaries as of the last day of the fiscal quarters ending March 31, 2025 and June 30, 2025 must be no less than 0.50x and 1.10x, respectively, and no less than 1.25x on the last day of the fiscal quarters ending September 30, 2025 and thereafter, instead of 1.10x as of March 31, 2025 and 1.25x as of June 30, 2025 and thereafter, as previously set forth in the Credit Agreement;

(ii) the Consolidated Leverage Ratio (as defined in the Credit Agreement) of the Company and its subsidiaries as of the last day of the fiscal quarters ending March 31, 2025, June 30, 2025, September 30, 2025, December 31, 2025 and March 31, 2026, must not exceed 4:25x, 3.50x, 3.25x, 3.25x, and 2.75x, respectively, and the Consolidated Leverage Ratio as of the last day of each fiscal quarter thereafter must not exceed 2.25x, instead of 3.25x as of March 31, 2025, 2.75x as of June 30, 2025, and 2.25x thereafter, as previously set forth in the Credit Agreement;

(iii) the Company and its subsidiaries will be required to maintain minimum Liquidity (as defined in the Credit Agreement) of not less than (A) $3,000,000.00 as of the last day of the month ending March 31, 2025, (B) $5,000,000 as of the last day of the month ending April 30, 2025, and (C) $7,500,000.00 as of the last day of the months ending May 31, 2025 and thereafter (or the last day of each fiscal quarter thereafter upon the satisfaction of certain financial tests described therein);

and (iv) new liquidity and financial reporting requirements have been added.

In addition to revising the covenants listed above, the Third Amendment revised or added new terms such that (i) for outstanding loans, beginning on or about July 1, 2025 the applicable per annum margin will be increased to 3.75% or 4.75% for base rate or SOFR, respectively, if the Company's total leverage ratio is equal to or greater than 3.00x, 3.50% or 4.50% for base rate or SOFR, respectively, if the Company's total leverage ratio is equal to or greater than 2.00x and less than 3.00x, and 3.25% or 4.25% for base rate or SOFR, respectively, if the Company's total leverage ratio is below 2.00x, (ii) the Term Loan and Revolving Credit Facility will mature on May 11, 2027 (instead of November 7, 2027);

(iii) Liquidity in excess of $3.0 million will be used to repay the outstanding funds drawn on the revolving credit facility on a monthly basis beginning April 30, 2025;

(iv) revolver draws will be subject to compliance with the minimum Liquidity covenant;

(v) the Company will be required to reimburse SVB for certain fees and expenses relating to the engagement of a financial advisor, and (vi) 100% of first $10.0 million of any equity proceeds will be used to repay the Term Loan, and Revolving Credit Facility, subject to a carve-out of the first $3.0 million of equity proceeds and any equity proceeds received from Sponsor.

In consideration of the Third Amendment, the Company paid a fee equal to 0.15% of the outstanding loans to consenting Lenders, and a $125,000 arrangement fee to SVB.

On March 12, 2025, in connection with the Third Amendment, the Company, SVB and our Sponsor (through certain affiliated entities) entered into that certain Limited Guarantee by and among Vesey Street Capital Partners Healthcare Fund, L.P., Vesey Street Capital Partners Healthcare Fund-A, L.P., SVB and the Company (the “Limited Guarantee”), pursuant to which our Sponsor agreed to provide a $10.0 million guaranty of the Company’s obligations under the Credit Agreement.

The Limited Guarantee is callable on June 15, 2025 (or upon the earlier occurrence of certain defaults described therein) if the Company has not prepaid the Term Loan (excluding regularly scheduled amortization) by $10.0 million as of such date.

Under the terms of the Limited Guarantee, if Sponsor is required to make any payment under the Limited Guarantee (other than as a result of a bankruptcy event), then Sponsor will be deemed to have purchased shares of common stock of the Company having an aggregate value equal to the amount of such payment.

The Company has agreed to issue a subordinated note to Sponsor if a payment occurs under the Limited Guarantee, to the extent such payment does not result from the issuance of shares of common stock by the Company to Sponsor.

Restrictive covenants in our debt instruments may adversely affect us.

Our Term Loan and Revolving Facility contain various covenants that limit, among other things, our ability and the ability of our restricted subsidiaries to:

Our Term Loan and Revolving Credit Facility, including the recent Third Amendment, contain various covenants that limit, among other things, our ability and the ability of our restricted subsidiaries to:

• incur additional indebtedness;

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• make payments to us (in the case of our restricted subsidiaries).

In addition, our Term Loan and Revolving Facility contain other and more restrictive covenants, including covenants requiring us to maintain specified financial ratios triggered in certain situations and to satisfy other financial condition tests.

In addition, our Term Loan and Revolving Credit Facility contain other and more restrictive covenants, including covenants requiring us to maintain specified financial ratios triggered in certain situations and to satisfy other financial condition tests.

Our ability to meet those financial ratios and tests can be affected by events beyond our control, and we cannot assure you that we will continue to meet those tests.

A breach of any of these covenants could result in a default under our Term Loan and Revolving Facility.

Upon the occurrence of an event of default under our Term Loan and Revolving Facility, the lenders could elect to declare all amounts outstanding under our Term Loan and Revolving Facility to be immediately due and payable and terminate all commitments to extend further credit.

A breach of any of these covenants could result in a default under our Term Loan and Revolving Credit Facility.

Upon the occurrence of an event of default under our Term Loan and Revolving Credit Facility, the lenders could elect to declare all amounts outstanding under our Term Loan and Revolving Credit Facility to be immediately due and payable and terminate all commitments to extend further credit.

If we were unable to repay those amounts, the lenders could proceed against the collateral granted to them to secure that indebtedness.

We have pledged substantially all of our assets, excluding assets of our non-guarantor subsidiaries, as security under our Term Loan and Revolving Facility.

If the lenders under our Term Loan and Revolving Facility accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay our Term Loan and Revolving Facility and our other indebtedness.

We cannot assure you that our business will generate sufficient cash flow from operations, that currently anticipated revenue growth and operating improvements will be realized or that future borrowings will be available to us under our Term Loan and Revolving Facility in amounts sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs.

We have pledged substantially all of our assets, excluding assets of our non-guarantor subsidiaries, as security under our Term Loan and Revolving Credit Facility.

If the lenders under our Term Loan and Revolving Credit Facility accelerate the repayment of borrowings, we cannot assure you that we will have sufficient assets to repay our Term Loan and Revolving Credit Facility and our other indebtedness.

We cannot assure you that our business will generate sufficient cash flow from operations, that revenue trends and operating improvements anticipated as of the date of this Annual Report on Form 10-K will be realized or that future borrowings will be available to us under our Term Loan and Revolving Credit Facility in amounts sufficient to enable us to pay our indebtedness, or to fund our other liquidity needs.

If we are unable to meet our debt service obligations or fund our other liquidity needs, we could attempt to restructure or refinance our indebtedness or seek additional equity capital.

We cannot assure you that we will be able to accomplish those actions on satisfactory terms, if at all.

Despite our current indebtedness levels, we and our subsidiaries may still be able to incur substantially more debt, which could further exacerbate the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur substantial additional indebtedness in the future, including secured indebtedness.

Although the Term Loan and Revolving Facility contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.

In addition, as of December 31, 2023 we had approximately $5.0 million available for additional borrowings under our Revolver, all of which is permitted to be incurred under the Term Loan and Revolving Facility subject to the conditions to borrowing thereunder.

Despite our current indebtedness levels, we and our subsidiaries may still be able to incur more debt, which could further exacerbate the risks associated with our substantial leverage.

We and our subsidiaries may be able to incur additional indebtedness in the future, including secured indebtedness.

Although the Term Loan and Revolving Credit Facility, including the recent Third Amendment, contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of significant qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial.

In addition, as of December 31, 2024 we had no availability under our Revolver.

If new debt is added to our or our subsidiaries’ current debt levels, the related risks that we face would be increased.

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Our ability to restructure or refinance our debt, if at all, will depend on the condition of the capital markets and our financial condition at such time.

Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could

further restrict our business operations.

Any refinancing of our debt could be at higher interest rates and may require us to comply with more onerous covenants, which could further restrict our business operations.

In addition, the terms of existing or future debt instruments may restrict us from adopting some of these alternatives.

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We are a holding company, and our ability to service our debt is dependent upon the earnings from the business conducted by our subsidiaries that operate the centers.

The effect of this structure is that we depend on the earnings of our subsidiaries, and the distribution or payment to us of a portion of these earnings to meet our obligations, including those under our Term Loan and Revolving Facility and any of our other debt obligations.

The effect of this structure is that we depend on the earnings of our

subsidiaries, and the distribution or payment to us of a portion of these earnings to meet our obligations, including those under our Term Loan and Revolving Credit Facility and any of our other debt obligations.

The distributions of those earnings or advances or other distributions of funds by these entities to us, all of which are contingent upon our subsidiaries’ earnings, are subject to various business considerations.

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Some of our subsidiaries may become subject to agreements that restrict the sale of assets and significantly restrict or prohibit the payment of dividends or the making of distributions, loans or other payments to stockholders, partners or members.

Our variable rate debt exposes us to risks associated with rising interest rates, including as a result of the phase out of LIBOR , which could adversely affect our cash flows.

As of December 31, 2023, we had borrowings under our Term Loan and Revolving Facility with variable rate debt that was indexed to the Secured Overnight Financing Rate (“SOFR”).

Our variable rate debt exposes us to risks associated with rising interest rates, which could adversely affect our cash flows.

As of December 31, 2024, we had borrowings under our Term Loan and Revolving Credit Facility with variable rate debt that was indexed to the Secured Overnight Financing Rate (“SOFR”).

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 2.0x.

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

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

There is significant uncertainty with respect to the implementation of the phase out of the LIBOR and what alternative indexes will be adopted which will ultimately be determined by the market as a whole.

It therefore remains uncertain how such changes will be implemented and the effects such changes would have on us and the financial markets generally.

These changes may have a material adverse impact on the availability of financing and on our financing costs.

Also, increases in interest rates on variable rate debt would increase our interest expense and the cost of refinancing existing debt and incurring new debt, unless we make arrangements that hedge the risk of rising interest rates, which would adversely affect net income and cash available for payment of our debt obligations and distributions to equity holders.

During the period from January 1, 2024, through September 12, 2024, the applicable per annum margin was 2.0% or 3.0% for base rate or SOFR, respectively, if the Company's total leverage ratio was equal to or greater than 2.0x.

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

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

During the period from September 13, 2024, through December 31, 2024, the applicable per annum margin was 2.5% or 3.5% for base rate or SOFR, respectively, if the Company's total leverage ratio was equal to or greater than 2.0x;

if the Company's total leverage ratio was equal to or greater than 1.0x and less than 2.0x, the applicable per annum margin of 2.0% or 3.0% for base rate or SOFR, respectively;

if the Company's total leverage ratio was below 1.0x, the applicable per annum margin of 1.5% or 2.5% for base rate or SOFR, respectively.

Increases in interest rates on variable rate debt would increase our interest expense and the cost of refinancing existing debt and incurring new debt, unless we make arrangements that hedge the risk of rising interest rates, which would adversely affect net income and cash available for payment of our debt obligations and distributions to equity holders.

Under the recent Third Amendment to our Credit Agreement, for SOFR loans, the applicable per annum margin has been updated, beginning on or about July 1, 2025, to 3.75% or 4.75% for base rate or SOFR, respectively, if the Company's total leverage ratio is equal to or greater than 3.00x, 3.50% or 4.50% for base rate or SOFR, respectively, if the Company's total leverage ratio is equal to or greater than 2.00x and less than 3.00x, and 3.25% or 4.25% for base rate or SOFR, respectively, if the Company's total leverage ratio is below 2.00x.

Comprehensive tax reform legislation or adverse outcomes resulting from examination of our income or other tax returns could adversely affect our financial condition and results of operations.

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We may be unable to locate replacement supplies, and ongoing delays could require us to reduce procedure volume or cause temporary shutdowns of our centers.

In addition, our results and financial condition may be adversely affected by future federal or state laws, regulations, orders, or other governmental or regulatory actions addressing new COVID-19 variants or the United States’ healthcare system, which, if adopted, could result in direct or indirect restrictions to our business, financial condition, results of operations and cash flow.Although we have disaster plans in place and operate pursuant to infectious disease protocols, the extent to which new COVID-19 variants or other public health crises could impact our business is difficult to predict and depends on many factors beyond our control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel and other activity, and public reactions to these factors.

Although we have disaster plans in place and operate pursuant to infectious disease protocols, the extent to which new COVID-19 variants or other public health crises could impact our business is difficult to predict and depends on many factors beyond our control, including the speed of contagion, the development and implementation of effective preventative measures and possible treatments, the scope of governmental and other restrictions on travel and other activity, and public reactions to these factors.

Our centers may be adversely impacted by weather and other factors beyond our control, and disruptions in our disaster recovery systems or management continuity planning could limit our ability to operate our business effectively.

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Use and storage of paper medical records increases risk of loss, destruction and could increase human error with respect to documentation and patient care.

The affiliated Professional Associations continue to rely on the use paper medical records, which are initially stored on-site at our centers.

The affiliated Professional Associations continue to rely on the use of paper medical records, which are initially stored on-site at our centers.

Paper records are more susceptible to human error both in terms of accurately capturing patient information, as well as with respect to misplacing or losing the same.

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If we are unable to obtain and maintain patent protection of sufficient scope or at all or freedom to operate for the AirSculpt ® procedure or any technology we develop, our ability to successfully commercialize any procedures we may develop may be adversely affected.

We seek to protect our position by filing patent applications in the United States related to our proprietary procedures and any products that we may develop that are important to our business.

We seek to protect our position by filing patent applications in the United States and internationally related to our proprietary procedures and any products that we may develop that are important to our business.

The patent prosecution process is expensive, time-consuming and complex, and we may not be able to file, prosecute, maintain, enforce or license all necessary or desirable patents or patent applications at a reasonable cost, in a timely manner, in all jurisdictions where protection may be commercially advantageous, or at all.

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We may not be able to protect our intellectual property rights throughout the world to the same extent as in the United States.

While we have applied for patent protection in the United States relating to certain of our procedures, a company may attempt to commercialize competing procedures utilizing our proprietary methods in foreign countries where we do not have any patents or patent applications and where legal recourse may be limited or unavailable.

While we have applied for patent protection in the United States and internationally relating to certain of our procedures, a company may attempt to commercialize competing procedures utilizing our proprietary methods in foreign countries where we do not have any patents or patent applications and where legal recourse may be limited or unavailable.

In addition, we currently own registered trademarks and trademark applications relating to our business in the United States and other markets, but other companies may own these marks in other jurisdictions.

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The regulation applicable to our business and to the healthcare industry generally to which we are subject is constantly in a state of flux.

A number of states, including states in which we operate, such as California, Massachusetts, and New York have passed recent legislation that are materially increasing the scrutiny of investors investing in for-profit health care providers, which could ultimately impact our existing structure.

While we believe that we have structured our agreements and operations in material compliance with applicable healthcare laws and regulations, there can be no assurance that we will be able to successfully address changes in the current regulatory environment or changes in interpretation of existing laws and regulations.

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These laws and regulations are often ambiguous, contradictory, and subject to changing or differing interpretations, and we expect new laws, rules and regulations regarding privacy, data protection, and information security to be proposed and enacted in the future.

For example, the California Confidentiality of Medical Information Act (CMIA) regulates the disclosure of medical information, and applies to the IIHI we Process in the ordinary course of our Business.

Violations of the CMIA can result in personal liability to the patient, the imposition of

administrative fines and civil penalties, and even criminal liability.

For example, the California Confidentiality of Medical

Information Act (CMIA) regulates the disclosure of medical information, and applies to the IIHI we Process in the ordinary course of our Business.

Violations of the CMIA can result in personal liability to the patient, the imposition of administrative fines and civil penalties, and even criminal liability.

Additionally, the CCPA provides certain exceptions for some IIHI, but is still applicable to certain PII we process in the ordinary course of our business.

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We could remain an emerging growth company until December 31, 2026, although circumstances could cause us to lose that status earlier, including if our total annual gross revenue is $1.235 billion or more, if we issue more than $1 billion in non-convertible debt during the previous three-year period, or if the Company qualifies as a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act.

We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.

investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

cannot predict if investors will find our common stock less attractive because we may rely on these exemptions.

If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

We filed a registration statement on Form S-3 with the SEC, and the number of shares of common stock being registered for sale is significant in relation to the number of our outstanding shares of common stock.

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• geopolitical conditions such as acts of terrorism, military or armed conflicts, such as the Russian invasion of Ukraine, or global pandemics;

• natural disasters and other calamities;

• natural disasters, including earthquakes, floods and wildfires (such as the 2025 Los Angeles wildfires), and other calamities;

• changes in general market and economic conditions.

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There may be sales of a substantial amount of our common stock by our current stockholders, and these sales could cause the price of our common stock to fall.

As of February 26, 2024, there are 57,422,246 shares of common stock outstanding.

As of March 13, 2025, there are 58,574,516 shares of common stock outstanding.

Such shares are freely transferable, except for any shares held by our “affiliates,” as that term is defined in Rule 144 under the Securities Act of 1933, as amended (the “Securities Act”).

As of February 26, 2024, approximately 79% of our outstanding common stock is held by investment funds affiliated with our Sponsor and members of our management and employees.

As of March 13, 2025, approximately 77.0% of our outstanding common stock is held by investment funds affiliated with our Sponsor and members of our management and employees.

Sales of substantial amounts of our common stock in the public market, or the perception that such sales will occur, could adversely affect the market price of our common stock and make it difficult for us to raise funds through securities offerings in the future.

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We have been, and will continue to be, implementing additional procedures and processes for the purpose of addressing the standards and requirements applicable to public companies.

Sustaining our growth also will require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion.

Future growth may also require us to commit additional management, operational and financial resources to identify new professionals to join our firm and to maintain appropriate operational and financial systems to adequately support expansion.

These activities may divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition, results of operations and cash flows.

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• our ability to maintain and attract new customers;

• our development and improvement of the quality of the AirSculpt ® experience, including, improving our proprietary AirSculpt ® technology and innovating new procedures;

• our development and improvement of the quality of the AirSculpt ® experience, including, improving our proprietary AirSculpt ® method and innovating new procedures;

• any change in the competitive landscape of our market;

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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 1A. Risk Factors