Airsculpt Technologies, Inc.

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See the section entitled “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including those risks. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report. You should read this Annual Report completely, including Part I, Item 1A (Risk Factors) of this Annual Report and the “Forward-Looking Statements” sections of this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by our forward-looking statements contained in the following discussion and analysis. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes and other financial information appearing elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. See the section entitled "Cautionary Note Regarding Forward-Looking Statements" in this Annual Report on Form 10-K. Our actual results could differ materially from those anticipated in the forward-looking statements for many reasons, including those risks. You should not place undue reliance on these forward-looking statements, which apply only as of the date of this Annual Report. You should read this Annual Report completely, including Part I, Item 1A (Risk Factors) of this Annual Report and the section titled “Cautionary Note Regarding Forward-Looking Statements” in this Annual Report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by our forward-looking statements contained in the following discussion and analysis. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

Previous wording

Given the recent decline in revenue, the Company is focusing on stabilizing revenue growth through a number of strategic and growth initiatives, including:

Current wording

Given the continued decline in its revenue, the Company is focusing returning to revenue growth through a number of strategic and growth initiatives, including:

Previous wording

•optimizing our marketing investment by spending on techniques that have proven successful for us in the past using a returns-based approach and testing new areas such as online video, and other social marketing channels under the direction of our new Chief Digital Officer;

Current wording

•optimizing our marketing investment by spending on techniques that have proven successful for us in the past using a returns-based approach and testing new areas such as online video, and other social marketing channels under the direction of our Chief Digital Officer;

Previous wording

•improving our go-to-market and sales strategies under our new Chief Sales Officer who is dedicated to strengthening our consultative sales model with enhanced training, improving our sales processes, and providing a greater focus on lead conversion;

Current wording

•improving our go-to-market and sales strategies under our Chief Sales Officer who is dedicated to strengthening our consultative sales model with enhanced training, improving our sales processes, and providing a greater focus on lead conversion;

Previous wording

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

Current wording

Our long-term growth strategy depends, in large part, on successfully operating our new facilities, both in existing and new geographic regions, particularly in densely populated and affluent metropolitan and suburban regions.

Previous wording

◦Same-center revenue per case increased (2.4)%, 1.5%, and 7.4% in 2024, 2023, and 2022, respectively;

Current wording

◦Same-center revenue per case changed 0.1%, (2.4)%, and 1.5% in 2025, 2024, and 2023, respectively;

Previous wording

◦Same-center volume changed (13.7)%, (1.4)%, and 0.7% in 2024, 2023, and 2022, respectively;

Current wording

◦Same-center volume changed (22.1)%, (13.7)%, and (1.4)% in 2025, 2024, and 2023, respectively;

Previous wording

•Loss per share was $(0.14), $(0.08) and $(0.26) for 2024, 2023 and 2022, respectively; and

Current wording

•Loss per share was $(0.19), $(0.14) and $(0.08) for 2025, 2024 and 2023, respectively; and

Previous wording

•Adjusted Net Income per share (diluted)* was $0.02, $0.28 and $0.32 in 2024, 2023 and 2022, respectively.

Current wording

•Adjusted Net Income per share (diluted)* was $(0.06), $0.02 and $0.29 in 2025, 2024 and 2023, respectively.

Previous wording

For the twelve months ended December 31, 2024 and 2023, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that were owned and operated during the twelve months ended December 31, 2024 and 2023, respectively. At facilities that were not owned or operated for the entirety of the prior year period, the current year period has been pro-rated to reflect only growth experienced during the portion of the twelve months ended December 31, 2024 in which such facilities were owned and operated during the twelve months ended December 31, 2023.We define same-center facilities and procedure rooms based on if a facility was owned or operated as of December 31, 2023.

Current wording

For the twelve months ended December 31, 2025 and 2024, we define same-center case and revenue growth as the growth in each of our cases and revenue at facilities that were owned and operated during the twelve months ended December 31, 2025 and 2024, respectively. At facilities that were not owned or operated for the entirety of the prior year period, the current year period has been pro-rated to reflect only growth experienced during the portion of the twelve months ended December 31, 2025 in which such facilities were owned and operated during the twelve months ended December 31, 2024. We define same-center facilities and procedure rooms based on if a facility was owned or operated as of December 31, 2024. Beginning September 30, 2025, we have excluded the London facility from all periods presented due to the closure of the facility.

Previous wording

Our same-store revenue decline is primarily attributed to weaker than expected performance across the broader aesthetics and high-end retail industries.

Current wording

Our same-center case decline is primarily attributed to weaker than expected performance across the broader aesthetics industry.

Previous wording

We define Adjusted EBITDA as net loss excluding depreciation and amortization, net interest expense, income tax expense, restructuring and related severance costs, loss on debt modification, loss/(gain) on disposal of long-lived assets, settlement costs for non-recurring litigation, and equity-based compensation.

Current wording

We define Adjusted EBITDA as net loss excluding depreciation and amortization, net interest expense, income tax (benefit)/expense, restructuring and related severance costs, Loss/(gain) on disposal of long-lived assets, settlement costs for non-recurring litigation, and equity-based compensation.

Previous wording

(2) This amount relates to settlement costs for non-recurring litigation of $0.9 million for the twelve months ended December 31, 2024.

Current wording

(4) This amount relates to settlement costs for non-recurring litigation of $0.9 million for the three and nine months ended September 30, 2024. See Note 9 to the condensed consolidated financial statements included in the Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2024 for further discussion.

Previous wording

For the twelve months ended December 31, 2024, 2023, and 2022 pre-opening de novo and relocation costs were $1.0 million, $3.3 million, and $4.3 million, respectively.

Current wording

For the twelve months ended December 31, 2025, 2024, and 2023 pre-opening de novo and relocation costs were $— million, $1.0 million, and $3.3 million, respectively.

Previous wording

The following table reconciles Adjusted Net Income and Adjusted Net Income per Share to net loss, the most directly comparable GAAP financial measure:

Current wording

The following table reconciles Adjusted Net (Loss)/Income and Adjusted Net (Loss)/Income per Share to net loss, the most directly comparable GAAP financial measure:

Previous wording

We generally expect our selling expenses to increase as we continue to grow our brand and expand our national footprint. We evaluate our selling expense as compared to growth in our sales volume and will invest accordingly to the extent we believe we can position ourselves for future growth without materially negatively impacting our Adjusted EBITDA Margins.

Current wording

We evaluate our selling expense as compared to growth in our sales volume and will invest accordingly to the extent we believe we can position ourselves for future growth without materially negatively impacting our Adjusted EBITDA Margins.

Previous wording

General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service and the salaries and commissions of sales and marketing employees), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. We expect our general and administrative expenses to increase over time due to the additional legal, accounting, insurance, investor relations and other costs that we will continue to incur as a public company.

Current wording

General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service and the salaries and commissions of sales and marketing employees), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources.

Previous wording

Cost of Service—Our cost of service decreased $2.6 million, or 3.6%, compared to the twelve months ended December 31, 2023. The percentage decrease in cost of service is driven by the decrease in cases compared to the 2023 period and partially offset by increases in nursing and rent costs related to our new facility openings during the 2024 period. Cost of service was 39.6% and 37.8% as a percentage of revenue for the twelve months ended December 31, 2024 and 2023, respectively. The percentage increase is primarily due to the decline in revenue and not being able to leverage certain fixed costs within cost of service such as rent and certain nursing costs.

Current wording

Cost of Service—Our cost of service decreased $9.5 million, or 13.3%, compared to the twelve months ended December 31, 2024. The percentage decrease in cost of service is driven by the decrease in cases compared to the same period in 2024. Cost of service was 40.6% and 39.5% as a percentage of revenue for the twelve months ended December 31, 2025 and 2024, respectively. The percentage increase is primarily due to the decline in revenue and not being able to leverage certain fixed costs within cost of service such as rent and certain nursing costs.

Previous wording

Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Total selling expenses were approximately $36.8 million and $30.1 million for the twelve months ended December 31, 2023 and 2022, respectively. Our customer acquisition costs were approximately $2,465 and $2,300 per customer in the twelve months ended December 31, 2023 and 2022, respectively. We intend to continue investing in our sales and marketing capabilities as we add new centers and further increase our brand awareness, which will also drive further same-center growth. As a result, we expect these costs to increase on an absolute dollar basis. Additionally, selling expenses as a percentage of revenue may fluctuate from quarter to quarter based on the timing and scope of our initiatives and the related impact to our revenue.

Current wording

Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel. Total selling expenses were approximately $36.9 million and $41.4 million for the twelve months ended December 31, 2025 and 2024, respectively. This decrease is primarily related to a decrease in advertising spend associated with brand awareness initiatives. Our customer acquisition costs were approximately $3,114 and $2,950 per customer in the twelve months ended December 31, 2025 and 2024, respectively. Additionally, selling expenses as a percentage of revenue may fluctuate from quarter to quarter based on the timing and scope of our initiatives and the related impact to our revenue.

Previous wording

General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. General and administrative expense were approximately $54.9 million and

Current wording

General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. General and administrative expense were approximately $45.3 million and $57.5 million for the twelve months ended December 31, 2025 and 2024, respectively. This decrease relates to a $3.7 million decrease in severance expense, $1.6 million decrease in professional services, $1.3 million reduction in travel expense, and a $1.4 million reduction in stock compensation expense.

Previous wording

Depreciation and Amortization—Depreciation and amortization increased to approximately $10.3 million for the twelve months ended December 31, 2023 compared to $8.1 million for the same period in 2022. This increase is the result of having five additional de novo centers during the twelve months ended December 31, 2023 as compared to the 2022 period.

Current wording

Depreciation and Amortization—Depreciation and amortization increased to approximately $12.8 million for the twelve months ended December 31, 2025 compared to $11.9 million for the same period in 2024.

Previous wording

Income Tax Expense— Our effective tax rate is 249.4% and (29.9)% for the twelve months ended December 31, 2023 and 2022, respectively. The main driver of the difference between the effective and statutory rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code.

Current wording

Income Tax Expense—Our effective tax rate was (33.8)% and (2.3)% for the twelve months ended December 31, 2025 and 2024, respectively. The main driver of the difference between the effective and statutory rate is non-deductible executive compensation under Section 162(m) of the Internal Revenue Code.

Previous wording

Revenue—Our revenue decreased $15.6 million, or 7.9%, compared to the same period in 2023. The decrease is primarily attributed to weaker than expected performance across the broader aesthetics and high-end retail industries.

Current wording

Revenue—Our revenue decreased $15.6 million, or 7.9%, compared to the same period in 2023. The decrease is primarily attributed to lower case volume and lower rate.

Previous wording

Selling, General and Administrative Expenses—Selling, general and administrative expenses increased $1.0 million, or 0.9%, for the twelve months ended December 31, 2023 compared to the same period in 2022. This increase is related to additional expenses we incurred for marketing and corporate support as we grow our center count through de novo expansion and providing support for our centers, offset by a decrease in our equity-based compensation expense. Selling, general and administrative expenses as a percent of revenue were 52.3% and 60.1% for the twelve months ended December 31, 2023 and 2022, respectively.

Current wording

Selling, General and Administrative Expenses—Selling, general and administrative expenses decreased $3.5 million, or 3.4%, for the twelve months ended December 31, 2024 compared to the same period in 2023. This decrease is related to a decrease in our equity-based compensation expense partially offset by additional expenses we incurred for marketing and corporate support as we grow our center count through de novo expansion and providing support for our centers.

Previous wording

General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. General and administrative expense were approximately $65.6 million and $71.3 million for the twelve months ended December 31, 2023 and 2022, respectively. This reduction is due to a decrease in equity-based compensation.

Current wording

General and administrative expenses include employee-related expenses, including salaries and related costs (excluding physician and clinical cost included in cost of service), equity-based compensation, technology, operations, finance, legal, corporate office rent and human resources. General and administrative expense were approximately $54.9 million and $65.6 million for the twelve months ended December 31, 2024 and 2023, respectively. This reduction is due to a decrease in equity-based compensation (see Note 6 to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion).

Previous wording

We principally rely on cash flows from operations as our primary source of liquidity and, if needed, up to $5.0 million in revolving loans under our revolving credit facility. Our primary cash needs are for payroll, marketing and advertisements, rent, debt service, as well as information technology and infrastructure, including our corporate office. As we have experienced revenue declines in the most recent year, we have implemented a cost reduction program that is estimated to eliminate approximately $3 million in annual overhead costs and contracted expenses. These initiatives may not realize anticipated savings or benefits from one or more of the various strategies and cost-savings initiatives undertaken as part of these efforts in full or in part or within the time periods expected. We also may not realize the increase in sales related to these initiatives. Our ability to improve operating results depends upon a significant number of factors, some of which are beyond our control. If we are unable to realize the anticipated savings or benefits, or otherwise fail to implement the growth strategies, the business operating results and liquidity may be adversely affected.

Current wording

Our primary cash uses are for payroll, marketing and advertisements, rent, debt service, as well as information technology and infrastructure, including our corporate office. Our cash flows are closely tied to the receipt of patient payments, and we have experienced revenue declines in the two most recent years due to a decline in overall cases performed. In response, we implemented during fiscal year 2025 initiatives to return to revenue growth, engaged in a cost reduction program that was estimated to eliminate approximately $3.0 million in annual overhead costs and contracted expenses during fiscal year 2025, and paused de novo center and new procedure room openings. Our ability to improve operating results depends upon a significant number of factors, some of which are beyond our control. If we are unable to realize the anticipated savings or benefits, or otherwise fail to implement the growth strategies, the business operating results and liquidity may be adversely affected.

Previous wording

As of December 31, 2023, we had $10.3 million in cash and cash equivalents and an available amount of $5.0 million under our revolving credit facility. We did not have any letters of credit outstanding as of December 31, 2023.

Current wording

As of December 31, 2025, we had $8.4 million in cash and cash equivalents and an available amount of $5.0 million under our revolving credit facility. We did not have any letters of credit outstanding as of December 31, 2025.

Previous wording

As of December 31, 2024, we had $8.2 million in cash and cash equivalents with no availability under our revolving credit facility. We do not have any letters of credit outstanding as of December 31, 2024.

Current wording

As of December 31, 2024, we had $8.2 million in cash and cash equivalents and no availability under our revolving credit facility. We did not have any letters of credit outstanding as of December 31, 2024.

Previous wording

The primary source of our operating cash flow is the collection of patient payments received prior to performing surgical procedures. For the twelve months ended December 31, 2024, our operating cash flow decreased by $12.6 million compared to the same period in 2023. The decrease is primarily attributed to weaker than expected revenue performance and an increase in our marketing investments during the twelve months ended December 31, 2024 as compared to the prior year period. At December 31, 2024, we had working capital of $(11.5) million compared to $(4.4) million at December 31, 2023.

Current wording

The primary source of our operating cash flow is the collection of patient payments received prior to performing surgical procedures. For the twelve months ended December 31, 2025, our operating cash flow decreased by $8.3 million compared to the same period in 2024. The decrease is primarily attributed to weaker than expected revenue performance during the twelve months ended December 31, 2025 as compared to the prior year period. At December 31, 2025, we had a working capital deficit of $(12.4) million compared to $(11.8) million at December 31, 2024.

Previous wording

Net cash used in investing activities for the twelve months ended December 31, 2024, 2023, and 2022 was $14.0 million, $9.9 million, and $12.9 million, respectively. Investing activities during all three periods were attributable to the preparation for the opening of de novo locations and the relocation of multiple existing facilities.

Current wording

Net cash used in investing activities for the twelve months ended December 31, 2025 and 2024 was $2.4 million and $14.0 million, respectively. Investing activities in the twelve months ended December 31, 2025 relate primarily to final payments on our White Plains, NY location that opened in December 2024 and maintenance capital expenditure. Investing activities during the twelve months ended December 31, 2024 were attributable to the preparation for the opening of our 2024 de novo locations.

Previous wording

Net cash used in financing activities during the twelve months ended December 31, 2024 was $0.6 million. During the twelve months ended December 31, 2024, we made principal payments on our debt of $2.1 million, borrowed $5.0 million on our revolving credit facility, and made payments of taxes withheld through vested equity-based compensation of $0.9 million.

Current wording

Net cash used in financing activities for the twelve months ended December 31, 2024 was $0.6 million. For the twelve months ended December 31, 2024, we made principal payments on our debt of $2.1 million and made payments of taxes withheld through vested equity-based compensation of $0.9 million.

Previous wording

(1)Years 1-3 includes both the principal of the Term Loan as well as the revolving credit facility. This amount does not reflect any prepayments.

Current wording

(1)This amount does not reflect any prepayments.

Previous wording

(2)Amounts in the table reflect the contractually required interest payable pursuant to borrowings under our debt related to our Credit Agreement. Interest payments in the table above were calculated using an interest rate of 7.86% for the debt which was the interest rate applicable to the borrowing as of December 31, 2024.

Current wording

(2)Amounts in the table reflect the contractually required interest payable pursuant to borrowings under our debt related to our Credit Agreement. Interest payments in the table above were calculated using an interest rate of 8.47% for the debt which was the interest rate applicable to the borrowing as of December 31, 2025.

Previous wording

The carrying value of our total indebtedness was $74.7 million and $71.6 million, which includes unamortized deferred financing costs and issuance discount of $1.0 million and $1.2 million, and funds drawn on the revolving credit facility of $5.0 million and $—, as of December 31, 2024 and December 31, 2023, respectively.

Current wording

The carrying value of our total indebtedness was $56.0 million and $74.7 million, which includes unamortized deferred financing costs and issuance discount of $0.9 million and $1.0 million, and funds drawn on the revolving credit facility of $0.0 million and $5.0 million, as of December 31, 2025 and December 31, 2024, respectively.

Previous wording

On November 7, 2022, the Company entered into the Term Loan and Revolving Credit Facility pursuant to the Credit Agreement with a syndicate of lenders, originally maturing November 7, 2027. Pursuant to the Credit Agreement, there is (i) an $85.0 million original aggregate principal amount of term loans and (ii) a revolving loan facility in an aggregate principal amount of up to $5.0 million. On September 29, 2023, the Company voluntarily pre-paid $10.0 million of the principal balance of the term loans under the Credit Agreement using cash on hand.

Current wording

On November 7, 2022, the Company entered into the Term Loan and Revolving Credit Facility pursuant to the Credit agreement with a syndicate of lenders (the "Credit Agreement"), originally maturing November 7, 2027. Pursuant to the Credit Agreement, there is (i) an $85.0 million original aggregate principal amount of term loans and (ii) a revolving loan facility in an aggregate principal amount of up to $5.0 million. On September 29, 2023, the Company voluntarily pre-paid $10.0 million of the principal balance of the term loans under the Credit Agreement using cash on hand.

Previous wording

Under the 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 2.0x. 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 is 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.

Current wording

Under the Credit Agreement, all outstanding loans originally bore interest based on either a base rate or SOFR plus an applicable per annum margin. 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 is below 1.0x, the applicable per annum margin was 1.0% or 2.0% for base rate or SOFR, respectively.

Previous wording

On September 13, 2024, the Company amended the Credit Agreement to modify certain financial condition covenants and the applicable margins. As such, for the period of September 13, 2024 through June 30, 2025, the applicable per annum margin is 2.5% or 3.5% 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 is 2.0% or 3.0% for base rate or SOFR, respectively. If the Company's total leverage ratio is below 1.0x, the applicable per annum margin is 1.5% or 2.5% for base rate or SOFR, respectively. As of December 31, 2024, the interest rate was 7.86%.

Current wording

On September 13, 2024, the Company amended the Credit Agreement to modify certain financial condition covenants and the applicable margins. As such, for the period of September 13, 2024 through June 30, 2025, 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 was 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 was 1.5% or 2.5% for base rate or SOFR, respectively.

Previous wording

On March 12, 2025, the Company entered the Third Amendment. 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.

Current wording

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) $3.0 million as of the last day of the month ending March 31, 2025, (B) $5.0 million as of the last day of the month ending April 30, 2025, and (C) $7.5 million 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.

Previous wording

In addition to revising the covenants listed above, the 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; and (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 the Limited Guarantee, pursuant to which our Sponsor agreed to provide a $10.0 million limited 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.

Current wording

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 our 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 thousand arrangement fee to Silicon Valley Bank. On March 12, 2025, in connection with the Third Amendment, the Company, SVB and our Sponsor (through certain affiliated entities) entered into the Limited Guarantee, pursuant to which our Sponsor agreed to provide a $10.0 million limited guaranty of the Company’s obligations under the Credit Agreement. The Limited Guarantee was callable on June 15, 2025 (or upon the earlier occurrence of certain defaults described therein) in the Company had not prepaid the Term Loan (excluding regularly scheduled amortization) by $10.0 million as of such date. On June 13, 2025, the Company made a $10.0 million principal payment on the term loan in accordance with the Third Amendment using proceeds from its underwritten public offering completed on June 11, 2025. The Limited Guarantee automatically terminated on March 12, 2026 following the prepayment of the Term Loan in an aggregate amount of $20.0 million since the date of the Limited Guarantee.

Previous wording

Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with any requirement that may be adopted by the PCAOB regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements (auditor discussion and analysis), and (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier.

Current wording

Subject to certain conditions set forth in the JOBS Act, if, as an “emerging growth company,” we choose to rely on such exemptions we may not be required to, among other things, (i) provide an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Wall Street Reform and Consumer Protection Act (iv) disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the CEO’s compensation to median employee compensation. These exemptions will apply for a period of five years following the completion of our IPO or until we are no longer an “emerging growth company,” whichever is earlier. December 31, 2025 is the last period the Company qualifies as an emerging growth company.