UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to .

Commission file number: 001-40973

AirSculpt Technologies, Inc.

(Exact name of registrant as specified in its charter)


Delaware		87-1471855
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)


400 Alton Road, Unit TH-103M
Miami Beach, Florida		33139
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (786) 709-9690

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001 per share	AIRS	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer ☒		Smaller reporting company ☒
		Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of December 2, 2021, there were 55,640,154 shares of the registrant’s common stock outstanding.

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TABLE OF CONTENTS

		Page(s)
PART I FINANCIAL INFORMATION

Item 1.	Financial Statements	2
	AirSculpt Technologies, Inc.
	Balance Sheets as of September 30, 2021 and June 30, 2021 (Unaudited)	2
	Statement of Cash Flows for the Three Months Ended September 30, 2021 (Unaudited)	3
	Notes to Unaudited Financial Statements	4
	EBS Intermediate Parent, LLC and Subsidiaries
	Condensed Consolidated Balance Sheets as of September 30, 2021 (Unaudited) and December 31, 2020	5
	Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	6
	Condensed Consolidated Statements of Changes in Member’s Equity for the Quarters and Nine Months Ended September 30, 2021 and 2020 (Unaudited)	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020 (Unaudited)	8
	Notes to Unaudited Condensed Consolidated Financial Statements	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26

PART II OTHER INFORMATION
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Mine Safety Disclosures	28
Item 5.	Other Information	28
Item 6.	Exhibits	28

Signatures		30

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

We have made statements in the sections titled “Quantitative and Qualitative Disclosures About Market Risk” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and in other sections of this Quarterly Report on Form 10-Q that are forward-looking statements. In some cases, you can identify these statements by forward-looking words such as “may,” “might,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential” or “continue,” the negative of these terms and other comparable terminology. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business. These statements are only predictions based on our current expectations and projections about future events. There are important factors that could cause our actual results, level of activity, performance or achievements to differ materially from the results, level of activity, performance or achievements expressed or implied by the forward-looking statements, including those factors discussed in the section titled “Risk Factors” in our Registration Statement (Registration No. 333-260067) on Form S-1.

Our future results could be affected by a variety of other factors, including, but not limited to, failure to open and operate new centers in a timely and cost-effective manner; shortages or quality control issues with third-party manufacturers or suppliers; competition for surgeons; litigation or medical malpractice claims; inability to protect the confidentiality of our proprietary information; changes in the laws governing the corporate practice of medicine or fee-splitting; changes in the regulatory, economic and other conditions of the states and jurisdictions where our facilities are located; and business disruption or other losses from war, pandemic, terrorist acts or political unrest.

The risk factors discussed in “Risk Factors” in our Registration Statement (Registration No. 333-260067) on Form S-1 and this Quarterly Report on Form 10-Q could cause our results to differ materially from those expressed in the forward-looking statements made in this Quarterly Report on Form 10-Q.

There also may be other risks that are currently unknown to us or that we are unable to predict at this time.

Although we believe the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, level of activity, performance or achievements. Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. Forward-looking statements speak only as of the date they were made, and we are under no duty to update any of these forward-looking statements after the date of this Quarterly Report on Form 10-Q to conform our prior statements to actual results or revised expectations.

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PART I FINANCIAL INFORMATION

Item. 1 Financial Statements

AirSculpt Technologies, Inc.

Balance Sheets


	September 30,
	2021		June 30,
	(Unaudited)		2021
Assets
Current assets
Cash and cash equivalents	$	10	$	—
Total current assets		10		—
Total assets	$	10	$	—

Stockholder’s Equity
Common stock, $0.0001 par value, 1,000,000 shares authorized, 100 shares outstanding	$	—	$	—
Accumulated paid in capital		10		10
Stockholder receivable		—		(10)
Total stockholder’s equity	$	10	$	—

The accompanying notes are an integral part of these balance sheets.

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AirSculpt Technologies, Inc.

Statement of Cash Flows (Unaudited)


	Three Months
	Ended
	September 30,
	2021
Cash flows from financing activities
Proceeds from stockholder receivable	$	10
Net cash provided by financing activities		10
Net increase in cash and cash equivalents		10
Cash and cash equivalents
Beginning of period		—
End of period	$	10

The accompanying notes are an integral part of this statement of cash flows.

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AirSculpt Technologies, Inc.

Notes to Unaudited Financial Statements

NOTE 1—ORGANIZATION

AirSculpt Technologies, Inc. (“AirSculpt”) was incorporated in the state of Delaware on June 30, 2021, with the issuance of 100 shares of common stock to its sole stockholder in exchange for $10 due from that stockholder. The receivable from the stockholder is presented in the accompanying balance sheet as a deduction from stockholder’s equity. AirSculpt collected this stockholder receivable during the three months ended September 30, 2021. The Company had no operations through September 30, 2021.

NOTE 2—BASIS OF PRESENTATION

The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Separate statements of income, comprehensive income, and changes in stockholder’s equity have not been presented because there have been no activities in this entity from the date of incorporation through September 30, 2021.

NOTE 3—SUBSEQUENT EVENTS

On October 28, 2021, AirSculpt completed an initial public offering (“IPO”) of 8,050,000 shares of common stock at an initial public offering price of $11.00 per share. Of the 8,050,000 shares, AirSculpt offered 2,173,913, while 5,876,087 shares were offered by AirSculpt stockholders. The 8,050,000 shares, includes 1,050,000 shares purchased from AirSculpt stockholders upon the full execution of the underwriter’s option to purchase additional shares. Pursuant to a reorganization (the “Reorganization”) among entities under common control immediately prior to the IPO, AirSculpt became a holding company with its principal asset being 100% of the ownership interests in EBS Intermediate Parent LLC (the “Company”). Immediately following the IPO, AirSculpt's total outstanding shares were 55,640,154.

As part of the IPO, AirSculpt received proceeds of $13.5 million, net of underwriting and other offering related expenses, from their portion of the offering and did not receive any proceeds from the sale of shares of common stock by the selling stockholders in the IPO.

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

On October 27, 2021, AirSculpt established the 2021 Equity Incentive Plan. Under the 2021 Equity Incentive Plan, 3,950,450 stock units were awarded to the AirSculpt’s executive officers and directors and 728,886 stock units were awarded to employees on November 4, 2021 and November 10, 2021, respectively.

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EBS Intermediate Parent, LLC and Subsidiaries

Condensed Consolidated Balance Sheets


	September 30,
	2021		December 31,
($000s)	(Unaudited)		2020
Assets
Current assets
Cash and cash equivalents	$	20,738	$	10,379
Prepaid expenses and other current assets		825		1,184
Total current assets		21,563		11,563
Property and equipment, net		11,725		7,108
Other long-term assets		1,682		1,544
Right of use operating lease assets		18,500		17,053
Intangible assets, net		57,041		60,608
Goodwill		81,734		81,734
Total assets	$	192,245	$	179,610
Liabilities and Member’s Equity
Current liabilities
Accounts payable	$	1,386	$	1,095
Accrued payroll and benefits		1,752		1,258
Current portion of long-term debt		850		400
Deferred revenue and patient deposits		4,334		3,233
Accrued and other current liabilities		1,371		581
Current right of use operating lease liabilities		3,383		2,890
Total current liabilities		13,076		9,457
Long-term debt, net		82,118		32,119
Long-term right of use operating lease liabilities		15,037		14,358
Total liabilities		110,231		55,934
Commitments and contingent liabilities (Note 9)
Member’s equity		82,014		123,676
Total liabilities and member’s equity	$	192,245	$	179,610

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

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EBS Intermediate Parent, LLC and Subsidiaries

Condensed Consolidated Statements of Income (Unaudited)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
($000s)	2021		2020		2021		2020
Revenue	$	34,651	$	17,837	$	95,759	$	39,923
Operating expenses:
Cost of service (exclusive of depreciation and amortization shown below)		11,410		6,758		31,462		15,853
Selling, general and administrative		11,980		6,199		30,926		16,118
Loss on debt modification		—		—		682		—
Depreciation and amortization		1,641		1,432		4,664		4,165
Total operating expenses		25,031		14,389		67,734		36,136
Income from operations		9,620		3,448		28,025		3,787
Interest expense, net		1,566		529		3,323		1,776
Net income		8,054		2,919		24,702		2,011
Pro forma income tax expense		1,933		496		5,908		496
Pro forma net income	$	6,121	$	2,423	$	18,794	$	1,515

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

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EBS Intermediate Parent, LLC and Subsidiaries

Condensed Consolidated Statement of Changes in Member’s Equity (Unaudited)


($000s)
Balance at December 31, 2019	$	120,391
Distributions		(4,330)
Unit-based compensation		82
Net loss		(882)
Balance at March 31, 2020		115,261
Distributions		(4)
Unit-based compensation		81
Net loss		(26)
Balance at June 30, 2020		115,312
Distributions		(293)
Unit-based compensation		81
Net income		2,919
Balance at September 30, 2020	$	118,019

Balance at December 31, 2020	$	123,676
Distributions		(3,658)
Unit-based compensation		86
Net income		6,621
Balance at March 31, 2021		126,725
Distributions		(60,120)
Unit-based compensation		86
Net income		10,027
Balance at June 30, 2021		76,718
Distributions		(2,844)
Unit-based compensation		86
Net income		8,054
Balance at September 30, 2021	$	82,014

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

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EBS Intermediate Parent, LLC and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)


	Nine Months Ended
	September 30,
($000s)	2021		2020
Cash flows from operating activities
Net income	$	24,702	$	2,011
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,664		4,165
Unit-based compensation		258		244
Non-cash interest expense; amortization of debt costs		399		159
Loss on debt modification		682		—
Changes in assets and liabilities
Prepaid expense and other current assets		(604)		550
Other assets		(1,585)		(2,961)
Accounts payable		291		(1,080)
Deferred revenue and patient deposits		1,100		336
Accrued and other liabilities		2,432		3,333
Net cash provided by operating activities		32,339		6,757
Cash flows from investing activities
Purchases of property and equipment, net		(4,726)		(2,543)
Net cash used in investing activities		(4,726)		(2,543)
Cash flows from financing activities
Payment on term loan		(626)		(301)
Borrowings on term loan, net		49,994		2,500
Distribution to member		(66,622)		(4,627)
Net cash used in financing activities		(17,254)		(2,428)
Net increase in cash and cash equivalents		10,359		1,786
Cash and cash equivalents
Beginning of period		10,379		5,128
End of period	$	20,738	$	6,914

Supplemental disclosure of cash flow information:
Cash paid for interest	$	2,722	$	1,712

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

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EBS Intermediate Parent, LLC and Subsidiaries

Notes to Condensed Consolidated Financial Statements (Unaudited)

NOTE 1 – ORGANIZATION AND SUMMARY OF KEY ACCOUNTING POLICIES

AirSculpt Technologies, Inc. (“AirSculpt”), was formed as a Delaware corporation on June 30, 2021. On October 28, 2021, AirSculpt. completed an initial public offering (“IPO”) of 8,050,000 shares of common stock at an initial public offering price of $11.00 per share. Of the 8,050,000 shares, AirSculpt offered 2,173,913, while 5,876,087 shares were offered by AirSculpt stockholders. The 8,050,000 shares, includes 1,050,000 shares purchased from AirSculpt stockholders upon the full execution of the underwriter's option to purchase additional shares. Immediately following the IPO, AirSculpt’s total outstanding shares were 55,640,154. Pursuant to a reorganization (the “Reorganization”) among entities under common control immediately prior to the IPO, AirSculpt became a holding company with its principal asset being 100% of the ownership interests in EBS Intermediate Parent LLC (the “Company”). The operations of the Company represent the predecessor to AirSculpt prior to the IPO. The Company and its consolidated subsidiaries are referred to collectively in this Quarterly Report on Form 10-Q (“10-Q Report”) as “we,” “our,” and “us.” Solely for convenience, some of the copyrights, trade names and trademarks referred to in this 10-Q Report are listed without their ©, ® and ™ symbols, but we will assert, to the fullest extent under applicable law, our rights to our copyrights, trade names and trademarks.

The Company was formed as a limited liability company under the laws of the state of Delaware pursuant to an agreement effective October 2, 2018 to facilitate the acquisition of EBS Enterprises, LLC f/k/a Rollins Enterprises, LLC. Prior to the Reorganization, the Company was a wholly-owned subsidiary of EBS Parent, LLC (the “Parent”). Subsequent to the Reorganization, the Company became a wholly-owned subsidiary of AirSculpt. The Company’s revenues are concentrated in the specialty, minimally invasive liposuction market.

The Company, through its wholly-owned subsidiaries, is a provider of practice management services to professional associations (“PAs”) located throughout the United States. The Company owns and operates non-clinical assets and provides its management services to the PAs through management services agreements (“MSAs”). Management services provide for the administration of the non-clinical aspects of the medical operations and include, but are not limited to, financial, administrative, technical, marketing, and personnel services.

At September 30, 2021 and 2020, the Company is providing management services to sixteen and thirteen medical practices, respectively. Pursuant to the MSA, the PA is responsible for all clinical aspects of the medical operations of the practice.

Impact of COVID-19

The COVID-19 global pandemic has significantly affected the Company’s facilities, employees, patients, business operations and financial performance, as well as the U.S. economy and financial markets. The COVID-19 pandemic materially impacted the Company’s financial performance for the nine months ended September 30, 2020. Beginning in March 2020, the COVID-19 pandemic began to negatively affect revenue and business operations. As a result of federal, state, and local guidelines, the Company cancelled or postponed most procedures scheduled at the facilities. As a result, case volumes across most of the Company’s centers were significantly impacted during the 2020 period. Although the length and severity of the impact of the COVID-19 pandemic cannot be predicted, the Company’s volumes improved in the second half of 2020 as states began to re-open and allow for non-emergent procedures. During the second half of 2020 the Company’s volumes and revenue recovered to pre-pandemic levels and for the three and nine months ended September 30, 2021 include minimal impact from the COVID-19 global pandemic. The length and severity of the pandemic continues to be difficult to predict and is dependent on factors beyond the Company’s control.

Principles of Consolidation

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

All intercompany accounts and transactions have been eliminated in consolidation.

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Variable Interest Entities

The Company has a variable interest in the managed PAs where it has a long-term and unilateral controlling financial interest over such PAs’ assets and operations. The Company has the ability to direct the activities that most significantly affect the PAs’ economic performance via the MSAs and related agreements. The Company is a practice management service organization and does not engage in the practice of medicine. These services are provided by licensed professionals at each of the PAs. Certain key features of the MSAs and related agreements enable the Company to assign the member interests of certain of the PAs to another member designated by the Company (i.e., “nominee shareholder”) for a nominal value in certain circumstances at the Company’s sole discretion. The MSA does not allow the Company to be involved in, or provide guidance on, the clinical operations of the PAs. The Company consolidates the PAs into the financial statements. All of the Company’s revenue is earned from services provided by the PAs. The only assets and liabilities held by the PAs included in the accompanying consolidated balance sheets are clinical related. The clinical assets and liabilities are not material to the Company as a whole.

Basis of Presentation

The condensed consolidated balance sheet as of September 30, 2021, and the condensed consolidated statements of income, member’s equity, and cash flows for the three and nine months ended September 30, 2020 and 2021 are unaudited. The unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair statement of the Company’s financial position as of September 30, 2021 and the results of operations and cash flows for the nine months ended September 30, 2021 and 2020. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. The financial data and the other financial information disclosed in these notes to the condensed consolidated financial statements related to the three and nine months ended September 30, 2021 and 2020 are also unaudited. The consolidated results of operations for the three and nine months ended September 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021 or for any other future annual or interim period.

The condensed consolidated balance sheet as of December 31, 2020 is derived from the Company’s annual audited consolidated financial statements for the year ended December 31, 2020, which should be read in conjunction with these condensed consolidated financial statements and which are included in the Company’s Prospectus dated October 28, 2021 filed with the Securities and Exchange Commission (“SEC”) pursuant to Rule 424(b) of the Securities Act of 1933, as amended, relating to the Company’s Registration Statement on Form S-1 (File No. 333-260067).

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, as well as interests in PAs controlled by the Company through rights granted to the Company by contract to manage and control the affiliate’s business (as described in “Variable Interest Entities” above). All significant intercompany balances and transactions are eliminated in consolidation.

Revenue Recognition

Revenue consists primarily of revenue earned for the provision of the Company’s patented AirSculpt® procedures. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account for revenue recognition. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. The Company’s performance obligations are delivery of specialty, minimally invasive liposuction services.

The Company assists patients, as needed, by providing third-party financing options to pay for procedures. The Company has arrangements with various financing companies to facilitate this option. There is a financing transaction fee based on a set percentage of the amount financed and the Company recognizes revenue based on the expected transaction price which is reduced for financing fees.

Revenue for services is recognized when the service is performed. Payment is typically rendered in advance of the service. Customer contracts generally do not include more than one performance obligation.

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The Company’s policy is to require payment for services in advance. Payments received for services that have yet to be performed as of September 30, 2021 and December 31, 2020 are included in deferred revenue and patient deposits.

Deferred Financing Costs, Net

Loan costs and discounts are capitalized in the period in which they are incurred and amortized on the straight-line basis over the term of the respective financing agreement which approximates the effective interest method. These costs are included as a reduction of long-term debt on the condensed consolidated balance sheets. Total amortization of deferred financing costs was approximately $399,000 and $159,000 for the nine months ended September 30, 2021 and 2020, respectively, and $208,000 and $53,000 for the three months ended September 30, 2021 and 2020, respectively. Amortization of loan costs and discounts is included as a component of interest expense.

Long-Lived Assets

The Company accounts for impairment of long-lived assets in accordance with the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 350, Intangibles – Goodwill and Other. This standard requires that long-lived assets and certain identifiable intangibles be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to future estimated cash flows expected to arise as a direct result of the use and eventual disposition of the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value, less costs to sell. No impairment charges were recognized for the three and nine months ended September 30, 2021 and 2020.

Fair Value

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

ASC Topic 820 defines three categories for the classification and measurement of assets and liabilities carried at fair value:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or observable inputs that are corroborated by market data.

Level 3: Unobservable inputs reflecting the reporting entity’s own assumptions.

The fair value of financial instruments is generally estimated through the use of public market prices, quotes from financial institutions and other available information. Judgment is required in interpreting data to develop estimates of market value and, accordingly, amounts are not necessarily indicative of the amounts that could be realized in a current market exchange.

Short-term financial instruments, including cash, prepaid expenses and other current assets, accounts payable, and other liabilities, consist primarily of instruments without extended maturities, for which the fair value, based on management’s estimates, approximates their carrying values. Borrowings bear interest at what is estimated to be current market rates of interest, accordingly, carrying value approximates fair value.

Earnings Per Share

Prior to the Reorganization, the Company was a wholly-owned subsidiary of EBS Parent, LLC. As a result, the Company does not believe earnings per share to be a meaningful presentation in the accompanying condensed consolidated financial statements.

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Advertising Costs

Advertising costs are expensed in the period when the costs are incurred and are included as a component of selling, general and administrative costs. Advertising expenses were approximately $4.3 million and $1.8 million for the three months ended September 30, 2021 and 2020, respectively, and $9.4 million and $4.8 million for the nine months ended September 30, 2021 and 2020, respectively.

Income Taxes

The Company is organized as a limited liability company and has elected to be treated as a partnership for federal and state income tax purposes. Accordingly, the tax consequences of the Company’s profits and losses are passed through to the members of the Company and are reported in their respective income tax returns. Therefore, historically no provision for income taxes has been provided in the accompanying condensed consolidated financial statements.

As a result of the Reorganization, the Company became subject to taxation as a C corporation for periods after October 28, 2021. The Company has included a pro forma tax expense in its condensed consolidated statements of income, as if it were taxed as a C corporation.

The Company applies the provisions of ASC 740-10, Accounting for Uncertain Tax Positions (“ASC 740-10”). Under these provisions, companies must determine and assess all material positions existing as of the reporting date, including all significant uncertain positions, for all tax years that are open to assessment or challenge under tax statutes. Additionally, those positions that have only timing consequences are analyzed and separated based on ASC 740-10’s recognition and measurement model.

ASC 740-10 provides guidance related to uncertain tax positions for pass-through entities and tax-exempt not-for profit entities. ASC 740-10 also modifies disclosure requirements related to uncertain tax positions for nonpublic entities and provides that all entities are subject to ASC 740-10 even if the only tax position in question is the entity’s status as a pass-through.

As required by the uncertain tax position guidance, the Company recognizes the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the condensed consolidated financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. The Company applied the uncertain tax position guidance to all tax positions for which the statute of limitations remained open and determined that there are no uncertain tax positions as of September 30, 2021 or December 31, 2020. The Company is not subject to U.S. federal tax examination prior to 2018, when it was formed.

Pro Forma Income Taxes

The Company has included a pro forma tax expense in its condensed consolidated statements of income, as if it were taxed as a C corporation. The Company has computed pro forma entity level income tax expense using an estimated effective tax rate of approximately 24.0% and 23.9% for the three and nine months ended September 30, 2021, respectively, and 17.0% and 24.7% for the three and nine months ended September 30, 2020, respectively, inclusive of all applicable U.S. federal and state income taxes.

NOTE 2 – GOODWILL AND INTANGIBLES, NET

The annual review of goodwill impairment will be performed in October 2021. There were no triggering events during the three and nine months ended September 30, 2021 and 2020.

The Company had goodwill of $81.7 million at September 30, 2021 and December 31, 2020.

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Intangible assets consisted of the following at September 30, 2021 and December 31, 2020 (in 000’s):


	September 30,		December 31,
	2021		2020		Useful Life
Technology and know-how	$	53,600	$	53,600	15 years
Trademarks and tradenames		17,700		17,700	15 years
		71,300		71,300
Accumulated amortization of technology and know-how		(10,719)

SEC Form 10-Q filed by AirSculpt Technologies Inc.