Annual report [Section 13 and 15(d), not S-K Item 405]

Divestitures

v3.25.4
Divestitures
 12 Months Ended
Dec. 31, 2025
Discontinued Operations and Disposal Groups [Abstract]  
Divestitures Divestitures
Corporate Clinic Segment Divestiture
In 2023, we initiated plans to refranchise the majority of our company-owned or managed clinics with plans to retain a small portion of high-performing clinics. During the third quarter of 2024, we expanded the refranchising plan to include additional clinic markets of company-owned or managed clinics, marketing the clinics in clusters grouped by proximity to larger private equity firms. Because we have formalized a plan to sell our entire corporate clinic reportable segment, we have concluded that the overall refranchising plan represents a strategic shift that will have a major effect on our operations and financial results.
Since December 31, 2024, the corporate clinics classified as held for sale are reported separately as discontinued operations in the consolidated income statements and consolidated balance sheets. As permitted, we elected not to adjust the consolidated statements of cash flows for the years ended December 31, 2025 and 2024 to exclude cash flows attributable to discontinued operations. Accordingly, we disclosed the depreciation and amortization, capital expenditures and significant operating and investing non-cash items related to the corporate clinic segment below.
The key components of Net income (loss) from discontinued operations that were included in our consolidated income statements are as follows:
Year Ended December 31,
2025 2024
Revenues:
Revenues from company-owned or managed clinics $ 54,038,508  $ 69,982,344 
Total revenues 54,038,508  69,982,344 
Cost of revenues:
IT cost of revenues 20,971  47,817 
Total cost of revenues 20,971  47,817 
Selling and marketing expenses 5,755,830  7,850,616 
Depreciation and amortization 69,558  3,350,748 
General and administrative expenses 39,450,918  54,988,780 
Total selling, general and administrative expenses 45,276,306  66,190,144 
Net loss on disposition or impairment from discontinued operations 5,441,010  7,714,555 
Income (loss) from discontinued operations 3,300,221  (3,970,172)
Other expense, net 99,592  2,114 
Income (loss) before income tax expense 3,200,629  (3,972,286)
Income tax expense from discontinued operations 25,207  210,263 
Net income (loss) from discontinued operations $ 3,175,422  $ (4,182,549)
The following table summarizes the major classes of assets and liabilities of discontinued operations that were included in our consolidated balance sheets:
December 31,
2025		 December 31,
2024
ASSETS
Accounts receivable $ 315,201  $ 2,484,248 
Prepaid expenses and other assets 581,504  549,605 
Assets held for sale 20,051,965  38,395,986 
Property and equipment, net 67,779  208,074 
Deferred tax assets (attributable to VIEs) 994,138  1,087,204 
Deposits and other assets 235,731  425,938 
Total assets, discontinued operations $ 22,246,318  $ 43,151,055 
LIABILITIES
Accounts payable $ 83,503  $ 67,107 
Accrued expenses 2,519,433  5,066,941 
Payroll liabilities ($0.6 million and $0.9 million attributable to VIEs, respectively)
 988,865  2,333,335 
Operating lease liability 651,844  153,517 
Finance lease liability —  38,015 
Other current liabilities (attributable to VIEs) 756,483  1,079,441 
Liabilities to be disposed of ($4.7 million and $5.2 million attributable to VIEs, respectively)
 16,368,318  28,629,103 
Total liabilities, discontinued operations $ 21,368,446  $ 37,367,459 
The key components of cash flows from discontinued operations are as follows:
Year Ended December 31,
2025 2024
Significant operating and investing non-cash items
Depreciation and amortization $ 69,558  $ 3,350,748 
Net loss on disposition or impairment 5,441,010  7,714,555 
Capital expenditures
Purchase of property and equipment 84,256  664,423 
The clustered clinics are in varying stages of sales negotiations with approximately all of the company-owned or managed clinics expected to be recognized as a completed sale within one year with an estimated fair value of $2.6 million at December 31, 2025. Effective with the designation as held for sale, we discontinued recording depreciation on property and equipment, net, amortization of intangible assets, net and amortization of ROU assets for the clinics as required by GAAP. We reported the related assets and liabilities of the clinics as held for sale as discontinued operations in our December 31, 2025 and 2024 consolidated balance sheets.
Long-lived assets that meet the criteria for the held for sale designation are reported at the lower of their carrying value or fair value less estimated cost to sell. As a result of our evaluation of the recoverability of the carrying value of the assets and liabilities held for sale relative to the clinics estimated fair values, we recorded an estimated loss on disposal of $2.7 million and $4.5 million for the years ended December 31, 2025 and 2024, respectively, in Income (loss) from discontinued operations before income tax expense in our consolidated income statements and a valuation allowance included in discontinued operations current assets in our consolidated balance sheets.
During the year ended December 31, 2025, in connection with the sale of company-owned or managed clinics classified as held for sale as of December 31, 2024 for a combined sales price of $7.8 million, we sold $16.4 million assets held for sale, net of a $1.0 million valuation allowance and $7.4 million of liabilities to be disposed of in the consolidated balance sheets as of December 31, 2024. As a result of the sales, we recorded a loss of $0.6 million included in Income (loss) from discontinued operations before income tax expense on the consolidated income statements for the year ended December 31, 2025.
During the year ended December 31, 2024, in connection with the sale of company-owned or managed clinics classified as held for sale as of December 31, 2023 for a combined sales price of $0.6 million, we sold $1.3 million assets held for sale, net of a $0.1 million valuation allowance and $0.8 million of liabilities to be disposed of in the consolidated balance sheets as of December 31, 2023. As a result of the sales, we recorded a gain of $0.1 million included in Income (loss) from discontinued operations before income tax expense on the consolidated income statements for the year ended December 31, 2024.

The principal components of the held for sale assets and liabilities to be disposed of as of December 31, 2025 and 2024 were as follows:

December 31, 2025 December 31, 2024
ASSETS
Property and equipment, net
$ 4,497,545  $ 8,457,627 
Operating lease right-of-use asset 14,111,081  19,643,917 
Intangible assets, net 4,288,265  6,906,807 
Goodwill 3,482,718  8,459,238 
Valuation allowance (6,327,644) (5,071,603)
Total assets held for sale $ 20,051,965  $ 38,395,986 
LIABILITIES
Operating lease liability $ 11,065,542  $ 20,526,714 
Deferred revenue from company-owned or managed clinics 5,302,776  8,102,389 
Total liabilities to be disposed of $ 16,368,318  $ 28,629,103 
The pre-tax income of the clinics designated as held for sale as of December 31, 2025 was $4.6 million and $4.7 million for the years ended December 31, 2025 and 2024, respectively, the results of which exclude the allocation of corporate overhead.