Segment Reporting

3 Months Ended

Mar. 31, 2020

An operating segment is defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”) to evaluate performance and make operating decisions. The Company has identified its CODM as the Chief Executive Officer.

The Company has two operating business segments and one non-operating business segment. The Corporate Clinics segment is composed of the operating activities of the company-owned or managed clinics. As of March 31, 2020, the Company operated or managed 61 clinics under this segment. The Franchise Operations segment is composed of the operating activities of the franchise business unit. As of March 31, 2020, the franchise system consisted of 469 clinics in operation. Corporate is a non-operating segment that develops and implements strategic initiatives and supports the Company’s two operating business segments by centralizing key administrative functions such as finance and treasury, information technology, insurance and risk management, legal and human resources. Corporate also provides the necessary administrative functions to support the Company as a publicly-traded company. A portion of the expenses incurred by Corporate are allocated to the operating segments.

The tables below present financial information for the Company’s two operating business segments.


	Three Months Ended
	March 31,
Revenues:	2020		2019
Corporate clinics	$	7,294,295	$	5,639,076
Franchise operations	6,350,191		5,040,300
Total revenues	$	13,644,486	$	10,679,376

Depreciation and amortization:
Corporate clinics	577,543		312,654
Franchise operations	342		169
Corporate administration	76,364		52,855
Total depreciation and amortization	$	654,249	$	365,678

Segment operating income:
Corporate clinics	$	783,706	$	839,981
Franchise operations	2,844,298		2,389,349
Total segment operating income	$	3,628,004	$	3,229,330

Reconciliation of total segment operating income to consolidated earnings before income taxes:

Total segment operating income	$	3,628,004	$	3,229,330
Unallocated corporate	(2,874,654)		(2,285,658)
Consolidated income from operations	753,350		943,672
Bargain purchase gain	—		19,298
Other expense, net	4,337		11,645
Income before income tax expense (benefit)	$	749,013	$	951,325


Segment assets:	March 31, 2020		December 31, 2019
Corporate clinics	$	25,084,849	$	25,389,147
Franchise operations	7,880,855		7,466,629
Total segment assets	32,965,704		32,855,776

Unallocated cash and cash equivalents and restricted cash	10,969,469		8,641,877
Unallocated property and equipment	1,236,556		996,385
Other unallocated assets	1,242,392		1,211,629
Total assets	$	46,414,121	$	43,705,667

“Unallocated cash and cash equivalents and restricted cash” relates primarily to corporate cash and cash equivalents and restricted cash (see Note 1), “unallocated property and equipment” relates primarily to corporate fixed assets, and “other unallocated assets” relates primarily to deposits, prepaid and other assets. Certain unallocated property and equipment balances were reclassified

to Corporate clinics and Franchise operations segments as of December 31, 2019 to conform to the current year presentation.