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Item 7. Management’s Discussion and Analysis

2026-03-31 compared with 2025-03-14 · 128 added, 96 removed, 326 unchanged (41% of the section changed)

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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.

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.

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Growth Initiatives and Strategic Priorities

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

• 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;

• 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;

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

• 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;

• expanding consumer financing offerings;

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Our Ability to Successfully Operate in New Markets

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.

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.

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

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• Same-center information:

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

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

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

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Cases 11,852 14,036 14,932

Case growth (6.0) % 14.3 % N/A

Case growth (15.6) % (6.0) % 14.3 %

Revenue per case $ 12,809 $ 12,849 $ 13,121

Revenue per case growth (2.1) % 1.5 % N/A

Revenue per case growth (0.3) % (2.1) % 1.5 %

Number of facilities 31 32 27

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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, 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.

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.

Twelve Months Ended

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Number of total procedure rooms 65 65

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

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

For the years 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 have been owned and operated for at least twelve months as of December 31, 2024.

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We report our financial results in accordance with accounting principles generally accepted in the United States of America ("GAAP"), however, management believes the evaluation of our ongoing operating results may be enhanced by a presentation of Adjusted EBITDA, Adjusted EBITDA Margin, Adjusted Net Income and Adjusted Net Income per Share, which are non-GAAP financial measures.

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.

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.

We define Adjusted Net Income as net loss excluding restructuring and related severance costs, Loss/(gain) on disposal of long-lived assets, settlement costs for non-recurring litigation, equity-based compensation and the tax effect of these adjustments.

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2,331 3,762 18,224

Loss on debt modification — — 932

IPO related costs — — 731

Restructuring and related severance costs 4,818 6,026 5,488

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Loss/(gain) on disposal of long-lived assets (2)

4,575 16 (212)

Cost related to closing location, net (3)

Litigation settlements (4)

Interest expense, net 6,078 6,247 6,485

Income tax expense 188 7,477 3,383

Income tax (benefit)/expense (5,971) 188 7,477

Adjusted EBITDA $ 15,097 $ 20,959 $ 43,475

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See Note 6 to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion.

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

(2) During the fiscal year ended 2025, the Company recorded a $4.5 million loss related to the impairment of a portion of the Salesforce implementation project and $0.1 million related to the corporate office PPE write-off.

See Note 1 to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion.

(3) During the fiscal year ended 2025, the Company recorded $2.2 million in costs related to the closure of the London facility.

Comprising of that amount is a $2.4 million loss on London PPE, $3.3 million rent expense from accelerated amortization, offset by a $3.2 million gain on the deconsolidation as of December 31, 2025 related to net liabilities and $0.3 million income from reclassification of CTA.

(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.

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.

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

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:

Twelve Months Ended

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2,331 3,762 18,224

Loss on debt modification — — 932

IPO related costs — — 731

Restructuring and related severance costs 4,818 6,026 5,488

Loss/(gain) on disposal of long-lived assets (2)

4,575 16 (212)

Cost related to closing location, net (3)

Litigation settlements (4)

Tax effect of adjustments (6)

(5,621) (1,271) (2,732)

Adjusted net (loss)/income $ (3,412) $ 1,365 $ 16,528

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See Note 6 to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion.

See Note 1 to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion.

(3) During the fiscal year ended 2025, the Company recorded $2.2 million in costs related to the closure of the London facility.

(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.

(5) Diluted Adjusted Net Income Per Share is computed by dividing adjusted net income by the weighted-average number of shares of common stock outstanding adjusted for the dilutive effect of all potential shares of common stock.

(6) Within the tax effect of adjustments, any disallowed stock compensation related to 162(m) is used to offset equity-based compensation recognized under GAAP.

For the year ended December 31, 2025, there is no disallowed stock compensation related to 162(m) because the prior year awards subject to these limitations have either vested or been forfeited, and no active stock awards are currently subject to these limitations.

Our Operating Structure

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We assist patients, as needed, by providing third-party financing options to pay for procedures.

We have arrangements with various financing companies to

facilitate this option.

We have arrangements with various financing companies to facilitate this option.

There is a financing transaction fee based on a set percentage of the amount financed.

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We define our customer acquisition costs as the total selling expenses per case.

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.

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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.

Interest Expense

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Results of Operations

Twelve Months Ended December 31, 2025 Compared to Twelve Months Ended December 31, 2024

The following table and notes summarize certain results from the statements of operations for each of the periods indicated and the changes between periods.

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Depreciation and amortization 12,781 8.4 % 11,888 6.6 % 10,253 5.2 %

Loss/(gain) on disposal of long-lived assets 16 — % (212) (0.1) % 147 0.1 %

Loss on impairment of long-lived assets 4,575 3.0 % 16 — % (212) (0.1) %

Cost related to closing location, net 2,152 — % — — % — — %

Total operating expenses 163,378 107.6 % 181,933 100.9 % 186,195 95.0 %

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Income tax (benefit)/expense (5,971) (3.9) % 188 0.1 % 7,477 3.8 %

Net loss $ (8,251) (4.6) % $ (4,479) (2.3) % $ (14,679) (8.7) %

Twelve Months Ended December 31, 2024 Compared to Twelve Months Ended December 31, 2023

Overview— Our financial results for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023 reflect the addition of five de novo centers which increased procedure rooms by ten.

Net (loss)/income $ (11,667) (7.7) % $ (8,018) (4.4) % $ (4,240) (2.2) %

Revenue— Our revenue decreased $28.5 million, or 15.8%, compared to the same period in 2024.

The decrease is primarily attributed to weaker than expected performance across the broader aesthetics and high-end retail industries.

The decrease is primarily attributed to lower case volume offset by increased rate.

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 2023 period and partially offset by increases in nursing and rent costs related to our new facility openings during the 2024 period.

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.

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Selling, General and Administrative Expenses— Selling, general and administrative expenses decreased $16.7 million, or 16.9%, for the twelve months ended December 31, 2025 compared to the same period in 2024.

This decrease is related to a decrease in our equity-based compensation expense (see Note 6 to the consolidated financial statements included in this Annual Report on Form 10-K for further discussion) 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.

We expect our marketing and corporate support costs to continue to increase on an absolute dollar basis as we open de novo centers.

This decrease relates to a $5.6 million decrease in advertising costs, $1.1 million decrease in office supplies and expenses, $1.4 million reduction in payroll, $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.

Selling, general and administrative expenses as a percent of revenue were 54.1% and 54.8% for the twelve months ended December 31, 2025 and 2024, respectively.

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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.

We intend to continue investing in our sales and marketing capabilities as we add new centers.

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.

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).

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.

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.

This increase is the result of having five additional de novo centers during the twelve months ended December 31, 2024 as compared to the 2023 period.

Interest Expense, net— Interest expense decreased to $6.2 million from $6.5 million for the twelve months ended December 31, 2024 and 2023, respectively.

The decrease is due to the lower principal balance resulting from the Company's voluntary $10 million prepayment made in 2023.

Income Tax Expense— Our effective tax rate is (2.3)% and 249.4% for the twelve months ended December 31, 2024 and 2023, respectively.

Loss on impairment of long-lived assets— The $4.6 million loss on impairment of long-lived assets during the twelve months ended December 31, 2025 primarily relates to the impairment of a portion of the Company's Salesforce implementation project.

Cost related to closing location, net - During the fiscal year ended 2025, the Company recorded $2.1 million in costs related to the closure of the London facility.

Interest Expense, net—Interest expense was $6.1 million and $6.2 million for the twelve months ended December 31, 2025 and 2024, respectively.

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.

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Overview — Our financial results for the twelve months ended December 31, 2024 compared to the twelve months ended December 31, 2023 reflect the addition of five de novo centers which increased procedure rooms by 10.

Revenue —Our revenue increased $27.1 million, or 16.1%, compared to the same period in 2022.

The increase is the result of adding five de novo centers which increased our footprint from 22 centers to 27 centers as of December 31, 2023.

Cost of Service —Our cost of service increased $11.2 million, or 17.9%, compared to the twelve months ended December 31, 2022.

This increase is primarily attributable to opening five de novo centers since the 2022 period.

Cost of service was 37.8% and 37.2% as a percentage of revenue for the twelve months ended December 31, 2023 and 2022, respectively.

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.

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.

Cost of Service —Our cost of service decreased $2.6 million, or 3.6% compared to the twelve months ended December 31, 2023.

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.

Selling expenses consist of advertising costs for social, digital and traditional marketing and sales and marketing personnel.

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Our customer acquisition costs were approximately $3,130 and $2,465 per customer in the twelve months ended December 31, 2024 and 2023, 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.

We intend to continue investing in our sales and marketing capabilities as we add new centers.

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.

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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.

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).

Depreciation and Amortization —Depreciation and amortization increased to approximately $11.9 million for the twelve months ended December 31, 2024 compared to $10.3 million for the same period in 2023.

This increase is the result of having five additional de novo centers during the twelve months ended December 31, 2024 as compared to the 2023 period.

(Gain)/loss on disposal of long-lived assets —For the twelve months ended December 31, 2023, we recognized a $212,000 gain related to the disposal of previous property, plant, and equipment as a result of relocation to expand certain centers.

Interest Expense, net —Interest expense decreased to $6.2 million from $6.5 million for the twelve months ended December 31, 2024 and 2023, respectively.

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Liquidity and Capital Resources

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.

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, subject to minimum liquidity draw requirements.

In March 2025, we filed a Registration Statement on Form S-3 (File No.

333-285825) which covers the offering, issuance and sale, for an aggregate initial offering price not to exceed $100.0 million, of shares of common stock and preferred stock;

debt securities;

warrants to purchase common stock, preferred stock and/or debt securities;

We also commenced an at-the-market offering program, with Leerink Partners LLC (“Leerink”) acting as sales agent.

This at-the-market offering program provides us with additional access to capital, as needed, subject to market conditions.

During the year-ended December 31, 2025, the Company sold approximately 2.1 million shares of common stock through its at-the-market offering program for total net proceeds of approximately $5.6 million.

Subsequent to December 31, 2025, the Company sold an additional approximate 5.9 million shares of common stock through its at-the-market offering program for total net proceeds of approximately $14.8 million.

In Q1 of 2026, the Company voluntarily pre-paid $10.0 million of the principal balance of the term loans under the Credit Agreement using cash on hand.

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.

Our term loan and revolver mature on May 11, 2027.

These obligations will need to be restructured prior to their maturity or paid out of then available cash.

There can be no assurance we will be able to restructure the debt with the current lender or obtain new financing.

We believe that the cash expected to be generated from operations will be sufficient for our working capital requirements, liquidity obligations, and payments due under our existing credit facilities for at least the next 12 months.

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.

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.

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.

The following table summarizes the net cash provided by (used for) operating activities, investing activities and financing activities for the periods indicated:

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Financing activities (478) 630 (13,391)

Net (decrease)/increase in cash and cash equivalents (2,027) 646 (15,731)

Net decrease in cash and cash equivalents 214 (2,027) 646

Operating Activities

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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 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.

For the twelve months ended December 31, 2023, our operating cash flow decreased by $0.5 million compared to the same period in 2022.

The decrease is related to having more restructuring and related severance costs and the timing of working capital payments primarily related to lease deposits on upcoming de novo projects.

At December 31, 2023, we had working capital of $(4.4) million compared to $(5.6) million at December 31, 2022.

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.

Investing Activities

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.

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.

Financing Activities

Net cash used in financing activities during the twelve months ended December 31, 2025 was $0.5 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.

Net cash used in financing activities for the twelve months ended December 31, 2023 was $13.4 million.

For the twelve months ended December 31, 2023, we paid cash dividends to stockholders of $0.4 million and made principal payments on our debt of $12.1 million.

During the twelve months ended December 31, 2025, we received net proceeds of $13.8 million from an underwritten public offering, made principal payments on our debt of $13.8 million, payments for debt modification of $0.4 million, made payments of taxes withheld through vested equity-based compensation of $0.1 million, and received net proceeds of $5.3 million from the at the market offering.

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, 2022, we made distributions to our former member of $1.2 million, paid cash dividends to stockholders of $23.2 million, and made payments of taxes withheld through vested equity-based compensation of $2.0 million.

Finally, we made principal payments on our debt of $84.3 million offset by borrowings of new debt of $83.5 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.

At-the-Market Common Offering Program

On March 14, 2025, we entered into a sales agreement (the “ATM Agreement”) with Leerink, as sales agent, in connection with an at-the-market offering program under which we may offer and sell, from time to time in our sole discretion, shares of our common stock having an aggregate offering price of up to $50.0 million at prices and on terms to be determined by market conditions at the time of offering.

The $50.0 million of common stock that may be offered, issued and sold under the ATM Agreement is included in the $100.0 million of securities that may be offered, issued and sold by us under our Registration Statement on Form S-3 (File No.

We and Leerink each have the right to suspend or terminate the ATM Agreement in each party’s sole discretion at any time.

For the year ended, December 31, 2025, we sold the following quantities of our common stock pursuant to the ATM Agreement for total net proceeds of approximately $5.6 million:

Q1 Total 5,618

Q2 Total 118,582

Q4 Total 2,105,791

Total Shares 2,229,991

2025 Underwritten Follow-On Equity Offering

On June 9, 2025, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Leerink Partners LLC (“Leerink Partners”), to issue and sell 3,160,000 shares (the “Firm Shares”) of the Company’s common stock to Leerink Partners, in an underwritten registered public offering (the “Offering”), at a price of $3.80 per share.

Pursuant to the Underwriting Agreement, the Company also granted Leerink Partners a 30-day option to purchase up to an additional 474,000 shares of the Company's common stock (the “Additional Shares,” and together with the Firm Shares, the “Shares”), at the same price per share as the Firm Shares.

Leerink Partners exercised in full its option to purchase the Additional Shares on June 10, 2025.

Vesey Street Capital Partners, L.L.C., which is affiliated with two directors and is the

largest stockholder of the Company, purchased an aggregate of 1,000,000 Shares in the Offering on the same terms and conditions as purchases by the public in the Offering.

The Offering closed on June 11, 2025, and the Company received net proceeds of approximately $13.8 million from the sale of 3,634,000 Shares, which included the 474,000 Additional Shares, after deducting estimated offering expenses.

The Company used the net proceeds from the Offering for the prepayment of a portion of the Company’s outstanding indebtedness under its existing credit agreement and the remainder of the net proceeds from the Offering for general corporate purposes, including working capital and other business opportunities.

The Offering was pursuant to a prospectus supplement dated June 9, 2025, filed with the SEC in connection with the Company’s shelf registration statement on Form S-3 (File 333-285825), filed with the SEC on March 14, 2025 and declared effective on March 24, 2025 and the related prospectus dated March 14, 2025.

Material Cash Requirements

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Total $ 97,880 $ 17,517 $ 69,398 $ 7,578 $ 3,387

(1) Years 1-3 includes both the principal of the Term Loan as well as the revolving credit facility.

(1) This amount does not reflect any prepayments.

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Long-Term Debt

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.

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.

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.

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.

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.

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.

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%.

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;

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.

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

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);

(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.

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);

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;

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.

(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 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.

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.

As of December 31, 2025, the interest rate under the Credit Agreement was 8.47%.

JOBS Act Accounting Election

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We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

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.

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.

Critical Accounting Policies and Estimates

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States that have corporate practice of medicine laws require only physicians to practice medicine, exercise control over medical decisions or engage in certain arrangements with other physicians, such as fee-splitting.

Therefore, we mainly operate by maintaining MSAs with our affiliated Professional

Associations, which are owned, directly or indirectly, and operated by a licensed surgeon, and which contract with individual surgeons to provide medical services.

Therefore, we mainly operate by maintaining MSAs with our affiliated Professional Associations, which are owned, directly or indirectly, and operated by a licensed surgeon, and which contract with individual surgeons to provide medical services.

Under the MSAs, we provide and perform non-medical Management Services for which we are paid a management fee by each Professional Association.

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The surgeons contracted by the Professional Associations are exclusively in control of, and responsible for, all aspects of the practice of medicine.

Each surgeon owner of a Professional Association (each a “Surgeon Owner,” and collectively, the “Surgeon Owners”) is also party to a continuity agreement (each, a “Continuity Agreement,” and collectively, the “Continuity Agreements”), which (i) prohibits the applicable surgeons from freely transferring or selling their interests in the Professional Associations, (ii) provides for the ability to add a second surgeon equity holder to help ensure continuity of the Professional Association, and (iii) provides for the automatic transfer of ownership upon the occurrence of certain events, save that, due to limitations under New York law, there is no Continuity Agreement in place with respect to the New York Professional Association.

events, save that, due to limitations under New York law, there is no Continuity Agreement in place with respect to the New York Professional Association.

See “Business—Surgeon Practice Structure—Continuity Agreements.”

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We recognize equity-based compensation expense for employees and non-employees based on the grant-date fair value of awards over the applicable service period.

See “Note 6 - Stockholders' Equity and Equity-based Compensation” for further

discussion of the awards outstanding.

See “Note 6 - Stockholders' Equity and Equity-based Compensation” for further discussion of the awards outstanding.

The grant date fair value of awards that contain market-based conditions are estimated using a Monte Carlo simulation model.

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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 7. Management’s Discussion and Analysis