000161263012-312020Q2falseP3YP3YP6MP1MP1MP1MP1M00016126302020-01-012020-06-30xbrli:shares00016126302020-08-03iso4217:USD00016126302020-06-3000016126302019-12-31iso4217:USDxbrli:shares0001612630jynt:RevenuesAndManagementFeesFromCompanyClinicsMember2020-04-012020-06-300001612630jynt:RevenuesAndManagementFeesFromCompanyClinicsMember2019-04-012019-06-300001612630jynt:RevenuesAndManagementFeesFromCompanyClinicsMember2020-01-012020-06-300001612630jynt:RevenuesAndManagementFeesFromCompanyClinicsMember2019-01-012019-06-300001612630us-gaap:RoyaltyMember2020-04-012020-06-300001612630us-gaap:RoyaltyMember2019-04-012019-06-300001612630us-gaap:RoyaltyMember2020-01-012020-06-300001612630us-gaap:RoyaltyMember2019-01-012019-06-300001612630us-gaap:FranchiseMember2020-04-012020-06-300001612630us-gaap:FranchiseMember2019-04-012019-06-300001612630us-gaap:FranchiseMember2020-01-012020-06-300001612630us-gaap:FranchiseMember2019-01-012019-06-300001612630us-gaap:AdvertisingMember2020-04-012020-06-300001612630us-gaap:AdvertisingMember2019-04-012019-06-300001612630us-gaap:AdvertisingMember2020-01-012020-06-300001612630us-gaap:AdvertisingMember2019-01-012019-06-300001612630us-gaap:TechnologyServiceMember2020-04-012020-06-300001612630us-gaap:TechnologyServiceMember2019-04-012019-06-300001612630us-gaap:TechnologyServiceMember2020-01-012020-06-300001612630us-gaap:TechnologyServiceMember2019-01-012019-06-300001612630jynt:RegionalDeveloperFeesMember2020-04-012020-06-300001612630jynt:RegionalDeveloperFeesMember2019-04-012019-06-300001612630jynt:RegionalDeveloperFeesMember2020-01-012020-06-300001612630jynt:RegionalDeveloperFeesMember2019-01-012019-06-300001612630us-gaap:ProductAndServiceOtherMember2020-04-012020-06-300001612630us-gaap:ProductAndServiceOtherMember2019-04-012019-06-300001612630us-gaap:ProductAndServiceOtherMember2020-01-012020-06-300001612630us-gaap:ProductAndServiceOtherMember2019-01-012019-06-3000016126302020-04-012020-06-3000016126302019-04-012019-06-3000016126302019-01-012019-06-300001612630us-gaap:CommonStockMember2019-12-310001612630us-gaap:AdditionalPaidInCapitalMember2019-12-310001612630us-gaap:TreasuryStockMember2019-12-310001612630us-gaap:RetainedEarningsMember2019-12-310001612630us-gaap:ParentMember2019-12-310001612630us-gaap:NoncontrollingInterestMember2019-12-310001612630us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001612630us-gaap:ParentMember2020-01-012020-03-3100016126302020-01-012020-03-310001612630us-gaap:CommonStockMember2020-01-012020-03-310001612630us-gaap:TreasuryStockMember2020-01-012020-03-310001612630us-gaap:RetainedEarningsMember2020-01-012020-03-310001612630us-gaap:CommonStockMember2020-03-310001612630us-gaap:AdditionalPaidInCapitalMember2020-03-310001612630us-gaap:TreasuryStockMember2020-03-310001612630us-gaap:RetainedEarningsMember2020-03-310001612630us-gaap:ParentMember2020-03-310001612630us-gaap:NoncontrollingInterestMember2020-03-3100016126302020-03-310001612630us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001612630us-gaap:ParentMember2020-04-012020-06-300001612630us-gaap:CommonStockMember2020-04-012020-06-300001612630us-gaap:RetainedEarningsMember2020-04-012020-06-300001612630us-gaap:CommonStockMember2020-06-300001612630us-gaap:AdditionalPaidInCapitalMember2020-06-300001612630us-gaap:TreasuryStockMember2020-06-300001612630us-gaap:RetainedEarningsMember2020-06-300001612630us-gaap:ParentMember2020-06-300001612630us-gaap:NoncontrollingInterestMember2020-06-300001612630us-gaap:CommonStockMember2018-12-310001612630us-gaap:AdditionalPaidInCapitalMember2018-12-310001612630us-gaap:TreasuryStockMember2018-12-310001612630us-gaap:RetainedEarningsMember2018-12-310001612630us-gaap:ParentMember2018-12-310001612630us-gaap:NoncontrollingInterestMember2018-12-3100016126302018-12-310001612630us-gaap:AdditionalPaidInCapitalMember2019-01-012019-03-310001612630us-gaap:ParentMember2019-01-012019-03-3100016126302019-01-012019-03-310001612630us-gaap:CommonStockMember2019-01-012019-03-310001612630us-gaap:RetainedEarningsMember2019-01-012019-03-310001612630us-gaap:CommonStockMember2019-03-310001612630us-gaap:AdditionalPaidInCapitalMember2019-03-310001612630us-gaap:TreasuryStockMember2019-03-310001612630us-gaap:RetainedEarningsMember2019-03-310001612630us-gaap:ParentMember2019-03-310001612630us-gaap:NoncontrollingInterestMember2019-03-3100016126302019-03-310001612630us-gaap:AdditionalPaidInCapitalMember2019-04-012019-06-300001612630us-gaap:ParentMember2019-04-012019-06-300001612630us-gaap:CommonStockMember2019-04-012019-06-300001612630us-gaap:RetainedEarningsMember2019-04-012019-06-300001612630us-gaap:CommonStockMember2019-06-300001612630us-gaap:AdditionalPaidInCapitalMember2019-06-300001612630us-gaap:TreasuryStockMember2019-06-300001612630us-gaap:RetainedEarningsMember2019-06-300001612630us-gaap:ParentMember2019-06-300001612630us-gaap:NoncontrollingInterestMember2019-06-3000016126302019-06-300001612630jynt:PurchaseOfPropertyPlantAndEquipmentIncludedInAccountsPayableMember2020-01-012020-06-300001612630jynt:PurchaseOfPropertyPlantAndEquipmentIncludedInAccruedExpensesMember2020-01-012020-06-300001612630jynt:PurchaseOfPropertyPlantAndEquipmentIncludedInAccountsPayableMember2019-01-012019-06-300001612630jynt:PurchaseOfPropertyPlantAndEquipmentIncludedInAccruedExpensesMember2019-01-012019-06-300001612630jynt:PurchaseOfPropertyPlantAndEquipmentIncludedInAccountsPayableMember2019-01-012019-12-310001612630jynt:PurchaseOfPropertyPlantAndEquipmentIncludedInAccruedExpensesMember2019-01-012019-12-310001612630jynt:AssetsAndFranchiseAgreementMember2019-06-300001612630jynt:LicenseFeeCollectionUponRegionalDeveloperAgreementMember2019-06-30jynt:clinic0001612630us-gaap:FranchisedUnitsMember2020-03-310001612630us-gaap:FranchisedUnitsMember2019-03-310001612630us-gaap:FranchisedUnitsMember2019-12-310001612630us-gaap:FranchisedUnitsMember2018-12-310001612630us-gaap:FranchisedUnitsMember2020-04-012020-06-300001612630us-gaap:FranchisedUnitsMember2019-04-012019-06-300001612630us-gaap:FranchisedUnitsMember2020-01-012020-06-300001612630us-gaap:FranchisedUnitsMember2019-01-012019-06-300001612630us-gaap:FranchisedUnitsMember2020-06-300001612630us-gaap:FranchisedUnitsMember2019-06-300001612630us-gaap:EntityOperatedUnitsMember2020-03-310001612630us-gaap:EntityOperatedUnitsMember2019-03-310001612630us-gaap:EntityOperatedUnitsMember2019-12-310001612630us-gaap:EntityOperatedUnitsMember2018-12-310001612630us-gaap:EntityOperatedUnitsMember2020-04-012020-06-300001612630us-gaap:EntityOperatedUnitsMember2019-04-012019-06-300001612630us-gaap:EntityOperatedUnitsMember2020-01-012020-06-300001612630us-gaap:EntityOperatedUnitsMember2019-01-012019-06-300001612630us-gaap:EntityOperatedUnitsMember2020-06-300001612630us-gaap:EntityOperatedUnitsMember2019-06-300001612630srt:MinimumMember2020-01-012020-06-300001612630srt:MaximumMember2020-01-012020-06-300001612630us-gaap:ComputerSoftwareIntangibleAssetMember2020-01-012020-06-300001612630srt:MinimumMemberjynt:DevelopmentRightsMember2020-01-012020-06-300001612630srt:MaximumMemberjynt:DevelopmentRightsMember2020-01-012020-06-300001612630jynt:DevelopmentRightsMember2020-01-012020-06-300001612630us-gaap:CustomerRelationshipsMember2020-01-012020-06-30xbrli:purejynt:agreement0001612630jynt:RegionalDevelopmentAgreementMember2020-06-300001612630us-gaap:RestrictedStockMember2020-04-012020-06-300001612630us-gaap:RestrictedStockMember2019-04-012019-06-300001612630us-gaap:RestrictedStockMember2020-01-012020-06-300001612630us-gaap:RestrictedStockMember2019-01-012019-06-300001612630us-gaap:EmployeeStockOptionMember2020-04-012020-06-300001612630us-gaap:EmployeeStockOptionMember2019-04-012019-06-300001612630us-gaap:EmployeeStockOptionMember2020-01-012020-06-300001612630us-gaap:EmployeeStockOptionMember2019-01-012019-06-30jynt:state00016126302020-07-012020-06-3000016126302021-01-012020-06-3000016126302022-01-012020-06-3000016126302023-01-012020-06-3000016126302024-01-012020-06-3000016126302025-01-012020-06-3000016126302017-04-2900016126302017-04-292017-04-2900016126302017-08-3100016126302017-08-312017-08-3100016126302017-10-1000016126302017-10-102017-10-1000016126302019-04-2600016126302019-04-262019-04-260001612630us-gaap:OfficeEquipmentMember2020-06-300001612630us-gaap:OfficeEquipmentMember2019-12-310001612630us-gaap:LeaseholdImprovementsMember2020-06-300001612630us-gaap:LeaseholdImprovementsMember2019-12-310001612630us-gaap:SoftwareDevelopmentMember2020-06-300001612630us-gaap:SoftwareDevelopmentMember2019-12-310001612630jynt:LeasedAssetsMember2020-06-300001612630jynt:LeasedAssetsMember2019-12-310001612630jynt:PropertyPlantAndEquipmentExcludingConstructionInProgressMember2020-06-300001612630jynt:PropertyPlantAndEquipmentExcludingConstructionInProgressMember2019-12-310001612630us-gaap:FranchiseRightsMember2020-06-300001612630us-gaap:CustomerRelationshipsMember2020-06-300001612630jynt:DevelopmentRightsMember2020-06-300001612630us-gaap:FranchiseRightsMember2019-12-310001612630us-gaap:CustomerRelationshipsMember2019-12-310001612630jynt:DevelopmentRightsMember2019-12-310001612630us-gaap:SecuredDebtMemberjynt:SeniorSecuredCreditFacilitiesMemberus-gaap:LineOfCreditMember2020-02-280001612630jynt:SeniorSecuredCreditFacilitiesMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2020-02-280001612630jynt:SeniorSecuredCreditFacilitiesMemberjynt:DevelopmentLineOfCreditMemberus-gaap:LineOfCreditMember2020-02-280001612630jynt:SeniorSecuredCreditFacilitiesMemberus-gaap:LetterOfCreditMemberus-gaap:LineOfCreditMember2020-02-28jynt:payment0001612630us-gaap:SecuredDebtMemberjynt:SeniorSecuredCreditFacilitiesMemberus-gaap:EurodollarMemberus-gaap:LineOfCreditMember2020-02-282020-02-280001612630us-gaap:SecuredDebtMemberjynt:SeniorSecuredCreditFacilitiesMemberjynt:AlternativeBaseRateMemberus-gaap:LineOfCreditMember2020-02-282020-02-280001612630us-gaap:SecuredDebtMemberjynt:SeniorSecuredCreditFacilitiesMemberus-gaap:LineOfCreditMemberus-gaap:PrimeRateMember2020-02-282020-02-280001612630jynt:SeniorSecuredCreditFacilitiesMemberjynt:AlternativeEurocurrencyBaseRateMemberus-gaap:LineOfCreditMember2020-02-282020-02-280001612630jynt:SeniorSecuredCreditFacilitiesMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LineOfCreditMember2020-03-182020-03-180001612630exch:JPCB2020-04-100001612630exch:JPCB2020-04-090001612630us-gaap:EmployeeStockOptionMember2020-01-012020-06-300001612630us-gaap:EmployeeStockOptionMember2019-01-012019-06-300001612630us-gaap:EmployeeStockOptionMember2019-12-310001612630us-gaap:EmployeeStockOptionMember2019-01-012019-12-310001612630us-gaap:EmployeeStockOptionMember2020-06-300001612630us-gaap:EmployeeStockOptionMember2020-04-012020-06-300001612630us-gaap:EmployeeStockOptionMember2019-04-012019-06-30jynt:installment0001612630us-gaap:RestrictedStockMember2020-06-300001612630us-gaap:RestrictedStockMember2020-01-012020-06-300001612630us-gaap:RestrictedStockMember2019-12-310001612630us-gaap:RestrictedStockMember2020-04-012020-06-300001612630us-gaap:RestrictedStockMember2019-04-012019-06-300001612630us-gaap:RestrictedStockMember2019-01-012019-06-300001612630jynt:PropertyPlantAndEquipmentFinanceLeasesMember2020-06-300001612630jynt:PropertyPlantAndEquipmentFinanceLeasesMember2019-12-31jynt:segment0001612630jynt:CorporateClinicsMember2020-04-012020-06-300001612630jynt:CorporateClinicsMember2019-04-012019-06-300001612630jynt:CorporateClinicsMember2020-01-012020-06-300001612630jynt:CorporateClinicsMember2019-01-012019-06-300001612630jynt:FranchiseOperationsMember2020-04-012020-06-300001612630jynt:FranchiseOperationsMember2019-04-012019-06-300001612630jynt:FranchiseOperationsMember2020-01-012020-06-300001612630jynt:FranchiseOperationsMember2019-01-012019-06-300001612630us-gaap:CorporateMember2020-04-012020-06-300001612630us-gaap:CorporateMember2019-04-012019-06-300001612630us-gaap:CorporateMember2020-01-012020-06-300001612630us-gaap:CorporateMember2019-01-012019-06-300001612630us-gaap:OperatingSegmentsMember2020-04-012020-06-300001612630us-gaap:OperatingSegmentsMember2019-04-012019-06-300001612630us-gaap:OperatingSegmentsMember2020-01-012020-06-300001612630us-gaap:OperatingSegmentsMember2019-01-012019-06-300001612630us-gaap:CorporateNonSegmentMember2020-04-012020-06-300001612630us-gaap:CorporateNonSegmentMember2019-04-012019-06-300001612630us-gaap:CorporateNonSegmentMember2020-01-012020-06-300001612630us-gaap:CorporateNonSegmentMember2019-01-012019-06-300001612630jynt:CorporateClinicsMemberus-gaap:OperatingSegmentsMember2020-06-300001612630jynt:CorporateClinicsMemberus-gaap:OperatingSegmentsMember2019-12-310001612630jynt:FranchiseOperationsMemberus-gaap:OperatingSegmentsMember2020-06-300001612630jynt:FranchiseOperationsMemberus-gaap:OperatingSegmentsMember2019-12-310001612630us-gaap:OperatingSegmentsMember2020-06-300001612630us-gaap:OperatingSegmentsMember2019-12-310001612630us-gaap:MaterialReconcilingItemsMember2020-06-300001612630us-gaap:MaterialReconcilingItemsMember2019-12-31

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 June 30, 2020 
OR
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: 001-36724
The Joint Corp.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or
organization)
90-0544160
(IRS Employer Identification No.)

16767 N. Perimeter Drive, Suite 110, Scottsdale
Arizona
(Address of principal executive offices)
85260
(Zip Code)
(480) 245-5960
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)

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, $0.001 Par Value Per Share
JYNT
The NASDAQ Capital Market LLC

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  x    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  x    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 Act).    Yes     No 
As of August 3, 2020, the registrant had 14,010,816 shares of Common Stock ($0.001 par value) outstanding.


Table of Contents
THE JOINT CORP.
FORM 10-Q
TABLE OF CONTENTS
PAGE
NO.
Part I, Item 3 – Not applicable
Part II, Items 3, 4, and 5 - Not applicable



Table of Contents
PART I: FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS

THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS
June 30,
2020
December 31,
2019
ASSETS
(unaudited)
Current assets:
Cash and cash equivalents
$14,573,266  $8,455,989  
Restricted cash
235,039  185,888  
Accounts receivable, net
2,009,480  2,645,085  
Notes receivable, net48,283  128,724  
Deferred franchise and regional development costs - current portion791,818  765,508  
Prepaid expenses and other current assets
1,158,267  1,122,478  
Total current assets
18,816,153  13,303,672  
Property and equipment, net
8,003,837  6,581,588  
Operating lease right-of-use asset
12,181,547  12,486,672  
Deferred franchise and regional development costs, net of current portion3,549,512  3,627,225  
Intangible assets, net
2,512,057  3,219,791  
Goodwill
4,150,461  4,150,461  
Deposits and other assets
394,500  336,258  
Total assets
$49,608,067  $43,705,667  
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable
$1,456,234  $1,525,838  
Accrued expenses
629,067  216,814  
Co-op funds liability
235,039  185,889  
Payroll liabilities
2,059,602  2,844,107  
Operating lease liability - current portion
2,700,024  2,313,109  
Finance lease liability - current portion
68,273  24,253  
Deferred franchise and regional developer fee revenue - current portion
2,818,607  2,740,954  
Deferred revenue from company clinics
3,092,574  3,196,664  
Debt under the Paycheck Protection Program - current portion1,211,977    
Other current liabilities
565,643  518,686  
Total current liabilities
14,837,040  13,566,314  
Operating lease liability - net of current portion
11,484,267  11,901,040  
Finance lease liability - net of current portion
168,290  34,398  
Debt under the Credit Agreement and Paycheck Protection Program, net of current portion3,515,993    
Deferred franchise and regional developer fee revenue, net of current portion
11,986,489  12,366,322  
Deferred tax liability
87,107  89,863  
Other liabilities
27,230  27,230  
Total liabilities
42,106,416  37,985,167  
Commitments and contingencies
Stockholders' equity:
Series A preferred stock, $0.001 par value; 50,000 shares authorized, 0 issued and outstanding, as of June 30, 2020 and December 31, 2019
    
Common stock, $0.001 par value; 20,000,000 shares authorized, 14,042,854 shares issued and 14,026,841 shares outstanding as of June 30, 2020 and 13,898,694 shares issued and 13,882,932 outstanding as of December 31, 2019
14,043  13,899  
Additional paid-in capital
40,309,186  39,454,937  
Treasury stock 16,013 shares as of June 30, 2020 and 15,762 shares as of December 31, 2019, at cost
(114,815) (111,041) 
Accumulated deficit
(32,706,863) (33,637,395) 
Total The Joint Corp. stockholders' equity
7,501,551  5,720,400  
Non-controlling Interest
100  100  
Total equity
7,501,651  5,720,500  
Total liabilities and stockholders' equity
$49,608,067  $43,705,667  
1

Table of Contents

The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Table of Contents
THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

Three Months Ended
June 30,
Six Months Ended
June 30,
2020201920202019
Revenues:
Revenues from company-owned or managed clinics
$6,856,807  $5,777,288  $14,151,102  $11,416,365  
Royalty fees3,268,653  3,263,530  6,986,883  6,290,346  
Franchise fees523,964  447,266  1,036,716  864,339  
Advertising fund revenue930,795  927,800  1,988,413  1,819,367  
Software fees631,198  377,125  1,276,922  742,361  
Regional developer fees213,424  200,524  421,066  384,381  
Other revenues164,952  176,446  373,177  332,197  
Total revenues12,589,793  11,169,979  26,234,279  21,849,356  
Cost of revenues:
Franchise and regional development cost of revenues1,275,191  1,198,378  2,692,682  2,315,431  
IT cost of revenues92,450  100,771  161,115  189,659  
Total cost of revenues1,367,641  1,299,149  2,853,797  2,505,090  
Selling and marketing expenses1,783,666  1,769,368  3,838,954  3,275,356  
Depreciation and amortization693,400  404,466  1,347,649  770,143  
General and administrative expenses8,541,108  7,227,662  17,235,358  13,780,566  
Total selling, general and administrative expenses
11,018,174  9,401,496  22,421,961  17,826,065  
Net (gain) loss on disposition or impairment(54,606) (18,266) (53,413) 86,927  
Income from operations258,584  487,600  1,011,934  1,431,274  
Other (expense) income:
Bargain purchase gain      19,298  
Other expense, net(25,243) (15,126) (29,581) (26,771) 
Total other expense(25,243) (15,126) (29,581) (7,473) 
Income before income tax expense
233,341  472,474  982,353  1,423,801  
Income tax expense117,756  10,214  51,821  8,896  
Net income and comprehensive income $115,585  $462,260  $930,532  $1,414,905  
Less: income attributable to the non-controlling interest$  $  $  $  
Net income attributable to The Joint Corp. stockholders
$115,585  $462,260  $930,532  $1,414,905  
Earnings per share:
Basic earnings per share$0.01  $0.03  $0.07  $0.10  
Diluted earnings per share$0.01  $0.03  $0.06  $0.10  
Basic weighted average shares13,980,984  13,797,497  13,935,829  13,774,474  
Diluted weighted average shares14,491,639  14,477,007  14,487,083  14,390,319  

The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Table of Contents
THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Common StockAdditional
Paid In
Capital
Treasury StockAccumulated
Deficit
Total The Joint Corp.
stockholders'
equity
Non-controlling
interest
Total
SharesAmountSharesAmount
Balances, December 31, 201913,898,694  $13,899  $39,454,937  15,762  $(111,041) $(33,637,395) $5,720,400  $100  $5,720,500  
Stock-based compensation expense—  —  250,392  —  —  —  250,392  —  250,392  
Issuance of restricted stock15,578  16  (16) —  —  —  —  —    
Exercise of stock options35,500  35  140,864  —  —  —  140,899  —  140,899  
Purchases of treasury stock under employee stock plans—  —  —  251  (3,774) —  (3,774) —  (3,774) 
Net income—  —  —  —  —  814,947  814,947  —  814,947  
Balances, March 31, 2020 (unaudited)13,949,772  $13,950  $39,846,177  16,013  $(114,815) $(32,822,448) $6,922,864  $100  $6,922,964  
Stock-based compensation expense—  —  216,081  —  —  —  216,081  —  216,081  
Issuance of restricted stock30,882  31  (31) —  —  —  —  —    
Exercise of stock options62,200  62  246,959  —  —  —  247,021  —  247,021  
Net income—  —  —  —  —  115,585  115,585  —  115,585  
Balances, June 30, 2020 (unaudited)14,042,854  $14,043  $40,309,186  16,013  $(114,815) $(32,706,863) $7,501,551  $100  $7,501,651  

Common StockAdditional
Paid In
Capital
Treasury StockAccumulated
Deficit
Total The Joint Corp.
stockholders'
equity
Non-controlling
interest
SharesAmountSharesAmountTotal
Balances, December 31, 2018 (as adjusted)13,757,200  $13,757  $38,189,251  14,670  $(90,856) $(37,384,651) $727,501  $100  $727,601  
Stock-based compensation expense—  —  171,771  —  —  —  171,771  —  171,771  
Exercise of stock options42,804  43  220,201  —  —  —  220,244  —  220,244  
Net income—  —  —  —  —  952,645  952,645  —  952,645  
Balances, March 31, 2019 (unaudited)13,800,004  $13,800  $38,581,223  14,670  $(90,856) $(36,432,006) $2,072,161  $100  $2,072,261  
Stock-based compensation expense—  —  178,953  —  —  —  178,953  —  178,953  
Issuance of restricted stock33,012  33  (33) —  —  —  —  —    
Exercise of stock options5,000  5  19,395  —  —  —  19,400  —  19,400  
Net income—  —  —  —  —  462,260  462,260  —  462,260  
Balances, June 30, 2019 (unaudited)13,838,016  $13,838  $38,779,538  14,670  $(90,856) $(35,969,746) $2,732,774  $100  $2,732,874  



The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Table of Contents
THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended
June 30,
20202019
Cash flows from operating activities:
Net income$930,532  $1,414,905  
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization1,347,649  770,143  
Loss on disposition or impairment1,193  86,927  
Net franchise fees recognized upon termination of franchise agreements(50,312)   
Bargain purchase gain  (19,298) 
Deferred income taxes(2,756) (4,788) 
Stock based compensation expense466,473  350,724  
Changes in operating assets and liabilities:
Accounts receivable635,605  (227,129) 
Prepaid expenses and other current assets(35,789) (5,386) 
Deferred franchise costs2,498  (707,230) 
Deposits and other assets4,406  262,248  
Accounts payable(141,327) (154,542) 
Accrued expenses406,986  (134,146) 
Payroll liabilities(784,505) (432,742) 
Deferred revenue(317,053) 1,923,148  
Other, net572,795  (286,054) 
Net cash provided by operating activities3,036,395  2,836,780  
Cash flows from investing activities:
Acquisition of business, net of cash acquired  (30,000) 
Purchase of property and equipment(1,986,367) (1,567,556) 
Reacquisition and termination of regional developer rights  (681,500) 
Payments received on notes receivable80,441  72,816  
Net cash used in investing activities(1,905,926) (2,206,240) 
Cash flows from financing activities:
Payments of finance lease obligation(23,509) (10,704) 
Purchases of treasury stock under employee stock plans(3,774)   
Proceeds from exercise of stock options387,920  239,644  
Proceeds from the Credit Agreement, net of related fees1,947,352    
Proceeds from the Paycheck Protection Program2,727,970    
Repayments on notes payable  (100,000) 
Net cash provided by financing activities5,035,959  128,940  
Increase in cash6,166,428  759,480  
Cash and restricted cash, beginning of period8,641,877  8,854,952  
Cash and restricted cash, end of period$14,808,305  $9,614,432  

The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Table of Contents
During the six months ended June 30, 2020 and 2019, cash paid for income taxes was $37,800 and $23,396, respectively. During the six months ended June 30, 2020 and 2019, cash paid for interest was $16,111 and $50,000, respectively.
Supplemental disclosure of non-cash activity:
As of June 30, 2020, accounts payable and accrued expenses include property and equipment purchases of $71,723 and $5,267, respectively. As of June 30, 2019, accounts payable and accrued expenses include property and equipment purchases of $100,609 and $46,773, respectively. As of December 31, 2019, accounts payable and accrued expenses include property and equipment purchases of $196,671, and $15,250, respectively.
In connection with the acquisition during the six months ended June 30, 2019, the Company acquired $9,166 of property and equipment and intangible assets of $62,000, in exchange for $30,000 in cash to the seller.  Additionally, at the time of these transactions, the Company carried net deferred revenue of $3,847, representing net franchise fees collected upon the execution of the franchise agreement.  The Company netted this amount against the purchase price of the acquisitions.
In connection with the Company’s reacquisition and termination of regional developer rights during the six months ended June 30, 2019, the Company had deferred revenue of $44,334 representing license fees collected upon the execution of the regional developer agreements.  The Company netted these amounts against the aggregate purchase price of the acquisitions.

THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Nature of Operations and Summary of Significant Accounting Policies
Basis of Presentation
These unaudited financial statements represent the condensed consolidated financial statements of The Joint Corp. (“The Joint”), its variable interest entities (“VIEs”), and its wholly owned subsidiary, The Joint Corporate Unit No. 1, LLC (collectively, the “Company”). The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments which are necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented in accordance with U.S. generally accepted accounting principles ("GAAP"). Such unaudited interim condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with The Joint Corp. and Subsidiary and Affiliates consolidated financial statements and the notes thereto as set forth in The Joint’s Form 10-K, which included all disclosures required by U.S. GAAP. The results of operations for the periods ended June 30, 2020 and 2019 are not necessarily indicative of expected operating results for the full year. The information presented throughout the document as of and for the periods ended June 30, 2020 and 2019 is unaudited.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other (expenses) income that are reported in the condensed consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates. For a discussion of significant estimates and judgments made in recognizing revenue and accounting for leases, see Note 2, Revenue Disclosures and Note 10, Commitments and Contingencies, respectively.
Principles of Consolidation
The accompanying condensed consolidated financial statements include the accounts of The Joint and its wholly owned subsidiary, The Joint Corporate Unit No. 1, LLC, which was dormant for all periods presented. The Company consolidates VIEs in which the Company is the primary beneficiary in accordance with Accounting Standards Codification 810, Consolidations (“ASC 810”). Non-controlling interests represent third-party equity ownership interests in VIEs. All significant inter-affiliate accounts and transactions between The Joint and its VIEs have been eliminated in consolidation.
6

Table of Contents
Comprehensive Income
Net income and comprehensive income are the same for the three and six months ended June 30, 2020 and 2019.
Nature of Operations
The Joint, a Delaware corporation, was formed on March 10, 2010 for the principal purpose of franchising, developing and managing chiropractic clinics, selling regional developer rights and supporting the operations of franchised chiropractic clinics at locations throughout the United States of America. The franchising of chiropractic clinics is regulated by the Federal Trade Commission and various state authorities.
The following table summarizes the number of clinics in operation under franchise agreements and as company-owned or managed clinics for the three and six months ended June 30, 2020 and 2019:

Three Months Ended
June 30,
Six Months Ended
June 30,
Franchised clinics:2020201920202019
Clinics open at beginning of period469  404  453  394  
Opened during the period12  14  28  26  
Sold during the period      (1) 
Closed during the period(4) (1) (4) (2) 
Clinics in operation at the end of the period477  417  477  417  
Three Months Ended
June 30,
Six Months Ended
June 30,
Company-owned or managed clinics:2020201920202019
Clinics open at beginning of period61  50  60  48  
Opened during the period1  1  2  3  
Acquired during the period      1  
Closed during the period      (1) 
Clinics in operation at the end of the period62  51  62  51  
Total clinics in operation at the end of the period539  468  539  468  
Clinic licenses sold but not yet developed169  176  169  176  
Executed letters of intent for future clinic licenses40  28  40  28  
Variable Interest Entities
An entity deemed to hold the controlling interest in a voting interest entity or deemed to be the primary beneficiary of a VIE is required to consolidate the VIE in its financial statements. An entity is deemed to be the primary beneficiary of a VIE if it has both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and (b) the obligation to absorb the majority of losses of the VIE or the right to receive the majority of benefits from the VIE.
Certain states in which the Company manages clinics regulate the practice of chiropractic care and require that chiropractic services be provided by legal entities organized under state laws as professional corporations or PCs. In these states, the Company has entered into management services agreements with PCs under which the Company provides, on an exclusive basis, all non-clinical services of the chiropractic practice. Such PCs are VIEs, as fees paid by the PCs to the Company as its management service provider are considered variable interests because they are liabilities on the PC’s books and the fees do not meet all the following criteria: 1) The fees are compensation for services provided and are commensurate with the level of effort required to provide those services; 2) The decision maker or service provider does not hold other interests in the VIE that individually, or in the aggregate, would absorb more than an insignificant amount of the VIE’s expected losses or receive more than an insignificant amount of the VIE’s expected residual returns; 3) The service arrangement includes only terms, conditions, or amounts that are
7

Table of Contents
customarily present in arrangements for similar services negotiated at arm’s length. The Company assessed the governance structure and operating procedures of the PCs and determined that the Company has the power to control certain significant non-clinical activities of the PCs, as defined by ASC 810, therefore, the Company is the primary beneficiary of the VIEs, and per ASC 810, must consolidate the VIEs. The carrying amount of VIE assets and liabilities are immaterial as of June 30, 2020, and December 31, 2019.
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and credit quality of, the financial institutions with which it invests. As of the balance sheet date and periodically throughout the period, the Company has maintained balances in various operating accounts in excess of federally insured limits. The Company has invested substantially all its cash in short-term bank deposits. The Company had no cash equivalents as of June 30, 2020 and December 31, 2019.
Restricted Cash
Restricted cash relates to cash that franchisees and company-owned or managed clinics contribute to the Company’s National Marketing Fund and cash that franchisees provide to various voluntary regional Co-Op Marketing Funds. Cash contributed by franchisees to the National Marketing Fund is to be used in accordance with the Company’s Franchise Disclosure Document with a focus on regional and national marketing and advertising. 
Accounts Receivable
Accounts receivable primarily represent amounts due from franchisees for royalty fees. The Company considers a reserve for doubtful accounts based on the creditworthiness of the entity. The provision for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover future losses. The allowance is management’s best estimate of uncollectible amounts and is determined based on specific identification and historical performance that the Company tracks on an ongoing basis. Actual losses ultimately could differ materially in the near term from the amounts estimated in determining the allowance. As of June 30, 2020 and December 31, 2019, the Company had an allowance for doubtful accounts of $0.
Deferred Franchise and Regional Development Costs
Deferred franchise and regional development costs represent commissions that are direct and incremental to the Company and are paid in conjunction with the sale of a franchise license or regional development rights. These costs are recognized as an expense, in franchise and regional development cost of revenues when the respective revenue is recognized, which is generally over the term of the related franchise or regional development agreement.
Property and Equipment
Property and equipment are stated at cost, or for property acquired as part of franchise acquisitions, at fair value at the date of closing. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the assets.
Maintenance and repairs are charged to expense as incurred; major renewals and improvements are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income.
Capitalized Software
The Company capitalizes certain software development costs. These capitalized costs are primarily related to software used by clinics for operations and by the Company for the management of operations. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct, are capitalized as assets in progress until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Software developed is recorded as
8

Table of Contents
part of property and equipment. Maintenance and training costs are expensed as incurred. Internal use software is amortized on a straight-line basis over its estimated useful life, which is generally five years.
Leases
The Company leases property and equipment under operating and finance leases. The Company leases its corporate office space and the space for each of the company-owned or managed clinic in the portfolio. The Company recognizes a right-of-use ("ROU") asset and lease liability for all leases. Determining the lease term and amount of lease payments to include in the calculation of the ROU asset and lease liability for leases containing options requires the use of judgment to determine whether the exercise of an option is reasonably certain and if the optional period and payments should be included in the calculation of the associated ROU asset and liability. In making this determination, all relevant economic factors are considered that would compel the Company to exercise or not exercise an option. When available, the Company uses the rate implicit in the lease to discount lease payments; however, the rate implicit in the lease is not readily determinable for substantially all of its leases. In such cases, the Company estimates its incremental borrowing rate as the interest rate it would pay to borrow an amount equal to the lease payments over a similar term, with similar collateral as in the lease, and in a similar economic environment. The Company estimates these rates using available evidence such as rates imposed by third-party lenders to the Company in recent financings or observable risk-free interest rate and credit spreads for commercial debt of a similar duration, with credit spreads correlating to the Company’s estimated creditworthiness.
For operating leases that include rent holidays and rent escalation clauses, the Company recognizes lease expense on a straight-line basis over the lease term from the date it takes possession of the leased property. Pre-opening costs are recorded as incurred in general and administrative expenses. The Company records the straight-line lease expense and any contingent rent, if applicable, in general and administrative expenses on the condensed consolidated statements of operations. Many of the Company’s leases also require it to pay real estate taxes, common area maintenance costs and other occupancy costs which are also included in general and administrative expenses on the condensed consolidated statements of operations.
Intangible Assets
Intangible assets consist primarily of re-acquired franchise and regional developer rights and customer relationships.  The Company amortizes the fair value of re-acquired franchise rights over the remaining contractual terms of the re-acquired franchise rights at the time of the acquisition, which generally range from three to eight years. In the case of regional developer rights, the Company generally amortizes the re-acquired regional developer rights over seven years. The fair value of customer relationships is amortized over their estimated useful life of two years.
Goodwill
Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired in the acquisitions of franchises. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are tested for impairment annually and more frequently if a triggering event occurs that makes it more likely than not that the fair value of a reporting unit is below carrying value. As required, the Company performs an annual impairment test of goodwill as of the first day of the fourth quarter or more frequently if a triggering event occurs.
In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates step 2 of the current goodwill impairment test that requires a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment loss will instead be measured at the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the recorded amount of goodwill. The provision of this ASU is effective for years beginning after December 15, 2022 for smaller reporting companies, as defined by the SEC, with early adoption permitted for any impairment test performed on testing dates after January 1, 2017. The Company adopted this ASU provision on January 1, 2020. As a result of the COVID-19 pandemic and its impact on the Company's projected cash flows, the Company tested goodwill for impairment at the end of the first quarter of 2020. The Company did not identify any triggering event during the second quarter of 2020. No impairments of goodwill were recorded for the three and six months ended June 30, 2020 and 2019.
Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily to estimated undiscounted future cash flows in its assessment of whether or not long-lived assets are recoverable. As a result of the current COVID-19 pandemic, the Company
9

Table of Contents
evaluated whether the carrying values of the long-lived assets in certain corporate clinics were recoverable at the end of the first quarter of 2020. The Company did not identify any triggering event during the second quarter of 2020. No impairments of long-lived assets were recorded for the three and six months ended June 30, 2020 and 2019.
Advertising Fund
The Company has established an advertising fund for national/regional marketing and advertising of services offered by its clinics. The monthly marketing fee is 2% of clinic sales. The Company segregates the marketing funds collected which are included in restricted cash on its consolidated balance sheets. As amounts are expended from the fund, the Company recognizes a related expense.
Co-Op Marketing Funds
Some franchises have established regional Co-Ops for advertising within their local and regional markets. The Company maintains a custodial relationship under which the marketing funds collected are segregated and used for the purposes specified by the Co-Ops’ officers. The marketing funds are included in restricted cash on the Company’s condensed consolidated balance sheets.
Revenue Recognition
The Company generates revenue primarily through its company-owned and managed clinics, royalties, franchise fees, advertising fund, and through IT related income and computer software fees.
Revenues from Company-Owned or Managed Clinics.  The Company earns revenues from clinics that it owns and operates or manages throughout the United States.  In those states where the Company owns and operates or manages the clinic, revenues are recognized when services are performed. The Company offers a variety of membership and wellness packages which feature discounted pricing as compared with its single-visit pricing.  Amounts collected in advance for membership and wellness packages are recorded as deferred revenue and recognized when the service is performed.  The Company recognizes a contract liability related to the prepaid treatment plans for which the Company has an ongoing performance obligation. The Company recognizes this contract liability, and recognizes revenue, as the patient consumes his or her visits related to the package and the Company transfers its services. Based on a historical lag analysis and an evaluation of legal obligation by jurisdiction, the Company concluded that any remaining contract liability that exists after 12 to 24 months from transaction date will be deemed breakage. Breakage revenue is recognized only at that point, when the likelihood of the patient exercising his or her remaining rights becomes remote.
Royalties and Advertising Fund Revenue. The Company collects royalties, as stipulated in the franchise agreement, equal to 7% of gross sales and a marketing and advertising fee currently equal to 2% of gross sales. Royalties, including franchisee contributions to advertising funds, are calculated as a percentage of clinic sales over the term of the franchise agreement. The franchise agreement royalties, inclusive of advertising fund contributions, represent sales-based royalties that are related entirely to the Company’s performance obligation under the franchise agreement and are recognized as franchisee clinic level sales occur. Royalties are collected semi-monthly, two working days after each sales period has ended.
Franchise Fees. The Company requires the entire non-refundable initial franchise fee to be paid upon execution of a franchise agreement, which typically has an initial term of ten years. Initial franchise fees are recognized ratably on a straight-line basis over the term of the franchise agreement.  The Company’s services under the franchise agreement include: training of franchisees and staff, site selection, construction/vendor management and ongoing operations support. The Company provides no financing to franchisees and offers no guarantees on their behalf. The services provided by the Company are highly interrelated with the franchise license and as such are considered to represent a single performance obligation.
Software Fees.  The Company collects a monthly fee for use of its proprietary chiropractic software, computer support, and internet services support. These fees are recognized ratably on a straight-line basis over the term of the respective franchise agreement.
Regional Developer Fees. During 2011, the Company established a regional developer program to engage independent contractors to assist in developing specified geographical regions. Under the historical program, regional developers paid a license fee for each franchise they received the right to develop within the region. In 2017, the program was revised to grant exclusive geographical territory and establish a minimum development obligation within that defined territory. Regional developer fees paid to the Company are non-refundable and are recognized as revenue ratably on a straight-line basis over the term of the regional
10

Table of Contents
developer agreement, which is considered to begin upon the execution of the agr