| Restatement of Previously Issued Annual Consolidated Financial Statements for the Fiscal Year Ended December 31, 2024 |
Restatement of Previously Issued Consolidated Financial Statements for the Fiscal Year Ended December 31, 2024 Subsequent to the issuance of our consolidated financial statements as of and for the year ended December 31, 2024, included in the Annual Report on Form 10-K filed with the SEC on March 14, 2025, an error was identified resulting from the misapplication of accounting guidance related to the valuation methodology used in connection with the fair value measurement of certain assets held for sale within discontinued operations. Upon further evaluation, the Company determined that the original valuation methodology— which relied on an earnings multiple approach based on the clinic’s historical financial performance and prior acquisition trends from reacquired franchise clinics—was not consistent with the relevant requirements of GAAP. As such, adjustments were necessary to accurately reflect our financial position and results of operations. The valuation methodology was updated to include and equally weight both a market approach using a multiple of earnings assumption as well as an income approach using a discounted cash flow model that more appropriately reflects the expected future economic benefits of the assets held for sale reported in discontinued operations.
The Company assessed the impact of the error on its previously issued financial statements and determined it to be material to 2024 based on its analysis of Staff Accounting Bulletin (“SAB”) No. 99, “Materiality,” and SAB No. 108, “Considering the
Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”. The error has been corrected in the accompanying consolidated balance sheets as of December 31, 2024 and the consolidated income statements, statements of changes in stockholders’ equity, and statements of cash flows for the year then ended.
In the restated presentation, the Company also recorded previously uncorrected misstatements that were determined to be immaterial to the financial statements.
The following table summarizes the effect of the error on the Company's consolidated balance sheet as of December 31, 2024:
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December 31,
2024 |
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December 31,
2024 |
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As Previously Reported |
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Adjustments |
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As Restated |
| Current assets: |
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| Prepaid expenses and other current assets |
$ |
1,729,079 |
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$ |
58,915 |
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$ |
1,787,994 |
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Discontinued operations current assets ($1.1 million attributable to VIEs) |
40,827,044 |
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2,324,011 |
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43,151,055 |
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| Total current assets |
72,194,522 |
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2,382,926 |
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74,577,448 |
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| Property and equipment, net |
3,166,882 |
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39,872 |
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3,206,754 |
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| Operating lease right-of-use asset |
245,384 |
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310,152 |
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555,536 |
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| Total assets |
80,421,458 |
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2,732,950 |
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83,154,408 |
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| Current liabilities: |
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| Operating lease liability, current portion |
448,285 |
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35,052 |
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483,337 |
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Discontinued operations current liabilities ($7.1 million attributable to VIEs) |
37,714,200 |
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(346,741) |
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37,367,459 |
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| Total current liabilities |
49,353,776 |
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(311,689) |
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49,042,087 |
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| Operating lease liability, net of current portion |
— |
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311,689 |
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311,689 |
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| Total liabilities |
62,476,289 |
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— |
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62,476,289 |
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| Accumulated deficit |
(30,435,420) |
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2,732,950 |
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(27,702,470) |
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| Total The Joint Corp. stockholders' equity |
17,920,169 |
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2,732,950 |
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20,653,119 |
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| Total equity |
17,945,169 |
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2,732,950 |
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20,678,119 |
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| Total liabilities and stockholders' equity |
80,421,458 |
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2,732,950 |
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83,154,408 |
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The following table summarizes the effect of the error on the Company's consolidated income statement for the year ended December 31, 2024:
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Year Ended December 31,
2024 |
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Year Ended December 31,
2024 |
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As Previously Reported |
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Adjustments |
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As Restated |
| Revenues: |
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| Other revenues |
$ |
1,886,352 |
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$ |
266,825 |
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$ |
2,153,177 |
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| Total revenues |
51,896,605 |
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266,825 |
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52,163,430 |
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| Cost of revenues: |
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| IT cost of revenues |
1,453,011 |
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193 |
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1,453,204 |
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| Total cost of revenues |
11,516,655 |
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193 |
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11,516,848 |
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| Selling and marketing expenses |
10,923,342 |
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50,268 |
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10,973,610 |
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| Depreciation and amortization |
1,363,453 |
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7,936 |
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1,371,389 |
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| General and administrative expenses |
29,833,570 |
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291,019 |
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30,124,589 |
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| Total selling, general, and administrative expenses |
42,120,365 |
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349,223 |
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42,469,588 |
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| Net loss on disposition or impairment |
14,642 |
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51,377 |
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66,019 |
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| Loss from operations |
(1,755,057) |
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(133,968) |
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(1,889,025) |
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| Loss before income tax expense |
(1,474,770) |
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(133,968) |
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(1,608,738) |
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| Income tax expense |
62,142 |
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(56,536) |
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5,606 |
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| Net loss from continuing operations |
(1,536,912) |
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(77,432) |
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(1,614,344) |
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| Discontinued Operations: |
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| (Loss) income from discontinued operations before income tax expense |
(6,780,289) |
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2,808,003 |
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(3,972,286) |
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| Income tax expense from discontinued operations |
212,642 |
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(2,379) |
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210,263 |
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| Net loss from discontinued operations |
(6,992,931) |
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2,810,382 |
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(4,182,549) |
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| Net loss |
$ |
(8,529,843) |
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$ |
2,732,950 |
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$ |
(5,796,893) |
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| Net loss from continuing operations per common share: |
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| Basic |
$ |
(0.10) |
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$ |
(0.01) |
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$ |
(0.11) |
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| Diluted |
$ |
(0.10) |
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$ |
(0.01) |
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$ |
(0.11) |
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| Net (loss) income from discontinued operations per common share: |
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| Basic |
$ |
(0.47) |
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$ |
0.19 |
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$ |
(0.28) |
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| Diluted |
$ |
(0.46) |
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$ |
0.18 |
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$ |
(0.28) |
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| Net (loss) income per common share: |
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| Basic |
$ |
(0.57) |
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$ |
0.18 |
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$ |
(0.39) |
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| Diluted |
$ |
(0.56) |
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$ |
0.17 |
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$ |
(0.38) |
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The following table summarizes the effect of the error on the Company's consolidated statements of stockholders' equity as of December 31, 2024:
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Accumulated
Deficit |
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Total The Joint Corp. stockholder's equity |
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Total Equity |
| Balances, December 31, 2024 (as previously reported) |
$ |
(30,435,420) |
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$ |
17,920,169 |
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$ |
17,945,169 |
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| Adjustment due to error correction |
2,732,950 |
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2,732,950 |
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2,732,950 |
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| Balances, December 31, 2024 (as restated) |
$ |
(27,702,470) |
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$ |
20,653,119 |
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$ |
20,678,119 |
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The following table summarizes the effect of the error on the Company's consolidated statement of cash flows for the year ended December 31, 2024:
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Year Ended December 31,
2024 |
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Year Ended December 31,
2024 |
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As Previously Reported |
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Adjustments |
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As Restated |
| Cash flows from operating activities: |
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| Net loss |
$ |
(8,529,843) |
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$ |
2,732,950 |
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$ |
(5,796,893) |
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| Adjustments to reconcile net loss to net cash provided by operating activities: |
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| Net loss on disposition or impairment (non-cash portion) |
10,454,609 |
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(2,674,035) |
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7,780,574 |
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| Prepaid expenses and other current assets |
160,082 |
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(58,915) |
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101,167 |
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| Net cash provided by operating activities |
9,415,050 |
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— |
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9,415,050 |
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| Increase in cash |
6,782,144 |
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— |
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6,782,144 |
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