Quarterly report pursuant to Section 13 or 15(d)

Nature of Operations and Summary of Significant Accounting Policies (Tables)

v3.23.3
Nature of Operations and Summary of Significant Accounting Policies (Tables)
 3 Months Ended
Mar. 31, 2023
Accounting Policies [Abstract]  
Schedule of Franchisor Disclosure
The following table summarizes the number of clinics in operation under franchise agreements and as company-owned or managed clinics for the three months ended March 31, 2023 and 2022:

Three Months Ended
March 31,
Franchised clinics: 2023 2022
Clinics open at beginning of period 712  610 
Opened during the period 29  27 
Sold during the period —  — 
Closed during the period (1) (1)
Clinics in operation at the end of the period 740  636 
Three Months Ended
March 31,
Company-owned or managed clinics: 2023 2022
Clinics open at beginning of period 126  96 
Opened during the period 4  4 
Acquired during the period —  — 
Closed during the period —  — 
Clinics in operation at the end of the period 130  100 
Total clinics in operation at the end of the period 870  736 
Clinic licenses sold but not yet developed 178  239 
Future clinic licenses subject to executed letters of intent 39  39 
Schedule of Earnings (Loss) per Common Share
Three Months Ended
March 31,
2023 2022
(as restated)
Net (loss) income $ 2,326,164  $ 4,220 
Weighted average common shares outstanding - basic 14,566,185  14,432,652 
Effect of dilutive securities:
Unvested restricted stock and stock options 295,549  — 
Weighted average common shares outstanding - diluted 14,861,734  14,432,652 
Basic (loss) earnings per share $ 0.16  $ — 
Diluted (loss) earnings per share $ 0.16  $ — 
The following common stock equivalents were excluded from the computation of diluted (loss) earnings per share for the periods presented because including them would have been antidilutive:
Three Months Ended
March 31,
Weighted average dilutive securities: 2023 2022
Restricted stocks —  7,447 
Stock options 92,652  502,107 
Schedule of Error Corrections and Prior Period Adjustments
The following table summarizes the effect of the errors on the Company’s consolidated balance sheet as of March 31, 2022:

March 31,
2022		 March 31,
2022
As Previously Reported
Adjustments
As Restated
Intangible assets, net $ 4,829,941  $ (552,911) $ 4,277,030 
Deferred tax assets 9,205,410  2,493,018  11,698,428 
Total assets 85,062,449  1,940,107  87,002,556 
Current liabilities:
Deferred franchise and regional development fee revenue, current portion 3,130,856  (3,130,856) — 
Deferred franchise fee revenue, current portion —  2,408,266  2,408,266 
Upfront regional developer fees, current portion —  722,590  722,590 
Other current liabilities 541,250  24,511  565,761 
Total current liabilities 20,624,047  24,511  20,648,558 
Deferred franchise and regional development fee revenue, net of current portion 15,410,136  (15,410,136) — 
Deferred franchise fee revenue, net of current portion —  13,154,047  13,154,047 
Upfront regional developer fees, net of current portion —  2,256,089  2,256,089 
Other liabilities 27,230  966,523  993,753 
Total liabilities 55,328,037  991,034  56,319,071 
Accumulated deficit (13,724,938) 949,073  (12,775,865)
Total The Joint Corp. stockholders' equity 29,709,412  949,073  30,658,485 
Total equity 29,734,412  949,073  30,683,485 
Total liabilities and stockholders' equity 85,062,449  1,940,107  87,002,556 

The following table summarizes the effect of the errors on the Company’s consolidated income statement for the three months ended March 31, 2022:
Three Months Ended March 31,
2022		 Three Months Ended March 31,
2022
As Previously Reported Adjustments As Restated
Revenues:
Regional developer fees $ 201,787  $ (201,787) $ — 
Total revenues 22,438,538  (201,787) 22,236,751 
Cost of revenues:
Franchise and regional developer cost of revenues 2,002,813  (201,787) 1,801,026 
Total cost of revenues 2,312,771  (201,787) 2,110,984 
Depreciation and amortization 1,629,176  (292,520) 1,336,656 
General and administrative expenses 15,378,623  154,803  15,533,426 
Total selling, general and administrative expenses 20,295,287  (137,717) 20,157,570 
Income from operations (176,426) 137,717  (38,709)
Income before income tax expense (benefit) (192,573) 137,717  (54,856)
Income tax expense (benefit) 13,224  (72,300) (59,076)
Net income (loss) (205,797) 210,017  4,220 
Earnings per share:
Basic earnings (loss) per share $ (0.01) $ 0.01  $ — 
Diluted earnings (loss) per share $ (0.01) $ 0.01  $ — 

The following table summarizes the effect of the errors on the Company’s consolidated statements of stockholders' equity as of March 31, 2022 and December 31, 2021:

Accumulated
Deficit		 Total The Joint Corp. stockholder's equity
Total Equity
Balances, December 31, 2021 (as previously reported)
 $ (13,519,142) $ 29,544,627  $ 29,569,627 
Adjustment due to cumulative error correction
 739,057  739,057  739,057 
Balances, December 31, 2021 (as restated) $ (12,780,085) $ 30,283,684  $ 30,308,684 
Balances, March 31, 2022 (as previously reported)
 $ (13,724,938) $ 29,709,412  $ 29,734,412 
Adjustment due to cumulative error correction
 949,073  949,073  949,073 
Balances, March 31, 2022 $ (12,775,865) $ 30,658,485  $ 30,683,485 


The following table summarizes the effect of the errors on the Company’s consolidated statement of cash flows for the three-month period ended March 31, 2022:
Three Months Ended March 31,
2022
Three Months Ended March 31,
2022
As Previously Reported Adjustments As Restated
Cash flows from operating activities:
Net income (loss) $ (205,797) 210,017  $ 4,220 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization 1,629,176  (292,520) 1,336,656 
Deferred income taxes (16,776) (194,853) (211,629)
Changes in operating assets and liabilities:
Upfront regional developer fees —  (296,983) (296,983)
Deferred revenue 296,487  201,786  498,273 
Other liabilities 280,162  122,553  402,715 
Net cash provided by (used in) operating activities 447,878  (250,000) 197,878 
Cash flows from investing activities:
Reacquisition and termination of regional developer rights (250,000) 250,000  — 
Net cash used in investing activities (1,539,943) 250,000  (1,289,943)
Decrease in cash (1,066,427) —  (1,066,427)

Correction of Immaterial Error

During the second quarter of 2023, the Company identified immaterial errors related to the first quarter of 2023 in the following: (i) the accounting for upfront regional developer fees as revenue as opposed to a reduction of cost of revenue, and (ii) the accounting for uncertain tax positions related to The Joint and VIEs transfer pricing calculation for income tax purposes.

The table below sets forth the impact of the revision on the previously issued consolidated balance sheet for the interim period ended March 31, 2023:
March 31,
2023		 March 31,
2023
As Previously Reported
Adjustments
As Revised
Intangible assets, net $ 11,905,176  $ (1,914,106) $ 9,991,070 
Deferred tax assets 7,708,323  3,486,439  11,194,762 
Total assets 98,050,712  1,572,333  99,623,045 
Current liabilities:
Deferred franchise and regional development fee revenue, current portion 2,978,937  (2,978,937) — 
Deferred franchise fee revenue, current portion —  2,487,795  2,487,795 
Upfront regional developer fees, current portion —  491,142  491,142 
Other current liabilities 494,250  98,043  592,293 
Total current liabilities 24,969,858  98,043  25,067,901 
Deferred franchise and regional development fee revenue, net of current portion 15,682,833  (15,682,833) — 
Deferred franchise fee revenue, net of current portion —  14,233,564  14,233,564 
Upfront regional developer fees, net of current portion —  1,449,270  1,449,270 
Other liabilities 27,230  1,260,649  1,287,879 
Total liabilities 62,948,315  1,358,693  64,307,008 
Accumulated deficit (10,040,856) 213,640  (9,827,216)
Total The Joint Corp. stockholders' equity 35,077,397  213,640  35,291,037 
Total equity 35,102,397  213,640  35,316,037 
Total liabilities and stockholders' equity 98,050,712  1,572,333  99,623,045 
The table below sets forth the impact of the revision on the previously issued consolidated income statement for the interim period ended March 31, 2023:
Three Months Ended March, 31 2023 Three Months Ended March, 31 2023
As Previously Reported
Adjustments
As Revised
Revenues:
Regional developer fees $ 149,478  $ (149,478) $ — 
Total revenues 28,450,298  (149,478) 28,300,820 
Cost of revenues:
Franchise and regional developer cost of revenues 2,290,313  (149,478) 2,140,835 
Total cost of revenues 2,624,163  (149,478) 2,474,685 
Depreciation and amortization 2,342,544  (127,489) 2,215,055 
General and administrative expenses 19,936,115  102,361  20,038,476 
Total selling, general and administrative expenses 26,438,903  (25,128) 26,413,775 
Loss from operations (678,237) 25,128  (653,109)
Income before income tax expense (benefit) 3,142,925  25,128  3,168,053 
Income tax expense 841,889  —  841,889 
Net income 2,301,036  25,128  2,326,164 
Earnings per share:
Basic earnings per share $ 0.16  $ —  $ 0.16 
Diluted earnings per share $ 0.15  $ 0.01  $ 0.16