Cover Page
Cover Page - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2020 | Mar. 01, 2021 | Jun. 30, 2020 | |
Cover [Abstract] | |||
Document Type | 10-K | ||
Document Annual Report | true | ||
Document Period End Date | Dec. 31, 2020 | ||
Current Fiscal Year End Date | --12-31 | ||
Document Transition Report | false | ||
Entity File Number | 001-36724 | ||
Entity Registrant Name | Joint Corp | ||
Entity Incorporation, State or Country Code | DE | ||
Entity Tax Identification Number | 90-0544160 | ||
Entity Address, Address Line One | 16767 North Perimeter Drive | ||
Entity Address, Address Line Two | Suite 110 | ||
Entity Address, City or Town | Scottsdale | ||
Entity Address, State or Province | AZ | ||
Entity Address, Postal Zip Code | 85260 | ||
City Area Code | 480 | ||
Local Phone Number | 245-5960 | ||
Title of 12(b) Security | Common Stock, $0.001 Par Value Per Share | ||
Trading Symbol | JYNT | ||
Security Exchange Name | NASDAQ | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Interactive Data Current | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Small Business | true | ||
Entity Emerging Growth Company | false | ||
Auditor Attestation Flag | false | ||
Entity Shell Company | false | ||
Entity Public Float | $ 205.8 | ||
Entity Common Stock, Shares Outstanding | 14,139,891 | ||
Documents Incorporated by Reference | Portions of the registrant's Proxy Statement relating to its 2021 Annual Meeting of Stockholders, to be filed with the Securities and Exchange Commission (“SEC”) pursuant to Regulation 14A within 120 days after the registrant’s fiscal year ended December 31, 2020, are incorporated by reference in Part III of this Form 10-K. | ||
Entity Central Index Key | 0001612630 | ||
Document Fiscal Year Focus | 2020 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false |
Consolidated Balance Sheets
Consolidated Balance Sheets - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 20,554,258 | $ 8,455,989 |
Restricted cash | 265,371 | 185,888 |
Accounts receivable, net | 1,850,499 | 2,645,085 |
Notes receivable, net | 0 | 128,724 |
Deferred franchise and regional development costs, current portion | 897,551 | 765,508 |
Prepaid expenses and other current assets | 1,566,025 | 1,122,478 |
Total current assets | 25,133,704 | 13,303,672 |
Property and equipment, net | 8,747,369 | 6,581,588 |
Operating lease right-of-use asset | 11,581,435 | 12,486,672 |
Deferred franchise and regional development costs, net of current portion | 4,340,756 | 3,627,225 |
Intangible assets, net | 2,865,006 | 3,219,791 |
Goodwill | 4,625,604 | 4,150,461 |
Deferred tax assets | 8,007,633 | 0 |
Deposits and other assets | 431,336 | 336,258 |
Total assets | 65,732,843 | 43,705,667 |
Current liabilities: | ||
Accounts payable | 1,561,648 | 1,525,838 |
Accrued expenses | 770,221 | 216,814 |
Co-op funds liability | 248,468 | 185,889 |
Payroll liabilities | 2,776,036 | 2,844,107 |
Operating lease liability, current portion | 2,918,140 | 2,313,109 |
Finance lease liability, current portion | 70,507 | 24,253 |
Deferred franchise and regional development fee revenue, current portion | 3,000,369 | 2,740,954 |
Deferred revenue from company clinics | 3,905,200 | 3,196,664 |
Debt under the Paycheck Protection Program | 2,727,970 | 0 |
Other current liabilities | 707,085 | 518,686 |
Total current liabilities | 18,685,644 | 13,566,314 |
Operating lease liability, net of current portion | 10,632,672 | 11,901,040 |
Finance lease liability, net of current portion | 132,469 | 34,398 |
Debt under the Credit Agreement | 2,000,000 | 0 |
Deferred franchise and regional development fee revenue, net of current portion | 13,503,745 | 12,366,322 |
Deferred tax liability | 0 | 89,863 |
Other liabilities | 27,230 | 27,230 |
Total liabilities | 44,981,760 | 37,985,167 |
Stockholders' equity: | ||
Series A preferred stock, $0.001 par value; 50,000 shares authorized, 0 issued and outstanding, as of December 31, 2020 and 2019 | 0 | 0 |
Common stock, $0.001 par value; 20,000,000 shares authorized, 14,174,237 shares issued and 14,157,070 shares outstanding as of December 31, 2020 and 13,898,694 shares issued and 13,882,932 outstanding as of December 31, 2019 | 14,174 | 13,899 |
Additional paid-in capital | 41,350,001 | 39,454,937 |
Treasury stock 17,167 shares as of December 31, 2020 and 15,762 shares as of December 31, 2019, at cost | (143,111) | (111,041) |
Accumulated deficit | (20,470,081) | (33,637,395) |
Total The Joint Corp. stockholders' equity | 20,750,983 | 5,720,400 |
Non-controlling Interest | 100 | 100 |
Total equity | 20,751,083 | 5,720,500 |
Total liabilities and stockholders' equity | $ 65,732,843 | $ 43,705,667 |
Consolidated Balance Sheets (Pa
Consolidated Balance Sheets (Parentheticals) - $ / shares | Dec. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Series A preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Series A preferred stock, shares authorized (in shares) | 50,000 | 50,000 |
Series A preferred stock, shares issued (in shares) | 0 | 0 |
Series A preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, shares issued (in shares) | 14,174,237 | 13,898,694 |
Common stock, shares outstanding (in shares) | 14,157,070 | 13,882,932 |
Treasury stock, shares (in shares) | 17,167 | 15,762 |
Consolidated Income Statements
Consolidated Income Statements - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Revenues: | ||
Total revenues | $ 58,682,976 | $ 48,450,900 |
Cost of revenues: | ||
Total cost of revenues | 6,507,468 | 5,565,917 |
Selling and marketing expenses | 7,804,420 | 6,913,709 |
Depreciation and amortization | 2,734,462 | 1,899,257 |
General and administrative expenses | 36,195,817 | 30,543,030 |
Total selling, general and administrative expenses | 46,734,699 | 39,355,996 |
Net (gain) loss on disposition or impairment | (51,321) | 114,352 |
Income from operations | 5,492,130 | 3,414,635 |
Other income (expense): | ||
Bargain purchase gain | 0 | 19,298 |
Other (expense), net | (79,478) | (61,515) |
Total other (expense) | (79,478) | (42,217) |
Income before income tax (benefit) expense | 5,412,652 | 3,372,418 |
Income tax (benefit) expense | (7,754,662) | 48,706 |
Net income and comprehensive income | 13,167,314 | 3,323,712 |
Less: income attributable to the non-controlling interest | 0 | 0 |
Net income attributable to The Joint Corp. stockholders | $ 13,167,314 | $ 3,323,712 |
Earnings per share: | ||
Basic earnings per share (in dollars per share) | $ 0.94 | $ 0.24 |
Diluted earnings per share (in dollars per share) | $ 0.90 | $ 0.23 |
Basic weighted average shares (in shares) | 14,003,708 | 13,819,149 |
Diluted weighted average shares (in shares) | 14,582,877 | 14,467,567 |
Revenues from company-owned or managed clinics | ||
Revenues: | ||
Total revenues | $ 31,771,288 | $ 25,807,584 |
Royalty fees | ||
Revenues: | ||
Total revenues | 15,886,051 | 13,557,170 |
Franchise fees/Regional developer cost of revenues | ||
Revenues: | ||
Total revenues | 2,100,800 | 1,791,545 |
Cost of revenues: | ||
Cost of revenues | 6,090,203 | 5,159,778 |
Advertising fund revenue | ||
Revenues: | ||
Total revenues | 4,506,413 | 3,884,055 |
Software fees/IT cost of revenues | ||
Revenues: | ||
Total revenues | 2,694,520 | 1,865,779 |
Cost of revenues: | ||
Cost of revenues | 417,265 | 406,139 |
Regional developer fees | ||
Revenues: | ||
Total revenues | 876,804 | 803,849 |
Other revenues | ||
Revenues: | ||
Total revenues | $ 847,100 | $ 740,918 |
Consolidated Statements of Chan
Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Total | Restatement Adjustment | Common Stock | Additional Paid In Capital | Treasury Stock | Accumulated Deficit | Accumulated DeficitRestatement Adjustment | Total The Joint Corp. stockholder's equity | Total The Joint Corp. stockholder's equityRestatement Adjustment | Non-controlling Interest |
Balance, beginning at Dec. 31, 2018 | $ 727,601 | $ 423,544 | $ 13,757 | $ 38,189,251 | $ (90,856) | $ (37,384,651) | $ 423,544 | $ 727,501 | $ 423,544 | $ 100 |
Balances, beginning (in shares) at Dec. 31, 2018 | 13,757,200 | (14,670) | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Stock-based compensation expense | 720,651 | 720,651 | 720,651 | |||||||
Issuance of restricted stock | 0 | $ 38 | (38) | |||||||
Issuance of restricted stock (in shares) | 38,289 | |||||||||
Exercise of stock options | 545,177 | $ 104 | 545,073 | 545,177 | ||||||
Exercise of stock options (in shares) | 103,205 | |||||||||
Purchases of treasury stock under employee stock plans | (20,185) | $ (20,185) | (20,185) | |||||||
Purchases of treasury stock under employee stock plans (in shares) | 1,092 | |||||||||
Net income | 3,323,712 | 3,323,712 | 3,323,712 | |||||||
Balance, ending at Dec. 31, 2019 | 5,720,500 | $ 13,899 | 39,454,937 | $ (111,041) | (33,637,395) | 5,720,400 | 100 | |||
Balance, ending (in shares) at Dec. 31, 2019 | 13,898,694 | (15,762) | ||||||||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||||||
Stock-based compensation expense | 885,975 | 885,975 | 885,975 | |||||||
Issuance of restricted stock | 0 | $ 51 | (51) | |||||||
Issuance of restricted stock (in shares) | 50,741 | |||||||||
Exercise of stock options | 1,009,364 | $ 224 | 1,009,140 | 1,009,364 | ||||||
Exercise of stock options (in shares) | 224,802 | |||||||||
Purchases of treasury stock under employee stock plans | (32,070) | $ (32,070) | (32,070) | |||||||
Purchases of treasury stock under employee stock plans (in shares) | 1,405 | |||||||||
Net income | 13,167,314 | 13,167,314 | 13,167,314 | |||||||
Balance, ending at Dec. 31, 2020 | $ 20,751,083 | $ 14,174 | $ 41,350,001 | $ (143,111) | $ (20,470,081) | $ 20,750,983 | $ 100 | |||
Balance, ending (in shares) at Dec. 31, 2020 | 14,174,237 | (17,167) |
Consolidated Statements of Cash
Consolidated Statements of Cash Flows - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 13,167,314 | $ 3,323,712 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 2,734,462 | 1,899,257 |
Net loss on disposition or impairment (non-cash portion) | 1,193 | 114,352 |
Net franchise fees recognized upon termination of franchise agreements | (57,080) | (113,944) |
Bargain purchase gain | 0 | (19,298) |
Deferred income taxes | (8,097,494) | 1,573 |
Stock based compensation expense | 885,975 | 720,651 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 794,586 | (1,838,735) |
Prepaid expenses and other current assets | (443,547) | (240,188) |
Deferred franchise costs | (899,056) | (882,672) |
Deposits and other assets | (43,380) | 268,369 |
Accounts payable | (90,429) | 75,893 |
Accrued expenses | 389,973 | (64,758) |
Payroll liabilities | (68,071) | 808,449 |
Deferred revenue | 2,206,063 | 2,615,896 |
Other liabilities | 702,733 | 853,392 |
Net cash provided by operating activities | 11,183,242 | 7,521,949 |
Cash flows from investing activities: | ||
Acquisition of business | (534,000) | (3,122,332) |
Purchase of property and equipment | (3,156,233) | (3,483,578) |
Reacquisition and termination of regional developer rights | (1,039,500) | (681,500) |
Payments received on notes receivable | 128,724 | 149,348 |
Net cash used in investing activities | (4,601,009) | (7,138,062) |
Cash flows from financing activities: | ||
Payments of finance lease obligation | (57,097) | (21,954) |
Purchases of treasury stock under employee stock plans | (32,070) | (20,185) |
Proceeds from exercise of stock options | 1,009,364 | 545,177 |
Proceeds from the Credit Agreement, net of related fees | 1,947,352 | 0 |
Proceeds from the Paycheck Protection Program | 2,727,970 | 0 |
Repayments on notes payable | 0 | (1,100,000) |
Net cash provided by (used in) financing activities | 5,595,519 | (596,962) |
Increase (decrease) in cash | 12,177,752 | (213,075) |
Cash and restricted cash, beginning of period | 8,641,877 | 8,854,952 |
Cash and restricted cash, end of period | $ 20,819,629 | $ 8,641,877 |
Supplemental Disclosure of Non-
Supplemental Disclosure of Non-cash Activity | 12 Months Ended |
Dec. 31, 2020 | |
Supplemental Cash Flow Elements [Abstract] | |
Supplemental Disclosure of Non-cash Activity | During the years ended December 31, 2020 and 2019, cash paid for income taxes was $237,655 and $65,064, respectively. During the years ended December 31, 2020 and 2019, cash paid for interest was $42,833 and $96,978, respectively. Supplemental disclosure of non-cash activity: As of December 31, 2020, accounts payable and accrued expenses include property and equipment purchases of $126,239, and $163,434, 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 acquisitions during the year ended December 31, 2020, the Company acquired $1,625 of property and equipment and intangible assets of $96,400, in exchange for $534,000 to the seller. Additionally, at the time of these transactions, the Company carried net deferred revenue of $355, representing unrecognized 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 acquisitions during the year ended December 31, 2019, the Company acquired $173,521 of property and equipment and intangible assets of $1,999,469, in exchange for $3,127,332 (of which $5,000 was in accounts payable as of December 31, 2019) to the sellers. Additionally, at the time of these transactions, the Company carried net deferred revenue of $40,805, representing unrecognized 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 year ended December 31, 2020, the Company had deferred revenue of $36,781 representing unrecognized license fees collected upon the execution of the regional developer agreement. The Company netted this amount against the aggregate purchase price of the acquisition. In connection with the Company's reacquisition and termination of regional developer rights during the year ended December 31, 2019, the Company had deferred revenue of $44,334 representing unrecognized license fees collected upon the execution of the regional developer agreements. The Company netted these amounts against the aggregate purchase price of the acquisitions. |
Nature of Operations and Summar
Nature of Operations and Summary of Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Nature of Operations and Summary of Significant Accounting Policies | Nature of Operations and Summary of Significant Accounting Policies Basis of Presentation These financial statements represent the 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 preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses, other (expenses) income, and income taxes that are reported in the 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, accounting for leases, and accounting for income taxes, see Note 2, "Revenue Disclosures", Note 9, "Income Taxes", and Note 10, "Commitments and Contingencies". Principles of Consolidation The accompanying consolidated financial statements include the accounts of The Joint Corp. 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 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. Comprehensive Income Net income and comprehensive income are the same for the years ended December 31, 2020 and 2019. 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 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 nonclinical 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 December 31, 2020. Nature of Operations The Joint Corp., a Delaware corporation, was formed on March 10, 2010 for the principal purpose of franchising, developing, selling regional developer rights, supporting the operations of franchised chiropractic clinics, and operating and managing corporate 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 for the years ended December 31, 2020 and 2019: Year Ended December 31, Franchised clinics: 2020 2019 Clinics open at beginning of period 453 394 Opened during the period 70 71 Sold during the period (1) (8) Closed during the period (7) (4) Clinics in operation at the end of the period 515 453 Year Ended December 31, Company-owned or managed clinics: 2020 2019 Clinics open at beginning of period 60 48 Opened during the period 3 5 Acquired during the period 1 8 Closed during the period — (1) Clinics in operation at the end of the period 64 60 Total clinics in operation at the end of the period 579 513 Clinic licenses sold but not yet developed 212 170 Executed letters of intent for future clinic licenses 41 34 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 December 31, 2020 and 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 December 31, 2020, and 2019, the Company had an allowance for doubtful accounts of $0. Deferred Franchise Costs 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 developer 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 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 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 three The FASB issued in August 2018 an update to accounting guidance related to implementation costs incurred in a cloud computing arrangement that is a service contract. The update aligns the requirements for capitalizing implementation costs incurred under such arrangements with the requirements for capitalizing costs incurred to develop or obtain internal-use software. Accordingly, implementation costs incurred in connection with a cloud computing arrangement that is a service contract are capitalized and such costs were included in prepaid expenses in the Company’s Consolidated Balance Sheet. 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 consolidated income statements. 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 consolidated income statements. 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 one two two 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. 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 also performed its annual impairment test of goodwill as of October 1, 2020 as required. No impairments of goodwill were recorded for the years ended December 31, 2020 and 2019. 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. 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 COVID-19 pandemic, the Company 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 remainder of 2020. No impairments of long-lived assets were recorded for the year ended December 31, 2020 and 2019. Advertising Fund The Company has established an advertising fund for national or 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 Co-Op Marketing Funds collected are segregated and used for the purposes specified by the Co-Ops’ officers. The Co-Op Marketing Funds are included in restricted cash on the Company’s consolidated balance sheets. Revenue Recognition The Company generates revenue primarily through its company-owned and managed clinics and through royalties, franchise fees, advertising fund contributions, IT related income and computer software fees from its franchisees. 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. Any unused visits associated with monthly memberships are recognized on a month-to-month basis. The Company recognizes a contract liability (or a deferred revenue 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 and marketing and advertising fees are collected bi-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 from its franchisees 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 developer agreement, which is considered to begin upon the execution of the agreement. The Company’s services under regional developer agreements include site selection, grand opening support for the clinics, sales support for identification of qualified franchisees, general operational support and marketing support to advertise for ownership opportunities. The services provided by the Company are highly interrelated with the development of the territory and the resulting franchise licenses sold by the regional developer and as such are considered to represent a single performance obligation. In addition, regional developers receive fees which are funded by the initial franchise fees collected from franchisees upon the sale of franchises within their exclusive geographical territory and a royalty of 3% of sales generated by franchised clinics in their exclusive geographical territory. Fees related to the sale of franchises within their exclusive geographical territory are initially deferred as deferred franchise costs and are recognized as an expense in franchise cost of revenues when the respective revenue is recognized, which is generally over the term of the related franchise agreement. Royalties of 3% of sales generated by franchised clinics in their regions are also recognized as franchise cost of revenues as franchisee clinic level sales occur, which is funded by the 7% royalties collected from the franchisees in their regions. Certain regional developer agreements result in the regional developer acquiring the rights to existing royalty streams from clinics already open in the respective territory. In those instances, the revenue associated from the sale of the royalty stream is recognized over the remaining life of the respective franchise agreements. The Company entered into two regional developer agreements for the year ended December 31, 2020 and one regional developer agreement for the year ended December 31, 2019 for which it received approximately $0.5 million and $0.3 million, respectively, which was deferred as of the respective transaction dates and will be recognized as revenue ratably on a straight-line basis over the term of the regional developer agreement, which is considered to be upon the execution of the agreement. Advertising Costs Advertising costs are advertising and marketing expenses incurred by the Company, primarily through advertising funds. The Company expenses production costs of commercial advertising upon first airing and expenses the costs of communicating the advertising in the period in which the advertising occurs. Advertising expenses were $2,640,853 and $2,292,628, for the years ended December 31, 2020 and 2019, respectively. Income Taxes Income taxes are accounted for using a balance sheet approach known as the asset and liability method. The asset and liability method accounts for deferred income taxes by applying the statutory tax rates in effect at the date of the balance sheets to differences between the book basis and the tax basis of assets and liabilities. Deferred tax assets and liabilities represent the future tax consequence for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. The differences relate principally to depreciation of property and equipment and treatment of revenue for franchise fees and regional developer fees collected. Tax positions are reviewed at least quarterly and adjusted as new information becomes available. The recoverability of deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These estimates of future taxable income inherently require significant judgment. To the extent it is considered more likely than not that a deferred tax asset will be not recovered, a valuation allowance is established. The Company accounts for uncertainty in income taxes by recognizing the tax benefit or expense from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits and expenses recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company has not identified any material uncertain tax positions as of December 31, 2020 and 2019, respectively. Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses. With exceptions due to the generation and utilization of net operating losses or credits, as of December 31, 2020, the Company is no longer subject to federal and state examinations by taxing authorities for tax years before 2017 and 2016, respectively. Earnings per Common Share Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed by giving effect to all potentially dilutive common shares including restricted stock and stock options. Year Ended December 31, 2020 2019 Net income $ 13,167,314 $ 3,323,712 Weighted average common shares outstanding - basic 14,003,708 13,819,149 Effect of dilutive securities: Unvested restricted stock and stock options 579,169 648,418 Weighted average common shares outstanding - diluted 14,582,877 14,467,567 Basic earnings per share $ 0.94 $ 0.24 Diluted earnings per share $ 0.90 $ 0.23 Potentially dilutive securities excluded from the calculation of diluted net income per common share as the effect would be anti-dilutive were as follows: Year Ended December 31, 2020 2019 Unvested restricted stock — — Stock options 94,294 39,286 Stock-Based Compensation The Company accounts for share-based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant. The Company determines the estimated grant-date fair value of restricted shares using the closing price on the date of the grant and the grant-date fair value of stock options using the Black-Scholes-Merton model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the model, including risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. The Company recognizes compensation costs ratably over the period of service using the straight-line method. Forfeitures are estimated based on historical and forecasted turnover, which is approximately 5%. Retirement Benefit Plan Employees of the Company are eligible to participate in a defined contribution retirement plan, the Joint Corp. 401(k) Retirement Plan (“401(k) Plan”), under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, employees may contribute their eligible compensation, not to exceed the annual limits set by the IRS. The 401(k) Plan allows the Company to match participants’ contributions in an amount determined at the sole discretion of the Company. The Company matched participants’ contributions for the years ended December 31, 2020 and 2019, up to a maximum of 4% and 2% of the employee’s eligible compensation, respectively. Employer contributions totaled $265,094 and $103,745, for the years ended December 31, 2020 and 2019, respectively. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Items subject to significant estimates and assumptions include the allowance for doubtful accounts, share-based compensation arrangements, fair value of stock options, useful lives and realizability of long-lived assets, classification of deferred revenue and revenue recognition related to breakage, classification of deferred franchise costs, calculation of ROU assets and liabilities related to leases, realizability of deferred tax assets, impairment of goodwill and intangible assets and purchase price allocations and related valuation. Recently Adopted Accounting Guidance On January 1, 2020, the Company early adopted 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. The Company reviewed other newly issued accounting pronouncements and concluded that they either are not applicable to the Company's operations or that no material effect is expected on the Company's financial statements upon future adoption. |
Revenue Disclosures
Revenue Disclosures | 12 Months Ended |
Dec. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Disclosures | Revenue Disclosures Company-owned or Managed Clinics The Company earns revenues from clinics that it owns and operates or manages throughout the United States. 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 or in accordance with the Company’s breakage policy as discussed in Note 1, Revenue Recognition. Franchising Fees, Royalty Fees, Advertising Fund Revenue, and Software Fees The Company currently franchises its concept across 32 states. The franchise arrangement is documented in the form of a franchise agreement. The franchise arrangement requires the Company to perform various activities to support the brand that do not directly transfer goods and services to the franchisee, but instead represent a single performance obligation, which is the transfer of the franchise license. The intellectual property subject to the franchise license is symbolic intellectual property as it does not have significant standalone functionality, and substantially all of the utility is derived from its association with the Company’s past or ongoing activities. The nature of the Company’s promise in granting the franchise license is to provide the franchisee with access to the brand’s symbolic intellectual property over the term of the license. The services provided by the Company are highly interrelated with the franchise license and as such are considered to represent a single performance obligation. The transaction price in a standard franchise arrangement primarily consists of (a) initial franchise fees; (b) continuing franchise fees (royalties); (c) advertising fees; and (d) software fees. Since the Company considers the licensing of the franchising right to be a single performance obligation, no allocation of the transaction price is required. The Company recognizes the primary components of the transaction price as follows: • Franchise fees are recognized as revenue ratably on a straight-line basis over the term of the franchise agreement commencing with the execution of the franchise agreement. As these fees are typically received in cash at or near the beginning of the franchise term, the cash received is initially recorded as a contract liability until recognized as revenue over time. • The Company is entitled to royalties and advertising fees based on a percentage of the franchisee's gross sales as defined in the franchise agreement. Royalty and advertising revenue are recognized when the franchisee's sales occur. Depending on timing within a fiscal period, the recognition of revenue results in either what is considered a contract asset (unbilled receivable) or, once billed, accounts receivable, on the balance sheet. • The Company is entitled to a software fee, which is charged monthly. The Company recognizes revenue related to software fees ratably on a straight-line basis over the term of the franchise agreement. In determining the amount and timing of revenue from contracts with customers, the Company exercises significant judgment with respect to collectability of the amount; however, the timing of recognition does not require significant judgment as it is based on either the franchise term or the reported sales of the franchisee, none of which require estimation. The Company believes its franchising arrangements do not contain a significant financing component. The Company recognizes advertising fees received under franchise agreements as advertising fund revenue. Regional Developer Fees The Company currently utilizes regional developers to assist in the development of the brand across certain geographic territories. The arrangement is documented in the form of a regional developer agreement. The arrangement between the Company and the regional developer requires the Company to perform various activities to support the brand that do not directly transfer goods and services to the regional developer, but instead represent a single performance obligation, which is the transfer of the development rights to the defined geographic region. The intellectual property subject to the development rights is symbolic intellectual property as it does not have significant standalone functionality, and substantially all of the utility is derived from its association with the Company’s past or ongoing activities. The nature of the Company’s promise in granting the development rights is to provide the regional developer with access to the brand’s symbolic intellectual property over the term of the agreement. The services provided by the Company are highly interrelated with the development of the territory and the resulting franchise licenses sold by the regional developer and as such are considered to represent a single performance obligation. The transaction price in a standard regional developer arrangement primarily consists of the initial territory fees. The Company recognizes the regional developer fee as revenue ratably on a straight-line basis over the term of the regional developer agreement commencing with the execution of the regional developer agreement. As these fees are typically received in cash at or near the beginning of the term of the regional developer agreement, the cash received is initially recorded as a contract liability until recognized as revenue over time. Disaggregation of Revenue The Company believes that the captions contained on the consolidated income statements appropriately reflect the disaggregation of its revenue by major type for the years ended December 31, 2020 and 2019. Other revenues primarily consist of merchant income associated with credit card transactions. Rollforward of Contract Liabilities and Contract Assets Changes in the Company's contract liability for deferred franchise and regional development fees during the years ended December 31, 2020 and 2019 were as follows: Deferred Revenue Balance at December 31, 2018 $ 13,609,463 Recognized as revenue during the year ended December 31, 2019 (2,595,394) Fees received and deferred during the year ended December 31, 2019 4,093,207 Balance at December 31, 2019 $ 15,107,276 Recognized as revenue during the year ended December 31, 2020 (2,977,604) Fees received and deferred during the year ended December 31, 2020 4,374,442 Balance at December 31, 2020 $ 16,504,114 Changes in the Company's contract assets for deferred franchise and development costs during the years ended December 31, 2020 and 2019 were as follows: Deferred Franchise and Development Costs Balance at December 31, 2018 $ 3,489,211 Recognized as cost of revenue during the year ended December 31, 2019 (811,731) Costs incurred and deferred during the year ended December 31, 2019 1,715,253 Balance at December 31, 2019 $ 4,392,733 Recognized as cost of revenue during the year ended December 31, 2020 (850,912) Costs incurred and deferred during the year ended December 31, 2020 1,696,486 Balance at December 31, 2020 $ 5,238,307 The following table illustrates revenues expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of December 31, 2020: Contract liabilities expected to be recognized in Amount 2021 $ 3,000,369 2022 2,671,594 2023 2,369,976 2024 1,894,088 2025 1,677,554 Thereafter 4,890,533 Total $ 16,504,114 |
Notes Receivable
Notes Receivable | 12 Months Ended |
Dec. 31, 2020 | |
Receivables [Abstract] | |
Notes Receivable | Notes Receivable Effective April 29, 2017, the Company entered into a regional developer agreement for certain territories in the state of Florida in exchange for $320,000, of which $187,000 was funded through a promissory note. The note bore interest at 10% per annum for 42 months and required monthly principal and interest payments over 36 months, which began on November 1, 2017 and matured on October 1, 2020. The note was secured by the regional developer rights in the respective territory. Effective August 31, 2017, the Company entered into a regional developer agreement for certain territories in Maryland/Washington DC in exchange for $220,000, of which $117,475 was funded through a promissory note. The note bore interest at 10% per annum for 36 months and required monthly principal and interest payments over 36 months, which began on September 1, 2017 and matured on August 1, 2020. The note was secured by the regional developer rights in the respective territory. Effective October 10, 2017, the Company entered into a regional developer agreement for certain territories in Texas, Oklahoma and Arkansas in exchange for $170,000, of which $135,688 was funded through a promissory note. The note bore interest at 10% per annum for 3 years, required monthly principal and interest payments over 3 years, and matured on October 24, 2020. The note was secured by the regional developer rights in the territory. Effective April 26, 2019, the Company entered into a promissory note valued at $31,086. The note bears interest at 0% per annum for 36 months and requires monthly principal payments over 36 months, beginning May 15, 2019 and maturing on May 15, 2022. The net outstanding balances of the notes as of December 31, 2020, and 2019 were $18,686 and $155,810, respectively. Allowance reserve on the outstanding notes as of December 31, 2020 and 2019 were $18,686 and $27,086, respectively. Maturities of notes receivable as of December 31, 2020 are as follows: 2021 $ 9,600 2022 9,086 Total $ 18,686 |
Property and Equipment
Property and Equipment | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment consist of the following: December 31, 2020 2019 Office and computer equipment $ 2,194,348 $ 1,594,364 Leasehold improvements 8,391,675 7,154,156 Software developed 1,193,007 1,193,007 Finance lease assets 282,027 80,604 12,061,057 10,022,131 Accumulated depreciation and amortization (6,890,837) (5,671,366) 5,170,220 4,350,765 Construction in progress 3,577,149 2,230,823 Property and Equipment, net $ 8,747,369 $ 6,581,588 Depreciation expense was $1,212,683 and $823,679 for the years ended December 31, 2020 and 2019, respectively. Amortization expense related to finance lease assets was $67,874 and $24,675 for the years ended December 31, 2020 and 2019, respectively. Construction in progress at December 31, 2020 and 2019 principally relate to development costs for a software to be used by clinics for operations and by the Company for the management of operations. |
Fair Value Consideration
Fair Value Consideration | 12 Months Ended |
Dec. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Consideration | Fair Value Consideration The Company’s financial instruments include cash, restricted cash, accounts receivable, notes receivable, accounts payable, accrued expenses and loan payable. The carrying amounts of its financial instruments approximate their fair value due to their short maturities. The Company does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. As of December 31, 2020, and 2019, the Company did not have any financial instruments that are measured on a recurring basis as Level 1, 2 or 3. The intangible assets resulting from the acquisitions were recorded at estimated fair value on a non-recurring basis and are considered Level 3 within the fair value hierarchy. |
Intangible Assets and Goodwill
Intangible Assets and Goodwill | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets and Goodwill | Intangible Assets and Goodwill On November 30, 2020, the Company entered into an Asset and Franchise Purchase Agreement under which the Company repurchased from the seller one operating franchise in Scottsdale, Arizona. The Company operates the franchise as a company-managed clinic. The total purchase price for the transaction was $534,000. The majority of the purchase price consideration was allocated to customer relationship and goodwill, which were assigned fair values of $96,000 and $475,143, respectively. On December 31, 2020, the Company entered into an agreement under which it repurchased the right to develop franchises in various counties in North Carolina. The total consideration for the transaction was $1,039,500. The Company carried a deferred revenue balance associated with this transaction of $36,781, representing the unrecognized portion of the license fee collected upon the execution of the regional developer agreement. The Company accounted for the termination of development rights associated with unsold or undeveloped franchises as a cancellation, and the associated deferred revenue was netted against the aggregate purchase price. Intangible assets consisted of the following: December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Carrying Value Intangible assets subject to amortization: Reacquired franchise rights $ 3,246,894 $ 2,107,730 $ 1,139,164 Customer relationships 1,351,975 1,130,800 221,175 Reacquired development rights 3,053,201 1,548,534 1,504,667 $ 7,652,070 $ 4,787,064 $ 2,865,006 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Value Intangible assets subject to amortization: Reacquired franchise rights $ 3,246,494 $ 1,400,086 $ 1,846,408 Customer relationships 1,255,975 865,478 390,497 Reacquired development rights 2,050,481 1,067,595 982,886 $ 6,552,950 $ 3,333,159 $ 3,219,791 Amortization expense related to the Company’s intangible assets was $1,453,905 and $1,050,903 for the years ended December 31, 2020 and 2019, respectively. Estimated amortization expense for 2021 and subsequent years is as follows: 2021 $ 1,713,819 2022 1,040,666 2023 90,521 2024 20,000 Total $ 2,865,006 The changes in the carrying amount of goodwill were as follows: Corporate Clinic Segment Balance as of December 31, 2019 Goodwill, gross $ 4,205,455 Accumulated impairment losses (54,994) Goodwill, net 4,150,461 2020 acquisition 475,143 Balance as of December 31, 2020 Goodwill, gross 4,680,598 Accumulated impairment losses (54,994) Goodwill, net $ 4,625,604 |
Debt
Debt | 12 Months Ended |
Dec. 31, 2020 | |
Debt Disclosure [Abstract] | |
Debt | Debt Credit Agreement On February 28, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”), with JPMorgan Chase Bank, N.A., individually, and as Administrative Agent and Issuing Bank (“JPMorgan Chase” or the “Lender”). The Credit Agreement provides for senior secured credit facilities (the “Credit Facilities”) in the amount of $7,500,000, including a $2,000,000 revolver (the “Revolver”) and $5,500,000 development line of credit (the “Line of Credit”). The Revolver includes amounts available for letters of credit of up to $1,000,000 and an uncommitted additional amount of $2,500,000. All outstanding principal and interest on the Revolver are due on February 28, 2022. Principal and interest outstanding on the Line of Credit at the end of the first year are converted to a term loan payable in 36 monthly payments with a final maturity date of March 31, 2024. Principal amounts on the Line of Credit borrowed during the second year plus interest thereon which are outstanding at the end of the second year are converted to a second term loan payable in 36 monthly payments with a final maturity date of March 31, 2025. Borrowings under the Credit Facilities bear interest at a rate equal to an applicable margin, which is a one-, three- or six-month reserve adjusted Eurocurrency rate plus 2.00% or, at the election of the Company, an alternative base rate, plus 1.00%. The alternative base rate is the greatest of the prime rate, the Federal Reserve Bank of New York rate plus 0.50% and the one-month reserve adjusted Eurocurrency plus 1.00%. Unused portions of the Credit Facilities bear interest at a rate equal to 0.25% per annum. If the current Eurocurrency rate is no longer available or representative, the loan agreement provides a mechanism for replacing that benchmark rate. The Credit Facilities are pre-payable at any time without penalty, other than customary breakage fees, and any voluntary repayments made by the Company would reduce the future required repayment amounts. The Credit Facilities contain customary events of default, including but not limited to nonpayment; material inaccuracy of representations and warranties; violations of covenants; certain bankruptcies and liquidations; cross-default to material indebtedness; certain material judgments; and certain fundamental changes such as a merger or sale of substantially all assets (as further defined in the Credit Facilities). The Credit Facilities require the Company to comply with customary affirmative, negative and financial covenants, including minimum interest coverage and maximum net leverage. A breach of any of these operating or financial covenants would result in a default under the Credit Facilities. If an event of default occurs and is continuing, the lenders could elect to declare all amounts then outstanding, together with accrued interest, to be immediately due and payable. The Credit Facilities are collateralized by substantially all of the Company’s assets, including the assets in the Company’s company-owned or managed clinics. The Company intends to use the Revolver for general working capital needs and the Line of Credit for acquiring and developing new chiropractic clinics. On March 18, 2020, the Company drew down $2,000,000 under the Revolver as a precautionary measure in order to further strengthen its cash position and provide financial flexibility in light of the uncertainty in the global markets resulting from the COVID-19 pandemic. As of December 31, 2020, the Company was in compliance with all applicable financial and non-financial covenants under the Credit Agreement. Paycheck Protection Program Loan On April 10, 2020, the Company received a loan in the amount of approximately $2.7 million from JPMorgan Chase Bank, N.A. (the “Loan”), pursuant to the Paycheck Protection Program (the “PPP”) administered by the United States Small Business Administration. The PPP is part of the Coronavirus Aid, Relief, and Economic Security Act, which provides for forgiveness of up to the full principal amount and accrued interest of qualifying loans guaranteed under the PPP. The Loan was granted pursuant to a Note dated April 9, 2020 issued by the Company. The Note matures on April 11, 2022 and bears interest at a rate of 0.98% per annum. Principal and accrued interest are payable monthly in equal installments through the maturity date, commencing on November 9, 2020, unless forgiven. However, all PPP loans in excess of $2 million are subject to review by SBA for compliance with program requirements set forth in the PPP Interim Final Rules and in the Borrower Application Form. The Note may be prepaid at any time prior to maturity with no prepayment penalties. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company grants stock-based awards under its 2014 Incentive Stock Plan (the “2014 Plan”) and the 2012 Stock Plan (the “2012 Plan”). The 2014 Plan replaced the 2012 Plan, but the 2012 plan remains in effect for the administration of awards made prior to its replacement by the 2014 Plan. The shares issued as a result of stock-based compensation transactions generally have been funded with the issuance of new shares of the Company’s common stock. The Company may grant the following types of incentive awards under the 2014 Plan: (i) non-qualified stock options; (ii) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; and (v) restricted stock units. Each award granted under the 2014 Plan is subject to an award agreement that incorporates, as applicable, the exercise price, the term of the award, the periods of restriction, the number of shares to which the award pertains, and such other terms and conditions as the plan committee determines. Awards granted under the 2014 Plan are classified as equity awards, which are recorded in stockholders’ equity in the Company’s consolidated balance sheets. Stock Options The Company’s closing price on the date of grant is the basis of fair value of its common stock used in determining the value of share-based awards. To the extent the value of the Company’s share-based awards involves a measure of volatility, the Company historically relied on the volatilities from publicly-traded companies with similar business models as its common stock lacked enough trading history for it to utilize its own historical volatility. Effective July 1, 2019, the Company uses available historical volatility of the Company’s common stock over a period of time corresponding to the expected stock option term. The Company uses the simplified method to calculate the expected term of stock option grants to employees as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term of stock options granted to employees. Accordingly, the expected life of the options granted is based on the average of the vesting term, which is generally four years and the contractual term, which is generally ten years. The Company will continue to evaluate the appropriateness of utilizing such method. The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding to the expected stock option term. The Company has computed the fair value of all options granted using the Black-Scholes-Merton model during the years ended December 31, 2020 and 2019, using the following assumptions: Year Ended December 31, 2020 2019 Expected volatility 53% to 58% 35% to 55% Expected dividends None None Expected term (years) 7 7 Risk-free rate 0.42% to 1.65% 1.89% to 2.61% The information below summarizes the stock options: Number of Weighted Weighted Aggregate Intrinsic Value Outstanding at December 31, 2018 986,691 $ 4.72 6.8 Granted at market price 65,759 12.31 Exercised (103,205) 5.28 $ 1,236,099 Cancelled — — Outstanding at December 31, 2019 949,245 $ 5.19 6.5 Granted at market price 111,158 14.76 Exercised (224,802) 4.49 $ 3,234,018 Cancelled — — Outstanding at December 31, 2020 835,601 $ 6.65 6.6 $ 16,153,117 Exercisable at December 31, 2020 570,724 $ 4.64 5.8 $ 12,334,489 The weighted-average grant-date fair value of the Company's stock options granted during 2020 and 2019 was $7.88 and $5.21, respectively. The aggregate fair value of the Company's stock options vested during 2020 and 2019 was $427,263 and $388,672, respectively. The Company recognizes compensation costs ratably over the period of service using the straight-line method. Forfeitures are estimated based on historical and forecasted turnover, which is approximately 5%. For the years ended December 31, 2020 and 2019, stock-based compensation expense for stock options was $517,431 and $418,301, respectively. Unrecognized stock-based compensation expense for stock options as of December 31, 2020 was $1,087,732, which is expected to be recognized ratably over the next 2.7 years. Restricted Stock Restricted stock awards granted to employees generally vest in four equal annual installments. Restricted stock awards granted to non-employee directors vest on the earlier of (i) one year from the grant date and (ii) the date of the next annual meeting of the shareholders of the Company occurring after the date of grant. The information below summaries the restricted stock activity: Restricted Stock Awards Shares Weighted Average Grant-Date Fair Value per Award Non-vested at December 31, 2019 38,976 $ 12.31 Granted 28,680 14.92 Vested (22,061) 13.99 Cancelled — — Non-vested at December 31, 2020 45,595 $ 13.13 |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes Income tax (benefit) provision reported in the consolidated income statements is comprised of the following: December 31, 2020 2019 Current provision: Federal $ — $ — State, net of state tax credits 342,832 47,133 Total current provision 342,832 47,133 Deferred (benefit) provision: Federal (6,074,433) 652 State (2,023,061) 921 Total deferred (benefit) provision (8,097,494) 1,573 Total income tax (benefit) provision $ (7,754,662) $ 48,706 The following are the components of the Company’s deferred tax assets (liabilities) for federal and state income taxes: December 31, 2020 2019 Deferred income tax assets: Accrued expenses $ 697,411 $ 515,802 Deferred revenue 5,109,283 4,435,474 Lease liability 3,696,955 3,782,796 Goodwill - component 2 51,536 55,302 Restricted stock compensation — 3,888 Nonqualified stock options 249,127 198,884 Net operating loss carryforwards 2,083,643 3,585,723 Tax credits 35,850 33,767 Asset basis difference related to property and equipment — 213,971 Intangibles 890,440 595,814 Total deferred income tax assets 12,814,245 13,421,421 Deferred income tax liabilities: Lease right-of-use asset (3,153,951) (3,267,892) Deferred franchise costs (291,915) (406,522) Goodwill - component 1 (321,967) (245,446) Asset basis difference related to property and equipment (256,487) — Restricted stock compensation (68,703) — Total deferred income tax liabilities (4,093,023) (3,919,860) Valuation allowance (713,589) (9,591,424) Net deferred tax asset (liability) $ 8,007,633 $ (89,863) As of December 31, 2019, the Company maintained a valuation allowance of $9.6 million against its deferred tax assets because there was insufficient positive evidence to overcome the existing negative evidence such that it was not more likely than not that the deferred tax assets were realizable. While the Company reported pre-tax income for the year ended December 31, 2019 and 2018, the Company continued to maintain the valuation allowance through the third quarter of 2020 due to the lack of sustained profitability over the three-year period. As of December 31, 2020, The Joint Corp., without the VIE, reported another pre-tax income for the year, resulting in a cumulative three-year pre-tax profit. After weighing all the evidence, management determined that it was more likely than not that the deferred tax assets were realizable and, therefore, the valuation allowance was no longer required for The Joint Corp. As a result, the Company released the valuation allowance against all of the U.S. federal and state deferred tax assets during the fourth quarter of 2020 related to The Joint Corp., without the VIE. Accordingly, the Company recorded a $8.9 million income tax benefit for the year ended December 31, 2020 for the reversal of its deferred tax valuation allowance. At December 31, 2020, The Joint Corp., without the VIE, had federal and state net operating losses of approximately $7.7 million and $9.8 million, respectively. These net operating losses are available to offset future taxable income and will begin to expire in 2036 for federal purposes and 2025 for state purposes. The Joint Corp. has research and development credits of $14,229 that will begin to expire in 2031 and $21,621 California alternative minimum tax credits that do not expire. The following is a reconciliation of the statutory federal income tax rate applied to pre-tax accounting net income, compared to the income tax (benefit) provision in the consolidated income statements: For the Years Ended December 31, 2020 2019 Amount Percent Amount Percent Expected federal tax expense $ 1,136,657 21.0 % $ 731,503 21.0 % State tax provision, net of federal benefit 277,401 5.1 % 315,805 9.1 % Change in valuation allowance (8,877,736) (164.0) % (810,190) (23.3) % Other permanent differences 123,913 2.3 % 41,711 1.2 % Stock compensation (398,007) (7.4) % (232,686) (6.7) % Bargain purchase gain — — % (5,205) (0.1) % Return to provision adjustments (16,890) (0.3) % 7,768 0.2 % (Benefit) provision $ (7,754,662) (143.3) % $ 48,706 1.4 % Changes in the Company's income tax (benefit) expense relate primarily to the release of valuation allowance in 2020, as well as changes in pretax income during the year ended December 31, 2020, as compared to year ended December 31, 2019. For the years ended December 31, 2020 and December 31, 2019, effective tax rates were (143.3)% and 1.4%, respectively. The difference between the statutory federal income tax rate and the Company's effective tax rate was primarily due to state taxes, the valuation allowance, VIE permanent differences, and stock-based compensation. For the years ended December 31, 2020 and December 31, 2019, the Company had no uncertain tax positions or interest and penalties related to uncertain tax positions. Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses, if any. With exceptions due to the generation and utilization of net operating losses or credits, as of December 31, 2020, the Company is no longer subject to federal and state examinations by taxing authorities for tax years before 2017 and 2016, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Leases The table below summarizes the components of lease expense and income statement location for the years ended December 31, 2020 and December 31, 2019: Years Ended December 31, Line Item in the Company’s Consolidated Income Statements 2020 2019 Finance lease costs: Amortization of assets Depreciation and amortization $ 67,874 $ 24,675 Interest on lease liabilities Other expense, net 11,575 6,832 Total finance lease costs $ 79,449 $ 31,507 Operating lease costs General and administrative expenses $ 3,552,395 $ 3,005,124 Total lease costs $ 3,631,844 $ 3,036,631 Supplemental information and balance sheet location related to leases is as follows: Years Ended December 31, 2020 2019 Operating Leases: Operating lease right-of -use asset $ 11,581,435 $ 12,486,672 Operating lease liability, current portion 2,918,140 2,313,109 Operating lease liability, net of current portion 10,632,672 11,901,040 Total operating lease liability $ 13,550,812 $ 14,214,149 Finance Leases: Property and equipment, at cost 282,027 80,604 Less accumulated amortization (92,549) (24,675) Property and equipment, net $ 189,478 $ 55,929 Finance lease liability, current portion 70,507 24,253 Finance lease liability, net of current portion 132,469 34,398 Total finance lease liabilities $ 202,976 $ 58,651 Weighted average remaining lease term (in years): Operating leases 4.7 5.4 Finance lease 4.1 2.3 Weighted average discount rate: Operating leases 8.5 % 8.7 % Finance leases 5.3 % 10.0 % Supplemental cash flow information related to leases is as follows: Years Ended December 31, 2020 2019 Cash paid for amounts included in measurement of liabilities: Operating cash flows from operating leases $ 3,462,848 $ 2,834,903 Operating cash flows from finance leases 11,575 6,832 Financing cash flows from finance leases 57,097 21,954 Non-cash transactions: ROU assets obtained in exchange for lease liabilities Operating lease 1,869,080 1,350,090 Finance lease $ 201,423 $ 80,604 Maturities of lease liabilities as of December 31, 2020 are as follows: Operating Leases Finance Lease 2021 $ 3,925,287 $ 78,900 2022 3,797,361 48,975 2023 3,099,227 27,600 2024 2,494,385 27,600 2025 2,077,593 27,600 Thereafter 991,612 11,500 Total lease payments 16,385,465 222,175 Less: Imputed interest (2,834,653) (19,199) Total lease obligations 13,550,812 202,976 Less: Current obligations (2,918,140) (70,507) Long-term lease obligation $ 10,632,672 $ 132,469 Total rent expense for the years ended December 31, 2020 and 2019 was $3,785,072 and $3,381,825, respectively. During the fourth quarter of 2020, the Company entered into various operating leases for its new corporate clinics' space that have not yet commenced. These leases are expected to result in additional ROU asset and liability of approximately $2.7 million. These leases are expected to commence during the first quarter of 2021, with a lease terms of five Litigation In the normal course of business, the Company is party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company. |
Segment Reporting
Segment Reporting | 12 Months Ended |
Dec. 31, 2020 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting An operating segment is defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”) to evaluate performance and make operating decisions. The Company has identified its CODM as the Chief Executive Officer. The Company has two operating business segments. The Corporate Clinics segment is comprised of the operating activities of the company-owned or managed clinics. As of December 31, 2020, the Company operated or managed 64 clinics under this segment. The Franchise Operations segment is comprised of the operating activities of the franchise business unit. As of December 31, 2020, the franchise system consisted of 515 clinics in operation. Corporate is a non-operating segment that develops and implements strategic initiatives and supports the Company’s two operating business segments by centralizing key administrative functions such as finance and treasury, information technology, insurance and risk management, legal and human resources. Corporate also provides the necessary administrative functions to support the Company as a publicly-traded company. A portion of the expenses incurred by Corporate are allocated to the operating segments. The tables below present financial information for the Company’s two operating business segments. Year Ended December 31, 2020 2019 Revenues: Corporate clinics $ 31,771,288 $ 25,807,584 Franchise operations 26,911,688 22,643,316 Total revenues $ 58,682,976 $ 48,450,900 Segment operating income: Corporate clinics $ 4,508,990 $ 3,365,295 Franchise operations 12,561,278 10,974,769 Total segment operating income $ 17,070,268 $ 14,340,064 Depreciation and amortization: Corporate clinics $ 2,503,181 $ 1,707,575 Franchise operations — — Corporate administration 231,281 191,682 Total depreciation and amortization $ 2,734,462 $ 1,899,257 Reconciliation of total segment operating income to consolidated earnings before income taxes: Total segment operating income $ 17,070,268 $ 14,340,064 Unallocated corporate (11,578,138) (10,925,429) Consolidated income from operations 5,492,130 3,414,635 Bargain purchase gain — 19,298 Other (expense), net (79,478) (61,515) Income before income tax expense $ 5,412,652 $ 3,372,418 December 31, 2020 December 31, 2019 Segment assets: Corporate clinics $ 24,928,311 $ 25,389,147 Franchise operations 9,744,375 7,466,629 Total segment assets $ 34,672,686 $ 32,855,776 Unallocated cash and cash equivalents and restricted cash $ 20,819,629 $ 8,641,877 Unallocated property and equipment 1,063,815 996,385 Other unallocated assets 9,176,713 1,211,629 Total assets $ 65,732,843 $ 43,705,667 “Unallocated cash and cash equivalents and restricted cash” relates primarily to corporate cash and cash equivalents and restricted cash (see Note 1), “unallocated property and equipment” relates primarily to corporate fixed assets, and “other unallocated assets” relates primarily to deposits, prepaid and other assets. Certain unallocated property and equipment balances were reclassified to Corporate clinics and Franchise operations segments as of December 31, 2019 to conform to the current year presentation. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2020 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party TransactionIn December 2020, the Company sold two franchise licenses to Marshall Gramm, who is a family member of the Managing Partner of Bandera Partners LLC. Bandera Partners LLC, is a beneficial holder of 5% or more of our outstanding common stock as of December 31, 2020 (approximately 12% as of December 31, 2020). The transaction involved terms no less favorable to the Company than those that would have been obtained in the absence of such affiliation. Amounts received from Mr. Gramm were $71,800 of which $71,494 was recorded as deferred revenue as of December 31, 2020. Although the Company has no way of estimating the aggregate amount of franchise fees, royalties, advertising fund fees, IT related income and computer software fees that Mr. Gramm will pay over the life of the franchise licenses, Mr. Gramm will be subject to such fees under the same terms and conditions as all other franchisees. |
Subsequent Events
Subsequent Events | 12 Months Ended |
Dec. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events | Subsequent EventsOn January 1, 2021, the Company entered into an agreement under which the Company repurchased the right to develop franchises in various counties in Georgia. The total consideration for the transaction was $1,388,700. The Company carried a deferred revenue balance associated with this transaction of $35,679, representing the fee collected upon the execution of the regional developer agreement. The Company accounted for the termination of development rights associated with unsold or undeveloped franchises as a cancellation, and the associated deferred revenue was netted against the aggregate purchase price. The Company recognized the net amount of $1,353,021 as reacquired development rights in January 2021, which will be amortized over the remaining original contract period of approximately 13 months. On March 4, 2021, the Company elected to repay the full principal and accrued interest on the PPP loan of approximately $2.7 million from JPMorgan Chase Bank, N.A. without the prepayment penalty, in accordance with the terms of the PPP loan. |
Nature of Operations and Summ_2
Nature of Operations and Summary of Significant Accounting Policies (Policies) | 12 Months Ended |
Dec. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation These financial statements represent the 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 preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses, other (expenses) income, and income taxes that are reported in the 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. |
Principles of Consolidation | Principles of Consolidation The accompanying consolidated financial statements include the accounts of The Joint Corp. 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 ASC 810. Non-controlling interests represent third-party equity ownership interests in VIEs. |
Comprehensive Income | Comprehensive Income Net income and comprehensive income are the same for the years ended December 31, 2020 and 2019. |
Variable Interest Entities | 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 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 nonclinical 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 December 31, 2020. |
Nature of Operations | Nature of Operations The Joint Corp., a Delaware corporation, was formed on March 10, 2010 for the principal purpose of franchising, developing, selling regional developer rights, supporting the operations of franchised chiropractic clinics, and operating and managing corporate 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. |
Cash and Cash Equivalents | 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 December 31, 2020 and 2019. |
Restricted Cash | 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 ReceivableAccounts 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 December 31, 2020, and 2019, the Company had an allowance for doubtful accounts of $0. |
Deferred Franchise Costs and Regional Development Costs | Deferred Franchise Costs 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 developer agreement. |
Property and Equipment | 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 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 | 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 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 three The FASB issued in August 2018 an update to accounting guidance related to implementation costs incurred in a cloud computing arrangement that is a service contract. The update aligns the requirements for capitalizing implementation costs incurred under such arrangements with the requirements for capitalizing costs incurred to develop or obtain internal-use software. Accordingly, implementation costs incurred in connection with a cloud computing arrangement that is a service contract are capitalized and such costs were included in prepaid expenses in the Company’s Consolidated Balance Sheet. |
Leases | 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 consolidated income statements. 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 consolidated income statements. |
Intangible Assets | Intangible AssetsIntangible 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 one two two |
Goodwill | 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. 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 also performed its annual impairment test of goodwill as of October 1, 2020 as required. No impairments of goodwill were recorded for the years ended December 31, 2020 and 2019. 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. |
Long-Lived Assets | Long-Lived AssetsThe 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 COVID-19 pandemic, the Company 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 remainder of 2020. |
Advertising Fund | Advertising Fund The Company has established an advertising fund for national or 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 | 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 Co-Op Marketing Funds collected are segregated and used for the purposes specified by the Co-Ops’ officers. The Co-Op Marketing Funds are included in restricted cash on the Company’s consolidated balance sheets. |
Revenue Recognition | Revenue Recognition The Company generates revenue primarily through its company-owned and managed clinics and through royalties, franchise fees, advertising fund contributions, IT related income and computer software fees from its franchisees. 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. Any unused visits associated with monthly memberships are recognized on a month-to-month basis. The Company recognizes a contract liability (or a deferred revenue 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 and marketing and advertising fees are collected bi-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 from its franchisees 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 developer agreement, which is considered to begin upon the execution of the agreement. The Company’s services under regional developer agreements include site selection, grand opening support for the clinics, sales support for identification of qualified franchisees, general operational support and marketing support to advertise for ownership opportunities. The services provided by the Company are highly interrelated with the development of the territory and the resulting franchise licenses sold by the regional developer and as such are considered to represent a single performance obligation. In addition, regional developers receive fees which are funded by the initial franchise fees collected from franchisees upon the sale of franchises within their exclusive geographical territory and a royalty of 3% of sales generated by franchised clinics in their exclusive geographical territory. Fees related to the sale of franchises within their exclusive geographical territory are initially deferred as deferred franchise costs and are recognized as an expense in franchise cost of revenues when the respective revenue is recognized, which is generally over the term of the related franchise agreement. Royalties of 3% of sales generated by franchised clinics in their regions are also recognized as franchise cost of revenues as franchisee clinic level sales occur, which is funded by the 7% royalties collected from the franchisees in their regions. Certain regional developer agreements result in the regional developer acquiring the rights to existing royalty streams from clinics already open in the respective territory. In those instances, the revenue associated from the sale of the royalty stream is recognized over the remaining life of the respective franchise agreements. |
Advertising Costs | Advertising CostsAdvertising costs are advertising and marketing expenses incurred by the Company, primarily through advertising funds. The Company expenses production costs of commercial advertising upon first airing and expenses the costs of communicating the advertising in the period in which the advertising occurs. |
Income Taxes | Income Taxes Income taxes are accounted for using a balance sheet approach known as the asset and liability method. The asset and liability method accounts for deferred income taxes by applying the statutory tax rates in effect at the date of the balance sheets to differences between the book basis and the tax basis of assets and liabilities. Deferred tax assets and liabilities represent the future tax consequence for those differences, which will either be taxable or deductible when the assets and liabilities are recovered or settled. The differences relate principally to depreciation of property and equipment and treatment of revenue for franchise fees and regional developer fees collected. Tax positions are reviewed at least quarterly and adjusted as new information becomes available. The recoverability of deferred tax assets is evaluated by assessing the adequacy of future expected taxable income from all sources, including reversal of taxable temporary differences, forecasted operating earnings and available tax planning strategies. These estimates of future taxable income inherently require significant judgment. To the extent it is considered more likely than not that a deferred tax asset will be not recovered, a valuation allowance is established. The Company accounts for uncertainty in income taxes by recognizing the tax benefit or expense from an uncertain tax position only if it is more likely than not that the tax position will be sustained upon examination by the taxing authorities, based on the technical merits of the position. The Company measures the tax benefits and expenses recognized in the consolidated financial statements from such a position based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution. The Company has not identified any material uncertain tax positions as of December 31, 2020 and 2019, respectively. Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses. With exceptions due to the generation and utilization of net operating losses or credits, as of December 31, 2020, the Company is no longer subject to federal and state examinations by taxing authorities for tax years before 2017 and 2016, respectively. |
Earnings per Common Share | Earnings per Common Share Basic earnings per common share is computed by dividing net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed by giving effect to all potentially dilutive common shares including restricted stock and stock options. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for share-based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant. The Company determines the estimated grant-date fair value of restricted shares using the closing price on the date of the grant and the grant-date fair value of stock options using the Black-Scholes-Merton model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the model, |
Retirement Benefit Plan | Retirement Benefit PlanEmployees of the Company are eligible to participate in a defined contribution retirement plan, the Joint Corp. 401(k) Retirement Plan (“401(k) Plan”), under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, employees may contribute their eligible compensation, not to exceed the annual limits set by the IRS. The 401(k) Plan allows the Company to match participants’ contributions in an amount determined at the sole discretion of the Company. The Company matched participants’ contributions for the years ended December 31, 2020 and 2019, up to a maximum of 4% and 2% of the employee’s eligible compensation, respectively. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Items subject to significant estimates and assumptions include the allowance for doubtful accounts, share-based compensation arrangements, fair value of stock options, useful lives and realizability of long-lived assets, classification of deferred revenue and revenue recognition related to breakage, classification of deferred franchise costs, calculation of ROU assets and liabilities related to leases, realizability of deferred tax assets, impairment of goodwill and intangible assets and purchase price allocations and related valuation. |
Recently Adopted Accounting Guidance | Recently Adopted Accounting Guidance On January 1, 2020, the Company early adopted 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. The Company reviewed other newly issued accounting pronouncements and concluded that they either are not applicable to the Company's operations or that no material effect is expected on the Company's financial statements upon future adoption. |
Nature of Operations and Summ_3
Nature of Operations and Summary of Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
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 for the years ended December 31, 2020 and 2019: Year Ended December 31, Franchised clinics: 2020 2019 Clinics open at beginning of period 453 394 Opened during the period 70 71 Sold during the period (1) (8) Closed during the period (7) (4) Clinics in operation at the end of the period 515 453 Year Ended December 31, Company-owned or managed clinics: 2020 2019 Clinics open at beginning of period 60 48 Opened during the period 3 5 Acquired during the period 1 8 Closed during the period — (1) Clinics in operation at the end of the period 64 60 Total clinics in operation at the end of the period 579 513 Clinic licenses sold but not yet developed 212 170 Executed letters of intent for future clinic licenses 41 34 |
Schedule of Earnings (Loss) per Common Share | Year Ended December 31, 2020 2019 Net income $ 13,167,314 $ 3,323,712 Weighted average common shares outstanding - basic 14,003,708 13,819,149 Effect of dilutive securities: Unvested restricted stock and stock options 579,169 648,418 Weighted average common shares outstanding - diluted 14,582,877 14,467,567 Basic earnings per share $ 0.94 $ 0.24 Diluted earnings per share $ 0.90 $ 0.23 Potentially dilutive securities excluded from the calculation of diluted net income per common share as the effect would be anti-dilutive were as follows: Year Ended December 31, 2020 2019 Unvested restricted stock — — Stock options 94,294 39,286 |
Revenue Disclosures (Tables)
Revenue Disclosures (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Changes in Contract Asset and Liability | Changes in the Company's contract liability for deferred franchise and regional development fees during the years ended December 31, 2020 and 2019 were as follows: Deferred Revenue Balance at December 31, 2018 $ 13,609,463 Recognized as revenue during the year ended December 31, 2019 (2,595,394) Fees received and deferred during the year ended December 31, 2019 4,093,207 Balance at December 31, 2019 $ 15,107,276 Recognized as revenue during the year ended December 31, 2020 (2,977,604) Fees received and deferred during the year ended December 31, 2020 4,374,442 Balance at December 31, 2020 $ 16,504,114 Changes in the Company's contract assets for deferred franchise and development costs during the years ended December 31, 2020 and 2019 were as follows: Deferred Franchise and Development Costs Balance at December 31, 2018 $ 3,489,211 Recognized as cost of revenue during the year ended December 31, 2019 (811,731) Costs incurred and deferred during the year ended December 31, 2019 1,715,253 Balance at December 31, 2019 $ 4,392,733 Recognized as cost of revenue during the year ended December 31, 2020 (850,912) Costs incurred and deferred during the year ended December 31, 2020 1,696,486 Balance at December 31, 2020 $ 5,238,307 |
Schedule of Revenue Expected to be Recognized Related to Performance Obligations | The following table illustrates revenues expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of December 31, 2020: Contract liabilities expected to be recognized in Amount 2021 $ 3,000,369 2022 2,671,594 2023 2,369,976 2024 1,894,088 2025 1,677,554 Thereafter 4,890,533 Total $ 16,504,114 |
Notes Receivable (Tables)
Notes Receivable (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Receivables [Abstract] | |
Schedule of Financing Receivables, Minimum Payments | Maturities of notes receivable as of December 31, 2020 are as follows: 2021 $ 9,600 2022 9,086 Total $ 18,686 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Schedule of Property Plant and Equipment | Property and equipment consist of the following: December 31, 2020 2019 Office and computer equipment $ 2,194,348 $ 1,594,364 Leasehold improvements 8,391,675 7,154,156 Software developed 1,193,007 1,193,007 Finance lease assets 282,027 80,604 12,061,057 10,022,131 Accumulated depreciation and amortization (6,890,837) (5,671,366) 5,170,220 4,350,765 Construction in progress 3,577,149 2,230,823 Property and Equipment, net $ 8,747,369 $ 6,581,588 |
Intangible Assets and Goodwill
Intangible Assets and Goodwill (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | Intangible assets consisted of the following: December 31, 2020 Gross Carrying Amount Accumulated Amortization Net Carrying Value Intangible assets subject to amortization: Reacquired franchise rights $ 3,246,894 $ 2,107,730 $ 1,139,164 Customer relationships 1,351,975 1,130,800 221,175 Reacquired development rights 3,053,201 1,548,534 1,504,667 $ 7,652,070 $ 4,787,064 $ 2,865,006 December 31, 2019 Gross Carrying Amount Accumulated Amortization Net Carrying Value Intangible assets subject to amortization: Reacquired franchise rights $ 3,246,494 $ 1,400,086 $ 1,846,408 Customer relationships 1,255,975 865,478 390,497 Reacquired development rights 2,050,481 1,067,595 982,886 $ 6,552,950 $ 3,333,159 $ 3,219,791 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Estimated amortization expense for 2021 and subsequent years is as follows: 2021 $ 1,713,819 2022 1,040,666 2023 90,521 2024 20,000 Total $ 2,865,006 |
Schedule of Goodwill | The changes in the carrying amount of goodwill were as follows: Corporate Clinic Segment Balance as of December 31, 2019 Goodwill, gross $ 4,205,455 Accumulated impairment losses (54,994) Goodwill, net 4,150,461 2020 acquisition 475,143 Balance as of December 31, 2020 Goodwill, gross 4,680,598 Accumulated impairment losses (54,994) Goodwill, net $ 4,625,604 |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Equity [Abstract] | |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The Company has computed the fair value of all options granted using the Black-Scholes-Merton model during the years ended December 31, 2020 and 2019, using the following assumptions: Year Ended December 31, 2020 2019 Expected volatility 53% to 58% 35% to 55% Expected dividends None None Expected term (years) 7 7 Risk-free rate 0.42% to 1.65% 1.89% to 2.61% |
Share-based Compensation, Stock Options, Activity | The information below summarizes the stock options: Number of Weighted Weighted Aggregate Intrinsic Value Outstanding at December 31, 2018 986,691 $ 4.72 6.8 Granted at market price 65,759 12.31 Exercised (103,205) 5.28 $ 1,236,099 Cancelled — — Outstanding at December 31, 2019 949,245 $ 5.19 6.5 Granted at market price 111,158 14.76 Exercised (224,802) 4.49 $ 3,234,018 Cancelled — — Outstanding at December 31, 2020 835,601 $ 6.65 6.6 $ 16,153,117 Exercisable at December 31, 2020 570,724 $ 4.64 5.8 $ 12,334,489 |
Schedule of Share-based Compensation, Restricted Stock and Restricted Stock Units Activity | The information below summaries the restricted stock activity: Restricted Stock Awards Shares Weighted Average Grant-Date Fair Value per Award Non-vested at December 31, 2019 38,976 $ 12.31 Granted 28,680 14.92 Vested (22,061) 13.99 Cancelled — — Non-vested at December 31, 2020 45,595 $ 13.13 |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Schedule of Components of Income Tax Expense (Benefit) | Income tax (benefit) provision reported in the consolidated income statements is comprised of the following: December 31, 2020 2019 Current provision: Federal $ — $ — State, net of state tax credits 342,832 47,133 Total current provision 342,832 47,133 Deferred (benefit) provision: Federal (6,074,433) 652 State (2,023,061) 921 Total deferred (benefit) provision (8,097,494) 1,573 Total income tax (benefit) provision $ (7,754,662) $ 48,706 |
Schedule of Deferred Tax Assets and Liabilities | The following are the components of the Company’s deferred tax assets (liabilities) for federal and state income taxes: December 31, 2020 2019 Deferred income tax assets: Accrued expenses $ 697,411 $ 515,802 Deferred revenue 5,109,283 4,435,474 Lease liability 3,696,955 3,782,796 Goodwill - component 2 51,536 55,302 Restricted stock compensation — 3,888 Nonqualified stock options 249,127 198,884 Net operating loss carryforwards 2,083,643 3,585,723 Tax credits 35,850 33,767 Asset basis difference related to property and equipment — 213,971 Intangibles 890,440 595,814 Total deferred income tax assets 12,814,245 13,421,421 Deferred income tax liabilities: Lease right-of-use asset (3,153,951) (3,267,892) Deferred franchise costs (291,915) (406,522) Goodwill - component 1 (321,967) (245,446) Asset basis difference related to property and equipment (256,487) — Restricted stock compensation (68,703) — Total deferred income tax liabilities (4,093,023) (3,919,860) Valuation allowance (713,589) (9,591,424) Net deferred tax asset (liability) $ 8,007,633 $ (89,863) |
Schedule of Effective Income Tax Rate Reconciliation | The following is a reconciliation of the statutory federal income tax rate applied to pre-tax accounting net income, compared to the income tax (benefit) provision in the consolidated income statements: For the Years Ended December 31, 2020 2019 Amount Percent Amount Percent Expected federal tax expense $ 1,136,657 21.0 % $ 731,503 21.0 % State tax provision, net of federal benefit 277,401 5.1 % 315,805 9.1 % Change in valuation allowance (8,877,736) (164.0) % (810,190) (23.3) % Other permanent differences 123,913 2.3 % 41,711 1.2 % Stock compensation (398,007) (7.4) % (232,686) (6.7) % Bargain purchase gain — — % (5,205) (0.1) % Return to provision adjustments (16,890) (0.3) % 7,768 0.2 % (Benefit) provision $ (7,754,662) (143.3) % $ 48,706 1.4 % |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Lease, Cost | The table below summarizes the components of lease expense and income statement location for the years ended December 31, 2020 and December 31, 2019: Years Ended December 31, Line Item in the Company’s Consolidated Income Statements 2020 2019 Finance lease costs: Amortization of assets Depreciation and amortization $ 67,874 $ 24,675 Interest on lease liabilities Other expense, net 11,575 6,832 Total finance lease costs $ 79,449 $ 31,507 Operating lease costs General and administrative expenses $ 3,552,395 $ 3,005,124 Total lease costs $ 3,631,844 $ 3,036,631 |
Assets And Liabilities, Lessee | Supplemental information and balance sheet location related to leases is as follows: Years Ended December 31, 2020 2019 Operating Leases: Operating lease right-of -use asset $ 11,581,435 $ 12,486,672 Operating lease liability, current portion 2,918,140 2,313,109 Operating lease liability, net of current portion 10,632,672 11,901,040 Total operating lease liability $ 13,550,812 $ 14,214,149 Finance Leases: Property and equipment, at cost 282,027 80,604 Less accumulated amortization (92,549) (24,675) Property and equipment, net $ 189,478 $ 55,929 Finance lease liability, current portion 70,507 24,253 Finance lease liability, net of current portion 132,469 34,398 Total finance lease liabilities $ 202,976 $ 58,651 Weighted average remaining lease term (in years): Operating leases 4.7 5.4 Finance lease 4.1 2.3 Weighted average discount rate: Operating leases 8.5 % 8.7 % Finance leases 5.3 % 10.0 % Supplemental cash flow information related to leases is as follows: Years Ended December 31, 2020 2019 Cash paid for amounts included in measurement of liabilities: Operating cash flows from operating leases $ 3,462,848 $ 2,834,903 Operating cash flows from finance leases 11,575 6,832 Financing cash flows from finance leases 57,097 21,954 Non-cash transactions: ROU assets obtained in exchange for lease liabilities Operating lease 1,869,080 1,350,090 Finance lease $ 201,423 $ 80,604 |
Lessee, Operating Lease, Liability, Maturity | Maturities of lease liabilities as of December 31, 2020 are as follows: Operating Leases Finance Lease 2021 $ 3,925,287 $ 78,900 2022 3,797,361 48,975 2023 3,099,227 27,600 2024 2,494,385 27,600 2025 2,077,593 27,600 Thereafter 991,612 11,500 Total lease payments 16,385,465 222,175 Less: Imputed interest (2,834,653) (19,199) Total lease obligations 13,550,812 202,976 Less: Current obligations (2,918,140) (70,507) Long-term lease obligation $ 10,632,672 $ 132,469 |
Finance Lease, Liability, Maturity | Maturities of lease liabilities as of December 31, 2020 are as follows: Operating Leases Finance Lease 2021 $ 3,925,287 $ 78,900 2022 3,797,361 48,975 2023 3,099,227 27,600 2024 2,494,385 27,600 2025 2,077,593 27,600 Thereafter 991,612 11,500 Total lease payments 16,385,465 222,175 Less: Imputed interest (2,834,653) (19,199) Total lease obligations 13,550,812 202,976 Less: Current obligations (2,918,140) (70,507) Long-term lease obligation $ 10,632,672 $ 132,469 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 12 Months Ended |
Dec. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | The tables below present financial information for the Company’s two operating business segments. Year Ended December 31, 2020 2019 Revenues: Corporate clinics $ 31,771,288 $ 25,807,584 Franchise operations 26,911,688 22,643,316 Total revenues $ 58,682,976 $ 48,450,900 Segment operating income: Corporate clinics $ 4,508,990 $ 3,365,295 Franchise operations 12,561,278 10,974,769 Total segment operating income $ 17,070,268 $ 14,340,064 Depreciation and amortization: Corporate clinics $ 2,503,181 $ 1,707,575 Franchise operations — — Corporate administration 231,281 191,682 Total depreciation and amortization $ 2,734,462 $ 1,899,257 Reconciliation of total segment operating income to consolidated earnings before income taxes: Total segment operating income $ 17,070,268 $ 14,340,064 Unallocated corporate (11,578,138) (10,925,429) Consolidated income from operations 5,492,130 3,414,635 Bargain purchase gain — 19,298 Other (expense), net (79,478) (61,515) Income before income tax expense $ 5,412,652 $ 3,372,418 |
Reconciliation of Assets from Segment to Consolidated | December 31, 2020 December 31, 2019 Segment assets: Corporate clinics $ 24,928,311 $ 25,389,147 Franchise operations 9,744,375 7,466,629 Total segment assets $ 34,672,686 $ 32,855,776 Unallocated cash and cash equivalents and restricted cash $ 20,819,629 $ 8,641,877 Unallocated property and equipment 1,063,815 996,385 Other unallocated assets 9,176,713 1,211,629 Total assets $ 65,732,843 $ 43,705,667 |
Supplemental Disclosure of No_2
Supplemental Disclosure of Non-cash Activity (Details) - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Income taxes paid | $ 237,655 | $ 65,064 | |
Cash paid for interest | 42,833 | 96,978 | |
Amount exchanged | 534,000 | 3,127,332 | |
Net deferred revenue | 16,504,114 | 15,107,276 | $ 13,609,463 |
Assets and Franchise Agreement | |||
Property and equipment acquired | 1,625 | 173,521 | |
Intangible assets acquired | 96,400 | 1,999,469 | |
Accounts payable | 5,000 | ||
Net deferred revenue | 355 | 40,805 | |
License Fee Collection Upon Regional Developer Agreement | |||
Net deferred revenue | 36,781 | 44,334 | |
Purchase of Property, Plant and Equipment Included in Accounts Payable | |||
Capital expenditures incurred but not yet paid | 126,239 | 196,671 | |
Purchase of Property, Plant and Equipment Included in Accrued Expenses | |||
Capital expenditures incurred but not yet paid | $ 163,434 | $ 15,250 |
Nature of Operations and Summ_4
Nature of Operations and Summary of Significant Accounting Policies - Narrative (Details) | 12 Months Ended | ||
Dec. 31, 2020USD ($)agreement | Dec. 31, 2019USD ($)agreement | Dec. 31, 2018USD ($) | |
Product Information [Line Items] | |||
Cash equivalents | $ 0 | $ 0 | |
Allowance for doubtful accounts | 0 | 0 | |
Impairments of goodwill | 0 | 0 | |
Impairments of long-lived assets | $ 0 | $ 0 | |
Monthly marketing fee | 2.00% | ||
Royalties percentage | 7.00% | ||
Franchise agreement term | 10 years | ||
Royalty sales generated by franchises percentage | 3.00% | ||
Number of regional developer agreements | agreement | 2 | 1 | |
Net deferred revenue | $ 16,504,114 | $ 15,107,276 | $ 13,609,463 |
Advertising expense | $ 2,640,853 | $ 2,292,628 | |
Forecasted turnover percentage | 5.00% | ||
Company matching contribution (maximum) | 4.00% | 2.00% | |
Employer contributions | $ 265,094 | $ 103,745 | |
Regional Development Agreement | |||
Product Information [Line Items] | |||
Net deferred revenue | $ 500,000 | $ 300,000 | |
Minimum | |||
Product Information [Line Items] | |||
Useful life, property and equipment | 3 years | ||
Remaining contract liability breakage period | 12 months | ||
Minimum | Computer Software | |||
Product Information [Line Items] | |||
Intangible assets, useful life | 3 years | ||
Minimum | Reacquired franchise rights | |||
Product Information [Line Items] | |||
Intangible assets, useful life | 1 year | ||
Minimum | Reacquired development rights | |||
Product Information [Line Items] | |||
Intangible assets, useful life | 2 years | ||
Minimum | Customer relationships | |||
Product Information [Line Items] | |||
Intangible assets, useful life | 2 years | ||
Maximum | |||
Product Information [Line Items] | |||
Useful life, property and equipment | 7 years | ||
Remaining contract liability breakage period | 24 months | ||
Maximum | Computer Software | |||
Product Information [Line Items] | |||
Intangible assets, useful life | 5 years | ||
Maximum | Reacquired franchise rights | |||
Product Information [Line Items] | |||
Intangible assets, useful life | 8 years | ||
Maximum | Reacquired development rights | |||
Product Information [Line Items] | |||
Intangible assets, useful life | 7 years | ||
Maximum | Customer relationships | |||
Product Information [Line Items] | |||
Intangible assets, useful life | 4 years |
Nature of Operations and Summ_5
Nature of Operations and Summary of Significant Accounting Policies - Clinics in Operation Under Franchise Agreements or Company-Owned or Managed (Details) - clinic | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Product Information, Franchised Clinics, Company-Owned Or Managed Clinics, Activity [Roll Forward] | ||
Clinics open at beginning of period | 513 | |
Clinics in operation at the end of the period | 579 | 513 |
Clinic licenses sold but not yet developed | 212 | 170 |
Executed letters of intent for future clinic licenses | 41 | 34 |
Franchised Units | ||
Product Information, Franchised Clinics, Company-Owned Or Managed Clinics, Activity [Roll Forward] | ||
Clinics open at beginning of period | 453 | 394 |
Opened during the period | 70 | 71 |
Sold during the period | (1) | (8) |
Closed during the period | (7) | (4) |
Clinics in operation at the end of the period | 515 | 453 |
Entity Operated Units | ||
Product Information, Franchised Clinics, Company-Owned Or Managed Clinics, Activity [Roll Forward] | ||
Clinics open at beginning of period | 60 | 48 |
Opened during the period | 3 | 5 |
Acquired during the period | 1 | 8 |
Closed during the period | 0 | (1) |
Clinics in operation at the end of the period | 64 | 60 |
Nature of Operations and Summ_6
Nature of Operations and Summary of Significant Accounting Policies - Earnings (Loss) Per Common Share (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Product Information [Line Items] | ||
Net income | $ 13,167,314 | $ 3,323,712 |
Weighted average common shares outstanding - basic (in shares) | 14,003,708 | 13,819,149 |
Effect of dilutive securities: | ||
Unvested restricted stock and stock options (in shares) | 579,169 | 648,418 |
Weighted average common shares outstanding - diluted (in shares) | 14,582,877 | 14,467,567 |
Basic earnings per share (in dollars per share) | $ 0.94 | $ 0.24 |
Diluted earnings per share (in dollars per share) | $ 0.90 | $ 0.23 |
Unvested restricted stock | ||
Effect of dilutive securities: | ||
Potentially dilutive securities excluded from calculation of diluted net income per common share (in shares) | 0 | 0 |
Stock options | ||
Effect of dilutive securities: | ||
Potentially dilutive securities excluded from calculation of diluted net income per common share (in shares) | 94,294 | 39,286 |
Revenue Disclosures - Changes i
Revenue Disclosures - Changes in Contract Assets and Contract Liabilities (Details) | 12 Months Ended | |
Dec. 31, 2020USD ($)state | Dec. 31, 2019USD ($) | |
Revenue from Contract with Customer [Abstract] | ||
Number of states with franchised concepts | state | 32 | |
Deferred Revenue short and long-term | ||
Balance, contract liabilities | $ 15,107,276 | $ 13,609,463 |
Recognized as revenue during the year | (2,977,604) | (2,595,394) |
Fees received and deferred during the year | 4,374,442 | 4,093,207 |
Balance, contract liabilities | 16,504,114 | 15,107,276 |
Deferred Franchise and Development Costs short and long-term | ||
Balance, contract assets | 4,392,733 | 3,489,211 |
Recognized as cost of revenue during the year | (850,912) | (811,731) |
Costs incurred and deferred during the year | 1,696,486 | 1,715,253 |
Balance, contract assets | $ 5,238,307 | $ 4,392,733 |
Revenue Disclosures - Revenue R
Revenue Disclosures - Revenue Related to Performance Obligations - Maturity (Details) | Dec. 31, 2020USD ($) |
Disaggregation of Revenue [Line Items] | |
Revenue expected to be recognized, amount | $ 16,504,114 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
Disaggregation of Revenue [Line Items] | |
Revenue expected to be recognized, amount | $ 3,000,369 |
Revenue expected to be recognized, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | |
Disaggregation of Revenue [Line Items] | |
Revenue expected to be recognized, amount | $ 2,671,594 |
Revenue expected to be recognized, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Disaggregation of Revenue [Line Items] | |
Revenue expected to be recognized, amount | $ 2,369,976 |
Revenue expected to be recognized, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | |
Disaggregation of Revenue [Line Items] | |
Revenue expected to be recognized, amount | $ 1,894,088 |
Revenue expected to be recognized, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | |
Disaggregation of Revenue [Line Items] | |
Revenue expected to be recognized, amount | $ 1,677,554 |
Revenue expected to be recognized, period | 1 year |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2026-01-01 | |
Disaggregation of Revenue [Line Items] | |
Revenue expected to be recognized, amount | $ 4,890,533 |
Revenue expected to be recognized, period |
Notes Receivable - Narrative (D
Notes Receivable - Narrative (Details) - USD ($) | Apr. 26, 2019 | Oct. 10, 2017 | Aug. 31, 2017 | Apr. 29, 2017 | Dec. 31, 2020 | Dec. 31, 2019 |
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Promissory note | $ 31,086 | $ 18,686 | ||||
Interest rate on promissory note | 0.00% | |||||
Term of promissory note | 36 months | |||||
Term of principal and interest on promissory note | 36 months | |||||
Allowance reserve | 18,686 | $ 27,086 | ||||
Company-owned Clinic | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Promissory note | $ 18,686 | $ 155,810 | ||||
Regional Developer Territory in Central Florida | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Regional development agreement | $ 320,000 | |||||
Regional Developer Territory in Central Florida | 10% Interest Bearing Promissory Note Maturing October 1, 2020 | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Promissory note | $ 187,000 | |||||
Interest rate on promissory note | 10.00% | |||||
Term of promissory note | 42 months | |||||
Term of principal and interest on promissory note | 36 months | |||||
Regional Developer Territory in Maryland/Washington DC | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Regional development agreement | $ 220,000 | |||||
Regional Developer Territory in Maryland/Washington DC | 10% Interest Bearing Promissory Note Maturing August 1, 2020 | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Promissory note | $ 117,475 | |||||
Interest rate on promissory note | 10.00% | |||||
Term of promissory note | 36 months | |||||
Term of principal and interest on promissory note | 36 months | |||||
Regional Developer Territories with Texas, Arkansas, and Oklahoma | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Regional development agreement | $ 170,000 | |||||
Regional Developer Territories with Texas, Arkansas, and Oklahoma | 10% Interest Bearing Promissory Note Maturing October 24, 2020 | ||||||
Accounts, Notes, Loans and Financing Receivable [Line Items] | ||||||
Promissory note | $ 135,688 | |||||
Interest rate on promissory note | 10.00% | |||||
Term of promissory note | 3 years | |||||
Term of principal and interest on promissory note | 3 years |
Notes Receivable - Schedule of
Notes Receivable - Schedule of Minimum Payments Due (Details) - USD ($) | Dec. 31, 2020 | Apr. 26, 2019 |
Receivables [Abstract] | ||
2021 | $ 9,600 | |
2022 | 9,086 | |
Total | $ 18,686 | $ 31,086 |
Property and Equipment - Summar
Property and Equipment - Summary of Property and Equipment (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Line Items] | ||
Finance lease assets | $ 282,027 | $ 80,604 |
Property and equipment, net | 8,747,369 | 6,581,588 |
Construction in progress | 3,577,149 | 2,230,823 |
Office and computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 2,194,348 | 1,594,364 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 8,391,675 | 7,154,156 |
Software developed | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 1,193,007 | 1,193,007 |
Finance lease assets | ||
Property, Plant and Equipment [Line Items] | ||
Finance lease assets | 282,027 | 80,604 |
Property Plant and Equipment, Excluding Construction in Progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 12,061,057 | 10,022,131 |
Accumulated depreciation and amortization | (6,890,837) | (5,671,366) |
Property and equipment, net | $ 5,170,220 | $ 4,350,765 |
Property and Equipment - Narrat
Property and Equipment - Narrative (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation expense | $ 1,212,683 | $ 823,679 |
Amortization of assets | $ 67,874 | $ 24,675 |
Intangible Assets and Goodwil_2
Intangible Assets and Goodwill - Narrative (Details) - USD ($) | Dec. 31, 2020 | Nov. 30, 2020 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Finite-Lived Intangible Assets [Line Items] | |||||
Payments to acquire businesses, gross | $ 534,000 | $ 534,000 | $ 3,122,332 | ||
Goodwill, acquired during period | 475,143 | 475,143 | |||
Net deferred revenue | $ 16,504,114 | 16,504,114 | 15,107,276 | $ 13,609,463 | |
Amortization of intangible assets | 1,453,905 | $ 1,050,903 | |||
Customer relationships | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Intangible assets acquired | $ 96,000 | ||||
Regional Developer Rights In North Carolina | |||||
Finite-Lived Intangible Assets [Line Items] | |||||
Total consideration for the transaction | 1,039,500 | ||||
Net deferred revenue | $ 36,781 | $ 36,781 |
Intangible Assets and Goodwil_3
Intangible Assets and Goodwill - Intangible Assets Acquired (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 7,652,070 | $ 6,552,950 |
Accumulated Amortization | 4,787,064 | 3,333,159 |
Net Carrying Value | 2,865,006 | 3,219,791 |
Reacquired franchise rights | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 3,246,894 | 3,246,494 |
Accumulated Amortization | 2,107,730 | 1,400,086 |
Net Carrying Value | 1,139,164 | 1,846,408 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 1,351,975 | 1,255,975 |
Accumulated Amortization | 1,130,800 | 865,478 |
Net Carrying Value | 221,175 | 390,497 |
Reacquired development rights | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 3,053,201 | 2,050,481 |
Accumulated Amortization | 1,548,534 | 1,067,595 |
Net Carrying Value | $ 1,504,667 | $ 982,886 |
Intangible Assets and Goodwil_4
Intangible Assets and Goodwill - Estimated Amortization Expense (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2021 | $ 1,713,819 | |
2022 | 1,040,666 | |
2023 | 90,521 | |
2024 | 20,000 | |
Net Carrying Value | $ 2,865,006 | $ 3,219,791 |
Intangible Assets and Goodwil_5
Intangible Assets and Goodwill - Schedule of Carrying Amount of Goodwill (Details) - USD ($) | Nov. 30, 2020 | Dec. 31, 2020 |
Goodwill [Roll Forward] | ||
Goodwill, gross, beginning | $ 4,205,455 | |
Accumulated impairment losses, beginning | (54,994) | |
Goodwill, net, beginning | 4,150,461 | |
2020 acquisition | $ 475,143 | 475,143 |
Goodwill, gross, ending | 4,680,598 | |
Accumulated impairment losses, ending | (54,994) | |
Goodwill, net, ending | $ 4,625,604 |
Debt (Details)
Debt (Details) | Mar. 18, 2020USD ($) | Feb. 28, 2020USD ($)option | Dec. 31, 2020USD ($) | Dec. 31, 2019USD ($) | Apr. 10, 2020USD ($) | Apr. 09, 2020 |
Debt Instrument [Line Items] | ||||||
Proceeds from lines of credit | $ 1,947,352 | $ 0 | ||||
Credit Facilities | Line of Credit | Alternative Eurocurrency Base Rate | ||||||
Debt Instrument [Line Items] | ||||||
Variable rate | 1.00% | |||||
Credit Facilities | Secured Debt | Line of Credit | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | $ 7,500,000 | |||||
Additional amount | $ 2,500,000 | |||||
Number of monthly payments | option | 36 | |||||
Credit Facilities | Secured Debt | Line of Credit | Eurocurrency | ||||||
Debt Instrument [Line Items] | ||||||
Variable rate | 2.00% | |||||
Credit Facilities | Secured Debt | Line of Credit | Alternative Base Rate | ||||||
Debt Instrument [Line Items] | ||||||
Variable rate | 1.00% | |||||
Credit Facilities | Secured Debt | Line of Credit | Prime Rate | ||||||
Debt Instrument [Line Items] | ||||||
Variable rate | 0.50% | |||||
Credit Facilities | Revolving Credit Facility | Line of Credit | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, face amount | $ 2,000,000 | |||||
Proceeds from lines of credit | $ 2,000,000 | |||||
Credit Facilities | Development Line of Credit | Line of Credit | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, face amount | 5,500,000 | |||||
Credit Facilities | Letter of Credit | Line of Credit | ||||||
Debt Instrument [Line Items] | ||||||
Maximum borrowing capacity | $ 1,000,000 | |||||
Number of monthly payments | option | 36 | |||||
Interest rate | 0.25% | |||||
Paycheck Protection Program CARES Act | J P C B | ||||||
Debt Instrument [Line Items] | ||||||
Debt instrument, face amount | $ 2,700,000 | |||||
Interest rate | 0.98% |
Stock-Based Compensation - Narr
Stock-Based Compensation - Narrative (Details) | 12 Months Ended | |
Dec. 31, 2020USD ($)option$ / shares | Dec. 31, 2019USD ($)$ / shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Weighted average fair value (in dollars per share) | $ / shares | $ 7.88 | $ 5.21 |
Fair value of stock options vested | $ 427,263 | $ 388,672 |
Forecasted turnover percentage | 5.00% | |
Stock options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period | 4 years | |
Contractual term | 10 years | |
Forecasted turnover percentage | 5.00% | |
Share-based compensation expense | $ 517,431 | 418,301 |
Unrecognized stock-based compensation expense | $ 1,087,732 | |
Unrecognized stock-based compensation, period of recognition | 2 years 8 months 12 days | |
Unvested restricted stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting period | 1 year | |
Share-based compensation expense | $ 368,544 | $ 302,350 |
Unrecognized stock-based compensation expense | $ 380,339 | |
Unrecognized stock-based compensation, period of recognition | 2 years | |
Number of equal annual installments | option | 4 |
Stock-Based Compensation - Fair
Stock-Based Compensation - Fair Value Assumptions of Options Granted (Details) - Stock options | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term (years) | 7 years | 7 years |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 53.00% | 35.00% |
Risk-free rate | 0.42% | 1.89% |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected volatility | 58.00% | 55.00% |
Risk-free rate | 1.65% | 2.61% |
Stock-Based Compensation - Stoc
Stock-Based Compensation - Stock Options Activity (Details) - Stock options - USD ($) | 12 Months Ended | ||
Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 | |
Number of Shares | |||
Outstanding, beginning (in shares) | 949,245 | 986,691 | |
Granted at market price (in shares) | 111,158 | 65,759 | |
Exercised (in shares) | (224,802) | (103,205) | |
Cancelled (in shares) | 0 | 0 | |
Outstanding, ending (in shares) | 835,601 | 949,245 | 986,691 |
Exercisable, Number of Shares (in shares) | 570,724 | ||
Weighted Average Exercise Price | |||
Outstanding, weighted average exercise price, beginning (in dollars per share) | $ 5.19 | $ 4.72 | |
Granted at market price, weighted average exercise price (in dollars per share) | 14.76 | 12.31 | |
Exercised, weighted average exercise price (in dollars per share) | 4.49 | 5.28 | |
Cancelled, weighted average exercise price (in dollars per share) | 0 | 0 | |
Outstanding, weighted average exercise price, ending (in dollars per share) | 6.65 | $ 5.19 | $ 4.72 |
Exercisable, weighted average exercise price (in dollars per share) | $ 4.64 | ||
Weighted Average Remaining Contractual Life | |||
Outstanding, weighted average remaining contractual life (Year) | 6 years 7 months 6 days | 6 years 6 months | 6 years 9 months 18 days |
Exercisable, weighted average remaining contractual life (Year) | 5 years 9 months 18 days | ||
Aggregate Intrinsic Value | |||
Exercised, aggregate intrinsic value | $ 3,234,018 | $ 1,236,099 | |
Outstanding, aggregate intrinsic value | 16,153,117 | ||
Exercisable, aggregate intrinsic value | $ 12,334,489 |
Stock-Based Compensation - Rest
Stock-Based Compensation - Restricted Stock Activity (Details) - Unvested restricted stock | 12 Months Ended |
Dec. 31, 2020$ / sharesshares | |
Restricted Stock Awards | |
Non-vested (in shares) | shares | 38,976 |
Granted (in shares) | shares | 28,680 |
Vested (in shares) | shares | (22,061) |
Cancelled (in shares) | shares | 0 |
Non-vested (in shares) | shares | 45,595 |
Weighted Average Grant-Date Fair Value per Award | |
Non-vested (in dollar per share) | $ / shares | $ 12.31 |
Granted (in dollars per share) | $ / shares | 14.92 |
Vested (in dollars per share) | $ / shares | 13.99 |
Cancelled (in dollars per share) | $ / shares | 0 |
Non-vested (in dollar per share) | $ / shares | $ 13.13 |
Income Taxes - Income Tax Provi
Income Taxes - Income Tax Provision (Benefit) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Current provision: | ||
Federal | $ 0 | $ 0 |
State, net of state tax credits | 342,832 | 47,133 |
Total current provision | 342,832 | 47,133 |
Deferred (benefit) provision: | ||
Federal | (6,074,433) | 652 |
State | (2,023,061) | 921 |
Total deferred (benefit) provision | (8,097,494) | 1,573 |
Total income tax (benefit) provision | $ (7,754,662) | $ 48,706 |
Income Taxes - Net Deferred Tax
Income Taxes - Net Deferred Taxes (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Deferred income tax assets: | ||
Accrued expenses | $ 697,411 | $ 515,802 |
Deferred revenue | 5,109,283 | 4,435,474 |
Lease liability | 3,696,955 | 3,782,796 |
Goodwill - component 2 | 51,536 | 55,302 |
Restricted stock compensation | 0 | 3,888 |
Nonqualified stock options | 249,127 | 198,884 |
Net operating loss carryforwards | 2,083,643 | 3,585,723 |
Tax credits | 35,850 | 33,767 |
Asset basis difference related to property and equipment | 0 | 213,971 |
Intangibles | 890,440 | 595,814 |
Total deferred income tax assets | 12,814,245 | 13,421,421 |
Deferred income tax liabilities: | ||
Lease right-of-use asset | (3,153,951) | (3,267,892) |
Deferred franchise costs | (291,915) | (406,522) |
Goodwill - component 1 | (321,967) | (245,446) |
Asset basis difference related to property and equipment | (256,487) | 0 |
Restricted stock compensation | (68,703) | 0 |
Total deferred income tax liabilities | (4,093,023) | (3,919,860) |
Valuation allowance | (713,589) | (9,591,424) |
Net deferred tax asset (liability) | $ 8,007,633 | |
Net deferred tax asset (liability) | $ (89,863) |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Income Tax Contingency [Line Items] | ||
Valuation allowance | $ 713,589 | $ 9,591,424 |
Income tax benefit | $ 8,900,000 | |
Provision (benefit) | (143.30%) | 1.40% |
Research Tax Credit Carryforward | ||
Income Tax Contingency [Line Items] | ||
Tax credit | $ 14,229 | |
California Alternative Minimum Tax Credit | ||
Income Tax Contingency [Line Items] | ||
Tax credit | 21,621 | |
Domestic Tax Authority | ||
Income Tax Contingency [Line Items] | ||
Net operating losses | 7,700,000 | |
State and Local Jurisdiction | ||
Income Tax Contingency [Line Items] | ||
Net operating losses | $ 9,800,000 |
Income Taxes - Reconciliation o
Income Taxes - Reconciliation of the Statutory Federal Income Tax Rate (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Effective Income Tax Rate Reconciliation, Amount [Abstract] | ||
Expected federal tax expense | $ 1,136,657 | $ 731,503 |
State tax provision, net of federal benefit | 277,401 | 315,805 |
Change in valuation allowance | (8,877,736) | (810,190) |
Other permanent differences | 123,913 | 41,711 |
Stock compensation | (398,007) | (232,686) |
Bargain purchase gain | 0 | (5,205) |
Return to provision adjustments | (16,890) | 7,768 |
Total income tax (benefit) provision | $ (7,754,662) | $ 48,706 |
Effective Income Tax Rate Reconciliation, Percent [Abstract] | ||
Expected federal tax expense | 21.00% | 21.00% |
State tax provision, net of federal benefit | 5.10% | 9.10% |
Change in valuation allowance | (164.00%) | (23.30%) |
Other permanent differences | 2.30% | 1.20% |
Stock compensation | (7.40%) | (6.70%) |
Bargain purchase gain | 0.00% | (0.10%) |
Return to provision adjustments | (0.30%) | 0.20% |
(Benefit) provision | (143.30%) | 1.40% |
Commitments and Contingencies -
Commitments and Contingencies - Lease Expense and Supplemental Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Finance lease costs: | ||
Amortization of assets | $ 67,874 | $ 24,675 |
Interest on lease liabilities | 11,575 | 6,832 |
Total finance lease costs | 79,449 | 31,507 |
Operating lease costs | 3,552,395 | 3,005,124 |
Total lease costs | 3,631,844 | 3,036,631 |
Operating Leases: | ||
Operating lease right-of-use asset | 11,581,435 | 12,486,672 |
Operating lease liability, current portion | 2,918,140 | 2,313,109 |
Operating lease liability, net of current portion | 10,632,672 | 11,901,040 |
Total operating lease liability | 13,550,812 | 14,214,149 |
Finance Leases: | ||
Finance lease assets | 282,027 | 80,604 |
Less accumulated amortization | (92,549) | (24,675) |
Property and equipment, net | 189,478 | 55,929 |
Finance lease liability, current portion | 70,507 | 24,253 |
Finance lease liability, net of current portion | 132,469 | 34,398 |
Total finance lease liabilities | $ 202,976 | $ 58,651 |
Weighted average remaining lease term (in years): | ||
Operating leases | 4 years 8 months 12 days | 5 years 4 months 24 days |
Finance lease | 4 years 1 month 6 days | 2 years 3 months 18 days |
Weighted average discount rate: | ||
Operating leases | 8.50% | 8.70% |
Finance leases | 5.30% | 10.00% |
Cash paid for amounts included in measurement of liabilities: | ||
Operating cash flows from operating leases | $ 3,462,848 | $ 2,834,903 |
Operating cash flows from finance leases | 11,575 | 6,832 |
Financing cash flows from finance leases | 57,097 | 21,954 |
Non-cash transactions: ROU assets obtained in exchange for lease liabilities | ||
Operating lease | 1,869,080 | 1,350,090 |
Finance lease | $ 201,423 | $ 80,604 |
Commitments and Contingencies_2
Commitments and Contingencies - Summary of Maturities of Lease Liabilities and Obligations (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Operating Leases | ||
2021 | $ 3,925,287 | |
2022 | 3,797,361 | |
2023 | 3,099,227 | |
2024 | 2,494,385 | |
2025 | 2,077,593 | |
Thereafter | 991,612 | |
Total lease payments | 16,385,465 | |
Less: Imputed interest | (2,834,653) | |
Total lease obligations | 13,550,812 | $ 14,214,149 |
Less: Current obligations | (2,918,140) | (2,313,109) |
Long-term lease obligation | 10,632,672 | 11,901,040 |
Finance Lease | ||
2021 | 78,900 | |
2022 | 48,975 | |
2023 | 27,600 | |
2024 | 27,600 | |
2025 | 27,600 | |
Thereafter | 11,500 | |
Total lease payments | 222,175 | |
Less: Imputed interest | (19,199) | |
Total lease obligations | 202,976 | 58,651 |
Less: Current obligations | (70,507) | (24,253) |
Long-term lease obligation | $ 132,469 | $ 34,398 |
Commitments and Contingencies_3
Commitments and Contingencies - Narrative (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Lessee, Lease, Description [Line Items] | ||
Rent expense | $ 3,785,072 | $ 3,381,825 |
Leases not yet commenced, liability | $ 2,700,000 | |
Minimum | ||
Lessee, Lease, Description [Line Items] | ||
Term of leases not yet commenced | 5 years | |
Maximum | ||
Lessee, Lease, Description [Line Items] | ||
Term of leases not yet commenced | 10 years |
Segment Reporting - Narrative (
Segment Reporting - Narrative (Details) | 12 Months Ended | ||
Dec. 31, 2020segmentclinic | Dec. 31, 2019clinic | Dec. 31, 2018clinic | |
Segment Reporting Information [Line Items] | |||
Number of operating segments | segment | 2 | ||
Number of stores | 579 | 513 | |
Entity Operated Units | |||
Segment Reporting Information [Line Items] | |||
Number of stores | 64 | 60 | 48 |
Franchised Units | |||
Segment Reporting Information [Line Items] | |||
Number of stores | 515 | 453 | 394 |
Segment Reporting - Segment Rep
Segment Reporting - Segment Reporting Financial Information (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2020 | Dec. 31, 2019 | |
Segment Reporting Information [Line Items] | ||
Revenues | $ 58,682,976 | $ 48,450,900 |
Segment operating income | 5,492,130 | 3,414,635 |
Depreciation and amortization | 2,734,462 | 1,899,257 |
Bargain purchase gain | 0 | 19,298 |
Other (expense), net | (79,478) | (61,515) |
Income before income tax expense | 5,412,652 | 3,372,418 |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Segment operating income | 17,070,268 | 14,340,064 |
Unallocated corporate | ||
Segment Reporting Information [Line Items] | ||
Segment operating income | (11,578,138) | (10,925,429) |
Corporate clinics | ||
Segment Reporting Information [Line Items] | ||
Revenues | 31,771,288 | 25,807,584 |
Corporate clinics | Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Segment operating income | 4,508,990 | 3,365,295 |
Depreciation and amortization | 2,503,181 | 1,707,575 |
Franchise operations | ||
Segment Reporting Information [Line Items] | ||
Revenues | 26,911,688 | 22,643,316 |
Franchise operations | Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Segment operating income | 12,561,278 | 10,974,769 |
Depreciation and amortization | 0 | 0 |
Corporate administration | ||
Segment Reporting Information [Line Items] | ||
Depreciation and amortization | $ 231,281 | $ 191,682 |
Segment Reporting - Segment R_2
Segment Reporting - Segment Reporting Information, Assets (Details) - USD ($) | Dec. 31, 2020 | Dec. 31, 2019 |
Segment Reporting Information [Line Items] | ||
Total assets | $ 65,732,843 | $ 43,705,667 |
Unallocated cash and cash equivalents and restricted cash | 20,554,258 | 8,455,989 |
Unallocated property and equipment | 8,747,369 | 6,581,588 |
Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Total assets | 34,672,686 | 32,855,776 |
Unallocated cash and cash equivalents and restricted cash | 20,819,629 | 8,641,877 |
Unallocated property and equipment | 1,063,815 | 996,385 |
Other unallocated assets | 9,176,713 | 1,211,629 |
Corporate clinics | Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Total assets | 24,928,311 | 25,389,147 |
Franchise operations | Operating Segments | ||
Segment Reporting Information [Line Items] | ||
Total assets | $ 9,744,375 | $ 7,466,629 |
Related Party Transactions (Det
Related Party Transactions (Details) | 1 Months Ended | ||
Dec. 31, 2020USD ($)franchise | Dec. 31, 2019USD ($) | Dec. 31, 2018USD ($) | |
Related Party Transaction [Line Items] | |||
Net deferred revenue | $ 16,504,114 | $ 15,107,276 | $ 13,609,463 |
Marshall Gramm | |||
Related Party Transaction [Line Items] | |||
Number of franchises | franchise | 2 | ||
Ownership threshold, percent | 5.00% | ||
Ownership, percent | 12.00% | ||
Amounts received | $ 71,800 | ||
Net deferred revenue | $ 71,494 |
Subsequent Events (Details)
Subsequent Events (Details) - USD ($) | Jan. 01, 2021 | Jan. 31, 2021 | Mar. 04, 2021 | Dec. 31, 2020 | Dec. 31, 2019 | Dec. 31, 2018 |
Subsequent Event [Line Items] | ||||||
Net deferred revenue | $ 16,504,114 | $ 15,107,276 | $ 13,609,463 | |||
Subsequent Event | JPMORGAN CHASE BANK N.A. | Paycheck Protection Program CARES Act | ||||||
Subsequent Event [Line Items] | ||||||
Debt instrument, face amount | $ 2,700,000 | |||||
Subsequent Event | Reacquired franchise rights | ||||||
Subsequent Event [Line Items] | ||||||
Consideration for transaction | $ 1,388,700 | $ 1,353,021 | ||||
Net deferred revenue | $ 35,679 | |||||
Remaining original contract period | 13 months |
Uncategorized Items - jynt-2020
Label | Element | Value |
Accounting Standards Update [Extensible List] | us-gaap_AccountingStandardsUpdateExtensibleList | us-gaap:AccountingStandardsUpdate201409Member |