(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell Company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of ~~November 6, 2017,~~May 3, 2019, the registrant had ~~13,518,146~~13,785,334 shares of Common Stock ($0.001 par value) outstanding.

Note: The Condensed Consolidated Balance Sheet has been derived from the audited consolidated financial statements, restated to reflect the consolidation of variable interest entities. See Note 1 of “Notes to Condensed Consolidated Financial Statements” under the heading “Prior Period Financial Statement Correction of Immaterial Error” for more details. The accompanying notes are an integral part of these condensed consolidated financial statements.

Note: The Condensed Consolidated Statement of Operations is unaudited and has been restated to reflect the consolidation of variable interest entities. See Note 1 of “Notes to Condensed Consolidated Financial Statements” under the heading “Prior Period Financial Statement Correction of Immaterial Error” for more details. The accompanying notes are an integral part of these condensed consolidated financial statements.

Note: The Condensed Consolidated Statement of Changes in Stockholders’ Equity is unaudited and has been restated to reflect the consolidation of variable interest entities. See Note 1 of “Notes to Condensed Consolidated Financial Statements” under the heading “Prior Period Financial Statement Correction of Immaterial Error” for more details. The accompanying notes are an integral part of these condensed consolidated financial statements.

Immaterial Error” for more details. The accompanying notes are an integral part of these condensed consolidated financial statements.

Note 1: Nature of Operations and Summary of Significant Accounting Policies

Basis of Presentation

These unaudited financial statements represent the condensed consolidated financial statements of The Joint Corp. (“The Joint”) and its wholly owned subsidiary, The Joint Corporate Unit No. 1, LLC (collectively, the “Company”). These unaudited condensed consolidated financial statements should be read in conjunction with The Joint Corp. and Subsidiary consolidated financial statements and the notes thereto as set forth in The Joint Corp.’s Form 10-K, which included all disclosures required by generally accepted accounting ~~principles.~~principles (“GAAP”) and the “prior period financial statement correction of immaterial error” note below. In the opinion of management, these unaudited condensed consolidated financial statements contain all adjustments necessary to present fairly the Company’s financial position on a consolidated basis and the consolidated results of operations, equity and cash flows for the interim periods presented. The results of operations for the periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 are not necessarily indicative of expected operating results for the full year. The information presented throughout the document as of and for the periods ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 is unaudited.

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 and other (expenses) income that are reported in the condensed consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates. For a discussion of significant estimates and judgments made in recognizing revenue and accounting for leases, see Note 3, Revenue Disclosures and Note 13, Commitments and Contingencies, respectively.

Prior Period Financial Statement Correction of Immaterial Error

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. The PCs are variable interest entities (“VIEs”). During the first quarter of 2019, the Company reassessed the governance structure and operating procedures of the PCs and determined that the Company has the power to control certain significant non-clinical activities of the PCs, as defined by Accounting Standards Codification 810 (“ASC 810”), Consolidations. Therefore, the Company is the primary beneficiary of the VIEs, and per ASC 810, must consolidate the VIEs. Prior to 2019, the Company did not consolidate the PCs. The Company has concluded the previous accounting policy to not consolidate the PCs was an immaterial error and has determined that the PCs should be consolidated. The adjustments will result in an increase to revenues from company clinics and a corresponding increase to general and administrative expenses. This will have no impact on net income (loss), except when the PC has sold treatment packages and wellness plans. Revenue from these treatment packages and wellness plans will now be deferred and will be recognized when patients use their visits. The Company has corrected this immaterial error by restating the 2018 condensed consolidated financial statements and related notes included herein.

The immaterial impacts of this error correction in the three months ended March 31, 2018 and the fiscal year ended December 31, 2018 are as follows:

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Three Months Ended March 31, 2018			Adjustments Due To VIE Consolidation		Three Months Ended March 31, 2018
	(as reported)					(as adjusted)
Revenues:
Revenues from company-owned or managed clinics	$	3,256,624			1,549,049	$	4,805,673
Total revenues		7,097,915			1,549,049		8,646,964
General and administrative expenses		5,074,927			1,193,759		6,268,686
Total selling, general and administrative expenses		6,564,648			1,193,759		7,758,407
Loss from operations		(439,065	)		355,290		(83,775	)

Other (expense) income, net		(11,194	)		–		(11,194	)
Loss before income tax benefit (expense)		(450,259	)		355,290		(94,969	)

Net loss and comprehensive loss	$	(386,904	)		355,290	$	(31,614	)

Loss per share:
Basic and diluted loss per share	$	(0.03	)		0.03	$	(0.00	)

Basic and diluted weighted average shares		13,587,837			–		13,587,837

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

	Year Ended December 31, 2018		Adjustments Due To VIE Consolidation			Year Ended December 31, 2018
	(as reported)					(as adjusted)
Revenues:
Revenues from company-owned or managed clinics	$	14,672,865		4,872,411		$	19,545,276
Total revenues		31,789,249		4,872,411			36,661,660
General and administrative expenses		20,304,132		4,933,989			25,238,121
Total selling, general and administrative expenses		26,679,927		4,933,989			31,613,916
Income from operations		205,113		(61,578	)		143,535

Other (expense) income, net		10,241		(44,808	)		(34,567	)
Income before income tax benefit (expense)		215,354		(106,386	)		108,968

Net income and comprehensive income	$	253,083		(106,386	)	$	146,696

Earnings (loss) per share:
Basic earnings (loss) per share	$	0.02		(0.01	)	$	0.01
Diluted earnings (loss) per share	$	0.02		(0.01	)	$	0.01

Basic weighted average shares		13,669,107		–			13,669,107
Diluted weighted average shares		14,031,717		–			14,031,717

THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited)

	December 31, 2018			Adjustments Due To VIE Consolidation			December 31, 2018
ASSETS	(as reported)						(as adjusted)
Current assets:
Accounts receivable, net		1,213,707			(407,357	)		806,350
Total current assets		11,711,345			(407,357	)		11,303,988
Goodwill		2,916,426			308,719			3,225,145
Total assets	$	23,526,352		$	(98,639	)	$	23,427,713

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Deferred revenue from company clinics		994,493			1,535,004			2,529,497
Total current liabilities		8,738,123			1,535,004			10,273,127
Total liabilities		21,165,108			1,535,004			22,700,112
Commitments and contingencies
Equity:
The Joint Corp. stockholders' equity:
Accumulated deficit		(35,750,908	)		(1,633,543	)		(37,384,451	)
Total The Joint Corp. stockholders' equity		2,361,244			(1,633,543	)		727,701
Non-controlling Interest		–			(100	)		(100	)
Total equity		2,361,244			(1,633,643	)		727,601
Total liabilities and equity	$	23,526,352		$	(98,639	)	$	23,427,713

Principles of Consolidation

The accompanying condensed 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 its interest in PCs, in accordance with ASC 810, Consolidation. PCs’ interests in the consolidated entities are reported as non-controlling interests.

All significant intercompany accounts and transactions between The Joint Corp. and its subsidiary have been eliminated in consolidation. All variable interest entity eliminations have been attributable to the Company. Certain balances were reclassified from ~~general and administrative expenses~~regional developer fees to other ~~(expense) income, net, as well as certain balances from other~~ revenues, ~~to revenues and management fees from company clinics~~ for the three ~~and nine~~ months ended ~~September 30, 2016~~March 31, 2018 to conform to the current year ~~presentation and align with the segment footnote~~ presentation.

Comprehensive ~~Loss~~Income (Loss)

Net ~~loss~~income (loss) and comprehensive ~~loss~~income (loss) are the same for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016.~~2018.

Nature of Operations

The Joint, a Delaware corporation, was formed on March 10, 2010 for the principal purpose of franchising, developing and managing chiropractic clinics, selling regional developer rights and supporting the operations of franchised chiropractic clinics at locations throughout the United States of America. The franchising of chiropractic clinics is regulated by the Federal Trade Commission and various state authorities.

The following table summarizes the number of clinics in operation under franchise agreements and as company-owned or managed clinics for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019 and ~~2016:~~2018:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,						Three Months Ended March 31,
Franchised clinics:	2017		2016		2017			2016			2019			2018
Clinics open at beginning of period		336		280		309			265			394			352
Opened or Purchased during the period		6		13		35			38			12			7
Acquired during the period		-		-		-			(6	)
Acquired or sold during the period												(1	)		-
Closed during the period		-		-		(2	)		(4	)		(1	)		-
Clinics in operation at the end of the period		342		293		342			293			404			359

	Three Months Ended				Nine Months Ended
	September 30,				September 30,					Three Months Ended March 31,
Company-owned or managed clinics:	2017		2016		2017			2016		2019			2018
Clinics open at beginning of period		47		61		61			47		48			47
Opened during the period		-		-		-			8		2			-
Acquired during the period		-		-		-			6		1			-
Closed or Sold during the period		-		-		(14	)		-		(1	)		-
Clinics in operation at the end of the period		47		61		47			61		50			47

Total clinics in operation at the end of the period		389		354		389			354		454			406

Clinics licenses sold but not yet developed		105		134		105			134
Clinic licenses sold but not yet developed											145			114
Executed letters of intent for future clinic licenses		5		-		5			-		27			8

An entity deemed to hold the controlling interest in a voting interest entity or deemed to be the primary beneficiary of a variable interest entity (“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. Investments where the Company does not hold the controlling interest and isare not the primary beneficiary are accounted for under the equity method.

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. Such PCs are ~~VIEs.~~VIEs, as fees paid by the PC 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. In these states, the Company has entered into management services agreements with ~~such~~ PCs under which the Company provides, on an exclusive basis, all non-clinical services of the chiropractic practice. ~~The~~During the first quarter of 2019, the Company ~~has analyzed its relationship with~~reassessed the governance structure and operating procedures of the PCs and ~~has~~ determined that the Company ~~does not have~~has the power to ~~direct the activities of the PCs. As such, the~~control certain significant non-clinical activities of the PCs, as defined by Accounting Standards Codification 810 (“ASC 810”), Consolidations. 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 ~~not included in the Company’s condensed consolidated financial statements.~~immaterial as of March 31, 2019.

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 ~~September 30, 2017~~March 31, 2019 and December 31, ~~2016.~~2018.

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.

From time to time, the Company grants credit in the normal course of business to franchisees and PCs related to the collection of royalties and other operating revenues. The Company periodically performs credit analysis and monitors the financial condition of the franchisees and PCs to reduce credit risk. As of September 30, 2017, one PC entity and four franchisees represented 19% of outstanding accounts receivable, compared to three PC entities and six franchisees representing 24% of outstanding accounts receivable as of December 31, 2016. The Company did not have any customers that represented greater than 10% of its revenues during the three or nine months ended September 30, 2017 and 2016.

Accounts receivable represent amounts due from franchisees for initial franchise fees and royalty ~~fees, working capital advances due from PCs, and tenant improvement allowances due from landlords.~~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 ~~September 30, 2017,~~March 31, 2019, and December 31, ~~2016,~~2018, the Company had an allowance for doubtful accounts of ~~$0 and $131,830, respectively.~~

The Company writes off accounts receivable when it deems them uncollectible and records recoveries of accounts receivable previously written off when it receives them. In the nine months ended September 30, 2017, the Company determined that certain working capital advances from its PC entities in Illinois and New York were no longer collectible as a result of the sale or closure of the related clinics. Accordingly, the Company wrote-off approximately $47,000 of accounts receivable to loss on disposition or impairment related to these entities during the nine months ended September 30, 2017.$0.

Deferred franchise costs represent commissions that are direct and incremental to the Company and are paid in conjunction with the sale of a ~~franchise and~~franchise. These costs are recognized as an expense when the respective revenue is recognized, which is generally ~~upon~~over the ~~opening~~term of ~~a clinic.~~the related franchise agreement.

Property and equipment are stated at cost or for property acquired as part of franchise acquisitions at fair value at the date of closing. Depreciation is computed using the straight-line method over estimated useful lives of three to seven years. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful life of the assets.

Maintenance and repairs are charged to expense as incurred; major renewals and improvements are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income.

The Company capitalizes certain software development costs. These capitalized costs are primarily related to ~~proprietary~~ 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, generally five years.

The Company adopted ASC 842 on January 1, 2019 which requires lessees to recognize a right-of-use ("ROU") asset and lease liability for all leases. The Company elected the package of transition practical expedients for existing contracts, which allowed us to carry forward our historical assessments of whether contracts are or contain leases, lease classification and determination of initial direct costs.

The Company leases property and equipment under finance and operating leases. The Company leases its corporate office space and the space for each of the company-owned or managed clinic in the portfolio. 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 us 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 our leases. In such cases, the Company estimates its incremental borrowing rate as the interest rate it could 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. Lease expense incurred before a clinic opens is recorded in pre-opening costs. Once a clinic opens, we record the straight-line lease expense and any contingent rent, if applicable, in general and administrative expenses on the condensed consolidated statements of operations. Many of the Company’s leases also require it to pay real estate taxes, common area maintenance costs and other occupancy costs which are included in general and administrative expenses on the condensed consolidated statements of operations.

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 range from ~~six~~four to eight years. In the case of regional developer rights, the Company amortizes the acquired regional developer rights over seven years. The fair value of customer relationships is amortized over their estimated useful life of two years.

Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired in the acquisitions ~~completed in the years ended December 31, 2014 through December 31, 2016.~~of franchises. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are subject to annual impairment tests. As required, the Company performs an annual impairment test of goodwill as of the first day of the fourth quarter or more frequently if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its, carrying value. No impairments of goodwill were recorded for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016.~~2018.

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 have been impaired. No impairments of long-lived assets were recorded for the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 and ~~2016.~~2018.

The Company has established an advertising fund for national/regional marketing and advertising of services offered by its clinics. The monthly marketing fee is 2% of clinic sales. The Company segregates the marketing funds collected which are included in restricted cash on its ~~condensed~~ consolidated balance sheets. As amounts are expended from the fund, the Company recognizes ~~advertising fund revenue and~~ a related expense.

Some franchises have established regional Co-Ops for advertising within their local and regional markets. The Company maintains a custodial relationship under which the marketing funds collected are segregated and used for the purposes specified by the Co-Ops’ officers. The marketing funds are included in restricted cash on the Company’s condensed consolidated balance sheets.

Costs to terminate an operating lease or other contracts are (a) costs to terminate the contract before the end of its term or (b) costs that will continue to be incurred under the contract for its remaining term without economic benefit to the entity. A liability for costs that will continue to be incurred under a contract for its remaining term without economic benefit to the entity is recognized at the cease-use date. In periods subsequent to initial measurement, changes to the liability are measured using the credit adjusted risk-free rate that was used to measure the fair value of the liability initially. The cumulative effect of a change resulting from a revision to either the timing or the amount of estimated cash flows is recognized as an adjustment to the liability in the period of the change.

As of September 30, 2017, the Company maintained a lease exit liability of approximately $0.4 million classified in other liabilities on its condensed consolidated balance sheets related to remaining operating leases that will no longer provide economic benefit to the Company, net of estimated sublease income.

Lease exit liability at December 31, 2016 $ 338,151
Additions 883,146
Settlements (706,991 )
Net Accretion (66,030 )
Lease exit liability at September 30, 2017 $ 448,276

In the nine months ended September 30, 2017, the Company ceased use of eight clinic locations from its corporate clinics segment and recognized a liability for lease exit costs incurred based on the remaining lease rental due, reduced by estimated sublease rental income that could be reasonably obtained for the properties. The Company recognized the resulting expense of approximately $418,000 in loss on disposition or impairment in the accompanying condensed consolidated statement of operations.

~~Deferred Rent~~

The Company leases office space for its corporate offices and company-owned or managed clinics under operating leases, which may include rent holidays and rent escalation clauses. It recognizes rent holiday periods and scheduled rent increases on a straight-line basis over the term of the lease. The Company records tenant improvement allowances as deferred rent and amortizes the allowance over the term of the lease, as a reduction to rent expense.

Revenue Recognition

The Company generates revenue primarily through ~~initial~~its company-owned and managed clinics, royalties, franchise fees, ~~regional developer fees, royalties,~~ advertising fund, ~~revenue,~~and through IT related income and computer software ~~fees,~~fees.

Revenues from Company-Owned or Managed Clinics. The Company earns revenues from clinics that it owns and operates or manages throughout the United States. In those states where the Company owns and operates or manages the clinic, revenues are recognized when services are performed. The Company offers a variety of membership and wellness packages which feature discounted pricing as compared with its single-visit pricing. Amounts collected in advance for membership and wellness packages are recorded as deferred revenue and recognized when the service is performed. The Company recognizes a contract liability (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, the Company concluded that any remaining contract liability that exists after 24 months from ~~its company-owned~~transaction date will be deemed breakage, and ~~managed clinics.~~only at that point when the likelihood of the patient exercising his or her remaining rights becomes remote will the Company recognize any breakage revenue.

Royalties and Advertising Fund Revenue. The Company collects royalties, as stipulated in the franchise agreement, equal to 7% of gross sales, and a marketing and advertising fee currently equal to 2% of gross sales. Royalties, including franchisee contributions to advertising funds, are calculated as a percentage of clinic sales over the term of the franchise agreement. The franchise agreement royalties, inclusive of advertising fund contributions, represent sales-based royalties that are related entirely to the Company’s performance obligation under the franchise agreement and are recognized as franchisee clinic level sales occur. Royalties are collected 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 ~~as revenue when~~ratably on a straight-line basis over the ~~Company has substantially completed its initial services under~~term of the franchise ~~agreement, which typically occurs upon opening of the clinic.~~agreement. The Company’s services under the franchise agreement include: training of franchisees and staff, site selection, construction/vendor management and ongoing operations support. The Company provides no financing to franchisees and offers no guarantees on their behalf. The services provided by the Company are highly interrelated with the franchise license and as such are considered to represent a single performance obligation.

Software Fees. The Company collects a monthly fee for use of its proprietary chiropractic software, computer support, and internet services support. These fees are recognized ratably on a straight-line basis over the term of the respective franchise agreement.

Regional Developer Fees. During 2011, the Company established a regional developer program to engage independent contractors to assist in developing specified geographical regions. Under the historical program, regional developers paid a license ~~fee ranging from $7,250 to 25% of the then current franchise~~ 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 developers receive fees ~~ranging from $14,500 to $19,950~~ which are collected from franchisees upon the sale of franchises within their region and a royalty of 3% of sales generated by franchised clinics in their region. Regional developer fees paid to the Company are nonrefundable and are recognized as revenue ~~when~~ratably on a straight-line basis over the ~~Company has performed substantially all initial services required by~~term of the regional developer agreement, which ~~generally~~ is considered to bebegin upon the opening of each franchised clinic. Accordingly, revenue is recognized on a pro-rata basis determined by the number of franchised clinics to be opened in the area covered by the regional developer agreement. Upon the execution of ~~a regional developer agreement,~~ the ~~Company estimates the number of franchised clinics to be opened, which is typically consistent with the contracted minimum.~~agreement. The Company reassesses the number of clinics expected to be opened as the regional developer performs under its regional developer agreement. When a material change to the original estimate becomes apparent, the amount of revenue to be recognized per clinic is revised on a prospective basis, and the unrecognized fees are allocated among, and recognized as revenue upon the opening of, the expected remaining unopened franchised clinics within the region. The franchisor’sCompany’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. ~~Several of the regional developer agreements grant~~The services provided by the Company are highly interrelated with the ~~option~~franchise license and as such are considered to ~~repurchase the regional developer’s license.~~represent a single performance obligation.

~~For the nine months ended September 30, 2017, the~~The Company entered into ~~eight~~one regional developer ~~agreements~~agreement for the three months ended March 31, 2019 for which it received approximately ~~$1.7 million,~~$290,000 which was deferred as of the ~~respective~~ transaction ~~dates~~date and will be recognized as revenue ratably on a ~~pro-rata~~straight-line basis over the ~~estimated number~~term of ~~franchised clinics~~the regional developer agreement, which is considered to ~~be opened in~~begin upon the ~~respective regions.~~execution of the agreement. Certain of these regional developer agreements resulted 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 being recognized over the remaining life of the respective franchise agreements.

~~Revenues and Management Fees from Company 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 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. In other states where state law requires the chiropractic practice to be owned by a licensed chiropractor, the Company enters into a management agreement with the doctor’s PC. Under the management agreement, the Company provides administrative and business management services to the doctor’s PC in return for a monthly management fee. When the collectability of the full management fee is uncertain, the Company recognizes management fee revenue only to the extent of fees expected to be collected from the PCs.

~~Royalties.~~ 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. Certain franchisees with franchise agreements acquired during the formation of the Company pay a monthly flat fee. Royalties are recognized as revenue when earned. Royalties are collected bi-monthly two working days after each sales period has ended.

~~IT Related Income and Software Fees.~~ The Company collects a monthly fee for use of its proprietary chiropractic software, computer support, and internet services support. These fees are recognized on a monthly basis as services are provided. IT related revenue represents a flat fee to purchase a clinic’s computer equipment, operating software, preinstalled chiropractic system software, key card scanner (patient identification card), credit card scanner and credit card receipt printer. These fees are recognized as revenue upon receipt of equipment by the franchisee.

Advertising Costs

Advertising costs are expensed as incurred. Advertising expenses were ~~$314,695~~$439,436 and ~~$961,106~~$410,637 for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019 and 2018, respectively. ~~Advertising expenses were $600,804 and $1,770,699 for the three and nine months ended September 30, 2016, respectively.~~

Income Taxes

The Company uses an estimated annual effective tax rate method in computing its interim tax provision. This effective tax rate is based on forecasted annual pre-tax income, permanent tax differences and statutory tax rates. Deferred income taxes are recognized for differences between the basis of assets and liabilities for financial statement and income tax purposes. The differences relate principally to depreciation of property and equipment, amortization of goodwill, accounting for leases, and treatment of revenue for franchise fees and regional developer fees collected. 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. Deferred taxes are also recognized for operating losses that are available to offset future taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized.

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 condensed 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.

~~At September 30, 2017~~ The Company has not identified any material uncertain tax positions as of March 31, 2019 and December 31, 2016, the Company maintained a liability for income taxes for uncertain tax positions of approximately $27,000 and $40,000, respectively, of which $26,000 and $27,000, respectively, represent penalties and interest and are recorded in the “other liabilities” section of the accompanying condensed consolidated balance sheets.2018. Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses.

The ~~Company’s~~Company's tax returns for tax years subject to examination by tax authorities ~~include 2013~~included 2014 through the current period for state and ~~2014~~2015 through the current period for federal reporting purposes.

~~Loss~~Earnings (Loss) per Common Share

Basic ~~loss~~earnings (loss) per common share is computed by dividing the net ~~loss~~income (loss) by the weighted-average number of common shares outstanding during the period. Diluted ~~loss~~earnings (loss) per common share is computed by giving effect to all potentially dilutive common shares including preferred stock, restricted stock, and stock options.

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016

Net loss $ (403,808 ) $ (2,626,894 ) $ (3,062,035 ) $ (9,413,407 )

Weighted average common shares outstanding - basic 13,262,032 12,730,624 13,144,764 12,657,435
Effect of dilutive securities:
Stock options - - - -
Weighted average common shares outstanding - diluted 13,262,032 12,730,624 13,144,764 12,657,435

Basic and diluted loss per share $ (0.03 ) $ (0.21 ) $ (0.23 ) $ (0.74 )

	Three Months Ended March 31,
		2019		2018
				(as adjusted)
Net Income (loss)	$	952,644	$	(31,614	)

Weighted average common shares outstanding - basic		13,751,196		13,587,837
Effect of dilutive securities:
Unvested restricted stock and stock options		504,810		-
Weighted average common shares outstanding - diluted		14,256,006		13,587,837

Basic earnings (loss) per share	$	0.07	$	(0.00	)
Diluted earnings (loss) per share	$	0.07	$	(0.00	)

~~The following table summarizes the potential shares of common stock that were excluded from diluted net loss per share, because the effect of including these potential shares was anti-dilutive:~~

Anti-Dilutive shares:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,				Three Months Ended March 31,
	2017		2016		2017		2016			2019	2018
Unvested restricted stock		63,700		92,415		63,700		92,415		31,247	63,700
Stock options		1,011,686		899,370		1,011,686		899,370		533,039	1,053,811
Warrants		90,000		90,000		90,000		90,000		-	90,000

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 quoted market prices and the grant-date fair value of stock options using the Black-Scholes option pricing model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the model, including the estimated fair value of underlying common stock, 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.

The preparation of the ~~condensed~~ consolidated financial statements in conformity with ~~accounting principles generally accepted in the United States of America~~GAAP requires management to make estimates and assumptions that affect the amounts reported in the ~~condensed~~ 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, ~~uncertain tax positions,~~lease exit liabilities, realizability of deferred tax assets, impairment of goodwill and intangible assets and purchase price allocations.

~~In May 2014, the Financial~~ Accounting Standards ~~Board (FASB) issued~~Adopted Effective January 1, 2019

On January 1, 2019, the Company adopted the guidance of Accounting Standards ~~Update (ASU) No. 2014-09, “~~~~Revenue from Contracts with Customers,~~”Codification 842 – Leases (“ASC 842), which requires ~~an entity~~lessees to recognize ~~the amount of revenue to which it expects to be entitled~~a right-of-use asset and lease liability on their balance sheet for the transfer of promised goods or services to customers. The standard also calls for additional disclosures around the nature, amount, timing and uncertainty of revenue and cash flows arising from contractsall leases with ~~customers. The ASU will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective.~~terms beyond twelve months. The new standard becomes effective for the Company on January 1, 2018. The Company has performed a preliminary review of ASU 2014-09 and does not expect the adoption of ASU 2014-09 to have a material impact on its revenues and management fees from company clinics or franchise royalty revenues, which are based on a percent of sales. The Company expects the adoption of Topic 606 to impact its accounting for initial franchise fees and regional developer fees. Currently, the Company recognizes revenue from initial franchise fees and regional developer fees upon the opening of a franchised clinic when the Company has performed all of its material obligations and initial services under the respective agreements. Upon the adoption of Topic 606, the Company expects to recognize the revenue related to initial franchise fees and regional developer fees over the term of the related franchise agreement or regional developer agreement. The Company is in the process of implementing this standard and has drafted certain accounting policies. The Company will be finalizing accounting policies, selecting its transition method, quantifying the impact of adopting this standard, and designing internal controls during the fourth quarter of the year ending December 31, 2017. The Company is currently unable to estimate the impact on its consolidated financial statements.

~~In February 2016, the FASB issued ASU No. 2016-02, “~~~~Leases (Topic 842).~~~~” The ASU~~also requires enhanced disclosures that substantially all operating leases be recognized as assets and liabilities on the Company’s balance sheet, which is a significant departure from the current standard, which classifies operating leases as off-balance sheet transactions and accounts for only the current year operating lease expense in the statement of operations. The right to use the leased property is to be capitalized as an asset and the expected lease payments over the life of the lease will be accounted for as a liability. The effective date is for fiscal years beginning after December 31, 2018. While the Company has not yet quantified the impact that this standard will have on its financial statements, it will result in a significant increase in the assets and liabilities reflected on the Company’s balance sheet and in the interest expense and depreciation and amortization expense reflected in its statement of operations, while reducing the amount of rent expense. This could potentially decrease the Company’s reported net income.

~~In April 2016, the FASB issued ASU No. 2016-10, “~~~~Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing,~~” to clarify the following two aspects of Topic 606: 1) identifying performance obligations, and 2) the licensing implementation guidance. The effective date and transition requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09. The Company is currently evaluating the impact of this amendment on its consolidated financial statements.

~~In May 2016, the FASB issued ASU No. 2016-12, “~~~~Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients,~~” to clarify certain core recognition principles including collectability, sales tax presentation, noncash consideration, contract modifications and completed contracts at transition and disclosures no longer required if the full retrospective transition method is adopted. The effective date and transition requirements for these amendments are the same as the effective date and transition requirements of ASU 2014-09. The Company is currently evaluating the impact of this amendment on its consolidated financial statements.

~~In August 2016, the FASB issued ASU No. 2016-15,~~ ~~“Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.”~~ This update addresses how certain cash inflows and outflows are classified in the statement of cash flows to eliminate existing diversity in practice. This update is effective for annual and interim reporting periods beginning after December 15, 2017. Early adoption is permitted. The Company is currently evaluating the impact of this amendment on its consolidated financial statements.

~~In November 2016, the FASB issued ASU No. 2016-18, “~~~~Statement of Cash Flows (Topic 230): Restricted Cash”~~ ~~(a consensus of the FASB Emerging Issues Task Force), to~~ provide guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. The amendments should be applied using a retrospective transition method, and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

~~In January 2017, the FASB issued ASU No. 2017-01, “~~~~Business Combinations (Topic 805): Clarifying the Definition of a Business,”~~to clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendments should be applied prospectively, and are effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of these amendments on its consolidated financial statements.

~~In January 2017, the FASB issued ASU 2017-04, “~~~~Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment~~.” This update simplifies the subsequent measurement of goodwill by eliminating “Step 2” from the goodwill impairment test. This update is effective for annual and interim reporting periods beginning after December 15, 2019. Early adoption is permitted. The Company is currently evaluating the impact this standard will have on the Company's consolidated financial statements and related disclosures.

~~In May 2017, the FASB issued ASU No. 2017-09,~~ ~~“Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting,”~~ to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718, Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The ASU provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in ASC 718.The amendments are effective for fiscal years beginning after December 15, 2017, and should be applied prospectively to an award modified on or after the adoption date. Early adoption is permitted, including adoption in an interim period. The Company is currently evaluating the impact this standard will have on the Company's consolidated financial statements and related disclosures.

~~In August 2017, the FASB issued ASU No. 2017-12,~~~~“Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities,”~~ ~~to (1) improve the~~more transparency and ~~understandability of~~ information ~~conveyed~~ to financial statement users about ~~an entity’s risk management activities by better aligning~~lease portfolios. Effective January 1, 2019, the ~~entity’s financial reporting for hedging relationships with those risk management activities~~Company adopted the requirements of ASC 842 using the modified retrospective approach using the optional transition method and ~~(2) reduce~~elected to apply the ~~complexity~~provisions of ~~and simplify~~ the application of hedge accounting by preparers. Specifically, the guidance creates better alignment of hedge accounting with risk management activities, eliminates the separate measurement and recording of hedge ineffectiveness, simplifies effectiveness assessments, and improves presentation and disclosure. The amendments are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earningsstandard as of the ~~beginning~~adoption date rather than the earliest date presented. The consolidated financial statements for the period ended March 31, 2019 are presented under the new standard, while comparative periods presented have not been adjusted and continue to be reported in accordance with the previous standard.

The adoption of the ~~fiscal year that an entity adopts~~guidance does not materially impact the ~~amendments in this update. The amended presentation~~Company’s results of operations other than recognition of the operating lease right-of-use asset and ~~disclosure guidance is~~lease liability. See Note 13 for additional disclosures required ~~only prospectively.~~ by ASC 842.

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 ~~currently evaluating~~expected on the ~~impact of this amendment on its~~Company's financial ~~statements.~~statements upon future adoption.

This selected unaudited pro forma ~~condensed~~ consolidated financial data is included only for the purpose of illustration and does not necessarily indicate what the operating results would have been if the ~~acquisitions~~acquisition had been completed on that date. Moreover, this information is not indicative of what the Company’s future operating results will be. The information for ~~2016~~2018 and 2019 prior to the acquisition is included based on prior accounting records maintained by the acquired ~~companies.~~company. In some cases, accounting policies differed materially from accounting policies adopted by the Company following the ~~acquisitions.~~acquisition. For ~~2016,~~2018, this information includes actual data recorded in the Company’s ~~condensed consolidated~~ financial statements for the period subsequent to the date of the ~~acquisitions.~~acquisition. The Company’s condensed consolidated statement of operations for the three months ended ~~September 30, 2016~~March 31, 2019 includes net revenue and net ~~income~~loss of approximately ~~$2.1 million~~$3,000 and ~~$0.1 million,~~$5,000, respectively, attributable to the acquisitions. The Company’s condensed consolidated statement of operations for the nine months ended September 30, 2016 includes net revenue and net income of approximately $5.6 million and $0.5 million, respectively, attributable to the acquisitions.acquisition.

The pro forma amounts included in the table above reflect the application of accounting policies and adjustment of the results of the clinics to reflect the additional depreciation and amortization that would have been charged assuming the fair value adjustments to property and equipment and intangible assets had been applied from January 1, ~~2016, together~~2018.

Depreciation expense was ~~$340,238~~$193,805 and ~~$1,099,698~~$264,353 for the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019 and 2018, respectively. ~~Depreciation expense was $492,076 and $1,356,176 for the three and nine months ended September 30, 2016, respectively.~~

In December 2016, the Company determined that 14 clinics from its Corporate Clinics segment met the criteria for classification as held for sale. Accordingly, in December 2016, the Company recognized a $2.4 million impairment charge to lower the carrying costs of the property and equipment to its estimated fair value less cost to sell which was recorded in the loss on disposition or impairment line of the 2016 consolidated statement of operations. The Company completed the sale of the property in the first quarter of 2017 for nominal consideration.

The intrinsic value of the Company’s stock options outstanding was ~~$1,405,592~~$10,659,380 at ~~September 30, 2017.~~March 31, 2019.

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019 and 2018, stock-based compensation expense for stock options was ~~$125,588~~$96,804 and ~~$261,471, respectively. For the three and nine months ended September 30, 2016, stock based compensation expense for stock options was $183,608, and $522,519,~~$139,172, respectively. Unrecognized stock-based compensation expense for stock options as of ~~September 30, 2017~~March 31, 2019 was ~~$716,667,~~$1,020,834, which is expected to be recognized ratably over the next ~~2.2~~3.0 years.

For the three ~~and nine~~ months ended ~~September 30, 2017,~~March 31, 2019 and 2018, stock-based compensation expense for restricted stock was ~~$59,804~~$74,967 and ~~$151,041, respectively. For the three and nine months ended September 30, 2016, stock based compensation expense for restricted stock was $71,698, and $490,181,~~$68,469, respectively. Unrecognized ~~stock based~~stock-based compensation expense for restricted stock awards as of ~~September 30, 2017~~March 31, 2019 was ~~$206,502~~$308,413, which is expected to be recognized ratably over the next ~~year.~~ 3.1 years.

In December 2013, the Company exercised its right of first refusal under the terms of a Stockholders Agreement dated March 10, 2010 to repurchase 534,000 shares of the Company’s common stock. The shares were purchased for $0.45 per share or $240,000 in cash along with the issuance of an option to repurchase the 534,000 shares. The repurchased shares were recorded as treasury stock, at cost in the amount of $791,638. The option is classified in equity as it is considered indexed to the Company’s stock and meets the criteria for classification in equity. The option was granted to the seller for a term of 8 years. The option contained the following exercise prices:

Consideration given in the form of the option was valued using a Binomial Lattice-Based model resulting in a fair value of $1.03 per share option for a total fair value of $551,638. The option was valued using the Binomial Lattice-Based valuation methodology because that model embodies all of the relevant assumptions that address the features underlying the instrument.

During December 2016, the option holder partially exercised the call option and purchased 250,872 shares at a total repurchase price of $210,000. The Company reduced the cost of treasury shares by approximately $113,000 related to the transaction, reduced the value of the option by approximately $259,000, and reduced additional paid-in-capital by approximately $162,000.

During September 2017, the option holder exercised the remainder of the call option and purchased 283,128 shares at a total repurchase price of $292,671. The Company reduced the cost of treasury shares by approximately $127,000 related to the transaction, reduced the value of the option by approximately $292,000, and reduced additional paid-in-capital by approximately $127,000.

~~Note 13: Subsequent Events~~

On October 10, 2017, the Company entered into a regional developer agreement for a number of counties in the state of Texas, one county in the state of Arkansas, and the entire state of Oklahoma. The party paid an initial development fee of $170,000. The development schedule requires the opening and operating of a minimum of 22 clinics over a ten-year period. A portion of the development fee will be funded through a promissory note. The note will bear interest at 10% per annum for 36 months and requires monthly principal and interest payments, beginning November 24, 2017 and maturing on October 24, 2020.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes included in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto as of and for the year ended December 31, ~~2016~~2018 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K.

Forward-Looking Statements

The information in this discussion contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (“the Exchange Act”), which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management; and accounting estimates and the impact of new or recently issued accounting pronouncements. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “will,” “should,” “could,” “predicts,” “potential,” “continue,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements. All forward-looking statements in this Form 10-Q are made based on our current expectations, forecasts, estimates and assumptions, and involve risks, uncertainties and other factors that could cause results or events to differ materially from those expressed in the forward-looking statements. In evaluating these statements, you should specifically consider various factors, uncertainties and risks that could affect our future results or operations as described from time to time in our SEC reports, including those risks outlined under “Risk Factors” which are contained in Part I, Item 1A of our Form 10-K for the year ended December 31, ~~2016~~2018 and in Part II, Item 1A of this Form ~~10-Q for the quarter ended September 30, 2017.~~10-Q. These factors, uncertainties and risks may cause our actual results to differ materially from any forward-looking statement set forth in this Form 10-Q. You should carefully consider these risks and uncertainties and other information contained in the reports we file with or furnish to the SEC before making any investment decision with respect to our securities. All forward-looking statements attributable to us or persons acting on our behalf are expressly qualified in their entirety by this cautionary statement. Some of the important factors contained in Part I, Item 1A of our Form 10-K for the year ended December 31, 2018 and in Part II, Item 1A of this Form 10-Q that could cause our actual results to differ materially from those projected in any forward-looking statements include, but are not limited to, the following:

•

we may not be able to successfully implement our growth strategy if we or our franchisees are unable to locate and secure appropriate sites for clinic locations, obtain favorable lease terms, and attract patients to our clinics;

•

we have limited experience operating company-owned or managed clinics, and we may not be able to duplicate the success of some of our ~~franchisees, and in the case of certain company-owned or managed clinics that we have closed or may close, we were not able to duplicate the success of our most successful~~ franchisees;

•

~~we may not be able to continue to sell franchises to qualified franchisees;~~

•

~~we may not be able to identify, recruit and train enough qualified chiropractors to staff our clinics;~~

•

~~new clinics may not be profitable, and we may not be able to maintain or improve revenues and franchise fees from existing franchised clinics;~~

•

we may not be able to acquire operating clinics from existing franchisees or develop company-owned or managed clinics on attractive terms;

•

any acquisitions that we make could disrupt our business and harm our financial condition;

•

we may not be able to continue to sell franchises to qualified franchisees;

•

we may not be able to identify, recruit and train enough qualified chiropractors to staff our clinics;

•

new clinics may not be profitable, and we may not be able to maintain or improve revenues and franchise fees from existing franchised clinics;

•

the chiropractic industry is highly competitive, with many well-established ~~competitors, which could prevent us from increasing our market share or result in reduction in our market share;~~competitors;

•

recent administrative actions and rulings regarding the corporate practice of medicine and joint employer responsibility may jeopardize our business model;

•

we may face negative publicity or damage to our reputation, which could arise from concerns expressed by opponents of chiropractic and by chiropractors operating under traditional service models;

•

legislation and regulations, as well as new medical procedures and techniques, could reduce or eliminate our competitive advantages; and

•

we face increased costs as a result of being a public company.

Additionally, there may be other risks that are otherwise described from time to time in the reports that we file with the Securities and Exchange Commission. Any forward-looking statements in this report should be considered in light of various important factors, including the risks and uncertainties listed above, as well as others.

Overview

Our principal business is to develop, own, operate, support and manage chiropractic clinics through franchising and the sale of regional developer rights and through direct ownership and management arrangements throughout the United States.

We seek to be the leading provider of chiropractic care in the markets we serve and to become the most recognized brand in our industry through the rapid and focused expansion of chiropractic clinics in key markets throughout North America and abroad.

Key Performance Measures. We receive monthly performance reports from our system and our clinics which include key performance indicators per clinic including gross sales, same-store Comp Sales, number of new patients, conversion percentage, and member attrition. In addition, we review monthly reporting related to clinic openings, clinic license sales, and various earnings metrics in the aggregate and per clinic. We believe these indicators provide us with useful data with which to measure our performance and to measure our franchisees’ and clinics’ performance.

Key Clinic Development Trends. As of March 31, 2019, we and our franchisees operated 454 clinics, of which 404 were operated by franchisees and 50 were operated as company-owned or managed clinics. Of the 50 company-owned or managed clinics, 18 were constructed and developed by us, and 32 were acquired from franchisees.

Our current strategy is to grow through the sale and development of additional franchises, build upon our regional developer strategy, and reinitiate our efforts to expand our corporate clinic portfolio within clustered locations in a deliberate and measured manner. The number of franchise licenses sold for the year ended December 31, 2018 increased to 99 licenses, up from 37 and 22 licenses for the years ended December 31, 2017 and 2016, respectively. We ended the first quarter of 2019 with 21 regional developers who were responsible for 100% of the 30 licenses sold during the period. The growth reflects the power of the regional developer program to accelerate the number of clinics sold, and eventually opened, across the country.

In addition, we believe that we can accelerate the development of, and revenue generation from, company-owned or managed clinics through the further selective acquisition of existing franchised clinics and opening of greenfield units. We will seek to acquire existing franchised clinics that meet our criteria for demographics, site attractiveness, proximity to other clinics and additional suitability factors. As of March 31, 2019, we opened two greenfield units, executed two leases for future greenfield clinic locations, and had nine additional letters-of-intent in place for further greenfield expansion.

We believe that ~~we have an attractive business~~The Joint has a sound concept, benefiting from the fundamental changes taking place in the manner in which Americans access chiropractic care and their growing interest in seeking effective, affordable natural solutions for general wellness. These trends join with the strong preference we have seen among chiropractic doctors to reject the insurance-based model to produce a ~~dynamic~~ combination that benefits the consumer and the service provider alike. We believe that these forces create an important opportunity to accelerate the growth of our network.

Significant Events and/or Recent Developments

~~Key Performance Measures.~~ We receive both weekly and monthly performance reports from our clinics which include key performance indicators including gross clinic sales, total royalty income, and patient office visits. We believe these indicators provide us with useful data with which to measure our performance and to measure our franchisees’ and clinics’ performance.

~~Key Clinic Development Trends~~~~. Our current growth strategy is~~We continue to ~~grow through the sale and development of additional franchises and regional developer territories~~deliver on our strategic initiatives and to ~~foster~~progress toward sustained profitability. For the ~~growth~~three months ended March 31, 2019 we saw:

i) Gross sales for all clinics open for any amount of ~~acquired and developed~~time grew 32% to $48.9 million dollars.

ii) System-wide Comp Sales – or “same store” retail sales of clinics that ~~are owned and managed by us. In the nine~~have been open for at least 13 full months ~~ended September 30, 2017, we added a net of 33~~– for all clinics open 13 months or more – increased 25%.

iii) System-wide Comp Sales for mature clinics open 48 months or more increased 18%.

iv) We opened 12 new franchised clinics and ~~closed or sold 14~~two company-owned or managed ~~clinics in the Chicago area and in Upstate New York as part~~greenfields for a total of our plan to improve cash usage and progress toward profitability. This brought the total number of clinics to 389 as of September 30, 2017, up from 370 total clinics at December 31, 2016, and 354 at September 30, 2016. 14 units.

We ~~recognize~~saw over 434,000 new patients in 2018, an increase of 25% from our new patient count the ~~critical importance~~year before, with approximately 26% of ~~preserving cash and strengthening clinics we have already developed. Therefore, we will~~those new patients having never been to a chiropractor before. We are not ~~actively pursue~~only increasing our percentage of market share but expanding the ~~addition~~chiropractic market. These factors, along with continued leverage of company-owned or managed clinics during the 2017 fiscal year, but will address strategic opportunities as they present themselves. Scaling back the launch of company-owned or managed clinics will allow us to continue to focus on growing gross sales, streamlining operations across all company-owned or managed clinics and expanding franchise development. During the nine months ended September 30, 2017, our company-owned or managed clinics continued to demonstrate improved performance. As of September 30, 2017, we had 47 company-owned or managed clinics which represented 12% of the clinic portfolio, as compared to 61, or 17% of the clinic portfolio, at the same point of the previous year. operating expenses, drove improvement in our bottom line.

~~Recent Developments~~

~~In January 2017,~~On March 4, 2019, we entered into a Credit and Security Agreement (the “Credit Agreement”) and signed a revolving credit note payable to the lender. Under the Credit Agreement, we are able to borrow up to an aggregate of $5,000,000 under revolving loans. Interest on the unpaid outstanding principal amount of any revolving loans is at a rate equal to 10% per annum, provided, however, that the minimum amount of interest paid in the aggregate on all revolving loans granted over the term of the Credit Agreement is $200,000. Interest is due and payable on the last day of each fiscal quarter in an amount determined by us, but not less than $25,000. The lender’s lending commitments under the Credit Agreement terminate in December 2019, unless sooner terminated in accordance with the provisions of the Credit Agreement. We are using the credit facility for general working capital needs. We have drawn $1,000,000 of the $5,000,000 available under the Credit Agreement.

In January 2017, we sold the assets of six of our 11 clinics in the Chicago area for a nominal amount to a limited liability company that includes existing franchisees. The purchaser operates the clinics as franchised locations pursuant to a franchise agreement. Concurrently, we sold regional developer rights to the Chicago area to the purchaser of our six Chicago clinics for $300,000. Pursuant to the regional developer agreement for a number of counties in the ~~developer has agreed to open~~states of Virginia, Pennsylvania and West Virginia for $290,000. The development schedule requires a minimum of ~~30 Chicago area~~40 clinics ~~over the next 10 years, with plans to~~ open five to 10 clinics over the 18 months following January 2017. We have closed the remaining five Chicago-area clinics, as well as three Company-managed clinics in upstate New York. We recognized an additional lease exit liability in the first quarter of 2017 of $739,000 related to these closures. These assets were designated as held for sale as of December 31, 2016, and we recognized a loss on disposition or impairment of approximately $3.5 million. We made these tactical decisions in the 4^th ~~quarter of 2016 to reduce our current cash usage, allowing us to focus on accelerating the point at which we believe we will achieve cash-flow breakeven.~~

In addition to the Chicago regional developer rights discussed above, during the first quarter of 2017, we sold regional developer territories for Philadelphia and Washington State for a total, including the Chicago area, of approximately $650,000. Their combined development schedule requires the opening and operating of a minimum of 70 clinics over a ten-year period. The revenues related to these sales will be recognized over the estimated number of franchised clinics to be opened in the respective territories.

During the three months ended June 30, 2017, we sold two regional developer territories for Central Florida and Ohio for a total of $620,000. Their combined development schedule requires the opening and operating of a minimum of 68 new clinics (34 in each territory) over a ten-year period.

During the three months ended September 30, 2017, we sold three regional developer territories for New Jersey, Maryland/Washington DC and Minnesota for a total of approximately $440,000. Their combined development schedule requires the opening and operating of a minimum of 50 new clinics over a ten-year period, with respect to New Jersey and Maryland/Washington DC and a five-year period for the Minnesota territory.

During the nine months ended September 30, 2017, we terminated two franchise licenses that were in default. In conjunction with these terminations, during the nine months ended September 30, 2017, we recognized $62,915 of revenue and $16,800 of costs, which were previously deferred.

Factors Affecting Our Performance

Our ~~quarterly~~ operating results may fluctuate significantly as a result of a variety of factors, including the timing of new clinic sales, openings, closures, markets in which ~~we operate~~they are contained and related expenses, general economic conditions, consumer confidence in the economy, consumer preferences, and competitive factors.

Significant Accounting Polices and Estimates

There were no changes in our significant accounting policies and estimates during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2019 from those set forth in “Significant Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2018, except as outlined in Note 1, Nature of Operations and Summary of Significant Accounting Policies, to our condensed consolidated financial statements included in this report as it relates to revenue recognition under ASC 606 and leases under ASC 842.

Results of Operations

The following discussion and analysis of our financial results encompasses our consolidated results and results of our two business segments: Corporate Clinics and Franchise Operations.

Prior Period Financial Statement Correction of Immaterial Error

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. The PCs are variable interest entities (“VIEs”). During the first quarter of 2019, the Company reassessed the governance structure and operating procedures of the PCs and determined that the Company has the power to control certain significant non-clinical activities of the PCs, as defined by Accounting Standards Codification 810 (“ASC 810”), Consolidations. Therefore, the Company is the primary beneficiary of the VIEs, and per ASC 810, must consolidate the VIEs. Prior to 2019, the Company did not consolidate the PCs. The Company has concluded the previous accounting policy to not consolidate the PCs was an immaterial error and has determined that the PCs should be consolidated. The adjustments will result in an increase to revenues from company clinics and a corresponding increase to general and administrative expenses. This will have no impact on net income (loss), except when the PC has sold treatment packages and wellness plans. Revenue from these treatment packages and wellness plans will now be deferred and will be recognized when patients use their visits. The Company has corrected these immaterial errors by restating the 2018 condensed consolidated financial statements as presented below.

Total Revenues – Three Months Ended ~~September 30, 2017~~March 31, 2019

Components of revenues for the three months ended ~~September 30, 2017~~March 31, 2019 as compared to the three months ended ~~September 30, 2016, are~~March 31, 2018, were as follows:

	Three Months Ended March 31,
	2019		2018		Change from Prior Year		Percent Change from Prior Year
Revenues:
Revenues from company-owned or managed clinics	$	5,639,076	$	4,805,673	$	833,403		17.3	%
Royalty fees		3,026,815		2,273,988		752,827		33.1	%
Franchise fees		417,073		348,337		68,736		19.7	%
Advertising fund revenue		891,567		659,030		232,537		35.3	%
Software fees		365,236		307,475		57,761		18.8	%
Regional developer fees		183,858		124,011		59,847		48.3	%
Other revenues		155,751		128,450		27,301		21.3	%

Total revenues	$	10,679,376	$	8,646,964	$	2,032,412		23.5	%

Three Months Ended
September 30,
2017 2016 Change from
Prior Year Percent Change
from Prior Year
Revenues:
Revenues and management fees from company clinics $ 2,929,850 $ 2,341,471 $ 588,379 25.1 %
Royalty fees 1,958,249 1,540,264 417,985 27.1 %
Franchise fees 229,715 602,400 (372,685 ) (61.9 )%
Advertising fund revenue 775,221 595,955 179,266 30.1 %
IT related income and software fees 290,250 235,925 54,325 23.0 %
Regional developer fees 259,230 123,921 135,309 109.2 %
Other revenues 103,336 63,654 39,682 62.3 %

Total revenues $ 6,545,851 $ 5,503,590 $ 1,042,261 18.9 %

The reasons for the significant changes in our components of total revenues ~~are~~were as follows:

Consolidated Results

Total revenues increased by ~~$1.0~~$2.0 million, primarily due to the continued revenue growth of our company-owned or managed clinics portfolio and continued expansion and revenue growth of our franchise base.

Corporate Clinics

Revenues ~~and management fees~~ from company-owned or managed clinics increased, primarily due ~~primarily~~ to improved same-store sales growth.

Franchise Operations

Royalty fees ~~have~~ increased due to an increase in the number of franchised clinics in operation during the current period along with continued sales growth in existing franchised clinics. As of ~~September 30, 2017,~~March 31, 2019, and ~~2016,~~2018, there were ~~342~~404 and ~~293~~359 franchised clinics in operation, respectively.

Franchise fees ~~decreased~~increased due to ~~the timing of~~an increase in franchise license terminations and fewer clinic openings. In the three months ended September 30, 2017 and 2016, we recognized revenue of $63,000 and $196,000, respectively, from terminated licenses. In the three months ended September 30, 2017 and 2016, 6 and 13 new franchised clinics opened, respectively.

agreements executed.

Regional developer fees increased due to the ~~timing~~sale of additional regional developer territories and the related revenue recognition onover the ~~clinic openings on specific RD territories.~~life of the regional developer agreement.

~~IT related income and software~~Software fees ~~and advertising fund~~ revenue increased due to an increase in our franchise clinic base as described above.

~~Total Revenues – Nine Months Ended September 30, 2017~~

~~Components of revenues for the nine months ended September 30, 2017 as compared to the nine months ended September 30, 2016, are as follows:~~

Nine Months Ended
September 30,
2017 2016 Change from
Prior Year Percent Change
from Prior Year
Revenues:
Revenues and management fees from company clinics $ 8,106,121 $ 6,137,277 $ 1,968,844 32.1 %
Royalty fees 5,518,409 4,337,643 1,180,766 27.2 %
Franchise fees 1,036,815 1,641,409 (604,594 ) (36.8 )%
Advertising fund revenue 1,995,235 1,218,256 776,979 63.8 %
IT related income and software fees 839,788 686,459 153,329 22.3 %
Regional developer fees 455,859 496,538 (40,679 ) (8.2 )%
Other revenues 282,289 225,086 57,203 25.4 %

Total revenues $ 18,234,516 $ 14,742,668 $ 3,491,848 23.7 %

~~The reasons for the significant changes in our components of total revenues are as follows:~~

~~Consolidated Results~~

Total revenues increased by $3.5 million, primarily due to the continued revenue growth of our company-owned or managed clinics portfolio and continued expansion and revenue growth of our franchise base.

~~Corporate Clinics~~

Revenues and management fees from company-owned or managed clinics increased due primarily to improved same-store sales growth, which includes contributions from clinics acquired in the second quarter of 2016.

~~Franchise Operations~~

Royalty fees have increased due to an increase in the number of franchised clinics in operation during the current period along with continued sales growth in existing franchised clinics. As of September 30, 2017, and 2016, there were 342 and 293 franchised clinics in operation, respectively.

Franchise fees decreased due to the timing of franchise license terminations. In the nine months ended September 30, 2017 and 2016, we recognized revenue of $63,000 and $477,000, respectively, from terminated licenses.

~~IT related income and software fees and advertising fund revenue increased due to an increase in our franchise clinic base as described above.~~

Cost of Revenues

Cost of Revenues 2017 2016 Change from
Prior Year Percent Change
from Prior Year

Three Months Ended September 30, $ 819,200 $ 718,762 $ 100,438 14.0 %
Nine Months Ended September 30, 2,331,522 2,186,464 145,058 6.6 %

Cost of Revenues	2019		2018		Change from Prior Year		Percent Change from Prior Year

Three Months Ended March 31,	$	1,205,941	$	972,332	$	233,609		24.0	%

For the three months ended ~~September 30, 2017,~~March 31, 2019, as compared with the ~~same period last year,~~three months ended March 31, 2018, the total cost of revenues increased ~~slightly~~ due to an increase in regional developer royalties of ~~$149,000~~$0.2 million triggered by an increase ofin franchise royalty revenues of approximately ~~27% as compared to the same quarter in the prior year, offset by a reduction of $69,000 in regional developer commissions recognized in conjunction with franchise openings.~~ 33%.

For the nine months ended September 30, 2017, as compared with the same period last year, the total cost of revenues increased slightly due to an increase in regional developer royalties of $330,000 triggered by an increase of royalty revenues of approximately 27% as compared to the same quarter in the prior year, offset by a reduction of $178,000 in regional developer commissions recognized in conjunction with franchise openings.

Selling and Marketing Expenses

Selling and Marketing Expenses 2017 2016 Change from
Prior Year Percent Change
from Prior Year

Three Months Ended September 30, $ 1,172,559 $ 1,272,524 $ (99,965 ) (7.9 )%
Nine Months Ended September 30, 3,189,489 3,184,484 5,005 0.2 %

Selling and Marketing Expenses	2019		2018		Change from Prior Year		Percent Change from Prior Year

Three Months Ended March 31,	$	1,505,988	$	1,102,304	$	403,684		36.6	%

Selling and marketing expenses decreased for the three months ended September 30, 2017, as compared to the three months ended September 30, 2016, due to the sale or closure of 14 company-owned or managed clinics, offset by an increase in the overall size of the national marketing fund due to the larger franchise clinic base, and the timing of national marketing fund expenditures.

Selling and marketing expenses increased ~~slightly~~ for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, as compared to the ~~nine~~three months ended ~~September 30, 2016, due to the~~March 31, 2018, driven by an increase in ~~the overall size of the national~~local marketing ~~fund due to~~expenditures by the ~~larger franchise clinic base, offset by lower spending on~~ company-owned or managed ~~clinics advertising and promotion due to the sale or closure of 14 clinics and due to the timing of the national conference occurring in the fourth quarter of 2017 versus the third quarter of 2016.~~clinics.

Depreciation and Amortization Expenses

Depreciation and Amortization Expenses 2017 2016 Change from
Prior Year Percent Change
from Prior Year

Three Months Ended September 30, $ 468,800 $ 695,579 $ (226,779 ) (32.6 )%
Nine Months Ended September 30, 1,550,013 1,908,238 (358,225 ) (18.8 )%

Depreciation and Amortization Expenses	2019		2018		Change from Prior Year			Percent Change from Prior Year

Three Months Ended March 31,	$	365,678	$	387,417	$	(21,739	)		(5.6	)%

Depreciation and amortization expenses decreased for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2019, as compared to the three ~~and nine~~ months ended ~~September 30, 2016,~~March 31, 2018, primarily due to assets reaching the ~~sale or closure~~end of ~~14 company-owned or managed clinics.~~their estimated depreciable lives during the period.

General and Administrative Expenses

General and Administrative Expenses 2017 2016 Change from
Prior Year Percent Change
from Prior Year

Three Months Ended September 30, $ 4,462,922 $ 5,435,219 $ (972,297 ) (17.9 )%
Nine Months Ended September 30, 13,694,690 16,749,945 (3,055,255 ) (18.2 )%

General and Administrative Expenses		2019		2018		Change from Prior Year	Percent Change from Prior Year

Three Months Ended March 31,	$	6,552,904	$	6,268,686	$	284,218	4.5	%

General and administrative expenses ~~decreased~~increased during the three months ended ~~September 30, 2017~~March 31, 2019 compared to the three months ended ~~September 30, 2016,~~March 31, 2018, primarily due to ~~the following:~~

	•	~~A decrease~~an increase in payroll and related expense of ~~approximately~~ $0.2 million ~~in payroll related expenses;~~

	•	~~A decrease of approximately $0.3 million in utilities and facilities related expenses due to the closure of 14 company-owned or managed clinics; and~~
	•	A decrease of approximately $0.3 million of other miscellaneous expenses as a result of certain legal settlements and expensing of real estate development expenses recognized in the three months ended September 30, 2016.

~~General and administrative expenses decreased during the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, primarily~~ due to the ~~following:~~inclusion of the VIEs and an increase in facilities and credit card processing fees of $0.1 million due to continued clinic count and revenue growth.

	•	~~A decrease of approximately $1.0 million in payroll related expenses;~~

	•	~~A decrease of approximately $0.5 million in legal and accounting related expenses;~~
	•	~~A decrease of approximately $0.5 million in utilities and facilities related expenses; and~~
	•	A decrease of approximately $0.9 million of other miscellaneous expenses as a result of certain legal settlements and real estate development expenses recognized in the three months ended September 30, 2016.

~~Loss~~Profit (Loss) from Operations - Three Months Ended ~~September 30, 2017~~March 31, 2019

Profit (Loss) from Operations	2017			2016			Change from Prior Year		Percent Change from Prior Year				2019		2018			Change from Prior Year	Percent Change from Prior Year

Three Months Ended September 30,	$	(377,630	)	$	(2,618,494	)	$	2,240,864		(85.6	)%
Three Months Ended March 31,												$	1,048,865	$	(83,775	)	$	1,132,640	1352.0	%

Consolidated Results

Consolidated ~~loss~~profit (loss) from operations ~~decreased~~increased by ~~$2.2~~$1.1 million for the ~~three months~~period ended ~~September 30, 2017~~March 31, 2019 compared to the ~~three months~~period ended ~~September 30, 2016,~~March 31, 2018, primarily driven by the ~~$1.3~~$0.5 million ~~decrease~~increase in operating ~~loss~~income in the corporate ~~clinic~~clinics segment discussed below ~~a decrease~~combined with an improvement in ~~corporate general and administrative expenses~~operating income of ~~$0.4~~$0.6 million ~~and increased net income from~~in franchised operations ~~of $0.5 million~~ discussed below.

Corporate Clinics

Our corporate clinics segment (i.e., company-owned or managed clinics) had ~~a loss~~net income from operations of ~~$0.2~~$0.9 million for the ~~three months~~period ended ~~September 30, 2017, a decrease~~March 31, 2019, an increase of ~~$1.3~~$0.5 million compared to ~~a loss~~income from operations of ~~$1.5~~$0.4 million for the same period last year. ~~This decrease~~The increase was primarily due to:

	•	An increase in revenues of approximately ~~$0.6~~$0.9 million from company-owned or managed clinics; ~~and~~partially offset by

	•	A ~~decrease of approximately $0.3~~$0.4 million ~~of utilities~~increase in depreciation, general and ~~facilities related expense, approximately $0.2 million in selling~~administrative and marketing expenses ~~and approximately $0.2 million~~ in ~~depreciation and amortization~~the three months ended March 31, 2019 primarily driven by an increase in payroll related ~~to the sale or closure of company-owned or managed clinics.~~expenses.

Franchise Operations

Our franchise operations segment had net income from operations of ~~$1.7~~$2.4 million for the three months ended ~~September 30, 2017,~~March 31, 2019, an increase of ~~$0.5~~$0.6 million, compared to net income from operations of ~~$1.2~~$1.8 million for the same period ended ~~September 30, 2016.~~March 31, 2018. This increase was primarily due to:

	•	An increase of approximately ~~$0.3~~$1.0 million in total royalty revenues (net of ~~national marketing~~advertising fund contributions)~~, due primarily to an approximately 27% increase in franchise royalty revenues; and~~; offset by

	•	~~A decrease~~An increase of approximately ~~$0.1 million in general and administrative expenses.~~

~~Loss from Operations - Nine Months Ended September 30, 2017~~

Profit (Loss) from Operations 2017 2016 Change from
Prior Year Percent Change
from Prior Year

Nine Months Ended September 30, (2,949,169 ) (9,286,463 ) 6,337,294 (68.2 )%

~~Consolidated Results~~

Consolidated loss from operations decreased by $6.3 million for the nine months ended September 30, 2017 compared to the nine months ended September 30, 2016, primarily driven by the $3.6 million decrease in operating loss in the corporate clinic segment, discussed below, a decrease in corporate general and administrative expenses of $1.4 million, and increased net income from franchised operations of $1.3 million discussed below.

~~Corporate Clinics~~

Our corporate clinics segment (i.e., company-owned or managed clinics) had a loss from operations of $1.2 million for the nine months ended September 30, 2017, a decrease of $3.6 million compared to a loss from operations of $4.8 million for the same period last year. This decrease was primarily due to:

	•	~~An increase in revenues of approximately $2.0 million from company-owned or managed clinics; and~~

	•	~~A decrease of approximately $0.6 million of utilities and facilities expense, approximately $0.5~~$0.4 million in selling and marketing expenses ~~and approximately $0.4 million in depreciation and amortization related~~primarily due to the ~~sale or closure of company-owned or managed clinics.~~

~~Franchise Operations~~

Our franchise operations segment had net income from operations of $4.5 million for the nine months ended September 30, 2017, an increase of $1.3 million, compared to net income from operations of $3.2 million for the same period ended September 30, 2016. This increase was primarily due to:

	•	~~An increase of approximately $0.7 million in total revenues (net of national marketing fund contributions), due primarily to an approximately 27%~~ increase in ~~franchise royalty revenues; and~~

	•	~~A decrease of approximately $0.6 million~~franchised clinics in ~~general and administrative expenses.~~operation.

Liquidity and Capital Resources

Sources of Liquidity

We used a significant amount of the net proceeds from our public offerings for the development of company-owned or managed clinics. We accomplished this by developing new clinics and by repurchasing existing franchises. In addition, we have used proceeds from our offerings to repurchase existing regional developer licenses, to continue to expand our franchised clinic business and for general business purposes. We are holding the remaining net proceeds in cash or short-term bank deposits.

As of ~~September 30, 2017,~~March 31, 2019, we had cash and short-term bank deposits of approximately ~~$2.6~~$8.1 million. ToWe provided $459,511 of cash flow from operating activities in the three months ended March 31, 2019. We will continue to preserve cash, and while we ~~will not proactively pursue~~have resumed the ~~addition~~acquisition and development of ~~any~~ company-owned or managed clinics, ~~during the 2017 fiscal year. In addition, our tactical decisions made with respect~~we intend to ~~the clinics in Chicago~~progress at a measured pace and ~~New York in January 2017, as well as the cash infusion from the sale of regional developer territories, has significantly reduced our estimated net cash usage for 2017~~target geographic clusters where we are able to ~~approximately $2.0 million. Cash used in 2016 included expenditures for the acquisition or development of 14 company-owned or managed clinics~~increase efficiencies through a consolidated real estate penetration strategy, leverage cooperative advertisement and ~~working capital losses in the Chicago~~marketing and ~~New York markets of approximately $2.8 million. As we have no current plan to acquire or develop company-owned or managed clinics during 2017,~~attain general corporate and ~~have sold or closed 14 clinics in the Chicago and New York markets, our projected use of cash in 2017 is significantly lower than in 2016.~~administrative operating efficiencies.

In January 2017, we executed a Credit and Security Agreement which provided a credit facility of up to $5.0 million. We have drawn $1.0 million under the credit facility. See Note 79 to our condensed consolidated financial statements included in this report for additional discussion of the credit facility.

In addition to approximately $8.1 million of unrestricted cash on hand as of March 31, 2019, the Company’s principal sources of liquidity are expected to be cash flows from operations, proceeds from debt financings or equity issuances, and/or proceeds from the sale of assets. The Company expects its available cash and cash flows from operations, debt financings or equity issuances, or proceeds from the sale of assets to be sufficient to fund its short-term working capital requirements. The Company’s long-term capital requirements, primarily for acquisitions and other corporate initiatives, could be dependent on its ability to access additional funds through the debt and/or equity markets. The Company from time to time considers and evaluates transactions related to its portfolio including debt financings, equity issuances, purchases and sales of assets, and other transactions. There can be no assurance that the Company will continue to generate cash flows at or above current levels or that the Company will be able to obtain the capital necessary to meet the Company’s short and long-term capital requirements.

Analysis of Cash Flows

Net cash ~~used in~~provided by (used in) operating activities ~~decreased~~increased by ~~$8,927,220~~$492,614 to ~~$1,416,497~~$459,511 for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019 compared to ~~$10,343,717~~($33,103) for the ~~nine~~three months ended ~~September 30, 2016.~~March 31, 2018. The ~~decrease in cash used in operating activities~~change was attributable primarily to decreased expenses ~~caused by decreased operating losses~~ and ~~working capital requirements~~continued profitability of our company-owned or managed clinics.

Net cash used in investing activities was ~~$150,701~~$1,201,573 and ~~$2,608,380~~$142,343 for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019 and ~~2016,~~2018, respectively. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019 this included an acquisition of $30,000, purchases of ~~fixed assets~~property and equipment of ~~$0.2 million~~$526,027 and ~~payments received on notes receivable of $39,888. For the nine months ended September 30, 2016, this includes acquisitions of franchises of $0.8 million, the~~ reacquisition and termination of regional developer rights of ~~$0.3 million,~~$681,500 offset by payments received on notes receivable of $35,954. For the three months ended March 31, 2018, this included purchases of property and equipment of ~~$1.5 million and~~$183,734, offset by payments ~~received~~ on notes receivable of ~~$26,000.~~$41,391.

Net cash provided by ~~(used in)~~ financing activities was ~~$1,185,982~~$84,601 and ~~($454,256)~~$23,325 for the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019 and ~~2016,~~2018, respectively. For the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, this included ~~borrowings of $1.0 million on our revolving line of credit, proceeds from sale of treasury stock of $0.3 million,~~ proceeds from the exercise of stock options of ~~$0.1 million, partially~~$189,886 offset by ~~purchases of treasury stock under employee stock plans of $2,655 and~~ repayments on notes payable of ~~$0.2 million.~~$100,000 and payments of finance lease obligation of $5,285. For the ~~nine~~three months ended ~~September 30, 2016,~~March 31, 2018, this ~~includes repayments on notes payable of $0.4 million, purchases of treasury stock under employee stock plans of $83,000 and offering costs adjustment of $1,000, partially offset by~~included proceeds from exercise of stock ~~options of $66,000.~~options.

Recent Accounting Pronouncements

See Note 1, Nature of Operations and Summary of Significant Accounting Policies, to our condensed consolidated financial statements included in this report for information regarding recently issued accounting pronouncements that may impact our financial statements.

Off-Balance Sheet Arrangements

During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2019, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that would have been established for the purpose of facilitating off-balance sheet arrangements.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our management ~~with the participation of our Chief Executive Officer and Chief Financial Officer,~~ evaluated the effectiveness of our disclosure controls and procedures as of ~~September 30, 2017.~~March 31, 2019. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act are accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of ~~September 30, 2017,~~March 31, 2019, our ~~Chief Executive Officer and Chief Financial Officer~~management concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

During the first quarter of 2019, we implemented new controls in connection with our adoption of the Accounting Standards Updates related to Topic 842, Leases. No ~~change~~other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the ~~quarter~~three months ended ~~September 30, 2017~~March 31, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, the Company is party to litigation from time to time.

ITEM 1A. RISK FACTORS

We documented our risk factors in Item 1A of Part I of our ~~annual report on~~ Form 10-K for the year ended December 31, ~~2016.~~2018. Other than changes to the risk ~~factor~~factors identified below, which should be read in conjunction with the risk factors as they appear in such Form 10-K, there have been no material changes to our risk factors since the filing of that report.

The disclosures in the risk factor under the heading “Our management services agreements, according to which we provide non-clinical services to affiliated PCs, could be challenged by a state or chiropractor under laws regulating the practice of chiropractic, and some state chiropractic boards have made inquiries concerning our business model ~~depends on proprietary~~” have been updated below with regard to Arkansas and third party management information systems that we use to, among other things, track financial and operating performance of our clinics, and any failure to successfully design and maintain these systems or implement new systems could materially harm our operations.

We depend on integrated management information systems, some of which are provided by third parties, and standardized procedures for operational and financial information, as well as for patient records and our billing operations. We may experience unanticipated delays, complications, data breaches or expenses in implementing, integrating, and operating our systems. Our management information systems regularly require modifications, improvements or replacements that may require both substantial expenditures as well as interruptions in operations. Our ability to implement these systems is subject to the availability of skilled information technology specialists to assist us in creating, implementing and supporting these systems. Our failure to successfully design, implement and maintain all of our systems could have a material adverse effect on our business, financial condition and results of operations.North Carolina:

In February 2019, a bill was introduced in the ~~nine months ended September 30, 2017,~~Arkansas state legislature to prohibit the ownership and management of a chiropractic corporation by a non-chiropractor. The bill was drafted by the Arkansas State Board of Chiropractic Examiners. This bill has since been withdrawn. While the prohibition might not have been applicable to our business model in Arkansas, depending upon how the language of the bill was interpreted, it could have posed a threat to that model if passed. We have no assurance that another bill posing a similar or greater threat to our business model will not be introduced in the future. Previously, in 2015, the Arkansas Board had questioned whether our business model might violate Arkansas law in its response to an inquiry we made on behalf of one of our franchisees. While the Arkansas Board did not thereafter pursue the matter of a possible violation, it might choose to do so at any time in the future.

In February 2019, the North Carolina Board of Chiropractic Examiners delivered notices alleging certain violations to approximately fifteen chiropractors working for clinics in North Carolina for which our franchisees provide management services. We retained legal counsel in this matter, and a preliminary hearing was conducted on February 21, 2019. The North Carolina Board issued its findings to each of the individual chiropractors, which generally included an overall finding that probable cause existed to show that the chiropractors violated one or more of the North Carolina Board’s rules. The findings each also proposed an Informal Settlement Agreement in lieu of proceeding to a full hearing before the North Carolina Board. On April 22, 2019, each of the chiropractors, through their attorneys, delivered to the North Carolina Board notices refuting the North Carolina Board’s findings and seeking revisions to the Settlement Agreement. The North Carolina Board has yet to reply to the notices. While the allegations consist primarily of quality of care and advertising issues, it is possible that the actions of the North Carolina Board arise out of concerns related to our business model, and if so, we have ~~experienced unanticipated delays~~no assurance that the North Carolina Board will not pursue other claims against the chiropractors.

The disclosures in the ~~performance~~risk factor under the heading “State regulations on corporate practice of chiropractic” have been updated below with regard to Arkansas:

In February 2019, a bill was introduced in the Arkansas state legislature prohibiting the ownership and management of a chiropractic corporation by a non-chiropractor. This bill has since been withdrawn. While it is questionable whether the prohibition would have been applicable to our ~~proprietary management information system when migrating~~business model in Arkansas, the ~~platform~~bill could have been interpreted to ~~a fully redundant cloud environment.~~challenge that model if it had passed in its proposed form. We have incurred additional costs to improve system performance and have allocated additional resources to stabilize and monitor the system on an ongoing basis. Our failure to stabilize the system could result in us incurring additional expenses and in interruptionsno assurance that another bill posing a similar or greater challenge to our ~~and our franchisees’~~ business ~~operations, and our initiatives to upgrade our proprietary management information system may~~model will not ~~succeed or may result~~be introduced in ~~greater than anticipated delays and expenditures, either of which could have a material adverse effect on our and our franchisees’ business operations.~~the future.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Use of Proceeds from Registered Securities

None.

ITEM 6. EXHIBITS

The Exhibit Index immediately following the Signatures to this Form 10-Q is hereby incorporated by reference into this Form 10-Q.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 Par Value Per Share	JYNT	The NASDAQ Capital Market LLC

			PAGE NO.
PART I FINANCIAL INFORMATION

	Item 1.	Financial Statements:
		Condensed Consolidated Balance Sheets as of ~~September 30, 2017~~March 31, 2019 (unaudited) and December 31, ~~2016~~2018	1
		Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 (unaudited)	2
		Condensed Consolidated Statements of Changes in Stockholders’ Equity for The Three Months Ended March 31, 2019 and 2018 (unaudited)	3
		Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2019 and ~~2016~~2018 (unaudited)	34
		Notes to Unaudited Condensed Consolidated Financial Statements	45

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2226

	Item 4.	Controls and Procedures	3033

Part I, Item 3 – Not applicable

PART II OTHER INFORMATION

	Item 1.	Legal Proceedings	3133

	Item 1A.	Risk Factors	3133

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3134

	Item 6.	Exhibits	3134

	SIGNATURES		3235

	EXHIBIT INDEX		3336

Part II, Items 3, 4, and 5 - Not applicable

	March 31, 2019			December 31, 2018
ASSETS	(unaudited)			(as adjusted)
Current assets:
Cash and cash equivalents	$	8,086,426		$	8,716,874
Restricted cash		111,065			138,078
Accounts receivable, net		1,078,558			806,350
Income taxes receivable		159			268
Notes receivable - current portion		153,114			149,349
Deferred franchise costs - current portion		644,560			611,047
Prepaid expenses and other current assets		830,571			882,022
Total current assets		10,904,453			11,303,988
Property and equipment, net		4,211,550			3,658,007
Operating lease right-of-use asset		9,977,018			–
Notes receivable, net of current portion and reserve		89,004			128,723
Deferred franchise costs, net of current portion		3,034,372			2,878,163
Intangible assets, net		2,167,522			1,634,060
Goodwill		3,225,145			3,225,145
Deposits and other assets		330,653			599,627
Total assets	$	33,939,717		$	23,427,713

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	1,216,513		$	1,253,274
Accrued expenses		152,127			266,322
Co-op funds liability		111,065			104,057
Payroll liabilities		884,006			2,035,658
Notes payable - current portion		1,000,000			1,100,000
Deferred rent - current portion		–			136,550
Operating lease liability - current portion		1,831,056			–
Finance lease liability - current portion		22,507			–
Deferred franchise revenue - current portion		2,521,297			2,370,241
Deferred revenue from company clinics		2,527,032			2,529,497
Other current liabilities		598,276			477,528
Total current liabilities		10,863,879			10,273,127
Notes payable, net of current portion		–			–
Deferred rent, net of current portion		–			721,730
Operating lease liability - net of current portion		9,031,909			–
Finance lease liability - net of current portion		52,812			–
Deferred franchise revenue, net of current portion		11,811,665			11,239,221
Deferred tax liability		79,962			76,672
Other liabilities		27,230			389,362
Total liabilities		31,867,457			22,700,112
Commitments and contingencies
Equity:
The Joint Corp. stockholders' equity:
Series A preferred stock, $0.001 par value; 50,000 shares authorized, 0 issued and outstanding, as of March 31, 2019 and December 31, 2018		–			–
Common stock, $0.001 par value; 20,000,000 shares authorized, 13,800,004 shares issued and 13,785,334 shares outstanding as of March 31, 2019 and 13,757,200 shares issued and 13,742,530 outstanding as of December 31, 2018		13,800			13,757
Additional paid-in capital		38,581,223			38,189,251
Treasury stock 14,670 shares as of March 31, 2019 and December 31, 2018, at cost		(90,856	)		(90,856	)
Accumulated deficit		(36,431,807	)		(37,384,451	)
Total The Joint Corp. stockholders' equity		2,072,360			727,701
Non-controlling Interest		(100	)		(100	)
Total equity		2,072,260			727,601
Total liabilities and equity	$	33,939,717		$	23,427,713

	September 30,			December 31,
	2017			2016
ASSETS		(unaudited)
Current assets:
Cash and cash equivalents	$	2,628,648		$	3,009,864
Restricted cash		157,470			334,394
Accounts receivable, net		1,277,862			1,021,733
Income taxes receivable		3,054			42,014
Notes receivable - current portion		128,781			40,826
Deferred franchise costs - current portion		617,131			748,300
Prepaid expenses and other current assets		604,777			499,525
Total current assets		5,417,723			5,696,656
Property and equipment, net		3,849,952			4,724,706
Notes receivable, net of current portion and reserve		295,779			-
Deferred franchise costs, net of current portion		811,350			836,350
Intangible assets, net		1,888,607			2,338,922
Goodwill		2,750,338			2,750,338
Deposits and other assets		634,257			707,889
Total assets	$	15,648,006		$	17,054,861

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable	$	718,412		$	1,054,946
Accrued expenses		131,665			299,997
Co-op funds liability		98,188			73,246
Payroll liabilities		533,881			750,421
Notes payable - current portion		100,000			331,500
Deferred rent - current portion		147,496			215,450
Deferred revenue - current portion		2,325,728			3,077,430
Other current liabilities		54,455			60,894
Total current liabilities		4,109,825			5,863,884
Notes payable, net of current portion		1,000,000			-
Deferred rent, net of current portion		840,163			1,400,790
Deferred revenue, net of current portion		4,233,334			2,231,712
Deferred tax liability		187,397			120,700
Other liabilities		583,915			512,362
Total liabilities		10,954,634			10,129,448
Commitments and contingencies
Stockholders' equity:
Series A preferred stock, $0.001 par value; 50,000 shares authorized, 0 issued and outstanding, as of September 30, 2017, and December 31, 2016		-			-
Common stock, $0.001 par value; 20,000,000 shares authorized, 13,499,684 shares issued and 13,485,600 shares outstanding as of September 30, 2017 and 13,317,393 shares issued and 13,020,889 outstanding as of December 31, 2016		13,499			13,317
Additional paid-in capital		36,811,327			36,398,588
Treasury stock 14,084 shares as of September 30, 2017 and 296,504 shares as of December 31, 2016, at cost		(86,045	)		(503,118	)
Accumulated deficit		(32,045,409	)		(28,983,374	)
Total stockholders' equity		4,693,372			6,925,413
Total liabilities and stockholders' equity	$	15,648,006		$	17,054,861

					Additional
	Common Stock				Paid In		Treasury Stock					Accumulated			Total The Joint Corp.			Non-controlling
	Shares		Amount		Capital		Shares		Amount			Deficit			stockholders' equity			interest			Total Equity
Balances, December 31, 2017 (as adjusted)		13,600,338	$	13,600	$	37,229,869		14,084	$	(86,045	)	$	(37,531,145	)	$	(373,721	)	$	(100	)	$	(373,821	)
Stock-based compensation expense		–		–		207,641		–		–			–		$	207,641			–		$	207,641
Exercise of stock options		7,500		7		23,318		–		–			–		$	23,325			–		$	23,325
Net loss		–		–		–		–		–			(31,614	)	$	(31,614	)		–		$	(31,614	)
Balances, March 31, 2018 (unaudited), as adjusted		13,607,838	$	13,607	$	37,460,828		14,084	$	(86,045	)	$	(37,562,759	)	$	(174,369	)	$	(100	)	$	(174,469	)

Lease exit liability at December 31, 2016	$	338,151
Additions		883,146
Settlements		(706,991	)
Net Accretion		(66,030	)
Lease exit liability at September 30, 2017	$	448,276

Property and equipment	$	293,014		$	9,166
Intangible assets		339,000			62,000
Favorable leases		140,728
Goodwill		269,780
Total assets acquired		1,042,522			71,166
Deferred membership revenue		(45,072	)
Deferred revenue					(25,715	)
Bargain purchase gain					(19,298	)
Net purchase price	$	997,450		$	26,153

	Pro Forma for the Three Months Ended					Pro Forma for the Nine Months Ended					Pro Forma for the Three Months Ended
	September 30, 2017		September 30, 2016			September 30, 2017		September 30, 2016				March 31, 2019		March 31, 2018
Revenues, net	$	-	$	5,503,590		$	-	$	14,723,514		$	10,725,000	$	8,753,702
Net loss	$	-	$	(2,614,518	)	$	-	$	(9,475,157	)
Net income (loss)											$	934,418	$	(97,764	)

	Deferred Revenue short and long-term
Balance at December 31, 2018	$	13,609
Recognized as revenue during the three months ended March 31, 2019		(601	)
Fees received and deferred during the three months ended March 31, 2019		1,325
Balance at March 31, 2019	$	14,333

	Deferred Franchise Costs short and long-term
Balance at December 31, 2018	$	3,489
Recognized as cost of revenue during the three months ended March 31, 2019		(155	)
Costs incurred and deferred during the three months ended March 31, 2019		345
Balance at March 31, 2019	$	3,679

Contract liabilities expected to be recognized in	Amount
2019 (remainder)	$	1,894
2020		2,517
2021		2,392
2022		1,969
2023		1,494
Thereafter		4,067
Total	$	14,333

	As of September 30, 2017
	Gross Carrying		Accumulated		Net Carrying		As of March 31, 2019
	Amount		Amortization		Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Amortized intangible assets:
Reacquired franchise rights	$	1,673,000	$	596,129	$	1,076,871	$	1,788,000	$	988,265	$	799,735
Customer relationships		701,000		649,417		51,583		777,000		722,997		54,003
Reacquired development rights		1,162,000		401,847		760,153		2,050,482		736,698		1,313,784
	$	3,536,000	$	1,647,393	$	1,888,607	$	4,615,482	$	2,447,960	$	2,167,522

	As of December 31, 2016
	Gross Carrying		Accumulated		Net Carrying		As of December 31, 2018
	Amount		Amortization		Value		Gross Carrying Amount		Accumulated Amortization		Net Carrying Value
Amortized intangible assets:
Reacquired franchise rights	$	1,673,000	$	410,688	$	1,262,312	$	1,758,000	$	921,138	$	836,862
Customer relationships		701,000		509,042		191,958		745,000		717,498		27,502
Reacquired development rights		1,162,000		277,348		884,652		1,413,316		643,620		769,696
	$	3,536,000	$	1,197,078	$	2,338,922	$	3,916,316	$	2,282,256	$	1,634,060

2017 (remaining)	$	128,564
2018		439,589
2019		413,256
2020		413,256
2021		348,034
Thereafter		145,908
Total	$	1,888,607

2019 (remainder)	$	570,435
2020		741,202
2021		657,152
2022		186,520
2023		12,213
Thereafter		-
Total	$	2,167,522

	Nine Months Ended September 30,						Three Months Ended March 31,
	2017			2016			2019		2018
Expected volatility		42%		43%	-	45%		35%		42%	-	43%
Expected dividends		None			None			None			None
Expected term (years)	5.5	to	7		7			7%			7
Risk-free rate	1.98%	to	2.14%	1.19%	to	1.68%		2.61%		2.53%	to	2.63%
Forfeiture rate		20%			20%			20%			20%

				Weighted		Weighted		Weighted		Number of Shares			Weighted Average Exercise Price		Weighted Average Fair Value		Weighted Average Remaining Contractual Life
				Average		Average		Average
	Number of			Exercise		Fair		Remaining
	Shares			Price		Value		Contractual Life
Outstanding at December 31, 2016		953,075		$	3.66	$	1.86		6.9
Outstanding at December 31, 2017											1,003,916		$	4.18	$	1.87		8.1
Granted at market price		195,286			3.70						145,792			7.00
Exercised		(106,221	)		1.20						(95,162	)		3.48
Cancelled		(30,454	)		5.21						(67,855	)		3.37
Outstanding at September 30, 2017		1,011,686		$	3.87	$	1.76		7.4
Exercisable at September 30, 2017		370,634		$	4.67	$	2.17		5.6
Outstanding at December 31, 2018											986,691		$	4.72	$	2.09		6.8
Granted at market price											62,944			12.02
Exercised											(42,804	)		5.15
Cancelled											-			-
Outstanding at March 31, 2019											1,006,831		$	5.16	$	2.25		6.5
Exercisable at March 31, 2019											522,488		$	4.67	$	2.04		6.5

Restricted Stock Awards	Shares
Outstanding at December 31, ~~2016~~2018		~~92,415~~51,134
Awards granted		~~59,700~~11,131
Awards vested		~~(76,070~~-	)
Awards forfeited		~~(12,345~~-	)
Outstanding at ~~September 30, 2017~~March 31, 2019		~~63,700~~62,265

Year 1	$	0.56
Year 2	$	0.68
Year 3	$	0.84
Year 4	$	1.03
Year 5	$	1.28
Year 6	$	1.59
Year 7	$	1.97
Year 8	$	2.45

	Three Months Ended March 31, 2019

Finance lease costs:
Amortization of assets	$	6,169
Interest on lease liabilities		1,911
Total finance lease costs		8,080
Operating lease costs	$	697,755
Total lease costs	$	705,835

		March 31, 2019

Operating Leases:
Operating lease right-of -use asset	$	9,977,018

Current maturities of operating leases	$	1,831,056
Non-current operating leases		9,031,909
Total operating lease liabilities	$	10,862,965

Finance Leases:
Property and equipment, at cost	$	80,604
Less accumulated amortization		(6,169	)
Property and equipment, net	$	74,435


Current maturities of finance leases	$	22,507
Long-term debt and finance leases		52,812
Total finance lease libililities	$	75,319

Weighted average remaining lease term (in years):
Operating leases		5.73
Finance lease		3.02

Weighted average discount rate:
Operating leases		9.38	%
Finance leases		10.00	%

	Three Months Ended March 31, 2019

Cash paid for amounts included in measurement of liabilities:
Operating cash flows from operating leases	$	735,426
Operating cash flows from finance leases		1,911
Financing cash flows from finance leases		5,285

ROU assets obtained in exchange for lease liabilities
Operating lease	$	-
Finance lease		80,604

2017 (remaining)	$	599,401
2018		1,910,339
2019		1,591,678
2020		1,321,133
2021		1,180,012
2022		1,072,743
Thereafter		3,060,963
Total	$	10,736,269

	Operating Leases
2019	$	2,630,443
2020		2,406,645
2021		2,299,887
2022		2,195,077
2023		1,474,396
Thereafter		2,772,575
Total lease payments	$	13,779,023

	March 31, 2019		December 31, 2018
Segment assets:			(as adjusted)
Corporate clinics	$	18,278	$	8,827
Franchise operations		4,646		4,455
Total segment assets	$	22,924	$	13,283

Unallocated cash and cash equivalents and restricted cash	$	8,197	$	8,855
Unallocated property and equipment		1,874		487
Other unallocated assets		945		803
Total assets	$	33,940	$	23,428

	THE JOINT CORP.

Dated: ~~November 13, 2017~~May 15, 2019	By:	/s/ Peter D. Holt
		Peter D. Holt
		President and Chief Executive Officer
		(Principal Executive ~~Officer )~~Officer)




Dated: ~~November 13, 2017~~May 15, 2019	By:	/s/ ~~John P. Meloun~~Jake Singleton
		~~John P. Meloun~~Jake Singleton
		Chief Financial Officer
		(Principal Financial Officer)

Exhibit Number		Description of Document

31.1		Certification of Principal Executive Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, (filed herewith).

31.2		Certification of Principal Financial Officer pursuant to Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, (filed herewith).

32		Certifications of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

101.INS		XBRL Instance Document.

101.SCH		XBRL Taxonomy Extension Schema Document.

101.CAL		XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF		XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB		XBRL Taxonomy Extension Label Linkbase Document.

101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document.

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