Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2020 | May 05, 2020 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2020 | |
Document Transition Report | false | |
Entity File Number | 001-36724 | |
Entity Registrant Name | Joint Corp | |
Entity Central Index Key | 0001612630 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Entity Incorporation, State or Country Code | DE | |
Entity Tax Identification Number | 90-0544160 | |
Entity Address, Address Line One | 16767 N. Perimeter Drive | |
Entity Address, Address Line Two | Suite 240 | |
Entity Address, City or Town | Scottsdale | |
Entity Address, State or Province | AZ | |
Entity Address, Postal Zip Code | 85260 | |
City Area Code | 480 | |
Local Phone Number | 245-5960 | |
Title of 12(b) Security | Common Stock, $0.001 Par Value Per Share | |
Trading Symbol | JYNT | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 13,942,734 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Current assets: | ||
Cash and cash equivalents | $ 10,712,846 | $ 8,455,989 |
Restricted cash | 256,623 | 185,888 |
Accounts receivable, net | 1,835,522 | 2,645,085 |
Notes receivable, net | 89,004 | 128,724 |
Deferred franchise and regional development costs - current portion | 789,968 | 765,508 |
Prepaid expenses and other current assets | 1,140,551 | 1,122,478 |
Total current assets | 14,824,514 | 13,303,672 |
Property and equipment, net | 8,059,393 | 6,581,588 |
Operating lease right-of-use asset | 12,430,910 | 12,486,672 |
Deferred franchise and regional development costs, net of current portion | 3,692,387 | 3,627,225 |
Intangible assets, net | 2,863,172 | 3,219,791 |
Goodwill | 4,150,461 | 4,150,461 |
Deposits and other assets | 393,284 | 336,258 |
Total assets | 46,414,121 | 43,705,667 |
Current liabilities: | ||
Accounts payable | 1,946,474 | 1,525,838 |
Accrued expenses | 436,512 | 216,814 |
Co-op funds liability | 256,624 | 185,889 |
Payroll liabilities | 1,117,086 | 2,844,107 |
Operating lease liability - current portion | 2,497,097 | 2,313,109 |
Finance lease liability - current portion | 46,607 | 24,253 |
Deferred franchise and regional developer fee revenue - current portion | 2,817,069 | 2,740,954 |
Deferred revenue from company clinics | 3,288,156 | 3,196,664 |
Other current liabilities | 481,338 | 518,686 |
Total current liabilities | 12,886,963 | 13,566,314 |
Operating lease liability - net of current portion | 11,856,766 | 11,901,040 |
Finance lease liability - net of current portion | 156,227 | 34,398 |
Debt under the Credit Agreement | 2,000,000 | 0 |
Deferred franchise and regional developer fee revenue, net of current portion | 12,508,515 | 12,366,322 |
Deferred tax liability | 55,457 | 89,863 |
Other liabilities | 27,229 | 27,230 |
Total liabilities | 39,491,157 | 37,985,167 |
Commitments and Contingencies | ||
Stockholders' equity: | ||
Series A preferred stock, $0.001 par value; 50,000 shares authorized, 0 issued and outstanding, as of March 31, 2020 and December 31, 2019 | 0 | 0 |
Common stock, $0.001 par value; 20,000,000 shares authorized, 13,949,772 shares issued and 13,933,759 shares outstanding as of March 31, 2020 and 13,898,694 shares issued and 13,882,932 outstanding as of December 31, 2019 | 13,950 | 13,899 |
Additional paid-in capital | 39,846,177 | 39,454,937 |
Treasury stock 16,013 shares as of March 31, 2020 and 15,762 shares as of December 31, 2019, at cost | (114,815) | (111,041) |
Accumulated deficit | (32,822,448) | (33,637,395) |
Total The Joint Corp. stockholders' equity | 6,922,864 | 5,720,400 |
Non-controlling Interest | 100 | 100 |
Total equity | 6,922,964 | 5,720,500 |
Total liabilities and stockholders' equity | $ 46,414,121 | $ 43,705,667 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parentheticals) - $ / shares | Mar. 31, 2020 | Dec. 31, 2019 |
Statement of Financial Position [Abstract] | ||
Series A preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Series A preferred stock, shares authorized (in shares) | 50,000 | 50,000 |
Series A preferred stock, shares issued (in shares) | 0 | 0 |
Series A preferred stock, shares outstanding (in shares) | 0 | 0 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 20,000,000 | 20,000,000 |
Common stock, shares issued (in shares) | 13,949,772 | 13,898,694 |
Common stock, shares outstanding (in shares) | 13,933,759 | 13,882,932 |
Treasury stock, shares (in shares) | 16,013 | 15,762 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenues: | ||
Revenues | $ 13,644,486 | $ 10,679,376 |
Cost of Revenue [Abstract] | ||
Cost of revenues | 1,486,155 | 1,205,941 |
Selling and marketing expenses | 2,055,289 | 1,505,988 |
Depreciation and amortization | 654,249 | 365,678 |
General and administrative expenses | 8,694,250 | 6,552,904 |
Total selling, general and administrative expenses | 11,403,788 | 8,424,570 |
Net loss on disposition or impairment | 1,193 | 105,193 |
Income from operations | 753,350 | 943,672 |
Other (expense) income: | ||
Bargain purchase gain | 0 | 19,298 |
Other expense, net | 4,337 | 11,645 |
Total other (expense) income | (4,337) | 7,653 |
Income before income tax benefit | 749,013 | 951,325 |
Income tax benefit | (65,934) | (1,319) |
Net income and comprehensive income | 814,947 | 952,644 |
Less: income attributable to the non-controlling interest | 0 | 0 |
Net income attributable to The Joint Corp. stockholders | $ 814,947 | $ 952,644 |
Earnings per share: | ||
Basic earnings per share (in dollars per share) | $ 0.06 | $ 0.07 |
Diluted earnings per share (in dollars per share) | $ 0.06 | $ 0.07 |
Basic weighted average shares (in shares) | 13,890,673 | 13,751,196 |
Diluted weighted average shares (in shares) | 14,483,584 | 14,256,006 |
Revenues from company-owned or managed clinics | ||
Revenues: | ||
Revenues | $ 7,294,295 | $ 5,639,076 |
Royalty fees | ||
Revenues: | ||
Revenues | 3,718,230 | 3,026,815 |
Franchise fees/Franchise and regional development cost of revenues | ||
Revenues: | ||
Revenues | 512,751 | 417,073 |
Cost of Revenue [Abstract] | ||
Cost of revenues | 1,417,491 | 1,117,053 |
Advertising fund revenue | ||
Revenues: | ||
Revenues | 1,057,618 | 891,567 |
Software fees/IT cost of revenues | ||
Revenues: | ||
Revenues | 645,725 | 365,236 |
Cost of Revenue [Abstract] | ||
Cost of revenues | 68,664 | 88,888 |
Regional developer fees | ||
Revenues: | ||
Revenues | 207,642 | 183,858 |
Other revenues | ||
Revenues: | ||
Revenues | $ 208,225 | $ 155,751 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Changes in Stockholders' Equity - USD ($) | Total | Common Stock | Additional Paid In Capital | Treasury Stock | Accumulated Deficit | Total The Joint Corp. stockholders' equity | Non-controlling interest |
Balance at Dec. 31, 2018 | $ 727,601 | $ 13,757 | $ 38,189,251 | $ (90,856) | $ (37,384,651) | $ 727,501 | $ 100 |
Balance (in shares) at Dec. 31, 2018 | 13,757,200 | 14,670 | |||||
Stock-based compensation expense | 171,771 | 171,771 | 171,771 | ||||
Exercise of stock options | 220,244 | $ 43 | 220,201 | 220,244 | |||
Exercise of stock options (in shares) | 42,804 | ||||||
Net income | 952,644 | 952,644 | 952,644 | ||||
Balance at Mar. 31, 2019 | 2,072,260 | $ 13,800 | 38,581,223 | $ (90,856) | (36,432,007) | 2,072,160 | 100 |
Balance (in shares) at Mar. 31, 2019 | 13,800,004 | 14,670 | |||||
Balance at Dec. 31, 2019 | 5,720,500 | $ 13,899 | 39,454,937 | $ (111,041) | (33,637,395) | 5,720,400 | 100 |
Balance (in shares) at Dec. 31, 2019 | 13,898,694 | 15,762 | |||||
Stock-based compensation expense | 250,392 | 250,392 | 250,392 | ||||
Issuance of vested restricted stock | 0 | $ 16 | (16) | ||||
Issuance of vested restricted stock (in shares) | 15,578 | ||||||
Exercise of stock options | 140,899 | $ 35 | 140,864 | 140,899 | |||
Exercise of stock options (in shares) | 35,500 | ||||||
Purchases of treasury stock under employee stock plans | (3,774) | $ (3,774) | (3,774) | ||||
Purchase of treasury stock under employee stock plans (in shares) | 251 | ||||||
Net income | 814,947 | 814,947 | 814,947 | ||||
Balance at Mar. 31, 2020 | $ 6,922,964 | $ 13,950 | $ 39,846,177 | $ (114,815) | $ (32,822,448) | $ 6,922,864 | $ 100 |
Balance (in shares) at Mar. 31, 2020 | 13,949,772 | 16,013 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Cash flows from operating activities: | ||
Net income | $ 814,947 | $ 952,644 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Depreciation and amortization | 654,249 | 365,678 |
Net loss on disposition or impairment | 1,193 | 105,193 |
Net franchise fees recognized upon termination of franchise agreements | (14,862) | 0 |
Bargain purchase gain | 0 | (19,298) |
Deferred income taxes | (34,406) | (22,425) |
Stock based compensation expense | 250,392 | 171,771 |
Changes in operating assets and liabilities: | ||
Accounts receivable | 809,563 | (241,850) |
Prepaid expenses and other current assets | (18,073) | 51,560 |
Deferred franchise costs | (104,483) | (189,722) |
Deposits and other assets | (4,378) | 268,974 |
Accounts payable | (80,682) | (276,074) |
Accrued expenses | 205,601 | (117,795) |
Payroll liabilities | (1,727,021) | (1,151,652) |
Deferred revenue | 339,523 | 769,216 |
Other liabilities | 380,259 | (206,709) |
Net cash provided by operating activities | 1,471,822 | 459,511 |
Cash flows from investing activities: | ||
Acquisition of business, net of cash acquired | 0 | (30,000) |
Purchase of property and equipment | (1,261,213) | (526,027) |
Reacquisition and termination of regional developer rights | 0 | (681,500) |
Payments received on notes receivable | 39,720 | 35,954 |
Net cash used in investing activities | (1,221,493) | (1,201,573) |
Cash flows from financing activities: | ||
Payments of finance lease obligation | (7,214) | (5,285) |
Purchases of treasury stock under employee stock plans | (3,774) | 0 |
Proceeds from exercise of stock options | 140,899 | 189,886 |
Proceeds from the Credit Agreement, net of related fees | 1,947,352 | 0 |
Repayments on notes payable | 0 | (100,000) |
Net cash provided by financing activities | 2,077,263 | 84,601 |
Increase (decrease) in cash | 2,327,592 | (657,461) |
Cash and restricted cash, beginning of period | 8,641,877 | 8,854,952 |
Cash and restricted cash, end of period | $ 10,969,469 | $ 8,197,491 |
Supplemental Disclosure of Non-
Supplemental Disclosure of Non-cash Activity | 3 Months Ended |
Mar. 31, 2020 | |
Supplemental Cash Flow Information [Abstract] | |
Cash Flow, Supplemental Disclosures [Text Block] | During the three months ended March 31, 2020 and 2019, cash paid for income taxes was $0 for both periods. During the three months ended March 31, 2020 and 2019, cash paid for interest was $0 and $25,000, respectively. Supplemental disclosure of non-cash activity: As of March 31, 2020, accounts payable and accrued expenses include property and equipment purchases of $501,318 and $14,097, respectively. As of December 31, 2019, accounts payable and accrued expenses include property and equipment purchases of $196,671, and $15,250, respectively. In connection with the acquisitions during the three months ended March 31, 2019, the Company acquired $9,166 of property and equipment and intangible assets of $62,000, in exchange for $30,000 in cash to the seller. Additionally, at the time of these transactions, the Company carried net deferred revenue of $3,847, representing net franchise fees collected upon the execution of the franchise agreement. The Company netted this amount against the purchase price of the acquisitions. In connection with the Company’s reacquisition and termination of regional developer rights during the three months ended March 31, 2019, the Company had deferred revenue of $44,334 representing license fees collected upon the execution of the regional developer agreements. The Company netted these amounts against the aggregate purchase price of the acquisitions. As of March 31, 2020, the Company had no stock option exercise proceeds included in accounts receivable. As of March 31, 2019, the Company had $30,358 of proceeds from the exercise of stock options included in accounts receivable. |
Nature of Operations and Summar
Nature of Operations and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Nature of Operations and Summary of Significant Accounting Policies | Nature of Operations and Summary of Significant Accounting Policies Basis of Presentation These unaudited financial statements represent the condensed consolidated financial statements of The Joint Corp. (“The Joint”), its variable interest entities (“VIEs”), and its wholly owned subsidiary, The Joint Corporate Unit No. 1, LLC (collectively, the “Company”). The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments which are necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented in accordance with U.S. generally accepted accounting principles (" GAAP"). Such unaudited interim condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with The Joint Corp. and Subsidiary and Affiliates consolidated financial statements and the notes thereto as set forth in The Joint’s Form 10-K, which included all disclosures required by U.S. GAAP. The results of operations for the periods ended March 31, 2020 and 2019 are not necessarily indicative of expected operating results for the full year. The information presented throughout the document as of and for the periods ended March 31, 2020 and 2019 is unaudited. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other (expenses) income that are reported in the condensed consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates. For a discussion of significant estimates and judgments made in recognizing revenue and accounting for leases, see Note 2, Revenue Disclosures and Note 11 , Commitments and Contingencies , respectively . Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of The Joint and its wholly owned subsidiary, The Joint Corporate Unit No. 1, LLC, which was dormant for all periods presented. The Company consolidates VIEs in which the Company is the primary beneficiary in accordance with Accounting Standards Codification 810, Consolidations (“ASC 810”). Non-controlling interests represent third-party equity ownership interests in VIEs. All significant inter-affiliate accounts and transactions between The Joint and its VIEs have been eliminated in consolidation. Comprehensive Income Net income and comprehensive income are the same for the three months ended March 31, 2020 and 2019. Nature of Operations The Joint, a Delaware corporation, was formed on March 10, 2010 for the principal purpose of franchising, developing and managing chiropractic clinics, selling regional developer rights and supporting the operations of franchised chiropractic clinics at locations throughout the United States of America. The franchising of chiropractic clinics is regulated by the Federal Trade Commission and various state authorities. The following table summarizes the number of clinics in operation under franchise agreements and as company-owned or managed clinics for the three months ended March 31, 2020 and 2019: Three Months Ended Franchised clinics: 2020 2019 Clinics open at beginning of period 453 394 Opened during the period 16 12 Sold during the period — (1) Closed during the period — (1) Clinics in operation at the end of the period 469 404 Three Months Ended Company-owned or managed clinics: 2020 2019 Clinics open at beginning of period 60 48 Opened during the period 1 2 Acquired during the period — 1 Closed during the period — (1) Clinics in operation at the end of the period 61 50 Total clinics in operation at the end of the period 530 454 Clinic licenses sold but not yet developed 176 145 Executed letters of intent for future clinic licenses 36 27 Variable Interest Entities An entity deemed to hold the controlling interest in a voting interest entity or deemed to be the primary beneficiary of a VIE is required to consolidate the VIE in its financial statements. An entity is deemed to be the primary beneficiary of a VIE if it has both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and (b) the obligation to absorb the majority of losses of the VIE or the right to receive the majority of benefits from the VIE. Certain states in which the Company manages clinics regulate the practice of chiropractic care and require that chiropractic services be provided by legal entities organized under state laws as professional corporations or PCs. In these states, the Company has entered into management services agreements with PCs under which the Company provides, on an exclusive basis, all non-clinical services of the chiropractic practice. Such PCs are VIEs, as fees paid by the PCs to the Company as its management service provider are considered variable interests because they are liabilities on the PC’s books and the fees do not meet all the following criteria: 1) The fees are compensation for services provided and are commensurate with the level of effort required to provide those services; 2) The decision maker or service provider does not hold other interests in the VIE that individually, or in the aggregate, would absorb more than an insignificant amount of the VIE’s expected losses or receive more than an insignificant amount of the VIE’s expected residual returns; 3) The service arrangement includes only terms, conditions, or amounts that are customarily present in arrangements for similar services negotiated at arm’s length. The Company assessed the governance structure and operating procedures of the PCs and determined that the Company has the power to control certain significant non-clinical activities of the PCs, as defined by ASC 810, Therefore, the Company is the primary beneficiary of the VIEs, and per ASC 810, must consolidate the VIEs. The carrying amount of VIE assets and liabilities are immaterial as of March 31, 2020, and December 31, 2019. Cash and Cash Equivalents The Company considers all highly liquid instruments purchased with an original maturity of three months or less to be cash equivalents. The Company continually monitors its positions with, and credit quality of, the financial institutions with which it invests. As of the balance sheet date and periodically throughout the period, the Company has maintained balances in various operating accounts in excess of federally insured limits. The Company has invested substantially all its cash in short-term bank deposits. The Company had no cash equivalents as of March 31, 2020 and December 31, 2019. Restricted Cash Restricted cash relates to cash that franchisees and company-owned or managed clinics contribute to the Company’s National Marketing Fund and cash that franchisees provide to various voluntary regional Co-Op Marketing Funds. Cash contributed by franchisees to the National Marketing Fund is to be used in accordance with the Company’s Franchise Disclosure Document with a focus on regional and national marketing and advertising. Accounts Receivable Accounts receivable primarily represent amounts due from franchisees for royalty fees. The Company considers a reserve for doubtful accounts based on the creditworthiness of the entity. The provision for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover future losses. The allowance is management’s best estimate of uncollectible amounts and is determined based on specific identification and historical performance that the Company tracks on an ongoing basis. Actual losses ultimately could differ materially in the near term from the amounts estimated in determining the allowance. As of March 31, 2020 and December 31, 2019, the Company had an allowance for doubtful accounts of $0. Deferred Franchise and Regional Development Costs Deferred franchise and regional development costs represent commissions that are direct and incremental to the Company and are paid in conjunction with the sale of a franchise license or regional development rights. These costs are recognized as an expense, in franchise and regional development cost of revenues when the respective revenue is recognized, which is generally over the term of the related franchise or regional development agreement. Property and Equipment Property and equipment are stated at cost or for property acquired as part of franchise acquisitions at fair value at the date of closing. Depreciation is computed using the straight-line method over estimated useful lives of three Maintenance and repairs are charged to expense as incurred; major renewals and improvements are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. Capitalized Software The Company capitalizes certain software development costs. These capitalized costs are primarily related to software used by clinics for operations and by the Company for the management of operations. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct, are capitalized as assets in progress until the software is substantially complete and ready for its intended use. Capitalization ceases upon completion of all substantial testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Software developed is recorded as part of property and equipment. Maintenance and training costs are expensed as incurred. Internal use software is amortized on a straight-line basis over its estimated useful life, which is generally five years. Leases The Company leases property and equipment under operating and finance leases. The Company leases its corporate office space and the space for each of the company-owned or managed clinic in the portfolio. The Company recognizes a right-of-use ("ROU") asset and lease liability for all leases. Determining the lease term and amount of lease payments to include in the calculation of the ROU asset and lease liability for leases containing options requires the use of judgment to determine whether the exercise of an option is reasonably certain and if the optional period and payments should be included in the calculation of the associated ROU asset and liability. In making this determination, all relevant economic factors are considered that would compel the Company to exercise or not exercise an option. When available, the Company uses the rate implicit in the lease to discount lease payments; however, the rate implicit in the lease is not readily determinable for substantially all of its leases. In such cases, the Company estimates its incremental borrowing rate as the interest rate it would pay to borrow an amount equal to the lease payments over a similar term, with similar collateral as in the lease, and in a similar economic environment. The Company estimates these rates using available evidence such as rates imposed by third-party lenders to the Company in recent financings or observable risk-free interest rate and credit spreads for commercial debt of a similar duration, with credit spreads correlating to the Company’s estimated creditworthiness. For operating leases that include rent holidays and rent escalation clauses, the Company recognizes lease expense on a straight-line basis over the lease term from the date it takes possession of the leased property. Pre-opening costs are recorded as incurred in general and administrative expenses. The Company records the straight-line lease expense and any contingent rent, if applicable, in general and administrative expenses on the condensed consolidated statements of operations. Many of the Company’s leases also require it to pay real estate taxes, common area maintenance costs and other occupancy costs which are also included in general and administrative expenses on the condensed consolidated statements of operations. Intangible Assets Intangible assets consist primarily of re-acquired franchise and regional developer rights and customer relationships. The Company amortizes the fair value of re-acquired franchise rights over the remaining contractual terms of the re-acquired franchise rights at the time of the acquisition, which generally range from three Goodwill Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired in the acquisitions of franchises. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are 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. In January 2017, the FASB issued ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates step 2 of the current goodwill impairment test that requires a hypothetical purchase price allocation to measure goodwill impairment. A goodwill impairment loss will instead be measured at the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the recorded amount of goodwill. The provision of this ASU is effective for years beginning after December 15, 2022 for smaller reporting companies, as defined by the SEC, with early adoption permitted for any impairment test performed on testing dates after January 1, 2017. The Company adopted this ASU provision on January 1, 2020. As a result of the current COVID-19 outbreak and its impact on the Company's projected cash flows, the Company tested goodwill for impairment at the end of the first quarter of 2020. No impairments of goodwill were recorded for the three months ended March 31, 2020 and 2019. Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily to estimated undiscounted future cash flows in its assessment of whether or not long-lived assets are recoverable. As a result of the current COVID-19 outbreak, the Company evaluated whether the carrying values of the long-lived assets in certain corporate clinics were recoverable. No impairments of long-lived assets were recorded for the three months ended March 31, 2020 and 2019. Advertising Fund The Company has established an advertising fund for national/regional marketing and advertising of services offered by its clinics. The monthly marketing fee is 2% of clinic sales. The Company segregates the marketing funds collected which are included in restricted cash on its consolidated balance sheets. As amounts are expended from the fund, the Company recognizes a related expense. Co-Op Marketing Funds Some franchises have established regional Co-Ops for advertising within their local and regional markets. The Company maintains a custodial relationship under which the marketing funds collected are segregated and used for the purposes specified by the Co-Ops’ officers. The marketing funds are included in restricted cash on the Company’s condensed consolidated balance sheets. Revenue Recognition The Company generates revenue primarily through its company-owned and managed clinics, royalties, franchise fees, advertising fund, and through IT related income and computer software fees. Revenues from Company-Owned or Managed Clinics. The Company earns revenues from clinics that it owns and operates or manages throughout the United States. In those states where the Company owns and operates or manages the clinic, revenues are recognized when services are performed. The Company offers a variety of membership and wellness packages which feature discounted pricing as compared with its single-visit pricing. Amounts collected in advance for membership and wellness packages are recorded as deferred revenue and recognized when the service is performed. The Company recognizes a contract liability (or a deferred revenue liability) related to the prepaid treatment plans for which the Company has an ongoing performance obligation. The Company recognizes this contract liability, and recognizes revenue, as the patient consumes his or her visits related to the package and the Company transfers its services. Based on a historical lag analysis and an evaluation of legal obligation by jurisdiction, the Company concluded that any remaining contract liability that exists after 12 to 24 months from transaction date will be deemed breakage. Breakage revenue is recognized only at that point, when the likelihood of the patient exercising his or her remaining rights becomes remote. Royalties and Advertising Fund Revenue. The Company collects royalties, as stipulated in the franchise agreement, equal to 7% of gross sales and a marketing and advertising fee currently equal to 2% of gross sales. Royalties, including franchisee contributions to advertising funds, are calculated as a percentage of clinic sales over the term of the franchise agreement. The franchise agreement royalties, inclusive of advertising fund contributions, represent sales-based royalties that are related entirely to the Company’s performance obligation under the franchise agreement and are recognized as franchisee clinic level sales occur. Royalties are collected semi-monthly, two working days after each sales period has ended. Franchise Fees. The Company requires the entire non-refundable initial franchise fee to be paid upon execution of a franchise agreement, which typically has an initial term of ten years. Initial franchise fees are recognized ratably on a straight-line basis over the term of the franchise agreement. The Company’s services under the franchise agreement include: training of franchisees and staff, site selection, construction/vendor management and ongoing operations support. The Company provides no financing to franchisees and offers no guarantees on their behalf. The services provided by the Company are highly interrelated with the franchise license and as such are considered to represent a single performance obligation. Software Fees. The Company collects a monthly fee for use of its proprietary chiropractic software, computer support, and internet services support. These fees are recognized ratably on a straight-line basis over the term of the respective franchise agreement. Regional Developer Fees . During 2011, the Company established a regional developer program to engage independent contractors to assist in developing specified geographical regions. Under the historical program, regional developers paid a license fee for each franchise they received the right to develop within the region. In 2017, the program was revised to grant exclusive geographical territory and establish a minimum development obligation within that defined territory. Regional developer fees paid to the Company are non-refundable and are recognized as revenue ratably on a straight-line basis over the term of the regional developer agreement, which is considered to begin upon the execution of the agreement. The Company’s services under regional developer agreements include site selection, grand opening support for the clinics, sales support for identification of qualified franchisees, general operational support and marketing support to advertise for ownership opportunities. The services provided by the Company are highly interrelated with the development of the territory and the resulting franchise licenses sold by the regional developer and as such are considered to represent a single performance obligation. In addition, regional developers receive fees which are funded by the initial franchise fees collected from franchisees upon the sale of franchises within their exclusive geographical territory and a royalty of 3% of sales generated by franchised clinics in their exclusive geographical territory. Fees related to the sale of franchises within their exclusive geographical territory are initially deferred as deferred franchise costs and are recognized as an expense in franchise cost of revenues when the respective revenue is recognized, which is generally over the term of the related franchise agreement. Royalties of 3% of sales generated by franchised clinics in their regions are also recognized as franchise cost of revenues as franchisee clinic level sales occur, which is funded by the 7% royalties collected from the franchisees in their regions. Certain regional developer agreements result in the regional developer acquiring the rights to existing royalty streams from clinics already open in the respective territory. In those instances, the revenue associated from the sale of the royalty stream is recognized over the remaining life of the respective franchise agreements. The Company entered into one regional developer agreement for the three months ended March 31, 2020 for which it received approximately $201,000. This fee was deferred as of the transaction date and will be recognized as revenue ratably on a straight-line basis over the term of the regional developer agreement, which is considered to begin upon the execution of the agreement. Advertising Costs Advertising costs are expensed as incurred. Advertising expenses were $658,673 and $439,436 for the three months ended March 31, 2020, and 2019, 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 stock-based compensation 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. The Company has not identified any material uncertain tax positions as of March 31, 2020 and December 31, 2019. Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses. With exceptions due to the generation and utilization of net operating losses or credits, as of March 31, 2020 and December 31, 2019, the Company is no longer subject to federal and state examinations by taxing authorities for tax years before 2016 and 2015, respectively. Earnings per Common Share Basic earnings per common share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed by giving effect to all potentially dilutive common shares including restricted stock and stock options. Three Months Ended 2020 2019 Net Income $ 814,947 $ 952,644 Weighted average common shares outstanding - basic 13,890,673 13,751,196 Effect of dilutive securities: Unvested restricted stock and stock options 592,911 504,810 Weighted average common shares outstanding - diluted 14,483,584 14,256,006 Basic earnings per share $ 0.06 $ 0.07 Diluted earnings per share $ 0.06 $ 0.07 Potentially dilutive securities excluded from the calculation of diluted net income per common share as the effect would be anti-dilutive were as follows: Three Months Ended Weighted average potentially dilutive securities: 2020 2019 Unvested restricted stock — 3,339 Stock options 101,692 69,675 Stock-Based Compensation The Company accounts for share-based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant. The Company determines the estimated grant-date fair value of restricted shares using the closing price on the date of the grant and the grant-date fair value of stock options using the Black-Scholes-Merton model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the model, including risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. The Company recognizes compensation costs ratably over the period of service using the straight-line method. Forfeitures are estimated based on historical and forecasted turnover. Retirement Benefit Plan Employees of the Company are eligible to participate in a defined contribution retirement plan, the Joint Corp. 401(k). Retirement Plan (“401(k) Plan”), under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, employees may contribute their eligible compensation, not to exceed the annual limits set by the IRS. The 401(k) Plan allows the Company to match participants’ contributions in an amount determined at the sole discretion of the Company. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Items subject to significant estimates and assumptions include the allowance for doubtful accounts, share-based compensation arrangements, fair value of stock options, useful lives and realizability of long-lived assets, classification of deferred revenue and revenue recognition related to breakage, classification of deferred franchise costs, calculation of ROU assets and liabilities related to leases, realizability of deferred tax assets, impairment of goodwill, intangible assets, and other long-lived assets, and purchase price allocations and related valuations. Recent Accounting Pronouncements On January 1, 2020, the Company early adopted ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates step 2 of the current goodwill impairment test that requires a hypothetical purchase price allocation to measure goodwill impairment. The Company reviewed other newly issued accounting pronouncements and concluded that they either are not applicable to the Company's operations or that no material effect is expected on the Company's financial statements upon future adoption. |
Revenue Disclosures
Revenue Disclosures | 3 Months Ended |
Mar. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Disclosures | Revenue Disclosures Company-owned or Managed Clinics The Company earns revenues from clinics that it owns and operates or manages throughout the United States. Revenues are recognized when services are performed. The Company offers a variety of membership and wellness packages which feature discounted pricing as compared with its single-visit pricing. Amounts collected in advance for membership and wellness packages are recorded as deferred revenue and recognized when the service is performed or in accordance with the Company’s breakage policy as discussed in Note 1, Revenue Recognition . Franchising Fees, Royalty Fees, Advertising Fund Revenue, and Software Fees The Company currently franchises its concept across 33 states. The franchise arrangement is documented in the form of a franchise agreement. The franchise arrangement requires the Company to perform various activities to support the brand that do not directly transfer goods and services to the franchisee, but instead represent a single performance obligation, which is the transfer of the franchise license. The intellectual property subject to the franchise license is symbolic intellectual property as it does not have significant standalone functionality, and substantially all of the utility is derived from its association with the Company’s past or ongoing activities. The nature of the Company’s promise in granting the franchise license is to provide the franchisee with access to the brand’s symbolic intellectual property over the term of the license. The services provided by the Company are highly interrelated with the franchise license and as such are considered to represent a single performance obligation. The transaction price in a standard franchise arrangement primarily consists of (a) initial franchise fees; (b) continuing franchise fees (royalties); (c) advertising fees; and (d) software fees. Since the Company considers the licensing of the franchising right to be a single performance obligation, no allocation of the transaction price is required. The Company recognizes the primary components of the transaction price as follows: • Franchise fees are recognized as revenue ratably on a straight-line basis over the term of the franchise agreement commencing with the execution of the franchise agreement. As these fees are typically received in cash at or near the beginning of the franchise term, the cash received is initially recorded as a contract liability until recognized as revenue over time. • The Company is entitled to royalties and advertising fees based on a percentage of the franchisee's gross sales as defined in the franchise agreement. Royalty and advertising revenue are recognized when the franchisee's sales occur. Depending on timing within a fiscal period, the recognition of revenue results in either what is considered a contract asset (unbilled receivable) or, once billed, accounts receivable, on the balance sheet. • The Company is entitled to a software fee, which is charged monthly. The Company recognizes revenue related to software fees ratably on a straight-line basis over the term of the franchise agreement. In determining the amount and timing of revenue from contracts with customers, the Company exercises significant judgment with respect to collectability of the amount; however, the timing of recognition does not require significant judgment as it is based on either the franchise term or the reported sales of the franchisee, none of which require estimation. The Company believes its franchising arrangements do not contain a significant financing component. The Company recognizes advertising fees received under franchise agreements as advertising fund revenue. Regional Developer Fees The Company currently utilizes regional developers to assist in the development of the brand across certain geographic territories. The arrangement is documented in the form of a regional developer agreement. The arrangement between the Company and the regional developer requires the Company to perform various activities to support the brand that do not directly transfer goods and services to the regional developer, but instead represent a single performance obligation, which is the transfer of the development rights to the defined geographic region. The intellectual property subject to the development rights is symbolic intellectual property as it does not have significant standalone functionality, and substantially all of the utility is derived from its association with the Company’s past or ongoing activities. The nature of the Company’s promise in granting the development rights is to provide the regional developer with access to the brand’s symbolic intellectual property over the term of the agreement. The services provided by the Company are highly interrelated with the development of the territory and the resulting franchise licenses sold by the regional developer and as such are considered to represent a single performance obligation. The transaction price in a standard regional developer arrangement primarily consists of the initial territory fees. The Company recognizes the regional developer fee as revenue ratably on a straight-line basis over the term of the regional developer agreement commencing with the execution of the regional developer agreement. As these fees are typically received in cash at or near the beginning of the term of the regional developer agreement, the cash received is initially recorded as a contract liability until recognized as revenue over time. Disaggregation of Revenue The Company believes that the captions contained on the condensed consolidated statements of operations appropriately reflect the disaggregation of its revenue by major type for the three months ended March 31, 2020 and 2019. Other revenues primarily consist of merchant income associated with credit card transactions. Rollforward of Contract Liabilities and Contract Assets Changes in the Company's contract liability for deferred franchise and regional development fees during the three months ended March 31, 2020 were as follows: Deferred Revenue Balance at December 31, 2019 $ 15,107,276 Recognized as revenue during the three months ended March 31, 2020 (720,393) Fees received and deferred during the three months ended March 31, 2020 938,701 Balance at March 31, 2020 $ 15,325,584 Changes in the Company's contract assets for deferred franchise and regional development costs during the three months ended March 31, 2020 were as follows: Deferred Franchise and Development Costs Balance at December 31, 2019 $ 4,392,733 Recognized as cost of revenue during the three months ended March 31, 2020 (203,501) Costs incurred and deferred during the three months ended March 31, 2020 293,123 Balance at March 31, 2020 $ 4,482,355 The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of March 31, 2020: Contract liabilities expected to be recognized in Amount 2020 (remainder) $ 2,130,191 2021 2,720,283 2022 2,334,730 2023 2,001,921 2024 1,565,354 Thereafter 4,573,105 Total $ 15,325,584 |
Restricted Cash
Restricted Cash | 3 Months Ended |
Mar. 31, 2020 | |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract] | |
Restricted Cash | Restricted Cash The table below reconciles the cash and cash equivalents balance and restricted cash balances from The Company’s condensed consolidated balance sheet to the amount of cash reported on the condensed consolidated statement of cash flows: March 31, 2020 December 31, 2019 Cash and cash equivalents $ 10,712,846 $ 8,455,989 Restricted cash 256,623 185,888 Total cash, cash equivalents and restricted cash $ 10,969,469 $ 8,641,877 |
Notes Receivable
Notes Receivable | 3 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
Notes Receivable | Notes Receivable Effective April 29, 2017, the Company entered into a regional developer agreement for certain territories in the state of Florida in exchange for $320,000, of which $187,000 was funded through a promissory note. The note bears interest at 10% per annum for 42 months and requires monthly principal and interest payments over 3 years, beginning November 1, 2017 and maturing on October 1, 2020. The note is secured by the regional developer rights in the respective territory. Effective August 31, 2017, the Company entered into a regional developer agreement for certain territories in Maryland/Washington DC in exchange for $220,000, of which $117,475 was funded through a promissory note. The note bears interest at 10% per annum for 3 years and requires monthly principal and interest payments over 3 years, beginning September 1, 2017 and maturing on August 1, 2020. The note is secured by the regional developer rights in the respective territory. Effective October 10, 2017, the Company entered into a regional developer agreement for certain territories in Texas, Oklahoma and Arkansas in exchange for $170,000, of which $135,688 was funded through a promissory note. The note bears interest at 10% per annum for 3 years and requires monthly principal and interest payments over 3 years, maturing on October 24, 2020. The note is secured by the regional developer rights in the territory. Effective April 26, 2019, the Company entered into a promissory note valued at $31,086. The note bears interest at 0% per annum for 3 years and requires monthly principal payments over 3 years, beginning May 15, 2019 and maturing on May 15, 2022. The net outstanding balances of the notes as of March 31, 2020 and December 31, 2019 were $114,590 and $155,810, respectively. The allowance for uncollectible amounts on the outstanding notes as of March 31, 2020, and December 31, 2019 were $25,586, and $27,086, respectively. Maturities of notes receivable as of March 31, 2020 are as follows: Amount (gross) 2020 (remaining) $ 95,904 2021 9,600 2022 9,086 Total $ 114,590 |
Property and Equipment
Property and Equipment | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property and Equipment | Property and Equipment Property and equipment consist of the following: March 31, December 31, Office and computer equipment $ 2,005,872 $ 1,594,364 Leasehold improvements 7,631,395 7,154,156 Software developed 1,193,007 1,193,007 Finance lease assets 232,001 80,604 11,062,275 10,022,131 Accumulated depreciation and amortization (5,929,760) (5,671,366) 5,132,515 4,350,765 Construction in progress 2,926,878 2,230,823 Property and equipment, net $ 8,059,393 $ 6,581,588 Depreciation expense was $287,076 and $193,805 for the three months ended March 31, 2020 and 2019, respectively. Amortization expense related to finance lease assets was $10,554 and $6,169 for the three months ended March 31, 2020 and 2019, respectively. Construction in progress at March 31, 2020 and December 31, 2019 principally relate to development costs for a software to be used by clinics for operations and by the Company for the management of operations. |
Fair Value Consideration
Fair Value Consideration | 3 Months Ended |
Mar. 31, 2020 | |
Fair Value Disclosures [Abstract] | |
Fair Value Consideration | Fair Value Consideration The Company’s financial instruments include cash, restricted cash, accounts receivable, notes receivable, accounts payable, accrued expenses and notes payable. The carrying amounts of its financial instruments approximate their fair value due to their short maturities. The Company does not use derivative financial instruments to hedge exposures to cash-flow, market or foreign-currency risks. Authoritative guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability, developed based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions of what market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy is broken down into three levels based on reliability of the inputs as follows: Level 1: Observable inputs such as quoted prices in active markets; Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and Level 3: Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions. As of March 31, 2020, and December 31, 2019, the Company did not have any financial instruments that were measured on a recurring basis as Level 1, 2 or 3. The intangible assets resulting from the acquisition (reference Note 7) were recorded at fair value on a non-recurring basis and are considered Level 3 within the fair value hierarchy. |
Intangible Assets
Intangible Assets | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Intangible Assets | Intangible Assets On February 4, 2019, the Company entered into an agreement under which it repurchased the right to develop franchises in various counties in South Carolina and Georgia. The total consideration for the transaction was $681,500. The Company carried a deferred revenue balance associated with these transactions of $44,334, representing license fees collected upon the execution of the regional developer agreements. The Company accounted for the termination of development rights associated with unsold or undeveloped franchises as a cancellation, and the associated deferred revenue was netted against the aggregate purchase price. Intangible assets consist of the following: As of March 31, 2020 Gross Carrying Accumulated Net Carrying Intangible assets subject to amortization: Reacquired franchise rights $ 3,246,494 $ (1,576,947) $ 1,669,547 Customer relationships 1,255,975 (934,938) 321,037 Reacquired development rights 2,050,481 (1,177,893) 872,588 $ 6,552,950 $ (3,689,778) $ 2,863,172 As of December 31, 2019 Gross Carrying Accumulated Net Carrying Intangible assets subject to amortization: Reacquired franchise rights $ 3,246,494 $ (1,400,086) $ 1,846,408 Customer relationships 1,255,975 (865,478) 390,497 Reacquired development rights 2,050,481 (1,067,595) 982,886 $ 6,552,950 $ (3,333,159) $ 3,219,791 Amortization expense related to the Company’s intangible assets was $356,619 and $165,704 for the three months ended March 31, 2020 and 2019, respectively. Estimated amortization expense for 2020 and subsequent years is as follows: Amount 2020 (remainder) $ 1,053,343 2021 1,212,703 2022 539,750 2023 57,376 Total $ 2,863,172 |
Debt
Debt | 3 Months Ended |
Mar. 31, 2020 | |
Debt Disclosure [Abstract] | |
Debt | Debt Credit Agreement On February 28, 2020, the Company entered into a Credit Agreement (the “Credit Agreement”), with JPMorgan Chase Bank, N.A., individually, and as Administrative Agent and Issuing Bank (“JPMorgan Chase” or the “Lender”). The Credit Agreement provides for senior secured credit facilities (the "Credit Facilities") in the amount of $7,500,000, including a $2,000,000 revolver (the "Revolver") and $5,500,000 development line of credit (the "Line of Credit"). The Revolver includes amounts available for letters of credit of up to $1,000,000 and an uncommitted additional amount of $2,500,000. All outstanding principal and interest on the Revolver are due on February 28, 2022. Principal and interest outstanding on the Line of Credit at the end of the first year are converted to a term loan payable in 36 monthly payments with a final maturity date of March 31, 2024. Principal amounts on the Line of Credit borrowed during the second year plus interest thereon which are outstanding at the end of the second year are converted to a second term loan payable in 36 monthly payments with a final maturity date of March 31, 2025. Borrowings under the Credit Facilities bear interest at a rate equal to an applicable margin, which is a one-, three- or six-month reserve adjusted Eurocurrency rate plus 2.00% or, at the election of the Company, an alternative base rate, plus 1.00%. The alternative base rate is the greatest of the prime rate, the Federal Reserve Bank of New York rate plus 0.50% and the one-month reserve adjusted Eurocurrency plus 1.00%. Unused portions of the Credit Facilities bear interest at a rate equal to 0.25% per annum. If the current Eurocurrency rate is no longer available or representative, the loan agreement provides a mechanism for replacing that benchmark rate. The Credit Facilities are pre-payable at any time without penalty, other than customary breakage fees, and any voluntary repayments made by the Company would reduce the future required repayment amounts. The Credit Facilities contain customary events of default, including but not limited to nonpayment; material inaccuracy of representations and warranties; violations of covenants; certain bankruptcies and liquidations; cross-default to material indebtedness; certain material judgments; and certain fundamental changes such as a merger or sale of substantially all assets (as further defined in the Credit Facilities). The Credit Facilities require the Company to comply with customary affirmative, negative and financial covenants, including minimum interest coverage and maximum net leverage. A breach of any of these operating or financial covenants would result in a default under the Credit Facilities. If an event of default occurs and is continuing, the lenders could elect to declare all amounts then outstanding, together with accrued interest, to be immediately due and payable. The Credit Facilities are collateralized by substantially all of the Company’s assets, including the assets in the Company’s company-owned or managed clinics. The Company intends to use the Revolver for general working capital needs and the Line of Credit for acquiring and developing new chiropractic clinics. On March 18, 2020, the Company drew down $2,000,000 under the Revolver as a precautionary measure in order to further strengthen its cash position and provide financial flexibility in light of the current uncertainty in the global markets resulting from the COVID-19 outbreak. As of March 31, 2020, the Company was in compliance with all applicable financial and non-financial covenants under the Credit Agreement. |
Stock-based Compensation
Stock-based Compensation | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Stock-Based Compensation | Stock-Based Compensation The Company grants stock-based awards under its 2014 Incentive Stock Plan (the “2014 Plan”) and the 2012 Stock Plan (the “2012 Plan”). The 2014 Plan replaced the 2012 Plan, but the 2012 plan remains in effect for the administration of awards made prior to its replacement by the 2014 Plan. The shares issued as a result of stock-based compensation transactions generally have been funded with the issuance of new shares of the Company’s common stock. The Company may grant the following types of incentive awards under the 2014 Plan: (i) non-qualified stock options; (ii) incentive stock options; (iii) stock appreciation rights; (iv) restricted stock; and (v) restricted stock units. Each award granted under the 2014 Plan is subject to an award agreement that incorporates, as applicable, the exercise price, the term of the award, the periods of restriction, the number of shares to which the award pertains, and such other terms and conditions as the plan committee determines. Awards granted under the 2014 Plan are classified as equity awards, which are recorded in stockholders’ equity in the Company’s Consolidated Balance Sheets. Stock Options The Company’s closing price on the date of grant is the basis of fair value of its common stock used in determining the value of share-based awards. To the extent the value of the Company’s share-based awards involves a measure of volatility, the Company historically relied on the volatilities from publicly-traded companies with similar business models as its common stock lacked enough trading history for it to utilize its own historical volatility. Effective July 1, 2019, the Company uses available historical volatility of the Company’s common stock over a period of time corresponding to the expected stock option term. The Company uses the simplified method to calculate the expected term of stock option grants to employees as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term of stock options granted to employees. Accordingly, the expected life of the options granted is based on the average of the vesting term, which is generally four years and the contractual term, which is generally ten years. The Company will continue to evaluate the appropriateness of utilizing such method. The risk-free interest rate is based on United States Treasury yields in effect at the date of grant for periods corresponding to the expected stock option term. The Company has computed the fair value of all options granted using the Black-Scholes-Merton model during the three months ended March 31, 2020 and 2019, using the following assumptions: Three Month Ended March 31, 2020 2019 Expected volatility 53% 35% Expected dividends None None Expected term (years) 7 7 Risk-free rate 0.89% 2.61% Forfeiture rate 5% 20% The information below summarizes the stock options activity for the three months ended March 31, 2020: Number of Weighted Weighted Outstanding at December 31, 2019 949,245 $ 5.19 6.5 Granted 108,454 14.72 Exercised (35,500) 3.97 Cancelled — — Outstanding at March 31, 2020 1,022,199 $ 6.24 6.8 Exercisable at March 31, 2020 640,123 $ 4.73 5.9 For the three months ended March 31, 2020 and 2019, stock-based compensation expense for stock options was $147,008 and $96,804, respectively. Restricted Stock Restricted stocks granted to employees generally vest in four equal annual installments. Restricted stocks granted to non-employee directors typically vest in full one year after the date of grant. The information below summaries the restricted stock activity for the three months ended March 31, 2020: Restricted Stock Awards Shares Weighted Average Non-vested at December 31, 2019 38,976 $ 12.31 Granted 12,798 14.68 Vested (2,780) 12.02 Cancelled — — Non-vested at March 31, 2020 48,994 $ 12.95 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Income Taxes During the three months ended March 31, 2020 and 2019, the Company recorded income tax benefit of $65,934 and $1,319, respectively. The Company’s effective tax rate differs from the federal statutory tax rate due to permanent differences, state taxes and changes in the valuation allowance. The Company’s negative effective tax rate for the three months ended March 31, 2020 is due to a projected tax expense on a projected loss for the year. The Company’s negative effective tax rate for the three months ended March 31, 2019 is due to changes in the valuation allowance and the impact of certain discrete item.The CARES Act was signed into law on March 27, 2020, which, may benefit the Company. The Company will continue to assess the income tax effect of the CARES Act and ongoing government guidance related to COVID-19 that may be issued. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Leases The table below summarizes the components of lease expense and income statement location for the three months ended March 31, 2020 and 2019: Line Item in the Three Months Ended Three Months Finance lease costs: Amortization of assets Depreciation and amortization $ 10,554 $ 6,169 Interest on lease liabilities Other expense, net 2,283 1,911 Total finance lease costs 12,837 8,080 Operating lease costs General and administrative expenses 849,891 697,755 Total lease costs $ 862,728 $ 705,835 Supplemental information and balance sheet location related to leases is as follows: March 31, 2020 December 31, 2019 Operating Leases: Operating lease right-of -use asset $ 12,430,910 $ 12,486,672 Operating lease liability - current portion $ 2,497,097 $ 2,313,109 Operating lease liability - net of current portion 11,856,766 11,901,040 Total operating lease liability $ 14,353,863 $ 14,214,149 Finance Leases: Property and equipment, at cost $ 232,001 $ 80,604 Less accumulated amortization (35,228) (24,675) Property and equipment, net $ 196,773 $ 55,929 Finance lease liability - current portion 46,607 24,253 Finance lease liability - net of current portion 156,227 34,398 Total finance lease liabilities $ 202,834 $ 58,651 Weighted average remaining lease term (in years): Operating leases 5.2 5.4 Finance lease 5.1 2.3 Weighted average discount rate: Operating leases 8.6 % 8.7 % Finance leases 5.7 % 10.0 % Supplemental cash flow information related to leases is as follows: Three Three Cash paid for amounts included in measurement of liabilities: Operating cash flows from operating leases $ 765,093 $ 735,426 Operating cash flows from finance leases 2,283 1,911 Financing cash flows from finance leases 7,214 5,285 Non-cash transactions: ROU assets obtained in exchange for lease liabilities Operating lease $ 549,004 $ — Finance lease 151,396 80,604 Maturities of lease liabilities as of March 31, 2020 are as follows: Operating Leases Finance Lease 2020 (remainder) $ 2,651,054 $ 42,290 2021 3,680,753 56,386 2022 3,564,346 35,276 2023 2,851,906 27,600 2024 2,233,014 27,600 Thereafter 2,794,811 39,100 Total lease payments $ 17,775,884 $ 228,252 Less: Imputed interest (3,422,021) (25,418) Total lease obligations 14,353,863 202,834 Less: Current obligations (2,497,097) (46,607) Long-term lease obligation $ 11,856,766 $ 156,227 Litigation In the normal course of business, the Company is party to litigation from time to time. The Company maintains insurance to cover certain actions and believes that resolution of such litigation will not have a material adverse effect on the Company. |
Segment Reporting
Segment Reporting | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Segment Reporting | Segment Reporting An operating segment is defined as a component of an enterprise for which discrete financial information is available and is reviewed regularly by the Chief Operating Decision Maker (“CODM”) to evaluate performance and make operating decisions. The Company has identified its CODM as the Chief Executive Officer. The Company has two operating business segments and one non-operating business segment. The Corporate Clinics segment is composed of the operating activities of the company-owned or managed clinics. As of March 31, 2020, the Company operated or managed 61 clinics under this segment. The Franchise Operations segment is composed of the operating activities of the franchise business unit. As of March 31, 2020, the franchise system consisted of 469 clinics in operation. Corporate is a non-operating segment that develops and implements strategic initiatives and supports the Company’s two operating business segments by centralizing key administrative functions such as finance and treasury, information technology, insurance and risk management, legal and human resources. Corporate also provides the necessary administrative functions to support the Company as a publicly-traded company. A portion of the expenses incurred by Corporate are allocated to the operating segments. The tables below present financial information for the Company’s two operating business segments. Three Months Ended March 31, Revenues: 2020 2019 Corporate clinics $ 7,294,295 $ 5,639,076 Franchise operations 6,350,191 5,040,300 Total revenues $ 13,644,486 $ 10,679,376 Depreciation and amortization: Corporate clinics 577,543 312,654 Franchise operations 342 169 Corporate administration 76,364 52,855 Total depreciation and amortization $ 654,249 $ 365,678 Segment operating income: Corporate clinics $ 783,706 $ 839,981 Franchise operations 2,844,298 2,389,349 Total segment operating income $ 3,628,004 $ 3,229,330 Reconciliation of total segment operating income to consolidated earnings before income taxes: Total segment operating income $ 3,628,004 $ 3,229,330 Unallocated corporate (2,874,654) (2,285,658) Consolidated income from operations 753,350 943,672 Bargain purchase gain — 19,298 Other expense, net 4,337 11,645 Income before income tax expense (benefit) $ 749,013 $ 951,325 Segment assets: March 31, December 31, Corporate clinics $ 25,084,849 $ 25,389,147 Franchise operations 7,880,855 7,466,629 Total segment assets 32,965,704 32,855,776 Unallocated cash and cash equivalents and restricted cash 10,969,469 8,641,877 Unallocated property and equipment 1,236,556 996,385 Other unallocated assets 1,242,392 1,211,629 Total assets $ 46,414,121 $ 43,705,667 “Unallocated cash and cash equivalents and restricted cash” relates primarily to corporate cash and cash equivalents and restricted cash (see Note 1), “unallocated property and equipment” relates primarily to corporate fixed assets, and “other unallocated assets” relates primarily to deposits, prepaid and other assets. Certain unallocated property and equipment balances were reclassified to Corporate clinics and Franchise operations segments as of December 31, 2019 to conform to the current year presentation. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events [Abstract] | |
Subsequent Events [Text Block] | Subsequent Events On April 10, 2020, the Company received a loan in the amount of approximately $2.7 million from JPMorgan Chase Bank, N.A. (the “Loan”), pursuant to the Paycheck Protection Program (the “PPP”) administered by the United States Small Business Administration (the “SBA”). The PPP is part of the Coronavirus Aid, Relief, and Economic Security Act (the “Cares Act”), which provides for forgiveness of up to the full principal amount and accrued interest of qualifying loans guaranteed under the PPP. The Loan was granted pursuant to a Note dated April 9, 2020 issued by the Company. The Note matures on April 11, 2022 and bears interest at a rate of 0.98% per annum. Principal and accrued interest are payable monthly in equal installments through the maturity date, commencing on November 9, 2020, unless forgiven as described below. The Note may be prepaid at any time prior to maturity with no prepayment penalties. Loan proceeds may only be used for the Company’s eligible payroll costs (with salary capped at $100,000 on an annualized basis for each employee), rent, and utilities, in each case paid during the eight-week period following the Loan disbursement. However, at least 75 percent of the Loan proceeds must be used for eligible payroll costs. The Loan will be fully forgiven if (1) proceeds are used to pay eligible payroll costs, rent, and utilities and (2) full-time employee headcount and salaries are either maintained during the applicable eight-week period or restored by June 30, 2020. If not so maintained or restored, forgiveness of the Loan will be reduced in accordance with the regulations issued by the SBA. The Company will carefully monitor all qualifying expenses and other requirements necessary to maximize loan forgiveness. |
Nature of Operations and Summ_2
Nature of Operations and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation These unaudited financial statements represent the condensed consolidated financial statements of The Joint Corp. (“The Joint”), its variable interest entities (“VIEs”), and its wholly owned subsidiary, The Joint Corporate Unit No. 1, LLC (collectively, the “Company”). The accompanying unaudited condensed consolidated interim financial statements reflect all adjustments which are necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented in accordance with U.S. generally accepted accounting principles (" GAAP"). Such unaudited interim condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the SEC. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with The Joint Corp. and Subsidiary and Affiliates consolidated financial statements and the notes thereto as set forth in The Joint’s Form 10-K, which included all disclosures required by U.S. GAAP. The results of operations for the periods ended March 31, 2020 and 2019 are not necessarily indicative of expected operating results for the full year. The information presented throughout the document as of and for the periods ended March 31, 2020 and 2019 is unaudited. |
Principles of Consolidation | Principles of Consolidation The accompanying condensed consolidated financial statements include the accounts of The Joint and its wholly owned subsidiary, The Joint Corporate Unit No. 1, LLC, which was dormant for all periods presented. The Company consolidates VIEs in which the Company is the primary beneficiary in accordance with Accounting Standards Codification 810, Consolidations |
Comprehensive Income | Comprehensive Income Net income and comprehensive income are the same for the three months ended March 31, 2020 and 2019. |
Nature of Operations | Nature of OperationsThe 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. |
Variable Interest Entities | Variable Interest Entities An entity deemed to hold the controlling interest in a voting interest entity or deemed to be the primary beneficiary of a VIE is required to consolidate the VIE in its financial statements. An entity is deemed to be the primary beneficiary of a VIE if it has both of the following characteristics: (a) the power to direct the activities of a VIE that most significantly impact the VIE's economic performance and (b) the obligation to absorb the majority of losses of the VIE or the right to receive the majority of benefits from the VIE. Certain states in which the Company manages clinics regulate the practice of chiropractic care and require that chiropractic services be provided by legal entities organized under state laws as professional corporations or PCs. In these states, the Company has entered into management services agreements with PCs under which the Company provides, on an exclusive basis, all non-clinical services of the chiropractic practice. Such PCs are VIEs, as fees paid by the PCs to the Company as its management service provider are considered variable interests because they are liabilities on the PC’s books and the fees do not meet all the following criteria: 1) The fees are compensation for services provided and are commensurate with the level of effort required to |
Cash and Cash Equivalents | Cash and Cash EquivalentsThe 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. |
Restricted Cash | Restricted CashRestricted cash relates to cash that franchisees and company-owned or managed clinics contribute to the Company’s National Marketing Fund and cash that franchisees provide to various voluntary regional Co-Op Marketing Funds. Cash contributed by franchisees to the National Marketing Fund is to be used in accordance with the Company’s Franchise Disclosure Document with a focus on regional and national marketing and advertising. |
Accounts Receivable | Accounts ReceivableAccounts receivable primarily represent amounts due from franchisees for royalty fees. The Company considers a reserve for doubtful accounts based on the creditworthiness of the entity. The provision for uncollectible amounts is continually reviewed and adjusted to maintain the allowance at a level considered adequate to cover future losses. The allowance is management’s best estimate of uncollectible amounts and is determined based on specific identification and historical performance that the Company tracks on an ongoing basis. Actual losses ultimately could differ materially in the near term from the amounts estimated in determining the allowance. |
Deferred Franchise and Regional Development Costs | Deferred Franchise and Regional Development Costs Deferred franchise and regional development costs represent commissions that are direct and incremental to the Company and are paid in conjunction with the sale of a franchise license or regional development rights. These costs are recognized as an expense, in franchise and regional development cost of revenues when the respective revenue is recognized, which is generally over the term of the related franchise or regional development agreement. |
Property and Equipment | Property and Equipment Property and equipment are stated at cost or for property acquired as part of franchise acquisitions at fair value at the date of closing. Depreciation is computed using the straight-line method over estimated useful lives of three Maintenance and repairs are charged to expense as incurred; major renewals and improvements are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. |
Capitalized Software | Capitalized Software The Company capitalizes certain software development costs. These capitalized costs are primarily related to software used by clinics for operations and by the Company for the management of operations. Costs incurred in the preliminary stages of development are expensed as incurred. Once an application has reached the development stage, internal and external costs, if direct, are capitalized as assets in progress until the software is substantially complete and ready for its intended use. |
Leases | Leases The Company leases property and equipment under operating and finance leases. The Company leases its corporate office space and the space for each of the company-owned or managed clinic in the portfolio. The Company recognizes a right-of-use ("ROU") asset and lease liability for all leases. Determining the lease term and amount of lease payments to include in the calculation of the ROU asset and lease liability for leases containing options requires the use of judgment to determine whether the exercise of an option is reasonably certain and if the optional period and payments should be included in the calculation of the associated ROU asset and liability. In making this determination, all relevant economic factors are considered that would compel the Company to exercise or not exercise an option. When available, the Company uses the rate implicit in the lease to discount lease payments; however, the rate implicit in the lease is not readily determinable for substantially all of its leases. In such cases, the Company estimates its incremental borrowing rate as the interest rate it would pay to borrow an amount equal to the lease payments over a similar term, with similar collateral as in the lease, and in a similar economic environment. The Company estimates these rates using available evidence such as rates imposed by third-party lenders to the Company in recent financings or observable risk-free interest rate and credit spreads for commercial debt of a similar duration, with credit spreads correlating to the Company’s estimated creditworthiness. For operating leases that include rent holidays and rent escalation clauses, the Company recognizes lease expense on a straight-line basis over the lease term from the date it takes possession of the leased property. Pre-opening costs are recorded as incurred in general and administrative expenses. The Company records the straight-line lease expense and any contingent rent, if applicable, in general and administrative expenses on the condensed consolidated statements of operations. Many of the Company’s leases also require it to pay real estate taxes, common area maintenance costs and other occupancy costs which are also included in general and administrative expenses on the condensed consolidated statements of operations. |
Intangible Assets | Intangible Assets Intangible assets consist primarily of re-acquired franchise and regional developer rights and customer relationships. The Company amortizes the fair value of re-acquired franchise rights over the remaining contractual terms of the re-acquired franchise rights at the time of the acquisition, which generally range from three |
Goodwill | Goodwill Goodwill consists of the excess of the purchase price over the fair value of tangible and identifiable intangible assets acquired in the acquisitions of franchises. Goodwill and intangible assets deemed to have indefinite lives are not amortized but are 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. |
Long-Lived Assets | Long-Lived Assets The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Company looks primarily to estimated undiscounted future cash flows in |
Advertising Fund | Advertising Fund The Company has established an advertising fund for national/regional marketing and advertising of services offered by its clinics. The monthly marketing fee is 2% of clinic sales. The Company segregates the marketing funds collected which are included in restricted cash on its consolidated balance sheets. As amounts are expended from the fund, the Company recognizes a related expense. |
Co-Op Marketing Funds | Co-Op Marketing Funds Some franchises have established regional Co-Ops for advertising within their local and regional markets. The Company maintains a custodial relationship under which the marketing funds collected are segregated and used for the purposes specified by the Co-Ops’ officers. The marketing funds are included in restricted cash on the Company’s condensed consolidated balance sheets. |
Revenue Recognition | Revenue Recognition The Company generates revenue primarily through its company-owned and managed clinics, royalties, franchise fees, advertising fund, and through IT related income and computer software fees. Revenues from Company-Owned or Managed Clinics. The Company earns revenues from clinics that it owns and operates or manages throughout the United States. In those states where the Company owns and operates or manages the clinic, revenues are recognized when services are performed. The Company offers a variety of membership and wellness packages which feature discounted pricing as compared with its single-visit pricing. Amounts collected in advance for membership and wellness packages are recorded as deferred revenue and recognized when the service is performed. The Company recognizes a contract liability (or a deferred revenue liability) related to the prepaid treatment plans for which the Company has an ongoing performance obligation. The Company recognizes this contract liability, and recognizes revenue, as the patient consumes his or her visits related to the package and the Company transfers its services. Based on a historical lag analysis and an evaluation of legal obligation by jurisdiction, the Company concluded that any remaining contract liability that exists after 12 to 24 months from transaction date will be deemed breakage. Breakage revenue is recognized only at that point, when the likelihood of the patient exercising his or her remaining rights becomes remote. Royalties and Advertising Fund Revenue. The Company collects royalties, as stipulated in the franchise agreement, equal to 7% of gross sales and a marketing and advertising fee currently equal to 2% of gross sales. Royalties, including franchisee contributions to advertising funds, are calculated as a percentage of clinic sales over the term of the franchise agreement. The franchise agreement royalties, inclusive of advertising fund contributions, represent sales-based royalties that are related entirely to the Company’s performance obligation under the franchise agreement and are recognized as franchisee clinic level sales occur. Royalties are collected semi-monthly, two working days after each sales period has ended. Franchise Fees. The Company requires the entire non-refundable initial franchise fee to be paid upon execution of a franchise agreement, which typically has an initial term of ten years. Initial franchise fees are recognized ratably on a straight-line basis over the term of the franchise agreement. The Company’s services under the franchise agreement include: training of franchisees and staff, site selection, construction/vendor management and ongoing operations support. The Company provides no financing to franchisees and offers no guarantees on their behalf. The services provided by the Company are highly interrelated with the franchise license and as such are considered to represent a single performance obligation. Software Fees. The Company collects a monthly fee for use of its proprietary chiropractic software, computer support, and internet services support. These fees are recognized ratably on a straight-line basis over the term of the respective franchise agreement. Regional Developer Fees . During 2011, the Company established a regional developer program to engage independent contractors to assist in developing specified geographical regions. Under the historical program, regional developers paid a license fee for each franchise they received the right to develop within the region. In 2017, the program was revised to grant exclusive geographical territory and establish a minimum development obligation within that defined territory. Regional developer fees paid to the Company are non-refundable and are recognized as revenue ratably on a straight-line basis over the term of the regional |
Advertising Costs | Advertising CostsAdvertising costs are expensed as incurred. |
Income Taxes | 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 stock-based compensation 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. The Company has not identified any material uncertain tax positions as of March 31, 2020 and December 31, 2019. Interest and penalties associated with tax positions are recorded in the period assessed as general and administrative expenses. With exceptions due to the generation and utilization of net operating losses or credits, as of March 31, 2020 and December 31, 2019, the Company is no longer subject to federal and state examinations by taxing authorities for tax years before 2016 and 2015, respectively. |
Earnings per Common Share | Earnings per Common Share Basic earnings per common share is computed by dividing the net income by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed by giving effect to all potentially dilutive common shares including restricted stock and stock options. |
Stock-Based Compensation | Stock-Based Compensation The Company accounts for share-based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant. The Company determines the estimated grant-date fair value of restricted shares using the closing price on the date of the grant and the grant-date fair value of stock options using the Black-Scholes-Merton model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the model, including risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. The Company recognizes compensation costs ratably over the period of service |
Retirement Benefit Plans | Retirement Benefit Plan Employees of the Company are eligible to participate in a defined contribution retirement plan, the Joint Corp. 401(k). Retirement Plan (“401(k) Plan”), under Section 401(k) of the Internal Revenue Code. Under the 401(k) Plan, employees may contribute their eligible compensation, not to exceed the annual limits set by the IRS. The 401(k) Plan allows the Company to match participants’ contributions in an amount determined at the sole discretion of the Company. |
Use of Estimates | Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates. Items subject to significant estimates and assumptions include the allowance for doubtful accounts, share-based compensation arrangements, fair value of stock options, useful lives and realizability of long-lived assets, classification of deferred revenue and revenue recognition related to breakage, classification of deferred franchise costs, calculation of ROU assets and liabilities related to leases, realizability of deferred tax assets, impairment of goodwill, intangible assets, and other long-lived assets, and purchase price allocations and related valuations. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements On January 1, 2020, the Company early adopted ASU 2017-04, "Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment," which eliminates step 2 of the current goodwill impairment test that requires a hypothetical purchase price allocation to measure goodwill impairment. The Company reviewed other newly issued accounting pronouncements and concluded that they either are not applicable to the Company's operations or that no material effect is expected on the Company's financial statements upon future adoption. |
Nature of Operations and Summ_3
Nature of Operations and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accounting Policies [Abstract] | |
Schedule of Franchisor Disclosure | The following table summarizes the number of clinics in operation under franchise agreements and as company-owned or managed clinics for the three months ended March 31, 2020 and 2019: Three Months Ended Franchised clinics: 2020 2019 Clinics open at beginning of period 453 394 Opened during the period 16 12 Sold during the period — (1) Closed during the period — (1) Clinics in operation at the end of the period 469 404 Three Months Ended Company-owned or managed clinics: 2020 2019 Clinics open at beginning of period 60 48 Opened during the period 1 2 Acquired during the period — 1 Closed during the period — (1) Clinics in operation at the end of the period 61 50 Total clinics in operation at the end of the period 530 454 Clinic licenses sold but not yet developed 176 145 Executed letters of intent for future clinic licenses 36 27 |
Schedule of Earnings (Loss) per Common Share | Three Months Ended 2020 2019 Net Income $ 814,947 $ 952,644 Weighted average common shares outstanding - basic 13,890,673 13,751,196 Effect of dilutive securities: Unvested restricted stock and stock options 592,911 504,810 Weighted average common shares outstanding - diluted 14,483,584 14,256,006 Basic earnings per share $ 0.06 $ 0.07 Diluted earnings per share $ 0.06 $ 0.07 Potentially dilutive securities excluded from the calculation of diluted net income per common share as the effect would be anti-dilutive were as follows: Three Months Ended Weighted average potentially dilutive securities: 2020 2019 Unvested restricted stock — 3,339 Stock options 101,692 69,675 |
Revenue Disclosures (Tables)
Revenue Disclosures (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Revenue from Contract with Customer [Abstract] | |
Contract with Customer, Asset and Liability | Changes in the Company's contract liability for deferred franchise and regional development fees during the three months ended March 31, 2020 were as follows: Deferred Revenue Balance at December 31, 2019 $ 15,107,276 Recognized as revenue during the three months ended March 31, 2020 (720,393) Fees received and deferred during the three months ended March 31, 2020 938,701 Balance at March 31, 2020 $ 15,325,584 Changes in the Company's contract assets for deferred franchise and regional development costs during the three months ended March 31, 2020 were as follows: Deferred Franchise and Development Costs Balance at December 31, 2019 $ 4,392,733 Recognized as cost of revenue during the three months ended March 31, 2020 (203,501) Costs incurred and deferred during the three months ended March 31, 2020 293,123 Balance at March 31, 2020 $ 4,482,355 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction | The following table illustrates estimated revenues expected to be recognized in the future related to performance obligations that were unsatisfied (or partially unsatisfied) as of March 31, 2020: Contract liabilities expected to be recognized in Amount 2020 (remainder) $ 2,130,191 2021 2,720,283 2022 2,334,730 2023 2,001,921 2024 1,565,354 Thereafter 4,573,105 Total $ 15,325,584 |
Restricted Cash (Tables)
Restricted Cash (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract] | |
Reconciliation of Cash, Cash Equivalents and Restricted Cash Balance | The table below reconciles the cash and cash equivalents balance and restricted cash balances from The Company’s condensed consolidated balance sheet to the amount of cash reported on the condensed consolidated statement of cash flows: March 31, 2020 December 31, 2019 Cash and cash equivalents $ 10,712,846 $ 8,455,989 Restricted cash 256,623 185,888 Total cash, cash equivalents and restricted cash $ 10,969,469 $ 8,641,877 |
Notes Receivable (Tables)
Notes Receivable (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Receivables [Abstract] | |
Schedule of Financing Receivables, Minimum Payments | Maturities of notes receivable as of March 31, 2020 are as follows: Amount (gross) 2020 (remaining) $ 95,904 2021 9,600 2022 9,086 Total $ 114,590 |
Property and Equipment (Tables)
Property and Equipment (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property, Plant and Equipment [Abstract] | |
Property, Plant and Equipment | Property and equipment consist of the following: March 31, December 31, Office and computer equipment $ 2,005,872 $ 1,594,364 Leasehold improvements 7,631,395 7,154,156 Software developed 1,193,007 1,193,007 Finance lease assets 232,001 80,604 11,062,275 10,022,131 Accumulated depreciation and amortization (5,929,760) (5,671,366) 5,132,515 4,350,765 Construction in progress 2,926,878 2,230,823 Property and equipment, net $ 8,059,393 $ 6,581,588 |
Intangible Assets (Tables)
Intangible Assets (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Intangible Assets | Intangible assets consist of the following: As of March 31, 2020 Gross Carrying Accumulated Net Carrying Intangible assets subject to amortization: Reacquired franchise rights $ 3,246,494 $ (1,576,947) $ 1,669,547 Customer relationships 1,255,975 (934,938) 321,037 Reacquired development rights 2,050,481 (1,177,893) 872,588 $ 6,552,950 $ (3,689,778) $ 2,863,172 As of December 31, 2019 Gross Carrying Accumulated Net Carrying Intangible assets subject to amortization: Reacquired franchise rights $ 3,246,494 $ (1,400,086) $ 1,846,408 Customer relationships 1,255,975 (865,478) 390,497 Reacquired development rights 2,050,481 (1,067,595) 982,886 $ 6,552,950 $ (3,333,159) $ 3,219,791 |
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense | Estimated amortization expense for 2020 and subsequent years is as follows: Amount 2020 (remainder) $ 1,053,343 2021 1,212,703 2022 539,750 2023 57,376 Total $ 2,863,172 |
Stock-based Compensation (Table
Stock-based Compensation (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Share-based Payment Arrangement [Abstract] | |
Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions | The Company has computed the fair value of all options granted using the Black-Scholes-Merton model during the three months ended March 31, 2020 and 2019, using the following assumptions: Three Month Ended March 31, 2020 2019 Expected volatility 53% 35% Expected dividends None None Expected term (years) 7 7 Risk-free rate 0.89% 2.61% Forfeiture rate 5% 20% |
Share-based Payment Arrangement, Option, Activity | The information below summarizes the stock options activity for the three months ended March 31, 2020: Number of Weighted Weighted Outstanding at December 31, 2019 949,245 $ 5.19 6.5 Granted 108,454 14.72 Exercised (35,500) 3.97 Cancelled — — Outstanding at March 31, 2020 1,022,199 $ 6.24 6.8 Exercisable at March 31, 2020 640,123 $ 4.73 5.9 |
Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity | The information below summaries the restricted stock activity for the three months ended March 31, 2020: Restricted Stock Awards Shares Weighted Average Non-vested at December 31, 2019 38,976 $ 12.31 Granted 12,798 14.68 Vested (2,780) 12.02 Cancelled — — Non-vested at March 31, 2020 48,994 $ 12.95 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies Disclosure [Abstract] | |
Lease, Cost | The table below summarizes the components of lease expense and income statement location for the three months ended March 31, 2020 and 2019: Line Item in the Three Months Ended Three Months Finance lease costs: Amortization of assets Depreciation and amortization $ 10,554 $ 6,169 Interest on lease liabilities Other expense, net 2,283 1,911 Total finance lease costs 12,837 8,080 Operating lease costs General and administrative expenses 849,891 697,755 Total lease costs $ 862,728 $ 705,835 |
Assets And Liabilities, Lessee | Supplemental information and balance sheet location related to leases is as follows: March 31, 2020 December 31, 2019 Operating Leases: Operating lease right-of -use asset $ 12,430,910 $ 12,486,672 Operating lease liability - current portion $ 2,497,097 $ 2,313,109 Operating lease liability - net of current portion 11,856,766 11,901,040 Total operating lease liability $ 14,353,863 $ 14,214,149 Finance Leases: Property and equipment, at cost $ 232,001 $ 80,604 Less accumulated amortization (35,228) (24,675) Property and equipment, net $ 196,773 $ 55,929 Finance lease liability - current portion 46,607 24,253 Finance lease liability - net of current portion 156,227 34,398 Total finance lease liabilities $ 202,834 $ 58,651 Weighted average remaining lease term (in years): Operating leases 5.2 5.4 Finance lease 5.1 2.3 Weighted average discount rate: Operating leases 8.6 % 8.7 % Finance leases 5.7 % 10.0 % Supplemental cash flow information related to leases is as follows: Three Three Cash paid for amounts included in measurement of liabilities: Operating cash flows from operating leases $ 765,093 $ 735,426 Operating cash flows from finance leases 2,283 1,911 Financing cash flows from finance leases 7,214 5,285 Non-cash transactions: ROU assets obtained in exchange for lease liabilities Operating lease $ 549,004 $ — Finance lease 151,396 80,604 |
Lessee, Operating Lease, Liability, Maturity | Maturities of lease liabilities as of March 31, 2020 are as follows: Operating Leases Finance Lease 2020 (remainder) $ 2,651,054 $ 42,290 2021 3,680,753 56,386 2022 3,564,346 35,276 2023 2,851,906 27,600 2024 2,233,014 27,600 Thereafter 2,794,811 39,100 Total lease payments $ 17,775,884 $ 228,252 Less: Imputed interest (3,422,021) (25,418) Total lease obligations 14,353,863 202,834 Less: Current obligations (2,497,097) (46,607) Long-term lease obligation $ 11,856,766 $ 156,227 |
Finance Lease, Liability, Maturity | Maturities of lease liabilities as of March 31, 2020 are as follows: Operating Leases Finance Lease 2020 (remainder) $ 2,651,054 $ 42,290 2021 3,680,753 56,386 2022 3,564,346 35,276 2023 2,851,906 27,600 2024 2,233,014 27,600 Thereafter 2,794,811 39,100 Total lease payments $ 17,775,884 $ 228,252 Less: Imputed interest (3,422,021) (25,418) Total lease obligations 14,353,863 202,834 Less: Current obligations (2,497,097) (46,607) Long-term lease obligation $ 11,856,766 $ 156,227 |
Segment Reporting (Tables)
Segment Reporting (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Segment Reporting [Abstract] | |
Schedule of Segment Reporting Information, by Segment | The tables below present financial information for the Company’s two operating business segments. Three Months Ended March 31, Revenues: 2020 2019 Corporate clinics $ 7,294,295 $ 5,639,076 Franchise operations 6,350,191 5,040,300 Total revenues $ 13,644,486 $ 10,679,376 Depreciation and amortization: Corporate clinics 577,543 312,654 Franchise operations 342 169 Corporate administration 76,364 52,855 Total depreciation and amortization $ 654,249 $ 365,678 Segment operating income: Corporate clinics $ 783,706 $ 839,981 Franchise operations 2,844,298 2,389,349 Total segment operating income $ 3,628,004 $ 3,229,330 Reconciliation of total segment operating income to consolidated earnings before income taxes: Total segment operating income $ 3,628,004 $ 3,229,330 Unallocated corporate (2,874,654) (2,285,658) Consolidated income from operations 753,350 943,672 Bargain purchase gain — 19,298 Other expense, net 4,337 11,645 Income before income tax expense (benefit) $ 749,013 $ 951,325 |
Reconciliation of Assets from Segment to Consolidated | Segment assets: March 31, December 31, Corporate clinics $ 25,084,849 $ 25,389,147 Franchise operations 7,880,855 7,466,629 Total segment assets 32,965,704 32,855,776 Unallocated cash and cash equivalents and restricted cash 10,969,469 8,641,877 Unallocated property and equipment 1,236,556 996,385 Other unallocated assets 1,242,392 1,211,629 Total assets $ 46,414,121 $ 43,705,667 |
Supplemental Disclosure of No_2
Supplemental Disclosure of Non-cash Activity (Details) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Jun. 30, 2019 | Dec. 31, 2019 | |
Income taxes | $ 0 | $ 0 | ||
Interest Paid, Excluding Capitalized Interest, Operating Activities | 0 | 25,000 | ||
Payments to Acquire Businesses, Net of Cash Acquired, Total | 0 | 30,000 | ||
Total consideration | 15,325,584 | $ 15,107,276 | ||
Stock Option Proceeds Receivable | 30,358 | |||
Assets and Franchise Agreement [Member] | ||||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Property, Plant, and Equipment, Total | 9,166 | |||
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Finite-Lived Intangibles | 62,000 | |||
Total consideration | 3,847 | |||
License Fee Collection Upon Regional Developer Agreement [Member] | ||||
Total consideration | $ 44,334 | |||
Purchase of Property, Plant and Equipment Included in Accounts Payable [Member] | ||||
Capital Expenditures Incurred but Not yet Paid | 501,318 | $ 196,671 | ||
Purchase of Property, Plant and Equipment Included in Accrued Expenses [Member] | ||||
Capital Expenditures Incurred but Not yet Paid | $ 14,097 | $ 15,250 |
Nature of Operations and Summ_4
Nature of Operations and Summary of Significant Accounting Policies - Narrative (Details) | 3 Months Ended | ||
Mar. 31, 2020USD ($)agreement | Mar. 31, 2019USD ($) | Dec. 31, 2019USD ($) | |
Cash equivalents | $ 0 | ||
Allowance for doubtful accounts | 0 | $ 0 | |
Impairments of goodwill | 0 | $ 0 | |
Impairments of long-lived assets | $ 0 | 0 | |
Marketing fee percentage | 2.00% | ||
Percentage of franchise royalty sales | 7.00% | ||
Initial term of franchise agreement | 10 years | ||
Percentage royalty of sales generated by franchised clinics | 3.00% | ||
Regional developer agreement, amount received | $ 15,325,584 | $ 15,107,276 | |
Number of regional developed agreements | agreement | 1 | ||
Advertising costs | $ 658,673 | $ 439,436 | |
Regional Development Agreement | |||
Regional developer agreement, amount received | $ 201,000 | ||
Computer Software, Intangible Asset | |||
Intangible assets, useful life | 5 years | ||
Reacquired development rights | |||
Intangible assets, useful life | 7 years | ||
Customer relationships | |||
Intangible assets, useful life | 2 years | ||
Minimum | |||
Property and equipment, useful life | 3 years | ||
Minimum | Reacquired development rights | |||
Intangible assets, useful life | 3 years | ||
Maximum | |||
Property and equipment, useful life | 7 years | ||
Maximum | Reacquired development rights | |||
Intangible assets, useful life | 8 years |
Nature of Operations and Summ_5
Nature of Operations and Summary of Significant Accounting Policies - Clinics in Operation Under Franchise Agreements or Company-owned or Managed (Details) | 3 Months Ended | |||||
Mar. 31, 2020 | Mar. 31, 2019 | Mar. 31, 2020 | Mar. 31, 2020clinic | Mar. 31, 2019 | Jun. 30, 2018 | |
Clinics in operation at the end of the period | 530 | 454 | ||||
Closed during the period | 0 | 1 | ||||
Number of Stores | 530 | 454 | 530 | 454 | ||
Clinic licenses sold but not yet developed | 176 | 145 | ||||
Executed letters of intent for future clinic licenses | 36 | 27 | ||||
Franchised Clinics | ||||||
Clinics open at beginning of period | 453 | |||||
Opened during the period | 16 | 12 | ||||
Sold during the period | 0 | 1 | ||||
Clinics in operation at the end of the period | 469 | 404 | ||||
Opened during the period | 16 | 12 | ||||
Closed during the period | 0 | (1) | ||||
Number of Stores | 469 | 404 | 469 | 469 | 404 | 394 |
Company-owned or Managed Clinics | ||||||
Clinics open at beginning of period | 60 | |||||
Opened during the period | 1 | 2 | ||||
Clinics in operation at the end of the period | 61 | 50 | ||||
Opened during the period | 1 | 2 | ||||
Acquired during the period | 0 | 1 | ||||
Number of Stores | 61 | 50 | 61 | 61 | 50 | 48 |
Nature of Operations and Summ_6
Nature of Operations and Summary of Significant Accounting Policies - Earnings (Loss) Per Common Share (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Net income | $ 814,947 | $ 952,644 |
Weighted average common shares outstanding - basic (in shares) | 13,890,673 | 13,751,196 |
Incremental Weighted Average Shares Attributable to Dilutive Effect [Abstract] | ||
Unvested restricted stock and stock options (in shares) | 592,911 | 504,810 |
Weighted average common shares outstanding - diluted (in shares) | 14,483,584 | 14,256,006 |
Basic earnings per share (in dollars per share) | $ 0.06 | $ 0.07 |
Diluted earnings per share (in dollars per share) | $ 0.06 | $ 0.07 |
Unvested restricted stock | ||
Incremental Weighted Average Shares Attributable to Dilutive Effect [Abstract] | ||
Weighted average potentially dilutive securities (in shares) | 0 | 3,339 |
Stock options | ||
Incremental Weighted Average Shares Attributable to Dilutive Effect [Abstract] | ||
Weighted average potentially dilutive securities (in shares) | 101,692 | 69,675 |
Revenue Disclosures - Narrative
Revenue Disclosures - Narrative (Details) | Mar. 31, 2020state |
Revenue from Contract with Customer [Abstract] | |
Franchises, number of states | 33 |
Revenue Disclosures - Changes i
Revenue Disclosures - Changes in Contract Assets and Contract Liabilities (Details) | 3 Months Ended |
Mar. 31, 2020USD ($) | |
Revenue from Contract with Customer [Abstract] | |
Balance, beginning | $ 15,107,276 |
Recognized as revenue during the period | (720,393) |
Fees received and deferred during the period | 938,701 |
Balance, ending | 15,325,584 |
Balance, beginning | 4,392,733 |
Recognized as cost of revenue during the period | (203,501) |
Costs incurred and deferred during the period | 293,123 |
Balance, ending | $ 4,482,355 |
Revenue Disclosures - Schedule
Revenue Disclosures - Schedule of Contract Liabilities Expected to be Recognized (Details) | Mar. 31, 2020USD ($) |
Revenue expected to be recognized, amount | $ 15,325,584 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-01 | |
Revenue expected to be recognized, period | 9 months |
Revenue expected to be recognized, amount | $ 2,130,191 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 | |
Revenue expected to be recognized, period | 1 month |
Revenue expected to be recognized, amount | $ 2,720,283 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-01-01 | |
Revenue expected to be recognized, period | 1 month |
Revenue expected to be recognized, amount | $ 2,334,730 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-01-01 | |
Revenue expected to be recognized, period | 1 month |
Revenue expected to be recognized, amount | $ 2,001,921 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2024-01-01 | |
Revenue expected to be recognized, period | 1 month |
Revenue expected to be recognized, amount | $ 1,565,354 |
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2025-01-01 | |
Revenue expected to be recognized, period | |
Revenue expected to be recognized, amount | $ 4,573,105 |
Restricted Cash - Reconciliatio
Restricted Cash - Reconciliation of Cash, Cash Equivalents and Restricted Cash Balance (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 | Mar. 31, 2019 | Dec. 31, 2018 |
Cash, Cash Equivalents, Restricted Cash and Restricted Cash Equivalents [Abstract] | ||||
Cash and cash equivalents | $ 10,712,846 | $ 8,455,989 | ||
Restricted cash | 256,623 | 185,888 | ||
Total cash, cash equivalents and restricted cash | $ 10,969,469 | $ 8,641,877 | $ 8,197,491 | $ 8,854,952 |
Notes Receivable - Narrative (D
Notes Receivable - Narrative (Details) - USD ($) | Apr. 26, 2019 | Oct. 10, 2017 | Apr. 29, 2017 | Aug. 31, 2017 | Mar. 31, 2020 | Dec. 31, 2019 |
Receivables [Abstract] | ||||||
Regional development agreement | $ 170,000 | $ 320,000 | $ 220,000 | |||
Promissory note | $ 31,086 | $ 135,688 | $ 187,000 | $ 117,475 | $ 114,590 | $ 155,810 |
Interest rate on promissory note | 0.00% | 10.00% | 10.00% | 10.00% | ||
Term of promissory note | 3 years | 3 years | 42 months | 3 years | ||
Term of principal and interest on promissory note | 3 years | 3 years | 3 years | 3 years | ||
Allowance reserve on outstanding notes | $ 25,586 | $ 27,086 |
Notes Receivable - Schedule of
Notes Receivable - Schedule of Minimum Payments Due (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 | Apr. 26, 2019 | Oct. 10, 2017 | Aug. 31, 2017 | Apr. 29, 2017 |
2020 (remaining) | $ 95,904 | |||||
2021 | 9,600 | |||||
2022 | 9,086 | |||||
Total, notes receivable | $ 114,590 | $ 155,810 | $ 31,086 | $ 135,688 | $ 117,475 | $ 187,000 |
Property and Equipment - Summar
Property and Equipment - Summary of Property and Equipment (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | $ 11,062,275 | $ 10,022,131 |
Accumulated depreciation and amortization | (5,929,760) | (5,671,366) |
Property and equipment, net | 8,059,393 | 6,581,588 |
Construction in progress | 2,926,878 | 2,230,823 |
Office and computer equipment | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 2,005,872 | 1,594,364 |
Leasehold improvements | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 7,631,395 | 7,154,156 |
Software developed | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, gross | 1,193,007 | 1,193,007 |
Finance lease assets | ||
Property, Plant and Equipment [Line Items] | ||
Finance lease assets | 232,001 | 80,604 |
Property Plant and Equipment, Excluding Construction in Progress | ||
Property, Plant and Equipment [Line Items] | ||
Property and equipment, net | $ 5,132,515 | $ 4,350,765 |
Property and Equipment - Narrat
Property and Equipment - Narrative (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Property, Plant and Equipment [Abstract] | ||
Depreciation, Total | $ 287,076 | $ 193,805 |
Amortization of assets | $ 10,554 | $ 6,169 |
Intangible Assets - Narrative (
Intangible Assets - Narrative (Details) - USD ($) | Feb. 04, 2019 | Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 |
Total consideration | $ 15,325,584 | $ 15,107,276 | ||
Revenues | 13,644,486 | $ 10,679,376 | ||
Amortization of Intangible assets | $ 356,619 | $ 165,704 | ||
Regional Developer Rights in South Carolina and Georgia [Member] | ||||
Total consideration | $ 681,500 | |||
Revenues | $ 44,334 |
Intangible Assets - Intangible
Intangible Assets - Intangible Assets Acquired (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Gross Carrying Amount | $ 6,552,950 | $ 6,552,950 |
Accumulated Amortization | (3,689,778) | (3,333,159) |
Net Carrying Value | 2,863,172 | 3,219,791 |
Reacquired franchise rights | ||
Gross Carrying Amount | 3,246,494 | 3,246,494 |
Accumulated Amortization | (1,576,947) | (1,400,086) |
Net Carrying Value | 1,669,547 | 1,846,408 |
Customer relationships | ||
Gross Carrying Amount | 1,255,975 | 1,255,975 |
Accumulated Amortization | (934,938) | (865,478) |
Net Carrying Value | 321,037 | 390,497 |
Reacquired development rights | ||
Gross Carrying Amount | 2,050,481 | 2,050,481 |
Accumulated Amortization | (1,177,893) | (1,067,595) |
Net Carrying Value | $ 872,588 | $ 982,886 |
Intangible Assets - Estimated A
Intangible Assets - Estimated Amortization Expense (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2020 (remainder) | $ 1,053,343 | |
2021 | 1,212,703 | |
2022 | 539,750 | |
2023 | 57,376 | |
Net Carrying Value | $ 2,863,172 | $ 3,219,791 |
Debt - Narrative (Details)
Debt - Narrative (Details) | Mar. 18, 2020USD ($) | Feb. 28, 2020USD ($)payment | Mar. 31, 2020USD ($) | Mar. 31, 2019USD ($) |
Proceeds from the Credit Agreement, net of related fees | $ 1,947,352 | $ 0 | ||
Line of Credit | Senior Secured Credit Facilities | Alternative Eurocurrency Base Rate | ||||
Basis spread on variable rate | 1.00% | |||
Line of Credit | Senior Secured Credit Facilities | Secured Debt | ||||
Maximum borrowing capacity | $ 7,500,000 | |||
Maximum borrowing capacity, additional amount | $ 2,500,000 | |||
Number of payments | payment | 36 | |||
Line of Credit | Senior Secured Credit Facilities | Secured Debt | Alternative Base Rate | ||||
Basis spread on variable rate | 1.00% | |||
Line of Credit | Senior Secured Credit Facilities | Secured Debt | Eurodollar | ||||
Basis spread on variable rate | 2.00% | |||
Line of Credit | Senior Secured Credit Facilities | Secured Debt | Prime Rate | ||||
Basis spread on variable rate | 0.50% | |||
Line of Credit | Senior Secured Credit Facilities | Revolving Credit Facility | ||||
Debt instrument, face amount | $ 2,000,000 | |||
Proceeds from the Credit Agreement, net of related fees | $ 2,000,000 | |||
Line of Credit | Senior Secured Credit Facilities | Development Line of Credit | ||||
Debt instrument, face amount | 5,500,000 | |||
Line of Credit | Senior Secured Credit Facilities | Letter of Credit | ||||
Maximum borrowing capacity | $ 1,000,000 | |||
State interest rate percentage | 0.25% |
Stock-based Compensation - Narr
Stock-based Compensation - Narrative (Details) | 3 Months Ended | |
Mar. 31, 2020USD ($)installment | Mar. 31, 2019USD ($) | |
Stock options | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Vesting term | 4 years | |
Contractual term | 10 years | |
Stock-based compensation expense | $ 147,008 | $ 96,804 |
Unvested restricted stock | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 103,384 | $ 74,967 |
Number of installments | installment | 4 |
Stock-based Compensation - Fair
Stock-based Compensation - Fair Value Assumptions of Options Granted (Details) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Risk-free rate | 89.00% | 2.61% |
Stock options | ||
Expected volatility | 53.00% | 35.00% |
Expected dividends | 0.00% | 0.00% |
Expected term (years) | 7 years | 7 years |
Forfeiture rate | 5.00% | 20.00% |
Stock-based Compensation - Stoc
Stock-based Compensation - Stock Options Activity (Details) - Stock options - $ / shares | 3 Months Ended | 6 Months Ended |
Mar. 31, 2020 | Jun. 30, 2019 | |
Number of Shares | ||
Outstanding, Number of Shares (in shares) | 949,245 | |
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | 108,454 | |
Exercised, Number of Shares (in shares) | (35,500) | |
Cancelled, Number of Shares (in shares) | 0 | |
Outstanding, Number of Shares (in shares) | 1,022,199 | |
Exercisable, Number of Shares (in shares) | 640,123 | |
Weighted Average Exercise Price | ||
Outstanding, Weighted Average Exercise Price (in dollars per share) | $ 5.19 | |
Granted, Weighted Average Exercise Price (in dollars per share) | 14.72 | |
Exercised, Weighted Average Exercise Price (in dollars per share) | 3.97 | |
Cancelled, Weighted Average Exercise Price (in dollars per share) | 0 | |
Outstanding, Weighted Average Exercise Price (in dollars per share) | 6.24 | |
Exercisable, Weighted Average Exercise Price (in dollars per share) | $ 4.73 | |
Outstanding, Weighted Average Remaining Contractual Life (Year) | 6 years 9 months 18 days | 6 years 6 months |
Exercisable, Weighted Average Remaining Contractual Life (Year) | 5 years 10 months 24 days |
Stock-based Compensation - Rest
Stock-based Compensation - Restricted Stock Activity (Details) - Unvested restricted stock | 3 Months Ended |
Mar. 31, 2020$ / sharesshares | |
Shares | |
Unvested, beginning (in shares) | shares | 38,976 |
Granted (in shares) | shares | 12,798 |
Awards vested (in shares) | shares | (2,780) |
Cancelled (in shares) | shares | 0 |
Unvested, ending (in shares) | shares | 48,994 |
Weighted Average Grant-Date Fair Value per Award | |
Non-vested, beginning (in dollars per share) | $ / shares | $ 12.31 |
Granted (in dollar per share) | $ / shares | 14.68 |
Vested (in dollars per share) | $ / shares | 12.02 |
Cancelled (in dollars per share) | $ / shares | 0 |
Non-vested, ending (in dollars per share) | $ / shares | $ 12.95 |
Income Taxes - Narrative (Detai
Income Taxes - Narrative (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Tax Disclosure [Abstract] | ||
Income tax benefit | $ (65,934) | $ (1,319) |
Commitments and Contingencies -
Commitments and Contingencies - Lease Expense and Supplemental Information (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Amortization of assets | $ 10,554 | $ 6,169 | |
Interest on lease liabilities | 2,283 | 1,911 | |
Total finance lease costs | 12,837 | 8,080 | |
Operating lease costs | 849,891 | 697,755 | |
Total lease costs | 862,728 | 705,835 | |
Operating lease right-of-use asset | 12,430,910 | $ 12,486,672 | |
Operating lease liability - current portion | 2,497,097 | 2,313,109 | |
Operating lease liability - net of current portion | 11,856,766 | 11,901,040 | |
Total operating lease liability | 14,353,863 | 14,214,149 | |
Property and equipment, net | 8,059,393 | 6,581,588 | |
Finance lease liability - current portion | 46,607 | 24,253 | |
Finance lease liability - net of current portion | 156,227 | 34,398 | |
Total finance lease liabilities | $ 202,834 | $ 58,651 | |
Operating Lease, Weighted Average Remaining Lease Term | 5 years 2 months 12 days | 5 years 4 months 24 days | |
Finance Lease, Weighted Average Remaining Lease Term | 5 years 1 month 6 days | 2 years 3 months 18 days | |
Operating leases | 8.60% | 8.70% | |
Finance leases | 5.70% | 10.00% | |
Operating cash flows from operating leases | $ 765,093 | 735,426 | |
Operating cash flows from finance leases | 2,283 | 1,911 | |
Financing cash flows from finance leases | 7,214 | 5,285 | |
Operating lease | 549,004 | 0 | |
Finance lease | 151,396 | $ 80,604 | |
Finance Leases | |||
Property and equipment, at cost | 232,001 | $ 80,604 | |
Less accumulated amortization | (35,228) | (24,675) | |
Property and equipment, net | $ 196,773 | $ 55,929 |
Commitments and Contingencies_2
Commitments and Contingencies - Maturities of Lease Liabilities (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Operating Leases | ||
2020 (remainder) | $ 2,651,054 | |
2021 | 3,680,753 | |
2022 | 3,564,346 | |
2023 | 2,851,906 | |
2024 | 2,233,014 | |
Thereafter | 2,794,811 | |
Total lease payments | 17,775,884 | |
Less: Imputed interest | (3,422,021) | |
Total lease obligations | 14,353,863 | $ 14,214,149 |
Less: Current obligations | (2,497,097) | (2,313,109) |
Long-term lease obligation | 11,856,766 | 11,901,040 |
Finance Lease | ||
2020 (remainder) | 42,290 | |
2021 | 56,386 | |
2022 | 35,276 | |
2023 | 27,600 | |
2024 | 27,600 | |
Thereafter | 39,100 | |
Total lease payments | 228,252 | |
Less: Imputed interest | (25,418) | |
Total lease obligations | 202,834 | 58,651 |
Less: Current obligations | (46,607) | (24,253) |
Long-term lease obligation | $ 156,227 | $ 34,398 |
Segment Reporting - Narrative (
Segment Reporting - Narrative (Details) | 3 Months Ended | ||||
Mar. 31, 2020segment | Mar. 31, 2020clinic | Dec. 31, 2019 | Mar. 31, 2019 | Jun. 30, 2018 | |
Number of operating segments | 2 | ||||
Number of non-operating segments | 1 | ||||
Number of Stores | 530 | 454 | |||
Company-owned or Managed Clinics | |||||
Number of Stores | 61 | 61 | 60 | 50 | 48 |
Franchised Clinics | |||||
Number of Stores | 469 | 469 | 453 | 404 | 394 |
Segment Reporting - Segment Rep
Segment Reporting - Segment Reporting Financial Information (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Revenues | $ 13,644,486 | $ 10,679,376 |
Depreciation and amortization | 654,249 | 365,678 |
Operating income (loss) | 753,350 | 943,672 |
Bargain purchase gain | 0 | 19,298 |
Other income (expense), net | (4,337) | (11,645) |
Income before income tax benefit | 749,013 | 951,325 |
Operating Segments | ||
Operating income (loss) | 3,628,004 | 3,229,330 |
Corporate, Non-Segment | ||
Operating income (loss) | (2,874,654) | (2,285,658) |
Corporate Clinics | ||
Revenues | 7,294,295 | 5,639,076 |
Depreciation and amortization | 577,543 | 312,654 |
Operating income (loss) | 783,706 | 839,981 |
Franchise Operations | ||
Revenues | 6,350,191 | 5,040,300 |
Depreciation and amortization | 342 | 169 |
Operating income (loss) | 2,844,298 | 2,389,349 |
Corporate Segment | ||
Depreciation and amortization | $ 76,364 | $ 52,855 |
Segment Reporting - Segment R_2
Segment Reporting - Segment Reporting Information, Assets (Details) - USD ($) | Mar. 31, 2020 | Dec. 31, 2019 |
Assets | $ 46,414,121 | $ 43,705,667 |
Cash and cash equivalents | 10,712,846 | 8,455,989 |
Property and equipment, net | 8,059,393 | 6,581,588 |
Operating Segments | ||
Assets | 32,965,704 | 32,855,776 |
Cash and cash equivalents | 10,969,469 | 8,641,877 |
Property and equipment, net | 1,236,556 | 996,385 |
Other Assets | 1,242,392 | 1,211,629 |
Corporate Clinics | ||
Assets | 25,084,849 | 25,389,147 |
Franchise Operations | ||
Assets | $ 7,880,855 | $ 7,466,629 |
Subsequent Events - Narrative (
Subsequent Events - Narrative (Details) - Subsequent Event - JPMorgan Chase Bank - USD ($) | Apr. 10, 2020 | Apr. 09, 2020 |
Debt instrument, face amount | $ 2,700,000 | |
State interest rate percentage | 0.98% |