10-Q 1 jynt-20230930.htm 10-Q jynt-20230930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2023 
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission file number: 001-36724
The Joint Corp.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or
organization)
90-0544160
(IRS Employer Identification No.)
16767 N. Perimeter Drive, Suite 110, Scottsdale
Arizona
(Address of principal executive offices)
85260
(Zip Code)
(480) 245-5960
(Registrant’s telephone number, including area code)


Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Common Stock, $0.001 Par Value Per Share
JYNT
The Nasdaq Capital Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  x    No  ¨

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

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



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

As of November 6, 2023, the registrant had 14,754,287 shares of Common Stock ($0.001 par value) outstanding.


Table of Contents
THE JOINT CORP.
FORM 10-Q
TABLE OF CONTENTS
PAGE
NO.



Table of Contents
PART I: FINANCIAL INFORMATION
ITEM 1. UNAUDITED FINANCIAL STATEMENTS
THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30,
2023
December 31,
2022
ASSETS
(unaudited)
(as restated)
Current assets:
Cash and cash equivalents$16,050,137 $9,745,066 
Restricted cash1,092,216 805,351 
Accounts receivable, net3,653,127 3,911,272 
Deferred franchise and regional development costs, current portion1,054,534 1,054,060 
Prepaid expenses and other current assets2,602,563 2,098,359 
Assets held for sale3,972,113  
Total current assets28,424,690 17,614,108 
Property and equipment, net15,355,755 17,475,152 
Operating lease right-of-use asset19,803,896 20,587,199 
Deferred franchise and regional development costs, net of current portion5,409,924 5,707,678 
Intangible assets, net8,623,115 10,928,295 
Goodwill8,448,893 8,493,407 
Deferred tax assets ($1.0 million and $1.0 million attributable to VIE)
11,741,090 11,928,152 
Deposits and other assets765,263 756,386 
Total assets$98,572,626 $93,490,377 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$1,877,162 $2,966,589 
Accrued expenses2,488,324 1,069,610 
Co-op funds liability1,092,216 805,351 
Payroll liabilities ($1.0 million and $0.6 million attributable to VIE)
3,875,453 2,030,510 
Operating lease liability, current portion5,392,944 5,295,830 
Finance lease liability, current portion25,223 24,433 
Deferred franchise revenue, current portion2,512,350 2,468,601 
Deferred revenue from company clinics ($4.6 million and $4.7 million attributable to VIE)
6,538,713 7,471,549 
Upfront regional developer fees, current portion383,972 487,250 
Other current liabilities516,249 597,294 
Liabilities to be disposed of2,971,933  
Total current liabilities27,674,539 23,217,017 
Operating lease liability, net of current portion17,200,146 18,672,719 
Finance lease liability, net of current portion44,490 63,507 
Debt under the Credit Agreement2,000,000 2,000,000 
Deferred franchise revenue, net of current portion13,980,758 14,161,134 
Upfront regional developer fees, net of current portion1,099,718 1,500,278 
Other liabilities ($1.3 million and $1.3 million attributable to VIE)
1,287,880 1,287,879 
Total liabilities63,287,531 60,902,534 
Commitments and contingencies (Note 10)
Stockholders' equity:
Series A preferred stock, $0.001 par value; 50,000 shares authorized, 0 issued and outstanding, as of September 30, 2023 and December 31, 2022
  
1

Table of Contents
Common stock, $0.001 par value; 20,000,000 shares authorized, 14,786,411 shares issued and 14,754,287 shares outstanding as of September 30, 2023 and 14,560,353 shares issued and 14,528,487 outstanding as of December 31, 2022
14,786 14,560 
Additional paid-in capital46,969,761 45,558,305 
Treasury stock 32,124 shares as of September 30, 2023 and 31,866 shares as of December 31, 2022, at cost
(860,474)(856,642)
Accumulated deficit(10,863,978)(12,153,380)
Total The Joint Corp. stockholders' equity35,260,095 32,562,843 
Non-controlling interest25,000 25,000 
Total equity35,285,095 32,587,843 
Total liabilities and stockholders' equity$98,572,626 $93,490,377 

The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Table of Contents
THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED INCOME STATEMENTS
(unaudited)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(as restated)(as restated)
Revenues:
Revenues from company-owned or managed clinics
$17,882,303 $15,836,327 $52,813,098 $42,936,298 
Royalty fees7,143,791 6,604,653 21,181,973 19,024,799 
Franchise fees754,029 642,405 2,179,822 1,970,256 
Advertising fund revenue2,050,106 1,881,367 6,043,563 5,417,840 
Software fees1,301,577 1,109,753 3,746,394 3,166,732 
Other revenues342,143 375,314 1,117,103 1,058,008 
Total revenues29,473,949 26,449,819 87,081,953 73,573,933 
Cost of revenues:
Franchise and regional development cost of revenues2,228,689 1,988,764 6,605,964 5,694,723 
IT cost of revenues375,411 348,331 1,068,332 1,010,446 
Total cost of revenues2,604,100 2,337,095 7,674,296 6,705,169 
Selling and marketing expenses4,301,017 3,539,287 13,169,079 10,666,500 
Depreciation and amortization2,349,206 1,779,924 6,893,529 4,578,450 
General and administrative expenses20,212,750 17,796,806 60,156,022 51,900,533 
Total selling, general and administrative expenses
26,862,973 23,116,017 80,218,630 67,145,483 
Net loss on disposition or impairment904,923 264,391 1,114,738 360,140 
Income (loss) from operations(898,047)732,316 (1,925,711)(636,859)
Other income (expense), net(6,244)(25,235)3,708,399 (60,668)
Income (loss) before income tax (benefit) expense(904,291)707,081 1,782,688 (697,527)
Income tax (benefit) expense(188,018)(24,015)493,286 (560,976)
Net (loss) income$(716,273)$731,096 $1,289,402 $(136,551)
Earnings per share:
Basic earnings (loss) per share$(0.05)$0.05 $0.09 $(0.01)
Diluted earnings (loss) per share$(0.05)$0.05 $0.09 $(0.01)
Basic weighted average shares14,790,663 14,512,856 14,666,222 14,474,323 
Diluted weighted average shares15,015,953 14,829,629 14,931,474 15,119,264 

The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Table of Contents
THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(unaudited)
Common StockAdditional
Paid In
Capital
Treasury StockAccumulated
Deficit
Total The Joint Corp.
stockholders'
equity
Non-controlling
interest
Total
SharesAmountSharesAmount
Balances, December 31, 2022, as restated14,560,353 $14,560 $45,558,305 31,866 $(856,642)$(12,153,380)$32,562,843 $25,000 $32,587,843 
Stock-based compensation expense— — 266,210 — — — 266,210 — 266,210 
Issuance of restricted stock95,386 95 (95)— — —  —  
Exercise of stock options15,621 16 138,441 — — — 138,457 — 138,457 
Purchases of treasury stock under employee stock plans— — — 169 (2,637)— (2,637)— (2,637)
Net Income— — — — — 2,326,164 2,326,164 — 2,326,164 
Balances, March 31, 2023, as revised (unaudited)14,671,360 $14,671 $45,962,861 32,035 $(859,279)$(9,827,216)$35,291,037 $25,000 $35,316,037 
Stock-based compensation expense— — 417,017 — — — 417,017 — 417,017 
Issuance of restricted stock91,158 91 (91)— — —  —  
Exercise of stock options10,002 10 63,919 — — — 63,929 — 63,929 
Net loss— — — — — (320,489)(320,489)— (320,489)
Balances, June 30, 2023 (unaudited)14,772,520 $14,772 $46,443,706 32,035 $(859,279)$(10,147,705)$35,451,494 $25,000 $35,476,494 
Stock-based compensation expense— — 526,069 — — — 526,069 — 526,069 
Issuance of restricted stock13,891 14 (14)— — —  —  
Exercise of stock options   — — —  —  
Purchases of treasury stock under employee stock plans— — — 89 (1,195)— (1,195)— (1,195)
Net loss— — — — — (716,273)(716,273)— (716,273)
Balances, September 30, 2023 (unaudited)14,786,411 $14,786 $46,969,761 32,124 $(860,474)$(10,863,978)$35,260,095 $25,000 $35,285,095 

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Common StockAdditional
Paid In
Capital
Treasury StockAccumulated
Deficit
Total The Joint Corp.
stockholders'
equity
Non-controlling
interest
SharesAmountSharesAmountTotal
(as restated)(as restated)(as restated)
Balances, December 31, 2021, as restated14,451,355 $14,450 $43,900,157 31,643 $(850,838)$(12,780,085)$30,283,684 $25,000 $30,308,684 
Stock-based compensation expense— — 323,556 — — — 323,556 — 323,556 
Issuance of restricted stock36,722 37 (37)— — —  —  
Exercise of stock options4,972 5 49,618 — — — 49,623 — 49,623 
Purchases of treasury stock under employee stock plans— — — 74 (2,598)— (2,598)— (2,598)
Net income— — — — — 4,220 4,220 — 4,220 
Balances, March 31, 2022, as restated (unaudited)14,493,049 $14,492 $44,273,294 31,717 $(853,436)$(12,775,865)$30,658,485 $25,000 $30,683,485 
Stock-based compensation expense— — 340,191 — — — 340,191 — 340,191 
Issuance of restricted stock28,758 29 (29)— — —  —  
Exercise of stock options4,610 5 64,045 — — — 64,050 — 64,050 
Net loss— — — — — (871,867)(871,867)— (871,867)
Balances, June 30, 2022, as restated (unaudited)14,526,417 $14,526 $44,677,501 31,717 $(853,436)$(13,647,732)$30,190,859 $25,000 $30,215,859 
Stock-based compensation expense— — 305,815 — — — 305,815 — 305,815 
Issuance of restricted stock2,845 3 (3)— — —  —  
Exercise of stock options32,283 32 248,324 — — — 248,356 — 248,356 
Purchases of treasury stock under employee stock plans— — — 149 (3,206)— (3,206)— (3,206)
Change in redemption value of non-controlling interest— —  — — —    
Net income— — — — — 731,096 731,096 — 731,096 
Balances, September 30, 2022, as restated (unaudited)14,561,545 $14,561 $45,231,637 31,866 $(856,642)$(12,916,636)$31,472,920 $25,000 $31,497,920 



The accompanying notes are an integral part of these condensed consolidated financial statements.
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THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Nine Months Ended
September 30,
20232022
(as restated)
Cash flows from operating activities:
Net income (loss)$1,289,402 $(136,551)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization6,893,529 4,578,450 
Net loss on disposition or impairment 1,114,738 360,140 
Net franchise fees recognized upon termination of franchise agreements(170,720)(15,218)
Deferred income taxes187,062 (961,759)
Stock-based compensation expense1,209,296 969,562 
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable258,145 (244,236)
Prepaid expenses and other current assets(504,203)(450,702)
Deferred franchise costs166,078 (186,618)
Deposits and other assets(15,377)(153,650)
Accounts payable(1,244,767)50,702 
Accrued expenses1,279,949 (571,447)
Payroll liabilities1,844,943 (1,118,259)
Deferred revenue(551,226)1,161,393 
Upfront regional developer fees(496,730)(977,841)
Other liabilities34,638 728,449 
Net cash provided by operating activities11,294,757 3,032,415 
Cash flows from investing activities:
Acquisition of AZ clinics (6,861,256)
Acquisition of NC clinics (1,105,000)
Acquisition of CA clinics(1,050,000) 
Purchase of property and equipment(3,833,148)(4,322,673)
Net cash used in investing activities(4,883,148)(12,288,929)
Cash flows from financing activities:
Payments of finance lease obligation(18,227)(43,907)
Purchases of treasury stock under employee stock plans(3,832)(5,804)
Proceeds from exercise of stock options202,386 362,029 
Repayment of debt under the Paycheck Protection Program  
Net cash provided by financing activities180,327 312,318 
Increase (decrease) in cash, cash equivalents and restricted cash6,591,936 (8,944,196)
Cash, cash equivalents and restricted cash, beginning of period10,550,417 19,912,338 
Cash, cash equivalents and restricted cash, end of period$17,142,353 $10,968,142 
Reconciliation of cash, cash equivalents and restricted cash:September 30,
2023
September 30,
2022
Cash and cash equivalents$16,050,137 $10,272,112 
Restricted cash1,092,216 696,030 
$17,142,353 $10,968,142 
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Supplemental cash flow disclosures:
The following table represents supplemental cash flow disclosures and non-cash investing and financing activities:
Nine Months Ended
September 30,
20232022
Net cash paid for:
Interest$163,334 $43,938 
Income taxes$468,289 $69,274 
Non-cash investing and financing activity:
Unpaid purchases of property and equipment$155,340 $225,967 
Non-cash investment in acquisition of franchised clinics$28,997 $115,372 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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THE JOINT CORP. AND SUBSIDIARY AND AFFILIATES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1: Nature of Operations and Summary of Significant Accounting Policies
Basis of Presentation
These unaudited financial statements represent the condensed consolidated financial statements of The Joint Corp. (“The Joint”), which includes 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 condensed consolidated interim financial statements have been prepared in accordance with the instructions to Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated interim 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 Amended Annual Report on Form 10-K/A as of and for the year ended December 31, 2022, filed with the SEC on September 26, 2023 (“Form 10-K/A”), which included all disclosures required by GAAP. The results of operations for the periods ended September 30, 2023 and 2022 are not necessarily indicative of expected operating results for the full year. The information presented throughout the document as of and for the three and nine-month periods ended September 30, 2023 and 2022 is unaudited.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amount of assets, liabilities, revenue, costs, expenses and other (expenses) income that are reported in the condensed consolidated financial statements and accompanying disclosures. These estimates are based on management’s best knowledge of current events, historical experience, actions that the Company may undertake in the future and on various other assumptions that are believed to be reasonable under the circumstances. As a result, actual results may be different from these estimates. For a discussion of significant estimates and judgments made in recognizing revenue, accounting for leases and accounting for income taxes, see this Note 1, Nature of Operations and Summary of Significant Accounting Policies.
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 was the same as comprehensive income for the three and nine months ended September 30, 2023 and 2022.
Restatement of Previously Issued Interim Condensed Financial Statements (Unaudited and Restated)
Subsequent to the issuance of the Company's consolidated financial statements as of and for the year ended December 31, 2022, included in the Company's Annual Report on Form 10-K filed with the SEC on March 10, 2023, the following errors were identified:
The Company has historically recorded the re-acquired Regional Developer Rights as an intangible asset and amortized the re-acquired Regional Developer Rights over the contractual terms under the RD Agreement remaining at the time of the re-acquisition. The Company has concluded that this treatment was incorrect in accordance with U.S. GAAP. The Company should not have capitalized the re-acquired Regional Developer Rights but instead should have recognized the full cost of the re-acquisition as an expense in the respective period.
The Company has historically recorded the upfront fee paid by the regional developer as a deferred liability, which was then recognized ratably to revenue as the regional developer performed various service obligations. However, the
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Company concluded that the deferred liability should be ratably recognized against cost of revenue as an offset against future commissions instead of revenue.
The Company has historically charged the VIEs a management fee for the benefit of the Company providing non-clinical administrative services needed by the professional corporation chiropractic practice. The economic compensation or profitability resulting from an intercompany transaction between two or more parties is based on each party’s relative contribution to the economic activity under analysis. The standalone professional corporations have not historically been profitable from an income tax perspective and are fully valuing their deferred tax assets and related attributes for ASC 740 purposes. The professional corporations' earned annual losses were not consistent with their function, risk and asset profile for transfer pricing. As such, the Company has estimated transfer pricing adjustments, which were computed based on assumed targets of profitability. The resulting operating profit, after incorporating estimated transfer pricing adjustments, were further used as a means for computing overall potential tax exposure and correlative benefit.
The Company assessed the impact of these errors on its previously issued interim financial statements and determined them to be quantitatively and qualitatively material to the period ended September 30, 2022 based on its analysis of Staff Accounting Bulletin (“SAB”) No. 99, “Materiality,” and SAB No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements”. These errors have been corrected in the consolidated balance sheets as of December 31, 2022 and 2021 and the consolidated income statements, statements of changes in stockholders’ equity and statements of cash flows for the years then ended.
The following table summarizes the effect of the errors on the Company’s condensed balance sheet as of September 30, 2022:

September 30,
2022
September 30,
2022
As Previously Reported
Adjustments
As Restated
Intangible assets, net$10,162,506 $(2,124,740)$8,037,766 
Deferred tax assets9,115,231 3,333,327 12,448,558 
Total assets88,291,398 1,208,587 89,499,985 
Current liabilities:
Deferred franchise and regional development fee revenue, current portion2,974,993 (2,974,993) 
Deferred franchise fee revenue, current portion 2,410,951 2,410,951 
Upfront regional developer fees, current portion 564,042 564,042 
Other current liabilities522,500 73,533 596,033 
Total current liabilities21,637,706 73,533 21,711,239 
Deferred franchise and regional development fee revenue, net of current portion15,604,180 (15,604,180) 
Deferred franchise fee revenue, net of current portion 13,870,401 13,870,401 
Upfront regional developer fees, net of current portion 1,733,779 1,733,779 
Other liabilities27,230 1,162,607 1,189,837 
Total liabilities56,765,925 1,236,140 58,002,065 
Accumulated deficit(12,889,083)(27,553)(12,916,636)
Total The Joint Corp. stockholders' equity31,500,473 (27,553)31,472,920 
Total equity31,525,473 (27,553)31,497,920 
Total liabilities and stockholders' equity88,291,398 1,208,587 89,499,985 

The following table summarizes the effect of the errors on the Company’s condensed income statement for the three and nine months ended September 30, 2022:
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As Previously ReportedAdjustmentsAs Restated
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022Three Months Ended September 30, 2022Nine Months Ended September 30, 2022Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
Revenues:
Regional developer fees$153,181 $524,923 $(153,181)$(524,923)$ $ 
Total revenues26,603,000 74,098,856 (153,181)(524,923)26,449,819 73,573,933 
Cost of revenues:
Franchise and regional developer cost of revenues2,141,945 6,219,646 (153,181)(524,923)1,988,764 5,694,723 
Total cost of revenues2,490,276 7,230,092 (153,181)(524,923)2,337,095 6,705,169 
Depreciation and amortization2,011,768 5,341,420 (231,844)(762,970)1,779,924 4,578,450 
General and administrative expenses17,796,806 49,703,451  2,197,082 17,796,806 51,900,533 
Total selling, general and administrative expenses23,347,861 65,711,371 (231,844)1,434,112 23,116,017 67,145,483 
Income (loss) from operations500,472 797,253 231,844 (1,434,112)732,316 (636,859)
Income before income tax expense (benefit)475,237 736,585 231,844 (1,434,112)707,081 (697,527)
Income tax expense (benefit)(15,876)106,527 (8,139)(667,503)(24,015)(560,976)
Net income (loss)$491,113 $630,058 $239,983 $(766,609)$731,096 $(136,551)
Earnings per share:
Basic earnings (loss) per share$0.03 $0.04 $0.02 $(0.05)$0.05 $(0.01)
Diluted earnings (loss) per share$0.03 $0.04 $0.02 $(0.05)$0.05 $(0.01)
The following table summarizes the effect of the errors on the Company’s condensed statements of stockholders' equity as of September 30, 2022, June 30, 2022, March 31, 2022 and December 31, 2021:
Accumulated
Deficit
Total The Joint Corp. Stockholder's Equity
Total Equity
Balances, December 31, 2021 (as previously reported)
$(13,519,142)$29,544,627 $29,569,627 
Adjustment due to cumulative error correction
739,057 739,057 739,057 
Balances, December 31, 2021 (as restated)$(12,780,085)$30,283,684 $30,308,684 
Balances, March 31, 2022 (as previously reported)
$(13,724,938)$29,709,412 $29,734,412 
Adjustment due to cumulative error correction
949,073 949,073 949,073 
Balances, March 31, 2022 (as restated)$(12,775,865)$30,658,485 $30,683,485 
Balances, June 30, 2022 (as previously reported)
$(13,380,196)$30,458,395 $30,483,395 
Adjustment due to cumulative error correction
(267,537)(267,537)(267,537)
Balances, June 30, 2022 (as restated)
$(13,647,733)$30,190,858 $30,215,858 
Balances, September 30, 2022 (as previously reported)$(12,889,083)$31,500,473 $31,525,473 
Adjustment due to cumulative error correction
(27,553)(27,553)(27,553)
Balances, September 30, 2022 (as restated)$(12,916,636)$31,472,920 $31,497,920 

The following table summarizes the effect of the errors on the Company’s condensed statement of cash flows for the nine-month period ended September 30, 2022:
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Nine Months Ended September 30,
2022
Nine Months Ended September 30,
2022
As Previously ReportedAdjustmentsAs Restated
Cash flows from operating activities:
Net income (loss)$630,058 (766,609)$(136,551)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization5,341,420 (762,970)4,578,450 
Deferred income taxes73,403 (1,035,162)(961,759)
Changes in operating assets and liabilities:
Upfront regional developer fees (977,841)(977,841)
Deferred revenue636,470 524,923 1,161,393 
Other liabilities360,790 367,659 728,449 
Net cash provided by (used in) operating activities5,682,415 (2,650,000)3,032,415 
Cash flows from investing activities:
Reacquisition and termination of regional developer rights(2,650,000)2,650,000  
Net cash used in investing activities(14,938,929)2,650,000 (12,288,929)
Decrease in cash(8,944,196) (8,944,196)
Nature of Operations
The Joint Corp., a Delaware corporation, was formed on March 10, 2010 for the principal purpose of franchising and developing chiropractic clinics, selling regional developer rights, supporting the operations of franchised chiropractic clinics and operating and managing corporate chiropractic clinics at locations throughout the United States of America. The franchising of chiropractic clinics is regulated by the Federal Trade Commission and various state authorities.
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The following table summarizes the number of clinics in operation under franchise agreements and as company-owned or managed clinics for the three and nine months ended September 30, 2023 and 2022:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Franchised clinics:2023202220232022
Clinics open at beginning of period756 662 712 610 
Opened during the period24 33 76 91 
Acquired during the period 1  1 
Sold during the period (4)(3)(8)
Closed during the period(2)(2)(7)(4)
Clinics in operation at the end of the period778 690 778 690 
Three Months Ended
September 30,
Nine Months Ended
September 30,
Company-owned or managed clinics:2023202220232022
Clinics open at beginning of period134 107 126 96 
Opened during the period2 5 9 12 
Acquired during the period 4 3 8 
Sold during the period (1) (1)
Closed during the period  (2) 
Clinics in operation at the end of the period136 115 136 115 
Total clinics in operation at the end of the period914 805 914 805 
Clinic licenses sold but not yet developed155 212 155 212 
Licenses for future clinics subject to executed letters of intent42 40 42 40 
Variable Interest Entities
Certain states prohibit the “corporate practice of chiropractic,” which restricts business corporations from practicing chiropractic care by exercising control over clinical decisions by chiropractic doctors. In states that prohibit the corporate practice of chiropractic, the Company typically enters into long-term management agreements with professional corporations (“PCs”) that are owned by licensed chiropractic doctors, which, in turn, employ or contract with doctors who provide professional chiropractic care in its clinics. Under these management agreements with PCs, the Company provides, on an exclusive basis, all non-clinical services of the chiropractic practice. The Company has entered into such management agreements with four PCs, including one in New Jersey, in connection with the opening of company-managed clinics in April 2023. If an entity is deemed to be the primary beneficiary of a VIE, the entity 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. In accordance with relevant accounting guidance, these PCs were determined to be VIEs as fees paid by the PCs to the Company as its management service provider are considered variable interests because 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; and (3) The service arrangement includes only terms, conditions or amounts that are customarily present in arrangements for similar services negotiated at arm’s length. Additionally, the Company has determined that it has the ability to direct the activities that most significantly impact the performance of these PCs and has an obligation to absorb losses or receive benefits which could potentially be significant to the PCs. Accordingly, the PCs are VIEs for which the Company is the primary beneficiary and are consolidated by the Company.
VIE total revenue and general administrative expenses for the three and nine-months ended September 30, 2023 and 2022 were as follows:
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Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
(as restated)(as restated)
Revenues$10,688,500 $9,150,103 $30,997,617 $25,433,407 
General and administrative expenses4,525,305 4,079,552 13,614,211 11,212,760 
The carrying amount of the VIEs’ assets and liabilities was immaterial as of September 30, 2023 and December 31, 2022, except for their payroll liability balances and amounts collected in advance for membership and wellness packages, which are recorded as deferred revenue. The VIEs’ payroll liability and deferred revenue from company managed clinics balances as of September 30, 2023 and December 31, 2022 were as follows:
September 30,
2023
December 31,
2022
Payroll liabilities$952,854 $586,960 
Deferred revenue from company managed clinics4,553,228 4,702,044 
Cash and Cash Equivalents
The Company considers all highly liquid instruments purchased with a maturity of three months or less at date of purchase to be cash equivalents. The Company continually monitors its positions with and credit quality of, the financial institutions with which it invests. As of the balance sheet date and periodically throughout the period, the Company has maintained balances in various operating accounts in excess of federally insured limits. The Company has invested substantially all its cash in short-term bank deposits. The Company had no cash equivalents as of September 30, 2023 and December 31, 2022.
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. While such cash balance is not legally segregated and restricted as to withdrawal or usage, the Company's accounting policy is to classify these funds as restricted cash.
Accounts Receivable
Accounts receivable primarily represents amounts due from franchisees for royalty fees. The Company records an allowance for credit losses as a reduction to its accounts receivables for amounts that the Company does not expect to recover. An allowance for credit losses is determined through assessments of collectability based on historical trends, the financial condition of the Company’s franchisees, including any known or anticipated bankruptcies and an evaluation of current economic conditions, as well as the Company’s expectations of conditions in the future. Actual losses ultimately could differ materially in the near term from the amounts estimated in determining the allowance. As of September 30, 2023 and December 31, 2022, the Company had an allowance for doubtful accounts of $0.
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, which is generally three to ten years. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or the estimated useful lives of the assets. Maintenance and repairs are charged to expense as incurred; major renewals and improvements are capitalized. When items of property or equipment are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gain or loss is included in income. The losses on disposed of or retired property or equipment were recorded in net loss on disposition or impairment of $68,200 and $217,810 for the three and nine-months ended September 30, 2023, respectively. The losses on disposed of or retired property or equipment were recorded in net loss on disposition or impairment of $23,554 and $119,303 for the three and nine-months ended September 30, 2022, respectively.
Leases
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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 clinics in the portfolio. The Company recognizes a right-of-use ("ROU") asset and lease liability for all leases. Certain leases include one or more renewal options, generally for the same period as the initial term of the lease. The exercise of lease renewal options is generally at the Company’s sole discretion and, as such, the Company typically determines that exercise of these renewal options is not reasonably certain. As a result, the Company does not include the renewal option period in the expected lease term and the associated lease payments are not included in the measurement of the right-of-use asset and lease liability. 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. Variable lease payments, such as percentage rentals based on location sales, periodic adjustments for inflation, reimbursement of real estate taxes, any variable common area maintenance and any other variable costs associated with the leased property are expensed as incurred and are also included in general and administrative expenses on the accompanying consolidated income statements.
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. The Company records an impairment loss when the carrying amount of the asset is not recoverable and exceeds its fair value. During the three and nine months ended September 30, 2023, intangible assets related to a clinic planned for closure with a total carrying amount of approximately $80,000 was written down to zero. As a result, the Company recorded a noncash impairment loss of approximately $80,000 during the three and nine months ended September 30, 2023. During the three and nine months ended September 30, 2022, an operating lease ROU asset related to a closed clinic with a total carrying amount of approximately $250,000 was written down to zero. As a result, the Company recorded a noncash impairment loss of approximately $250,000 during the three and nine months ended September 30, 2022.
In connection with the planned sale of 16 company-owned and managed clinics, the Company reclassified $2,153,454 of property and equipment and $2,204,293 of ROU assets to Assets held for sale and reclassified $2,585,642 of ROU liability and $386,291 of deferred revenue from company clinics to Liabilities to be disposed of, in the consolidated balance sheet as of September 30, 2023. Long-lived assets that meet the held for sale criteria are reported at the lower of their carrying value or fair value, less estimated costs to sell. As a result, the Company recorded a valuation allowance of $756,228 and $816,429 to adjust the carrying value of the disposal group to fair value less cost to sell during the three and nine months ended September 30, 2023, respectively.
Revenue Recognition
The Company generates revenue primarily through its company-owned and managed clinics and through royalties, franchise fees, advertising fund contributions, IT related income and computer software fees from its franchisees.
Revenues from Company-Owned or Managed Clinics. The Company earns revenues from clinics that it owns and operates or manages throughout the United States. Revenues are recognized when services are performed. The Company offers a variety of membership and wellness packages, which feature discounted pricing as compared with its single-visit pricing. Amounts collected in advance for membership and wellness packages are recorded as deferred revenue and recognized when the service is performed. Any unused visits associated with monthly memberships are recognized on a month-to-month basis. The Company recognizes a contract liability (or a deferred revenue liability) related to the prepaid treatment plans for which the Company has an ongoing performance obligation. The Company derecognizes this contract liability and recognizes revenue, as the patient consumes his or her visits related to the package and the Company transfers its services. If the Company determines that it is not subject to unclaimed property laws for the portion of wellness package that it does not expect to be redeemed (referred to as “breakage”), then it recognizes breakage revenue in proportion to the pattern of exercised rights by the patient.
Royalties and Advertising Fund Revenue. The Company collects royalties from its franchisees, 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,
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including franchisee contributions to advertising funds, are calculated as a percentage of clinic sales over the term of the franchise agreement. The revenue accounting standard provides an exception for the recognition of sales-based royalties promised in exchange for a license (which generally requires a reporting entity to estimate the amount of variable consideration to which it will be entitled in the transaction price). 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 therefore, such royalties 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. Renewal franchise fees, as well as transfer fees, are also recognized as revenue on a straight-line basis over the term of the respective franchise agreement.
Software Fees.  The Company collects a monthly fee from its franchisees for use of its proprietary chiropractic software, computer support and internet services support. These fees are recognized ratably on a straight-line basis over the term of the respective franchise agreement.
Capitalized Sales Commissions: Sale commissions earned by the regional developers and the Company's sales force are considered incremental and recoverable costs of obtaining a franchise agreement with a franchisee. These costs are deferred and then amortized as the respective franchise fees are recognized ratably on a straight-line basis over the term of the franchise agreement.
Regional Developer Fees. The Company has a regional developer program where regional developers are granted an exclusive geographical territory and commit to a minimum development obligation within that defined territory. Regional developer fees paid to the Company are non-refundable and are amortized on a straight-line bases over the term of the regional developer agreement and recognized as a decrease to franchise cost of revenues.
In addition, regional developers receive fees that 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. Initial 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. This 3% fee 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 did not enter into any new regional developer agreements during the nine months ended September 30, 2023 and 2022.
Advertising Costs
Advertising costs are advertising and marketing expenses incurred by the Company, primarily through advertising funds. The Company expenses production costs of commercial advertising upon first airing and expenses the costs of communicating the advertising in the period in which the advertising occurs. Advertising expenses were $1,796,865 and $5,375,156 for the three and nine months ended September 30, 2023, respectively. Advertising expenses were $1,444,783 and $3,763,351 for the three and nine months ended September 30, 2022, respectively.
Income Taxes
Income tax expense during interim periods is based on applying an estimated annual effective income tax rate to year-to-date pre-tax income, plus any significant unusual or infrequently occurring items which are recorded in the interim period. The computation of the annual estimated effective tax rate at each interim period requires certain estimates and significant judgment, including, but not limited to, the expected pre-tax income for the year and permanent differences. The accounting estimates used to compute the provision for income taxes may change as new events occur, more experience is obtained, additional information becomes known or as the tax environment changes.
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Earnings (Loss) per Common Share
Basic earnings per common share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted earnings per common share is computed by giving effect to all potentially dilutive common shares, including restricted stock and stock options.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Net (loss) income$(716,273)$731,096 $1,289,402 $(136,551)
Weighted average common shares outstanding - basic14,790,663 14,512,856 14,666,222 14,474,323 
Effect of dilutive securities:
Unvested restricted stock and stock options225,290 316,773 265,252 644,941 
Weighted average common shares outstanding - diluted15,015,953 14,829,629 14,931,474 15,119,264 
Basic earnings (loss) per share$(0.05)$0.05 $0.09 $(0.01)
Diluted earnings (loss) per share$(0.05)$0.05 $0.09 $(0.01)
The following common stock equivalents were excluded from the computation of diluted earnings per share for the periods presented because including them would have been antidilutive:
Three Months Ended
September 30,
Nine Months Ended
September 30,
Weighted average dilutive securities:2023202220232022
Restricted stocks    
Stock options121,699 77,485 89,883 41,293 
Stock-Based Compensation
The Company accounts for share-based payments by recognizing compensation expense based upon the estimated fair value of the awards on the date of grant. The Company determines the estimated grant-date fair value of restricted shares using the closing price on the date of the grant and the grant-date fair value of stock options using the Black-Scholes-Merton model. In order to calculate the fair value of the options, certain assumptions are made regarding the components of the model, including risk-free interest rate, volatility, expected dividend yield and expected option life. Changes to the assumptions could cause significant adjustments to the valuation. The Company recognizes compensation costs ratably over the period of service using the straight-line method. Forfeitures are estimated based on historical and forecasted turnover, which is approximately 5%.
Loss Contingencies
ASC Topic 450 governs the disclosure of loss contingencies and accrual of loss contingencies in respect of litigation and other claims. The Company records an accrual for a potential loss when it is probable that a loss will occur and the amount of the loss can be reasonably estimated. When the reasonable estimate of the potential loss is within a range of amounts, the minimum of the range of potential loss is accrued, unless a higher amount within the range is a better estimate than any other amount within the range. Moreover, even if an accrual is not required, the Company provides additional disclosure related to litigation and other claims when it is reasonably possible (i.e., more than remote) that the outcomes of such litigation and other claims include potential material adverse impacts on the Company. Legal costs to be incurred in connection with a loss contingency are expensed as such costs are incurred.
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 credit losses,
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loss contingencies, share-based compensations, useful lives and realizability of long-lived assets, deferred revenue and revenue recognition related to breakage, deferred franchise costs, calculation of ROU assets and liabilities related to leases, realizability of deferred tax assets, impairment of goodwill, intangible assets, other long-lived assets and purchase price allocations and related valuations.
Recent Accounting Pronouncements Adopted and Not Yet Adopted

The Company reviewed 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.
Note 2: 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 that 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 41 states, the District of Columbia and Puerto Rico. 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. The revenue accounting standard provides an exception for the recognition of sales-based royalties promised in exchange for a license (which otherwise requires a reporting entity to estimate the amount of variable consideration to which it will be entitled in the transaction price).
The Company recognizes the primary components of the transaction price as follows:
Initial and renewal franchise fees, as well as transfer fees, are recognized as revenue ratably on a straight-line basis over the term of the respective franchise agreement, commencing with the execution of the franchise, renewal or transfer agreement. As these fees are typically received in cash at or near the beginning of the contract 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.
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Capitalized Sales Commissions
Sales commissions earned by the regional developers and the Company’s sales force are considered incremental and recoverable costs of obtaining a franchise agreement with a franchisee. These costs are deferred and then amortized as the respective franchise fees are recognized ratably on a straight-line basis over the term of the franchise agreement.
Disaggregation of Revenue
The Company believes that the captions contained on the condensed consolidated income statements appropriately reflect the disaggregation of its revenue by major type for the three and nine months ended September 30, 2023 and 2022. Other revenues primarily consist of preferred vendor royalties associated with franchisees' credit card transactions.
The following table shows the Company's revenues disaggregated according to the timing of transfer of services:
Three Months Ended
September 30, 2023
Nine Months Ended
September 30, 2023
2023202220232022
(as restated)(as restated)
Revenue recognized at a point in time$27,418,343 $24,697,661 $81,155,737 $68,436,945 
Revenue recognized over time2,055,606 1,752,158 5,926,216 5,136,988 
Total Revenues$29,473,949 $26,449,819 $87,081,953 $73,573,933 
Rollforward of Contract Liabilities and Contract Assets
Changes in the Company's contract liability for deferred revenue from company clinics during the nine months ended September 30, 2023 were as follows:
Deferred Revenue
from company clinics
Balance at December 31, 2022$7,471,549 
Revenue recognized that was included in the contract liability at the beginning of the year(5,959,308)
Net increase during the nine months ended September 30, 20235,026,472 
Balance at September 30, 2023$6,538,713 
Changes in the Company's contract liability for deferred franchise fees during the nine months ended September 30, 2023 were as follows:
Deferred Revenue
short and long-term
Balance at December 31, 2022$16,629,735 
Revenue recognized that was included in the contract liability at the beginning of the year(2,042,823)
Net increase during the nine months ended September 30, 20231,906,196 
Balance at September 30, 2023$16,493,108 
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The Company's deferred franchise and development costs represent capitalized sales commissions. Changes during the nine months ended September 30, 2023 were as follows:
Deferred Franchise and Development Costs
short and long-term
Balance at December 31, 2022$6,761,738 
Cost of revenue recognized that was included in the contract asset at the beginning of the year(863,619)
Net increase during the nine months ended September 30, 2022566,339 
Balance at September 30, 2023$6,464,458 
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 September 30, 2023:
Contract liabilities expected to be recognized inAmount
2023 (remainder)$643,492 
20242,495,683 
20252,358,322 
20262,264,085 
20272,190,960 
Thereafter6,540,566 
Total$16,493,108 

Note 3: Acquisitions and Assets Held for Sale
2023 Acquisition
On May 22, 2023, the Company entered into an Asset and Franchise Purchase Agreement under which the Company repurchased from the sellers three operating franchised clinics in California (the “CA Clinics Purchase”). As of the acquisition date, the Company operates the franchises as company-managed clinics. The total purchase price for the transaction was $1,188,764 to the seller (of which $109,767 is to be paid in the fourth quarter of 2023), less $28,997 of net deferred revenue, resulting in total purchase consideration of $1,159,767.

Based on the terms of the purchase agreement, the CA Clinics Purchase has been treated as an asset purchase under GAAP as there were no outputs or processes to generate outputs acquired as part of these transactions. Under an asset purchase, assets are recognized based on their cost to the acquiring entity. Cost is allocated to the individual assets acquired or liabilities assumed based on their relative fair values and does not give rise to goodwill.
The allocation of the total purchase price of the CA Clinics Purchase was as follows:
Property and equipment$313,995 
Operating lease right-of-use asset317,662 
Intangible assets1,004,513 
Total assets acquired1,636,170 
Deferred revenue(158,365)
Operating lease liability - current portion(118,081)
Operating lease liability - net of current portion(199,957)
Net purchase consideration$1,159,767 
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Intangible assets in the table above primarily consist of reacquired franchise rights of $0.7 million amortized over their estimated useful lives of six to seven years, customer relationships of $0.1 million amortized over an estimated useful life of two years and assembled workforce of $0.2 million amortized over an estimated useful life of two years.
2022 Acquisitions

On May 19, 2022, the Company entered into an Asset and Franchise Purchase Agreement under which the Company repurchased from the seller four operating franchises in Arizona (the "May 19th Acquisition"). The Company operates the franchises as company-owned clinics. The total purchase price for the transaction was $5,761,256, less $70,484 of net deferred revenue, resulting in total purchase consideration of $5,690,772.
On July 5, 2022, the Company entered into an Asset and Franchise Purchase Agreement under which the Company repurchased from the seller one operating franchise in Arizona (collectively, including the May 19th Acquisition, the “AZ Clinics Purchase”). The Company operates the franchise as a company-owned clinic. The total purchase price for the transaction was $1,205,667, less $13,241 of net deferred revenue, resulting in total purchase consideration of $1,192,426.
Based on the terms of the purchase agreements, the AZ Clinics Purchase has been treated as a business combination under U.S. GAAP using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price over the estimated fair values of the net assets acquired is recorded as goodwill.
The allocation of the total purchase price of the AZ Clinics Purchase was as follows:
Property and equipment$241,511 
Operating lease right-of-use asset912,937 
Intangible assets3,689,100 
Total identifiable assets acquired4,843,548 
Goodwill3,408,205 
Deferred revenue (455,317)
Operating lease liability - current portion (128,516)