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What changed in JOINT Corp's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of JOINT Corp's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+282 added−286 removedSource: 10-K (2025-03-14) vs 10-K (2024-03-08)

Top changes in JOINT Corp's 2024 10-K

282 paragraphs added · 286 removed · 231 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

83 edited+14 added−13 removed119 unchanged
Biggest changeIn February 2020, the State of Washington Chiropractic Quality Assurance Commission delivered notices that it was investigating complaints made against three chiropractors who own clinics, or are (or were) employed by clinics, in Washington. These clinics 8 Table of Contents receive management services from our franchisees that are not owned by chiropractors.
Biggest changeWe and our franchisees that are not owned by chiropractors enter into management services agreements with PCs to provide the PCs on an exclusive basis with all non-clinical administrative services needed by the chiropractic practice. 7 Table of Contents In February 2020, the State of Washington Chiropractic Quality Assurance Commission delivered notices that it was investigating complaints made against three chiropractors who own clinics, or are (or were) employed by clinics, in Washington.
While we have determined that we are not a “covered entity” and thus do not currently fall under the purview of HPAA, we may have access to sensitive data regarding our patients, and we recognize that some of the standards established by HIPAA represent “best practices” for our business.
While we have determined that we are not a “covered entity” and thus do not currently fall under the purview of HIPAA, we may have access to sensitive data regarding our patients, and we recognize that some of the standards established by HIPAA represent “best practices” for our business.
Courts addressing this issue have come to differing conclusions, and while it remains uncertain as to how the joint employer issue will finally be resolved in California, potential new federal laws or regulations may ultimately be controlling on this issue. 11 Table of Contents AB-5 has been the subject of widespread national discussion. Other states are considering similar approaches.
Courts addressing this issue have come to differing conclusions, and while it remains uncertain as to how the joint employer issue will finally be resolved in California, potential new federal laws or regulations may ultimately be controlling on this issue. 10 Table of Contents AB-5 has been the subject of widespread national discussion. Other states are considering similar approaches.
In addition, we continue to expand and strengthen our relationship with chiropractic colleges to increase engagement with students and to increase the applicant flow of qualified candidates. 12 Table of Contents In order to ensure that we are meeting our human capital objectives, we will continue to utilize engagement surveys to understand the perception of our brand as an employer and the effectiveness of our employee and compensation programs and to learn where we can improve across the company.
In addition, we continue to expand and strengthen our relationship with chiropractic colleges to increase engagement with students and to increase the applicant flow of qualified candidates. 11 Table of Contents In order to ensure that we are meeting our human capital objectives, we will continue to utilize engagement surveys to understand the perception of our brand as an employer and the effectiveness of our employee and compensation programs and to learn where we can improve across the company.
Additionally, an August 2015 decision by the NLRB held that Browning-Ferris Industries was a “joint employer” for purposes of collective bargaining under the National Labor Relations Act (the "NLRA") and, thus, obligated to negotiate with the Teamsters union over workers supplied by a contract staffing firm within one of its recycling plants.
Additionally, an August 2015 decision by the NLRB held that Browning-Ferris Industries was a “joint employer” for purposes of collective bargaining under the National Labor Relations Act (the “NLRA”) and, thus, obligated to negotiate with the Teamsters union over workers supplied by a contract staffing firm within one of its recycling plants.
We intend to continue to drive awareness of our brand by continuing to locate clinics mainly at retail centers and convenience points, displaying prominent signage and employing consistent, proven and targeted marketing tools. We offer our patients the flexibility to visit our clinics without an appointment where they will receive 4 Table of Contents prompt attention.
We intend to continue to drive awareness of our brand by continuing to locate clinics mainly at retail centers and convenience points, displaying prominent signage and employing consistent, proven and targeted marketing tools. We offer our patients the flexibility to visit our clinics without an appointment where they will receive 3 Table of Contents prompt attention.
Even when entities are not covered by HIPAA, the Federal Trade Commission (the "FTC") has taken the position that a failure to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of the Federal Trade Commission Act.
Even when entities are not covered by HIPAA, the Federal Trade Commission (the “FTC”) has taken the position that a failure to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of the Federal Trade Commission Act.
Chiropractic care is increasingly recognized as an effective treatment for pain and potentially for a variety of other conditions. The American College of Physicians (the "ACP") now recommends non-drug therapy such as spinal manipulation as a first line of treatment for patients with chronic low-back pain.
Chiropractic care is increasingly recognized as an effective treatment for pain and potentially for a variety of other conditions. The American College of Physicians (the “ACP”) now recommends non-drug therapy such as spinal manipulation as a first line of treatment for patients with chronic low-back pain.
On November 14, 2014, we completed our initial public offering (the "IPO") of 3,000,000 shares of common stock at an initial price to the public of $6.50 per share, and we received net proceeds of approximately $17.1 million.
On November 14, 2014, we completed our initial public offering (the “IPO”) of 3,000,000 shares of common stock at an initial price to the public of $6.50 per share, and we received net proceeds of approximately $17.1 million.
The following table sets forth our average price per adjustment as of December 31, 2023 for patients who pay by single adjustment plans, multiple adjustment packages and multiple adjustment membership plans. Our price per adjustment as of December 31, 2023 averaged approximately $36 across all three groups.
The following table sets forth our average price per adjustment as of December 31, 2024 for patients who pay by single adjustment plans, multiple adjustment packages and multiple adjustment membership plans. Our price per adjustment as of December 31, 2024 averaged approximately $36 across all three groups.
State Regulations on Corporate Practice of Chiropractic In states that regulate the “corporate practice of chiropractic,” chiropractic services are provided solely by legal entities organized under state laws as professional corporations ("PCs") or their equivalents.
State Regulations on Corporate Practice of Chiropractic In states that regulate the “corporate practice of chiropractic,” chiropractic services are provided solely by legal entities organized under state laws as professional corporations (“PCs”) or their equivalents.
As of January 1, 2023, the minimum wage increased in a number of states, the District of Columbia and local municipalities, with many of these wage increases triggered automatically by increases in the cost of living due to high inflation.
As of January 1, 2024, the minimum wage increased in a number of states, the District of Columbia and local municipalities, with many of these wage increases triggered automatically by increases in the cost of living due to high inflation.
A July 2014 decision by the United States National Labor Relations Board (the "NLRB") held that McDonald’s Corporation could be held liable as a “joint employer” for labor and wage violations by its franchisees under the FLSA.
A July 2014 decision by the United States National Labor Relations Board (the “NLRB”) held that McDonald’s Corporation could be held liable as a “joint employer” for labor and wage violations by its franchisees under the FLSA.
The imposition of any requirement that we or our franchisees provide health insurance benefits to our or their employees that are more extensive than the health insurance benefits that we currently provide to our employees or that franchisees may or may not provide, or the imposition of additional employer paid employment taxes on income earned by our employees, could have an adverse effect on our results of operations and financial position.
The imposition of any requirement that we or our franchisees provide health insurance benefits to our or their employees that are more extensive than the health insurance benefits that we currently provide to our employees or that franchisees may or may not provide, or the imposition of additional employer paid employment taxes on income earned by our employees, could have an adverse effect on our results of 9 Table of Contents operations and financial position.
Comp Sales include the sales from both company-owned or managed clinics and franchised clinics that in each case have been open at least 13 full months and exclude any clinics that have closed.
Comp Sales includes the sales from both company-owned or managed clinics and franchised clinics that in each case have been open at least 13 full months and exclude any clinics that have closed.
We are obligated under two additional leases for facilities in which we have ceased clinic operations. Our corporate headquarters are located at 16767 N. Perimeter Center Drive, Suite 110, Scottsdale, Arizona 85260. The term of our lease for this location expires on December 31, 2025.
We are obligated under one additional lease for facilities in which we have ceased clinic operations. Our corporate headquarters are located at 16767 N. Perimeter Center Drive, Suite 110, Scottsdale, Arizona 85260. The term of our lease for this location expires on December 31, 2025.
Accordingly, our long-term growth tactics include: • the continued growth of system sales through the increased attraction and retention of patients; 6 Table of Contents • the increase in royalty income through the acceleration of the opening of clinics already in development and the sale of additional franchises; and • improving operational margins and expanding additional revenue streams within our clinics.
Accordingly, our long-term growth tactics include: • the continued growth of system sales through the increased attraction and retention of patients; • the increase in royalty income through the acceleration of the opening of clinics already in development and the sale of additional franchises; and • improving operational margins and expanding additional revenue streams within our clinics.
With the over-allotment option exercise, we received aggregate net proceeds of approximately $13.3 million. We deliver convenient, appointment-free chiropractic adjustments in an inviting, open bay environment at prices that are approximately 45% lower than the average industry cost for comparable procedures offered by traditional chiropractors, according to 2023 industry data from Chiropractic Economics.
With the over-allotment option exercise, we received aggregate net proceeds of approximately $13.3 million. We deliver convenient, appointment-free chiropractic adjustments in an inviting, open bay environment at prices that are approximately 52% lower than the average industry cost for comparable procedures offered by traditional chiropractors, according to 2024 industry data from Chiropractic Economics.
According to the November 2023 IBIS market research report, the Top 50 largest industry practices accounted for only 4% of total industry revenue. We believe these characteristics are evidence of an underserved market with potential consumer demand that is favorable for an efficient, low-cost, consumer-oriented provider. Most chiropractic practices are set up to accept and to process insurance-based reimbursement.
According to the September 2024 IBIS market research report, the Top 50 largest industry practices accounted for only 4% of total industry revenue. We believe these characteristics are evidence of an underserved market with potential consumer demand that is favorable for an efficient, low-cost, consumer-oriented provider. Most chiropractic practices are set up to accept and to process insurance-based reimbursement.
We can do this because our clinics do not have the expenses of performing certain diagnostic procedures and processing reimbursement claims. Our model allows us to pass these savings on to our patients. According to Chiropractic Economics, in 2022, the average fee for a chiropractic treatment involving spinal manipulation in a cash-based practice in the United States is approximately $65.
We can do this because our clinics do not have the expenses of performing certain diagnostic procedures and processing reimbursement claims. Our model allows us to pass these savings on to our patients. According to Chiropractic Economics, in 2024, the average fee for a chiropractic treatment involving spinal manipulation in a cash-based practice in the United States is approximately $76.
Other Federal, State and Local Regulation We are subject to varied federal regulations affecting the operation of our business. We are subject to the U.S. Fair Labor Standards Act (the "FLSA"), the U.S.
Other Federal, State and Local Regulation We are subject to varied federal regulations affecting the operation of our business. We are subject to the U.S. Fair Labor Standards Act (the “FLSA”), the U.S.
In an effort to effectively reverse the McDonald’s Corporation decision, in 2020, the Department of Labor (the "DOL") issued a final rule narrowing the meaning of “joint employer” in the FLSA.
In an effort to effectively reverse the McDonald’s Corporation decision, in 2020, the Department of Labor (the “DOL”) issued a final rule narrowing the meaning of “joint employer” in the FLSA.
Regulatory Environment HIPAA and State Privacy and Breach Notification Rules Numerous federal and state laws, regulations, standards and other legal obligations govern the collection, dissemination, use, access to, confidentiality, security and processing of personal information, including cybersecurity breach notification and targeted advertising.
Regulatory Environment HIPAA and State Privacy and Breach Notification Rules Numerous federal and state laws, regulations, standards and other legal obligations govern the collection, dissemination, use, access to, confidentiality, security and processing of personal information, including cybersecurity breach notification and targeted 6 Table of Contents advertising.
The SEC’s website, www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 14 Table of Contents
The SEC’s website, www.sec.gov, contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 13 Table of Contents
After spending four years as a chiropractor in one of our clinics, he took the role of Senior Doctor of Chiropractic for 13 of our clinics and, subsequently, was elevated to a director position at the corporate office.
After spending four years as a chiropractor in one of the clinics, he took the role of Senior Doctor of Chiropractic for 13 company-owned clinics and, subsequently, he was elevated to a director position at the corporate office.
These flexible plans are designed to attract patients and encourage repeat visits and routine usage as part of an overall health and wellness program. As of December 31, 2023, we had 935 franchised or company-owned or managed clinics in operation in 41 states and the District of Columbia.
These flexible plans are designed to attract patients and encourage repeat visits and routine usage as part of an overall health and wellness program. As of December 31, 2024, we had 967 franchised or company-owned or managed clinics in operation in 41 states and the District of Columbia.
For example, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) imposes extensive privacy and security requirements governing the transmission, use and disclosure of health information by covered entities in the healthcare 7 Table of Contents industry.
For example, the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) imposes extensive privacy and security requirements governing the transmission, use and disclosure of health information by covered entities in the healthcare industry.
The map below shows the states in which we or our franchisees manage or operate clinics and the number of clinics open in each state or district as of December 31, 2023. 2 Table of Contents Our retail locations have been selected to be visible, accessible and convenient.
The map below shows the states in which we or our franchisees manage or operate clinics and the number of clinics open in each state or district as of December 31, 2024. 1 Table of Contents Our retail locations have been selected to be visible, accessible and convenient.
California adopted Assembly Bill 5 ("AB-5"), which took effect on January 1, 2020. This legislation codifies the standard established in a California Supreme Court case (Dynamex Operations West v.
California adopted Assembly Bill 5 (“AB-5”), which took effect on January 1, 2020. This legislation codifies the standard established in a California Supreme Court case (Dynamex Operations West v.
In conjunction with our scale, we have been able to achieve broad geographic diversification across the United States with clinics in 41 states and the District of Columbia as of December 31, 2023.
In conjunction with our scale, we have been able to achieve broad geographic diversification across the United States with clinics in 41 states and the District of Columbia as of December 2024.
The Joint Service Offering Single Visit Package(s) Membership(s) Price per adjustment $45 $19—$35 $17—$22 Proven track record of opening clinics and growing revenue at the clinic level. We have grown our clinic revenue base consistently.
The Joint Service Offering Single Visit Package(s) Membership(s) Price per adjustment $55 $21—$35 $17—$22 Proven track record of opening clinics and growing revenue at the clinic level. We have grown our clinic revenue base consistently.
While there is significant variation in results in our system, and the results of our top-performing clinics are not representative of our system overall, we believe it is worth noting that in January 2012, the highest-performing clinic in our system was a franchised clinic which had monthly sales of approximately $45,000, and in December 2023, the highest performing clinic in our system was a franchised clinic which had monthly sales of approximately $180,000.
While there is significant variation in results in our system, and the results of our top-performing clinics are not representative of our system overall, we believe it is worth noting that in January 2012, the highest-performing clinic in our system was a franchised clinic which had monthly sales of approximately $45,000, and in December 2024, the highest performing clinic in our system was a franchised clinic which had monthly sales of approximately $183,371.
Our geographic reach represents a competitive advantage, as we have demonstrated success across various markets, and we are able to remain competitive nationally when extraordinary events heavily impact specific markets. Strong and proven management team . Our strategic vision is directed by our president and chief executive officer, Peter D.
Our geographic reach represents a competitive advantage, as we have demonstrated success across various markets, and we are able to remain competitive nationally when extraordinary events heavily impact specific markets. Strong and proven management team . Our strategic vision is directed by our President and Chief Executive Officer, Sanjiv Razdan. Mr.
As the leader in this vertical, and as one of few players of scale, we believe that we occupy an advantageous position in an otherwise highly fragmented market.
As the leader in this vertical, and as one of few players of scale, we believe that we occupy an 4 Table of Contents advantageous position in an otherwise highly fragmented market.
We attracted an average of 1,021 new patients per clinic (for all clinics open for the full 12 months of 2023) during the year ended December 31, 2023, as compared to the most recent chiropractic industry average of 380 new patients per year for traditional insurance-based non-multidisciplinary or integrated practices, according to a 2023 Chiropractic Economics survey (published in June of 2023).
We attracted an average of 992 new patients per clinic (for all clinics open for the full 12 months of 2024) during the year ended December 31, 2024, as compared to the most recent chiropractic industry average of 468 new patients per year for traditional insurance-based non-multidisciplinary or integrated practices, according to a 2024 Chiropractic Economics survey (published in June of 2023).
By comparison, our average fee as of December 31, 2023 was approximately $36, approximately 45% lower than the industry average price. We believe our pricing and service offering structure helps us to generate higher usage.
By comparison, our average fee as of December 31, 2024 was approximately $36, approximately 52% lower than the industry average price. We believe our pricing and service offering structure helps us to generate higher usage.
Our distributors and suppliers also may be affected by higher minimum wage and benefit standards, which could result in higher costs for goods and services supplied to us. Joint Employer Rules 10 Table of Contents Background.
Our distributors and suppliers also may be affected by higher minimum wage and benefit standards, which could result in higher costs for goods and services supplied to us. Joint Employer Rules Background.
Workforce As of December 31, 2023, we and our consolidated VIEs employed approximately 444 persons on a full-time basis and approximately 350 persons on a part-time basis. None of our employees are members of unions or participate in other collective bargaining arrangements. Recruitment We believe our employees are among our most valuable resources and are critical to our continued success.
Workforce As of December 31, 2024, we and our consolidated VIEs employed approximately 443 persons on a full-time basis and approximately 293 persons on a part-time basis. None of our employees are members of unions or participate in other collective bargaining arrangements. Recruitment We believe our employees are among our most valuable resources and are critical to our continued success.
Our doctors continually refine their skills, as our clinics see an average of 305 patient visits per week (for clinics open for the full 12 months of 2023), as compared to the most recent chiropractic industry average of 155 patients per week for non-multidisciplinary or integrated practices, according to the same 2023 Chiropractic Economics survey referred to above.
Our doctors continually refine their skills, as our clinics see an average of 301 patient visits per week (for clinics open for the full 12 months of 2024), as compared to the most recent chiropractic industry average of 113 patients per week for non-multidisciplinary or integrated practices, according to the same 2024 Chiropractic Economics survey referred to above.
To elevate our brand equity and drive awareness, we will strive to increase our active patient count by improving the intake process, by testing setting up appointments for the initial visits only, and by optimizing local clinic marketing.
To elevate our brand equity and drive awareness, we will strive to increase our active patient count by improving the intake process, by expanding the roll out of setting up appointments for the initial visits only, and by optimizing local clinic marketing.
As of December 31, 2023, our franchisees owned or managed 800 clinics, and we owned or managed 135 clinics. Our future growth strategy will focus on accelerating the development of our franchise base through the sale of additional franchises and through the continued support of our robust regional developer network.
As of December 31, 2024, our franchisees owned or managed 842 clinics, and we owned or managed 125 clinics. Our future growth strategy will focus on accelerating the development of our franchise base through the sale of additional franchises and through the continued support of our robust regional developer network.
As of December 31, 2023, we had 935 franchised or company-owned or managed clinics in operation in 41 states and the District of Columbia. All of our locations are leased. Intellectual Property Trademarks, Trade Names and Service Marks Our registered trademarks include the following in the United States: 13 Table of Contents Trademark Registration Date Registration Number DON'T DO PAIN.
As of December 31, 2024, we had 967 franchised or company-owned or managed clinics in operation in 41 states and the District of Columbia. All of our locations are leased. Intellectual Property Trademarks, Trade Names and Service Marks Our registered trademarks include the following in the United States: Trademark Registration Date Registration Number DON'T DO PAIN. DO YOU.
Quality, Empathetic Service . Across our system we have a community of more than 2,591 fully licensed chiropractic doctors, who performed approximately 13.6 million adjustments in 2023 alone. Our doctors provide personal and intuitive patient care focused on pain relief and ongoing wellness to promote healthy, active lifestyles.
Quality, empathetic service . Across our system we have a community of more than 2,662 fully licensed chiropractic doctors, who performed approximately 14.7 million adjustments in 2024 alone. Our doctors provide personal and intuitive patient care focused on pain relief and ongoing wellness to promote healthy, active lifestyles.
We plan to lengthen the time patients stay engaged with The Joint and to reactivate lapsed patients by leveraging new content, automated messaging, and enticing promotions. Additionally, we intend to employ new media campaigns to increase our new patient leads. Selling Additional Franchises We will continue to sell franchises.
We plan to lengthen the time patients stay engaged with The Joint and to reactivate lapsed patients by leveraging new content, automated messaging, and enticing promotions. Additionally, we intend to employ new media campaigns to increase our new patient leads.
Since acquiring the predecessor to our company in March 2010, we have grown our enterprise from eight to 935 clinics in operation as of December 31, 2023, with an additional 132 franchise licenses sold but not yet developed across our network, and 40 letters of intent for 40 future clinic licenses.
Since acquiring the predecessor to our company in March 2010, we have grown our enterprise from eight to 967 clinics in operation as of December 31, 2024, with an additional 92 franchise licenses sold but not yet developed across our network, and 53 letters of intent for 53 future clinic licenses.
Opening Clinics in Development In addition to our 935 operating clinics as of December 31, 2023, we have granted franchises, either directly or with our regional developers' support, for an additional 132 clinics that we believe will be developed in the future and executed letters-of-intent for 40 future clinic licenses.
Opening Clinics in Development In addition to our 967 operating clinics as of December 31, 2024, we have granted franchises, either directly or with our regional developers’ support, for an additional 92 clinics that we believe will be developed in the future and executed letters-of-intent for 53 future clinic licenses.
We are operating under exemptions from registration in several states based on our qualifications for exemption as set forth in those states’ laws. As of December 31, 2023, we were registered to sell franchises in every state (where registrations are required) and could sell franchises in all 50 states.
We are operating under exemptions from registration in several states based on our qualifications for exemption as set forth in those states’ laws. As of December 31, 2024, we were registered to sell franchises in every state (where registrations are required) except for Wyoming, North and South Dakota and could sell franchises in 47 of all 50 states.
According to a report issued by IBIS World Chiropractors Market Research in November 2023, expenditures for chiropractic services in the U.S. are approximately $20.5 billion annually. The United States Bureau of Labor Statistics expects employment of chiropractors to grow nine percent from 2022 to 2032, much faster than the average for all occupations.
According to a report issued by IBIS World Chiropractors Market Research in September 2024, expenditures for chiropractic services in the U.S. are approximately $20.6 billion annually. The United States Bureau of Labor Statistics expects employment of chiropractors to grow ten percent from 2023 to 2033, much faster than the average for all occupations.
Market leading position with significant nationwide scale . We are the largest chiropractic franchisor in the United States with over 935 clinics operating across the United States. Our chiropractic brand is approximately six times larger than the next largest chiropractic 5 Table of Contents chain, as of December 31, 2023.
Market leading position with significant nationwide scale . We are the largest chiropractic franchisor in the United States with over 967 clinics operating across the United States. Our chiropractic brand is approximately six times larger than the next largest chiropractic chain, as of December 2024.
We seek to be the leading provider of chiropractic care in the markets we serve and to become the most recognized brand in our industry. We delivered over 13.6 million patient visits in 2023, up from 12.2 million patient visits in 2022, generating over $488.0 million and $435 million of system-wide sales, respectively, across our highly franchised network.
We seek to be the leading provider of chiropractic care in the markets we serve and to become the most recognized brand in our industry. We delivered over 14.7 million patient visits in 2024, up from 13.6 million patient visits in 2023, generating over $530.3 million and $488 million of system-wide sales, respectively, across our highly franchised network.
DO YOU. August 2022 6810062 THE JOINT CHIROPRACTIC December 2016 5095943 THE JOINT CHIROPRACTIC (STYLIZED-BLACK BOX) April 2021 6331815 THE JOINT CHIROPRACTIC (STYLIZED-HORIZ LOGO) April 2021 6331917 THE JOINT CHIROPRACTIC (STYLIZED-STCKD LOGO) April 2021 6331918 YOU'RE BACK, BABY.
August 2022 6810062 THE JOINT CHIROPRACTIC December 2016 5095943 THE JOINT CHIROPRACTIC (STYLIZED-BLACK BOX) April 2021 6331815 12 Table of Contents THE JOINT CHIROPRACTIC (STYLIZED-HORIZ LOGO) April 2021 6331917 THE JOINT CHIROPRACTIC (STYLIZED-STCKD LOGO) April 2021 6331918 YOU'RE BACK, BABY.
Immigration Reform and Control Act of 1986, the Occupational Safety and Health Act and various other federal and state laws governing such matters as minimum wage requirements, overtime, fringe benefits, workplace safety and other working conditions and citizenship requirements.
Immigration Reform and Control Act of 1986, the Occupational Safety and Health Act, Title VII of the Civil Rights Act of 1964, the Americans with Disabilities Act of 1990 and various other federal and state laws governing such matters as minimum wage requirements, overtime, fringe benefits, workplace safety and other working conditions and citizenship requirements.
The notices contained allegations of fee-splitting, specifically targeting a provision in our Franchise Disclosure Document ("FDD") providing for the payment of royalty fees based on revenue derived from the furnishing of chiropractic care. The notices appeared to question our business model.
These clinics receive management services from our franchisees that are not owned by chiropractors. The notices contained allegations of fee-splitting, specifically targeting a provision in our Franchise Disclosure Document (“FDD”) providing for the payment of royalty fees based on revenue derived from the furnishing of chiropractic care. The notices appeared to question our business model.
Furthermore, there have been private lawsuits in which parties have alleged that a franchisor and its franchisee “jointly employ” the franchisee’s staff, that the franchisor is responsible for the franchisees’ staff (under theories of apparent agency, ostensible agency, or actual agency), or otherwise. Americans with Disabilities Act We are required to comply with the accessibility standards mandated by the U.S.
Furthermore, there have been private lawsuits in which parties have alleged that a franchisor and its franchisee “jointly employ” the franchisee’s staff, that the franchisor is responsible for the franchisees’ staff (under theories of apparent agency, ostensible agency, or actual agency), or otherwise.
We could have responsibility for damages, reinstatement, back pay and penalties in connection with labor law and employment discrimination violations by our franchisees over whom we have limited control.
If we are considered a joint employer, we could have responsibility for damages, reinstatement, back pay and penalties in connection with labor law and employment discrimination violations by our franchisees.
According to our patient survey conducted in early 2024 by WestGroup Research, 36% of our new patients had never tried chiropractic care before they came to The Joint. This remains consistent with the strong outcomes of 35% and 36% of patients new to chiropractic in the same survey conducted in 2023 and 2022, respectively.
According to our patient survey conducted in 2024 by WestGroup Research, 36% of our new patients had never tried chiropractic care before they came to The Joint.
The replacement or withdrawal of the NLRA and FLSA rules and possible new rules for the EEOC, which include or reinstate expansive definitions of “joint employer,” have implications for our business model.
Significance of Joint Employer Rules for our Business Model. The replacement or withdrawal of the NLRA and FLSA rules or new standards under federal and state discrimination statue (such as Title VII), which include or reinstate expansive definitions of “joint employer,” have implications for our business model.
While it has not done so to date, we cannot assure you that the New York Attorney General will not similarly choose to challenge our contractual relationships with our affiliated PCs in New York and, in particular, to question whether use of The Joint trademark by our affiliated PCs misleads consumers, causing them to incorrectly conclude that we are the provider of chiropractic treatment. 9 Table of Contents The Kansas Healing Arts Board, in response to a third-party complaint about one of our franchisees, sent a letter to the franchisee in February 2015 questioning whether the franchise business model might violate Kansas law regarding the unauthorized practice of chiropractic care.
While it has not done so to date, we cannot assure you that the New York Attorney General will not similarly choose to challenge our contractual relationships with our affiliated PCs in New York and, in 8 Table of Contents particular, to question whether use of The Joint trademark by our affiliated PCs misleads consumers, causing them to incorrectly conclude that we are the provider of chiropractic treatment.
This rule, which took effect on February 26, 2024, resurrects the broader standards from the NLRB’s 2015 Browning-Ferris Industries decision, which include considerations of indirect or potential control in determining joint employment.
This rule, which has not yet become effective due to pending litigation, resurrects the broader standards from the NLRB’s 2015 Browning-Ferris Industries decision, which include considerations of indirect or potential control in determining joint employment.
In August 2017, he was appointed by the governor to serve on the Arizona Board of Chiropractic Examiners, a position which he continues to hold. We believe that our management team’s experience and demonstrated success in building and operating a robust franchise system is a key driver of our growth and has positioned us well for achieving our long-term strategy.
We believe that our management team’s experience and demonstrated success in building and operating a robust franchise system is a key driver of our growth and has positioned us well for achieving our long-term strategy.
This is also an increase from 27% in 2021, 26% in 2019, 22% in 2017, 21% in 2016, and 16% in 2013, demonstrating our continued impact on the chiropractic market and offering validation to our thesis that we are a key driver in expanding the overall market for chiropractic.
This is also an increase from 16% from the same survey in 2013, demonstrating our continued impact on the chiropractic market and offering validation to our thesis that we are a key driver in expanding the overall market for chiropractic. Our patients arrive at our clinics without appointments at times convenient to their schedules.
Our patients arrive at our clinics without appointments at times convenient to their schedules. Once a patient has joined our system and is returning for treatment, they simply swipe their membership card at a card reader at the reception desk to announce their arrival.
Once a patient has joined our system and is returning for treatment, they simply swipe their membership card at a card reader at the reception desk to announce their arrival. The patient is then escorted to our open adjustment area, where they are required to remove only their outerwear to receive their adjustment.
During this period, we increased the number of clinics in operation from 33 to 935. We continue to be encouraged by the ability of individual clinics to generate growth.
We continue to be encouraged by the ability of individual clinics to generate growth.
Therefore, it is important to attract, develop and retain a diverse and engaged workforce at all levels of our business.
Human Capital Resources We believe that a strong culture of engagement and alignment to be essential to the ongoing success of our business. Therefore, it is important to attract, develop and retain a diverse and engaged workforce at all levels of our business.
The primary functions performed at our corporate headquarters are finance and accounting, treasury, marketing, operations, human resources, information systems support, and legal. We are also obligated under non-cancellable leases for the clinics which we own or manage. Our clinics are on average 1,200 square feet.
We are also obligated under non-cancellable leases for the clinics which we own or manage. Our clinics are on average 1,200 square feet.
Our Industry Chiropractic care is widely accepted among individuals with a variety of medical conditions, particularly back pain. A 2018 Gallup report commissioned by Palmer College of Chiropractic shows that among all U.S. adults, including those who did not have neck or 3 Table of Contents back pain, 16% went to a chiropractor in the last 12 months.
A 2018 Gallup report commissioned by Palmer College of Chiropractic shows that among all U.S. adults, including those who did not have neck or back pain, 16% went to a chiropractor in the last 12 months. These numbers represent a marked increase over the 2012 National Health Interview Survey that measured chiropractic use at 8% of the population.
Charles Nelles joined as chief technology officer in January 2022, bringing more than 20 years of technology experience in the healthcare and financial services industries. Prior to working at our company, Mr. Nelles held the role of vice president of technology for American Express Global Business Travel.
Abou Habib earned several promotions with increasing responsibility. Prior to SONIC, she worked at CKE Restaurants, Inc. and Eateries, Inc. Charles Nelles joined us as our Chief Technology Officer in January 2022, bringing more than 20 years of technology experience in the healthcare and financial services industries. Prior to working at our company, Mr.
From January 2012 through December 31, 2023, we have increased the annual system-wide sales from $22.3 million to $488.0 million (which includes $70.7 million of gross sales from clinics owned or managed by us and $417.3 million from clinics owned or managed by our franchisees, which is a non-GAAP measure for the year ended December 31, 2023).
From January 2012 through December 31, 2024, we have increased the annual system-wide sales from $22.3 million to $530.3 million (which is a non-GAAP measure for the year ended December 31, 2024). During this period, we increased the number of clinics in operation from 33 to 967.
Continued Growth of System Sales System wide comparable same-store sales growth (“Comp Sales”) for 2023 was 4%, reflecting the continued resilience of The Joint business model. Comp Sales refers to the amount of sales a clinic generates in the most recent accounting period, compared to the amount of sales it generated in a similar period in the past.
Comp Sales refers to the amount of sales a clinic generates in the most recent accounting period, compared to the amount of sales it generated in a similar period in the past.
The Mayo Clinic has recognized chiropractic as safe when performed by trained and licensed chiropractors, and the Cleveland Clinic has stated that chiropractors are established members of the mainstream medical team. The chiropractic industry in the United States is large and highly fragmented.
The Cleveland Clinic has stated that chiropractors are established members of the mainstream medical team with chiropractic adjustments being an effective treatment option for all ages and is the most common alternative treatment option in the United States. The chiropractic industry in the United States is large and highly fragmented.
We believe our first mover advantage, proprietary operations systems and strong unit level economics will continue to accelerate our growth even with the spawning of additional competition. Human Capital Resources We believe that a strong culture of engagement and alignment to be essential to the ongoing success of our business.
We anticipate that other direct competitors will join our industry as our visibility, reputation and perceived advantages become more widely known. We believe our first mover advantage, proprietary operations systems and strong unit level economics will continue to accelerate our growth even with the spawning of additional competition.
We hold ourselves to the highest standards of acting with integrity as outlined in our core values statements. Facilities We lease the property for our corporate headquarters and all of the properties on which we own or manage clinics. As of December 31, 2023, we leased 138 facilities in which we operate or intend to operate clinics.
Facilities We lease the property for our corporate headquarters and all of the properties on which we own or manage clinics. As of December 31, 2024, we leased 129 facilities in which we currently operate or manage, with our corporate headquarters being the only leased property that will remain after the completion of our refranchising strategy.
Our competitors include approximately 40,000 independent chiropractic offices currently open throughout the United States, according to a 2024 Kentley Insights market research report, as well as certain multi-unit operators. We may also face competition from traditional medical practices, outpatient clinics, physical therapists, med-spas, massage therapists and sellers of devices intended for home use to address back and joint discomfort.
We may also face competition from traditional medical practices, outpatient clinics, physical therapists, med-spas, massage therapists and sellers of devices intended for home use to address back and joint discomfort. Our four largest multi-unit competitors are Airrosti, HealthSource Chiropractic, 100% Chiropractic and ChiroOne all of which are insurance-based models.
While these expenses could be material, our current expectation is that any such actions will not require us to expend substantial funds. Competition The chiropractic industry is highly fragmented. According to the November 2023 IBIS market research report, the Top 50 industry practices accounted for only 4% of total industry revenue.
We may, in the future, have to modify our clinics to provide service to or make reasonable accommodations for disabled persons. While these expenses could be material, our current expectation is that any such actions will not require us to expend substantial funds. Competition The chiropractic industry is highly fragmented.
The patient is then escorted to our open adjustment area, where they are required to remove only their outerwear to receive their adjustment. Each patient’s records are digitally updated for retrieval in our proprietary data storage system by our chiropractors in compliance with all applicable medical records security and privacy regulations.
Each patient’s records are digitally updated for retrieval in our proprietary data storage system by our chiropractors in compliance with all applicable medical records security and privacy regulations. The adjustment process, administered by a licensed chiropractor, takes approximately 15 - 20 minutes on average for a new patient and 5 - 7 minutes on average for a returning patient.
These numbers represent a marked increase over the 2012 National Health Interview Survey that measured chiropractic use at 8% of the population. According to the American Chiropractic Association, 80% of Americans experience back pain at least once in their lifetime.
According to the American Chiropractic Association, 2 Table of Contents 80% of Americans experience back pain at least once in their lifetime.
In her role, she led all marketing strategy for SONIC, which included national marketing, media, digital strategy, marketing technology and product innovation. A 15-year veteran of SONIC, Abou Habib earned several promotions with increasing responsibility. Previous to SONIC, she worked at CKE Restaurants, Inc. and Eateries, Inc.
Abou Habib served for six years as the Senior Vice President and Chief Marketing Officer of SONIC® America’s Drive-In®, part of the Inspire Brands family of restaurants. In her role, she led all marketing strategy for SONIC, which included national marketing, media, digital strategy, marketing technology and product innovation. A 15-year veteran of SONIC, Ms.
Holt's executive leadership team includes: Jake Singleton has served as chief financial officer since November 2018. Mr. Singleton served as our corporate controller before assuming the role of CFO, Mr. Singleton has financial and accounting experience from his time with the public accounting firm Ernst & Young LLP (EY).
Singleton served as our Corporate Controller before assuming the role of Chief Financial Officer. Mr. Singleton has financial and accounting experience from his time with the public accounting firm Ernst & Young LLP (“EY”). During his 10 years in EY’s Assurance & Audit practice, he focused on service public companies and assisting in raising capital through debit and equity offerings.
As our model does not focus on the treatment of severe or acute injury, we do not provide expensive and invasive diagnostic tools such as MRIs and X-rays. Instead, we refer those with severe or acute symptoms to alternate healthcare providers, including traditional chiropractors.
Our consumer-focused service model targets the non-acute treatment market, which is part of the $20.6 billion chiropractic services market, according to an IBIS market research report in September 2024. As our model does not focus on the treatment of severe or acute injury, we do not provide expensive and invasive diagnostic tools such as MRIs and X-rays.
Americans with Disabilities Act of 1990 and related federal and state statutes, which generally prohibit discrimination in accommodation or employment based on disability. We may, in the future, have to modify our clinics to provide service to or make reasonable accommodations for disabled persons.
Americans with Disabilities Act We are required to comply with the accessibility standards mandated by the Americans with Disabilities Act of 1990 and related federal and state statutes, which generally prohibit discrimination on the basis of disability in places of public accommodation.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changePlease see “Part I, Item 1 - Business - Regulatory Environment - State regulations on corporate practice of chiropractic” for a description of certain of these actions by states, including state legislatures, state chiropractic regulatory bodies and a state attorney general, to regulate and restrict the corporate practice of chiropractic. 21 Table of Contents RISKS RELATED TO OTHER LEGAL AND REGULATORY MATTERS Proposed and expected new federal regulations under the Biden administration expanding the meaning of “joint employer” and evolving state laws increase our potential liability for employment law violations by our franchisees and the likelihood that we may be required to participate in collective bargaining with our franchisees’ employees.
Biggest changeRISKS RELATED TO OTHER LEGAL AND REGULATORY MATTERS Uncertainties with federal regulations under the new presidential administration expanding the meaning of “joint employer” and evolving state laws increase our potential liability for employment law violations by our franchisees and the likelihood that we may be required to participate in collective bargaining with our franchisees’ employees.
If we do not successfully execute our plans to enter new markets, our business, financial condition and results of operations could be materially adversely affected Opening new clinics in existing markets may negatively affect revenue at our existing clinics.
If we do not successfully execute our plans to enter new markets, our business, financial condition and results of operations could be materially adversely affected Opening new clinics in existing markets may negatively affect revenue at existing clinics.
Our level of debt could have important consequences to investors, including: • requiring a portion of our cash flows from operations be used for the payment of interest on our debt, thereby reducing the funds available to us for our operations or other capital needs; 18 Table of Contents • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate because our available cash flow, after paying principal and interest on our debt, may not be sufficient to make the capital and other expenditures necessary to address these changes; • increasing our vulnerability to general adverse economic and industry conditions, since we will be required to devote a proportion of our cash flow to paying principal and interest on our debt during periods in which we experience lower earnings and cash flow; • limiting our ability to obtain additional financing in the future to fund working capital, capital expenditures, acquisitions, and general corporate requirements; and • placing us at a competitive disadvantage to other relatively less leveraged competitors that have more cash flow available to fund working capital, capital expenditures, acquisitions, and general corporate requirements.
Our level of debt could have important consequences to investors, including: • requiring a portion of our cash flows from operations be used for the payment of interest on our debt, thereby reducing the funds available to us for our operations or other capital needs; • limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate because our available cash flow, after paying principal and interest on our debt, may not be sufficient to make the capital and other expenditures necessary to address these changes; 17 Table of Contents • increasing our vulnerability to general adverse economic and industry conditions, since we will be required to devote a proportion of our cash flow to paying principal and interest on our debt during periods in which we experience lower earnings and cash flow; • limiting our ability to obtain additional financing in the future to fund working capital, capital expenditures, acquisitions, and general corporate requirements; and • placing us at a competitive disadvantage to other relatively less leveraged competitors that have more cash flow available to fund working capital, capital expenditures, acquisitions, and general corporate requirements.
Furthermore, our independent registered public accounting firm is now required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404, since as of December 31, 2023, we became an accelerated filer. Internal controls related to the operation of financial reporting and accounting systems are critical to maintaining adequate internal control over financial reporting.
Furthermore, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting pursuant to Section 404, since as of December 31, 2023, we became an accelerated filer. Internal controls related to the operation of financial reporting and accounting systems are critical to maintaining adequate internal control over financial reporting.
Please see “Part I, Item 1 - Business - Regulatory Environment – Joint Employer Rules” for a detailed description of the background and current status of federal and state “joint employer" laws and regulations.
Please see “Part I, Item 1 - Business - Regulatory Environment – Joint Employer Rules” for a detailed description of the background and current status of federal and state “joint employer” laws and regulations.
Beginning in the fourth quarter of 2021 and through 2023, company-owned or managed clinics were negatively impacted by wage increases, which increased our general and administrative expenses and decreased profitability. A significant number of our clinic service personnel are paid at rates related to the applicable minimum wage, and increases in the minimum wage could increase our labor costs.
Beginning in the fourth quarter of 2021 and through 2024, company-owned or managed clinics were negatively impacted by wage increases, which increased our general and administrative expenses and decreased profitability. A significant number of our clinic service personnel are paid at rates related to the applicable minimum wage, and increases in the minimum wage could increase our labor costs.
As further disclosed under the aforementioned caption, we anticipate that fiscal 2024 will continue to be a volatile macroeconomic environment and expect elevated levels of cost inflation to persist for 2024. Reductions in discretionary spending may adversely impact our business, financial condition, or results of operations.
As further disclosed under the aforementioned caption, we anticipate that fiscal 2025 will continue to be a volatile macroeconomic environment and expect elevated levels of cost inflation to persist for 2025. Reductions in discretionary spending may adversely impact our business, financial condition, or results of operations.
As noted in a previous risk factor, the current period of high inflation, which is expected to persist through at least 2024, is likely to reduce consumer discretionary spending. Traffic in our clinics could decline if consumers choose to reduce the amount they spend on non-critical medical procedures.
As noted in a previous risk factor, the current period of high inflation, which is expected to persist through at least 2025, is likely to reduce consumer discretionary spending. Traffic in our clinics could decline if consumers choose to reduce the amount they spend on non-critical medical procedures.
Noncompliance with privacy laws, financial industry group requirements or a security breach involving the misappropriation, loss or other unauthorized disclosure of personal, sensitive and/or confidential information, whether by us or by one of our vendors, could have material adverse effects on our business, operations, reputation and financial condition, including decreased revenue; material fines and penalties; increased financial processing fees; compensatory, statutory, punitive or other damages; adverse actions against our licenses to do business; and injunctive relief whether by court or consent order.
Noncompliance with privacy laws, financial industry group requirements or a security breach involving the misappropriation, loss or other unauthorized disclosure of personal, sensitive and/or confidential information, whether by us or by one of our vendors, could have material adverse effects on our business, operations, reputation and financial condition, including decreased revenue; 23 Table of Contents material fines and penalties; increased financial processing fees; compensatory, statutory, punitive or other damages; adverse actions against our licenses to do business; and injunctive relief whether by court or consent order.
As of January 1, 2023, the minimum wage increased in a number of states, the District of Columbia and local municipalities, with many of these wage increases triggered automatically by increases in the cost of living due to high inflation. Such wage increases likely will further increase our general and administrative expenses in the affected jurisdictions.
As of January 1, 2024, the minimum wage increased in a number of states, the District of Columbia and local municipalities, with many of these wage increases triggered automatically by increases in the cost of living due to high inflation. Such wage increases likely will further increase our general and administrative expenses in the affected jurisdictions.
Existing clinics could also make it more difficult to build our patient base for a new clinic in the same market.
Existing clinics could also make it more difficult to build the patient base for a new clinic in the same market.
If the IRS audits us during that time, it may find that we were not eligible to receive some or all of the ERC, in which case we would be required to return some or all of the ERC to the IRS. Additionally, 20% of the ERC will be paid to an outside third party as a consulting fee.
If the IRS audits us during that time, it may find that we were not eligible to receive some or all of the ERC, in which case we would be required to return some or all of the ERC to the IRS. Additionally, 20% of the ERC was paid to an outside third party as a consulting fee.
If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods 19 Table of Contents could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.
If we are unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, negatively affect investor confidence in our financial statements and adversely impact our stock price.
Our business strategy does not entail opening new clinics that we believe will materially affect revenue at our existing clinics, but we may selectively open new clinics in and around areas of existing clinics that are operating at or near capacity to effectively serve our patients.
Our business strategy does not entail opening new franchised clinics that we believe will materially affect revenue at existing clinics, but we may selectively open new franchised clinics in and around areas of existing clinics that are operating at or near capacity to effectively serve the patients.
In the event that a continued deterioration of economic conditions causes a significant decrease in demand for our services, this could negatively impact our ability to meet the financial covenants in our credit facility, although we were in compliance as of December 31, 2023.
In the event that a continued deterioration of economic conditions causes a significant decrease in demand for our services, this could negatively impact our ability to meet the financial covenants in our credit facility, although we were in compliance as of December 31, 2024.
Our success is dependent on the chiropractors who control the PCs, or PC owners, with whom we enter into management services agreements, and we may have difficulty locating qualified chiropractors to replace PC owners. In states that regulate the corporate practice of chiropractic, our chiropractic services are provided by legal entities organized under state laws as PCs and their equivalents.
Our success is dependent on the chiropractors who control the PCs, or PC owners, with whom we enter into management services agreements, and we may have difficulty locating qualified chiropractors to replace PC owners. 19 Table of Contents In states that regulate the corporate practice of chiropractic, our chiropractic services are provided by legal entities organized under state laws as PCs and their equivalents.
New clinics, once opened, may not be profitable, and the increases in average clinic sales and comparable clinic sales that we have experienced in the past may not be indicative of future results. Our clinics continue to demonstrate increases in comparable clinic sales even as they mature.
New clinics, once opened, may not be profitable, and the increases in average clinic sales and comparable clinic sales that our franchisees have experienced in the past may not be indicative of future results. Our clinics continue to demonstrate increases in comparable clinic sales even as they mature.
In the event we are required to return some or all of the ERC, we may not be able to recoup the consulting fee. 20 Table of Contents RISKS RELATED TO INDUSTRY DYNAMICS AND COMPETITION Our clinics and chiropractors compete for patients in a highly competitive environment that may make it more difficult to increase patient volumes and revenues.
In the event we are required to return some or all of the ERC, we may not be able to recoup the consulting fee. RISKS RELATED TO INDUSTRY DYNAMICS AND COMPETITION Our clinics and chiropractors compete for patients in a highly competitive environment that may make it more difficult to increase patient volumes and revenues.
In addition, the length of time to complete the re-franchising efforts could be in excess of our current expectations, and result in increased levels of general and administrative expenses for longer than anticipated. We may experience insufficient working capital to fully implement our growth plans, and our business, financial condition and results of operations could be adversely affected.
In addition, the length of time to complete the refranchising efforts could be in excess of our current expectations, and result in increased levels of general and administrative expenses for longer than anticipated. We may experience insufficient working capital to fully implement our growth plans, and our business, financial condition and results of operations could be adversely affected.
Our ability to operate new clinics, especially company-owned or managed clinics, profitably and increase average clinic sales and comparable clinic sales depends on many factors, some of which are beyond our control, including: (i) consumer awareness and understanding of our brand and changes in consumer preferences and discretionary spending; (ii) 15 Table of Contents general economic conditions, which can affect clinic traffic, local rent and labor costs and prices we pay for the supplies we use; (iii) competition, either from our competitors in the chiropractic industry or our own and our franchisees’ clinics; (iv) the identification and availability of attractive sites for new facilities and the anticipated commercial, residential and infrastructure development near our new facilities; (v) changes in government regulation; (vi) in certain regions, decreases in demand for our services due to inclement weather; and (vii) other unanticipated increases in costs, any of which could give rise to delays or cost overruns.
Our ability to operate new franchisee clinics profitably and increase average clinic sales and comparable clinic sales depends on many factors, some of which are beyond our control, including: (i) consumer awareness and understanding of our brand and changes in consumer preferences and discretionary spending; (ii) general economic conditions, which can affect clinic traffic, local rent 14 Table of Contents and labor costs and prices we pay for the supplies we use; (iii) competition, either from our competitors in the chiropractic industry or our own and our franchisees’ clinics; (iv) the identification and availability of attractive sites for new facilities and the anticipated commercial, residential and infrastructure development near our new facilities; (v) changes in government regulation; (vi) in certain regions, decreases in demand for our services due to inclement weather; and (vii) other unanticipated increases in costs, any of which could give rise to delays or cost overruns.
The target area of our clinics varies by location and depends on a number of factors, including population density, other available retail services, area demographics and geography. As a result, the opening of a new clinic in or near markets in which we already have clinics could adversely affect the revenues of those existing clinics.
The target area of our franchised clinics varies by location and depends on a number of factors, including population density, other available retail services, area demographics and geography. As a result, the opening of a new clinic in or near markets in which our franchisees already have clinics could adversely affect the revenues of those existing clinics.
Any new or re-implemented accommodations and the occurrence of any of the other events described here and in the next four risk factors could impact our ability to collect royalty payments from our franchisees, harm the goodwill associated with our brand, and materially adversely affect our business and results of operations.
Any new or re-implemented accommodations and the occurrence of any of the other events described here and in 16 Table of Contents the next four risk factors could impact our ability to collect royalty payments from our franchisees, harm the goodwill associated with our brand, and materially adversely affect our business and results of operations.
Further, our brand value could suffer and our business could be adversely affected if patients perceive a reduction in the quality of service or staff. 16 Table of Contents Our marketing programs may not be successful. We incur costs and expend other resources in our marketing efforts to attract and retain patients.
Further, our brand value could suffer and our business could be adversely affected if patients perceive a reduction in the quality of service or staff. Our marketing programs may not be successful. We incur costs and expend other resources in our marketing efforts to attract and retain patients.
Any audit by the IRS with respect to our receipt of an employee retention credit (“ERC”) under The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act could result in additional taxes or costs to our company. We received an ERC pursuant to the CARES ACT.
Any audit by the IRS with respect to our receipt of an employee retention credit (“ERC”) under The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) could result in additional taxes or costs to our company. We received an ERC pursuant to the CARES Act.
We may be subject to short selling strategies that may drive down the market price of our common stock. In 2021, we were the target of negative allegations posted on an internet platform designed to advise short sellers, which precipitated a decline in the 26 Table of Contents price of our stock.
We may be subject to short selling strategies that may drive down the market price of our common stock. In 2021, we were the target of negative allegations posted on an internet platform designed to advise short sellers, which precipitated a decline in the price of our stock.
Clinics we open in new markets may take longer to reach expected sales and profit levels on a consistent basis and may have higher construction, occupancy, marketing or operating costs than clinics we open in existing markets, thereby affecting our overall profitability.
Clinics our franchisees open in new markets may take longer to reach expected sales and profit levels on a consistent basis and may have higher construction, occupancy, marketing or operating costs than clinics opened in existing markets, thereby affecting our overall profitability.
As of December 31, 2023, we had active licenses and letters-of-intent for 172 clinics which we believe to be developable within the specified time periods, but we cannot be certain of this. Our regional developers are independent operators over whom we have limited control. Our regional developers are independent operators. Accordingly, their actions are outside of our control.
As of December 31, 2024, we had active licenses and letters-of-intent for 145 clinics which we believe to be developable within the specified time periods, but we cannot be certain of this. Our regional developers are independent operators over whom we have limited control. Our regional developers are independent operators. Accordingly, their actions are outside of our control.
As we execute on our re-franchising strategy, we will place a greater reliance on revenue from franchise fees and royalties. As company-owned or managed clinics are sold to franchisees, the total amount of revenue will decrease.
As we execute on our refranchising strategy, we will place a greater reliance on revenue from franchise fees and royalties. As company-owned or managed clinics are sold to franchisees, the total amount of revenue will decrease.
Discretionary spending is negatively impacted by, among other things, those factors disclosed in this Form 10-K under the caption “Recent Events” in Management’s Discussion and Analysis of Financial Condition and Results of Operations -- unfavorable global economic or political conditions, such as the Ukraine War, the Israel-Gaza conflict, labor shortages, inflation and other cost increases, and increases in interest rates.
Discretionary spending is negatively impacted by, among other things, those factors disclosed in this Form 10-K under the caption “Recent Events” in Management’s Discussion and Analysis of Financial Condition and Results of Operations -- unfavorable global economic or political conditions, such as labor shortages, inflation and other cost increases, and increases in interest rates.
While we have determined that we are not currently regulated as a covered entity under HIPAA and thus are not subject to its requirements or penalties, any entity may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy principles.
While we have determined that we are not currently regulated as a covered entity under HIPAA and thus are not subject to its requirements or penalties, any entity may be prosecuted under HIPAA’s criminal provisions either directly or 22 Table of Contents under aiding-and-abetting or conspiracy principles.
If we are unable to maintain our chargeback or refund rates at acceptable levels, credit and debit card companies may increase our transaction fees, impose monthly fines until resolved or terminate their relationships with us.
If we are unable to maintain our chargeback or refund rates at acceptable levels, credit and debit card companies may increase our transaction fees, impose monthly fines until resolved or terminate their 24 Table of Contents relationships with us.
Our marketing activities are principally focused on increasing brand awareness and driving patient volumes. As we open new clinics, we undertake aggressive marketing campaigns to increase community awareness about our growing presence.
Our marketing activities are principally focused on increasing brand awareness and driving patient volumes. As we open new clinics, we undertake 15 Table of Contents aggressive marketing campaigns to increase community awareness about our growing presence.
Based on the self-assessment completed as of January 22, 2024, we are currently in compliance with the Payment Card Industry Data Security Standard, or PCI DSS, the payment card industry’s security standard for companies that collect, store or transmit certain data regarding credit and debit cards, credit and debit card holders and credit and debit card transactions.
Based on the self-assessment completed as of March 3, 2025, we are currently in compliance with the Payment Card Industry Data Security Standard, or PCI DSS, the payment card industry’s security standard for companies that collect, store or transmit certain data regarding credit and debit cards, credit and debit card holders and credit and debit card transactions.
Of our total of 17 regional developers as of December 31, 2023, three had not met their minimum franchise sales requirements within the time periods specified in their regional developer agreements. FINANCIAL RISK FACTORS Our level of debt could impair our financial condition and ability to operate.
Of our total of 16 regional developers as of December 31, 2024, six had not met their minimum franchise sales requirements within the time periods specified in their regional developer agreements. FINANCIAL RISK FACTORS Our level of debt could impair our financial condition and ability to operate.
Please see Note 12, “Employee Retention Credit” in the Notes to the consolidated financial statements included in Item 8 of this Form 10-K for a description of the ERC. Our eligibility to receive the ERC remains subject to audit by the IRS for a period of five years.
Please see Note 11, Employee Retention Credit in the Notes to the consolidated financial statements included in Item 8 of this Form 10-K for a description of the ERC. Our eligibility to receive the ERC remains subject to audit by the IRS for a period of five years.
Furthermore, there is an expectation that new rules will be issued by the EEOC, similarly expanding “joint liability” with respect to the enforcement of anti-discrimination laws. Such expansions of joint employer liability have implications for our business model.
Furthermore, there is an expectation that new rules will be issued by the Equal Employment Opportunity Commission, similarly expanding “joint liability” with respect to the enforcement of anti-discrimination laws. 20 Table of Contents Such expansions of joint employer liability have implications for our business model.
Any claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims and may reduce the amount of money available to us.
Any claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims and may reduce the amount of money available to us. ITEM 1B. UNRESOLVED STAFF COMMENTS None.
In addition, our average clinic sales and comparable clinic sales for existing clinics may not increase at the rates achieved over the past several years.
In addition, our average clinic sales and comparable clinic sales for existing clinics may deteriorate from the rates achieved over the past several years.
Our annual Comp Sales for the full year 2023, for clinics that have been open for at least 13 full months, was 4%, and for clinics that have been open for greater than 48 months, was (1)%.
Our annual Comp Sales for the full year 2024, for clinics that have been open for at least 13 full months, was 4%. However, for clinics that have been open for greater than 48 months, our annual Comp Sales for the full 2024 year was (2)%.
Revenue “cannibalization” between our clinics may become significant in the future as we continue to expand our operations and could affect our revenue growth, which could, in turn, adversely affect our business, financial condition and results of operations.
Revenue “cannibalization” between clinics may become significant in the future as we continue to expand our operations and could affect our revenue growth, which could, in turn, adversely affect our business, financial condition and results of operations. Damage to our reputation or our brand in existing or new markets could negatively impact our business, financial condition and results of operations.
Long-lived assets, such as operating lease right-of-use ("ROU") assets and property, plant and equipment in our corporate clinics, are tested for impairment if an event occurs or circumstances change that would indicate the carrying amount may not be recoverable.
A decline in the current and projected cash flows in our corporate clinics could result in impairment charges, which could be material. 18 Table of Contents Long-lived assets, such as operating lease right-of-use (“ROU”) assets and property, plant and equipment in our corporate clinics, are tested for impairment if an event occurs or circumstances change that would indicate the carrying amount may not be recoverable.
Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property rights may not be adequate.
Our ability to compete effectively depends in part upon our intellectual property rights, including but not limited to our trademarks. Our use of contractual provisions, confidentiality procedures and agreements, and trademark, copyright, unfair competition, trade secret and other laws to protect our intellectual property rights may not be adequate.
The occurrence of any events or rumors that cause patients to no longer associate the brands with quality, convenient and inexpensive chiropractic maintenance care may materially adversely affect the value of the brand names and demand for chiropractic services at our franchisees or their affiliated PCs. 23 Table of Contents Our ability to compete effectively depends in part upon our intellectual property rights, including but not limited to our trademarks.
The occurrence of any events or rumors that cause patients to no longer associate the brands with quality, convenient and inexpensive chiropractic maintenance care may materially adversely affect the value of the brand names and demand for chiropractic services at our franchisees or their affiliated PCs.
In addition, if our billing software fails to work properly, and as a result, we do not automatically process monthly membership fees to our patients’ credit cards on a timely basis or at all, or there are issues with financial insolvency of our third-party vendors or other unanticipated problems or events, we could lose revenue, which would harm our operating results. 25 Table of Contents We are also subject to payment card association operating rules, certification requirements and rules governing electronic funds transfers, which could change or be reinterpreted to make it more difficult for us to comply.
In addition, if our billing software fails to work properly, and as a result, we do not automatically process monthly membership fees to our patients’ credit cards on a timely basis or at all, or there are issues with financial insolvency of our third-party vendors or other unanticipated problems or events, we could lose revenue, which would harm our operating results.
Furthermore, in 2020, we took additional actions to support our franchisees that experienced challenges during the COVID-19 pandemic, further reducing our royalty revenues and other fees from franchisees.
These risks include a significant further decline in our franchisees’ revenue, which occurred in 2020 as a result of the COVID-19 pandemic. Furthermore, in 2020, we took additional actions to support our franchisees that experienced challenges during the COVID-19 pandemic, further reducing our royalty revenues and other fees from franchisees.
Damage to our reputation or our brand in existing or new markets could negatively impact our business, financial condition and results of operations. We believe we have built our reputation on high quality, empathetic patient care, and we must protect and grow the value of our brand to continue to be successful in the future.
We believe we have built our reputation on high quality, empathetic patient care, and we must protect and grow the value of our brand to continue to be successful in the future.
As of December 31, 2023, we had 14,751,633 outstanding shares of common stock and are authorized to sell up to 20,000,000 shares of common stock. The trading volume of shares of our common stock averaged approximately 136,520 shares per day during the year ended December 31, 2023.
As of December 31, 2024, we had 15,159,878 outstanding shares of common stock and are authorized to sell up to 20,000,000 shares of common stock. The trading volume of shares of our common stock averaged approximately 65,747 shares per day during the 25 Table of Contents year ended December 31, 2024.
We have experienced net losses and may not achieve or sustain profitability in the future. We have experienced periods of net losses in the past, and while we have achieved profitability since 2018, our revenue may not grow and we may not maintain profitability in the future.
We have experienced net losses and may not achieve or sustain profitability in the future. We have experienced periods of net losses in the past, and while we have achieved profitability from 2018 through 2022, we have experienced net losses in both 2023 and 2024.
Our three largest multi-unit competitors are Airrosti, which currently operates 150 clinics; HealthSource Chiropractic, which currently operates 131 clinics; and 100% Chiropractic, which currently operates 125 clinics. Two of these competitors are currently operating under an insurance-based model.
Our four largest multi-unit competitors are Airrosti, which currently operates 150 clinics; HealthSource Chiropractic, which currently operates 133 clinics; 100% Chiropractic, which currently operates 106 clinics; and ChiroOne, which currently operates 102 clinics. All of these competitors are currently operating under an insurance-based model, including two of which also accept private pay.
Our balance sheet includes a significant number of long-lived assets in our corporate clinics, including operating lease right-of-use assets and property, plant and equipment. A decline in the current and projected cash flows in our corporate clinics could result in impairment charges, which could be material.
Our balance sheet includes a significant number of long-lived assets in our corporate clinics, including operating lease right-of-use assets and property, plant and equipment.
However, we cannot assure you that this will continue for our existing clinics or that clinics we open in the future will see similar results.
As such, we cannot assure you that increases in comparable clinic sales will continue for our existing clinics or that clinics that are opened in the future will see similar results.
As of December 31, 2023, we had drawn $2.0 million under the Credit Agreement (defined at Note 7, Debt).
As of December 31, 2024, we had access to draw $20.0 million under the Credit Agreement (defined at Note 6, Debt ).
Our ability to maintain profitability will be affected by the other risks and uncertainties described in this section and in Management’s Discussion and Analysis. If we are not able to sustain or increase profitability, our business will be materially adversely affected and the price of our common stock may decline.
If we are not able to achieve or sustain profitability, our business will be materially adversely affected and the price of our common stock may decline.
We may need to re-implement, expand or extend these accommodations to franchisees, further reducing our revenues from franchised clinics and reducing the visibility of “The Joint” brand in the marketplace.
In 2020, for a period of time, we waived minimum royalty requirements, monthly software fees for clinics forced to close temporarily due to the pandemic, and minimum required marketing expenditures. We may need to re-implement, expand or extend these accommodations to franchisees, further reducing our revenues from franchised clinics and reducing the visibility of “The Joint” brand in the marketplace.
Our efforts to comply with these laws, rules and regulations may impose significant costs and burdens, and failure to comply with these laws, rules and regulations may result in fines or other charges being imposed on us. Our chiropractors are subject to ethical guidelines and operating standards which, if not complied with, could adversely affect our business.
Our efforts to comply with these laws, rules and 21 Table of Contents regulations may impose significant costs and burdens, and failure to comply with these laws, rules and regulations may result in fines or other charges being imposed on us.
Please see “Part I, Item 1 - Business - Regulatory Environment – Regulation relating to franchising” for a description of other federal and state regulation related to franchising. 22 Table of Contents We conduct business in a heavily regulated industry, and if we fail to comply with these laws and government regulations, we could incur penalties or be required to make significant changes to our operations.
We conduct business in a heavily regulated industry, and if we fail to comply with these laws and government regulations, we could incur penalties or be required to make significant changes to our operations.
Bills also have been introduced in Congress from time to time providing for protections of franchisee rights, including certain currently pending bills seeking to establish what are described as fair franchise practices. Compliance with new, complex and changing laws may cause our expenses to increase, and non-compliance with such laws could result in penalties or enforcement actions against us.
The use of such offending representations also could increase the likelihood of successful lawsuits against us by our franchisees over claims of fraud or misrepresentation. Bills also have been introduced in Congress from time to time providing for protections of franchisee rights, including certain currently pending bills seeking to establish what are described as fair franchise practices.
Our failure to successfully design, implement and maintain all of our systems could have a material adverse effect on our business, financial condition and results of operations.
Our failure to successfully design, implement and maintain all of our systems could have a material adverse effect on our business, financial condition and results of operations. If we fail to properly maintain the integrity of our data or to strategically implement, upgrade or consolidate existing information systems, our reputation and business could be materially adversely affected.
In addition, we have a corporate business owner’s policy with coverage of $2.0 million per occurrence and $4.0 million in annual aggregate.
Our current minimum professional liability insurance coverage required for our franchisees, affiliated PCs and company-owned clinics is $1.0 million per occurrence and $3.0 million in annual aggregate. In addition, we have a corporate business owner’s policy with coverage of $2.0 million per occurrence and $4.0 million in annual aggregate.
We, along with our affiliated PCs and their chiropractors, are subject to malpractice and other similar claims and may be unable to obtain or maintain adequate insurance against these claims. The provision of chiropractic services by chiropractors entails an inherent risk of potential malpractice and other similar claims.
In addition, a review of our business by accreditation authorities could result in a determination that could adversely affect our operations. We, along with our affiliated PCs and their chiropractors, are subject to malpractice and other similar claims and may be unable to obtain or maintain adequate insurance against these claims.
(“NASAA”) rejects the use of required representations or waivers of claims by franchisees in franchise agreements for the purpose of insulating a franchisor from liability in disputes related to alleged fraud or misrepresentations during the offer and sale of a franchise. It is expected that state regulators will follow NASAA’s guidance and limit their use, as California has already done.
Recently, there has been an increased focus on unfair franchise practices. A policy from NASAA rejects the use of required representations or waivers of claims by franchisees in franchise agreements for the purpose of insulating a franchisor from liability in disputes related to alleged fraud or misrepresentations during the offer and sale of a franchise.
Reductions in staff levels, asset impairment charges and potential clinic closures could result from prolonged negative clinic sales, which could materially adversely affect our business, financial condition and results of operations.
Reductions in staff levels and potential clinic closures could result from prolonged negative clinic sales, which could materially adversely affect our business, financial condition and results of operations. RISKS RELATED TO USE OF THE FRANCHISE BUSINESS MODEL Our dependence on the success of our franchisees exposes us to risks, including the loss of royalty revenue and harm to our brand.
If we fail to properly maintain the integrity of our data or to strategically implement, upgrade or consolidate existing information systems, our reputation and business could be materially adversely affected. 24 Table of Contents We increasingly use electronic means to interact with our customers and collect, maintain and store individually identifiable information, including, but not limited to, personal financial information and health-related information.
We increasingly use electronic means to interact with our customers and collect, maintain and store individually identifiable information, including, but not limited to, personal financial information and health-related information.
We anticipate that franchise royalties will represent a substantial part of our revenues in the future. As of December 31, 2023, we had franchisees operating or managing 800 clinics. We rely on the performance of our franchisees in successfully opening and operating their clinics and paying royalties and other fees to us on a timely basis.
We rely on the performance of our franchisees in successfully opening and operating their clinics and paying royalties and other fees to us on a timely basis. Our franchise system subjects us to a number of risks as described here and in the next four risk factors.
Our services emphasize maintenance therapy, which is generally not a medical necessity, and should be viewed as a discretionary medical expenditure.
Changes in economic conditions and adverse weather and other unforeseen conditions could materially affect our ability to maintain or increase sales at our clinics. Our services emphasize maintenance therapy, which is generally not a medical necessity, and should be viewed as a discretionary medical expenditure.
The chiropractors who work in our system are subject to ethical guidelines and operating standards of professional and trade associations and private accreditation agencies. Compliance with these guidelines and standards is often required by our contracts with our chiropractors, patients and franchise owners (and their contractual relationships) and serve to maintain our reputation.
Our chiropractors are subject to ethical guidelines and operating standards which, if not complied with, could adversely affect our business. The chiropractors who work in our system are subject to ethical guidelines and operating standards of professional and trade associations and private accreditation agencies.
The guidelines and standards governing the provision of healthcare services may change significantly in the future. New or changed guidelines or standards may materially and adversely affect our business. In addition, a review of our business by accreditation authorities could result in a determination that could adversely affect our operations.
Compliance with these guidelines and standards is often required by our contracts with our chiropractors, patients and franchise owners (and their contractual relationships) and serve to maintain our reputation. The guidelines and standards governing the provision of healthcare services may change significantly in the future. New or changed guidelines or standards may materially and adversely affect our business.
We risk exposure to unfair trade practice claims by state regulators if we try to use a franchisee’s representations in a manner that offends NASAA’s policy. The use of such offending representations also could increase the likelihood of successful lawsuits against us by our franchisees over claims of fraud or misrepresentation.
It is expected that state regulators will follow NASAA’s guidance and limit their use, as California has already done. We risk exposure to unfair trade practice claims by state regulators if we try to use a franchisee’s representations in a manner that offends NASAA’s policy.
RISKS RELATED TO USE OF THE FRANCHISE BUSINESS MODEL Our dependence on the success of our franchisees exposes us to risks including the loss of royalty revenue and harm to our brand. A substantial portion of our revenues comes from royalties generated by our franchised clinics, which royalties are based on the revenues generated by those clinics.
A substantial portion of our revenues comes from royalties generated by our franchised clinics, which royalties are based on the revenues generated by those clinics. We anticipate that franchise royalties will represent a substantial part of our revenues in the future. As of December 31, 2024, we had franchisees operating or managing 842 clinics.
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We may find it more difficult in new markets to hire, motivate and keep qualified employees who share our vision and culture. We may also incur higher costs from entering new markets, particularly with company-owned or managed clinics if, for example, we hire and assign regional managers to manage comparatively fewer clinics than in more developed markets.
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These risks are heightened as we continue to increase our refranchising efforts which may adversely affect our financial condition or results of operations.
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For these reasons, some of our new clinics were less successful than our existing clinics or have achieved target rates of patient visits at a slower rate.
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In addition, we are secondarily liable on certain franchisees’ clinic lease agreements, including lease agreements that we have guaranteed or assigned to franchisees, and our operating results and/or growth prospects could be impacted by any rent obligations to the extent such franchisees default on these lease agreements.
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In addition, we may fail to negotiate renewals as each of our leases expires, either on commercially acceptable terms or at all, which could cause us to pay increased occupancy costs or to close clinics in desirable locations.
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As we execute on our refranchising strategy, the total amount of revenue will decrease and our ability to decrease our general and administrative expenses accordingly will drive our ability to achieve profitability in the future. Our ability to achieve profitability will be affected by the other risks and uncertainties described in this section and in Management’s Discussion and Analysis.
Removed
These potential increases in occupancy costs and the cost of closing company-owned or managed clinics could materially adversely affect our business, financial condition or results of operations. Changes in economic conditions and adverse weather and other unforeseen conditions could materially affect our ability to maintain or increase sales at our clinics or open new clinics.
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Please see “Part I, Item 1 - Business - Regulatory Environment - State regulations on corporate practice of chiropractic” for a description of certain of these actions by states, including state legislatures, state chiropractic regulatory bodies and a state attorney general, to regulate and restrict the corporate practice of chiropractic.
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Our franchise system subjects us to a number of risks as described here and in the next four risk factors. These risks include a significant further decline in our franchisees’ revenue, which occurred in 2020 as a result of the COVID-19 pandemic.
Added
Compliance with new, complex and changing laws may cause our expenses to increase, and non-compliance with such laws could result in penalties or enforcement actions against us. Please see “Part I, Item 1 - Business - Regulatory Environment – Regulation relating to franchising” for a description of other federal and state regulation related to franchising.
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In 2020, for a period of time, we waived 17 Table of Contents minimum royalty requirements, monthly software fees for clinics forced to close temporarily due to the pandemic, and minimum required marketing expenditures.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeA dedicated team of technology professionals works throughout the year to monitor all matters of risk relating to cybersecurity. We have begun our certification process for the globally recognized International Organization for Standardization certification for Information Security Management Systems (ISO 27001) that we expect to achieve by the second quarter of 2024.
Biggest changeA dedicated team of technology professionals works throughout the year to monitor all matters of risk relating to cybersecurity. We completed our ISO 27001 Information Security Management certification project culminating in a primary and secondary audit against the standard. We expect to complete the final remediation and updates to policies and procedures and achieve our certification in March 2025.
Additionally, we operate and are compliant under the following provisions: HIPAA attestation for the HIPAA Security Rule and the Health Information Technology for Economic and Clinical Health Act (HITECH) Breach Notification requirements. 27 Table of Contents Vendors that have access to our information are required to manage such information in accordance with laws and appropriate privacy and security standards.
Additionally, we operate and are compliant under the following provisions: HIPAA attestation for the HIPAA Security Rule and the Health Information Technology for Economic and Clinical Health Act (HITECH) Breach Notification requirements. Vendors that have access to our information are required to manage such information in accordance with laws and appropriate privacy and security standards.
We are in process of establishing defined response procedures to effectively address any cyber threat that may occur regardless of the safeguards in place that minimize the chance of a successful cyberattack. The response procedures will be designed to identify, analyze, contain and remediate such cyber incidents expeditiously.
We have established defined response procedures to effectively address any cyber threat that may occur regardless of the safeguards in place that minimize the chance of a successful cyberattack. The response procedures are designed to identify, analyze, contain and remediate such cyber incidents expeditiously.
Currently, we rely on an established major incident management and communication process to address any potential cybersecurity incidents. This established process includes the use of third party partnerships to make available the distinct skill sets needed to assist in properly responding to any cybersecurity threat.
In 2025, we plan to move to a quarterly testing regimen. Currently, we rely on an established major incident management and communication process to address any potential cybersecurity incidents. This established process includes the use of third party partnerships to make available the distinct skill sets needed to assist in properly responding to any cybersecurity threat.
We test multiple aspects of cybersecurity regularly, including annual pen testing over our proprietary information systems and have historically tested annually and beginning 2024 will test semi-annually our technical recovery and incident response procedures. We maintain a robust privacy compliance program.
We test multiple aspects of cybersecurity regularly, including annual pen testing over our proprietary information systems and our technical recovery and incident response procedures annually. We maintain a robust privacy compliance program.
Cybersecurity Subcommittee materials are provided to the Audit Committee as well as the full Board of Directors. The Board of Directors believes that a strong cyber strategy based on industry accepted best practices is vital to protect our business, customers and assets.
The Board of Directors believes that a strong cyber strategy based on industry accepted best practices is vital to protect our business, customers and assets.
Employees receive periodic email communications, which train them to detect and report malware, ransomware and other malicious software and social engineering attempts that may compromise our information technology systems. In the first quarter of 2024, we will be implementing a best in class security awareness training system and a quarterly training program for all employees.
Employees receive periodic email communications, which train them to detect and report malware, ransomware and other malicious software and social engineering attempts that may compromise our information technology systems. In the second quarter of 2024, we implemented the KnowBe4 security training system and completed our first annual training in August 2024.
Depending on the nature of the vendors' access to our information, we monitor and evaluate the controls and governance established with the vendors ranging from a continuous cadence to at least quarterly. We annually assess our cybersecurity programs against third-party requirements, including HIPAA and the Sarbanes-Oxley Act (SOX).
Depending on the nature of the vendors’ access to our information, we monitor and evaluate the controls and governance established with the vendors ranging from a continuous cadence to at least quarterly.
Added
Cybersecurity Subcommittee materials are provided to the Audit Committee as well as the full Board of Directors. The members of the Cybersecurity Subcommittee brings at least 40 years of expertise and executive-level experience in information technology and cybersecurity to successfully support the CTO to maintain strong a cybersecurity strategy within our company.
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Our CTO Leverages more than 20 years of technology experience in the healthcare and financial services industries involving managing information security, developing cybersecurity strategy, implementing effective information and cybersecurity programs and managing within highly regulated global environments. He has managed technology compliance under the regulatory governance of frameworks such as HIPAA, GDPR, FDA, CCPA and TJC Hospital Accreditation.
Added
Management has responsibility to manage risk and bring to the Board’s attention the most material near-term and long-term risks to the Company. The Company’s CTO leads management’s assessment and management of cybersecurity risk. The CTO reports to the Company’s Chief Executive Officer. The CTO regularly reviews cybersecurity matters with management.
Added
We have not directly encountered any incidents from cybersecurity threats to date, but in November 2022, a breach was suffered by one of our vendors, which resulted in the release of certain information with respect to our patients and employees. This breach is discussed in more detail in Item 1.
Added
Business, under Regulatory Environment entitled "HIPAA and State Privacy and Breach Notification Rules".
Added
Based upon our investigation and the cooperation with our vendor, we believe the data breach did not have a material adverse effect on our business or result in any material damage to us and do not believe are reasonably likely to materially affect our business strategy, results of operations, or financial condition.
Added
Although we have not yet been materially impacted by any cybersecurity incident, we are subject to cybersecurity threats, as discussed in Item 1A.
Added
Risk Factors, including in the risk factor entitled “If we fail to properly maintain the integrity of our data or to strategically implement, upgrade or consolidate existing information systems, our reputation and business could be materially adversely affected” and “If our security systems are breached, we may face civil liability and public perception of our security measures could be diminished, either of which would negatively affect our ability to attract and retain patients” . 26 Table of Contents We annually assess our cybersecurity programs against third-party requirements, including HIPAA and the Sarbanes-Oxley Act (SOX).

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur corporate headquarters are located at 16767 N. Perimeter Center Drive, Suite 110, Scottsdale, Arizona 85260. The term of our lease for this location expires on December 31, 2025. The primary functions performed at our corporate headquarters are financial, accounting, treasury, marketing, operations, human resources, information systems support and legal.
Biggest changeWe are obligated under one additional lease for facilities in which we have ceased clinic operations. Our corporate headquarters are located at 16767 N. Perimeter Center Drive, Suite 110, Scottsdale, Arizona 85260. The term of our lease for this location expires on December 31, 2025.
Our clinic leases generally have an initial term of five years, include one to two options to renew for terms of five years, and require us to pay a proportionate share of real estate taxes, insurance, common area maintenance charges and other operating costs.
Our clinic leases generally have an initial term of five years, include one to two options to renew for terms of five years, and require us to pay a proportionate share of real estate taxes, insurance, common area maintenance charges and other operating costs. ITEM 3.
ITEM 2. PROPERTIES We lease the property for our corporate headquarters and all of the properties on which we own or manage clinics. As of December 31, 2023, we leased 138 facilities in which we operate or intend to operate clinics. We are obligated under two additional leases for facilities in which we have ceased clinic operations.
ITEM 2. PROPERTIES We lease the property for our corporate headquarters and all of the properties on which we own or manage clinics. As of December 31, 2024, we leased 129 facilities in which we operate, with our corporate headquarters being the only leased property that will remain after the completion of our refranchising strategy.
Added
In February 2025, we executed an amendment to the lease agreement to extend the term of our lease commencing January 1, 2026 and terminating on May 31, 2031. The primary functions performed at our corporate headquarters are financial, accounting, treasury, marketing, operations, human resources, information systems support and legal.
Added
LEGAL PROCEEDINGS Information regarding our legal proceedings is discussed in Note 9 in the Notes to the consolidated financial statements, which is incorporated herein by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 27 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the Nasdaq Capital Market under the symbol “JYNT.” Holders As of December 31, 2023, there were approximately 104 holders of record of our common stock and 14,751,633 shares of our common stock outstanding.
Biggest changeITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the Nasdaq Capital Market under the symbol “JYNT.” Holders As of December 31, 2024, there were approximately 36 holders of record of our common stock and 15,159,878 shares of our common stock outstanding.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2023 2022 Non-GAAP Financial Data: Net (loss) income $ (9,752,197) $ 626,705 Net interest 67,461 133,101 Depreciation and amortization expense 8,582,203 6,646,622 Income tax expense 11,390,953 68,448 EBITDA 10,288,420 7,474,876 Stock compensation expense 1,737,682 1,273,989 Acquisition related expenses 873,214 2,356,049 Net loss on disposition or impairment 2,632,604 410,215 Costs related to restatement filings 380,221 — Restructuring Costs 72,880 — Other income related to the ERC (3,779,304) — Adjusted EBITDA $ 12,205,717 $ 11,515,129 Adjusted EBITDA consists of net (loss) income before interest, income taxes, depreciation and amortization, acquisition related expenses (which includes contract termination costs associated with reacquired regional developer rights), stock-based compensation expense, bargain purchase gain, (gain) loss on disposition or impairment, costs related to restatement filings, restructuring costs, and other income related to the ERC.
Biggest changeNon-GAAP Financial Measures The table below reconciles net loss from continuing operations to Adjusted EBITDA from continuing operations for the years ended December 31, 2024 and 2023. 36 Table of Contents Year Ended December 31, 2024 2023 from Continuing Operations from Discontinued Operations Net Operations from Continuing Operations from Discontinued Operations Net Operations Non-GAAP Financial Data: (Loss) Income $ (1,536,912) $ (6,992,931) $ (8,529,843) $ (10,769,405) $ 1,017,208 $ (9,752,197) Net interest (280,287) 2,114 (278,173) 64,293 3,168 67,461 Depreciation and amortization expense 1,363,453 3,358,684 4,722,137 1,278,148 7,304,055 8,582,203 Income tax expense 62,142 212,642 274,784 11,023,411 367,542 11,390,953 EBITDA (391,604) (3,419,491) (3,811,095) 1,596,447 8,691,973 10,288,420 Stock compensation expense 1,679,005 — 1,679,005 1,737,682 — 1,737,682 Acquisition related expenses 478,710 — 478,710 811,547 61,667 873,214 Net loss on disposition or impairment 14,642 10,439,967 10,454,609 (20,894) 2,653,498 2,632,604 Costs related to restatement filings — — — 380,221 — 380,221 Restructuring Costs 607,231 495,097 1,102,328 — 72,880 72,880 Litigation expenses — 1,481,000 1,481,000 — — — Other income related to the ERC — — — — (3,779,304) (3,779,304) Adjusted EBITDA $ 2,387,984 $ 8,996,573 $ 11,384,557 $ 4,505,003 $ 7,700,714 $ 12,205,717 Adjusted EBITDA from continuing operations consists of net loss from continuing operations before interest, income taxes, depreciation and amortization, acquisition related expenses (which includes contract termination costs associated with reacquired regional developer rights), stock-based compensation expense, bargain purchase gain, (gain) loss on disposition or impairment, costs related to restatement filings, restructuring costs, and litigation expenses (consisting of legal and related fees for specific proceedings that arise outside of the ordinary course of our business).
These trends join with the preference we have seen among chiropractic doctors to reject the insurance-based model to produce a combination that benefits the consumer and the service provider alike. We believe that these forces create an important opportunity to accelerate the growth of our network.
These trends join with the preference we have seen among chiropractic doctors to reject the insurance-based model produce a combination that benefits the consumer and the service provider alike. We believe that these forces create an important opportunity to accelerate the growth of our network.
As required, we perform an annual impairment test of goodwill as of the first day of the fourth quarter or more frequently if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. No impairments of goodwill were recorded for the years ended December 31, 2023 and 2022.
As required, we perform an annual impairment test of goodwill as of the first day of the fourth quarter or more frequently if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. No impairments of goodwill were recorded for the years ended December 31, 2024 and 2023.
We anticipate that 2024 will continue to be a volatile macroeconomic environment. The primary inflationary factor affecting our operations is labor costs. In 2022 and 2023, clinics owned or managed by us or our franchisees were negatively impacted by labor shortages and wage increases, which increased our general and administrative expenses.
We anticipate that 2025 will continue to be a volatile macroeconomic environment. The primary inflationary factor affecting our operations is labor costs. In 2023 and 2024, clinics owned or managed by us or our franchisees were negatively impacted by labor shortages and wage increases, which increased our general and administrative expenses.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our results of operations and financial condition for the years ended December 31, 2023 and 2022 should be read in conjunction with the consolidated financial statements and the notes thereto, and other financial information contained elsewhere in this Form 10-K.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis of our results of operations and financial condition for the years ended December 31, 2024 and 2023 should be read in conjunction with the consolidated financial statements and the notes thereto, and other financial information contained elsewhere in this Form 10-K.
From time to time, we consider and evaluate transactions related to our portfolio and capital structure, including debt financings, equity issuances, purchases and sales of assets, and other transactions. Given the ongoing uncertainties described above, the levels of our cash flows from operations for 2024 may be impacted.
From time to time, we consider and evaluate transactions related to our portfolio and capital structure, including debt financings, equity issuances, purchases and sales of assets, and other transactions. Given the ongoing uncertainties described above, the levels of our cash flows from operations for 2025 may be impacted.
Overview We are a rapidly growing franchisor and operator of chiropractic clinics that uses a private pay, non-insurance, cash-based model. We seek to be the leading provider of chiropractic care in the markets we serve and to become the most recognized brand in our industry.
Overview We are a rapidly growing franchisor that uses a private pay, non-insurance, cash-based model. We seek to be the leading provider of chiropractic care in the markets we serve and to become the most recognized brand in our industry.
Off-Balance Sheet Arrangements During the year ended December 31, 2023, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements.
Off-Balance Sheet Arrangements During the year ended December 31, 2024, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements.
For 2024, we expect to use or redeploy our cash resources to support our business within the context of prevailing market conditions, which, given the ongoing uncertainties described above, could rapidly and materially deteriorate or otherwise change.
For 2025, we expect to use or redeploy our cash resources to support our business within the context of prevailing market conditions, which, given the ongoing uncertainties described above, could rapidly and materially deteriorate or otherwise change.
While the interruptions, delays and/or cost increases resulting from political instability and geopolitical tensions, economic weakness, inflationary pressures, increase in interest rates and other factors have created uncertainty as to general economic conditions for 2024, as of the date of this Form 10-K, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business.
While the interruptions, delays and/or cost increases resulting from political instability and geopolitical tensions, adverse weather conditions, economic weakness, inflationary pressures, increase in interest rates and other factors have created uncertainty as to general economic conditions for 2025, as of the date of this Form 10-K, we believe we have adequate capital resources and sufficient access to external financing sources to satisfy our current and reasonably anticipated requirements for funds to conduct our operations and meet other needs in the ordinary course of our business.
Examples of critical estimates used in valuing certain intangible assets we have acquired or may acquire in the future include, but are not limited to, future expected cash flows and member relationships, revenue growth rates, the period of time the acquired member relationships will continue to be used, anticipated member attrition rates, and discount rates used to determine 31 Table of Contents the present value of estimated future cash flows.
Examples of critical estimates used in valuing certain intangible assets we have acquired or may acquire in the future include, but are not limited to, future expected cash flows and member relationships, revenue growth rates, the period of time the acquired member relationships will continue to be used, anticipated member attrition rates, and discount rates used to determine the present value of estimated future cash flows.
Our inability to produce and file the 2023 Q2 10-Q in a timely manner (which filing constitutes delivery to JP Morgan Chase of our financial statements) was the result of the discovery of errors in the GAAP accounting treatment for re-acquired regional developer rights and for transfer pricing for our VIEs.
Our inability to produce and file the 2023 Q2 10-Q in a timely manner (which filing constitutes delivery to JP Morgan Chase of our financial statements) was the result of the discovery of errors in the GAAP accounting treatment for reacquired regional developer rights and for transfer pricing for our VIEs.
Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate Adjusted EBITDA in the same manner. 38 Table of Contents Our management does not consider Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP.
Our computation of Adjusted EBITDA may not be comparable to other similarly titled measures computed by other companies, because all companies do not calculate Adjusted EBITDA in the same manner. Our management does not consider Adjusted EBITDA in isolation or as an alternative to financial measures determined in accordance with GAAP.
Acquisitions We allocate the purchase price of acquired companies to the assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill.
Acquisitions 30 Table of Contents We allocate the purchase price of acquired companies to the assets acquired and liabilities assumed based on estimated fair values at the acquisition date, with the excess of purchase price over the estimated fair value of the identifiable net assets acquired recorded as goodwill.
These opportunities could include, but are not limited to, reinvestment in the brand and related marketing, continued investment in our IT platforms, the repurchase of RD territories, and/or a stock repurchase program.
These opportunities could include, but are not limited to, reinvestment in the brand and related marketing, continued investment in our IT platforms, the repurchase of RD territories, certain merger or acquisition opportunities and/or a stock repurchase program.
Intangible Assets Intangible assets consist primarily of re-acquired franchise rights and customer relationships. We amortize the fair value of re-acquired franchise rights over the remaining contractual terms of the re-acquired franchise rights at the time of the acquisition, which range from one to ten years.
Intangible Assets Intangible assets consist primarily of reacquired franchise rights and customer relationships. We amortize the fair value of reacquired franchise rights over the remaining contractual terms of the reacquired franchise rights at the time of the acquisition, which range from one to ten years.
We believe that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other outpatient medical clinics, which may present similar non-GAAP financial measures to investors.
We may calculate Adjusted EBITDA differently from other companies. We believe that the use of Adjusted EBITDA provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing our financial measures with other outpatient medical clinics, which may present similar non-GAAP financial measures to investors.
For the year ended December 31, 2023, this included proceeds from the exercise of stock options of $0.2 million. For the year ended December 31, 2022, this included proceeds from the exercise of stock options of $0.4 million.
For the year ended December 31, 2023, this included proceeds from the exercise of stock options of $0.2 million.
On November 6, 2023, we discussed certain strategic initiatives with the Board of Directors and were authorized to initiate a plan to re-franchise the majority of our corporate-owned or managed clinics with plans to retain a small portion of high-performing clinics.
On November 6, 2023, we discussed certain strategic initiatives with the Board of Directors and were authorized to initiate a plan to refranchise the majority of our company-owned or managed clinics with plans to retain a small portion of high-performing clinics.
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; •. Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; •.
Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; •. Adjusted EBITDA does not reflect the interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; 37 Table of Contents •.
You should review the reconciliation of net (loss) income to Adjusted EBITDA above and not rely on any single financial measure to evaluate our business. Liquidity and Capital Resources Sources of Liquidity As of December 31, 2023, we had cash and short-term bank deposits of $18.2 million.
You should review the reconciliation of Net loss to Adjusted EBITDA above and not rely on any single financial measure to evaluate our business. Liquidity and Capital Resources Sources of Liquidity As of December 31, 2024, we had cash and short-term bank deposits of $25.1 million.
Forfeitures are estimated based on historical and forecasted turnover, which is approximately 5%. Revenue Recognition We generate revenue through our company-owned and managed clinics and through royalties, franchise fees, advertising fund contributions, IT related income and computer software fees from our franchisees. Revenues from Company-Owned or Managed Clinics.
Forfeitures are estimated based on historical and forecasted turnover, which is approximately 5%. Revenue Recognition We generate revenue through royalties, franchise fees, advertising fund contributions, IT-related income and computer software fees from our franchisees.
We saw over 932,000 new patients in 2023, with approximately 36% of those new patients visiting a chiropractor for the first time. We are not only increasing our percentage of market share, but are expanding the chiropractic market. Key Performance Measures.
We saw 957,000 new patients in 2024, with approximately 36% of new patients visiting a chiropractor for the first time. We are not only increasing our percentage of market share, but are expanding the chiropractic market. Key Performance Measures.
We do not consider this to be indicative of our ongoing operations. Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.
Because of these limitations, Adjusted EBITDA should not be considered in isolation or as a substitute for performance measures calculated in accordance with GAAP. We compensate for these limitations by relying primarily on our GAAP results and using Adjusted EBITDA only supplementally.
We regularly assess the tax risk of our tax return filing positions, and we have identified $1.2 million and $1.3 million in uncertain tax positions as of December 31, 2023 and 2022, respectively.
We regularly assess the tax risk of our tax return filing positions, and we have identified $0.9 million and $1.2 million in uncertain tax positions as of December 31, 2024 and 2023, respectively.
We delivered over 13.6 million patient visits in 2023, up from 12.2 million patient visits in 2022, generating over $488.0 million and $435 million of system-wide sales, respectively, across our highly franchised network. We will continue the rapid and franchised focused expansion of chiropractic clinics in key markets throughout North America and potentially abroad.
We delivered over 14.7 million patient visits in 2024, up from 13.6 million patient visits in 2023, generating over $530.3 million and $488 million of system-wide sales, respectively, across our highly franchised network. We will continue the rapid and franchised focused expansion of chiropractic clinics in key markets throughout North America and potentially abroad.
If we determine that it is not subject to unclaimed property laws for the portion of wellness package that we do not expect to be redeemed (referred to as “breakage”), then we recognize breakage revenue in proportion to the pattern of exercised rights by the patient. 32 Table of Contents Royalties and Advertising Fund Revenue.
If we determine that it is not subject to unclaimed property laws for the portion of wellness package that we do not expect to be redeemed (referred to as “breakage”), then we recognize breakage revenue in proportion to the pattern of exercised rights by the patient. Franchise Fees.
As of December 31, 2023 and 2022, there were 800 and 712 franchised clinics in operation, respectively. • Franchise fees revenue increased due to the continued increase in active franchise licenses and the impact of accelerated revenue recognition resulting from the terminated franchise license agreements, with 21 and 17 franchise license agreements terminated during the years ended December 31, 2023 and 2022, respectively. • Software fees revenue increased due to an increase in our franchised clinic base and the related revenue recognition over the term of the franchise agreement as described above. • Other revenues primarily consisted of merchant income associated with credit card transactions.
As of December 31, 2024 and 2023, there were 842 and 800 franchised clinics in operation, respectively. • Franchise fees revenue increased due to the continued increase in active franchise licenses and the impact of accelerated revenue recognition resulting from the terminated franchise license agreements, with 24 and 21 franchise license agreements terminated during the years ended December 31, 2024 and 2023, respectively. • Software fees revenue increased due to an increase in our franchised clinic base and the related revenue recognition over the term of the franchise agreement as described above. • Other revenues primarily consisted of merchant income associated with credit card transactions and during the year ended December 31, 2024 also included conference fee revenue for our national franchisee conference held in 2024.
We earn revenue from clinics that we own and operate or manage throughout the United States. In those states where we own and operate the clinic, revenues are recognized when services are performed. We offer a variety of membership and wellness packages which feature discounted pricing as compared with our single-visit pricing.
In those states where we own and operate the clinic, revenues are recognized when services are performed. We offer a variety of membership and wellness packages which feature discounted pricing as compared with our single-visit pricing.
The number of franchise licenses sold for the year ended December 31, 2023 was 55, compared with 75 and 156 licenses for the years ended December 31, 2022 and 2021, respectively. We ended 2023 with 17 regional developers who were responsible for 51% of the 55 licenses sold during the year.
The number of franchise licenses sold for the year ended December 31, 2024 was 46, compared with 55 and 75 licenses for the years ended December 31, 2023 and 2022, respectively. We ended 2024 with 16 regional developers who were responsible for 30% of the 46 licenses sold during the year.
JP Morgan Chase waived this default until September 30, 2023. The filing of our 2023 Q2 10-Q on September 26, 2023 cured the default. Recent Events Recent events that may impact our business include unfavorable global economic or political conditions, such as the Ukraine War, the Israel-Gaza conflict, labor shortages, and inflation and other cost increases.
JP Morgan Chase waived this default until September 30, 2023. The filing of our 2023 Q2 10-Q on September 26, 2023 cured the default. Recent Events Recent events that may impact our business include unfavorable global economic or political conditions, such as uncertainties that come with changes to the presidential administration, labor shortages, and inflation and other cost increases.
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; •.
Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and •. Adjusted EBITDA does not reflect the (gain) loss on disposition or impairment, which represents the impairment of assets as of the reporting date.
As a percentage of revenue, general and administrative expenses were flat at 69% during the year ended December 31, 2023 and 2022, respectively.
As a percentage of revenue, general and administrative expenses were 57% and 56% during the year ended December 31, 2024 and 2023, respectively.
The fluctuation in the effective rate was primarily attributable to state taxes, including the change in rates, stock-based compensation and changes in valuation allowance during the year ended December 31, 2023, as compared to the year ended December 31, 2022.
The fluctuation in the effective rate was primarily attributable to state taxes, including the change in rates, stock-based compensation, the officer’s compensation limit under Section 162(m), change in valuation allowance and uncertain tax positions during the year ended December 31, 2024, as compared to the year ended December 31, 2023.
The sales are expected to close during the first quarter of 2024, subject to customary closing conditions. On June 15, 2023, we entered into an agreement under which we repurchased the right to develop franchises in various counties in Wisconsin. The total consideration for the transaction was $1.0 million.
On June 15, 2023, we entered into an agreement under which we repurchased the right to develop franchises in various counties in Wisconsin. The total consideration for the transaction was $1.0 million.
Legal costs to be incurred in connection with a loss contingency are expensed as such costs are incurred. Results of Operations The following discussion and analysis of our financial results encompasses our consolidated results and results of our two business segments: Corporate Clinics and Franchise Operations.
Legal costs to be incurred in connection with a loss contingency are expensed as such costs are incurred. Results of Operations The following discussion and analysis of our financial results encompasses our consolidated results and results of our business segment: Franchise Operations. All financial results and metrics discussed below are on a continuing operation basis.
The following table summarizes our material contractual obligations at December 31, 2023 and the effect that such obligations are expected to have on our liquidity and cash flows in future periods: Material Contractual Cash Requirements Payments Due by Fiscal Year Total 2024 2025 2026 2027 2028 Thereafter Operating leases $ 16,694,145 4,424,754 4,052,720 2,753,979 2,026,045 1,202,912 2,233,735 Debt under the Credit Agreement $ 2,000,000 — — — 2,000,000 — — Recent Accounting Pronouncements Please see Note 1, “Nature of Operations and Summary of Significant Accounting Policies” in the Notes to consolidated financial statements included in Item 8 of this Form 10-K for information regarding recently issued accounting pronouncements that may impact our financial statements.
The following table summarizes our material contractual obligations from continuing operations at December 31, 2024 and the effect that such obligations are expected to have on our liquidity and cash flows in future periods: Material Contractual Cash Requirements from Continuing Operations Payments Due by Fiscal Year Total 2025 2026 2027 2028 2029 Thereafter Operating leases $ 460,056 460,056 — — — — — Recent Accounting Pronouncements Please see Note 1, Nature of Operations and Summary of Significant Accounting Policies in the Notes to consolidated financial statements included in Item 8 of this Form 10-K for information regarding recently issued accounting pronouncements that may impact our financial statements.
As of December 31, 2023, we and our franchisees operated or managed 935 clinics, of which 800 were operated or managed by franchisees and 135 were operated as company-owned or managed clinics. We and our franchisees opened 114 clinics during 2023, 104 franchised clinics and 10 company-owned or managed clinics.
As of December 31, 2024, we and our franchisees operated or managed 967 clinics, of which 842 were operated or managed by franchisees and 125 were operated as company-owned or managed clinics. Our franchisees opened 57 clinics during 2024. This compares to 114 clinics opened in 2023, 104 franchised clinics and 10 company-owned or managed clinics.
This strong result reflects the power of the regional developer program to accelerate the number of clinics sold, and eventually opened, across the country.
We will continue to leverage the power of the regional developer program to accelerate the number of clinics sold, and eventually opened, across the country.
Analysis of Cash Flows Net cash provided by operating activities was $14.7 million for the year ended December 31, 2023, compared to net cash provided by operating activities of $8.2 million for the year ended December 31, 2022.
Analysis of Cash Flows Net cash provided by operating activities for both continuing and discontinued operations was $9.4 million for the year ended December 31, 2024, compared to net cash provided by operating activities for both continuing and discontinued operations of $14.7 million for the year ended December 31, 2023.
System-wide Comp Sales include the sales from both company-owned or managed clinics and franchised clinics that in each case have been open at least 13 full months and exclude any clinics that have closed.
We believe these indicators provide us with useful data with which to measure our performance and to measure our franchisees’ and clinics’ performance. System-wide Comp Sales include the sales from both company-owned or managed clinics and franchised clinics that in each case have been open at least 13 full months and exclude any clinics that have closed.
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 33 Table of Contents costs associated with the leased property are expensed as incurred and are also included in general and administrative expenses on the consolidated income statements.
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 consolidated income statements. 32 Table of Contents Income Taxes We recognize deferred tax assets and liabilities for both the expected impact of differences between the financial statement amount and the tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax losses and tax credit carryforwards.
The increase was primarily attributable to the increased net income, net of non-cash charges, in the year ended December 31, 2023 of $13.9 million versus $8.4 million in the prior year period and the changes in operating assets and liabilities of $0.8 million in the year ended December 31, 2023 versus $(0.2) million in the prior year period.
The decrease was primarily attributable to the decrease in net income, net of non-cash charges, from both continuing and discontinued operations in the year ended December 31, 2024 of $8.3 million versus $13.9 million in the prior year period offset by the increases in operating assets and liabilities of $1.2 million in the year ended December 31, 2024 versus $0.8 million in the prior year period.
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. We recognize a contract liability (or a deferred revenue liability) related to the prepaid treatment plans for which we have an ongoing performance obligation.
Amounts collected in advance for membership and wellness packages are recorded as deferred revenue and 31 Table of Contents recognized when the service is performed. Any unused visits associated with monthly memberships are recognized on a month-to-month basis.
We recognize this contract liability, and recognize revenue, as the patient consumes his or her visits related to the package and we perform the services.
We recognize a contract liability (or a deferred revenue liability) related to the prepaid treatment plans for which we have an ongoing performance obligation. We recognize this contract liability, and recognize revenue, as the patient consumes his or her visits related to the package and we perform the services.
You should not consider Adjusted EBITDA as a substitute for operating profit as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of liquidity. We may calculate Adjusted EBITDA differently from other companies.
We have provided Adjusted EBITDA, a non-GAAP measure of financial performance because it is commonly used for comparing companies in our industry. You should not consider Adjusted EBITDA as a substitute for operating profit as an indicator of our operating performance or as an alternative to cash flows from operating activities as a measure of liquidity.
Significant Events and/or Recent Developments For the year ended December 31, 2023: • Comp Sales of clinics that have been open for at least 13 full months increased 4%. • Comp Sales for mature clinics open 48 months or more decreased 1%. 30 Table of Contents • System-wide sales for all clinics open for any amount of time grew 12% to $488.0 million.
Significant Events and/or Recent Developments For the year ended December 31, 2024: • Comp Sales of clinics that have been open for at least 13 full months increased 4%. • Comp Sales for mature clinics open 48 months or more decreased 2%. • System-wide sales for all clinics open for any amount of time grew 9% to $530.3 million. 29 Table of Contents We saw 957,000 new patients in 2024, compared with 932,000 new patients in 2023, with approximately 36% of new patients having never been to a chiropractor before.
This compares to 137 clinics opened in 2022, 121 franchised clinics and 16 company-owned or managed clinics. Of the 135 company-owned or managed clinics at December 31, 2023, 65 were constructed and developed by us, and 70 were acquired from franchisees. 29 Table of Contents Our current strategy is to grow through the sale and development of additional franchises.
Of the 125 company-owned or managed clinics at December 31, 2024, 58 were constructed and developed by us, and 67 were acquired from franchisees. Our current strategy is to grow through the sale and development of additional franchises.
We generated $14.7 million of cash flow from operating activities in the year ended December 31, 2023.
We generated $9.4 million of cash flow from operating activities from both continuing and discontinued operations in the year ended December 31, 2024.
We receive monthly performance reports from our system and our clinics, which include key performance indicators per clinic, including gross sales, comparable same-store sales growth (“Comp Sales”), number of new patients, conversion percentage and member attrition.
We receive monthly performance reports from our system and our clinics, which include key performance indicators per clinic, including gross sales, Comp Sales, number of new patients, conversion percentage and member attrition. In addition, we review monthly reporting related to system-wide sales, clinic openings, clinic license sales and various earnings metrics in the aggregate and per clinic.
We record an impairment loss when the carrying amount of the asset is not recoverable and exceeds its fair value.
We record an impairment loss when the carrying amount of the asset is not recoverable and exceeds its fair value. Stock-Based Compensation We account for share-based payments by recognizing compensation expense based on the estimated fair value of the awards on the date of grant.
For the year ended December 31, 2022, this included clinic acquisitions for $12.1 million, purchases of property and equipment for $5.9 million. Net cash provided by financing activities was $0.2 million and $0.3 million during the years ended December 31, 2023 and 2022, respectively.
Net cash used for financing activities was $2.0 million and net cash provided by financing activities was $0.2 million during the years ended December 31, 2024 and 2023, respectively. For the year ended December 31, 2024, this related to the repayment of debt under the Credit Agreement of $2.0 million.
Based on the terms of the purchase agreement, the acquisition has been treated as an asset purchase. For the year ended December 31, 2023, we constructed and developed 10 new corporate clinics.
Based on the terms of the purchase agreement, the acquisition has been treated as an asset purchase.
The increase in operating assets and liabilities for the year ended December 31, 39 Table of Contents 2023 is primarily attributable to (i) an increase in accrued expenses of $0.8 million, mainly driven by accruals relating to the restatement and ERC consultants, (ii) an increase in payroll liabilities of $1.5 million, mostly due to the short-term incentive compensation accrual in the current year (without the comparable accrual as of December 31, 2022) and payroll cycle timing, (iii) an increase in deferred franchise cost of $0.4 million related to the commissions paid for the sale of franchise licenses during the year and (iv) an increase in deferred revenue of $0.3 million related to the amounts collected for the sale of franchise license and membership and wellness packages sold during the year (which are recorded as deferred revenue until the service is performed).
The increase in operating assets and liabilities from both continuing and discontinued operations for the year ended December 31, 2024 is primarily attributable to (i) an increase in accrued expenses of $4.6 million, mainly driven by accruals relating to two litigation settlements, (ii) an increase in accounts receivable of $1.6 million primarily related to a receivable recorded from the Company’s insurance related to medical injury claim settlement, and (iii) an increase in payroll liabilities of $2.4 million, mostly due to the short-term incentive compensation accrual in the current year (without the comparable accrual as of December 31, 2023), payroll cycle timing and restructuring cost accruals.
Net cash used in investing activities was $6.2 million and $17.9 million during the years ended December 31, 2023 and 2022, respectively. For the year ended December 31, 2023, this included clinic acquisitions for $1.2 million and purchases of property and equipment for $5.0 million.
For the year ended December 31, 2024, this included purchases of property and equipment for $1.2 million partially offset by proceeds from the sale of company-owned and managed clinics of $0.6 million. For the year ended December 31, 2023, this included clinic acquisitions for $1.2 million and purchases of property and equipment for $5.0 million.
After evaluating options for improvement, during 2023 the board authorized management to initiate a plan to re-franchise or sell the majority of our company-owned or managed clinics. This refined strategy will leverage our greatest strength – our capacity to build a franchise – to drive long-term growth for both our franchisees and The Joint as a public company.
This refined strategy will leverage our greatest strength — our capacity to build a franchise — to drive long-term growth for both our franchisees and The Joint as a public company. We have created a robust framework for the refranchising effort, organizing clinics into clusters, and generating comprehensive disclosure packets for marketing efficiency.
Income Tax Expense 37 Table of Contents Year Ended December 31, Change from Prior Year Percent Change from Prior Year 2023 2022 Income tax expense $ 11,390,953 $ 68,448 $ 11,322,505 16,541.8 % For the years ended December 31, 2023 and 2022, the effective tax rates were 695.1% and 9.8%, respectively.
Income Tax Expense Year Ended December 31, Change from Prior Year Percent Change from Prior Year 2024 2023 Income tax expense $ 62,142 $ 11,023,411 $ (10,961,269) (99.4) % For the years ended December 31, 2024 and 2023, the effective tax rates were (4.2)% and 4,339.9%, respectively.
General and Administrative Expenses Year Ended December 31, Change from Prior Year Percent Change from Prior Year 2023 2022 General and Administrative Expenses $ 81,466,088 $ 70,233,447 $ 11,232,641 16.0 % General and administrative expenses increased during the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to the increases in the following to support continued clinic count and revenue growth in both operating segments: (i) payroll and related expenses of $8.2 million; (ii) general overhead and administrative expenses of $2.7 million; (iii) professional and advisory fees of $1.0 million primarily related to the accounting restatement; and (iv) software and maintenance expense of $0.4 million; offset by a decrease in acquisition related expenses of $1.1 million.
General and Administrative Expenses Year Ended December 31, Change from Prior Year Percent Change from Prior Year 2024 2023 General and Administrative Expenses $ 29,833,570 $ 26,231,615 $ 3,601,955 13.7 % General and administrative expenses increased during the year ended December 31, 2024 compared to the year ended December 31, 2023, primarily due to the increases in the following expenses to support the Company’s continued efforts in executing on its strategy to become a pure-play franchisor: (i) payroll and related expenses of $1.3 million; (ii) restructuring costs of $0.6 million; (iii) professional and advisory fees of $1.2 million primarily related to additional IT outsourced resources to support the Company’s proprietary chiropractic software and help desk; and (iv) accounting services expenses of $0.4 million.
Please see Note 9, “Income Taxes” in the Notes to consolidated financial statements included in Item 8 of this Form 10-K for further discussion. Non-GAAP Financial Measures The table below reconciles net (loss) income to Adjusted EBITDA for the years ended December 31, 2023 and 2022.
In contrast, the absence of this adjustment for the year ended December 31, 2024 led to an effective tax rate that remained within a more comparable range. Please see Note 8, Income Taxes , in the Notes to consolidated financial statements included in Item 8 of this Form 10-K for further discussion.
Total Revenues Components of revenues for the year ended December 31, 2023, as compared to the year ended December 31, 2022, were as follows: 34 Table of Contents Year Ended December 31, Change from Prior Year Percent Change from Prior Year 2023 2022 Revenues: Revenues from company-owned or managed clinics $ 70,718,880 $ 59,422,294 $ 11,296,586 19.0 % Royalty fees 29,160,831 26,190,531 2,970,300 11.3 % Franchise fees 2,882,895 2,441,325 441,570 18.1 % Advertising fund revenue 8,321,043 7,456,696 864,347 11.6 % Software fees 5,086,562 4,290,739 795,823 18.5 % Other revenues 1,526,145 1,450,725 75,420 5.2 % Total revenues $ 117,696,356 $ 101,252,310 $ 16,444,046 16.2 % The reasons for the significant changes in our components of total revenues were as follows: Consolidated Results • Total revenues increased by $16.4 million, primarily due to the continued expansion and revenue growth of our franchise base, continued same-store sales growth and expansion of our corporate-owned or managed clinics portfolio.
Total Revenues Components of revenues for the year ended December 31, 2024, as compared to the year ended December 31, 2023, were as follows: 33 Table of Contents Year Ended December 31, Change from Prior Year Percent Change from Prior Year 2024 2023 Revenues: Royalty fees 32,144,796 29,160,832 2,983,964 10.2 % Franchise fees 2,997,850 2,882,895 114,955 4.0 % Advertising fund revenue 9,180,281 8,321,043 859,238 10.3 % Software fees 5,687,326 5,086,562 600,764 11.8 % Other revenues 1,886,352 1,526,145 360,207 23.6 % Total revenues $ 51,896,605 $ 46,977,477 $ 4,919,128 10.5 % The reasons for the significant changes in our components of total revenues were as follows: • Total revenues increased by $4.9 million, primarily due to the continued expansion and revenue growth of our franchise base. • Royalty fees and advertising fund revenue increased due to an increase in the number of franchised clinics in operation during 2024, along with continued sales growth in existing franchised clinics.
Adjusted EBITDA does not reflect the bargain purchase gain, which represents the excess of the fair value of net assets acquired over the purchase consideration; and •. Adjusted EBITDA does not reflect the (gain) loss on disposition or impairment, which represents the impairment of assets as of the reporting date.
We do not consider this to be indicative of our ongoing operations; and •. While not included in the presented periods, Adjusted EBITDA would not reflect any bargain purchase gain, which would represent the excess of the fair value of net assets acquired over the purchase consideration.
These increases in operating assets and liabilities were partially offset by the decreases in (i) upfront regional developer fees of $0.6 million, (ii) accounts payable of $1.4 million due to the general increase in operating expenses and timing of payments, and (iii) prepaid expenses and other current assets of $0.3 million, mainly driven by the general increase in operating expenses.
These increases in operating assets and liabilities were partially offset by the decreases in (i) operating lease liabilities of $3.8 million related to monthly rent payments against the lease liabilities held for sale, (ii) a decrease in deferred revenue of $0.6 million and a decrease in deferred franchise cost of $0.5 million both primarily related to the decreased sales of franchise licenses during the year, and (iii) a decrease in upfront regional developer fees of $0.4 million. 38 Table of Contents Cash provided by operating activities is subject to variability period over period as a result of the timing of collections and payments related to accounts receivable, accrued expenses, and other operating assets and liabilities.
Cash provided by operating activities is subject to variability period over period as a result of the timing of collections and payments related to accounts receivable, accrued expenses, and other operating assets and liabilities. Royalties and other fees are collected from our franchisees semi-monthly, two working days after each sales period has ended.
Royalties and other fees are collected from our franchisees semi-monthly, two working days after each sales period has ended. Net cash used in investing activities was $0.6 million and $6.2 million during the years ended December 31, 2024 and 2023, respectively.
Cost of Revenues Year Ended December 31, Change from Prior Year Percent Change from Prior Year 2023 2022 Cost of Revenues $ 10,546,558 $ 9,171,063 $ 1,375,495 15.0 % For the year ended December 31, 2023, as compared with the year ended December 31, 2022, the total cost of revenues increased due to an increase in regional developer royalties and sales commissions of $1.3 million and an increase in website hosting costs of $0.1 million. 35 Table of Contents Selling and Marketing Expenses Year Ended December 31, Change from Prior Year Percent Change from Prior Year 2023 2022 Selling and Marketing Expenses $ 16,541,990 $ 13,962,709 $ 2,579,281 18.5 % Selling and marketing expenses increased $2.6 million for the year ended December 31, 2023, as compared to the year ended December 31, 2022, driven by an increase in advertising fund expenditures from a larger franchise base and increased local marketing expenditures from a larger company-owned or managed clinic base.
Cost of Revenues Year Ended December 31, Change from Prior Year Percent Change from Prior Year 2024 2023 Cost of Revenues $ 11,516,655 $ 10,480,645 $ 1,036,010 9.9 % For the year ended December 31, 2024, as compared with the year ended December 31, 2023, the total cost of revenues increased due to an increase in regional developer royalties and sales commissions.
Removed
Information pertaining to fiscal year 2021 was included in our Amended Annual Report on Form 10-K/A for the year ended December 31, 2021 under Part II, Item 7, “Management’s Discussion and Analysis of Financial Position and Results of Operations,” which was filed with the SEC on September 26, 2023.
Added
After evaluating options for improvement, during 2023 the board authorized management to initiate a plan to refranchise or sell the majority of our company-owned or managed clinics. During the third quarter of 2024, the Company expanded the refranchising plan to include the full portfolio of our company-owned or managed clinics, marketing the clinics in large clusters grouped by geographic territory.
Removed
In addition, we review monthly reporting related to system-wide sales, clinic openings, clinic license sales and various earnings metrics in the aggregate and per clinic. We believe these indicators provide us with useful data with which to measure our performance and to measure our franchisees’ and clinics’ performance.
Added
We had given 28 Table of Contents initial preference to existing franchisees and in the third quarter of 2024 expanded the marketing efforts to larger multi-unit, multi-brand operators and certain private equity firms interested in purchasing and operating large market-based clinic clusters and have received significant interest to date in most markets.
Removed
We have created a robust framework for the re-franchising effort, organizing clinics into clusters, and generating comprehensive disclosure packets for marketing efficiency. We have given initial preference to existing franchisees and have received significant interest to date. Our goal will be to generate significant proceeds that will provide us with value creating capital allocation opportunities.
Added
Subsequent to the balance sheet date, we have received draft letters of intent (“LOIs”) for our full portfolio of company-owned or managed clinics and as of the filing of this Form 10-K are in the financial stages of LOI term negotiations. Our goal will be to generate significant processes that will provide us with value creating capital allocation opportunities.
Removed
We saw over 932,000 new patients in 2023, compared with 845,000 new patients in 2022, with approximately 36% of those new patients having never been to a chiropractor before. We are not only increasing our percentage of market share, but expanding the chiropractic market. These factors, along with continued leverage of our operating expenses, drove improvement in our bottom line.
Added
We are not only increasing our percentage of market share, but expanding the chiropractic market. On June 24, 2024, we entered into an agreement pursuant to which we repurchased the right to develop franchises in various counties in Maryland. The total consideration for the transaction was $0.6 million.
Removed
Based on the timing and varied scope of the initiative, we are unable to estimate the financial impact of such plans.
Added
We carried an upfront regional developer fee liability balance associated with this transaction of $0.1 million, representing the unrecognized fee collected upon the execution of the regional developer agreement.
Removed
In October 2023, we entered into two separate letters of intent to sell two of our company-owned or managed clinics that were part of the approximately 10% of clinics identified for sale and classified as held for sale as of September 30, 2023 for a combined total sales price of $185,000.
Added
We accounted for the termination of development rights associated with unsold or undeveloped franchises as a cancellation, and the associated upfront regional developer fee liability was netted against the aggregate purchase price. We recognized the net amount of $0.5 million as a general and administrative expense for the year ended December 31, 2024. Effective October 10, 2024, Peter D.
Removed
During the year ended December 31, 2023, intangible assets and property and equipment, net related to a closed clinic and asset groups determined to not be recoverable with a total carrying amount of approximately $3.0 million was written down to $1.2 million.
Added
Holt resigned as the President and Chief Executive Officer of the Company and as a member of the Company’s Board of Directors. Effective October 14, 2024, the Board of Directors of the Company appointed Sanjiv Razdan as President and Chief Executive Officer of the Company and as a member of the Company’s Board of Directors.
Removed
As a result, we recorded a noncash impairment loss of approximately $1.8 million during the year ended December 31, 2023. During the year ended December 31, 2022, an operating lease ROU asset related to a closed clinic with a total carrying amount of $0.2 million was written down to their fair value of zero.
Added
During the third quarter of 2024, the Company, with the authorization of the Board of Directors, expanded the refranchising plan to include the full portfolio of our company-owned or managed clinics, marketing the clinics in clusters grouped by proximity to larger private equity firms.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAs such, the Revolver exposes us to market risk for changes in interest rates. Given our short-term debt position as of December 31, 2023, the effect of a 10-basis point change in interest rates would not have a material impact on our variable interest expense.
Biggest changeAs we do not maintain a debt position under the Credit Agreement as of December 31, 2024, the effect of a change in interest rates would not have an impact to our interest expense.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Financial instruments held by us as of December 31, 2023 include cash and cash equivalents and short-term borrowings. A portion of our cash is affected by short-term interest rates, which are currently low.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Financial instruments held by us as of December 31, 2024 include cash and cash equivalents and short-term borrowings. A portion of our cash is affected by short-term interest rates, which are currently low.
Given the low interest income generated from our cash, any reduction in interest rates would not have a material impact on our interest income. 40 Table of Contents Borrowings under the Credit Agreement bear interest at a rate equal to an applicable margin plus a variable rate.
Given the low interest income generated from our cash, any reduction in interest rates would not have a material impact on our interest income. Borrowings under the Credit Agreement bear interest at a rate equal to an applicable margin plus a variable rate. As such, the Revolver exposes us to market risk for changes in interest rates.

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