The next dialogue and evaluation of the outcomes of operations and monetary
situation of The Joint Corp. for the years ended December 31, 2020 and 2019
must be learn along side the consolidated monetary statements and the
notes thereto, and different monetary data contained elsewhere on this Kind
10-Ok.
Overview
Our principal enterprise is to develop, personal, function, assist and handle
chiropractic clinics via franchising and the sale of regional developer
rights and thru direct possession and administration preparations all through the
United States.
We search to be the main supplier of chiropractic care within the markets we serve
and to turn out to be essentially the most acknowledged model in our business via the fast and
targeted growth of chiropractic clinics in key markets all through North
America and doubtlessly overseas. We noticed over 584,000 new sufferers in 2020,
regardless of the pandemic and with roughly 27% of these new sufferers visiting a
chiropractor for the primary time. We're not solely growing our proportion of
market share, however increasing the chiropractic market.
Key Efficiency Measures. We obtain month-to-month efficiency studies from our system
and our clinics which embody key efficiency indicators per clinic together with
product sales, comparable same-store gross sales development, or "Comp Gross sales," variety of new
sufferers, conversion proportion, and member attrition. As well as, we overview
month-to-month reporting associated to system-wide gross sales, clinic openings, clinic license
gross sales, and varied earnings metrics within the mixture and per clinic. We imagine
these indicators present us with helpful information with which to measure our
efficiency and to measure our franchisees' and clinics' efficiency. Comp Gross sales
embody the gross sales from each company-owned or managed clinics and franchised
clinics that in every case have been open at the least 13 full months and exclude any
clinics which have closed. System-wide gross sales embody gross sales in any respect clinics,
whether or not operated by us or by franchisees. Whereas franchised gross sales will not be
recorded as revenues by us, administration believes the data is essential in
understanding the general model's monetary efficiency, as a result of these gross sales are
the idea on which we calculate and file royalty charges and are indicative of
the monetary well being of the franchisee base.
Key Clinic Improvement Developments.  As of December 31, 2020, we and our franchisees
operated or managed 579 clinics, of which 515 had been operated or managed by
franchisees and 64 had been operated as company-owned or managed clinics. Of the 64
company-owned or managed clinics, 23 had been constructed and developed by us, and
41 had been acquired from franchisees.
Our present technique is to develop via the sale and improvement of further
franchises, construct upon our regional developer technique, and proceed to increase
our company clinic portfolio inside clustered areas. The variety of
franchise licenses offered for the 12 months ended December 31, 2020 was 121, in contrast
with 126 and 99 licenses for the years ended December 31, 2019 and 2018,
respectively. We ended 2020 with 22 regional builders who had been liable for
83% of the 121 licenses offered through the 12 months. This sturdy outcome displays the
energy of the regional developer program to speed up the variety of clinics
offered, and ultimately opened, throughout the nation.
As well as, we imagine that we will speed up the event of, and income
technology from, company-owned or managed clinics via the accelerated
improvement of greenfield items and the additional selective acquisition of
present franchised clinics. We'll search to amass present franchised clinics
that meet our standards for demographics, web site attractiveness, proximity to different
clinics and extra suitability components.
We imagine that The Joint has a sound idea, which was additional validated
via its resiliency through the pandemic and can profit from the elemental
modifications going down within the method wherein People entry chiropractic care
and their rising curiosity in in search of efficient, reasonably priced pure options
for basic wellness. These developments be part of with the desire we now have seen amongst
chiropractic medical doctors to reject the insurance-based mannequin to provide a
mixture that advantages the buyer and the service supplier alike. We
imagine that these forces create an essential alternative to speed up the
development of our community.

Replace on the COVID-19 pandemic

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Contents

The COVID-19 pandemic has had a big impression on our enterprise, monetary
situation, money flows and outcomes of operations in 2020. Virus-related considerations,
momentary clinic closures and government-imposed restrictions resulted in
decreased affected person site visitors and spending developments and in membership freezes and
cancellations in our clinics throughout 2020. This unfavorable impression on our
franchisees' clinics has additionally negatively impacted our royalty and promoting
charge income. Roughly 10% of our system-wide clinics had been closed throughout
April, with some clinics starting to reopen in Could. Roughly 99% of our
clinics have reopened as of the date of this report, though some are working
on decreased hours. Our company clinics and headquarters have been in a position to
function with none furloughs or lay-offs as we carried out enhanced sanitary
measures to make sure affected person and worker security. Our new sanitary and security
measures embody cleansing of devices between every affected person use, elimination of
non-essential gadgets, bodily distancing, and masks for all Joint workers. Attributable to
the government-imposed restrictions, our outcomes of operations had been most
negatively impacted through the month of April. With the intention to rebuild, we launched
our summer season promotional exercise through the second and third quarters of 2020,
which included incentives to unfreeze wellness plan memberships, free
chiropractic care to new sufferers, and a restoration promotion, which was geared toward
lapsed sufferers and former plan members. Our summer season promotion, coupled with the
easing of presidency restrictions, have resulted in enchancment in most of our
key metrics, together with product sales, Comp Gross sales, affected person site visitors, and new affected person
conversion price. As well as, the attrition price amongst present sufferers has
remained comparatively secure through the second half of the 12 months. Regardless of
enhancements through the second half of the 12 months, vital uncertainty stays
concerning the period and extent of the impression on our enterprise of the COVID-19
pandemic. Our 2020 income and earnings had been negatively impacted in comparison with our
pre-COVID-19 pandemic expectations, and the pandemic could have a unfavorable impression
on our income and internet revenue in 2021. At the same time as authorities restrictions are
lifted and clinics reopen, the continuing financial impacts and well being considerations
related to the pandemic could proceed to have an effect on affected person habits and
spending ranges and will end in decreased visits and affected person spending developments
that adversely impression our monetary place and outcomes of operations. In
addition, the impression of the COVID-19 pandemic depends upon components past our
information or management, together with the period and severity of the outbreak, different
further vital will increase within the quantity or severity of circumstances in future
durations, and actions taken to comprise its unfold and mitigate its public well being
results. On account of the COVID-19 pandemic, we took the next steps to
protect liquidity and make sure the Firm's monetary flexibility in 2020:
•Reviewed discretionary working bills and deferred sure capital
expenditures and hiring.
•Drew down the $2 million of our revolving credit score facility with J.P. Morgan
Chase Financial institution, N.A. in March, noting we now have a further $5.5 million below a
developmental line of credit score that's unavailable for basic company functions.
•Secured a $2.7 million mortgage below CARES Act Paycheck Safety Program in
April, bringing complete unrestricted money to $21 million as of December 31, 2020.

Vital Occasions and/or Latest Developments
We proceed to ship on our strategic initiatives and to progress towards
sustained profitability.
For the 12 months ended December 31, 2020:
•Comp Gross sales of clinics which have been open for at the least 13 full months elevated
9%.
•Comp Gross sales for mature clinics open 48 months or extra elevated 5%.
•System-wide gross sales for all clinics open for any period of time grew 18% to $260
million.
Regardless of the government-imposed restrictions and decreased site visitors through the
second quarter of 2020, we noticed over 584,000 new sufferers in 2020, in contrast with
585,000 new sufferers in 2019, with roughly 27% of these new sufferers
having by no means been to a chiropractor earlier than. We're not solely growing our
proportion of market share, however increasing the chiropractic market. These
components, together with decreased discretionary working bills, drove enchancment
in our backside line.
Through the first quarter of 2020, we entered right into a regional developer settlement
for the states of Iowa, Nebraska, South Dakota and the county of Rock Island in
the state of Illinois for which we obtained roughly $201,000. The
settlement requires the opening of a minimal of 18 clinics over a seven-year
interval. As well as, through the third quarter of 2020, we entered right into a
regional developer settlement for the state of Wisconsin and the remaining
obtainable territories throughout the state of
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Illinois for which we obtained roughly $340,000. The settlement requires
the opening of a minimal of 19 clinics over a ten-year interval.
On December 31, 2020, we entered into an settlement below which we repurchased
the correct to develop franchises in varied counties in North Carolina. The whole
consideration for the transaction was $1,039,500. We carried a deferred income
steadiness related to this transaction of $36,781, representing the charge
collected upon the execution of the regional developer settlement. We accounted
for the termination of improvement rights related to unsold or undeveloped
franchises as a cancellation, and the related deferred income was netted
in opposition to the combination buy value.
On January 1, 2021, the Firm entered into an settlement below which the
Firm repurchased the correct to develop franchises in varied counties in
Georgia. The whole consideration for the transaction was $1,388,700. The Firm
carried a deferred income steadiness related to this transaction of $35,679,
representing the charge collected upon the execution of the regional developer
settlement. The Firm accounted for the termination of improvement rights
related to unsold or undeveloped franchises as a cancellation, and the
related deferred income was netted in opposition to the combination buy value.
For the 12 months ended December 31, 2020, we acquired one clinic for $534,000 and
constructed and developed three new company clinics.
Components Affecting Our Efficiency
Our working outcomes could fluctuate considerably on account of quite a lot of
components, together with the timing of latest clinic gross sales and clinic openings and
closures, the magnitude of bills associated to the foregoing, the financial
situation of the markets wherein our clinics are situated, basic financial
situations, client confidence within the economic system, client preferences,
aggressive components, and illness epidemics and different health-related considerations,
similar to the present COVID-19 pandemic.
Vital Accounting Polices and Estimates
The preparation of consolidated monetary statements requires us to make
estimates and assumptions. These estimates and assumptions have an effect on the reported
quantities of belongings and liabilities and disclosure of contingent belongings and
liabilities on the date of the consolidated monetary statements, and the
reported quantities of revenues and bills through the reporting interval. We base
our accounting estimates on historic expertise and different components that we
imagine to be cheap below the circumstances. Precise outcomes may differ
from these estimates.  We've mentioned the event and number of
vital accounting insurance policies and estimates with our Audit Committee.
Intangible Property
Intangible belongings consist primarily of re-acquired franchise and regional
developer rights and buyer relationships. We amortize the truthful worth of
re-acquired franchise rights over the remaining contractual phrases of the
re-acquired franchise rights on the time of the acquisition, which vary from
one to eight years. Within the case of regional developer rights, we amortize the
acquired regional developer rights over the remaining contractual phrases on the
time of the acquisition, which vary from two to seven years. The truthful worth of
buyer relationships is amortized over their estimated helpful life which
ranges from two to 4 years.
Goodwill
Goodwill consists of the surplus of the acquisition value over the truthful worth of
tangible and identifiable intangible belongings acquired within the acquisitions of
franchises. Goodwill and intangible belongings deemed to have indefinite lives are
not amortized however are topic to annual impairment assessments. As required, we
carry out an annual impairment take a look at of goodwill as of the primary day of the fourth
quarter or extra often if occasions or circumstances change that might extra
probably than not scale back the truthful worth of a reporting unit beneath its carrying
worth. No impairments of goodwill had been recorded for the years ended December 31,
2020 and 2019.
Lengthy-Lived Property
We overview our long-lived belongings for impairment every time occasions or modifications in
circumstances point out that the carrying quantity of the asset might not be
recovered. We glance primarily to estimated undiscounted future money flows in its
evaluation of whether or not or not long-lived belongings are recoverable. On account of
the present COVID-19 pandemic, we evaluated whether or not the carrying values of the
long-lived belongings in sure company clinics had been recoverable on the finish of
the primary quarter of 2020. We
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didn't determine any triggering occasion through the the rest of 2020. No
impairments of long-lived belongings had been recorded for the years ended December 31,
2020 and 2019.
Inventory-Based mostly Compensation
We account for share-based funds by recognizing compensation expense primarily based
upon the estimated truthful worth of the awards on the date of grant. We decide
the estimated grant-date truthful worth of restricted shares utilizing the closing value
on the date of the grant and the grant-date truthful worth of inventory choices utilizing
the Black-Scholes-Merton mannequin. With the intention to calculate the truthful worth of the
choices, sure assumptions are made relating to the elements of the mannequin,
together with risk-free rate of interest, volatility, anticipated dividend yield and
anticipated choice life. Adjustments to the assumptions may trigger vital
changes to the valuation. We acknowledge compensation prices ratably over the
interval of service utilizing the straight-line methodology. Forfeitures are estimated
primarily based on historic and forecasted turnover, which is roughly 5%.
Income Recognition

We generate income primarily via our company-owned and managed clinics and
via royalties, franchise charges, promoting fund contributions, IT associated
revenue and laptop software program charges from our franchisees.
Revenues from Firm-Owned or Managed Clinics. We earn income from clinics
that we personal and function or handle all through the USA.  In these states
the place we personal and function the clinic, revenues are acknowledged when companies are
carried out. We provide quite a lot of membership and wellness packages which characteristic
discounted pricing as in contrast with our single-visit pricing.  Quantities collected
prematurely for membership and wellness packages are recorded as deferred income
and acknowledged when the service is carried out. Any unused visits related to
month-to-month memberships are acknowledged on a month-to-month foundation. We acknowledge a
contract legal responsibility (or a deferred income legal responsibility) associated to the pay as you go
therapy plans for which we now have an ongoing efficiency obligation. We
acknowledge this contract legal responsibility, and acknowledge income, because the affected person
consumes his or her visits associated to the bundle and we carry out the companies.
Based mostly on a historic lag evaluation and an analysis of authorized obligation by
jurisdiction, we concluded that any remaining contract legal responsibility that exists
after 12 to 24 months from transaction date can be deemed breakage. Breakage
income is acknowledged solely at that time, when the chance of the affected person
exercising his or her remaining rights turns into distant.
Royalties and Promoting Fund Income. We accumulate royalties from our
franchisees, as stipulated within the franchise settlement, equal to 7% of gross
gross sales and a advertising and marketing and promoting charge presently equal to 2% of product sales.
Royalties, together with franchisee contributions to promoting funds, are
calculated as a proportion of clinic gross sales over the time period of the franchise
settlement. The franchise settlement royalties, inclusive of promoting fund
contributions, signify sales-based royalties which are associated fully to our
efficiency obligation below the franchise settlement and are acknowledged as
franchisee clinic stage gross sales happen. Royalties and advertising and marketing and promoting
charges are collected bi-monthly two working days after every gross sales interval has
ended.
Franchise Charges. We require the complete non-refundable preliminary franchise charge to be
paid upon execution of a franchise settlement, which generally has an preliminary
time period of ten years. Preliminary franchise charges are acknowledged ratably on a
straight-line foundation over the time period of the franchise settlement. Our companies below
the franchise settlement embody: coaching of franchisees and workers, web site
choice, development/vendor administration and ongoing operations assist. We
present no financing to franchisees and supply no ensures on their behalf. The
companies we offer are extremely interrelated with the franchise license and as
such are thought-about to signify a single efficiency obligation.
Software program Charges. We accumulate a month-to-month charge from our franchisees to be used of our
proprietary or chosen chiropractic or buyer relationship administration
software program, laptop assist, and web companies assist. These charges are
acknowledged ratably on a straight-line foundation over the time period of the respective
franchise settlement.
Regional Developer Charges. Throughout 2011, we established a regional developer
program to interact impartial contractors to help in creating specified
geographical areas. Below the unique program, regional builders paid a
license charge for every franchise they obtained the correct to develop throughout the
area. In 2018, this system was revised to grant unique geographical
territory and set up a minimal improvement obligation inside that outlined
territory. Regional developer charges are non-refundable and are acknowledged as
income ratably on a straight-line foundation over the time period of the regional developer
settlement, which is taken into account to start upon the execution of the settlement. Our
companies below regional developer agreements embody web site choice, grand
opening assist for the clinics, gross sales assist for identification of certified
franchisees, basic operational assist and advertising and marketing assist to promote for
possession alternatives. The companies we offer are extremely interrelated with
the event of the territory and the ensuing franchise licenses offered by
the regional developer and as such are thought-about to
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signify a single efficiency obligation. As well as, regional builders
obtain charges that are funded by the preliminary franchise charges collected from
franchisees upon the sale of franchises inside their unique geographical
territory and a royalty of three% of gross sales generated by franchised clinics of their
unique geographical territory. Charges associated to the sale of franchises inside
their unique geographical territory are initially deferred as deferred
franchise prices and are acknowledged as an expense in franchise price of revenues
when the respective income is acknowledged, which is mostly over the time period of
the associated franchise settlement. Royalties of three% of product sales generated by
franchised clinics of their areas are additionally acknowledged as franchise price of
revenues as franchisee clinic stage gross sales happen, which is funded by the 7%
royalties collected from the franchisees of their areas. Sure regional
developer agreements outcome within the regional developer buying the rights to
present royalty streams from clinics already open within the respective territory.
In these cases, the income related from the sale of the royalty stream
is acknowledged over the remaining lifetime of the respective franchise agreements.
Leases
We adopted, efficient the primary quarter of 2019, accounting steering associated to
leases. The steering, amongst different modifications, requires lessees to acknowledge a
right-of-use ("ROU") asset and a lease legal responsibility within the steadiness sheet for many
leases, however retains an expense recognition mannequin just like the earlier
steering. The lease legal responsibility is measured at present worth of the fastened
lease funds over the lease time period and the ROU asset is measured on the lease
legal responsibility quantity, adjusted for lease prepayments, lease incentives obtained and
the lessee's preliminary direct prices. Figuring out the lease time period and quantity of
lease funds to incorporate within the calculation of the ROU asset and lease
legal responsibility for leases containing choices requires using judgment to
decide whether or not the train of an choice within reason sure and if the
non-obligatory interval and funds must be included within the calculation of the
related ROU asset and legal responsibility. In making this willpower, all related
financial components are thought-about that might compel us to train or not train
an choice. When obtainable, we use the speed implicit within the lease to low cost
lease funds; nonetheless, the speed implicit within the lease shouldn't be readily
determinable for considerably all of our leases. In such circumstances, we estimate our
incremental borrowing price because the rate of interest we might pay to borrow an quantity
equal to the lease funds over the same time period, with comparable collateral as in
the lease, and in the same financial setting. We estimate these charges utilizing
obtainable proof similar to charges imposed by third-party lenders in current
financings or observable risk-free rate of interest and credit score spreads for
business debt of the same period, with credit score spreads correlating to our
estimated creditworthiness.
For working leases that embody lease holidays and lease escalation clauses, we
acknowledge lease expense on a straight-line foundation over the lease time period from the
date we take possession of the leased property. Pre-opening prices are recorded
as incurred on the whole and administrative bills. We file the straight-line
lease expense and any contingent lease, if relevant, on the whole and
administrative bills on the consolidated revenue statements. Lots of our
leases additionally require us to pay actual property taxes, frequent space upkeep prices
and different occupancy prices that are additionally included on the whole and administrative
bills on the consolidated revenue statements.
Revenue Taxes
We acknowledge deferred tax belongings and liabilities for each the anticipated impression of
variations between the monetary assertion quantity and the tax foundation of belongings
and liabilities and for the anticipated future tax profit to be derived from tax
losses and tax credit score carryforwards.
We file a valuation allowance in opposition to deferred tax belongings when it's
thought-about extra probably than not that every one or a portion of our deferred tax belongings
won't be realized. In making this willpower, we're required to present
vital weight to proof that may be objectively verified. It's typically
troublesome to conclude {that a} valuation allowance shouldn't be wanted when there may be
vital unfavorable proof, similar to cumulative losses in recent times.
Forecasts of future taxable revenue are thought-about to be much less goal than previous
outcomes. Due to this fact, cumulative losses weigh closely within the general evaluation.
Along with contemplating forecasts of future taxable revenue, we're additionally
required to guage and quantify different potential sources of taxable revenue in
order to evaluate the belief of our deferred tax belongings, specifically the reversal
of present momentary variations, the carry again of losses and credit as
allowed below present tax regulation, and the implementation of tax planning
methods. Evaluating and quantifying these quantities entails vital
judgments. Every supply of revenue have to be evaluated primarily based on all optimistic and
unfavorable proof; this analysis entails assumptions about future exercise.
In 2019, we continued to take care of a full valuation allowance on the deferred tax
belongings as a result of current cumulative losses as of December 31, 2019. As of
December 31, 2020, we recorded an revenue tax good thing about $7.8 million primarily
as a result of discount within the valuation allowance. The valuation allowance was
decreased as a result of the load of proof relating to the longer term realizability of the
deferred tax belongings had turn out to be predominately optimistic and realization of the
deferred tax belongings was extra probably than not. The optimistic proof thought-about
in our evaluation of the realizability of the deferred tax belongings included the
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technology of great optimistic cumulative revenue for the three-year interval
ended December 31, 2020 and projections of future taxable revenue. Based mostly on our
earnings efficiency pattern and anticipated continued profitability, administration
decided it was extra probably than not that every one of our deferred tax belongings would
be realized. The unfavorable proof thought-about included historic loss in 2017,
marginal pre-tax revenue generated in 2018, and basic financial uncertainties
associated to the impression of the pandemic. Nevertheless, administration has concluded that
optimistic proof outweighed this unfavorable proof.
Vital judgment can be required in evaluating our unsure tax positions.
We set up accruals for unsure tax positions once we imagine that the complete
quantity of the related tax profit might not be realized. If we prevail in
issues for which accruals have been established beforehand or pay quantities in
extra of reserves, there may very well be an impact on our revenue tax provisions within the
interval wherein such willpower is made.
We usually assess the tax danger of our tax return submitting positions and we now have
not recognized any materials unsure tax positions as of December 31, 2020 and
2019, respectively.
Outcomes of Operations
The next dialogue and evaluation of our monetary outcomes encompasses our
consolidated outcomes and outcomes of our two enterprise segments: Company Clinics
and Franchise Operations.
Complete Revenues
Parts of revenues for the 12 months ended December 31, 2020, as in comparison with the
12 months ended December 31, 2019, are as follows:
                                                        12 months Ended
                                                       December 31,                      Change from          P.c Change
                                                2020                  2019               Prior 12 months           from Prior 12 months
Revenues:
Revenues from company-owned or managed
clinics                                    $ 31,771,288$ 25,807,584$  5,963,704                    23.1  %
Royalty charges                                 15,886,051            13,557,170             2,328,881                    17.2  %
Franchise charges                                2,100,800             1,791,545               309,255                    17.3  %
Promoting fund income                      4,506,413             3,884,055               622,358                    16.0  %
Software program charges                                 2,694,520             1,865,779               828,741                    44.4  %
Regional developer charges                         876,804               803,849                72,955                     9.1  %
Different revenues                                  847,100               740,918               106,182                    14.3  %
Complete revenues                             $ 58,682,976$ 48,450,900$ 10,232,076                    21.1  %


The explanations for the numerous modifications in our elements of complete revenues are
as follows:
Consolidated Outcomes
•Complete revenues elevated by $10.2 million, primarily as a result of continued
growth and income development of our franchise base and the continued income
development and growth of our firm owned or managed clinics portfolio, which
was partially offset by the unfavorable impression of the pandemic.
Company Clinics
•Revenues from company-owned or managed clinics elevated, primarily as a consequence of
improved same-store development, in addition to the growth of our corporate-owned or
managed clinics portfolio, which was partially offset by the unfavorable impression of
the pandemic.
Franchise Operations
•Royalty charges and promoting fund income elevated, as a consequence of a rise within the
variety of franchised clinics in operation together with continued gross sales development in
present franchised clinics. These will increase had been partially offset by the
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gross sales decline within the present franchised clinics as a result of pandemic. As of
December 31, 2020, and 2019, there have been 515 and 453 franchised clinics in
operation, respectively.
•Franchise charges elevated as a consequence of a rise in executed franchise agreements,
as these charges are acknowledged ratably over the time period of the respective franchise
settlement. For the 12 months ended December 31, 2020, there have been executed franchise
license gross sales or letters-of-intent for 121 franchise licenses, in comparison with 126
for the 12 months ended December 31, 2019.
•Regional developer charges elevated as a result of sale of further developer
territories and the associated income recognition over the lifetime of the regional
developer agreements. We entered into two new regional developer agreements in
2020 collectively masking 5 states and one new regional developer settlement
in 2019 masking various counties in every of three states. Given the ratable
recognition of the income, the agreements executed through the course of 2019
now have a full 12 months of recognition in 2020.
•Software program charges income elevated as a consequence of a rise in our franchise clinic base
and the associated income recognition over the time period of the franchise settlement as
described above.
•Different revenues primarily include service provider revenue related to bank card
transactions.
Value of Revenues
                             12 months Ended December 31,              Change 

of the share change

                          2020                       2019          Prior 

12 months of earlier 12 months

  Value of Revenues    6,507,468                   5,565,917      $    941,551                16.9  %


For the 12 months ended December 31, 2020, as in contrast with the 12 months ended
December 31, 2019, the entire price of revenues elevated primarily as a consequence of an
improve in regional developer royalties of $0.9 million, which is in step with
a rise in franchise royalty revenues of 17%, coupled with a bigger portion
of our franchise base working in regional developer territories.
Promoting and Advertising and marketing Bills
                                                      12 months Ended December 31,                      Change from          P.c Change
                                                 2020                           2019               Prior 12 months           from Prior 12 months
     Promoting and Advertising and marketing Bills            7,804,420                      6,913,709          $    890,711                    12.9  %


Promoting and advertising and marketing bills elevated $0.9 million for the 12 months ended
December 31, 2020, as in comparison with the 12 months ended December 31, 2019, pushed by an
improve in promoting fund expenditures from a bigger franchise base and
elevated native advertising and marketing expenditures by the company-owned or managed clinics.
Depreciation and Amortization Bills
                                                        12 months Ended December 31,                      Change from          P.c Change
                                                   2020                           2019               Prior 12 months           from Prior 12 months
  Depreciation and Amortization Bills         2,734,462                      1,899,257          $    835,205                    44.0  %


Depreciation and amortization bills elevated for the 12 months ended December 31,
2020, as in comparison with the 12 months ended December 31, 2019, primarily as a result of
amortization of intangibles associated to the 2019 acquisitions, coupled with
depreciation bills related to the growth of our corporate-owned or
managed clinics portfolio in 2019.
Normal and Administrative Bills
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                                                           12 months Ended December 31,                      Change from          P.c Change
                                                     2020                            2019                Prior 12 months          from Prior 12 months
    Normal and Administrative Bills            36,195,817                      30,543,030          $ 5,652,787                    18.5  %


Normal and administrative bills elevated through the 12 months ended December 31,
2020, in comparison with the 12 months ended December 31, 2019, primarily as a consequence of a rise
in payroll and associated bills, in addition to working bills to assist
continued clinic rely and income development in each working segments. As a
proportion of income, basic and administrative bills through the 12 months ended
December 31, 2020 and 2019 had been 62% and 63%, respectively. Normal and
administrative bills as a proportion of income had been comparatively flat for the
present 12 months interval primarily as a consequence of decrease than anticipated income development due
to the pandemic, which was principally offset by the income development through the second
half of 2020. Regardless of the unfavorable impression of the pandemic on our pre-COVID-19
income development expectations, we continued to function our company clinics and
headquarters with none furloughs or lay-offs whereas working to extend
sanitary measures to make sure affected person and worker security.
Revenue from Operations
                                                                   12 months Ended December 31,                    Change from          P.c Change
                                                              2020                          2019               Prior 12 months         from Prior 12 months
                Revenue from Operations                      5,492,130                     3,414,635          $ 2,077,495                   60.8  %


Consolidated Outcomes
Consolidated revenue from operations elevated by $2.1 million for the 12 months ended
December 31, 2020 in comparison with the 12 months ended December 31, 2019, primarily as a consequence of
the improved working revenue in each the company clinics and the franchise
operations segments, partially offset by elevated bills within the unallocated
company section mentioned beneath.
Company Clinics
Our company clinics section had revenue from operations of $4.5 million for the
12 months ended December 31, 2020, a rise of $1.1 million in comparison with revenue
from operations of $3.4 million for the 12 months ended December 31, 2019. This
improve was primarily as a consequence of:
•A rise in revenues of $6.0 million from company-owned or managed clinics
primarily as a consequence of improved same-store development, in addition to the growth of our
corporate-owned or managed clinics portfolio; partially offset by
•A $4.8 million improve in working bills primarily pushed by: (i) an
improve in payroll-related bills as a consequence of a better head rely to assist the
growth of our company clinic portfolio, (ii) a rise in depreciation
and administration expense as a result of amortization of intangibles associated to the
2019 acquisitions, coupled with depreciation bills related to the
growth of our corporate-owned or managed clinics portfolio in 2019, and (iii)
a rise in promoting and advertising and marketing bills as a consequence of elevated native advertising and marketing
expenditures by the company-owned or managed clinics.
Franchise Operations
Our franchise operations section had revenue from operations of $12.6 million for
the 12 months ended December 31, 2020, a rise of $1.6 million, in comparison with
revenue from operations of $11.0 million for the 12 months ended December 31, 2019.
This improve was primarily as a consequence of:
•A rise of $4.3 million in complete revenues as a consequence of a rise within the quantity
of franchised clinics in operation together with continued gross sales development in present
franchised clinics; partially offset by
•A rise of $1.0 million in price of revenues primarily as a consequence of (i) an
improve in regional developer royalties and (ii) a rise of $1.7 million in
working bills. The rise in working bills displays the
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improve in our franchise base, which resulted in (a) a rise in
payroll-related bills as a consequence of a better head rely, and (b) a rise in
promoting and advertising and marketing bills.
Revenue Tax (Profit) Expense
                                                      12 months Ended December 31,                      Change from              P.c Change
                                                 2020                           2019               Prior 12 months               from Prior 12 months
      Revenue tax (profit) expense             (7,754,662)                       48,706          $ (7,803,368)                      (16,021.4) %


For the years ended December 31, 2020 and 2019, the efficient tax charges had been
(143.3)% and 1.4%, respectively. The fluctuation within the efficient price was
primarily attributable to the reversal of the valuation allowance on deferred
tax belongings on December 31, 2020. In 2019, a full valuation allowance was
established on all deferred tax belongings as a consequence of historic losses in sure prior
years and uncertainty about future earnings forecast. The valuation allowance
was decreased in 2020 as a result of the load of proof relating to the longer term
realizability of the deferred tax belongings had turn out to be predominately optimistic.
Please see Be aware 9, "Revenue Taxes" within the Notes to Consolidated Monetary
Statements included in Merchandise 8 of this report for additional dialogue.
Liquidity and Capital Assets
Sources of Liquidity
As of December 31, 2020, we had money and short-term financial institution deposits of $20.6
million. We generated $11.2 million of money circulation from working actions in
the 12 months ended December 31, 2020. In February 2020, we executed a line of credit score
settlement, which supplies a credit score facility of as much as $7.5 million, together with a
$2.0 million revolver and $5.5 million improvement line of credit score. On March 18,
2020, we drew down $2.0 million below the credit score settlement as a precautionary
measure so as to additional strengthen our money place and supply monetary
flexibility in mild of the uncertainty within the world markets ensuing from the
COVID-19 pandemic. As well as, on April 10, 2020, we obtained a mortgage within the
quantity of roughly $2.7 million from JPMorgan Chase Financial institution, N.A., pursuant to
the Paycheck Safety Program ("PPP"). We'll proceed to protect money, and
whereas we deferred nearly all of our deliberate 2020 capital expenditures given
the dynamic nature of the COVID-19 pandemic, our long-term aim and development
alternatives stay unchanged. We presently plan to renew the acquisition and
improvement of company-owned or managed clinics in 2021 and past and to
proceed to progress in the direction of our aim, concentrating on geographic clusters the place we
are in a position to improve efficiencies via a consolidated actual property penetration
technique, leveraged cooperative promoting and advertising and marketing and basic company
and administrative working efficiencies.
Along with $20.6 million of unrestricted money readily available as of December 31,
2020, our principal sources of liquidity are anticipated to be money flows from
operations and proceeds from the credit score facility, debt financings or fairness
issuances, and/or proceeds from the sale of belongings. We count on our obtainable money
and money flows from operations and the credit score facility to be adequate to fund
our short-term working capital necessities. As well as, we imagine we can be
in a position to fund future liquidity and capital necessities via money flows
generated from working actions for a interval of at the least twelve months from
the date our monetary statements are issued. Our long-term capital
necessities, primarily for acquisitions and different company initiatives, may
be depending on our skill to entry further funds via the debt and/or
fairness markets. Infrequently, we take into account and consider transactions associated
to our portfolio and capital construction, together with debt financings, fairness
issuances, purchases and gross sales of belongings, and different transactions. As a result of
COVID-19 pandemic, the degrees of our money flows from operations for 2021 could also be
impacted. There may be no assurance that we can generate adequate
money flows or receive the capital mandatory to fulfill our quick and long-term
capital necessities.
Evaluation of Money Flows
Internet money offered by working actions was $11.2 million for the 12 months ended
December 31, 2020, in comparison with internet money offered by working actions of $7.5
million for the 12 months ended December 31, 2019. The rise was primarily
attributable to: (i) the gathering of tenant leasehold enchancment allowance of
$0.7 million, (ii) a rise in income over the prior 12 months interval, (iii),
impacts of price containment initiatives, and (iv) the sale of two regional
developer agreements for which we obtained roughly $0.5 million, which
had been partially offset by a rise on the whole and administrative bills over
the prior 12 months interval.
Internet money utilized in investing actions was $4.6 million and $7.1 million throughout
the years ended December 31, 2020 and 2019, respectively. For the 12 months ended
December 31, 2020, this included acquisition of a enterprise for $0.5 million,
purchases
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of property and tools for $3.2 million, and reacquisition and termination of
regional developer rights for $1.0 million. For the 12 months ended December 31,
2019, this included acquisitions of companies for $3.1 million, purchases of
property and tools for $3.5 million, and reacquisition and termination of
regional developer rights for $0.7 million.
Internet money offered by (utilized in) financing actions was $5.6 million and $(0.6)
million through the years ended December 31, 2020 and 2019, respectively. For the
12 months ended December 31, 2020, this included proceeds from: (i) the credit score
facility, internet of associated charges of $1.9 million, (ii) the mortgage below the CARES Act
Paycheck Safety Program of $2.7 million, and (iii) the train of inventory
choices of $1.0 million. For the 12 months ended December 31, 2019, this included
proceeds from train of inventory choices of $0.5 million and repayments on notes
payable of $1.1 million
Latest Accounting Pronouncements
Please see Be aware 1, "Nature of Operations and Abstract of Vital Accounting
Insurance policies" within the Notes to Consolidated Monetary Statements included in Merchandise 8
of this report for data relating to lately issued accounting
pronouncements that will impression our monetary statements.
Contractual Obligations and Danger
The next desk summarizes our contractual obligations at December 31, 2020
and the impact that such obligations are anticipated to have on our liquidity and
money flows in future durations:
                                                                                     Funds Due by Fiscal 12 months
                             Complete                  2021                  2022                  2023                  2024                  2025                Thereafter
Working leases       $   16,385,465             3,925,287             3,797,361             3,099,227             2,494,385             2,077,593              991,612



Off-Steadiness Sheet Preparations
Through the 12 months ended December 31, 2020, we didn't have any relationships with
unconsolidated organizations or monetary partnerships, similar to structured
finance or particular function entities that had been established for the aim of
facilitating off-balance sheet preparations.

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