JOINT CORP MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed
consolidated financial statements and related notes included in this Quarterly
Report on Form 10-Q and the audited consolidated financial statements and notes
thereto as of and for the year ended December 31, 2021 and the related
Management's Discussion and Analysis of Financial Condition and Results of
Operations, both of which are contained in our Annual Report on Form 10-K for
the year ended December 2021.

Forward-Looking Statements

This Quarterly Report on Form 10-Q, especially in this Management's Discussion
and Analysis or MD&A, contains forward-looking statements and information within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended, ("the Exchange
Act"), which are subject to the "safe harbor" created by those sections. These
forward-looking statements include, but are not limited to, statements
concerning our strategy, future operations, future financial position, future
revenues, projected costs, prospects and plans and objectives of management; and
accounting estimates and the impact of new or recently issued accounting
pronouncements. The words "anticipates," "believes," "estimates," "expects,"
"intends," "may," "plans," "projects," "will," "should," "could," "predicts,"
"potential,"
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"continue," "would" and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements contain
these identifying words. We may not actually achieve the plans, intentions or
expectations disclosed in our forward-looking statements and you should not
place undue reliance on our forward-looking statements. Actual results or events
could differ materially from the plans, intentions and expectations disclosed in
the forward-looking statements that we make. The forward-looking statements are
applicable only as of the date on which they are made, and we do not assume any
obligation to update any forward-looking statements. All forward-looking
statements in this Form 10-Q are made based on our current expectations,
forecasts, estimates and assumptions, and involve risks, uncertainties and other
factors that could cause results or events to differ materially from those
expressed in the forward-looking statements. In evaluating these statements, you
should specifically consider various factors, uncertainties and risks that could
affect our future results or operations as described from time to time in our
SEC reports, including those risks outlined under "Risk Factors" which are
contained in Part I, Item 1A of our Form 10-K for the year ended December 31,
2021 and in Part II, Item 1A of this Form 10-Q. These factors, uncertainties and
risks may cause our actual results to differ materially from any forward-looking
statement set forth in this Form 10-Q. You should carefully consider these risks
and uncertainties and other information contained in the reports we file with or
furnish to the SEC before making any investment decision with respect to our
securities. All forward-looking statements attributable to us or persons acting
on our behalf are expressly qualified in their entirety by this cautionary
statement. Some of the important factors contained in Part I, Item 1A of our
Form 10-K for the year ended December 31, 2021 and in Part II, Item 1A of this
Form 10-Q that could cause our actual results to differ materially from those
projected in any forward-looking statements include, but are not limited to, the
following:

•major public health concerns, including the outbreak of epidemic or pandemic
contagious disease, may adversely affect revenue at our clinics and disrupt
financial markets, adversely affecting our stock price;

•the impact of the COVID-19 pandemic on the economy and our operations,
including the measures taken by governmental authorities to address it, may
precipitate or exacerbate other risks and/or uncertainties;

•inflation, exacerbated by COVID-19 and the current war in Ukraine (the “Ukraine
War”), has led to increased labor costs and interest rates and may lead to
reduced discretionary spending, all of which may negatively impact our business;

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

•we have limited experience operating company-owned or managed clinics in those
geographic areas where we currently have few or no clinics, and we may not be
able to duplicate the success of some of our franchisees;

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

•we may not be able to identify, recruit and train enough qualified
chiropractors and other personnel to staff our clinics, particularly in light of
the current nationwide labor shortage, which might limit our ability to
implement our growth strategy;

•short-selling strategies and negative opinions posted on the internet may drive
down the market price of our common stock and could result in class action
lawsuits;

•we may fail to remediate the current or future material weaknesses in our
internal controls over financial reporting or may otherwise be unable to
maintain an effective system of internal control over financial reporting, which
might negatively impact our ability to accurately report our financial results,
prevent fraud, or maintain investor confidence;

•we may fail to successfully design and maintain our proprietary and third-party
management information systems or implement new systems;

•we may fail to properly maintain the integrity of our data or to strategically
implement, upgrade or consolidate existing information systems;

• franchised clinic acquisitions that we make could disrupt our business and
harm our financial condition if we cannot continue their operational success or
successfully integrate them;
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•we may not be able to continue to sell franchises to qualified franchisees, and
our franchisees may not succeed in developing profitable territories and
clinics;

•new clinics may not reach the point of profitability, and we may not be able to
maintain or improve revenues and franchise fees from existing franchised
clinics;

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

•state administrative actions and rulings regarding the corporate practice of
chiropractic and federal and state laws and regulations regarding joint employer
responsibility may jeopardize our business model;

•negative publicity or damage to our reputation, which could arise from concerns
expressed by opponents of chiropractic and by chiropractors operating under
traditional service models, could adversely impact our operations and financial
position;

•our IT security systems may be breached, and 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; and

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

Overview

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

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

Key Performance Measures. We receive monthly performance reports from our system
and our clinics which include key performance indicators per clinic including
gross sales, comparable same-store sales growth, or "Comp Sales," number of new
patients, conversion percentage, and membership attrition. In addition, we
review monthly reporting related to system-wide sales, clinic openings, clinic
license sales, adjusted EBITDA, 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. 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. System-wide sales include sales
at all clinics, whether operated by us or by franchisees. While franchised sales
are not recorded as revenues by us, management believes the information is
important in understanding the overall brand's financial performance, because
these sales are the basis on which we calculate and record royalty fees and are
indicative of the financial health of the franchisee base. Adjusted EBITDA
consists of net income before interest, income taxes, depreciation and
amortization, acquisition related expenses, stock-based compensation expense,
bargain purchase gain, and (gain) loss on disposition or impairment. There was
no bargain purchase gain for the three and nine months ended September 30, 2022
and 2021.

Key Clinic Development Trends.  As of September 30, 2022, we and our franchisees
operated or managed 805 clinics, of which 690 were operated or managed by
franchisees and 115 were operated as company-owned or managed clinics. Of the
115 company-owned or managed clinics, 54 were constructed and developed by us,
and 61 were acquired from franchisees.

Our current strategy is to grow through the sale and development of additional
franchises, build upon our regional developer strategy, and continue to expand
our corporate clinic portfolio within clustered locations. The number of
franchise licenses sold for the year ended December 31, 2021 was 156, compared
with 121 and 126 licenses for the years ended December 31, 2020 and 2019,
respectively. We ended the first nine months of 2022 with 19 regional developers
who were responsible for 62% of the 58 licenses sold during the period. This
strong result reflects the power of the regional developer program to accelerate
the number of clinics sold, and eventually opened, across the country.
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In addition, we believe that we can accelerate the development of, and revenue
generation from, company-owned or managed clinics through the accelerated
development of greenfield units and the further selective acquisition of
existing franchised clinics. We will seek to acquire existing franchised clinics
that meet our criteria for demographics, site attractiveness, proximity to other
clinics and additional suitability factors. During the quarter ended
September 30, 2022, we opened five greenfield clinics, and as of September 30,
2022, we executed 8 leases for future greenfield clinic locations for further
greenfield expansion.

We believe that The Joint has a sound concept, which was further validated
through its resiliency during the pandemic and will benefit from the fundamental
changes taking place in the manner in which Americans access chiropractic care
and their growing interest in seeking effective, affordable natural solutions
for general wellness. These trends join with the 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.

Recent Events and COVID-19 Update

Recent events that may impact our business include unfavorable global economic
or political conditions, such as the ongoing COVID-19 pandemic, the Ukraine War,
and inflation and other cost increases. We anticipate that the remainder of 2022
will continue to be a volatile macroeconomic environment. As of the date of this
Quarterly Report, we have not experienced a significant negative impact on our
revenues and profitability due to the direct impact of the COVID-19 pandemic.
However, there still remains uncertainty around the pandemic, its effect on
labor or other macroeconomic factors, the severity and duration of the pandemic,
the continued availability and effectiveness of vaccines and actions taken by
government authorities, including restrictions, laws or regulations, and other
third parties in response to the pandemic.

The primary inflationary factor affecting our operations is labor costs. In the
fourth quarter of 2021 and the first nine months of 2022, company-owned or
managed clinics were negatively impacted by wage increases, which increased our
general and administrative expenses. Further, should we fail to continue to
increase our wages competitively in response to increasing wage rates, the
quality of our workforce could decline, causing our patient service to suffer.
We expect elevated levels of cost inflation to persist for the remainder of
2022. While we anticipate that these headwinds will be partially mitigated by
pricing actions taken in response to inflation, there can be no assurance that
we will be able to continue to do so in the future. A continued increase in
labor costs could have an adverse effect on our operating costs, financial
condition and results of operations.

Also, the Ukraine War and the sanctions imposed on Russia in response to this
conflict have increased global economic and political uncertainty. In addition,
the increase in interest rates and the expectation that interest rates will
continue to rise may adversely affect patients' financial conditions, resulting
in reduced spending on our services. While the impact of these factors continues
to remain uncertain, we will continue to evaluate the extent to which these
factors will impact our business, financial condition, or results of operations.
These and other uncertainties with respect to these recent events could result
in changes to our current expectations.
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Other Significant Events and/or Recent Developments

For the three months ended September 30, 2022, compared to the prior year
period:

•Comp Sales of clinics that have been open for at least 13 full months increased
6%.

•Comp Sales for mature clinics open 48 months or more increased 2%.

•System-wide sales for all clinics open for any amount of time grew 18%.

On October 24, 2022, we entered into an Asset and Franchise Purchase Agreement
under which we repurchased from the seller an operating franchise in North
Carolina. We operate the franchise as a company-managed clinic. The total
purchase price for the transaction was $1,400,000, less $9,262 of net deferred
revenue, resulting in total purchase consideration of $1,390,738.

On October 12, 2022, we entered into an agreement under which we repurchased the
right to develop franchises in various counties in the Philadelphia area. The
total consideration for the transaction was $225,000. We carried a deferred
revenue balance associated with this transaction of $73,757, representing the
unrecognized fee collected upon the execution of the regional developer
agreement. We accounted for the termination of development rights associated
with unsold or undeveloped franchises as a cancellation, and the associated
deferred revenue was netted against the aggregate purchase price. We recognized
the net amount of $151,243 as reacquired development rights on October 12, 2022,
which is amortized over the remaining original contract period of approximately
4.2 years.

On October 13, 2022, we entered into an Asset and Franchise Purchase Agreement
under which we repurchased from the seller one operating franchise in North
Carolina. We operate the franchise as a company-managed clinic. The total
purchase price for the transaction was $772,000, less $5,108 of net deferred
revenue, resulting in total purchase consideration of $766,892.

On July 29, 2022, we entered into an Asset and Franchise Purchase Agreements
under which we repurchased from the sellers three operating franchises in North
Carolina. We operate the franchises as company-managed clinics. The total
purchase price for the transaction was $1,317,312, less $31,647 of net deferred
revenue, resulting in total purchase consideration of $1,285,665. Based on the
terms of the purchase agreement, the acquisition has been treated as an asset
purchase.

On July 5, 2022, we entered into an Asset and Franchise Purchase Agreement under
which we repurchased from the seller an operating franchise in Arizona. We
operate the franchise as a company-owned clinic. The total purchase price for
the transaction was $1,205,667, less $13,241 of net deferred revenue, resulting
in total purchase consideration of $1,192,426. Based on the terms of the
purchase agreement, the acquisition has been treated as a business combination
under U.S. GAAP using the acquisition method of accounting, which requires that
assets acquired and liabilities assumed be recorded at the date of acquisition
at their respective fair values. Any excess of the purchase price over the
estimated fair values of the net assets acquired will be recorded as goodwill.

On May 19, 2022, we entered into an Asset and Franchise Purchase Agreement under
which we repurchased from the seller four operating franchises in Arizona. We
operate the franchises as company-owned clinics. The total purchase price for
the transaction was $5,761,256, less $70,484 of net deferred revenue, resulting
in total purchase consideration of $5,690,772. Based on the terms of the
purchase agreement, the acquisition has been treated as a business combination.

On April 1, 2022, we entered into an agreement under which we repurchased the
right to develop franchises in various counties in California. The total
consideration for the transaction was $2,400,000. We carried a deferred revenue
balance associated with this transaction of $357,721, representing the
unrecognized fee collected upon the execution of the regional developer
agreement. We accounted for the termination of development rights associated
with unsold or undeveloped franchises as a cancellation, and the associated
deferred revenue was netted against the aggregate purchase price. We recognized
the net amount of $2,042,279 as reacquired development rights on April 1, 2022,
which is amortized over the remaining original contract period of approximately
5.3 years.

On March 18, 2022, we entered into an agreement under which we repurchased the
right to develop franchises in various counties in New Jersey. The total
consideration for the transaction was $250,000. We carried a deferred revenue
balance associated with this transaction of $95,197, representing the
unrecognized fee collected upon the execution of the regional developer
agreement. We accounted for the termination of development rights associated
with unsold or undeveloped franchises as a cancellation, and the associated
deferred revenue was netted against the aggregate purchase price. We recognized
the net amount of $154,803 as reacquired development rights on March 18, 2022,
which is amortized over the remaining original contract period of approximately
5.5 years.
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On February 28, 2022, we entered into an amendment to our Credit Facilities (as
amended, the "2022 Credit Facility") with the Lender. Under the 2022 Credit
Facility, the Revolver increased to $20,000,000 (from $2,000,000), the portion
of the Revolver available for letters of credit increased to $5,000,000 (from
$1,000,000), the uncommitted additional amount increased to $30,000,000 (from
$2,500,000) and the developmental line of credit of $5,500,000 was terminated.
The Revolver will be used for working capital needs, general corporate purposes
and for acquisitions, development and capital improvement uses.

For the three months ended September 30, 2022, we constructed and developed five
new corporate clinics.


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2022 Full Year Outlook

•We now expect our revenues to be between $100 million and $102 million,
compared to $80.9 million in 2021.
•We now expect our adjusted EBITDA to be between $11.5 million and $12.5
million, compared to $12.6 million in 2021.
•We expect franchised clinic openings to be between 110 and 130, compared to 110
in 2021.
•We expect Company-owned or managed clinics, through a combination of both
greenfields and buybacks, to increase by between 30 and 40, compared to 32 in
2021.

We believe we are well positioned to continue our rapid clinic expansion due to,
among other things, our resilient business model, planned new clinic openings
and expansion of company-owned or managed clinics. However, the long-term impact
of COVID-19, increased global economic uncertainty, and the increase in interest
rates and the expectation that interest rates will continue to rise, may
adversely affect patients' financial conditions, resulting in reduced spending
on our services. Rising interest rates would also make it more expensive for a
potential franchisee to finance a transaction. These and other uncertainties
with respect to these recent events could result in changes to our current
expectations.

Factors Affecting Our Performance

Our operating results may fluctuate significantly as a result of a variety of
factors, including the timing of new clinic sales, openings, closures, markets
in which they are contained and related expenses, general economic conditions,
cost inflation, labor shortages, consumer confidence in the economy, consumer
preferences, competitive factors, and disease epidemics and other health-related
concerns, such as the current COVID-19 outbreak.

Significant Accounting Polices and Estimates

There were no changes in our significant accounting policies and estimates
during the nine months ended September 30, 2022 from those set forth in
“Significant Accounting Policies and Estimates” in our Annual Report on Form
10-K for the year ended December 31, 2021.

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.

Total Revenues – three months ended September 30, 2022 compared with three
months ended September 30, 2021

Components of revenues were as follows:

                                                       Three Months Ended
                                                          September 30,
                                                                                           Change from          Percent Change
                                                   2022                  2021               Prior Year         from Prior Year
Revenues:
Revenues from company-owned or managed
clinics                                       $ 15,836,327          $ 11,634,009          $ 4,202,318                   36.1  %
Royalty fees                                     6,604,653             5,714,637          $   890,016                   15.6  %
Franchise fees                                     642,405               648,598          $    (6,193)                  (1.0) %
Advertising fund revenue                         1,881,367             1,627,693          $   253,674                   15.6  %
IT related income and software fees              1,109,753               840,969          $   268,784                   32.0  %
Regional developer fees                            153,181               209,651          $   (56,470)                 (26.9) %
Other revenues                                     375,314               316,064          $    59,250                   18.7  %
Total revenues                                $ 26,603,000          $ 20,991,621          $ 5,611,379                   26.7  %


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Consolidated Results

Total revenues increased by $5.6 million, primarily due to the continued
expansion and revenue growth of our franchise base and the continued revenue
growth and expansion of our company-owned or managed clinics portfolio.

Corporate Clinics

Revenues from company-owned or managed clinics increased, primarily due to
improved same-store sales growth, as well as due to the expansion of our
company-owned or managed clinics portfolio. As of September 30, 2022 and 2021,
there were 115 and 83 company-owned or managed clinics in operation,
respectively.

Franchise Operations

•Royalty fees and advertising fund revenue increased due to an increase in the
number of franchised clinics in operation during the current period, along with
continued sales growth in existing franchised clinics. As of September 30, 2022
and 2021, there were 690 and 583 franchised clinics in operation, respectively.

•Franchise fees revenue was relatively flat as the impact of an increase in
executed franchise agreements was more than offset by the impact of accelerated
revenue recognition resulting from the terminated franchise license agreements
in the prior year period. There were no such comparable events during the third
quarter of 2022 .

•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.

•Regional developer fees revenue decreased due to the impact of repurchased
regional developer rights during the first half of 2022.

•Other revenues primarily consisted of merchant income associated with credit
card transactions.

Total Revenues – nine months ended September 30, 2022 compared with nine months
ended September 30, 2021

Components of revenues were as follows:

                                                        Nine Months Ended
                                                          September 30,
                                                                                            Change from          Percent Change
                                                   2022                  2021               Prior Year          from Prior Year
Revenues:
Revenues from company-owned or managed
clinics                                       $ 42,936,298          $ 32,537,942          $ 10,398,356                   32.0  %
Royalty fees                                    19,024,799            15,816,500          $  3,208,299                   20.3  %
Franchise fees                                   1,970,256             1,967,680          $      2,576                    0.1  %
Advertising fund revenue                         5,417,840             4,521,342          $    896,498                   19.8  %
IT related income and software fees              3,166,732             2,387,543          $    779,189                   32.6  %
Regional developer fees                            524,923               642,041          $   (117,118)                 (18.2) %
Other revenues                                   1,058,008               885,335          $    172,673                   19.5  %
Total revenues                                $ 74,098,856          $ 58,758,383          $ 15,340,473                   26.1  %

Consolidated Results

Total revenues increased by $15.3 million, primarily due to the continued
expansion and revenue growth of our franchise base and of our company-owned or
managed clinics portfolio.

Corporate Clinics
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Revenues from company-owned or managed clinics increased, primarily due to
improved same-store sales growth, as well as due to the expansion of our
company-owned or managed clinics portfolio. As of September 30, 2022 and 2021,
there were 115 and 83 company-owned or managed clinics in operation,
respectively.

Franchise Operations

•Royalty fees and advertising fund revenue increased due to an increase in the
number of franchised clinics in operation during the current period, along with
continued sales growth in existing franchised clinics. As of September 30, 2022
and 2021, there were 690 and 583 franchised clinics in operation, respectively.

•Franchise fees were relatively flat over the prior year period as the impact of
the increase in executed franchise agreements was partially offset by the impact
of greater accelerated revenue recognition resulting from the terminated
franchise license agreements in the prior year period compared to the current
period.

•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.

•Regional developer fees revenue decreased due to the impact of repurchased
regional developer rights during the first and second quarters of 2022.

•Other revenues primarily consisted of merchant income associated with credit
card transactions.

Change from Percent Change

         Cost of Revenues                  2022            2021        

Prior Year from Prior Year

Three Months Ended September 30, 2,490,276 2,300,122 $ 190,154

                 8.3  %

Nine Months Ended September 30, 7,230,092 6,103,976 $ 1,126,116

                18.4  %


For the three months ended September 30, 2022, as compared with the three months
ended September 30, 2021, the total cost of revenues increased, primarily due to
an increase in regional developer royalties and sales commissions of $0.2
million. For the nine months ended September 30, 2022, as compared with the nine
months ended September 30, 2021, the total cost of revenues increased, primarily
due to an increase in regional developer royalties and sales commissions of $0.8
million and an increase in website hosting costs of $0.2 million.

Selling and Marketing Expenses

Change from Percent Change

  Selling and Marketing Expenses          2022             2021         

Prior Year from Prior Year

Three Months Ended September 30, 3,539,287 2,881,575 $ 657,712

                22.8  %

Nine Months Ended September 30, 10,666,500 8,503,617 $ 2,162,883

                25.4  %



Selling and marketing expenses increased for the three and nine months ended
September 30, 2022, as compared to the three and nine months ended September 30,
2021, driven by an increase in advertising fund expenditures from a larger
franchise base and an increase in local marketing expenditures by the
company-owned or managed clinics.

Depreciation and Amortization Expenses

                                                                                                Change from          Percent Change
   Depreciation and Amortization Expenses               2022                  2021               Prior Year         from Prior Year

      Three Months Ended September 30,                2,011,768             1,662,255          $   349,513                   21.0  %
      Nine Months Ended September 30,                 5,341,420             4,275,140          $ 1,066,280                   24.9  %


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Depreciation and amortization expenses increased for the three months ended
September 30, 2022, as compared to the three months ended September 30, 2021,
primarily due to the depreciation expenses associated with the expansion of our
company-owned or managed clinics portfolio in 2021 and 2022. Depreciation and
amortization expenses increased for the nine months ended September 30, 2022, as
compared to the nine months ended September 30, 2021, primarily due to
depreciation expenses associated with the expansion of our company-owned or
managed clinics portfolio in 2021 and 2022 and the new IT platform used by
clinics for operations and for the management of operations, which went live in
July 2021.

General and Administrative Expenses

                                                                                                     Change from          Percent Change
     General and Administrative Expenses                   2022                   2021               Prior Year          from Prior Year

       Three Months Ended September 30,                 17,796,806             12,812,331          $  4,984,475                   38.9  %
       Nine Months Ended September 30,                  49,703,451             34,513,378          $ 15,190,073                   44.0  %


General and administrative expenses increased for the three months ended
September 30, 2022, as compared to the three months ended September 30, 2021,
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 $3.7 million, (ii) general overhead and administrative expenses of
$1.0 million, and (iii) software and maintenance expense of $0.2 million.
General and administrative expenses increased for the nine months ended
September 30, 2022, as compared to the nine months ended September 30, 2021,
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 $10.6 million, (ii) general overhead and administrative expenses of
$3.1 million, (iii) professional and advisory fees of $1.0 million, and (iv)
software and maintenance expense of $0.5 million. As a percentage of revenue,
general and administrative expenses during the nine months ended September 30,
2022 and 2021 were 67% and 61%, respectively, reflecting the impact of the
greenfields that opened in 2022.

Income from Operations – three months ended September 30, 2022 compared with
three months ended September 30, 2021

Change from Percent Change

 Three Months Ended September 30,         2022           2021         Prior 

Year from Prior Year

      Income from Operations            500,472       1,338,878      $  (838,406)              (62.6) %


Consolidated Results

Consolidated income from operations decreased by $0.8 million for the three
months ended September 30, 2022 compared with the three months ended
September 30, 2021, primarily due to the increased expenses in the corporate
clinics and unallocated corporate segments discussed below.

Corporate Clinics

Our corporate clinics segment had loss from operations of $0.3 million for the
three months ended September 30, 2022, a decrease of $1.5 million compared to
income from operations of $1.2 million for the prior year period. The decrease
was primarily due to:

•A $5.7 million increase in operating expenses due to the increases in the
following: (i) payroll-related expenses of $4.1 million due to a higher head
count to support the expansion of our corporate clinic portfolio and general
wage increases to remain competitive in the current labor market, (ii) selling
and marketing expenses of $0.4 million driven by an increase in local marketing
expenditures by the company-owned or managed clinics, (iii) depreciation expense
associated with the expansion of our company-owned or managed clinics portfolio
in 2021 and 2022 of $0.2 million, (iv) general overhead and administrative
expenses to support the expansion of our corporate clinic portfolio of $0.7
million, and (v) impairment loss of $0.3 million; partially offset by

•An increase in revenues of $4.2 million from company-owned or managed clinics.

Franchise Operations

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Our franchise operations segment had income from operations of $5.2 million for
the three months ended September 30, 2022, an increase of $1.0 million, compared
to income from operations of $4.2 million for the prior year period. This
increase was primarily due to:

•An increase of $1.4 million in total revenues; partially offset by

•An increase of $0.2 million in cost of revenues primarily due to an increase in
regional developer royalties and an increase of $0.2 million in operating
expenses.

Unallocated Corporate

Unallocated corporate expenses for the three months ended September 30, 2022
increased by $0.3 million compared to the prior year period, primarily due to
the increase in general and administrative expenses of $0.2 million and
amortization expense of 0.1 million.

Income from Operations – nine months ended September 30, 2022 compared with nine
months ended September 30, 2021

Change from Percent Change

  Nine Months Ended September 30,         2022           2021          

Prior Year from Prior Year

      Income from Operations            797,253       5,345,305      $ (4,548,052)              (85.1) %


Consolidated Results

Consolidated income from operations decreased by $4.5 million for the nine
months ended September 30, 2022 compared with nine months ended September 30,
2021
, primarily due to the increased expenses in the corporate clinics and
unallocated corporate segments discussed below.

Corporate Clinics

Our corporate clinics segment had loss from operations of $0.4 million for the
nine months ended September 30, 2022, a decrease of $4.8 million compared to
income from operations of $4.4 million for the prior year period. The decrease
was primarily due to:

•A $15.2 million increase in operating expenses due to the increases in the
following: (i) payroll-related expenses of $11.0 million due to a higher head
count to support the expansion of our corporate clinic portfolio and general
wage increases to remain competitive in the current labor market, (ii)
depreciation expense associated with the expansion of our company-owned or
managed clinics portfolio in 2021 and 2022 of $0.7 million, (iii) selling and
marketing expenses due to increased local marketing expenditures by the
company-owned or managed clinics of $0.8 million, (iv) general overhead and
administrative expenses to support the expansion of our corporate clinic
portfolio of $2.4 million, and (v) impairment loss of $0.3 million; partially
offset by

•An increase in revenues of $10.4 million from company-owned or managed clinics.

Franchise Operations

Our franchise operations segment had income from operations of $13.8 million for
the nine months ended September 30, 2022, an increase of $1.9 million, compared
to income from operations of $11.9 million for the prior year period. This
increase was primarily due to:

•An increase of $4.9 million in total revenues; partially offset by

•An increase of $1.1 million in cost of revenues, primarily due to an increase
in regional developer royalties and website hosting costs and an increase of
$1.9 million in operating expenses, primarily due to an increase in: (i) selling
and marketing expenses resulting from a larger franchise base of $1.4 million,
(ii) depreciation expense associated with the new IT platform of $0.4 million,
and (iii) payroll-related expenses of $0.1 million.

Unallocated Corporate

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Unallocated corporate expenses for the nine months ended September 30, 2022
increased by $1.6 million compared to the prior year period, primarily due to
the increases in professional and advisory fees of $0.8 million and general
overhead and administrative expenses of $0.8 million.

Non-GAAP Financial Measures

The table below reconciles net income to Adjusted EBITDA for the three and nine
months ended September 30, 2022 and 2021.

                                                                                                    Nine Months Ended
                                               Three Months Ended September 30,                       September 30,
                                                   2022                    2021                 2022                 2021

Non-GAAP Financial Data:

  Net income                               $         491,113          $ 

1,937,095 $ 630,058 $ 6,935,751

  Net interest expense                                25,235               16,139               60,668                54,050
  Depreciation and amortization expense            2,011,768            1,662,255            5,341,420             4,275,140
  Tax (benefit) expense                              (15,876)            (614,356)             106,527            (1,644,496)
   EBITDA                                          2,512,240            3,001,133            6,138,673             9,620,445
  Stock compensation expense                         305,815              296,850              969,562               826,908
  Acquisition related expenses                        46,712                3,000               78,298                48,346
  Loss (gain) on disposition or impairment           264,391               (3,540)             360,140                16,967
   Adjusted EBITDA                         $       3,129,158          $ 

3,297,443 $ 7,546,673 $ 10,512,666


Adjusted EBITDA consists of net income before interest, income taxes,
depreciation and amortization, acquisition related expenses, stock-based
compensation expense, bargain purchase gain, and (gain) loss on disposition or
impairment. There was no bargain purchase gain for the three and nine months
ended September 30, 2022 and 2021. We have provided Adjusted EBITDA because it
is a non-GAAP measure of financial performance 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. 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. In addition, you
should be aware when evaluating Adjusted EBITDA that in the future we may incur
expenses similar to those excluded when calculating these measures. Our
presentation of these measures should not be construed as an inference that our
future results will be unaffected by unusual or non-recurring items. 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.

Liquidity and Capital Resources

As of September 30, 2022, we had unrestricted cash and short-term bank deposits
of $10.3 million and $18 million of available capacity under the development
line of credit. While the ongoing COVID-19 pandemic and the Ukraine War create
potential liquidity risks, as discussed further below, we believe that our
existing cash and cash equivalents, our anticipated cash flows from operations
and amounts available under our development line of credit will be sufficient to
fund our anticipated operating and investment needs for at least the next twelve
months.

While the interruptions, delays and/or cost increases resulting from the ongoing
COVID-19 pandemic, political instability and geopolitical tensions, such as the
Ukraine War, economic weakness, inflationary pressures, increase in interest
rates and other factors have created uncertainty as to general economic
conditions for the remainder of 2022 and beyond, as of the date of this report,
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. For the remainder of 2022, 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. Our long-term capital
requirements, primarily for acquisitions and other corporate initiatives, could
be
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dependent on our ability to access additional funds through the debt and/or
equity markets. If the equity and credit markets deteriorate, including as a
result of economic weakness, a resurgence of COVID-19, political unrest or war,
including the Ukraine War, or any other reason, it may make any necessary equity
or debt financing more difficult to obtain in a timely manner and on favorable
terms, if at all, and if obtained, it may be more costly or more dilutive. 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 2022 may be
impacted. There can be no assurance that we will be able to generate sufficient
cash flows or obtain the capital necessary to meet our short and long-term
capital requirements.

Analysis of Cash Flows

Net cash provided by operating activities decreased by $6.8 million to $5.7
million for the nine months ended September 30, 2022, compared to $12.5 million
for the nine months ended September 30, 2021. The decrease was primarily
attributable to an increase in general and administrative expenses over the
prior year period and negative change in working capital, which was partially
offset by an increase in revenue over the prior year period.

Net cash used in investing activities was $14.9 million and $11.3 million for
the nine months ended September 30, 2022 and 2021, respectively. For the nine
months ended September 30, 2022, this included acquisitions of $8.0 million,
purchases of property and equipment of $4.3 million and reacquisition and
termination of regional developer rights for $2.7 million. For the nine months
ended September 30, 2021, this included acquisitions of $4.5 million, purchases
of property and equipment of $5.4 million and reacquisition and termination of
regional developer rights for $1.4 million.

Net cash provided by financing activities for the nine months ended September
30, 2022 was $0.3 million, primarily from the proceeds from the exercise of
stock options, compared to net cash used in financing activities of $2.0 million
for the nine months ended September 30, 2021. For the nine months ended
September 30, 2021, this included repayment of the PPP loan of $2.7 million and
purchases of treasury stock for $0.7 million, which were partially offset by the
proceeds from the exercise of stock options of $1.5 million.

Recent Accounting Pronouncements

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

Off-Balance Sheet Arrangements

During the nine months ended September 30, 2022, we did not have any
relationships with unconsolidated organizations or financial partnerships, such
as structured finance or special purpose entities that would have been
established for the purpose of facilitating off-balance sheet arrangements.

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