The Company leases its corporate office space and the space for each of the company-owned or managed clinics in the portfolio.

 

Total rent expense for the three months ended March 31, 2016 and 2015 was $752,495 and $118,000, respectively.

 

Future minimum annual lease payments are as follows:

 

2016 (remaining)		$	2,161,327
2017			2,878,355
2018			2,361,373
2019			2,069,390
2020			1,847,278
Thereafter			8,818,859
		$	20,136,582

 

 

In the normal course of business, the Company is party to litigation from time to time.

 

On July 7, 2015, a group of six franchisees, who formerly owned a total of 8 franchise licenses that were terminated by the Company due to defaults in performance, commenced a collective arbitration proceeding before the American Arbitration Association in San Diego, California. The claimants’ demand for arbitration asserts claims for breach of contract, promissory fraud, negligent misrepresentation, breach of the implied covenant of good faith and fair dealing, wrongful termination of franchise agreements and “wrongful competition” pursuant to unspecified state business practices, unfair competition and franchise statutes. The claimants also seek “a preliminary and permanent injunction prohibiting the Company from seeking to operate corporate clinics within 25 miles of any franchise clinic.” Although commenced in California, the arbitration proceeding has been moved to Arizona, pursuant to the franchise agreements in dispute, which include clauses that make it mandatory for any arbitration proceeding to be conducted in Phoenix, Arizona. The Company has also asserted counterclaims against each of the claimants for unpaid termination fees due to the premature termination of their licenses. In April 2016, one of the franchisee’s claims was voluntarily dismissed, thereby leaving a total of five claimants with a collective total of 16 former licenses remaining as part of the arbitration proceeding. The Company does not believe that any of the claimants’ affirmative claims, either collectively or individually, have any legal merit and intends to vigorously defend the arbitration proceeding.