Annual report pursuant to Section 13 and 15(d)

Note 11 - Commitments and Contingencies

v3.7.0.1
Note 11 - Commitments and Contingencies
12 Months Ended
Dec. 31, 2016
Notes to Financial Statements  
Commitments and Contingencies Disclosure [Text Block]
Note
11:
Commitments and Contingencies
 
Operating Leases
 
The Company leases its corporate office space and the space for each of the company-owned or managed clinics in the portfolio. During the year ended
December
31,
2016,
the Company assumed
16
additional leases for clinic locations. These leases vary in length from
60
to
127
months and have monthly payments ranging from
$1,917
to
$7,498.
 
Total rent expense for the years ended
December
31,
2016
and
2015
was
$3,389,971
and
$1,574,803,
respectively.
 
Future minimum annual lease payments are as follows:
 
2017   $
3,180,100
 
2018    
2,587,425
 
2019    
2,248,195
 
2020    
1,982,392
 
2021    
1,868,976
 
Thereafter    
7,180,991
 
Total   $
19,048,079
 
 
In
December,
2016,
the Company ceased use of
five
undeveloped clinic locations from its corporate clinics segment and recognized a liability for lease exit costs incurred based on the remaining lease rental due, reduced by estimated sublease rental income that could be reasonably obtained for the properties. The Company classified all of the approximately
$338,000
lease exit liability in other liabilities in the accompanying consolidated balance sheets as of
December
31,
2016,
and related expense in Loss on disposition or impairment in the accompanying consolidated statement of operations for the year ended
December
31,
2016.
 
Litigation
 
In the normal course of business, the Company is party to litigation from time to time.
 
On
July
7,
2015
six
franchisees who owned a total of
13
franchise licenses ("Claimants") filed a Demand for Arbitration against the Company alleging breach of contract, breach of implied covenant of good faith and fair dealing, wrongful termination, fraud, promissory fraud, negligent misrepresentation, and claims under or arising out of violations of Section
31300,
31301,
31201
and
31202
of the California Franchise Investment Law. The Company vigorously denied liability for all of Claimants' claims and asserted counterclaims against each Claimant for breach of contract, breach of guaranty, among other claims, and sought a declaratory judgment that termination was proper because Claimants failed to adhere to the development schedules in their respective franchise agreements. The Company, through its counterclaim, sought damages for each unopened license, in accordance with the terms of the parties’ franchise agreements. The parties entered into a settlement agreement dated
December
12,
2016,
which included, among other things, a mutual general release of claims. The arbitration was subsequently dismissed with prejudice, based on the parties' stipulation.