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 and nine months ended September 30, 2016 was $903,771 and $2,510,782, respectively. Total rent expense for the three and nine months ended September 30, 2015 was $402,061 and $756,678, respectively.

 

Future minimum annual lease payments are as follows:

 

2016 (remaining)		$	843,053
2017			3,342,862
2018			2,753,063
2019			2,416,784
2020			2,154,008
Thereafter			10,112,360
Total		$	21,622,130

 

 

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 13 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. In April 2016, one of the franchisee’s claims was voluntarily dismissed, thereby leaving a total of five claimants with a collective total of 12 former licenses remaining as part of the arbitration proceeding. On August 8, 2016, the claimants filed a Second Amended Addendum to Demand in which they seek, among other things, rescission of all franchise investment- related fees and alleged losses on behalf of all remaining claimants. Based on a written discovery response served on October 7, 2016, certain of the claimants disclosed that they are alternatively seeking to recover lost profits, plus punitive damages and attorneys' fees.  There is an evidentiary hearing presently set to commence on January 16, 2017. The Company is vigorously defending the arbitration proceeding, and does not believe a loss contingency is probable or estimable as of September 30, 2016.