Annual report pursuant to Section 13 and 15(d)

9. Capital Lease Obligations

9. Capital Lease Obligations

12 Months Ended

Dec. 31, 2016

The Company leases various assets under capital leases expiring in 2019 and 2020 as follows:

	December 31,			December 31,
	2016			2015
Medical equipment	$	4,497,025		$	5,663,332
Less accumulated depreciation		(2,809,511	)		(2,093,920	)

Net	$	1,687,514		$	3,569,412

Depreciation expense on assets under capital leases was $1.3 million and $1.2 million for the years ended December 31, 2016 and 2015, respectively.

During the fourth quarter of 2016, the Company did not meet its payment obligations under two of its capital lease agreements, which comprise substantially all of the Company’s aggregate capital lease obligations. In December 2016, the two counterparties to these lease agreements filed separate lawsuits against the Company and in January of 2017 default judgments were issued against the Company in the aggregate amount of $3.5 million, which includes default interest, late fees, penalties and other fees (see note 13). As a result, the Company recognized additional interest expense of $0.6 million to recognize the additional obligations under these leases. Aggregate future minimum rentals under capital leases are as follows:

December 31,
	2017	$	1,881,155
	2018		1,427,375
	2019		377,919
	2020		32,611
	Total		3,719,060

	Less interest		148,886
	Present value of minimum lease payments		3,570,174

	Less current portion of capital lease obligations		1,796,053
	Capital lease obligations, net of current portion	$	1,774,121