Annual report pursuant to Section 13 and 15(d)

20. Commitments and Contingencies

20. Commitments and Contingencies
12 Months Ended
Dec. 31, 2016
Pro forma financial information  
20. Commitments and Contingencies

Operating Leases


The Company has various non-cancelable operating lease agreements for office facilities. A summary of the approximate lease commitments under non-cancelable leases for years ending subsequent to December 31, 2016 are as follows:


2017 1,543,787
2018 1,061,075
2019 1,034,249
2020 892,842
2021 283,116


Rent expense for all operating leases was $1.6 million and $1.8 million for the years ended December 31, 2016 and 2015, respectively.  Certain of the Company’s leases include fixed rent escalation schedules or rent escalations based upon a fixed percentage.  The Company recognizes rent expense (including escalations) on a straight-line basis over the lease term.


Legal Matters


The Company is from time to time involved in claims and legal actions arising in the ordinary course of business. Management does not expect that the outcome of any such claims or actions will have a material effect on the Company’s liquidity, results of operations or financial condition.  In addition, due to the regulatory nature of the communications industry, the Company periodically receives and responds to various inquiries from state and federal regulatory agencies.  Management does not expect the outcome of any such claims, legal actions or regulatory inquiries to have a material impact on the Company’s liquidity, results of operations or financial condition.


Apptix is currently undergoing a compliance audit for its use of certain software licenses. The audit covers periods prior to the date the Company acquired Apptix, and the Company has accrued approximately $2.9 million based on the preliminary findings of the compliance audit as part of the Apptix purchase price allocation (see notes 5 and 8). In connection with the Apptix transaction, the Company purchased representation and warranty insurance. Subject to applicable deductibles, the Company believes it will be able to recover amounts arising from the audit under this policy. Under limited circumstances, the Company may also see recourse directly from the seller. There can be no assurances, however, that the Company will be able to recover any amount related to this liability.