(3)	ACQUISITIONS

With each Office acquisition, the Company enters into a contractual arrangement, including a Management Agreement, which has a term of 40 years. Pursuant to these contractual arrangements, the Company provides all business and marketing services at the Offices, other than the provision of dental services, and it has long-term and unilateral control over the assets and business operations of each Office. Accordingly, acquisitions are considered business combinations and are accounted as such.

2009 Acquisitions

On September 30, 2009, the Company acquired the assets of an Arizona partnership and entered into a Management Agreement to manage the practice for a purchase price of $350,000, all payable in cash, and an estimated fair value of contingent liabilities of $718,000 assumed in this acquisition. These contingent liabilities were recorded as of the date of acquisition, were payable beginning after four years from the acquisition date and were calculated at a multiple of then trailing twelve-month operating cash flows. During the quarter ended December 31, 2011, the Company remeasured the value of the contingent liabilities and reduced it by $300,000 to $418,000. The $300,000 was recognized as other income. During the quarter ended September 30, 2013, the Company remeasured the fair value of the contingent liabilities and reduced it by $17,000 to $401,000. The $17,000 was recognized as other income for the quarter. The $401,000 of contingent liabilities became payable as of September 30, 2013. The Company paid $201,000 in October 2013. The remaining $200,000 was represented by a promissory note payable over five years with 5% interest. The note was paid off during the quarter ended December 31, 2013 at a discounted value, and $22,000 was recognized as other income during the quarter.

On October 29, 2009, the Company acquired the assets of a second Arizona partnership and entered into a Management Agreement to manage the practice for a purchase price of $700,000, all payable in cash, and an estimated fair value of contingent liabilities of $850,000 assumed in this acquisition. These contingent liabilities were recorded as of the date of acquisition, were payable beginning after four years from the acquisition date and were calculated at a multiple of the then trailing twelve-month operating cash flows. During the quarter ended December 31, 2011, the Company remeasured the value of the contingent liabilities and reduced it by $250,000 to $600,000. The $250,000 was recognized as other income. During the quarter ended September 30, 2013, the Company remeasured the fair value of the contingent liabilities and reduced it by $179,000 to $421,000. The $179,000 was recognized as other income during the quarter.

On December 30, 2009, the Company acquired the assets of a dental practice and entered into a Management Agreement to manage the practice for a purchase price of $340,000, all payable in cash, and an estimated fair value of contingent liabilities of $280,000 assumed in this acquisition. These contingent liabilities were recorded as of the date of acquisition. On November 2, 2011, the Company terminated this practice’s dentist for cause. Pursuant to the purchase agreement, the Company paid $5,000 to terminate the agreement. As a result, $280,000 of contingent liabilities were extinguished and recognized as other income during the quarter ended December 31, 2011.

The fair values of the acquisitions were based on significant inputs not observable in the market and are therefore defined as level 3 inputs under ASC Topic 820. Key assumptions include the projected operating results of the acquired enterprises.

The Company did not acquire any Offices in 2011, 2012 or 2013.