(2)	LIQUIDITY AND FINANCIAL RESOURCES UPDATE

The Company has historically operated with negative working capital and has been able to meet its current obligations as a result of strong operating cash flows and availability on its revolving lines of credit. Recent decreases in operating cash flows have led the Company to take certain actions. The Company believes that cash generated from operations and borrowings under its Credit Facility will be sufficient to fund its anticipated working capital needs and capital expenditures for at least the next 12 months. In order to meet its long-term liquidity needs, the Company may need to issue additional equity or debt securities or engage in other borrowings or financing activities, subject to market and other conditions. There can be no assurance that such additional financing will be available on terms acceptable to the Company or at all. The failure to raise the funds necessary to finance its future cash requirements could adversely affect the Company’s ability to pursue its strategy and could negatively affect its operations in future periods.

In late September 2016, the Company hired a new, fully dedicated dentist recruiter to replace the previous recruiter. The Company believes the new recruiter is making progress in increasing its number of dentists. On January 30, 2017, the Company added a highly experienced Chief Dental Officer to work directly with its network dentists in their offices, which the Company believes will help reduce dentist turnover, improve dentist performance and enhance dentist recruitment going forward. The Company also has begun to work with an additional experienced dentist on a part time consulting basis to further improve retention and productivity. In addition, the Company has begun to offer equity buy-in opportunities for dentists, which it believes will also aid in recruiting and retaining dentists and reducing dentist turnover.

Management is also continuously seeking to reduce expenses and, on February 1, 2017, the Company’s Chief Executive Officer, Chief Financial Officer and outside directors all took 20 percent reductions in base salary and director fees, respectively, amounting to approximately $175,000 in annual expense savings. Additionally, one of the Company’s two offices in Fort Collins, Colorado that had negative earnings before interest, taxes, depreciation, amortization and stock-based compensation expense (“Adjusted EBITDA”) of $78,000 in 2016 was consolidated with another newer office at the end of January 2017. The Company is considering other actions to reduce expenses and improve profitability.

The Company has prepared its business plan for the ensuing twelve months and believes it has sufficient liquidity and financial resources to operate for the ensuing twelve month period.