UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE TO

Tender Offer Statement under Section 14(d)(1) or 13(e)(1)
of the Securities Exchange Act of 1934
(Amendment No. ____)

BIRNER DENTAL MANAGEMENT SERVICES, INC.

(Name of Subject Company (Issuer))

BIRNER DENTAL MANAGEMENT SERVICES, INC.

(Name of Filing Person (Issuer))

Common Stock, Without Par Value

(Title of Class of Securities)

091283200

(CUSIP Number of Class of Securities)

Dennis N. Genty
Chief Financial Officer, Secretary, and Treasurer
Birner Dental Management Services, Inc.
3801 East Florida Avenue, Suite 508
Denver, Colorado 80210
(303) 691-0680

(Name, address and telephone number of person authorized
to receive notices and communications on behalf of filing person)

Copy to:
Douglas R. Wright, Esq.
Faegre & Benson LLP
3200 Wells Fargo Center
1700 Lincoln St.
Denver, CO 80203
(303) 607-3500

Calculation of Filing Fee


	Transaction valuation*		Amount of filing fee


	$4,900,000		$525


*	Calculated solely for purposes of determining the filing fee. The amount of the filing fee, calculated in accordance with Rule 0-11 of the Securities Exchange Act of 1934, as amended, assumes the purchase of 175,000 shares of common stock at the maximum tender offer purchase price of $28.00 per share in cash.

o	Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.


	Amount Previously Paid:	Not applicable.


	Form or Registration No.:	Not applicable.


	Filing party:	Not applicable.


	Date filed:	Not applicable.


o	Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer.

	Check the appropriate boxes below to designate any transactions to which the statement relates:

	o	third party tender offer subject to Rule 14d-1.

	x	issuer tender offer subject to Rule 13e-4.

	o	going-private transaction subject to Rule 13e-3.

	o	amendment to Schedule 13D under Rule 13d-2.

	Check the following box if the filing is a final amendment reporting the results of the tender offer. o

Item 1. Summary Term Sheet.

The information set forth under “Summary Term Sheet” in the Offer to Purchase (the “Offer to Purchase”), attached hereto as Exhibit (a)(1), is incorporated herein by reference.

Item 2. Subject Company Information.

(a) The name of the issuer is Birner Dental Management Services, Inc. , a Colorado corporation (the “Company”). The address of the Company’s principal executive offices is 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210, and the telephone number is (303) 691-0680.

(b) The subject securities are the Company’s common stock, without par value. As of August 9, 2006, there were 2,311,719 shares of the Company’s common stock outstanding.

(c) The information set forth in the Offer to Purchase under Section 8 (“Price Range of Shares; Dividends”) is incorporated herein by reference.

Item 3. Identity and Background of Filing Person.

(a) The Company is the filing person and the information set forth under Item 2(a) above is incorporated herein by reference. The address of the Company’s principal executive offices is 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210, and the telephone number is (303) 691-0680. The information set forth in the Offer to Purchase under Section 12 (“Interest of Directors and Officers; Transactions and Arrangements Concerning Shares”) is incorporated herein by reference.

Item 4. Terms of the Transaction.

(a)-(b) The information set forth in the Offer to Purchase under “Summary Term Sheet”, Section 1 (“Number of Shares; Priority of Purchases; Proration”); Section 3 (“Procedures for Tendering Shares”), Section 4 (“Withdrawal Rights”), Section 7 (“Conditions of the Offer”), Section 11 (“Source and Amount of Consideration”), Section 13 (“Legal Matters; Regulatory Approvals”), Section 14 (“Certain Federal Income Tax Consequences”) and Section 15 (“Extension of Tender Period; Termination; Amendments”) is incorporated herein by reference.

There will be no material differences in the rights of shareholders as a result of this transaction.

Item 5. Past Contacts, Transactions, Negotiations and Arrangements.

(e) The information set forth in the Offer to Purchase under Section 12 (“Interest of Directors and Officers; Transactions and Arrangements Concerning Shares”) is incorporated herein by reference.

Item 6. Purposes of the Transaction and Plans or Proposals.

(a) The information set forth in the Offer to Purchase under Section 9 (“Purpose of the Offer; Certain Additional Effects of the Offer; Plans and Proposals”) is incorporated herein by reference.

(b) The information set forth in the Offer to Purchase under Section 5 (“Acceptance for Payment of Shares and Payment of Purchase Price”) and Section 9 (“Purpose of the Offer; Certain Additional Effects of the Offer; Plans and Proposals “) is incorporated herein by reference.

(c) The information set forth in the Offer to Purchase under Section 9 (“Purpose of the Offer; Certain Additional Effects of the Offer; Plans and Proposals “) is incorporated herein by reference.

Item 7. Source and Amount of Funds or Other Consideration.

(a), (b) and (d) The information set forth in the Offer to Purchase under Section 11 (“Source and Amount of Funds”) is incorporated herein by reference.

Item 8. Interest in Securities of the Subject Company.

(a) The information set forth in the Offer to Purchase under Section 12 (“Interest of Directors and Officers; Transactions and Arrangements Concerning Shares”) is incorporated herein by reference.

(b) The information set forth in the Offer to Purchase under Section 12 (“Interest of Directors and Officers; Transactions and Arrangements Concerning Shares”) is incorporated herein by reference.

Item 9. Person/Assets, Retained, Employed, Compensated or Used.

(a) The information set forth in the Offer to Purchase under Section 16 (“Fees and Expenses”) is incorporated herein by reference.

Item 10. Financial Statements.

(a)-(b) The information set forth (i) in the Offer to Purchase under Section 10 (“Information Concerning Birner Dental Management Services, Inc.”); (ii) on pages 36 through 59 of the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2005; and (iii) on pages 3 through 14 of the Company’s Quarterly Report on Form 10-Q for its fiscal quarter ended June 30, 2006 is incorporated herein by reference.

Item 11. Additional Information.

(a) The information set forth in the Offer to Purchase under Section 10 (“Information Concerning Birner Dental Management Services, Inc.”) Section 12 (“Interest of Directors and Officers; Transactions and Arrangements Concerning the Shares”) and Section 13 (“Legal Matters; Regulatory Approvals”), is incorporated herein by reference.

(b) Not applicable.

Item 12. Exhibits.


	(a)(1)(i) Offer to Purchase, dated August 31, 2006.

	(a)(1)(ii) Letter of Transmittal.

	(a)(1)(iii) Notice of Guaranteed Delivery.

	(a)(1)(iv) Instruction form for vested stock options.

	(a)(2) None.

	(a)(3) None.

	(a)(4) None.

	(a)(5)(i) Form of letter to brokers, dealers, commercial banks, trust companies and other nominees.

	(a)(5)(ii) Form of letter to be used by brokers, dealers, commercial banks, trust companies and other nominees to their clients.

	(a)(5)(iii) Press Release dated August 31, 2006.


	(b)(i) Fourth Amendment to the Second Amended and Restated Credit Agreement between the Company and KeyBank National Association dated August 30, 2006

	(b)(ii) Third Amended and Restated Security Agreement between the Company and KeyBank National Association dated August 30, 2006.

	(d) Not applicable.

	(g) Not applicable.

	(h) Not applicable.

Item 13. Information Required by Schedule 13E-3.

(a) Not applicable.

SIGNATURE

After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Schedule TO is true, complete and correct.


	Birner Dental Management Services, Inc.

		/s/ Frederic W. J. Birner

		Name: Frederic W.J. Birner

		Title: Chairman of the Board and Chief Executive Officer

		Date: August 31, 2006

Index to Exhibits


Exhibit Number		Description


(a)(1)(i)		Offer to Purchase, dated August 31, 2006.

(a)(1)(ii)		Letter of Transmittal.

(a)(1)(iii)		Notice of Guaranteed Delivery.

(a)(1)(iv)		Instruction form for vested stock options.

(a)(2)		None.

(a)(3)		None.

(a)(4)		None.

(a)(5)(i)		Form of letter to brokers, dealers, commercial banks, trust companies and other nominees.

(a)(5)(ii)		Form of letter to be used by brokers, dealers, commercial banks, trust companies and other nominees to their clients.

(a)(5)(iii)		Press Release dated August 31, 2006.

(b)(i)		Fourth Amendment to the Second Amended and Restated Credit Agreement between the Company and KeyBank National Association dated August 30, 2006

(b)(ii)		Third Amended and Restated Security Agreement between the Company and KeyBank National Association dated August 30, 2006.

(d)		Not applicable.

(g)		Not applicable.

(h)		Not applicable.

EX-99.(A)(1)(I) 2 ex99_a1i.htm

BIRNER DENTAL MANAGEMENT SERVICES, INC.

OFFER TO PURCHASE

UP TO 175,000 SHARES OF BIRNER DENTAL MANAGEMENT SERVICES, INC.
COMMON STOCK AT A PRICE NOT GREATER THAN $28.00 NOR LESS THAN $17.50 PER SHARE

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M. MOUNTAIN TIME
ON SEPTEMBER 29, 2006,
UNLESS THE OFFER IS EXTENDED.

We hereby invite our shareholders to tender up to 175,000 shares of our common stock for purchase by us at a price not greater than $28.00 nor less than $17.50 per share, in cash, without interest, upon the terms and subject to the conditions set forth in this offer to purchase. We will select the lowest purchase price (the “Purchase Price”) that will allow us to purchase up to 175,000 shares or, if a lesser number of shares are properly tendered, all shares that are properly tendered and not withdrawn. All shares acquired will be acquired at the same price regardless of whether the shareholder tendered at a lower price. However, because of the “Odd Lot” priority and proration provisions described in this offer to purchase, all of the shares tendered at or below the Purchase Price may not be purchased if more than the number of shares we seek are properly tendered. Shares tendered but not purchased in the offer will be returned to the tendering shareholders at our expense promptly after the expiration of the offer. Our offer is being made upon the terms and subject to the terms described in this offer to purchase.

Our intent is to purchase 175,000 of our shares. In the event that more than 175,000 shares are tendered at or below the Purchase Price, we may exercise our right to purchase up to an additional 2% of our outstanding shares without extending the offer. We also expressly reserve the right, in our sole discretion, to purchase additional shares subject to applicable legal requirements.

Questions or requests for assistance or for additional copies of this offer to purchase, the letter of transmittal or other tender offer materials may be directed to Computershare Trust Company, Inc., the information agent, at the address and telephone number set forth on the back cover of this offer to purchase, and copies will be furnished promptly at our expense. Shareholders also may contact their broker, dealer, commercial bank or trust company for assistance concerning the offer.

Shares of our common stock are quoted on the Nasdaq Capital Market under the symbol “BDMS.” On August 30, 2006, the last reported sale price of the common stock on the Nasdaq Capital Market was $17.75 per share. WE RECOMMEND THAT YOU OBTAIN CURRENT MARKET QUOTATIONS FOR OUR COMMON STOCK BEFORE DECIDING WHETHER TO TENDER YOUR SHARES.

WE HAVE NOT AUTHORIZED ANY PERSON TO MAKE ANY RECOMMENDATION ON OUR BEHALF AS TO WHETHER YOU SHOULD TENDER OR REFRAIN FROM TENDERING YOUR SHARES PURSUANT TO THE OFFER. YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED IN THIS DOCUMENT OR TO WHICH WE HAVE REFERRED YOU. WE HAVE NOT AUTHORIZED ANYONE TO GIVE YOU ANY INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFER OTHER THAN THE INFORMATION AND REPRESENTATIONS CONTAINED IN THIS DOCUMENT OR IN THE RELATED LETTER OF TRANSMITTAL. IF ANYONE MAKES ANY RECOMMENDATION OR REPRESENTATION TO YOU OR GIVES YOU ANY INFORMATION, YOU MUST NOT RELY UPON THAT RECOMMENDATION, REPRESENTATION OR INFORMATION AS HAVING BEEN AUTHORIZED BY US.

The date of this offer to purchase is August 31, 2006.

TABLE OF CONTENTS


Summary Term Sheet		1

Forward Looking Statements		5

The Offer		6

1. Number of Shares; Priority of Purchases; Proration		6

2. Tenders by Holders of Fewer Than 100 Shares		7

3. Procedure for Tendering Shares		7

4. Withdrawal Rights		12

5. Acceptance for Payment of Shares and Payment of Purchase Price		12

6. Conditional Tender		13

7. Conditions of the Offer		13

8. Price Range of Shares; Dividends		16

9. Purpose of the Offer; Certain Additional Effects of the Offer; Plans and Proposals		18

10. Information Concerning Birner Dental Management Services, Inc.		20

11. Source and Amount of Funds		26

12. Interest of Directors and Officers; Transactions and Arrangements Concerning Shares		26

13. Legal Matters; Regulatory Approvals		28

14. Certain United States Federal Income Tax Consequences		28

15. Extension of Tender Period; Termination; Amendments		30

16. Fees and Expenses		31

17. Miscellaneous		31

SUMMARY TERM SHEET

We are providing this summary term sheet for your convenience. It highlights material information in this document, but you should understand that it does not describe all of the details of the tender offer to the same extent described elsewhere in this document. We urge you to read the entire document and the related letter of transmittal because they contain the full details of the tender offer. We have included references to the sections of this document where you will find a more complete discussion.

Who is offering to purchase my shares?

Birner Dental Management Services, Inc., which we refer to as “we”, “us” or “Birner Dental” is offering to purchase shares of its common stock, without par value, in a tender offer.

What will the purchase price for the shares be and what will be the form of payment?

All shares we purchase will be purchased at a price not greater than $28.00 nor less than $17.50 per share, in cash, without interest, upon the terms and subject to the conditions set forth in this offer to purchase. We will select the lowest price that will allow us to purchase up to 175,000 shares or, if a lesser number of shares are properly tendered, all shares that are properly tendered and not withdrawn. All shares acquired will be acquired at the same price regardless of whether the shareholder tendered at a lower price. If your shares are purchased in the tender offer, you will be paid the Purchase Price in cash, without interest, promptly after the expiration of the tender offer. Under no circumstances will we pay interest on the Purchase Price, even if there is a delay in making payment. See Section 1.

How many shares will we purchase?

We will purchase up to 175,000 shares validly tendered in the tender offer, or such fewer number of shares as are properly tendered and not properly withdrawn prior to the expiration date. The 175,000 shares represents approximately 7.6% of our outstanding common stock. We also expressly reserve the right to purchase an additional number of shares not to exceed 2% of our outstanding shares, and could decide to purchase more shares, subject to applicable legal requirements. As of August 9, 2006, there were 2,311,719 shares issued and outstanding. See Section 1. The tender offer is not conditioned on any minimum number of shares being tendered. See Section 7.

Why are we making the tender offer?

We believe that the tender offer is a prudent use of our financial resources given our business profile, assets, recent trading volume and current market price, and that investing in our own shares is an attractive use of capital and an efficient means to provide value to our shareholders. The tender offer also will provide increased liquidity to holders of shares who tender and the opportunity for holders to sell shares without the usual transaction costs associated with open market sales. Depending on market conditions and the availability of capital, our board of directors may authorize additional repurchases pursuant to one or more tender offers. See Section 1. Pursuant to existing board authority, management is also authorized to repurchase up to an additional $599,618 of shares in the open market in the future. See Section 9.

How will we pay for the shares?

Assuming we purchase 175,000 shares in the tender offer at the purchase price of $28.00 per share (the maximum offer price), $4.9 million will be required to purchase such shares, exclusive of related fees and expenses. We have entered into a loan commitment to finance the purchase of the shares. See Section 11.

How long do I have to tender my shares?

You may tender your shares until the tender offer expires. The tender offer will expire on September 29, 2006, at 5:00 p.m., Mountain time, unless we extend it. See Section 1. We may choose to extend the

tender offer for any reason, subject to applicable laws. See Section 15.

How will you be notified if we extend the tender offer?

We will issue a press release by 10:00 a.m., Mountain time, on the business day after the previously scheduled expiration date if we decide to extend the tender offer. See Section 15.

What will happen if I do not tender my shares?

Upon the completion of the tender offer, non-tendering shareholders will realize a proportionate increase in their relative ownership interest in us and thus in our future earnings and assets, subject to our right to issue additional shares of common stock and other equity securities in the future. See Section 1.

If I tender my shares will I still receive the third quarter dividend?

Yes. See Section 5.

Are there any conditions to the tender offer?

Yes. It is a condition of our obligation to purchase shares pursuant to the tender offer that there not be any reasonable likelihood, as determined by us in our reasonable judgment, that any of the following events will occur (See Section 7):


	•	Failure to close on our loan commitment prior to expiration of the tender offer.

	•	The tender offer being considered a “going private transaction” under Rule 13e-3 of the Securities Exchange Act of 1934 (the “Exchange Act”).

	•	Any pending legal action, or threatened or taken legal action, that might adversely affect the tender offer.

	•	Commencement or escalation of a war, armed hostilities or other international or national calamity, including, but not limited to, an act of terrorism.

	•	Decrease in the price of our common stock by more than 15% from the last reported sale price on August 30, 2006.

	•	Decline in the Nasdaq Composite Index by more than 10% from the close of business on August 30, 2006.

	•	Any person or entity has proposed, announced or made a tender or exchange offer (other than this tender offer), merger, business combination or other similar transaction involving us.

	•	Any person or entity (including certain groups) shall have acquired, or proposed to acquire, beneficial ownership of more than 5% of our outstanding shares (other than anyone who publicly disclosed such ownership in a filing with the Securities and Exchange Commission (the “SEC”) prior to August 30, 2006). In addition, no new group shall have been formed that beneficially owns more than 5% of our outstanding shares.

	•	No material adverse change in our business condition (financial or otherwise), assets, income, operations, prospects or stock ownership shall have occurred during the tender offer.

How do I tender my shares?

To tender your shares, prior to 5:00 p.m., Mountain time, on September 29, 2006 (unless the tender offer is extended):


	•	you must deliver your share certificate(s) and a properly completed and duly executed letter of transmittal to the depositary at the address appearing on the back cover page of this document;


		or

	•	the depositary must receive a confirmation of receipt of your shares by book-entry transfer and a properly completed and duly executed letter of transmittal; or

	•	you must comply with the guaranteed delivery procedure.

If your shares are held through a broker, dealer, commercial bank, trust company or other nominee, you must request such broker, dealer, commercial bank, trust company or other nominee to effect the transaction for you. You may also contact the information agent for assistance. See Section 3 and the instructions in the related letter of transmittal.

Special procedures apply to holders of vested options in our stock option plans. See Section 3.

Once I have tendered shares in the tender offer, can I withdraw my tender?

You may withdraw any shares you have tendered at any time before 5:00 p.m., Mountain time, on September 29, 2006, unless we extend the tender offer, in which case you may withdraw tendered shares until the tender offer, as so extended, expires. After the tender offer expires, if we have not accepted for payment the shares you have tendered to us, you may withdraw your shares after October 27, 2006. See Section 4.

How do I withdraw shares I previously tendered?

You must deliver, on a timely basis, a written notice of your withdrawal to the depositary at the address appearing on the back cover page of this document. Your notice of withdrawal must specify your name, the number of shares to be withdrawn and the name of the registered holder of the shares. Some additional requirements apply if the share certificates to be withdrawn have been delivered to the depositary or if your shares have been tendered under the procedure for book-entry transfer set forth in Section 3. See Section 4.

Have we or our board of directors adopted a position on the tender offer?

Our board of directors has approved the tender offer. However, neither we nor our board of directors makes any recommendation to you as to whether you should tender or refrain from tendering your shares. You must make your own decision as to whether to tender your shares and, if so, how many shares to tender. See Section 9.

Will our directors and executive officers or significant shareholders tender shares in the tender offer?

We have not been advised as to whether our directors, executive officers or significant shareholders intend to tender shares in the tender offer. However, our directors, executive officers and employees who own shares may participate in the offer on the same basis as our other shareholders. See Section 12.

Following the tender offer, will we continue as a public company?

We do not believe that our purchase of shares in the offer could result in the offer being considered a “going private transaction” under Rule 13e-3 of the Exchange Act. We will not be required to accept for purchase any shares tendered if, in our good faith reasonable judgment, any purchase of shares under the offer could result in the offer being considered a “going private transaction” under Rule 13e-3 of the Exchange Act, for us, that is, if our purchase of shares pursuant to this offer would result in our common stock no longer being authorized for trading on the Nasdaq Capital Market. This condition is a nonwaivable condition to our offer. See Section 7.

What happens if more than 175,000 shares are tendered in the tender offer?

We will purchase shares:


	•	First, from all holders of “Odd Lots” of fewer than 100 shares who properly tender all of their shares and do not properly withdraw them before the expiration date; and

	•	Second, after purchasing the shares from the “Odd Lot” holders, from all other shareholders who properly tender shares, on a pro rata basis. See Section 1.

When will we pay for the shares you tender?

We will pay the Purchase Price, net to you in cash, without interest, for the shares we purchase promptly after the expiration of the tender offer and the acceptance of the shares for payment. In the event of proration, we do not expect to be able to commence payment for shares until approximately ten business days after the expiration date. See Section 5.

What is the recent market price of my shares?

On August 30, 2006, the last trading day before we announced our intention to make this tender offer, the closing price of our shares on the Nasdaq Capital Market was $17.75. You are urged to obtain current market quotations for the shares before deciding whether to tender your shares. See Section 8.

Will I have to pay brokerage commissions if I tender my shares?

If you are a registered shareholder and you tender your shares directly to the depositary, you will not incur any brokerage commissions. If you hold shares through a broker or bank, we urge you to consult your broker or bank to determine whether transaction costs are applicable. See Section 1 and Section 3.

What are the U.S. federal income tax consequences if I tender my shares?

Generally, if you are a U.S. Holder (as defined in Section 14), you will be subject to U.S. federal income taxation when you receive cash from us in exchange for the shares you tender. In addition, the receipt of cash for your tendered shares will be treated either as (1) a sale or exchange eligible for capital gains treatment, or (2) a dividend. If you are a non-U.S. Holder (as defined in Section 14), you are urged to consult your tax advisor regarding the application of U.S. federal income tax withholding and backup withholding, including eligibility for a withholding tax reduction or exemption, and the refund procedure. See Section 14.

If you are a U.S. Holder, you should complete the Substitute Form W-9 included in your letter of transmittal. Any tendering shareholder or other payee that fails to complete, sign and return to the Depositary the Substitute Form W-9 included in the letter of transmittal (or such other Internal Revenue Service (“IRS”) form as may be applicable) may be subject to United States backup withholding. Such withholding would be equal to 28% of the gross proceeds paid to the shareholder or other payee pursuant to the tender offer. Different rules on filings in respect of withholding of tax apply to foreign shareholders. See Section 3.

Will I have to pay any stock transfer tax if I tender my shares?

If you instruct the depositary, Computershare Trust Company, Inc., in the letter of transmittal to make the payment for the shares to the registered holder, you will not incur any stock transfer tax. See Section 5.

Whom can I talk to if I have questions?

The information agent can help answer your questions. The information agent is Computershare Trust Company, Inc. Its contact information is set forth on the back cover page of this document.

FORWARD LOOKING STATEMENTS

This offer to purchase and the documents to which we refer you contain forward-looking statements. These statements, which are not statements of historical fact, may contain estimates, assumptions, projections and/or expectations regarding our financial position, results of operations, market position, product development, growth opportunities, economic conditions and other similar forecasts and statements of expectation. We generally indicate these statements by words or phrases such as “anticipate,” “estimate,” “plan,” “expect,” “believe,” “intend,” “foresee” and similar words or phrases. These forward-looking statements are not guarantees of future performance and are subject to a number of factors and uncertainties that could cause our actual results and experiences to differ materially from the anticipated results and expectations expressed in such forward-looking statements.

Such forward-looking statements involve certain risks and uncertainties that could cause actual results to differ materially from anticipated results. These risks and uncertainties include regulatory constraints, changes in laws or regulations concerning the practice of dentistry or dental practice management companies, the availability of suitable new markets and suitable locations within such markets, changes in the our operating or expansion strategy, the general economy of the United States and the specific markets in which our offices are located or are proposed to be located, trends in the health care, dental care and managed care industries, as well as the risk factors set forth in Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2005, and other factors as may be identified from time to time in our filings with the SEC or in our press releases.


	THE OFFER

1. NUMBER OF SHARES; PRIORITY OF PURCHASES; PRORATION

General

Upon the terms and subject to the conditions described in this document and in the letter of transmittal, we will purchase up to up to 175,000 shares of our common stock that are properly tendered and not withdrawn in accordance with Section 4, at a price not greater than $28.00 nor less than $17.50 per share, in cash, without interest, on or prior to the expiration date of the offer. The later of 5:00 p.m., Mountain time, on September 29, 2006, or the latest time and date to which the offer is extended pursuant to Section 15, is referred to herein as the “expiration date.”

We will select the lowest Purchase Price that will allow us to purchase up to 175,000 shares or, if a lesser number of shares are properly tendered (as described in Section 3), all shares that are properly tendered and not withdrawn. All shares acquired will be acquired at the same price regardless of whether the shareholder tendered at a lower price. If this offer is oversubscribed as described below, only shares tendered at the Purchase Price on, or prior to, the expiration date will be eligible for proration. The proration period also expires on the expiration date. All shares not purchased pursuant to this offer, including shares not purchased because of proration, will be returned to the tendering shareholders at our expense promptly following the expiration date.

This offer is not conditioned on any minimum number of shares being tendered. The offer is, however, subject to certain other conditions. See Section 7.

We expressly reserve the right, in our sole discretion, at any time or from time to time, to extend the period of time during which the offer is open by giving oral or written notice of such extension to the depositary and making a public announcement thereof. See Section 15. There can be no assurance, however, that we will exercise our right to extend the offer.

For purposes of the offer, a “business day” means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 a.m. through 12:00 midnight, Mountain time.

Copies of this offer to purchase and the related letter of transmittal are being mailed to record holders of shares and will be furnished to brokers, banks and similar persons whose names, or the names of whose nominees, appear on our shareholder list or, if applicable, who are listed as participants in a clearing agency’s security position listing for subsequent transmittal to beneficial owners of shares.

Priority of Purchases

Upon the terms and subject to the conditions of this offer, if 175,000 or fewer shares have been validly tendered and not withdrawn on or prior to the expiration date, we will purchase all the shares.

Upon the terms and subject to the conditions of this offer, if more than 175,000 shares have been validly tendered and not withdrawn on or prior to the expiration date, we will purchase shares in the following order of priority:


	•	First, all shares validly tendered and not withdrawn on or prior to the expiration date by or on behalf of any shareholder who owns of record or beneficially an aggregate of fewer than 100 shares and who validly tenders all of such shares (partial tenders will not qualify for this


		preference) and completes the box captioned “Odd Lots” on the letter of transmittal and, if applicable, in the notice of guaranteed delivery.

	•	Second, after purchase of all the shares properly tendered by odd lot holders, all other shares validly tendered and not withdrawn on or prior to the expiration date on a pro rata basis, if necessary, with appropriate adjustments to avoid purchases of fractional shares. We will purchase the same percentage of shares tendered from each tendering shareholder in this second category. We will announce the proration percentage, if it is necessary, after the offer expires.

Proration

If proration of tendered shares is required, we will determine the final proration factor promptly after the expiration date. Proration for each shareholder tendering shares, other than odd lot holders, will be based on the ratio of the number of shares tendered by the shareholder to the total number of shares tendered by all shareholders at or below the Purchase Price selected by us. This ratio will be applied to shareholders tendering shares to determine the number of shares, rounded up to the nearest whole share, that will be purchased from each shareholder pursuant to our offer.

Because of the potential difficulty in determining the number of shares properly tendered and not properly withdrawn, including shares tendered by guaranteed delivery procedures as described in Section 3, and because of the odd lot procedures described in Section 2, we do not expect that we will be able to announce the final proration percentage until seven to ten business days after the expiration date. The preliminary results of any proration will be announced by press release promptly after the expiration date. In the event of a proration, we anticipate that we will commence payment on the tendered shares within ten business days after the expiration date.

As described in Section 14, the number of shares that we will purchase from a shareholder under our offer may affect the United States federal income tax consequences to that shareholder and, therefore, may be relevant to a shareholder’s decision whether or not to tender shares. The letter of transmittal affords each shareholder the opportunity to designate the order of priority in which shares are to be purchased in the event of proration, should a shareholder decide to do so for federal income tax reasons.

2. TENDERS BY HOLDERS OF FEWER THAN 100 SHARES

Upon the terms and subject to the conditions of the offer, all shares validly tendered and not withdrawn on or prior to the expiration date by or on behalf of any shareholder who owned of record or beneficially an aggregate of fewer than 100 shares, will be accepted for purchase before proration, if any, of other tendered shares. This preference is not available to record or beneficial holders of 100 or more shares, even if the holders have separate stock certificates for fewer than 100 shares. By accepting this offer, a shareholder owning of record or beneficially fewer than 100 shares will avoid the payment of brokerage commissions and the applicable odd lot discount payable in a sale of such shares in a transaction effected on a securities exchange.

As of April 10, 2006, there were approximately 208 holders of record of our common stock. Approximately 169 of these holders of record held individually fewer than 100 shares and held in the aggregate approximately 2,787 shares. Because of the large number of shares held in the names of brokers and nominees, we are unable to estimate the exact number of beneficial owners of fewer than 100 shares or the aggregate number of shares they own. Any shareholder wishing to tender all of his or her shares pursuant to this section should complete the box captioned “Odd Lots” on the letter of transmittal and, if applicable, in the notice of guaranteed delivery.

3. PROCEDURE FOR TENDERING SHARES

To tender shares pursuant to our offer, either (1) or (2) below must occur:

(1) A properly completed and duly executed letter of transmittal, together with any required signature guarantees and any other documents required by the letter of transmittal, must be received by the depositary at its address set forth on the back cover of this offer to purchase and either (i) certificates for the shares to be tendered must be received by the depositary at such address or (ii) the shares must be delivered pursuant to the procedures for book-entry transfer described below, and a confirmation of the delivery received by the depositary including an agent’s message (described under “Book Entry Delivery” below), in each case on or prior to the expiration date.

(2) You must comply with the guaranteed delivery procedure set forth below (described under “Guaranteed Delivery” below).

If you submit multiple letters of transmittal, you may withdraw all or any portion of the shares transferred pursuant to a single notice of withdrawal made in accordance with Section 4 of this document.

IN ACCORDANCE WITH INSTRUCTION 5 OF THE LETTER OF TRANSMITTAL, EACH SHAREHOLDER DESIRING TO TENDER SHARES PURSUANT TO THE OFFER MUST CHECK ONE OF THE BOXES IN THE SECTION OF THE LETTER OF TRANSMITTAL CAPTIONED “SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER” INDICATING THE PRICE (IN INCREMENTS OF $0.25) AT WHICH SHARES ARE BEING TENDERED.

A shareholder must indicate a specific price (in increments of $0.25) at which such shareholder’s shares are being tendered by checking a box under the section captioned “Shares Tendered at Price Determined by Shareholder.” A shareholder who wishes to tender shares at more than one price must complete a separate letter of transmittal for each price at which shares are being tendered. The same shares may not be tendered at more than one price unless such shares are previously withdrawn according to the terms of the offer.

A TENDER OF SHARES WILL BE PROPER IF, AND ONLY IF, ON THE APPROPRIATE LETTER OF TRANSMITTAL ONE OF THE BOXES IN THE SECTION CAPTIONED “SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER” IS CHECKED. SHAREHOLDERS WHO HOLD SHARES THROUGH BROKERS OR BANKS ARE URGED TO CONSULT THEIR BROKERS OR BANKS TO DETERMINE WHETHER TRANSACTION COSTS ARE APPLICABLE IF SHAREHOLDERS TENDER SHARES THROUGH THE BROKERS OR BANKS.

Odd lot holders who tender all their shares must also complete the section captioned “Odd Lots” in the letter of transmittal and, if applicable, in the notice of guaranteed delivery, to qualify for the preferential treatment available to odd lot holders as set forth in Section 1.

In cases where shares are tendered by a registered holder of our common stock who has completed either the box entitled “Special Payment Instructions” or the box entitled “Special Delivery Instructions” in the letter of transmittal, all signatures on the letters of transmittal must be guaranteed by an “eligible institution.” An “eligible institution” is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association or other entity that is an “eligible guarantor institution,” as that term is defined in Rule 17Ad-15 under the Exchange Act. If the certificates are registered in the name of a person other than the signer of the letter of transmittal, or if certificates for unpurchased shares are to be issued to a person other than the registered holder(s), the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signature(s) on the certificates or stock powers guaranteed by an eligible institution.

A tender of shares pursuant to the procedures described in this section will constitute a binding agreement between the tendering shareholder and us upon the terms and subject to the conditions of our offer.

The method of delivering all documents, including certificates for shares, the letter of transmittal and any other required documents, is at your election and risk. If delivery is by mail, registered mail with return receipt requested, properly insured, is recommended.

All deliveries in connection with our offer, including a letter of transmittal and certificates for shares, must be made to the depositary and not to us or the book-entry transfer facility. Any documents delivered to us or the book-entry transfer facility will not be forwarded to the depositary and therefore will not be deemed to be properly tendered. In all cases, sufficient time should be allowed to ensure timely delivery.

Book-Entry Delivery

The depositary will establish an account with respect to the shares at the book-entry transfer facility for purposes of our offer within two business days after the date of this document. Any financial institution that is a participant in the system of the book-entry transfer facility may make book-entry delivery of shares by causing the book-entry transfer facility to transfer the shares into the depositary’s account in accordance with the depositary’s procedure for the transfer. Even though delivery of shares may be effected through book-entry transfer into the depositary’s account at the book-entry transfer facility, either (1) or (2) below must occur for a valid tender:

(1) A properly completed and duly executed letter of transmittal or a manually signed copy thereof, or an agent’s message, as defined below, together with any required signature guarantees and any other required documents, must, in any case, be transmitted to and received by the depositary at its address set forth on the back cover of this offer on or prior to the expiration date.

(2) You must comply with the guaranteed delivery procedures set forth below (described under “Guaranteed Delivery” below).

Delivery of the letter of transmittal (or other required documentation) to the book-entry transfer facility does not constitute delivery to the depositary.

The term “agent’s message” means a message transmitted by the book-entry transfer facility to, and received by, the depositary and forming a part of a book-entry confirmation, which states that the book-entry transfer facility has received an express acknowledgement from the participant in the book-entry transfer facility tendering the shares, that the participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce the agreement against the participant.

Guaranteed Delivery

If you want to tender your shares pursuant to our offer but your share certificates are not immediately available, the procedure for book-entry transfer cannot be completed on a timely basis, or if time will not permit all required documents to reach the depositary prior to the expiration date, you can still tender your shares if all the following conditions are met:


	•	the tender is made by or through an eligible institution;

	•	the depositary receives by hand, mail, or overnight courier, prior to the expiration date, a properly completed and duly executed notice of guaranteed delivery in the form we have provided with this document, with signatures guaranteed by an eligible institution; and

	•	the depositary receives, within three trading days after the date of its receipt of the notice of guaranteed delivery:


	•	the certificates for all tendered shares, or confirmation of receipt of the shares pursuant to the procedure for book-entry transfer as described above;

	•	a properly completed and duly executed letter of transmittal or an agent’s message in the case of a book-entry transfer, and


	•	any other documents required by the letter of transmittal.

In any event, the exchange of the Purchase Price for shares tendered and accepted for purchase pursuant to our offer will be made only after timely receipt by the depositary of certificates for the shares, properly completed, duly executed letter(s) of transmittal and any other required documents.

Determination of Validity; Rejection of Shares; Waiver of Defects; No Obligation to Give Notice of Defects

All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any tender of shares will be determined by us in our sole discretion, and our determination will be final and binding. We reserve the absolute right to reject any or all tenders determined by us not to be in proper form or the acceptance or purchase of which may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive prior to the expiration date any condition (other than the nonwaivable conditions) or any defect or irregularity in the tender of any shares. If a condition is waived for any particular shareholder, the same condition will be waived for all shareholders who tender shares. No tender of shares will be deemed to have been validly made until all defects and irregularities have been cured or waived. Our interpretation of the terms and conditions of our offer (including this document, the letter of transmittal and its instructions and other offer materials) will be final and binding. Neither we, the depositary nor any other person will be under any duty to give notification of any defects or irregularities in the tender of any shares or will incur any liability for failure to give any such notification.

Procedure for Shares Held By Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees

If your shares are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, you must contact the broker, dealer, commercial bank, trust company or other nominee if you wish to tender your shares. You should contact your broker, dealer, commercial bank, trust company or other nominee in sufficient time to permit notification of your desire to tender to reach the depositary by the expiration date of our offer.

Procedure for Vested Options Held in Our Stock Option Plan

If you hold vested options in any of our stock option plans, then you may exercise such vested options as indicated in the special instructions separately sent to you by paying the cash exercise price and receiving shares which you may then tender by following the instructions set forth in the letter of transmittal. You must exercise your options by not later than 3:00 p.m. Mountain time on September 22, 2006, in order to obtain shares to tender by the expiration date.

Your Representations and Warranties; Our Acceptance Constitutes an Agreement

It is a violation of Rule 14e-4 promulgated under the Exchange Act for a person, directly or indirectly, to tender shares for that person’s own account unless, at the time of tender and at the end of the proration period, the person so tendering:


	•	has a “net long position” equal to or greater than the amount of (i) shares tendered or (ii) securities immediately convertible into, or exchangeable or exercisable for, the subject securities; and

	•	will deliver or cause to be delivered the shares in accordance with the terms of the offer.

Rule 14e-4 provides a similar restriction applicable to the tender or guarantee of a tender on behalf of another person.

A tender of shares under any of the procedures described above will constitute your acceptance of the terms and conditions of our offer, as well as your representation and warranty to us that:


	•	you have a “net long position” in the shares or equivalent securities at least equal to the shares tendered within the meaning of Rule 14e-4; and

	•	the tender of shares complies with Rule 14e-4.

Our acceptance for payment of shares tendered under our offer will constitute a binding agreement between you and us upon the terms and conditions of our offer described in this and related documents.

U.S. Federal Income Tax Withholding

Under the federal income tax backup withholding rules, 28% of the gross proceeds payable to a shareholder or other payee pursuant to the offer must be withheld and remitted to the United States Treasury, unless the shareholder or other payee provides his or her taxpayer identification number (employer identification number or social security number) to the depositary and certifies, under penalties of perjury, that such number is correct or an exemption otherwise applies under applicable regulations. Therefore, unless such an exemption exists and is proven in a manner satisfactory to the depositary, each tendering shareholder that is a U.S. Holder (as defined in Section 14) should complete and sign the Substitute Form W-9 included as part of the letter of transmittal so as to provide the information and certification necessary to avoid backup withholding. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, that shareholder must submit a statement (generally a Form W-8BEN), signed under penalties of perjury, attesting to that individual’s exempt status. Such forms can be obtained from the depositary. See Instruction 11 of the letter of transmittal. The amounts withheld under the backup withholding rules are not an additional tax and may be refunded or credited against a shareholder’s U.S. federal income tax liability, provided that the required information is furnished.

ANY TENDERING SHAREHOLDER OR OTHER PAYEE WHO FAILS TO COMPLETE FULLY AND SIGN THE SUBSTITUTE FORM W-9 INCLUDED IN THE LETTER OF TRANSMITTAL MAY BE SUBJECT TO REQUIRED FEDERAL INCOME TAX BACKUP WITHHOLDING OF 28% OF THE GROSS PROCEEDS PAID TO SUCH SHAREHOLDER OR OTHER PAYEE PURSUANT TO THE OFFER.

Gross proceeds payable pursuant to the offer to a non-U.S. Holder (as defined in Section 14) or his or her agent will be subject to withholding of federal income tax at a rate of 30%, unless the non-U.S. Holder establishes that a reduced rate of withholding is applicable pursuant to a tax treaty or that an exemption from withholding is applicable because such gross proceeds are effectively connected with the conduct of a trade or business within the United States. A non-U.S. Holder may be eligible to file for a refund of such tax or a portion of such tax if such shareholder meets the “complete redemption,” “substantially disproportionate” or “not essentially equivalent to a dividend” tests described in Section 14 or if such shareholder is entitled to a reduced rate of withholding pursuant to a tax treaty and we withheld at a higher rate. In order to obtain a reduced rate of withholding under a tax treaty, a non-U.S. Holder must deliver to the depositary before the payment a properly completed and executed Form W-8BEN. Such form can be obtained from the depositary. In order to claim an exemption from withholding on the grounds that gross proceeds paid pursuant to the offer are effectively connected with the conduct of a trade or business within the United States, a foreign shareholder must deliver to the depositary a properly executed Form W-8BEN. Such form can be obtained from the depositary. See Instruction 11 of the letter of transmittal. Non-U.S. Holders are urged to consult their own tax advisors regarding the application of federal income tax withholding, including eligibility for a reduction to or an exemption from the withholding tax and the refund procedure.

For a discussion of material United States federal income tax consequences to tendering shareholders, see Section 14.

Lost or Destroyed Certificates

If your certificate(s) for part or all of your shares have been lost, stolen, misplaced or destroyed, you should contact Computershare Trust Company, Inc. at 1-800-962-4284 (extension 4732) and indicate that fact on the letter of transmittal. You may be required to post a bond to secure against the risk that the certificates may be subsequently recirculated. See instruction 15 of the letter of transmittal.

4. WITHDRAWAL RIGHTS

Tenders of shares made pursuant to the offer may be withdrawn at any time prior to the expiration date. Thereafter, tenders are irrevocable, except that they may be withdrawn after 12:00 midnight, Mountain time, October 27, 2006, unless previously accepted for payment by us as provided in this offer to purchase. If we extend the period of time during which the offer is open, are delayed in purchasing shares or are unable to purchase shares pursuant to the offer for any reason, then, without prejudice to our rights under the offer, the depositary may, on our behalf, retain all shares tendered, and the shares may not be withdrawn except as otherwise provided in this Section 4, subject to Rule 13e-4(f)(5) under the Exchange Act, which provides that the issuer making the offer shall either pay the consideration offered or return the tendered securities promptly after the termination or withdrawal of the offer.

Withdrawal of Shares Held in Physical Form. For a withdrawal to be effective, a holder of shares held in physical form must provide a written notice of withdrawal to the depositary at its address set forth on the back cover page of this offer before the expiration date, which notice must contain: (1) the name of the person who tendered the shares; (2) a description of the shares to be withdrawn; (3) the certificate numbers shown on the particular certificates evidencing the shares; (4) the signature of the shareholder executed in the same manner as the original signature on the letter of transmittal, including any signature guarantee, if such original signature was guaranteed; and (5) if the shares are held by a new beneficial owner, evidence satisfactory to us that the person withdrawing the tender has succeeded to the beneficial ownership of the shares. A purported notice of withdrawal that lacks any of the required information will not be an effective withdrawal of a tender previously made.

Withdrawal of Shares Held with the Book-Entry Transfer Facility. For a withdrawal to be effective, a holder of shares held with the book-entry transfer facility must: (1) call his or her broker and instruct the broker to withdraw the tender of shares by debiting the depositary’s account at the book-entry transfer facility for all shares to be withdrawn; and (2) instruct the broker to provide a written notice of withdrawal to the depositary on or before the expiration date. The notice of withdrawal must contain (a) the name of the person who tendered the shares; (b) a description of the shares to be withdrawn; and (c) if the shares are held by a new beneficial owner, evidence satisfactory to us that the person withdrawing the tender has succeeded to the beneficial ownership of the shares. A purported notice of withdrawal that lacks any of the required information will not be an effective withdrawal of a tender previously made.

Any permitted withdrawals of tenders of shares may not be rescinded, and any shares so withdrawn will thereafter be deemed not validly tendered for purposes of the offer; provided, however, that withdrawn shares may be re-tendered by following the procedures for tendering prior to the expiration date.

All questions as to the form and validity, including time of receipt, of any notice of withdrawal will be determined by us, in our sole discretion, which determination shall be final and binding on all parties. Neither we, the information agent, the depositary nor any other person is or will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or incur any liability for failure to give any such notification.

5. ACCEPTANCE FOR PAYMENT OF SHARES AND PAYMENT OF PURCHASE PRICE

Upon the terms and subject to the conditions of the offer, including the proration provisions of the offer, and promptly after the expiration date, we (1) will determine the Purchase Price we will pay for shares properly tendered and not properly withdrawn before the expiration date, taking into account the number of shares so tendered and the prices specified by tendering shareholders, and (2) will accept for payment and pay for, and thereby purchase, up to 175,000 shares properly tendered at prices at or below the

Purchase Price and not properly withdrawn before the expiration date. Thereafter, payment for all shares validly tendered on or prior to the expiration date and accepted for payment pursuant to the offer will be made promptly by the depositary by check. Payment for shares accepted pursuant to the offer will be made only after timely receipt by the depositary of: (1) certificates for such shares or confirmation of a book-entry transfer of such shares into the depositary’s account at the book-entry transfer facility; (2) a properly completed and duly executed letter of transmittal or a manually signed copy thereof, with any required signature guarantees, or, in the case of a book-entry delivery, an agent’s message; and (3) any other required documents.

For purposes of the offer, we will be deemed to have accepted for payment, and thereby purchased, subject to proration, shares that are validly tendered and not withdrawn as, if and when we give oral or written notice to the depositary of our acceptance for payment of the shares. In the event of proration, we will determine the proration factor and pay for those tendered shares accepted for payment promptly after the expiration date. However, we do not expect to be able to announce the final results of any such proration until approximately seven to ten business days after the expiration date. We will pay for shares that we have purchased pursuant to the offer by depositing the aggregate purchase price therefor with the depositary. The depositary will act as agent for tendering shareholders for the purpose of receiving payment from us and transmitting payment to tendering shareholders. Under no circumstances will interest be paid on amounts to be paid to tendering shareholders, regardless of any delay in making such payment.

Certificates for all shares not purchased pursuant to this offer to purchase will be returned, or, in the case of shares tendered by book-entry transfer, the shares will be credited to an account maintained with the book-entry transfer facility by the participant therein who so delivered the shares, promptly following the expiration date without expense to the tendering shareholder.

Payment for shares may be delayed in the event of difficulty in determining the number of shares properly tendered or if proration is required. See Section 1. In addition, if certain events occur, we may not be obligated to purchase shares pursuant to the offer. See Section 7.

We will pay or cause to be paid any stock transfer taxes with respect to the sale and transfer of any shares to us or our order pursuant to the offer. If, however, payment of the purchase price is to be made to, or a portion of the shares delivered, whether in certificated form or by book-entry, but not tendered or not purchased are to be registered in the name of, any person other than the registered holder, or if tendered shares are registered in the name of any person other than the person signing the letter of transmittal, unless the person is signing in a representative or fiduciary capacity, the amount of any stock transfer taxes, whether imposed on the registered holder, such other person or otherwise, payable on account of the transfer to the person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted. See Instruction 9 to the letter of transmittal.

Tendering shareholders will receive our third quarter dividend relating to their shares.

Any tendering shareholder or other payee who fails to complete fully and sign the substitute Form W-9 included in the letter of transmittal or, in the case of a foreign individual, a Form W-8, may be subject to required federal income tax withholding of 28% of the gross proceeds paid to such shareholder or other payee pursuant to the offer. See Section 3.

6. CONDITIONAL TENDER

Shareholders will not be permitted to “conditionally tender” their shares by requiring us to purchase a minimum number of the shares tendered. Under certain circumstances and subject to the exceptions set forth in Section 1, we may prorate the number of shares purchased pursuant to the offer. As discussed in Section 14, the number of shares to be purchased from a particular shareholder might affect the tax treatment of the purchase for the shareholder and the shareholder’s decision whether to tender. Each shareholder is urged to consult with his or her own tax advisor.

7. CONDITIONS OF THE OFFER

Notwithstanding any other provisions of our offer, we will not be required to accept for purchase or purchase any shares, may postpone the acceptance for purchase of or the purchase of shares tendered, and may cancel, terminate or amend our offer as provided herein if any of the following conditions are not satisfied or waived on or before the expiration date.

Financing

We will not be obligated to close the offer if, prior to the expiration of the offer, we fail to close on our $5 million fixed rate term loan commitment. We expect to fund the purchase of the shares tendered in this offer from the borrowings under such loan. This condition is a nonwaivable condition to our offer. See Section 11.

Avoidance of Rule 13e-3 Transaction Condition

We may amend or terminate the offer, and will not be required to accept for purchase any shares tendered if, in our good faith reasonable judgment, any purchase of shares under the offer could result in the offer being considered a “going private transaction” under Rule 13e-3 of the Exchange Act, for us, that is, if our purchase of shares pursuant to this offer would result in our common stock no longer being authorized for trading on the Nasdaq Capital Market. This condition is a nonwaivable condition to our offer.

A tender offer may also be considered a “going private transaction” under Rule 13e-3 of the Exchange Act if it results in us being held of record by fewer than 300 holders. However, we currently have fewer than 300 holders of record. Therefore, this offer cannot “result” in us being held of record by fewer than 300 holders. We have been advised that having fewer than 300 record holders before commencement of the offer will not cause the offer to be considered a “going private transaction”.

As of August 9, 2006, there were approximately 208 record holders and approximately 647 beneficial owners of our shares.

No Legal Prohibition Condition

We will not be obligated to close the offer if a preliminary or permanent injunction, decree or order has been entered or threatened by any governmental authority, or another legal restraint or prohibition is in effect, that either:


•	enjoins, restrains or prohibits our offer; or

•	in our reasonable judgment, could materially and adversely affect our business, financial condition, income, operations or prospects, or otherwise materially impair in any way the contemplated future conduct of our business or our ability to purchase 175,000 shares of our common stock in the offer.

As of the date of this document, no such injunction, decree, order, restraint or prohibition exists, nor to our knowledge has any of the foregoing been threatened. However, we can give no assurance that an injunction, decree, order, restraint or prohibition will not exist in the future.

We reserve the right (but are not obligated), subject to the rules and regulations of the SEC, to waive this condition, in whole or in part, on or before the expiration date.

Material Adverse Change Condition

We will not be obligated to close the offer if, after the date of this document, any of the following has occurred:


•	the declaration of any banking moratorium or any suspension of payments in respect of banks in the United States (whether or not mandatory);

•	any general suspension of trading in, or limitation on prices for, securities on any U.S. national securities exchange or in the over-the-counter market;

•	any limitation (whether or not mandatory) by any governmental, regulatory or administrative agency or authority on, or any event which, in our reasonable judgment, might materially affect the extension of credit by banks or other lending institutions in the United States;

•	a decrease in the market price of our shares of more than 15% measured from the close of trading on August 30, 2006, the last trading day preceding the date this offer was announced, and the close of trading on the last trading day prior to expiration of this offer;

•	any change in the general political, market, economic or financial conditions in the United States or abroad that could have, in our reasonable judgment, a material adverse effect on our business, financial condition, income, operations or prospects, or on the trading in our shares;

•	any decline in the Nasdaq Composite Index by an amount in excess of 10% measured from the close of trading on August 30, 2006; or

•	any change or event has occurred or is threatened in our subsidiaries’ business condition (financial or otherwise), assets, income, operations or prospects or stock ownership that, in our reasonable judgment, is or is reasonably likely to have a material adverse effect on us or our subsidiaries.

No Competing Offer Condition

We will not be obligated to close the offer if, after the date of this document, a tender or exchange offer with respect to some or all of the shares (other than our offer), or merger, acquisition proposal or other business combination for us has been proposed, announced or made by another person or we have learned that:


•	any person or “group” (within the meaning of Section 13(d)(3) of the Exchange Act) has acquired or proposes to acquire beneficial ownership of more than 5% of our outstanding shares, whether through the acquisition of stock, the formation of a group, the grant of any option or right or otherwise (other than as disclosed in a Schedule 13D or 13G (or an amendment thereto) on file with the SEC on the date of this document);

•	any such person or group that on or prior to the date of this document had filed such a Schedule with the SEC thereafter has acquired or has proposed to acquire, whether through the acquisition of stock, the formation of a group, the grant of any option or right or otherwise, beneficial ownership of additional shares representing 2% or more of our outstanding shares; or

•	any person or group has filed a Notification and Report Form under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, reflecting an intent to acquire us or any of the shares, or has made a public announcement reflecting an intent to acquire us or any of our subsidiaries or any of their assets.

We are not aware of any such event having occurred. In any event, we reserve the right (but are not obligated), subject to the rules and regulations of the SEC, to waive this condition, in whole or in part, prior to the expiration date.

Effect of Failing to Satisfy Conditions

If any of the conditions have not been satisfied or, if waivable, not waived by the expiration date, we may elect either to:


•	extend the expiration date and our offer and retain all shares tendered until the expiration date of the offer as extended, subject to the right of a tendering shareholder to withdraw his or her shares;

•	waive the conditions (other than the condition regarding going private and the condition regarding no legal prohibitions), extend our offer for a period of ten business days if our offer is scheduled to expire prior thereto if such waiver constitutes a material change in our offer, and thereafter purchase all properly tendered shares; or

•	terminate our offer and purchase none of the shares and return all tendered shares.

We will not accept for purchase any shares pursuant to our offer until such time as the conditions have been satisfied or waived. If a condition is waived for any particular shareholder, we will waive it with respect to all shareholders.

8. PRICE RANGE OF SHARES; DIVIDENDS

Our common stock is listed on the Nasdaq Capital Market under the symbol “BDMS.” The following table sets forth the high and low sales prices for our common stock as reported on the Nasdaq Capital Market. On July 13, 2005, we announced that our board of directors declared a 2-for-1 stock split of our common stock. The 2-for-1 stock split, which was effected as a stock dividend, was distributed on August 8, 2005 to shareholders of record at the close of business on August 1, 2005. The stock split increased the number of shares outstanding on August 8, 2005 from 1,210,295 to 2,420,590. The share prices, dividends per share and number of shares purchased prior to August 8, 2005 listed in the tables below have been adjusted to reflect the stock split.


	HIGH		LOW

2004

First Quarter	$	8.39	$	6.11

Second Quarter		8.84		7.50

Third Quarter		9.85		7.88

Fourth Quarter		10.50		7.96

2005

First Quarter	$	13.63	$	9.18

Second Quarter		14.80		10.75

Third Quarter		18.00		13.50

Fourth Quarter		21.53		16.00

2006

First Quarter	$	21.07	$	17.00

Second Quarter		17.50		14.96

Third Quarter (through August 23, 2006)		17.53		14.72

On August 30, 2006, the last trading day before we announced our intention to make this offer, the closing price of our shares on the Nasdaq Capital Market was $17.75. On August 29, 2006, the next to the last trading day prior to the commencement of the offer, the closing price of the shares on the Nasdaq Capital Market was $17.30. WE URGE YOU TO OBTAIN MORE CURRENT MARKET QUOTATIONS FOR THE SHARES.

On March 9, 2004, we announced a quarterly cash dividend of $.0375 per share. On February 10, 2005, we announced an increase in the amount of the quarterly dividend to $.10 per share. On January 10, 2006, we announced an increase in the amount of the quarterly dividend to $.13 per share. However, the payment of dividends in the future is subject to the discretion of our board of directors, and various factors may prevent us from paying dividends. Such factors include the our financial position, capital requirements and liquidity, the existence of a stock repurchase program, any loan agreement restrictions, state corporate law restrictions, results of operations and such other factors as our board of directors may consider relevant. The table below sets forth the frequency and dividends paid per share over the last two years.


	Dividend
2004

First Quarter	$	.0375

Second Quarter	$	.0375

Third Quarter	$	.0375

Fourth Quarter	$	.0375

2005

First Quarter	$	.10

Second Quarter	$	.10

Third Quarter	$	.10

Fourth Quarter	$	.10

2006

First Quarter	$	.13

Second Quarter	$	.13

We have repurchased 425,900 shares of common stock during the two years ended August 31, 2006. The table below sets forth the number of shares purchased, the range of prices paid and the average purchase price paid for each quarter from 2004 though today.


	Number of Shares Purchased	Price Range of Shares Purchased		Average Price of Shares Purchased

2004

First Quarter	83,000	$	6.38-$6.70	$	6.57

Second Quarter	None		N/A		N/A

Third Quarter	None		N/A		N/A

Fourth Quarter	25,000	$	9.30-$9.30	$	9.30

2005

First Quarter	70,000	$	9.00-$10.30	$	9.56

Second Quarter	127,364	$	12.00-$12.00	$	12.00

Third Quarter	33,822	$	15.64-$17.61	$	16.91

Fourth Quarter	80,775	$	17.61-$19.40	$	19.08

2006

First Quarter	1,147	$	17.20-$18.10	$	17.68

Second Quarter	86,793	$	15.00-$17.21	$	15.31

Third Quarter (through August 31, 2006)	999	$	15.00-$16.30	$	15.68


9.	PURPOSE OF THE OFFER; CERTAIN ADDITIONAL EFFECTS OF THE OFFER; PLANS AND PROPOSALS

We are making this offer because our board of directors has evaluated our operations, strategy and expectations for the future and continues to believe that purchasing our own shares is an attractive use of capital and an efficient means to provide value to our shareholders. The offer permits us to accelerate these purchases, and we believe that the offer is a prudent use of our financial resources given our business profile, assets, recent trading volume and current market price. We believe that our current financial resources and debt capacity exceed the financial requirements of our business.

We believe that the offer set forth herein represents a mechanism to provide all shareholders with the opportunity to tender all or a portion of their shares and, thereby, receive a return of capital if they so elect. This format of repurchase provides a method for shareholders not participating to increase their relative percentage ownership interest in us and at no additional cost. The offer also provides shareholders with an opportunity to obtain liquidity with respect to their shares, without potential disruption to the share price and the usual transaction costs associated with market sales.

We have previously repurchased shares as a means of increasing shareholder value. Since January 1, 2002, we have repurchased approximately 1.3 million shares of our common stock for total consideration of $11.5 million, an average price of $8.63 per share. Management is currently authorized by the board to repurchase up to an additional $599,618 of shares in the open market in the future.

After the offer is completed, we may continue to repurchase shares under our current repurchase program subsequent to the termination of the offer or engage in other stock repurchase transactions. However, Rule 13e-4 under the Exchange Act prohibits us and our affiliates from purchasing any shares, other than in the offer, until at least 10 business days after the expiration date.

In setting the price for our offer, we considered the funds available to us and the impact on pro forma earnings per share. Our goal was to structure the size and price of our offer so that it would be appealing to shareholders who may be interested in selling their shares and beneficial to shareholders who may be interested in retaining their shares.

We believe the offer may be attractive to our shareholders for the following reasons:


•	The offer gives shareholders liquidity by giving them opportunity to sell their shares for cash without the usual transaction costs associated with open-market sales.

•	The offer provides shareholders with the opportunity to sell their shares for a price that may be greater than market prices prevailing prior to the announcement of the offer.

•	Odd lot holders who tender shares pursuant to the offer will avoid the payment of brokerage commissions for their sale of shares directly to us and will avoid any applicable odd lot discounts payable on sales of odd lots.

•	The offer allows shareholders to sell a portion of their shares while retaining a continuing ownership interest in us subject to the risks and rewards inherent in owning equity securities.

•	Shareholders who do not tender their shares pursuant to the offer will proportionately increase their relative ownership interest in us.

•	To the extent the purchase of shares in the offer results in a reduction in the number of shareholders of record, the costs to us for services to shareholders will be reduced.

Shareholders may be able to sell non-tendered shares in the future through the Nasdaq Capital Market, at a net price higher or lower than the purchase price in the offer. We give no assurances, however, as to the price at which a shareholder will be able to sell our shares in the offer or in the future. Shareholders who hold shares through brokers or banks are urged to consult their brokers or banks to determine whether transaction costs are applicable if shareholders tender shares through the brokers or banks.

The offer also presents some potential risks and disadvantages to us and our continuing shareholders:


•	The offer will result in a decrease in the amount of our cash and an increase in our indebtedness.

•	The offer will reduce the number of shares owned by outside shareholders and available for trading in the securities markets (sometimes called “public float”). As of August 9, 2006, there were 2,311,719 shares issued and outstanding. Assuming we acquire 175,000 shares in the offer and assuming that shares underlying vested options are not tendered in the offer, 2,136,719 shares will be outstanding immediately after the offer. This may result in lower stock prices or reduced liquidity in the trading markets for our shares. We believe that following our purchase of shares pursuant to the offer, our remaining shares will continue to qualify to be listed on the Nasdaq Capital Market. We will not be required to accept for purchase any shares tendered if, in our good faith reasonable judgment, any purchase of shares under the offer could result in the offer being considered a “going private transaction” under Rule 13e-3 of the Exchange Act, for us, that is, if our purchase of shares pursuant to this offer would result in our common stock no longer being authorized for trading on the Nasdaq Capital Market. This condition is a nonwaivable condition to our offer. See Section 7.

Neither we nor our board of directors makes any recommendation to any shareholder as to whether to tender all or any shares. Each shareholder must make his or her own decision whether to tender shares and, if so, how many shares to tender and at what price. Our directors, officers and employees who own shares may participate in the offer on the same basis as our other shareholders. See Section 12 for information about the stock ownership of our directors and executive officers.

Certain Additional Effects of the Tender Offer

Shares that we acquire pursuant to the offer will be cancelled and will have the status of authorized but not issued shares.

The shares are currently “margin securities” under the rules of the Federal Reserve Board. This has the effect, among other things, of allowing brokers to extend credit to their customers using the shares as

collateral. We believe that, following the purchase of the shares pursuant to the offer, the shares will continue to be “margin securities” for purposes of the Federal Reserve Board’s margin rules and regulations.

Plans or Proposals

Except as disclosed elsewhere in this offer to purchase, or as may occur in the ordinary course of our business, we currently have no plans, proposals or negotiations that relate to or would result in:


•	an extraordinary transaction, such as a merger, reorganization or liquidation, involving us or any of our subsidiaries;

•	a purchase, sale or transfer of a material amount of our assets or any of our subsidiaries’ assets;

•	Any material change in our present dividend rate or policy, indebtedness or capitalization;

•	any change in our present board of directors or management, including, but not limited to, any plans or proposals to change the number or the term of directors, or to fill any existing vacancies on the board or to change any material term of the employment contract of any executive officer;

•	Any other material change in our corporate structure or business;

•	a class of our equity securities being delisted from a national securities exchange or ceasing to be authorized to be quoted in an automated quotations system of a registered national securities association;

•	a class of our equity securities being terminated from registration pursuant to Section 12(g)(4) of the Exchange Act;

•	the suspension of our obligation to file reports pursuant to Section 15(d) of the Exchange Act;

•	the acquisition by any person of additional Birner Dental securities, or the disposition of our securities; or

•	any changes in our charter, bylaws or other governing instruments or other actions that could impede the acquisition of control of us.

We reserve the right to change our plans and intentions at any time, as we deem appropriate.


10.	INFORMATION CONCERNING BIRNER DENTAL MANAGEMENT SERVICES, INC.

We acquire, develop, and manage geographically dense dental practice networks in select markets, currently including Colorado, New Mexico and Arizona. We were formed in May 1995 as a Colorado corporation. The address of our principal executive offices is 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210, and our telephone number is (303) 691-0680.

We are subject to the reporting requirements of the Exchange Act, and file with the SEC periodic reports and other information relating to our business, financial condition and other matters. We are required to disclose in these periodic reports certain information, concerning our directors and executive officers, their compensation, the principal holders of our securities and any material interest of such persons in transactions with us. Pursuant to Rule 13e-4(c)(2) under the Exchange Act, we have filed with the SEC an Issuer Tender Offer Statement on Schedule TO that includes additional information with respect to this offer. This material and other information may be inspected at the public reference facilities maintained by the SEC at 100 F Street, NE, Washington, D.C. 20549. Copies of this material can also be obtained by mail, upon payment of the SEC’s customary charges, by writing to the Public Reference Section at 100 F Street, NE, Washington, D.C. 20549. The SEC also maintains a web site on the Internet at

http://www.sec.gov that contains periodic reports and information statements and other information regarding registrants that file electronically with the SEC.

We “incorporate by reference” to certain information filed by us with the SEC, which means that we can disclose important information to you by referring you to those documents. The information incorporated by reference contain important information about us and are an important part of this offer to purchase. We incorporate by reference the documents listed below, which have been filed with the SEC, and any future filings we may make with the SEC under the Exchange Act. However, we are not incorporating any information furnished under Items 2.02 or 7.01 of any Current Report on Form 8-K. The following documents are incorporated herein by reference, including the financial statements appearing therein:


•	Annual Report on Form 10-K for the year ended December 31, 2005;

•	Quarterly Reports on Form 10-Q for the fiscal quarters ended March 31, 2006 and June 30, 2006;

•	Current Reports on Form 8-K filed on January 9, 2006, January 13, 2006, March 15, 2006, April 18, 2006, April 27, 2006, and June 14, 2006; and

•	The description of our common stock contained in the Registration Statement on Form 8-A filed on November 13, 1997.

You can obtain these documents from us or from the SEC’s website as described above. You can obtain the documents from us, without charge, by requesting them in writing or by telephone from us at 3801 East Florida Avenue, Suite 508, Denver, Colorado 80210, ATTN: Corporate Secretary, (303) 691-0680. Please be sure to include your complete name and address in the request.

Selected Historical and Pro Forma Financial Information

Condensed Historical Financial Information. Set forth below is condensed consolidated historical financial information. The historical financial information for the years ended December 31, 2005 and December 31, 2004 was derived from the audited consolidated financial statements and other information included in our Annual Report on Form 10-K for the year ended December 31, 2005. The historical financial information for the six months ended June 30, 2006 and June 31, 2005 was derived from the unaudited consolidated financial statements included in the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006. This information is qualified in its entirety by reference to such reports and all of the financial statements and related notes contained therein, copies of which may be obtained as set forth below above.

BIRNER DENTAL MANAGEMENT SERVICES, INC AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


	Six months ended June 30,				Fiscal Year ended December 31,

	2006		2005(a)		2005		2004(a)

Condensed Consolidated Income Statement:
Total dental group practice revenue	$	29,146,349	$	26,694,923	$	52,526,276	$	46,460,595
Net Revenue		20,231,498		18,761,015		36,716,117		32,170,405
Income from continuing operations		1,325,491		1,332,911		2,164,303		1,567,198
Net income		1,325,491		1,332,911		2,164,303		1,379,597

Net income per share of Common Stock - Basic:
Continuing operations	$	0.56	$	0.57	$	0.91	$	0.65
Discontinued operations	$	—	$	—	$	—	$	(0.08	)
Net income per share of Common Stock	$	0.56	$	0.57	$	0.91	$	0.57

Net income per share of Common Stock - Diluted
Continuing operations	$	0.52	$	0.52	$	0.82	$	0.60
Discontinued operations	$	—	$	—	$	—	$	(0.07	)
Net income per share of Common Stock	$	0.52	$	0.52	$	0.82	$	0.53

Weighted average shares used in calculation:
Basic		2,349,824		2,342,994		2,367,923		2,415,844
Diluted		2,546,337		2,587,816		2,624,286		2,631,054

Condensed Consolidated Balance Sheet
Assets
Cash and cash equivalents	$	763,302	$	1,006,352	$	921,742	$	756,181
Total current assets		5,148,650		5,519,124		4,903,121		4,749,182
Noncurrent assets		18,181,785		16,683,267		17,130,349		17,110,657
Total assets		23,330,435		22,202,391		22,033,470		21,859,839

Liabilities and stockholders’ equity
Total current liabilities	$	5,764,935	$	5,831,337	$	4,998,888	$	4,805,144
Total noncurrent liabilities		4,443,975		2,065,841		3,833,235		1,926,345
Stockholders’ equity		13,121,525		14,305,213		13,201,347		15,128,350

Ratio of earnings to fixed charges (b)		11.87		31.51		19.02		10.90
Book value per share outstanding	$	5.58	$	6.11	$	5.58	$	6.26

(a) Adjusted to include the impact of the two-for one-stock split effective August 8, 2005.

(b) Ratio of earnings to fixed charges is calculated by dividing total earnings by total fixed charges. Total earnings is the summation of pretax income and fixed charges. Fixed charges is the summation of interest expense and an estimate of the interest expense attributable to operating leases which was derived by taking 8% of total operating lease payments.

Pro Forma Financial Information. Set forth below is our unaudited pro forma condensed consolidated financial information based on historical information which has been adjusted to give effect to the offer.

This condensed unaudited pro forma financial information is not necessarily indicative of either our financial position or results of operations that actually would have been attained had the purchase of shares pursuant to the offer and the related financing been completed at the dates indicated, or will be achieved in the future.

BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEETS


	Historical June 30, 2006			Pro forma adjustments			Pro forma June 30, 2006

ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	763,302					$	763,302
Accounts receivable, net		3,618,859						3,618,859
Deferred tax asset		210,777						210,777
Prepaid expenses and other assets		555,712						555,712


Total current assets		5,148,650						5,148,650

PROPERTY AND EQUIPMENT, net		5,337,870						5,337,870

OTHER NONCURRENT ASSETS:
Intangible assets, net		12,662,055						12,662,055
Deferred charges and other assets		181,860						181,860


Total assets	$	23,330,435					$	23,330,435


LIABILITIES AND SHAREHOLDERS’ EQUITY

CURRENT LIABILITIES:
Accounts payable	$	1,768,524					$	1,768,524
Accrued expenses		1,325,416						1,325,416
Accrued payroll and related expenses		2,203,286						2,203,286
Income taxes payable		369,037						369,037
Current maturities of long-term debt		98,672			796,250	(a)		894,922

Total current liabilities		5,764,935			796,250			6,561,185

LONG-TERM LIABILITIES:
Deferred tax liability, net		779,445						779,445
Long-term debt, net of current maturities		3,372,694			3,185,000	(b)		6,557,694
Other long-term obligations		291,836						291,836

Total liabilities		10,208,910			3,981,250			14,190,160

COMMITMENTS AND CONTINGENCIES (Note 10)

SHAREHOLDERS’ EQUITY:
Common Stock		8,670,773			(3,981,250	) (c)		4,689,523
Deferred equity compensation		(486,180	)					(486,180	)
Retained earnings		4,936,932						4,936,932


Total shareholders’ equity		13,121,525			(3,981,250	)		9,104,275

Total liabilities and shareholders’ equity	$	23,330,435					$	23,330,435

Shares outstanding at end of period		2,349,824			(175,000	) (c)		2,174,824
Book value per share	$	5.58					$	4.19


(a)	Reflects the current portion of the debt incurred to acquire shares.

(b)	Reflects the long term portion of the debt incurred to acquire shares.

(c)	Reflects the repurchase of 175,000 shares of common stock assuming a mid-range price of $22.75 per share.

BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME


	Historical Six months ended June 30, 2006		Pro forma adjustments			Pro forma Six months ended June 30, 2006

NET REVENUE:	$	20,231,498				$	20,231,498

DIRECT EXPENSES:

Clinical salaries and benefits		7,270,235					7,270,235
Dental supplies		1,153,206					1,153,206
Laboratory fees		1,325,258					1,325,258
Occupancy		2,150,881					2,150,881
Advertising and marketing		460,933					460,933
Depreciation and amortization		1,008,463					1,008,463
General and administrative		2,329,922					2,329,922

		15,698,898		—			15,698,898

Contribution from dental offices		4,532,600		—			4,532,600

CORPORATE EXPENSES:

General and administrative		2,222,273					2,222,273
Depreciation and amortization		66,642					66,642


Operating income		2,243,685		—			2,243,685

Interest expense (income), net		80,087		133,919	(a)		214,006


Income before income taxes		2,163,598		(133,919	)		2,029,679
Income tax expense		838,107		(52,228	) (b)		785,879


Net income	$	1,325,491	$	(81,691	)	$	1,243,800

Net income per share:
Basic	$	0.56				$	0.57
Diluted	$	0.52				$	0.52

Weighted average shares used in calculation:
Basic		2,349,824		(175,000	) (c)		2,174,824
Diluted		2,546,337		(175,000	) (c)		2,371,337

Ratio of earnings to fixed charges (d)		11.87		—			6.69


(a)	Reflects the additional interest expense associated with the newly issued debt at an assumed interest rate of 6.9%.

(b)	Reflects the tax benefit associated with the pro forma adjustment at an effective tax rate of 39%

(c)	Reflects the repurchase of 175,000 shares of common stock.

(d)	Ratio of earnings to fixed charges is calculated by dividing total earnings by total fixed charges. Total earnings is the summation of pretax income and fixed charges. Fixed charges is the summation of interest expense and an estimate of the interest expense attributable to operating leases which was derived by taking 8% of total operating lease payments.

BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF INCOME


	Historical Fiscal year ended December 31, 2005			Pro forma adjustments			Pro forma Fiscal year ended December 31, 2005

NET REVENUE:	$	36,716,117					$	36,716,117

DIRECT EXPENSES:
Clinical salaries and benefits		13,578,650						13,578,650
Dental supplies		2,215,685						2,215,685
Laboratory fees		2,446,344						2,446,344
Occupancy		3,864,640						3,864,640
Advertising and marketing		951,916						951,916
Depreciation and amortization		1,703,330						1,703,330
General and administrative		4,183,471						4,183,471

		28,944,036			—			28,944,036


Contribution from dental offices		7,772,081			—			7,772,081

CORPORATE EXPENSES:
General and administrative		4,235,510						4,235,510
Depreciation and amortization		139,512						139,512


Operating income		3,397,059			—			3,397,059

Interest expense (income), net		(12,204	)		254,103	(a)		241,899


Income before income taxes		3,409,263			(254,103	)		3,155,160
Income tax expense		1,244,960			(99,100	) (b)		1,145,860


Net income	$	2,164,303		$	(155,003	)	$	2,009,300


Net income per share:
Basic	$	0.91					$	0.92
Diluted	$	0.82					$	0.82

Weighted average shares used in calculation:
Basic		2,367,923			(175,000	) (c)		2,192,923
Diluted		2,624,286			(175,000	) (c)		2,449,286

Ratio of earnings to fixed charges (d)		19.02			—			7.54


(a)	Reflects the additional interest expense associated with the newly issued debt at an assumed interest rate of 6.9%.

(b)	Reflects the tax benefit associated with the pro forma adjustment at an effective tax rate of 39%

(c)	Reflects the repurchase of 175,000 shares of common stock.

(d)	Ratio of earnings to fixed charges is calculated by dividing total earnings by total fixed charges. Total earnings is the summation of pretax income and fixed charges. Fixed charges is the summation of interest expense and an estimate of the interest expense attributable to operating leases which was derived by taking 8% of total operating lease payments.

11. SOURCE AND AMOUNT OF FUNDS

Assuming that we purchase the maximum of 175,000 shares pursuant to this offer at the maximum Purchase Price, $28.00 per share, the total amount required by us to purchase these shares will be $4.9 million, exclusive of fees and other expenses. We expect to fund the purchase of the shares tendered in the offer from borrowings under the fixed rate term loan described below. The offer is subject to our receipt of such financing. See Section 7.

We received a commitment from a commercial bank for a $5 million five year fixed rate term loan (the “Loan”). The proceeds of the Loan will be used to finance the purchase of the shares in the offer. The interest rate will be fixed at the time the loan is funded. The interest rate will be either, or a combination of, a fixed rate, the bank’s Base Rate or LIBOR plus a LIBOR rate margin, at our option. The bank’s Base Rate computes interest at the higher of their “prime rate” or the Federal Funds Rate plus one-half percent (0.5%). The LIBOR option computes interest at the LIBOR rate as of the date such LIBOR Rate loan was made plus a LIBOR rate margin of 1.50%. We may prepay any fixed rate or Base Rate loan at any time and any LIBOR rate loan upon not less than three business days prior written notice given to the bank, but we are responsible for any loss or cost incurred by the lender in liquidating or employing deposits required to fund or maintain the LIBOR rate loan. The Loan amortizes quarterly over five years. The Loan requires us to maintain certain financial ratios on an ongoing basis. As of June 30, 2006, we were in compliance with these financial ratios. The Loan is secured by a pledge of our management agreements. We plan to repay the Loan by making quarterly principal and interest payments over the Loan’s five year term.

12.

INTEREST OF DIRECTORS AND OFFICERS; TRANSACTIONS AND ARRANGEMENTS CONCERNING SHARES

As of August 9, 2006, we had 2,311,719 shares issued and outstanding. The 175,000 shares that we are offering to purchase represent approximately 7.6% of our outstanding shares. As of August 9, 2006, our directors and executive officers as a group, nine persons, beneficially owned an aggregate of 1,193,975 shares, including 294,666 shares covered by currently exercisable options granted under our stock option plan, representing approximately 45.8% of our outstanding shares, assuming the exercise by these persons of their currently exercisable options.

Our directors, officers and employees who own shares may participate in the offer on the same basis as our other shareholders.

Assuming we purchase 175,000 shares pursuant to the offer and our executive officers and directors do not tender any shares, then after the purchase of shares pursuant to the offer, our executive officers and directors as a group would own beneficially approximately 49.1% of our outstanding shares, assuming the exercise by these persons of their currently exercisable options.

The following table sets forth certain information with respect to the beneficial ownership of our common stock as of August 9, 2006, by each director and each executive officer and all directors and executive officers as a group.


Name of Beneficial Owner	Number of Shares		Percent of Class(1)(2)

Frederic W.J. Birner (3)		342,596		14.2%
Mark A. Birner, D.D.S. (4)		408,010		17.2%
Dennis N. Genty (5)		305,802		12.9%
Brooks G. O’Neil (6)		38,001		1.6%
Paul E. Valuck, D.D.S (7)		42,552		1.8%
Thomas D. Wolf (8)		57,014		2.4%

All executive officers and directors (six persons) (9)		1,193,975		45.8%

(1) Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Shares of common stock subject to options currently exercisable or exercisable within 60 days of August 9, 2006, are deemed outstanding for computing the percentage of the person or entity holding such securities but are not outstanding for computing the percentage of any other person or entity. Except as indicated by footnote, and subject to community property laws where applicable, the persons named in the table above have sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

(2) Percentage of ownership for each beneficial owner is based on shares of common stock outstanding at August 9, 2006 plus any options currently exercisable or exercisable within 60 days of August 9, 2006, computed separately for each beneficial owner using information provided in the following footnotes.

(3) Includes 93,334 shares of common stock that are issuable upon the exercise of options that are currently exercisable.

(4) Includes 66,666 shares of common stock that are issuable upon the exercise of options that are currently exercisable.

(5) Includes 66,666 shares of common stock that are issuable upon the exercise of options that are currently exercisable. Includes 119,386 shares of common stock owned by Mr. Genty’s wife. Mr. Genty disclaims beneficial ownership of all shares held by his wife.

(6) Includes 26,000 shares of common stock that are issuable upon the exercise of options that are currently exercisable.

(7) Includes 12,000 shares of common stock that are issuable upon the exercise of options that are currently exercisable.

(8) Includes 30,000 shares of common stock that are issuable upon the exercise of options that are currently exercisable.

(9) Includes 294,666 shares of common stock issuable upon the exercise of options held by all executive officers and directors as a group that are currently exercisable or are exercisable within 60 days of August 9, 2006.

Based on our records and on information provided to us by our directors and executive officers, neither we nor any of our directors or executive officers have effected any transactions involving our common stock during the 60 days prior to August 31, 2006.

At our June 2005 annual meeting of shareholders, our shareholders approved the 2005 Equity Incentive Plan (“2005 Plan”), which reserved 300,000 shares of common stock for issuance. The 2005 Plan provides for the grant of incentive stock options, restricted stock, restricted stock units and stock grants to employees (including officers and employee-directors) and non-statutory stock options to employees, directors and consultants. The objectives of this plan include attracting and retaining the best personnel, providing for additional performance incentives by providing employees with the opportunity to acquire shares of our common stock. As of June 30, 2006, there were 67,800 shares available for issuance under the 2005 Plan. The option price of the stock options issued under the 2005 Plan is equal to the market price, or market price plus 10% for shareholders with 10% or more control of us, at the date of grant. These stock options expire seven years, or five years for shareholders with 10% or more control of us, from the date of the grant and vest annually over a service period ranging from three to five years. The 2005 Plan is administered by a committee of two or more outside directors from the our board of directors (the “Committee”). The Committee determines the eligible individuals to whom awards under the 2005 Plan may be granted, as well as the time or times at which awards will be granted, the number of shares subject to awards to be granted to any eligible individual, the life of

any award, and any other terms and conditions of the grant in addition to those contained in the 2005 Plan.

The Employee Stock Option Plan (the “Employee Plan”) was adopted by our board of directors effective as of October 30, 1995, and as amended on September 4, 1997, February 28, 2002, and June 8, 2004, reserved 479,250 shares of common stock for issuance. The Employee Plan provided for the grant of incentive stock options to employees (including officers and employee-directors) and non-statutory stock options to employees, directors and consultants. The Employee Plan expired by its terms on October 30, 2005. As of June 30, 2006, there were 308,733 vested options outstanding and 105,666 unvested options outstanding under the Employee Plan.

The Dental Center Stock Option Plan (“Dental Center Plan”) was adopted by our board of directors effective as of October 30, 1995, and as amended on September 4, 1997, reserved 160,475 shares of common stock for issuance. The Dental Center Plan provided for the grant of non-statutory stock options to professional corporations that operate the Offices (“P.C.s”) that are parties to management agreements with us, and to dentists or dental hygienists who are either employed by or an owner of the P.C.s. The Dental Center Plan expired by its terms on October 30, 2005. As of June 30, 2006, there were 14,000 vested options outstanding and no unvested options outstanding under the Dental Center Plan.

The Savings Plan and Trust Agreement (the “401(k) Plan”) was adopted by our board of directors effective as of April 1, 1997. The 401(k) Plan allows participants to save money for retirement through salary deductions and also allows us to make matching contributions on a portion of the amount saved by participants. In addition, the 401(k) Plan provides that we may make profit sharing contributions to participants. At our discretion, the profit sharing contribution may be made in shares of our common stock. As of June 30, 2006, there were 5,043 vested shares of common stock contributed by us held by participants in the 401(k) Plan. These shares are held in a restricted account within the 401(k) Plan and participants do not have the individual right to vote or sell these shares, including pursuant to this offer.

13. LEGAL MATTERS; REGULATORY APPROVALS

We are not aware of any license or regulatory permit that appears to be material to our business that might be adversely affected by our acquisition of shares as contemplated herein or of any approval or other action by, or any filing with, any government or governmental, administrative or regulatory authority or agency, domestic or foreign, that would be required for the acquisition or ownership of shares by us as contemplated herein. Should any approval or other action be required, we presently contemplate that the approval or other action will be sought. We are unable to predict whether we may determine that we are required to delay the acceptance for payment of or payment for shares tendered pursuant to this offer pending the outcome of any such matter. There can be no assurance that any approval or other action, if needed, would be obtained or would be obtained without substantial conditions or that the failure to obtain any approval or other action might not result in adverse consequences to our business. Our obligations under the offer to accept for payment and pay for shares is subject to certain conditions. See Section 7.

14. CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following describes the material United States federal income tax consequences of the offer that may be relevant to U.S. Holders (as defined below). This discussion is based upon the Internal Revenue Code of 1986, as amended to the date hereof (the “Code”), existing and proposed Treasury Regulations, administrative pronouncements and judicial decisions, changes to which could materially affect the tax consequences described herein and could be made on a retroactive basis.

This discussion deals only with shares of our common stock held as capital assets and does not deal with all tax consequences that may be relevant to all categories of shareholders (such as dealers in securities or commodities, insurance companies, tax-exempt organizations or persons who hold shares as a position in a straddle or similar transaction). In particular, different rules may apply to shares acquired as

compensation (including shares acquired upon the exercise of options. This discussion does not address the state, local or foreign tax consequences of participating in the offer. Shareholders should consult their tax advisors as to the particular consequences to them of participation in the offer.

As used herein, a “U.S. Holder” means a beneficial holder of shares that is for United States federal income tax purposes: (a) an individual citizen or resident of the United States, (b) a corporation, partnership, or other entity created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate the income of which is subject to United States federal income taxation regardless of its source, or (d) a trust if either: (A) a United States court is able to exercise primary supervision over the administration of the trust, and one or more United States persons have the authority to control all substantial decisions of the trust or (B) a trust has a valid election in effect to be treated as a United States person under applicable treasury regulations. The term also includes nonresident alien individuals, foreign corporations, foreign partnerships, and foreign estates and trusts (“foreign shareholders”) to the extent that their ownership of the shares is effectively connected with the conduct of a trade or business within the United States, as well as certain former citizens and residents of the United States who, under certain circumstances, are taxed on income from U.S. sources as if they were citizens or residents. It should also be noted that certain “single member entities” are disregarded for U.S. federal income tax purposes. Such foreign shareholders that are single member non-corporate entities, should consult with their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them. A non-U.S. Holder is a shareholder other than a U.S. Holder.

Non-U.S. Holders should consult their tax advisors regarding the United States federal income tax consequences and any applicable foreign tax consequences of the offer and should also see Section 3 for a discussion of the applicable United States backup withholding and withholding tax rules and the potential for obtaining a refund of all or a portion of any taxes withheld.

U.S. Holders of shares who do not participate in the offer will not incur any tax liability as a result of the consummation of the offer.

An exchange of shares for cash pursuant to the offer will be a taxable transaction for United States federal income tax purposes. A U.S. Holder who receives cash pursuant to the offer will, depending on such Holder’s particular circumstances, be treated either as recognizing gain or loss from the disposition of the shares or as receiving a dividend distribution from us.

Under Section 302 of the Code, a U.S. Holder will recognize gain or loss on an exchange of shares for cash if the exchange (i) results in a “complete termination” of all of such Holder’s equity interest in us, (ii) results in a “substantially disproportionate” redemption with respect to such Holder or (iii) is “not essentially equivalent to a dividend” with respect to the U.S. Holder. In applying the Section 302 tests, a U.S. Holder must take account of stock that such U.S. Holder constructively owns under attribution rules, pursuant to which the U.S. Holder will be treated as owning our stock owned by certain family members (except that in the case of a “complete termination” a U.S. Holder may, under certain circumstances, waive attribution from family members) and related entities and our stock that the U.S. Holder has the right to acquire by exercise of an option. An exchange of shares for cash will generally be a substantially disproportionate redemption with respect to a U.S. Holder if the percentage of the then outstanding shares owned by such U.S. Holder immediately after the exchange is less than 80% of the percentage of the shares owned by such U.S. Holder immediately before the exchange. If an exchange of shares for cash fails to satisfy the “substantially disproportionate” test, the U.S. Holder may nonetheless satisfy the “not essentially equivalent to a dividend” test. An exchange of shares for cash will satisfy the “not essentially equivalent to a dividend” test if it results in a “meaningful reduction” of the U.S. Holder’s equity interest in us. An exchange of shares for cash that results in a reduction of the proportionate equity interest in us of a U.S. Holder whose relative equity interest in us is minimal (an interest of less than one percent should satisfy this requirement) and who does not exercise any control over or participate in the management of our corporate affairs should be treated as “not essentially equivalent to a dividend.” U.S.

Holders should consult their tax advisors regarding the application of the rules of Section 302 in their particular circumstances.

If a U.S. Holder is treated as recognizing gain or loss from the disposition of the shares for cash, such gain or loss will be equal to the difference between the amount of cash received and such U.S. Holder’s tax basis in the shares exchanged therefor. Any such gain or loss generally will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder has held the shares for more than one year as of the date of the exchange. Limitations may apply to the deductibility of capital losses.

If a U.S. Holder does not meet the requirements of Section 302 of the Code, the entire amount of cash received by such U.S. Holder pursuant to the exchange, without reduction for the tax basis of the shares exchanged, will be treated as a dividend to the extent of the U.S. Holder’s allocable portion of our current and accumulated earnings and profits. Provided certain holding period requirements are satisfied, non-corporate Holders generally will be subject to U.S. federal income tax at a maximum rate of 15% on amounts treated as dividends. Non-corporate U.S. Holders should consult their tax advisors regarding the tax treatment of any loss on the sale of shares with respect to which they have received an “extraordinary dividend,” as defined in the Code. To the extent that cash received in exchange for shares is treated as a dividend to a corporate U.S. Holder, (i) it will be eligible for a dividends-received deduction (subject to applicable limitations) and (ii) it will be subject to the “extraordinary dividend” provisions of Section 1059 of the Code. Corporate U.S. Holders should consult their tax advisors concerning the availability of the dividends-received deduction and the application of the “extraordinary dividend” provisions of the Code in their particular circumstances.

We cannot predict whether or the extent to which the offer will be oversubscribed. If the offer is oversubscribed, proration of tenders pursuant to the offer will cause us to accept fewer shares than are tendered. Therefore, a U.S. Holder can be given no assurance that a sufficient number of such U.S. Holder’s shares will be purchased pursuant to the offer to ensure that such purchase will be treated as a sale or exchange, rather than as a dividend, for federal income tax purposes pursuant to the rules discussed above.

See Section 3 with respect to the application of federal income tax withholding and backup withholding.

EACH SHAREHOLDER IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR TO DETERMINE THE TAX CONSEQUENCES OF THE OFFER IN LIGHT OF HIS OR HER PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICATION OF FEDERAL, STATE, LOCAL AND FOREIGN TAX LAWS.

15. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENTS

We expressly reserve the right, in our sole discretion, to extend the period of time during which the offer is open by giving oral or written notice of the extension to the depositary and making a public announcement thereof. There can be no assurance, however, that we will exercise our right to extend the offer. During any extension, all shares previously tendered will remain subject to the offer, except to the extent that shares may be withdrawn as set forth in Section 4. We also expressly reserve the right, in our sole discretion, (i) to terminate the offer and not accept for payment any shares not previously accepted for payment or, subject to Rule 13e-4(f)(5) under the Exchange Act, which requires us either to pay the consideration offered or to return the shares tendered promptly after the termination or withdrawal of the offer, to postpone payment for shares upon the occurrence of any of the conditions specified in Section 7 hereof, by giving oral or written notice of the termination to the depositary and making a public announcement thereof; and (ii) to amend the offer in any respect. Amendments to the offer may be effected by public announcement. Without limiting the manner in which we may choose to make public announcement of any extension, termination or amendment, we shall have no obligation, except as otherwise required by applicable law, to publish, advertise or otherwise communicate any public announcement, other than by making a release to PR News Wire, Dow Jones News Service, or another comparable news service, except in the case of an announcement of an extension of the offer, in which

case we shall have no obligation to publish, advertise or otherwise communicate the announcement other than by issuing a notice of the extension by press release or other public announcement, which notice shall be issued no later than 10:00 a.m., Mountain time, on the next business day after the previously scheduled expiration date. Material changes to information previously provided to holders of the shares in this offer or in documents furnished subsequent thereto will be disseminated to holders of shares in compliance with Rule 13e-4(e)(3) promulgated by the SEC under the Exchange Act.

If we materially change the terms of the offer or the information concerning the offer, or if we waive a material condition of the offer, we will extend the offer to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Exchange Act. Those rules require that the minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price, change in dealer’s soliciting fee or change in percentage of securities sought, will depend on the facts and circumstances, including the relative materiality of the terms or information. In a published release, the SEC has stated that in its view, an offer should remain open for a minimum of five business days from the date that notice of a material change is first published, sent or given. The offer will continue or be extended for at least ten business days from the time we publish, send or give holders of shares a notice that we will (i) increase or decrease the price we will pay for shares or (ii) increase, except for an increase not exceeding 2% of the outstanding shares, or decrease the number of shares we seek.

16. FEES AND EXPENSES

Computershare Trust Company, Inc. will act as the information agent in connection with the offer. Computershare Trust Company, Inc., as information agent, may contact shareholders by mail, telephone, facsimile, telex, telegraph, other electronic means and personal interviews, and may request brokers, dealers and other nominee shareholders to forward materials relating to the offer to beneficial owners.

We have also retained Computershare Trust Company, Inc. as depositary in connection with the offer. We have agreed to indemnify the depositary against certain liabilities in connection with the offer.

The information agent and depositary will receive reasonable and customary compensation for their services and will also be reimbursed for certain out-of-pocket expenses. The amount of such compensation is not material to us.

We will not pay any fees or commissions to any broker, dealer or other person for soliciting tenders of shares pursuant to the offer. We will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and customary handling and mailing expenses incurred by them in forwarding materials relating to the offer to their customers.

Neither the information agent nor the depositary has been retained to make solicitations or recommendations in connection with the offer.

17. MISCELLANEOUS

The offer is being made to all holders of shares. We are not aware of any state where the making of the offer is prohibited by administrative or judicial action pursuant to a valid state statute. If we become aware of any valid state statute prohibiting the making of the offer, we will make a good faith effort to comply with the statute. If, after such good faith effort, we cannot comply with the statute, the offer will not be made to, nor will tenders be accepted from or on behalf of, holders of shares in that state. In those jurisdictions whose securities, blue sky or other laws require the offer to be made by a licensed broker or dealer, the offer shall be deemed to be made on our behalf by the one or more registered brokers or dealers licensed under the laws of these jurisdictions.

You should rely only on the information contained in this document or to which we have referred you. We have not authorized anyone to provide you with information or make any representation on our behalf in connection with the offer other than those contained in this offer to purchase, the related letter of transmittal or in the other documents that constitute a part of the offer. If given or made, you should not rely on that information or representation as having been authorized by us.

BIRNER DENTAL MANAGEMENT SERVICES, INC.

August 31, 2006

Questions and requests for assistance may be directed to the information agent at the telephone number listed below. Additional copies of this offer to purchase, the letter of transmittal, the notice of guaranteed delivery or any other tender offer materials may be obtained from the information agent. You may also contact your broker, dealer, bank, trust company or other nominee for assistance concerning the offer.

The information agent for the offer is:

Computershare Trust Company, Inc.
350 Indiana Street, Suite 800
Golden, Colorado 80401

Toll Free Number: 1-800-962-4284 (extension 4732)

The letter of transmittal, certificates for shares and any other required documents should be sent or delivered by the shareholder or the shareholder’s broker, dealer, bank, trust company or other nominee to the depositary at the address listed below. Any questions concerning tender procedures may be directed to the depositary at the telephone number listed below.

The depositary for the offer is: Computershare Trust Company, Inc.

Toll Free Number: 1-800-962-4284 (extension 4732)



By Mail:			By Hand or Overnight Courier:

Computershare Trust Company, Inc. P.O. Box 1596 Denver, Colorado 80201-1596			Computershare Trust Company, Inc. 350 Indiana Street, Suite 800 Golden, Colorado 80401

EX-99.(A)(1)(II) 3 ex99_a1ii.htm

Exhibit (a)(1)(ii)

LETTER OF TRANSMITTAL
To Tender Shares of Common Stock
of
BIRNER DENTAL MANAGEMENT SERVICES, INC.
Pursuant to its Offer to Purchase
Dated August 31, 2006

THE TENDER OFFER (THE ”OFFER”), THE PRORATION PERIOD AND WITHDRAWAL RIGHTS
EXPIRE AT 5:00 P.M., MOUNTAIN TIME, ON SEPTEMBER 29, 2006, UNLESS THE OFFER IS EXTENDED.

The Depositary for the Offer is:

Computershare Trust Company, Inc.


By Registered, Certified Mail or First Class Mail:		By Hand or Courier Delivery:
Computershare Trust Company, Inc.		Computershare Trust Company, Inc.
P.O. Box 1596		350 Indiana Street, Suite 800
Denver, CO 80201-1596		Golden, CO 80401

Delivery of this Letter of Transmittal to an address other than as set forth above will not constitute a valid delivery to the Depositary. The instructions set forth in this Letter of Transmittal should be read carefully before this Letter of Transmittal is completed.

You should use this Letter of Transmittal if you are tendering physical certificates, or are causing the Shares to be delivered by book-entry transfer to the Depositary’s account at The Depository Trust Company (“DTC”), which is hereinafter referred to as the “Book-Entry Transfer Facility”) pursuant to the procedures set forth in Section 3 of the Offer to Purchase.


Description of Shares Tendered
Name(s) and Address(es) of Registered Holder(s) (Please fill in, if blank, exactly as name(s) appear(s) on Share Certificate(s))				Shares Tendered (Attach additional list if necessary)
				Certificate Number(s)	Total Number of Shares Represented by Certificate(s)	Number of Shares Tendered*




				Total Shares
	Indicate in this box the order (by certificate number) in which Shares are to be purchased in the event of proration**
	1st: 2nd: 3rd: 4th:
		*	Unless otherwise indicated, it will be assumed that all Shares represented by any certificates delivered to the Depositary are being tendered. See Instruction 4.
		**	If you do not designate an order, in the event less than all Shares tendered are purchased due to proration, Shares will be selected for purchase by the Depositary.

If you desire to tender Shares of Birner Dental Management Services, Inc. (“Birner Dental”) pursuant to the Offer, but you cannot deliver your Shares and all other required documents to the Depositary by the Expiration Date (as defined in the Offer to Purchase) or cannot comply with the procedures for book-entry transfer on a timely basis, you must tender your Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. See Instruction 2.

Additional Information if Shares Have Been Lost, Are Being Delivered By Book-Entry Transfer or Are Being Delivered Pursuant to a Previous Notice of Guaranteed Delivery

o	Check here if tendered Shares are being delivered pursuant to a Notice of Guaranteed Delivery previously sent to the Depositary and complete the following:

	Name(s) of Tendering Shareholder(s) ___________________________________________

	Date of Execution of Notice of Guaranteed Delivery _______________________________

	Name of Institution which Guaranteed Delivery ___________________________________

	If any certificate evidencing the Shares you are tendering with this Letter of Transmittal has been lost, stolen, destroyed or mutilated you should call Computershare Trust Company, Inc., as Transfer Agent at 800-962-4284 (extension 4732), regarding the requirements for replacement. You may be required to post a bond to secure against the risk that the certificates may be subsequently recirculated. You are urged to contact the Transfer Agent immediately in order to receive further instructions, for a determination of whether you will need to post a bond and to permit timely processing of this documentation. See Instruction 15.

o	Check here if tendered Shares are being delivered by book-entry transfer made to an account maintained by the Depositary with the Book-Entry Transfer Facility and complete the following (only financial institutions that are participants in the system of any Book-Entry Transfer Facility may deliver Shares by book-entry transfer):

	Name of Tendering Institution _____________________________________________________________

	Account No. ___________________________________________________________________________

	Transaction Code No. ____________________________________________________________________

NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY

CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES.

SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER
(See Instruction 5)

By checking ONE of the boxes below, the undersigned hereby tenders Shares at the price checked. This action could result in none of the Shares being purchased if the Purchase Price (as defined in the Offer to Purchase) for the Shares is less than the price checked. If the Purchase Price for the Shares is equal to or greater than the price checked, then the Shares purchased by Birner Dental will be purchased at the Purchase Price upon the terms and subject to the conditions set forth in the Offer to Purchase. A shareholder who desires to tender Shares at more than one price must complete a separate Letter of Transmittal for each price at which Shares are tendered. The same Shares cannot be tendered at more than one price (unless those Shares were previously tendered and withdrawn).

PRICE (IN U.S. DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED (CHECK ONE)


o	$17.50	o	$20.50	o	$23.50	o	$26.50
o	$17.75	o	$20.75	o	$23.75	o	$26.75
o	$18.00	o	$21.00	o	$24.00	o	$27.00
o	$18.25	o	$21.25	o	$24.25	o	$27.25
o	$18.50	o	$21.50	o	$24.50	o	$27.50
o	$18.75	o	$21.75	o	$24.75	o	$27.75
o	$19.00	o	$22.00	o	$25.00	o	$28.00
o	$19.25	o	$22.25	o	$25.25
o	$19.50	o	$22.50	o	$25.50
o	$19.75	o	$22.75	o	$25.75
o	$20.00	o	$23.00	o	$26.00
o	$20.25	o	$23.25	o	$26.25

ODD LOTS
(See Instruction 6)

To be completed only if Shares are being tendered by or on behalf of a person owning, beneficially or of record, an aggregate of fewer than 100 Shares. The undersigned:


o	is the beneficial or record owner of an aggregate of fewer than 100 Shares, all of which are being tendered.

SPECIAL PAYMENT INSTRUCTIONS
(See Instructions 1, 8, 9 and 10)

To be completed ONLY if the check for the purchase price of Shares purchased (less the amount of any federal income and backup with holding tax required to be withheld) and/or certificates for Shares not tendered or not purchased are to be issued in the name of someone other than the undersigned or if Shares tendered hereby and delivered by book-entry transfer which are not purchased are to be returned by credit to an account at the Book-Entry Transfer Facility other than that designated above.

Issue o Check to:

o Share certificate(s) to:


Name(s)	____________________________________________________________________________
	(Please Print)

Address	_____________________________________________________________________

________________________________________________________________________________________________
(Zip Code)

________________________________________________________________________________________________
(Taxpayer Identification No.)

o Credit Shares delivered by book-entry transfer and not purchased to the account set forth below:

Account Number:	____________________________________________________________

SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 1, 8, 9 and 10)

To be completed ONLY if the check for the purchase price of Shares purchased (less the amount of any federal income and backup withholding tax required to be withheld) and/or certificates for Shares not tendered or not purchased are to be mailed to someone other than the undersigned or to the undersigned at an address other than that shown below the undersigned’s signature(s).

Deliver o Check to:

o Share certificate(s) to:


Name(s)	___________________________________________________________________________
	(Please Print)

Address	_____________________________________________________________________

________________________________________________________________________________________________

________________________________________________________________________________________________
(Zip Code)

Signature	____________________________________________________________________

IMPORTANT—SHAREHOLDERS SIGN HERE
(PLEASE COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 INCLUDED HEREIN)








(Must be signed by the registered holder(s) exactly as such holder(s) name(s) appear(s) on certificate(s) for shares or on a security position listing or by person(s) authorized to become the registered holder(s) thereof by certificates and documents transmitted with this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, please set forth full title and see Instruction 8.)



(Signature(s) of Owner(s))


Dated: ____________________ , __________ 2006


Name (s):


	(Please Print)



Capacity: (Full Title)


Address:







(Include Zip Code)


Daytime Area Code and Telephone Number:


Employer Identification or Social Security Number:


	(See Substitute Form W-9 included herein)

GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 8)


Authorized Signature:


Name:


	(Please Print)

Title:


Name of Firm:


Address:

(Include Zip Code)


Daytime Area Code and Telephone Number:

Dated: _______________ , __________2006


SUBSTITUTE Form W-9	Part 1—PLEASE PROVIDE YOUR TIN IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND DATING BELOW.

Department of the Treasury Internal Revenue Service				Social Security Number

				OR

Payer’s Request for Taxpayer Identification Number (TIN)				Employer Identification Number


	Part 2—Certification

	Under penalties of perjury, I certify that:

	(1)	The number shown on this form is my correct taxpayer identification number (or I am waiting for a number to be issued to me), and

	(2)	I am not subject to backup withholding because (a) I am exempt from backup withholding, or (b) I have not been notified by the Internal Revenue Service (the “IRS”) that I am subject to backup
		withholding as a result of a failure to report all interest or dividends, or (c) the IRS has notified me that I am no longer subject to backup withholding, and

	(3)	I am a U.S. person (including a U.S. resident alien)


	Certification Instructions––You must cross out item (2) in Part 2 above if you have been notified by the IRS that you are currently subject to backup withholding because of underreporting interest or dividends on your tax return. However, if after being notified by the IRS that you are subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2).

	SIGNATURE		DATE


	NAME


	ADDRESS


	CITY
			STATE____ ZIP CODE

NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY IMPOSED BY THE U.S. INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF U.S. FEDERAL INCOME TAX ON ANY CASH PAYMENTS MADE TO YOU PURSUANT TO AN OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

Guidelines for Determining the Proper Identification Number to Give the Payer. The taxpayer identification number for an individual is the individual’s Social Security number. Social Security numbers have nine digits separated by two hyphens: e.g., 000-00-0000. The taxpayer identification number for an entity is the entity’s Employer Identification number. Employer Identification numbers have nine digits separated by one hyphen: e.g., 00-0000000. The table below will help determine the number to give the payer.


For this type of account:			Give the NAME and SOCIAL SECURITY number of–	For this type of account:		Give the NAME and EMPLOYER IDENTIFICATION number of–
1.	Individual		The individual	7.	A valid trust, estate or pension trust	The legal entity(4)
2.	Two or more individuals (joint account)		The actual owner of the account or, if combined funds, the first individual on the account(1)	8.	Corporate or LLC electing corporate status on Form 8832	The corporation
3.	Custodian account of a minor (Uniform Gift to Minors Act)		The minor(2)	9.	Association, club, religious, charitable, educational or other tax-exempt organization	The organization
4.	a.	The usual revocable savings trust (grantor is also trustee)	The grantor-trustee(1)	10.	Partnership or multi-member LLC	The partnership
	b.	So-called trust account that is not a legal or valid trust under state law	The actual owner(1)	11.	A broker or registered nominee	The broker or nominee
5.	Sole proprietorship or single-owner LLC		The owner(3)	12.	Account with the Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments	The public entity
6.	Sole proprietorship single-owner LLC		The owner


(1)	List first and circle the name of the person whose number you furnish. If only one person on a joint account has a SSN, that person’s number must be furnished.

(2)	Circle the minor’s name and furnish the minor’s social security number.

(3)	You must show your individual name, but you may also enter your business or “doing business as” name. You may use either your SSN or TIN (if you have one).

(4)	List first and circle the name of the legal trust, estate, or pension trust. (Do not furnish the TIN of the personal representative or trustee unless the legal entity itself is not designated in the account title.)

Note: If no name is circled when more than one name is listed, the number will be considered to be that of the first name listed.

GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9

(Section references are to the U.S. Internal Revenue Code)

Obtaining a Number

If you do not have a U.S. taxpayer identification number or you don’t know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the U.S. Social Security Administration or the U.S. Internal Revenue Service (the “IRS”) and apply for a number.

In some cases, individuals who become U.S. resident aliens for tax purposes are not eligible to obtain an SSN. This includes certain resident aliens who must receive information returns but who cannot obtain an SSN. These individuals must apply for an Individual Taxpayer Identification Number (“ITIN”) on Form W-7, Application for IRS Individual Taxpayer Identification Number, unless they have an application pending for an SSN. Individuals who have an ITIN must provide it on Form W-9.

To complete the Substitute Form W-9, if you do not have a taxpayer identification number, write “Applied For” in the space for the taxpayer identification number, sign and date the Form, and give it to the requester. Notwithstanding that you comply with the foregoing, the depositary will withhold U.S. federal income tax on any purchase price and any accrued and unpaid interest paid to you, subject to some exceptions, or other payee with respect to the Securities prior to the time a properly certified TIN is provided to the depositary.

Payees Exempt from Backup Withholding

The following is a list of payees exempt from backup withholding and for which no information reporting is required. For interest and dividends, all listed payees are exempt except item (9). For broker transactions, payees listed in (1) through (13) and a person registered under the Investment Advisers Act of 1940 who regularly acts as a broker are exempt. Payments subject to reporting under sections 6041 and 6041A are generally exempt from backup withholding only if made to payees described in items (1) through (7), except that a corporation that provides medical and health care services or bills and collects payments for such services is not exempt from backup withholding or information reporting. Only payees described in items (2) through (6) are exempt from backup withholding for barter exchange transactions, patronage dividends and payments by certain fishing boat operators.


	(1)	A corporation.

	(2)	An organization exempt from tax under section 501(a), or an individual retirement plan (“IRA”), or a custodial account under 403(b)(7), if the account satisfies the requirements of section 401(f)(2).

	(3)	The United States or any of its agencies or instrumentalities.

	(4)	A State, the District of Columbia, a possession of the United States or any of their political subdivisions or instrumentalities.

	(5)	A foreign government or any of its political subdivisions, agencies or instrumentalities.

	(6)	An international organization or any of its agencies or instrumentalities.

	(7)	A foreign central bank of issue.

	(8)	A dealer in securities or commodities required to register in the United States, the District of Columbia or a possession of the United States.

	(9)	A futures commission merchant registered with the Commodity Futures Trading Commission.

	(10)	A real estate investment trust.

	(11)	An entity registered at all times during the tax year under the Investment Company Act of 1940.

	(12)	A common trust fund operated by a bank under section 584(a).

	(13)	A financial institution.

	(14)	A middleman known in the investment community as a nominee or custodian.

	(15)	A trust exempt from tax under section 664 or described in section 4947.

Payments of dividends and patronage dividends generally not subject to backup withholding also include the following:


	•	Payments to nonresident aliens subject to withholding under section 1441.

	•	Payments to partnerships not engaged in a trade or business in the United States and that have at least one nonresident partner.


	•	Payments of patronage dividends not paid in money.

	•	Payments made by certain foreign organizations.

	•	Section 404(k) distributions made by an ESOP.

Payments of interest generally not subject to backup withholding include the following:


	•	Payments of interest on obligations issued by individuals.

		Note: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer’s trade or business and you have not provided your correct taxpayer identification number to the payer.

	•	Payments of tax-exempt interest (including exempt interest dividends under section 852).

	•	Payments described in section 6049(b)(5) to nonresident aliens.

	•	Payments on tax-free covenant bonds under section 1451.

	•	Payments made by certain foreign organizations.

	•	Mortgage interest paid by you.

Payments that are not subject to information reporting are also not subject to backup withholding. For details see sections 6041, 6041A(a), 6042, 6044, 6045, 6049, 6050A and 6050N and the regulations under such sections.

Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. ENTER YOUR TAXPAYER IDENTIFICATION NUMBER. WRITE “EXEMPT” ON THE FACE OF THE FORM, SIGN AND DATE THE FORM AND RETURN IT TO THE PAYER.

Privacy Act Notices

Section 6109 requires you to give your correct taxpayer identification number to persons who must file information returns with the IRS to report interest, dividends, and certain other income paid to you, mortgage interest you paid, the acquisition or abandonment of secured property, cancellation of debt or contributions you made to an IRA. The IRS uses the numbers for identification purposes and to help verify the accuracy of your tax return. The IRS may also provide this information to the Department of Justice for civil and criminal litigation and to cities, states and the District of Columbia to carry out their tax laws. The IRS may also disclose this information on to other countries under a tax treaty, to federal and state agencies to enforce federal non-tax criminal laws, or to federal law enforcement and intelligence agencies to combat terrorism. You must provide your taxpayer identification number whether or not you are required to file a tax return. Payers must generally withhold 28% of taxable interest, dividend, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply.

Penalties


	(1)	Penalty for Failure to Furnish Taxpayer Identification Number. If you fail to furnish your correct taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect.

	(2)	Civil Penalty for False Information With Respect to Withholding. If you make a false statement with no reasonable basis that results in no backup withholding, you are subject to a $500 penalty.

	(3)	Criminal Penalty for Falsifying Information. Willfully falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment.

FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE U.S. INTERNAL REVENUE SERVICE.

Ladies and Gentlemen:

The undersigned hereby tenders to Birner Dental Management Services, Inc., a Colorado corporation (“Birner Dental”), Shares of Birner Dental Common Stock, without par value, pursuant to Birner Dental’s offer to purchase up to 175,000 Shares at a price per Share indicated in this Letter of Transmittal, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 31, 2006 (the “Offer to Purchase”), receipt of which is hereby acknowledged, and in this Letter of Transmittal (which together, as amended or supplemented, constitute the “Offer”). The Offer will expire at 5:00 p.m. Mountain time on September 29, 2006 (the “Expiration Date”). In the event that more than 175,000 Shares are tendered pursuant to the Offer at or below the Purchase Price, Birner Dental may exercise its right to purchase up to an additional 2% of its outstanding Shares without extending the Offer. Birner Dental also expressly reserves the right to purchase additional Shares subject to applicable legal requirements.

Subject to, and effective upon, acceptance for payment of and payment for the Shares tendered herewith, the undersigned hereby sells, assigns and transfers to or upon the order of Birner Dental all right, title and interest in and to all the Shares that are being tendered hereby and appoints the Depositary the true and lawful agent and attorney-in-fact of the undersigned with respect to such Shares, with full power of substitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to:

(1) deliver certificates for such Shares, or transfer ownership of such Shares on the account books maintained by the Book-Entry Transfer Facility, together, in any such case, with all accompanying evidences of transfer and authenticity, to or upon the order of Birner Dental;

(2) present such Shares for transfer and cancellation on the books of Birner Dental; and

(3) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares, all in accordance with the terms of the Offer.

The undersigned understands that Birner Dental will determine a single per Share price, not greater than $28.00 nor less than $17.50 per Share (the “Purchase Price”), that it will pay for Shares validly tendered and not withdrawn pursuant to the Offer, after taking into account the number of Shares so tendered and the prices specified by the tendering shareholders. The undersigned acknowledges and understands that Birner Dental will select the lowest Purchase Price that will allow it to purchase 175,000 Shares or, if a lesser number of Shares are validly tendered and not withdrawn, all such Shares that are properly tendered and not withdrawn. All Shares properly tendered at prices at or below the Purchase Price and not properly withdrawn will be purchased, subject to the conditions of the Offer and the “odd lot” priority and proration described in the Offer to Purchase. The undersigned understands that all shareholders whose Shares are purchased by Birner Dental will receive the same Purchase Price for each share purchased pursuant to the Offer.

The undersigned hereby represents and warrants that the undersigned:

(1) has a net long position in Shares at least equal to the number of Shares being tendered;

(2) has full power and authority to tender, sell, assign and transfer the Shares tendered hereby and that, when the same are accepted for payment by Birner Dental, Birner Dental will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to any adverse claims; and

(3) will, upon request, execute and deliver any additional documents deemed by the Depositary or Birner Dental to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby.

The undersigned understands that tendering Shares pursuant to any of the procedures described in Section 3 of the Offer to Purchase and in accordance with the instructions hereto will constitute an agreement between the undersigned and Birner Dental upon the terms and subject to the conditions of the Offer. The undersigned acknowledges that Birner Dental will not pay interest on the Purchase Price under any circumstances.

The undersigned recognizes that, under certain circumstances set forth in the Offer to Purchase, Birner Dental may terminate or amend the Offer, may postpone the acceptance for payment of, or for, Shares tendered or may accept for payment fewer than all of the Shares tendered.

Unless otherwise indicated under “Special Payment Instructions,” Birner Dental will issue the check for the Purchase Price of any Shares purchased (less the amount of any federal income or backup withholding tax required to be withheld), and return any Shares not tendered or not purchased, in the name(s) of the undersigned or, in the case of Shares tendered by book-entry transfer, by credit to the account at the Book-Entry Transfer Facility designated above. Similarly, unless otherwise indicated under “Special Delivery Instructions” herein, Birner Dental will mail the check for the Purchase Price of any Shares purchased (less the amount of any federal income or backup withholding tax required to be withheld) and any certificates for Shares not tendered or not purchased (and accompanying documents, as appropriate) to the undersigned at the address shown below the undersigned’s signature(s). In the event that both “Special Payment Instructions” and “Special Delivery Instructions” are completed, please issue the check for the Purchase Price of any Shares purchased (less the amount of any federal income or backup withholding tax required to be withheld) and return any Shares not tendered or not purchased in the name(s) of, and mail said check and any certificates to, the person(s) so indicated.

The undersigned acknowledges that Birner Dental has no obligation, pursuant to the “Special Payment Instructions,” to transfer any Shares from the name of the registered holder(s) thereof, if Birner Dental does not accept for payment any of the Shares so tendered.

All authority herein conferred or agreed to be conferred shall survive the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon such undersigned’s heirs, personal representatives, successors and assigns. Except as provided in the Offer to Purchase, this tender is irrevocable.

The undersigned understands the Offer is not being made to, nor will tenders be accepted from, or on behalf of, holders of Shares in any jurisdiction in which the making or acceptance thereof would not be in compliance with the laws of such jurisdiction.

INSTRUCTIONS

Forming Part of the Terms and Conditions of the Offer

1. Guarantee of Signatures. Except as otherwise provided below, all signatures on this Letter of Transmittal must be guaranteed by a financial institution (including most banks and brokerage houses) which is a participant in the Securities Transfer Agents Medallion Program (an “Eligible Institution”). Signatures on this Letter of Transmittal need not be guaranteed (a) if this Letter of Transmittal is signed by the registered holder(s) of the Shares (which term, for purposes of this document, shall include any participant in the Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered herewith and such holder(s) have not completed the box entitled “Special Payment Instructions” or “Special Delivery Instructions” on this Letter of Transmittal or (b) if such Shares are tendered for the account of an Eligible Institution. See Instruction 10. You may also need to have any certificates you deliver endorsed or accompanied by a stock power, and the signatures on these documents may also need to be guaranteed. See Instruction 8.

2. Delivery of Letter of Transmittal and Shares; Guaranteed Delivery Procedure. You should use this Letter of Transmittal only if you are forwarding certificates with this Letter of Transmittal or causing the Shares to be delivered by book-entry transfer pursuant to the procedures set forth in Section 3 of the Offer to Purchase. In order for you to validly tender Shares, certificates for all physically delivered Shares, or a confirmation of a book-entry transfer of all Shares delivered electronically into the Depositary’s account at the Book-Entry Transfer Facility, as well as a properly completed and duly executed Letter of Transmittal or an Agent’s Message in connection with book-entry transfer and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth on the front page of this Letter of Transmittal by the Expiration Date (as defined in the Offer to Purchase).

Agent’s Message. The term “Agent’s Message” means a message transmitted by the Book-Entry Transfer Facility to, and received by, the Depositary, which states that the Book-Entry Transfer Facility has received an acknowledgment from the participant in the Book-Entry Transfer Facility tendering the Shares that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and Birner Dental may enforce such agreement against them.

Guaranteed Delivery. If you cannot deliver your Shares and all other required documents to the Depositary by the Expiration Date or the procedure for book-entry transfer cannot be completed on a timely basis, you must tender your Shares pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to such procedure:

(a) such tender must be made by or through an Eligible Institution;

(b) a properly completed and duly executed Notice of Guaranteed Delivery substantially in the form provided to you by Birner Dental must be received by the Depositary by the Expiration Date, specifying the price at which Shares are being tendered, including (where required) a signature guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery; and

(c) the certificates for all physically delivered Shares, or a confirmation of a book-entry transfer of all Shares delivered electronically into the Depositary’s account at the Book-Entry Transfer Facility, together with a properly completed and duly executed Letter of Transmittal with any required signature guarantees or an Agent’s Message and any other documents required by this Letter of Transmittal, must be received by the Depositary within three Nasdaq trading days after the date of execution of such Notice of Guaranteed Delivery, all as provided in Section 3 of the Offer to Purchase.

The method of delivery of all documents, including share certificates, is at your option and risk. If you choose to deliver the documents by mail, then registered mail with return receipt requested, properly insured, is recommended. In all cases, sufficient time should be allowed to ensure timely delivery.

As specifically permitted by Section 6 of the Offer to Purchase, Birner Dental will not accept any alternative, conditional or contingent tenders, and no fractional Shares will be purchased. By executing this Letter of Transmittal, you waive any right to receive any notice of the acceptance for payment of the Shares.

3. Inadequate Space. If the space provided in the box captioned “Description of Shares Tendered” is inadequate, then you should list the certificate numbers and/or the number of Shares on a separate signed schedule attached hereto.

4. Partial Tenders (Not applicable to shareholders who tender by book-entry transfer). If you wish to tender (offer to sell) fewer than all of the Shares represented by any certificates that you deliver to the Depositary, fill in the number of Shares which are to be tendered in the box entitled “Number of Shares Tendered.” In such case, a new certificate for the remainder of the Shares represented by the old certificate will be sent to the person(s) signing this Letter of Transmittal, unless otherwise provided in the appropriate box on this Letter of Transmittal, as promptly as practicable after the expiration or termination of the Offer. Unless you indicate otherwise, all Shares represented by certificates delivered to the Depositary will be deemed to have been tendered. In the case of Shares tendered by book-entry transfer at the Book-Entry Transfer Facility, the Shares will be credited to the appropriate account maintained by the tendering shareholder at the Book-Entry Transfer Facility. In each case, Shares will be returned or credited without expense to the shareholder.

5. Indication of Price at Which Shares Are Being Tendered. In order to validly tender by this Letter of Transmittal, you must check the box indicating the price per Share at which you are tendering Shares, under “Shares Tendered at Price Determined by Shareholder.”

By checking a box under “Shares Tendered at Price Determined by Shareholder,” you acknowledge that doing so could result in none of the Shares being purchased if the Purchase Price for the Shares is less than the price that you checked.

You may check only one box. If you check more than one box or no boxes, then you will not be deemed to have validly tendered your Shares. If you wish to tender portions of your share holdings at different prices, you must complete a separate Letter of Transmittal for each price at which you wish to tender each such portion of your Shares. You cannot tender the same Shares at more than one price (unless you previously tendered and withdrew those Shares, as provided in Section 4 of the Offer to Purchase).

6. Odd Lots. As described in Section 1 of the Offer to Purchase, if Birner Dental purchases less than all Shares tendered and not withdrawn before the Expiration Date, the Shares purchased first will consist of all Shares tendered by any shareholder who owns, beneficially or of record, an aggregate of fewer than 100 Shares and who tenders all of such Shares. Even if you otherwise qualify for such “odd lot” preferential treatment, you will not receive such preferential treatment unless you complete the box captioned “Odd Lots.”

7. Order of Purchase in Event of Proration. Shareholders may specify the order in which their Shares are to be purchased in the event that as a result of the proration provisions or otherwise, some but not all of the tendered Shares are purchased in the Offer. The order of purchase may have an effect on the United States federal income tax treatment of the purchase for the Shares purchased. See Section 1 and Section 13 of the Offer to Purchase.

8. Signatures on Letter of Transmittal; Stock Powers and Endorsements.

(a) Exact Signatures. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond with the name(s) as written on the face of the certificates without alteration, enlargement or any change whatsoever.

(b) Joint Holders. If any of the Shares tendered hereby are held of record by two or more persons, all such persons must sign this Letter of Transmittal.

(c) Different Names on Certificates. If any of the Shares tendered hereby are registered in different names on different certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates.

(d) Endorsements. If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, no endorsements of certificates or separate stock powers are required unless payment of the Purchase Price is to be made, or Shares not tendered or not purchased are to be returned, in the name of any person other than the registered holder(s). Signatures on any such certificates or stock powers must be guaranteed by an Eligible Institution.

If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares tendered hereby, certificates must be endorsed or accompanied by appropriate stock powers, in either case, signed exactly as the name(s) of the registered holder(s) appear(s) on the certificates for such Shares. Signature(s) on any such certificates or stock powers must be guaranteed by an Eligible Institution. See Instruction 1.

If this Letter of Transmittal or any certificate or stock power is signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Depositary of the authority of such person so to act must be submitted.

9. Stock Transfer Taxes. Except as provided in this Instruction 9, Birner Dental will pay any stock transfer taxes with respect to the sale and transfer of any Shares to it or its order pursuant to the Offer. If, however, payment of the purchase price is to be made to, or Shares not tendered or not purchased are to be returned in the name of, any person other than the registered holder(s), or tendered Shares are registered in the name of a person other than the name of the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder(s), such other person or otherwise) payable on account of the transfer to such person will be deducted from the purchase price by the Depositary, unless satisfactory evidence of the payment of such taxes, or exemption therefrom, is submitted.

10. Special Payment and Delivery Instructions. If the check for the purchase price of any Shares purchased is to be issued and any Shares not tendered or not purchased are to be returned, in the name of a person other than the person(s) signing this Letter of Transmittal or if the check and any certificates for Shares not tendered or not purchased are to be mailed to someone other than the person(s) signing this Letter of Transmittal or to the person(s) signing this Letter of Transmittal at an address other than that shown above, the boxes captioned “Special Delivery Instructions” and/or “Special Payment Instructions” on this Letter of Transmittal should be completed.

11. Federal Income Tax Withholding. Under the federal income tax laws, the Depositary will be required to withhold 28% of the amount of any payments made to certain shareholders pursuant to the Offer. In order to avoid such backup withholding, each tendering shareholder must provide the Depositary with such shareholder’s correct taxpayer identification number by completing the Substitute Form W-9 set forth above.

In general, if a shareholder is an individual, the taxpayer identification number is the social security number of such individual. If the Depositary is not provided with the correct taxpayer identification number, the shareholder may be subject to a $50 penalty imposed by the Internal Revenue Service and payments that are made to such shareholder pursuant to the Offer may be subject to backup withholding. Certain shareholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements (but may be subject to other tax withholding requirements described below). In order to satisfy the Depositary that a foreign individual qualifies as an exempt recipient, such shareholder must submit an IRS Form W-8, signed under penalties of perjury, attesting to that individual’s exempt status. Such statements can be obtained from the Depositary.

For further information concerning backup withholding and instructions for completing the Substitute Form W-9 (including how to obtain a taxpayer identification number if you do not have one and how to complete the Substitute Form W-9 if Shares are held in more than one name), consult the enclosed Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.

Failure to complete the Substitute Form W-9 will not, by itself, cause Shares to be deemed invalidly tendered, but may require the Depositary to withhold 28% of the amount of any payments made pursuant to the Offer. Backup

withholding is not an additional federal income tax. Rather, the federal income tax liability of a person subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained.

NOTE: FAILURE TO COMPLETE AND RETURN THE SUBSTITUTE FORM W-9 MAY RESULT IN BACKUP WITHHOLDING OF 28% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.

Unless Birner Dental determines that a reduced rate of withholding is applicable pursuant to a tax treaty or that an exemption from withholding is applicable because gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, Birner Dental will be required to withhold federal income tax at a rate of 30% from such gross proceeds paid to a foreign shareholder or his agent. For this purpose, a foreign shareholder is any shareholder that is not (i) a citizen or resident of the United States, (ii) a corporation, partnership or other entity created or organized in or under the laws of the United States, or (iii) any estate or trust the income of which is subject to United States federal income taxation regardless of its source. A foreign shareholder may be eligible to file for a refund of such tax or a portion of such tax if such shareholder meets the “complete redemption,” “substantially disproportionate” or “not essentially equivalent to a dividend” tests described in the Offer to Purchase under the caption “United States Federal Income Tax Consequences” or if such shareholder is entitled to a reduced rate of withholding pursuant to a treaty and Birner Dental withheld at a higher rate.

In order to obtain a reduced rate of withholding under a tax treaty, a foreign shareholder must deliver to the Depositary, before the payment, a properly completed and executed statement claiming such an exemption or reduction. Such statements can be obtained from the Depositary. In order to claim an exemption from withholding on the grounds that gross proceeds paid pursuant to the Offer are effectively connected with the conduct of a trade or business within the United States, a foreign shareholder must deliver to the Depositary a properly executed statement claiming such an exemption. Such statements can be obtained from the Depositary. Foreign shareholders are urged to consult their own tax advisors regarding the application of federal income tax withholding, including eligibility for a withholding tax reduction or exemption and the refund procedure.

12. Irregularities. All questions as to Purchase Price, the form of documents and the validity, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by Birner Dental in its sole discretion, which determinations shall be final and binding on all parties. Birner Dental reserves the absolute right to reject any or all tenders of the Shares it determines not to be in proper form or the acceptance of which or payment for which may, be unlawful. Birner Dental also reserves the absolute right to waive any of the conditions of the Offer and any defect or irregularity in the tender of any particular Shares, and Birner Dental’s interpretation of the terms of the Offer (including these instructions) will be final and binding on all parties. No tender of Shares will be deemed to be properly made until all defects and irregularities have been cured or waived. Unless waived, any defects or irregularities in connection with tenders must be cured within such time period as Birner Dental shall determine. None of Birner Dental, the Depositary, the Information Agent (as the foregoing are defined in the Offer to Purchase) or any other person is or will be obligated to give notice of any defects or irregularities in tenders and none of them will incur any liability for failure to give any such notice.

13. Requests for Assistance or Additional Copies. Questions and requests for assistance or additional copies of the Offer to Purchase and this Letter of Transmittal should be directed to the Information Agent at its addresses and telephone numbers as set forth below.

14. Stock Option Plans. If you hold vested options in any of the Birner Dental’s stock option plans, then you may exercise such vested options as indicated in the instructions separately sent to you by paying the cash exercise price and receiving Shares which you may then tender by following the instructions set forth in the Offer to Purchase and this Letter of Transmittal. You must exercise your options by not later than 3:00 p.m. Mountain time on September 22, 2006, in order to obtain Shares to tender by the Expiration Date.

15. Lost, Stolen, Destroyed or Mutilated Certificates. If your certificate or certificates for part or all of your Shares has been lost, stolen, destroyed or mutilated, you should call Computershare Trust Company, Inc., as

Transfer Agent, at 800-962-4284 (extension 4732), regarding the requirements for replacement at the address set forth on the cover page of this Letter of Transmittal. You may be required to post a bond to secure against the risk that the certificate may be subsequently recirculated. You are urged to contact the Transfer Agent immediately in order to receive further instructions, for a determination as to whether you will need to post a bond and to permit timely processing of this documentation.

This Letter of Transmittal, properly completed and duly executed, together with certificates representing Shares being tendered (or confirmation of book-entry transfer) and all other required documents, must be received before 5:00 p.m., Mountain time, on the Expiration Date, or the tendering shareholder must comply with the procedures for guaranteed delivery.

The Information Agent for the Offer is:
Computershare Trust Company, Inc.
350 Indiana Street
Golden, CO 80401
1-800-962-4284 (extension 4732)

EX-99.(A)(1)(III) 4 ex99_a1iii.htm

Exhibit (a)(1)(iii)

NOTICE OF GUARANTEED DELIVERY
(Not To Be Used For Signature Guarantee)

To Tender Shares of Common Stock
of
BIRNER DENTAL MANAGEMENT SERVICES, INC.

Pursuant to its Offer to Purchase
Dated August 31, 2006

THE TENDER OFFER (THE “OFFER”), THE PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., MOUNTAIN TIME, ON SEPTEMBER 29, 2006, UNLESS THE OFFER IS EXTENDED.

As set forth in Section 3 of the Offer to Purchase (defined below), this form, or a form substantially equivalent to this form, must be used to accept the Offer (defined below) if (1) certificates for Shares of Common Stock, without par value, of Birner Dental Management Services, Inc. and all other documents required by the Letter of Transmittal cannot be delivered to the Depositary or (2) the procedures for book-entry transfer cannot be completed by the Expiration Date (defined in the Offer to Purchase). This form may be delivered by hand, courier or mail to the Depositary. See Section 3 of the Offer to Purchase.

The Depositary for the Tender Offer is:

Computershare Trust Company, Inc.


By Registered, Certified Mail or First Class Mail:		By Hand or Courier Delivery:
Computershare Trust Company, Inc.		Computershare Trust Company, Inc.
P.O. Box 1596		350 Indiana Street, Suite 800
Denver, CO 80201-1596		Golden, CO 80401

Delivery of this Notice of Guaranteed Delivery to an address other than those shown above does NOT constitute a valid delivery. Deliveries to the Book-Entry Transfer Facility (as defined in the Offer to Purchase) does not constitute valid delivery to the Depositary.

This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an “Eligible Institution” under the instructions thereto, such signature guarantee must appear in the applicable space provided in the signature box on the Letter of Transmittal.

Ladies and Gentlemen:

The undersigned hereby tenders to Birner Dental Management Services, Inc. (“Birner Dental”) upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 31, 2006 (the “Offer to Purchase”) and the related Letter of Transmittal (which together, as amended or supplemented, constitute the “Offer”), receipt of which is hereby acknowledged, the number (indicated below) of shares of Birner Dental Common Stock, without par value (the “Shares”), pursuant to the guaranteed delivery procedure set forth in Section 3 of the Offer to Purchase.

NUMBER OF SHARES BEING TENDERED: SHARES

CHECK ONLY ONE BOX. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES.

SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER
(See Instruction 5 of the Letter of Transmittal)

By checking ONE of the boxes below, the undersigned hereby tenders Shares at the price checked. This action could result in none of the Shares being purchased if the Purchase Price (as defined in the Offer to Purchase) for the Shares is less than the price checked. If the Purchase Price for the Shares is equal to or greater than the price checked, then the Shares purchased by Birner Dental will be purchased at the Purchase Price upon the terms and subject to the conditions set forth in the Offer to Purchase. A shareholder who desires to tender Shares at more than one price must complete a separate Notice of Guaranteed Delivery for each price at which Shares are tendered. The same Shares cannot be tendered at more than one price (unless those Shares were previously tendered and withdrawn).

PRICE (IN U.S. DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED (CHECK ONE)


o	$17.50	o	$20.50	o	$23.50	o	$26.50
o	$17.75	o	$20.75	o	$23.75	o	$26.75
o	$18.00	o	$21.00	o	$24.00	o	$27.00
o	$18.25	o	$21.25	o	$24.25	o	$27.25
o	$18.50	o	$21.50	o	$24.50	o	$27.50
o	$18.75	o	$21.75	o	$24.75	o	$27.75
o	$19.00	o	$22.00	o	$25.00	o	$28.00
o	$19.25	o	$22.25	o	$25.25
o	$19.50	o	$22.50	o	$25.50
o	$19.75	o	$22.75	o	$25.75
o	$20.00	o	$23.00	o	$26.00
o	$20.25	o	$23.25	o	$26.25

ODD LOTS
(See Instruction 6)

To be completed only if Shares are being tendered by or on behalf of a person owning, beneficially or of record, an aggregate of fewer than 100 Shares. The undersigned:


o	is the beneficial or record owner of an aggregate of fewer than 100 Shares, all of which are being tendered.

SIGN HERE






Signature(s)

Dated: , 2006

Name(s) of Shareholders:





(Please Type or Print)





(Address)


(Zip Code)


(Area Code and Telephone No.)


(Taxpayer ID No. or Social Security No.)

GUARANTEE
(Not to be used for signature guarantee)

The undersigned, a firm that is a member of a registered national securities exchange or the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office, branch or agency in the United States, or otherwise an “eligible institution” within the meaning of Rule 17Ad-15 of the Securities Exchange Act of 1934, as amended, guarantees (a) that the above named person(s) “own(s)” the Shares tendered hereby within the meaning of Rule 14e-4 under the Securities Exchange Act of 1934, as amended, (b) that such tender of Shares complies with Rule 14e-4 and (c) to deliver to the Depositary the Shares tendered hereby, together with a properly completed and duly executed Letter(s) of Transmittal with any required signature guarantee, unless an Agent’s Message (as defined in the Offer to Purchase) in the case of book-entry transfer is utilized, and any other required documents, all within three (3) Nasdaq trading days of the date hereof.



(Name of Firm)


(Authorized Signature)


(Name)


(Address)


(Zip Code)


(Area Code and Telephone No.)



Dated: , 2006

DO NOT SEND STOCK CERTIFICATES WITH THIS FORM.
YOUR STOCK CERTIFICATES MUST BE SENT WITH THE LETTER OF TRANSMITTAL.

EX-99.(A)(1)(IV) 5 ex99_a1iv.htm

Exhibit (a)(1)(iv)

Offer to Purchase Common Stock of Birner Dental Management Services, Inc.

August 31, 2006

Notice to Holders of Vested Stock Options:

Birner Dental Management Services, Inc. (the “Company”) has recently announced its offer (the “Offer”) to purchase up to 175,000 shares of the Company’s common stock, without par value (such shares, together with all other outstanding shares of the Company’s common stock, the “Shares”), at a price specified by such shareholders not greater than $28.00 nor less than $17.50 per share, without interest, upon the terms and subject to the conditions set forth in the Offer to Purchase dated August 31, 2006 and in the related Letter of Transmittal (collectively, the “Offer Documents”). You may obtain copies of the Offer Documents by calling Computershare Trust Company, Inc. at 1-800-962-4284 (extension 4732).

As a holder of vested stock options, you may wish to exercise some or all of your options that are vested on or before September 22, 2006, and then tender the shares acquired through such exercise to the Company pursuant to the Offer. The last day that you may exercise your vested options in order to tender the Shares subject to such options in the Offer is September 22, 2006. To assist you, attached is a summary of your exercisable stock option grants, including the option date, exercise price, and the number of options from each grant that are exercisable as of August 31, 2006. In the event that you have options vesting after August 31, 2006 but on or before September 22, 2006, such additional options, once vested, may be exercised no later than September 22, 2006 for purposes of tendering the underlying Shares in the Offer.

You will need to evaluate the Offer Documents to determine if participation would be beneficial to you, based on your stock option exercise prices, the date of your stock option grants and the years left to exercise your options, the range of tender prices, and the provisions for pro rata purchases by the Company as described in the Offer.

The Company will, upon the terms and subject to the conditions of the Offer, determine a single per share price (the “Purchase Price”), not greater than $28.00 nor less than $17.50 per share, that it will pay for the Shares validly tendered pursuant to the Offer and not properly withdrawn, taking into account the number of Shares so tendered and the prices specified by tendering shareholders. The Company will select the lowest price that will allow it to purchase 175,000 Shares or, if a lesser number of Shares are validly tendered, such lesser number as are validly tendered and not properly withdrawn. All shareholders whose Shares are purchased by the Company will receive the Purchase Price for each Share purchased in the Offer. In the event that more than 175,000 Shares are tendered in the Offer at or below the Purchase Price, the Company may exercise its right to purchase up to an additional 2% of its outstanding Shares without extending the Offer. The Company also reserves the right, in its sole discretion, to purchase additional Shares subject to applicable legal requirements.

Holders of vested stock options who exercise and tender the Shares underlying such options will have their Shares purchased by the Company on the same basis as other shareholders. There can be no guarantee that all Shares acquired pursuant to an exercise of vested options, or any other method, will be purchased by the Company.

We strongly encourage that you discuss the Offer with your tax advisor or broker.

The Offer will expire at 5:00 p.m., Mountain time, on September 29, 2006 (the “Expiration Date”) unless extended by the Company. If you do intend to exercise stock options in order to tender Shares in the Offer, you must exercise your options not later than 3:00 p.m., Mountain time, September 22, 2006, in order to obtain Shares to tender by the Expiration Date.

Upon the terms and subject to the conditions of the Offer, if more than 175,000 Shares, or such greater number of Shares as the Company may elect to purchase subject to applicable law, have been validly tendered and not properly withdrawn prior to the Expiration Date, at prices at or below the Purchase Price, the Company will purchase Shares on the following basis:


	•	First, from all holders of “odd lots” of fewer than 100 Shares who properly tender all of their Shares and do not properly withdraw them before the Expiration Date; and

	•	Second, after purchasing the Shares from the “odd lot” holders, from all other shareholders who properly tender shares, on a pro rata basis.

The Offer is not being made to, nor will tenders be accepted from, or on behalf of, holders of Shares in any jurisdiction in which the making or acceptance thereof would not be in compliance with the laws of such jurisdiction.

EX-99.(A)(5)(I) 6 ex99_a5i.htm

Exhibit (a)(5)(i)

BIRNER DENTAL MANAGEMENT SERVICES, INC.

OFFER TO PURCHASE
UP TO 175,000 SHARES OF BIRNER DENTAL MANAGEMENT SERVICES, INC.
COMMON STOCK AT A PRICE NOT GREATER THAN $28.00 NOR LESS THAN $17.50 PER SHARE

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M. MOUNTAIN TIME
ON SEPTEMBER 29, 2006,
UNLESS THE OFFER IS EXTENDED.

August 31, 2006

To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:

For your information and for forwarding to your clients for whom you hold Shares registered in your name or in the name of your nominee, we are enclosing the following documents:


	1.	Offer to Purchase dated August 31, 2006;

	2.	Letter of Transmittal for your use only, together with Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 providing information relating to backup federal income tax withholding;

	3.	Notice of Guaranteed Delivery to be used to accept the Offer if the Shares and all other required documents cannot be delivered to the Depositary by the Expiration Date (as defined in the Offer to Purchase) or if the procedure for book-entry transfer cannot be completed on a timely basis;

	4.	A form of letter that you may send to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients’ instructions with regard to the Offer; and

	6.	Return envelope addressed to Computershare Trust Company, Inc., the Depositary, for your use only.

CERTAIN CONDITIONS TO THE OFFER ARE DESCRIBED IN SECTION 7 OF THE OFFER TO PURCHASE.

WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS EXPIRE AT 5:00 P.M., MOUNTAIN TIME, ON SEPTEMBER 29, 2006, UNLESS THE OFFER IS EXTENDED.

For Shares to be properly tendered pursuant to the Offer, (1) the share certificates or confirmation of receipt of such Shares under the procedure for book-entry transfer, together with a properly completed and duly executed Letter of Transmittal, including any required signature guarantees, or an Agent’s Message (as defined in the Offer to Purchase) in the case of book-entry transfer, and any other documents required in the Letter of Transmittal, must be timely received by the Depositary, or (2) the tendering shareholder must comply with the guaranteed delivery procedures, all in accordance with the terms of the Offer to Purchase and Letter of Transmittal.

The Company will not pay any fees or commissions to any broker or dealer or other person for soliciting tenders of Shares pursuant to the Offer. The Company will, however, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding materials to their customers. The Company will pay all stock transfer taxes applicable to its purchase of Shares pursuant to the Offer, subject to Instruction 9 of the Letter of Transmittal. No broker, dealer, bank, trust company or fiduciary shall be deemed to be either our agent or the agent of the Company, the Information Agent or the Depositary for the purpose of the Offer.

Any inquiries you may have with respect to the Offer should be addressed to, and additional copies of the enclosed materials may be obtained from, the Information Agent or the undersigned at the addresses and telephone numbers set forth on the back cover of the Offer to Purchase.

Very truly yours,

/s/ Frederic W. J. Birner

Frederic W. J. Birner
Chairman of the Board and Chief Executive Officer

EX-99.(A)(5)(II) 7 ex99_a5ii.htm

Exhibit (a)(5)(ii)

BIRNER DENTAL MANAGEMENT SERVICES, INC.

OFFER TO PURCHASE
UP TO 175,000 SHARES OF BIRNER DENTAL MANAGEMENT SERVICES, INC.
COMMON STOCK AT A PRICE NOT GREATER THAN $28.00 NOR LESS THAN $17.50 PER SHARE

THE OFFER AND WITHDRAWAL RIGHTS EXPIRE
AT 5:00 P.M. MOUNTAIN TIME
ON SEPTEMBER 29, 2006,

UNLESS THE OFFER IS EXTENDED.

To Our Clients:

Enclosed for your consideration is the Offer to Purchase dated August 31, 2006 (as amended or supplemented from time to time, the “Offer”) in connection with the offer by Birner Dental Management Services, Inc., a Colorado corporation (the “Company”), to purchase for cash up to 175,000 shares of its common stock, without par value (such shares, together with all other outstanding shares of the Company’s common stock, the “Shares”), at a price specified by its shareholders not greater than $28.00 nor less than $17.50 per Share, without interest, upon the terms and subject to the conditions of the Offer.

We are the holder of record of Shares held for your account. As such, only we, pursuant to your instructions, can tender your Shares.


	•	First, from all holders of “odd lots” of fewer than 100 Shares who properly tender all of their Shares and do not properly withdraw them before the Expiration Date; and

	•	Second, after purchasing the Shares from the “odd lot” holders, from all other shareholders who properly tender shares, on a pro rata basis.

We request instructions as to whether you wish us to tender any or all of the Shares held by us for your account, upon the terms and subject to the conditions set forth in the Offer to Purchase.

Please note carefully the following:


	1.	You may tender Shares at a price not greater than $28.00 nor less than $17.50 per Share, as indicated in the attached Instruction Form.

	2.	The Offer, the proration period and withdrawal rights expire at 5:00 p.m., Mountain time, on September 29, 2006 unless the Offer is extended by the Company.

	3.	The Offer is for up to 175,000 Shares, constitutes approximately 7.6% of the Company’s outstanding


		Shares as of August 9, 2006.

	4.	Tendering shareholders who are registered shareholders or who tender their Shares directly to Computershare Trust Company, Inc., the Depositary, will not be obligated to pay any brokerage commissions or fees to the Company, solicitation fees, or, except as set forth in the Offer to Purchase, stock transfer taxes on the Company’s purchase of Shares pursuant to the Offer.

	5.	If you wish to tender portions of your Shares at different prices, you must complete a separate Instruction Form for each price at which you wish to tender each such portion of your Shares. We must submit separate Letters of Transmittal on your behalf for each price you will accept for each portion tendered.

	6.	If you hold beneficially or of record an aggregate of fewer than 100 Shares, and you instruct us to tender on your behalf all such Shares at or below the purchase price before the Expiration Date (as defined in the Offer to Purchase) and check the box captioned “Odd Lots” on the attached Instruction Form, the Company on the terms and subject to the conditions of the Offer, will accept all such Shares for purchase before proration, if any, of the purchase of other Shares properly tendered at or below the Purchase Price and not properly withdrawn.

If you wish to have us tender any or all of your Shares, please so instruct us by completing, executing, detaching and returning to us the Instruction Form on the detachable part hereof. An envelope to return your instructions to us is enclosed. If you authorize tender of your Shares, all such Shares will be tendered unless otherwise specified on the Instruction Form.

YOUR PROMPT ACTION IS REQUESTED. YOUR INSTRUCTION FORM SHOULD BE FORWARDED TO US IN AMPLE TIME TO PERMIT US TO SUBMIT THE TENDER ON YOUR BEHALF BEFORE THE EXPIRATION OF THE OFFER.

The Offer is not being made to, nor will tenders be accepted from or on behalf of, holders of Shares in any jurisdiction in which the making of the Offer or acceptance thereof would not be in compliance with the laws of such jurisdiction.

INSTRUCTION FORM

With Respect to the Offer by

BIRNER DENTAL MANAGEMENT SERVICES, INC.

to Purchase for Cash Up to 175,000 Shares of its Common Stock

The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase dated August 31, 2006 (as amended or supplemented from time to time, the “Offer”), in connection with the offer by Birner Dental Management Services, Inc. (“Birner Dental”) to purchase up to 175,000 shares of its Common Stock, without par value (such shares, together with all other outstanding shares of the Company’s common stock, the “Shares”), at a price not greater than $28.00 nor less than $17.50 per Share, without interest.

The undersigned hereby instruct(s) you to tender to Birner Dental the number of Shares indicated below or, if no number is indicated, all Shares held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer.

NUMBER OF SHARES BEING TENDERED HEREBY:_______________ SHARES*

*Unless otherwise indicated, it will be assumed that all Shares held by us for your account are to be tendered.

CHECK ONLY ONE BOX BELOW. IF MORE THAN ONE BOX IS CHECKED, OR IF NO BOX IS CHECKED, THERE IS NO VALID TENDER OF SHARES.

SHARES TENDERED AT PRICE DETERMINED BY SHAREHOLDER

By checking ONE of the boxes below, the undersigned hereby tenders Shares at the price checked. This action could result in none of the Shares being purchased if the Purchase Price (as defined in the Offer to Purchase) for the Shares is less than the price checked. If the Purchase Price for the Shares is equal to or greater than the price checked, then the Shares purchased by Birner Dental will be purchased at the Purchase Price upon the terms and subject to the conditions set forth in the Offer to Purchase. A shareholder who desires to tender Shares at more than one price must complete a separate Instruction Form for each price at which Shares are tendered. The same Shares cannot be tendered at more than one price (unless those Shares were previously tendered and withdrawn).

PRICE (IN U.S. DOLLARS) PER SHARE AT WHICH SHARES ARE BEING TENDERED (CHECK ONE)


o	$17.50	o	$20.50	o	$23.50	o	$26.50
o	$17.75	o	$20.75	o	$23.75	o	$26.75
o	$18.00	o	$21.00	o	$24.00	o	$27.00
o	$18.25	o	$21.25	o	$24.25	o	$27.25
o	$18.50	o	$21.50	o	$24.50	o	$27.50
o	$18.75	o	$21.75	o	$24.75	o	$27.75
o	$19.00	o	$22.00	o	$25.00	o	$28.00
o	$19.25	o	$22.25	o	$25.25
o	$19.50	o	$22.50	o	$25.50
o	$19.75	o	$22.75	o	$25.75
o	$20.00	o	$23.00	o	$26.00
o	$20.25	o	$23.25	o	$26.25

ODD LOTS

To be completed only if Shares are being tendered by or on behalf of a person owning, beneficially or of record, an aggregate of fewer than 100 Shares.


o	By checking this box, the undersigned represents that it is the beneficial or record owner of an aggregate of fewer than 100 Shares, all of which are being tendered.

THE METHOD OF DELIVERY OF THIS DOCUMENT IS AT THE ELECTION AND RISK OF THE TENDERING SHAREHOLDER. IF DELIVERY IS BY MAIL, THEN REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.

SIGN HERE


Signature(s):


Name(s):


(PLEASE PRINT)

Taxpayer Identification or Social Security Number


Address:


(INCLUDING ZIP CODE)

Area Code/Phone Number:


Date:

EX-99.(A)(5)(III) 8 ex99_a5iii.htm

Birner Dental Management Services, Inc.

EXHIBIT (a)(5)(iii)

3801 East Florida Avenue, Suite 508

Denver, Colorado 80210

303-691-0680

FOR IMMEDIATE RELEASE

August 31, 2006

BIRNER DENTAL MANAGEMENT SERVICES, INC.

ANNOUNCES COMMENCEMENT OF TENDER OFFER

DENVER, COLORADO, August 31, 2006. Birner Dental Management Services, Inc. (Nasdaq Capital Market: BDMS), operators of PERFECT TEETH dental practices announces that it is commencing a modified “Dutch Auction” tender offer for up to 175,000 shares of its common stock with proceeds from a $5 million term loan. In the tender offer, shareholders will have the opportunity to tender some or all of their shares at a price not greater than $28.00 per share or less than $17.50 per share. The tender offer will expire on September 29, 2006 at 5:00 pm, Mountain time, unless extended by the Company.

The Company believes that the tender offer is a prudent use of our financial resources given our business profile, recent trading volume and current market price of its common stock. Investing in its common stock is an attractive use of the Company’s capital and an efficient means to provide value to the Company’s shareholders.

The Company will, upon the terms and subject to the conditions of the Offer, determine a single per share price (the “Purchase Price”), not greater than $28.00 nor less than $17.50 per share, that it will pay for the shares validly tendered and not properly withdrawn, taking into account the number of shares so tendered and the prices specified by tendering shareholders. The Company will select the lowest price that will allow it to purchase 175,000 shares or, if a lesser number of shares are validly tendered, such lesser number as are validly tendered and not properly withdrawn. All shareholders whose shares are purchased by the Company will receive the Purchase Price for each share purchased in the Offer. In the event that more than 175,000 Shares are tendered in the Offer at or below the Purchase Price, the Company may exercise its right to purchase up to an additional 2% of its outstanding Shares without extending the Offer. The Company also reserves the right, in its sole discretion, to purchase additional Shares subject to applicable legal requirements.

The tender offer is not contingent on any minimum number of shares being tendered. However, the tender offer is subject to a number of other conditions specified in the Offer to Purchase that will be distributed to all Company shareholders of record.

Computershare Trust Company, Inc. is the information agent for the tender offer and any questions concerning the tender offer or requests for copies of the Offer to Purchase, Letter of Transmittal and related documents should be directed to Computershare Trust Company, Inc. by calling 1-800-962-4284 (extension 4732). The Offer to Purchase, Letter of Transmittal and related documents are being mailed to registered shareholders and will also be made available for distribution to beneficial owners of the Company’s common stock.

This news release is for informational purposes only, and is not an offer to buy, or the solicitation of an offer to sell, any shares. The full details of the tender offer, including instructions on how to tender shares, along with the Letter of Transmittal and related materials, are expected to be mailed promptly. Shareholders should carefully read the Offer to Purchase, the Letter of Transmittal and other related materials when they are available because they will contain important information including various terms and conditions of the tender offer. Shareholders may obtain free copies, when available, of the Offer to Purchase and other related documents that will be filed by the Company with the U.S. Securities and Exchange Commission at the Commission’s website at www.sec.gov. Shareholders also may obtain a copy of these documents, without charge, from Computershare Trust Company, Inc., the information agent for the tender offer. Shareholders are urged to read these materials carefully prior to making any decision with respect to the tender offer.

Neither the Company nor any member of its Board of Directors, nor the Information Agent is making any recommendation to shareholders as to whether to tender or refrain from tendering their shares into the tender

offer. Shareholders must decide how many shares they will tender, if any, and the price, within the stated range, at which they will offer their shares for purchase by the Company.

About Birner Dental Management Services, Inc.

Birner Dental Management Services, Inc. acquires, develops, and manages geographically dense dental practice networks in select markets in Colorado, New Mexico, and Arizona. Currently, the Company manages 60 dental offices, of which 35 were acquired and 25 were de novo developments. The Company operates its dental offices under the PERFECT TEETH name.

Certain of the matters discussed herein may contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from expectations. These and other risks are set forth in the reports filed by the Company with the Securities and Exchange Commission.

For Further Information Contact:

Birner Dental Management Services, Inc.

Dennis Genty

Chief Financial Officer

(303) 691-0680

EX-99.(B)(I) 9 ex99_bi.htm

FOURTH AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS FOURTH AMENDMENT TO SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Amendment"), is executed this 30th day of August, 2006, by and between BIRNER DENTAL MANAGEMENT SERVICES, INC., a Colorado corporation ("Borrower"), and KEYBANK NATIONAL ASSOCIATION, a national banking association ("Lender").

R E C I T A L S

A. Borrower and Lender are parties to a Second Amended and Restated Credit Agreement, dated as of August 7, 2003 (the "Credit Agreement"), pursuant to which Lender has agreed to make loans up to $7,000,000 to Borrower on the terms and subject to the conditions set forth therein. The Credit Agreement was amended by the terms of that certain First Amendment to Second Amended and Restated Credit Agreement dated May 6, 2004 (the "First Amendment"), that certain Second Amendment to Second Amended and Restated Credit Agreement dated April 29, 2005 (the "Second Amendment") and, that certain Third Amendment to Second Amended and Restated Credit Agreement dated April 25, 2006 (the "Third Amendment").

B. Borrower desires to further modify certain terms and conditions of the Credit Agreement, and Lender is willing to agree to the modifications contained in this Amendment, on the terms and conditions set forth herein.

C. Capitalized terms used in this Amendment and not defined herein shall have the meanings assigned to those terms in the Credit Agreement.

NOW, THEREFORE, in consideration of the foregoing premises and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:

1. AMENDMENTS TO CREDIT AGREEMENT. The Credit Agreement is hereby amended as follows:

(i) Definitions. Section 1.1 of the Credit Agreement is amended by adding or amending, as the case may be, the following definitions:

"Loan Documents" shall mean this Agreement, the Notes, the Security Agreement, and any other instruments or documents evidencing, securing or relating to the Loans.

"Notes" shall mean the Revolving Credit Note and the Term Loan Note.

"Revolving Credit Note" shall mean the Fourth Amended and Restated Revolving Credit Note of the Borrower evidencing the Revolving Loans, in substantially the form of Exhibit A to the Fourth Amendment to this Agreement.

"Security Agreement" means the Third Amended and Restated Security Agreement dated as of the date of this Agreement, as such document may be amended, restated, or supplemented from time to time.

"Term Loan" shall mean the term loan made by Lender to the Borrower pursuant to Section 2.1(b).

"Term Loan Maturity Date" shall mean September 30, 2011.

"Term Loan Note" shall mean the Term Loan Note of the Borrower evidencing the Term Loan, in substantially the form of Exhibit B to the Fourth Amendment to this Agreement.

(ii) Addition of Term Loan Facility. Sections 2.1 and 2.2 of the Credit Agreement are hereby amended to read in their entireties as follows:

"SECTION 2.1 Revolving Loans and Term Loan.

(a) Revolving Commitment. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, Lender agrees to make Revolving Loans to the Borrower, at any time and from time to time and until the earlier of the Revolving Credit Maturity Date and the termination of the Revolving Loan Commitment in accordance with the terms hereof, in an amount not to exceed the Revolving Loan Commitment. Within the limits set forth in the preceding sentence, the Borrower may borrow, pay or prepay and reborrow Revolving Loans on or after the Closing Date and prior to the Revolving Credit Maturity Date, subject to the terms, conditions and limitations set forth herein.

(b) Term Loan. Subject to the terms and conditions and relying upon the representations and warranties herein set forth, Lender agrees to make a single advance in the amount of up to $5,000,000 (the "Term Loan") to the Borrower, on the date requested by the Borrower following effectiveness of the Fourth Amendment to this Agreement, but in any event no later than September 30, 2006.

(c) LIBOR and Base Rate. The Term Loan and each advance under the Revolving Loan Commitment (each such advance is referred to herein as a "Loan") shall constitute either a LIBOR Rate Loan or a Base Rate Loan, subject to the following conditions:

(1) Each Loan that is made or continued as a LIBOR Rate Loan shall be made or continued on such Business Day, in such amount (equal to $100,000.00 or an integral multiple thereto), and with such an Interest Period as the Borrower shall request by written notice given to the Lender no later than 11:00 a.m. (Denver, Colorado time) on the third Business Day prior to the date of disbursement or continuation of the requested LIBOR Rate Loan. Each written notice of any LIBOR Rate Loan shall be irrevocable and binding on the Borrower and the Borrower shall indemnify the Lender against any loss or expense incurred by the Lender as a result of any failure by the Borrower to consummate such

LIBOR Rate Loan, including, without limitation, any loss (including loss of anticipated profits) or expense incurred by reason of liquidation or reemployment of deposits or other funds acquired by the Lender to fund the LIBOR Rate Loan. A certificate as to the amount of such loss or expense submitted by the Lender to the Borrower shall be conclusive and binding for all purposes, absent manifest error. In the event that the Borrower fails to provide the Lender with the required written notice, the Borrower shall be deemed to have given a written notice that such LIBOR Rate Loan shall be converted to a Base Rate Loan on the last day of the applicable Interest Period. In no event shall the Borrower be permitted to select a LIBOR Rate Loan having an Interest Period ending after the Maturity Date;

(2) Each Loan that is made as a Base Rate Loan shall be made on such Business Day and in such amount as the Borrower shall request by written notice given to the Lender no later than 11:00 a.m. (Denver, Colorado time) on the date of disbursement of the requested Base Rate Loan.

SECTION 2.2 Notes.

(a) The Revolving Loans shall be evidenced by the Revolving Credit Note. The Revolving Credit Note shall be a master note, and the principal amount of all Revolving Loans outstanding shall be evidenced by the Revolving Credit Note or any ledger or other record of the Lender, which shall be presumptive evidence of the principal owing and unpaid on the Revolving Credit Note.

(b) The Term Loan shall be evidenced by the Term Loan Note. The principal amount of the Term Loan outstanding shall be evidenced by the Tern Loan Note or any ledger or other record of the Lender, which shall be presumptive evidence of the principal owing and unpaid on the Term Loan Note."

(iii) Repayment of Loans. Section 2.4 of the Credit Agreement is hereby amended to read in its entirety as follows:

"SECTION 2.4 Notation of Loan Amounts; Repayment of Loans.

(a) Notation of Loan Amounts. Each Note shall bear interest from the date of the advances thereunder on the outstanding principal balance thereof as set forth in Section 2.6. The Lender shall, and is hereby authorized by the Borrower to, endorse on a schedule attached to each Note (or on a continuation of such schedule attached to such Note and made a part thereof), or otherwise to record in Lender’s internal records, an appropriate notation evidencing the date and amount of each Loan, each payment and prepayment of principal of the Loans, each payment of interest on the Loans and the other information provided for on such schedule; provided, however, that the failure of the Lender to make such a notation or any error therein shall not affect the obligation of the Borrower to repay any Loans in accordance with the terms of this Agreement and the Notes.

(b) Repayment of Revolving Loans. Upon the Revolving Credit Maturity Date or upon the earlier termination of this Agreement, the entire outstanding principal balance of the Revolving Credit Note, together with all accrued but unpaid interest thereon and all other sums due hereunder, shall be due and payable in full.

(1) In equal quarterly installments in an amount equal to one-twentieth (1/20) of the aggregate amount advanced under the Term Loan Note, which installments shall be due beginning on December 31, 2006, and on the last day of each quarter thereafter; and

(2) Upon the Term Loan Maturity Date or upon the earlier termination of this Agreement, the entire outstanding principal balance of the Term Loan Note, together with all accrued but unpaid interest thereon and all other sums due hereunder, shall be due and payable in full."

(iii) Use of Proceeds. Section 5.8 of the Credit Agreement is hereby amended to read in its entirety as follows:

"SECTION 5.8 Use of Proceeds. Use the proceeds of the Revolving Loans only for working capital and for other general corporate purposes, and use the proceeds of the Term Loan only for repurchase of outstanding common stock of the Borrower."

2. LOAN DOCUMENT AMENDMENTS. Each of the other Loan Documents is hereby amended to conform to the amendments to the Credit Agreement as set forth in Paragraph 1.

3. DOCUMENT RATIFICATION. Subject to the amendments set forth in Paragraph 1 above, all of the terms and conditions contained in the Credit Agreement and the other Loan Documents shall remain unmodified and in full force and effect.

4. CONDITIONS PRECEDENT. This Amendment shall be effective when the Lender shall have received an executed original hereof, together with a Third Amended and Restated Security Agreement, a Fourth Amended and Restated Revolving Credit Note, and a Term Loan Note, each properly executed by the Borrower, and each in substance and form acceptable to the Lender:

5. RELEASE. The execution of this Amendment by Lender does not and shall not constitute a waiver of any rights or remedies to which Lender is entitled pursuant to the Credit Agreement or the other Loan Documents, nor shall the same constitute a waiver of any default now existing or which may occur in the future with respect to the Credit Agreement or the other Loan Documents. Borrower hereby agrees that Lender has fully performed its obligations pursuant to the Credit Agreement and the other Loan Documents through the date hereof and hereby waives, releases and relinquishes any and all claims whatsoever, known or unknown, that it may have against Lender with respect to the Credit Agreement or the other Loan Documents through the date hereof.

6. PAYMENT OF COSTS AND FEES. Borrower shall pay all out-of-pocket expenses incurred by Lender in connection with the preparation of this Amendment, including, without limitation, reasonable attorneys' fees.

7. REPRESENTATIONS, WARRANTIES AND COVENANTS OF BORROWER. Borrower represents, warrants and covenants to Lender:

(a) No default or event of default under any of the Loan Documents as modified herein, nor any event, that, with the giving of notice or the passage of time or both, would be a default or an event of default under the Loan Documents as modified herein has occurred and is continuing.

(b) There has been no material adverse change in the financial condition of Borrower or any other person whose financial statement has been delivered to Lender in connection with the Loan from the most recent financial statement received by Lender.

(d) Borrower has no claims, counterclaims, defenses, or set-offs with respect to the Loan or the Loan Documents as modified herein.

(e) The Loan Documents as modified herein are the legal, valid, and binding obligation of Borrower, enforceable against Borrower in accordance with their terms.

(f) Borrower shall execute, deliver, and provide to Lender such additional agreements, documents, and instruments as reasonably required by Lender to effectuate the intent of this Amendment, including, but not limited to execution and delivery of the Term Note in the form attached hereto as Exhibit A.

8. CONTROLLING LAW. The terms and provisions of this Amendment shall be construed in accordance with and governed by the laws of the State of Colorado.

9. BINDING EFFECT. This Amendment shall be binding upon and inure to the benefit of the parties hereto, their successors and assigns.

10. CAPTIONS. The paragraph captions utilized herein are in no way intended to interpret or limit the terms and conditions hereof, rather, they are intended for purposes of convenience only.

11. COUNTERPARTS. This Amendment may be executed in any number of counterparts, each of which shall be effective only upon delivery and thereafter shall be deemed an original, and all of which shall be taken to be one and the same instrument, for the same effect as if all parties hereto had signed the same signature page. Any signature page of this Amendment may be detached from any counterpart of this Amendment without impairing the legal effect of any signatures thereon and may be attached to another counterpart of this Amendment identical in form hereto but having attached to it one or more additional signature pages.

[SIGNATURE PAGE TO FOURTH AMENDMENT TO

SECOND AMENDED AND RESTATED CREDIT AGREEMENT]

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the day and year first above written.

BORROWER:

BIRNER DENTAL MANAGEMENT SERVICES, INC., a Colorado corporation

	By:	/s/ Dennis Genty
		Dennis Genty, Chief Financial Officer

LENDER:

KEYBANK NATIONAL ASSOCIATION, a national banking association

By:

/s/ Joseph Nimmons

Joseph Nimmons, Vice President

EXHIBIT A

FOURTH AMENDED AND RESTATED REVOLVING CREDIT NOTE

$7,000,000	Denver, Colorado
		August 30, 2006

FOR VALUE RECEIVED, the undersigned, BIRNER DENTAL MANAGEMENT SERVICES, INC., a Colorado corporation ("Borrower"), whose address is 3801 E. Florida Ave., Suite 508, Denver, Colorado 80210, promises to pay to the order of KEYBANK NATIONAL ASSOCIATION ("Lender"), at its office at 1675 Broadway, Suite 500, Denver, Colorado 80202 (or at such other place as Lender shall designate in writing), in lawful money of the United States of America, the principal sum of Seven Million Dollars ($7,000,000) or so much thereof as may be advanced by Lender and remain unpaid from time to time, pursuant to the terms of that certain Second Amended and Restated Credit Agreement dated May 6, 2004 (as amended) to which the Borrower and Lender are parties (as the same may from time to time be amended or supplemented, the "Credit Agreement"), together with interest on said principal sum or such part thereof advanced by Lender, from the date of each advance made by Lender (an "Advance") until repaid in full, at the rate and at the times set forth in the Credit Agreement. The loan evidenced by this Note is a revolving loan, whereby the Borrower may borrow, repay and reborrow the principal indebtedness evidenced hereby.

1. Credit Agreement. This Note (the "Note") is the Revolving Credit Note referred to in the Credit Agreement and is entitled to the benefits thereof. The proceeds of this Note have been advanced for the uses specified in the Credit Agreement. Capitalized terms used herein, unless otherwise defined herein, shall have the meanings given them in the Credit Agreement.

2. Interest and Payments. The outstanding principal balance of this Note shall bear interest, from the date of each Advance made by Lender until repaid in full, at the rate specified in the Credit Agreement, which interest shall be due and payable, in arrears, as provided in the Credit Agreement. Upon the Revolving Credit Maturity Date or upon the earlier termination of the Credit Agreement, the entire outstanding principal balance of this Note, together with all accrued but unpaid interest thereon and all other sums due hereunder, shall be due and payable in full. The Borrower shall have the right to prepay the outstanding principal balance of this Note, together with all accrued but unpaid interest thereon and all other sums due hereunder, in full or in part, as set forth in the Credit Agreement. All payments of principal, interest and any other sums on this Note due from the Borrower to Lender shall be made to Lender in lawful money of the United States of America in the manner set forth in the Credit Agreement.

3. Application of Proceeds. All payments hereunder by Borrower shall be applied by Lender:

First, to the payment of all reimbursable expenses, liabilities and advances made or incurred by Lender in connection herewith including reasonable attorneys fees incurred in connection with any enforcement action taken with respect to this Note;

Second, to the payment of any other amounts due (other than principal and interest) under this Note or the Credit Agreement;

Third, to the payment of all interest accrued and unpaid on the outstanding indebtedness; and

Fourth, to the payment of the outstanding principal balance of the outstanding indebtedness.

4. Default. Time is of the essence hereof. The occurrence of any Event of Default under the Credit Agreement shall be a default hereunder and, upon the occurrence of any such default, the payment of all principal, interest and any other sums due in accordance with the terms of this Note shall, at the option of Lender, be accelerated and such principal, interest and other sums shall be immediately due and payable without notice or demand, and Lender shall have the option to foreclose or to require foreclosure of any or all liens and security interests securing the payment hereof and/or to exercise any other rights and remedies available to Lender hereunder or under the Credit Agreement. From and after an Event of Default, the outstanding principal balance shall accrue interest at the Default Rate.

5. Governing Law. As additional consideration for the extension of credit, Borrower understands and agrees that the loan evidenced by this Note is made in the State of Colorado and the provisions hereof will be construed in accordance with the laws of the State of Colorado. The parties consent to the personal jurisdiction of the courts and the venue specified in the Credit Agreement.

6. Maximum Interest. The provisions of this Note are hereby expressly limited so that in no event whatsoever, whether by reason of demand or acceleration of the maturity of this Note or otherwise, shall the amount paid, or agreed to be paid ("Interest"), to Lender for the use, forbearance or retention of the money loaned hereunder exceed the maximum amount permissible under applicable law. If, from any circumstance whatsoever, performance or fulfillment of any provision of this Note shall, at the time of performance or fulfillment of such provision shall be due, exceed the limit for Interest prescribed by law, then ipso facto the obligation to be performed or fulfilled shall be reduced to such limit and if, from any circumstance whatsoever, Lender shall ever receive anything of value deemed Interest by applicable law in excess of the maximum lawful amount, an amount equal to any excessive Interest shall be applied to the reduction of the principal (whether or not then due) or at the option of Lender be paid over to the Borrower, and not to the payment of Interest.

Miscellaneous Provisions.

(a) The Borrower hereby waives demand for payment, presentment for payment, protest, notice of protest, notice of dishonor, notice of nonpayment, notice of acceleration of maturity, diligence in taking any action to collect sums owing hereunder and all duty or obligation of Lender to effect, protect, perfect, retain or enforce any security for the payment of this Note or to proceed against any collateral before otherwise enforcing this Note.

(b) This Note and each payment of principal and interest hereunder shall be paid when due without deduction or setoff of any kind or nature or for any costs whatsoever.

(c) The Borrower agrees to reimburse Lender upon demand for all reasonable out-of-pocket expenses, including, without limitation, reasonable attorneys' fees and costs, incurred in connection with Lender's collection of payments due from Borrower hereunder.

(d) The Borrower agrees that Lender may from time to time extend the maturity of this Note or the time any payment is due under this Note and may accept further security or release security for the payment of this Note, without in any way affecting any obligations of the Borrower to Lender.

(e) This Fourth Amended and Restated Revolving Credit Note restates and replaces in its entirety the Third Amended and Restated Revolving Credit Note dated April 25, 2006 in the principal amount of $7,000,000.

IN WITNESS WHEREOF, the Borrower has executed this Note to be effective as of the day and year first-above written.

BIRNER DENTAL MANAGEMENT SERVICES, INC., a Colorado corporation

	By:	/s/ Dennis Genty
		Dennis Genty, Chief Financial Officer

EXHIBIT B

TERM LOAN NOTE

$5,000,000	Denver, Colorado
		August 30, 2006

FOR VALUE RECEIVED, the undersigned, BIRNER DENTAL MANAGEMENT SERVICES, INC., a Colorado corporation ("Borrower"), whose address is 3801 E. Florida Ave., Suite 508, Denver, Colorado 80210, promises to pay to the order of KEYBANK NATIONAL ASSOCIATION ("Lender"), at its office at 1675 Broadway, Suite 500, Denver, Colorado 80202 (or at such other place as Lender shall designate in writing), in lawful money of the United States of America, the principal sum of Five Million Dollars ($5,000,000) or so much thereof as may be advanced by Lender and remain unpaid from time to time, pursuant to the terms of that certain Second Amended and Restated Credit Agreement dated May 6, 2004 (as amended) to which the Borrower and Lender are parties (as the same may from time to time be amended or supplemented, the "Credit Agreement"), together with interest on said principal sum or such part thereof advanced by Lender, from the date of each advance made by Lender (an "Advance") until repaid in full, at the rate and at the times set forth in the Credit Agreement.

1. Credit Agreement. This Note (the "Note") is the Term Loan Note referred to in the Credit Agreement and is entitled to the benefits thereof. The proceeds of this Note have been advanced for the uses specified in the Credit Agreement. Capitalized terms used herein, unless otherwise defined herein, shall have the meanings given them in the Credit Agreement.

2. Interest and Payments. The outstanding principal balance of this Note shall bear interest, from the date of each Advance made by Lender until repaid in full, at the rate specified in the Credit Agreement, which interest shall be due and payable, in arrears, as provided in the Credit Agreement. Principal payments shall be due and payable as provided in the Credit Agreement. Upon the Term Loan Maturity Date or upon the earlier termination of the Credit Agreement, the entire outstanding principal balance of this Note, together with all accrued but unpaid interest thereon and all other sums due hereunder, shall be due and payable in full. The Borrower shall have the right to prepay the outstanding principal balance of this Note, together with all accrued but unpaid interest thereon and all other sums due hereunder, in full or in part, as set forth in the Credit Agreement. All payments of principal, interest and any other sums on this Note due from the Borrower to Lender shall be made to Lender in lawful money of the United States of America in the manner set forth in the Credit Agreement.

3. Application of Proceeds. All payments hereunder by Borrower shall be applied by Lender:

Second, to the payment of any other amounts due (other than principal and interest) under this Note or the Credit Agreement;

Third, to the payment of all interest accrued and unpaid on the outstanding indebtedness; and

Fourth, to the payment of the outstanding principal balance of the outstanding indebtedness.

Miscellaneous Provisions.

(b) This Note and each payment of principal and interest hereunder shall be paid when due without deduction or setoff of any kind or nature or for any costs whatsoever.

IN WITNESS WHEREOF, the Borrower has executed this Note to be effective as of the day and year first-above written.

BIRNER DENTAL MANAGEMENT SERVICES, INC., a Colorado corporation

	By:	/s/ Dennis Genty
		Dennis Genty, Chief Financial Officer

EX-99.(B)(II) 10 ex99_bii.htm

THIRD AMENDED AND RESTATED SECURITY AGREEMENT

1.	DEBTOR:	BIRNER DENTAL MANAGEMENT SERVICES, INC.
		3801 E. Florida Ave., Suite 208
		Denver, Colorado 80210
		ATTN: Dennis Genty
			Chief Financial Officer

2.	SECURED PARTY:	KEYBANK NATIONAL ASSOCIATION
		1675 Broadway, Suite 500
		Denver, Colorado 80202
		ATTN: Joe Nimmons

DATED:

August 30, 2006

4. COLLATERAL: All of the following personal property which is now or hereafter owned or acquired by Debtor or in which Debtor now or hereafter has any right, title or interest (excluding any equipment and fixtures exclusively owned by the Professional Corporations, as such term is defined in the Credit Agreement, and located in the offices of such Professional Corporations), is hereinafter collectively referred to as the "Collateral":

a. All accounts, deposit accounts, reserves, deferred payments, refunds, accounts receivable, notes, chattel paper and general intangibles of every kind and nature, including, without limitation, all governmental permits, licenses, certificates, consents and approvals, all inventory, equipment, fixtures, instruments, investment property, letter of credit rights, documents, intellectual property, supporting obligations, all rights to carry on business under any name under which Debtor does business, and all patents, copyrights, tradenames, trademarks and goodwill; all books, records and other documentation relating to the foregoing including, without limitation, all listing and compilations of such accounts and all original documents creating, evidencing, securing or guaranteeing the indebtedness under any such accounts such as contracts, orders, invoices, receipts, security documents and guarantees;

b. All rights to payment under contracts relating to services provided by Debtor and all accounts receivable related thereto;

c. All causes of action, claims and compensation of every kind and nature, whether direct or consequential, or for any injury, loss or diminution in value of the property owned by Debtor, and all policies of insurance covering any of the other items of property listed herein and all proceeds, loss payments and premium refunds which may become payable with respect to such insurance policies;

d. All additions, renewals, replacements and proceeds and products of the items of property listed in this Paragraph and all articles in substitution therefor, including, without limitation, all cash and non-cash proceeds from the sale or other transfer of any of such items.

6433\154\994207.2

5.	PRIMARY USE OF COLLATERAL: Business.
6.	OBLIGATIONS (collectively, the "Obligations"):

(a) All obligations to Secured Party, direct or indirect, absolute or contingent, now existing or hereafter arising in connection with that certain:

(i) Second Amended and Restated Credit Agreement (as amended, restated, or supplemented from time to time, the "Credit Agreement") dated as of August 7, 2003, by and between Secured Party and Borrower (capitalized terms used but not defined herein have the meanings given in the Credit Agreement);

(ii) Revolving Credit Note, Term Loan Note, and each other Note now existing or hereafter delivered in connection with the Credit Agreement.

(iii) all other documents or instruments now or hereafter evidencing, securing, guaranteeing and/or relating to the indebtedness evidenced by the Credit Agreement or any Note.

This Security Agreement and all of the documents and instruments referred to in this subparagraph (a), as the same may be amended or replaced from time to time, are hereinafter collectively referred to as the "Loan Documents".

(b) All expenditures made or incurred by Secured Party to protect and maintain the Collateral and to enforce its rights under this Security Agreement, as more fully set forth herein.

7. SECURITY INTEREST: Debtor hereby grants to Secured Party a continuing security interest in the Collateral. The security interest granted herein is given to secure payment and performance of the Obligations.

8. WARRANTIES AND REPRESENTATIONS: Debtor warrants and represents to Secured Party that:

(a) Debtor has the right to transfer the Collateral and is the sole owner of the Collateral free and clear of all liens, security interests, adverse claims and encumbrances (other than the security interest created by the Loan Documents), except as otherwise permitted by Section 6.2 of the Credit Agreement.

(b) No financing statement covering any of the Collateral is on file in any public office, other than the financing statement evidencing the security interest created hereby.

(c) The execution and delivery of this Security Agreement will not violate any law, agreement or document governing Debtor or to which Debtor is a party.

6433\154\994207.2

(d) The Collateral is located solely in the States of Colorado, Arizona and New Mexico and will be used primarily for the purposes set forth in Paragraph 5 above.

(e) The principal place of business of Debtor is 3801 E. Florida Ave., Suite 508, Denver, Colorado 80210, the state of its incorporation is Colorado, and the exact legal name of Debtor is as set forth in Paragraph 1 of this Security Agreement..

9. COVENANTS OF DEBTOR: Except as may otherwise be set forth in or allowed under the terms of any of the other Loan Documents, Debtor covenants and agrees that unless and until Secured Party expressly agrees in writing to another course of action:

(a) Debtor shall not sell, pledge, hypothecate, transfer, lease, assign, abandon or otherwise dispose of any of the Collateral or any interest therein except in the ordinary course of business.

(b) Debtor shall promptly notify Secured Party of any Event of Default (as defined in Paragraph 10 hereof).

(c)

Debtor shall defend the Collateral against the claims and demands of all persons.

(d) Debtor shall, at any time upon demand of Secured Party, exhibit to and allow inspection by Secured Party of records with respect to the Collateral and shall, promptly upon request from Secured Party, deliver to Secured Party an accounting as to the identity, location and value of the Collateral in such detail as Secured Party shall reasonably require.

(e) Secured Party, at its option, may discharge taxes, liens, security interests and other encumbrances against the Collateral and may pay for the maintenance and preservation thereof if not otherwise paid or performed by Debtor. Debtor shall reimburse Secured Party on demand for any payments as made, plus interest thereon at the Default Rate (as defined in the Credit Agreement) from the date of such payment. Any such payments made by Secured Party, together with interest thereon, shall be secured by the Collateral as provided herein and by all of the other Loan Documents.

(f) Debtor authorizes Secured Party to from time to time file financing statements and other documents in form satisfactory to Secured Party (and pay the cost of filing or recording them in whatever public offices Secured Party deems necessary) and perform such other acts as Secured Party may request to perfect and maintain a valid security interest in the Collateral.

(g) Debtor shall not change the state of its incorporation or move its principal place of business or its books and records relating to the Collateral without thirty (30) days prior written notice thereof to Secured Party.

(h) Debtor shall not change its corporate name or otherwise do anything which would make the information set forth in the financing statements relating to the Collateral materially misleading without immediately notifying Secured Party of the same.

(i) Debtor will corporate with Secured Party in obtaining control with respect to Collateral consisting of: deposit accounts, investment property and letter of credit rights.

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10. EVENTS OF DEFAULT: The happening of any of the following events or conditions shall be a default under this Security Agreement (singularly, an "Event of Default" or collectively, "Events of Default"):

(a) Any Default or Event of Default not cured within the notice and grace period provided in Article VII of the Credit Agreement; or

(b) Default by Debtor under the Note or any of the other Loan Documents not cured within any applicable notice or grace period specified therein; or

(c) Any warranty, representation or statement of Debtor contained herein, any of the other Loan Documents or otherwise made or furnished to Secured Party by or on behalf of Debtor proves to have been false in any material respect when made or furnished; or

(d) The seizure or taking of any of the Collateral by any governmental or similar authority or the issuance of a writ, order of attachment or garnishment with respect thereto.

Any default under this Security Agreement not cured within the applicable grace or cure period, if any, shall be a default under each of the other Loan Documents.

11.	RIGHTS AND REMEDIES:

(a) Upon the occurrence of any Event of Default, which Event of Default has not been cured within the applicable grace or cure period, Secured Party may, without further notice or demand, declare any of the Obligations immediately due and payable and this Security Agreement in default, and thereafter, Secured Party shall have the remedies of a secured party under the Uniform Commercial Code as then in effect in the State of Colorado and all other rights and remedies at law or in equity available to secured creditors in the State of Colorado. Proceeds of any disposition of the Collateral shall be applied to the Obligations as specified in the Credit Agreement.

(b) During the time that Secured Party is in possession of the Collateral, and to the extent permitted by law, Secured Party shall have the right to hold, use, operate, manage and control all or any part of the Collateral. Upon the occurrence of an Event of Default, Secured Party may notify account debtors to make payment directly to Secured Party and collect and retain all proceeds and other sums due or to become due with respect to the Collateral, accounting only for the net proceeds arising from such use and charging against receipts from such use all costs, expenses, charges, damage or loss by reason of such use. Notwithstanding the foregoing, Secured Party shall also be entitled, without further notice or demand and to the extent permitted by law, to have a receiver appointed to take charge of all or any part of the Collateral, exercising all of the rights specified in the immediately preceding sentence.

(c) Debtor shall pay to Secured Party on demand all reasonable out-of-pocket expenses, including, without limitation, reasonable attorneys' fees and costs, incurred by Secured Party incidental to taking, holding, collecting upon, selling and the like or otherwise dealing with the Collateral, or incurred by Secured Party in otherwise enforcing any term or condition of this Security Agreement, together with interest thereon at the default interest rate (as specified in the Credit Agreement), and all such expenses and interest shall be secured by the Collateral as

6433\154\994207.2

provided herein and by all of the other Loan Documents securing all or any part of the indebtedness evidenced by the Note.

(d) Any and all statements of fact or other recitals made in any bill of sale or assignment or other instrument evidencing any foreclosure sale hereunder as to nonpayment of indebtedness or as to the occurrence of any default, or as to Secured Party having declared all of such indebtedness to be due and payable, or as to notice of time, place and terms of sale and of the properties to be sold having been duly given by Secured Party, shall be taken as prima facie evidence of the truth of the facts so stated and recited.

(e) Secured Party may appoint or delegate any one or more persons as agent to perform any act or acts necessary or incident to any sale of the Collateral held by Secured Party, including the sending of notices and the conduct of the sale, in the name and on behalf of Secured Party.

(f) Nothing herein contained is intended, nor shall be construed, to preclude Secured Party from pursuing any other remedy provided by law for the collection or enforcement of any of the Obligations. Any and all rights and remedies herein expressly conferred upon Secured Party shall be deemed cumulative with, and not exclusive of, any other remedy conferred hereby, by the other Loan Documents or by law or equity on Secured Party, and the exercise of any one remedy shall not preclude the exercise of any other.

12.

GENERAL:

(a) Except for matters arising from the gross negligence or willful misconduct of the Secured Party, its employees, officers or agents, Debtor hereby indemnifies and holds harmless Secured Party, and its employees, officers and agents, from and against any and all liabilities to third parties, losses and damages which may be incurred, asserted or imposed upon them or any of them as a result of or in connection with any use, operation, lease or consumption of any of the Collateral or as a result of Secured Party's seeking to obtain performance of any of the obligations due with respect to the Collateral.

(b) No default shall be waived by Secured Party except in writing and no waiver of any payment or other right under this Security Agreement shall operate as a waiver of any other payment or right.

(c) Without affecting any obligations of Debtor under this Security Agreement and without prejudice to any of its rights hereunder, Secured Party may, without notice or demand, renew, extend or grant indulgences with respect to any of the Obligations, take or release any other collateral as security for any of the Obligations, or add or release any guarantor, endorser, surety or other party to any of the Obligations.

(d) Debtor hereby waives diligence, presentment, protest, demand and notice of every kind, as well as the right to require Secured Party to proceed against any person liable for the payment or performance of any of the Obligations or to foreclose upon, sell or otherwise realize upon or collect or apply any other property, real or personal, securing any of the Obligations, as a condition or prior to proceeding hereunder.

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(e) All notices, demands, requests or other communications to be sent by one party to the other hereunder or required by law shall be in writing and sent to the addresses of the parties specified herein.

(f) Unless the context otherwise requires, all terms used herein which are defined in the Uniform Commercial Code as in effect in the State of Colorado shall have the meanings therein stated.

(g) All of the rights and remedies of Secured Party under this Security Agreement shall inure to the benefit of its successors and assigns. All obligations of Debtor hereunder shall be binding upon the successors and assigns of Debtor.

(h) This Security Agreement may not be amended, modified or otherwise changed except by a written instrument duly executed by Debtor and Secured Party.

(i) This Security Agreement shall be construed under and governed by the laws of the State of Colorado. The parties hereby consent to the personal jurisdiction of the courts and the venue specified in the Credit Agreement.

(j)

Time is of the essence of this Security Agreement and all of its provisions.

(k) The headings of this Security Agreement are inserted for convenience only and shall not affect the meaning or interpretation of this Security Agreement or any provisions hereof.

(l) This Security Agreement restates and replaces in its entirety the Second Amended and Restated Security Agreement dated August 7, 2003 between Debtor and Secured Party.

6433\154\994207.2

DATED: August 30, 2006

BIRNER DENTAL MANAGEMENT SERVICES, INC., a Colorado corporation

	By:	/s/ Dennis Genty
		Dennis Genty, Chief Financial Officer

KEYBANK NATIONAL ASSOCIATION, a national banking association

	By:	/s/ Joseph Nimmons
		Joseph Nimmons, Vice President

6433\154\994207.2