##### Table of Contents





UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, DC
    20549
  Form 10-K
  (Mark One)þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2007oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to   Commission file number
    000-23092
 NATIONAL DENTEX
    CORPORATION
 (Exact name of registrant as
    specified in its charter)
  MASSACHUSETTS

04-2762050(State or Other Jurisdiction
    of
    Incorporation or Organization)

(I.R.S. Employer
    Identification No.)2 Vision Drive,

01760Natick, MA

(Zip Code)(Address of Principal Executive
    Offices)   (508) 907-7800 (Registrants
    Telephone No., including Area Code) Securities
    registered pursuant to Section 12(b) of the Act:
  Title of Each Class

Name of Exchange on Which RegisteredCommon Stock, par value $.01 per share

The NASDAQ Stock Market, LLC   Securities registered pursuant to Section 12(g) of the
    Act:
    None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
   12b-2
  Large accelerated
    filer o

Accelerated
    filer þ

Non-accelerated
    filer o

Smaller reporting
    company o(Do not check if a smaller reporting company)   Rule 12b-2 o þ
      DOCUMENTS
    INCORPORATED BY REFERENCE




---





TABLE OF CONTENTS  PART IItem 1. BusinessItem 1A. Risk FactorsItem 1B. Unresolved Staff CommentsItem 2. PropertiesItem 3. Legal ProceedingsItem 4. Submission of Matters to a Vote of Security HoldersPART IIItem 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesItem 6. Selected Financial DataItem 7. Managements Discussion and Analysis of Financial Condition and Results of OperationsItem 7A. Quantitative and Qualitative Disclosures about Market RiskItem 8. Financial Statements and Supplementary DataItem 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureItem 9A. Controls and ProceduresItem 9A(T). Controls and ProceduresItem 9B. Other InformationPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceItem 11. Executive CompensationItem 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder MattersItem 13. Certain Relationships and Related TransactionsItem 14. Principal Accountant Fees and ServicesPART IVItem 15. Exhibits and Financial Statement SchedulesREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMCONSOLIDATED BALANCE SHEETSCONSOLIDATED STATEMENTS OF INCOMECONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITYCONSOLIDATED STATEMENTS OF CASH FLOWSNOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2007SIGNATURESEXHIBIT INDEXEX-10.25 Written Summary of Non-Employee Director Compensation ArrangementsEX-23 Consent of PricewaterhouseCoopers LLPEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO    Table of Contents  
  PART I
 
  Item 1.
    Business  General
    (508) 907-7800. Form 10-K, Form 10-Q, Form 8-K,
  Information
    as to Industry and Operating Segments
    Description
    of Business
      Restorative Products.
 1




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##### Table of Contents



Reconstructive Products.
  Cosmetic Products.
  Laboratory
    and Corporate Operations
        Sales
    and Marketing
  tm
 2




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##### Table of Contents



tm
  Competition
        Employees
   3




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##### Table of Contents



Intellectual
    Property
    Backlog
   
  Item 1A.
    Risk
    Factors    Our
    success depends on economic and other external factors that
    affect consumer decisions about whether and when to have dental
    procedures performed.
    We
    operate in a highly competitive and fragmented market that is
    increasingly global in scope.
   4




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##### Table of Contents



We
    face increased competitive pressures from larger competitors,
    foreign-sourced products and technology-based
    solutions.
        We may
    face increased regulatory action by, among other governmental
    entities, the United States Food and Drug Administration (the
    FDA).
    Risks
    associated with our strategic acquisitions could adversely
    affect our business.
    
    difficulties integrating the acquired company, retaining the
    acquired laboratories customers, and achieving the
    expected benefits of the acquisition, such as revenue increases,
    cost savings, and increases in geographic or product presence,
    in the desired time frames, if at all;
    loss of key employees from the acquired company;
    implementing and maintaining consistent standards, controls,
    procedures, policies and information systems; and
    diversion of managements attention from other business
    concerns.   5




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##### Table of Contents



If we
    fail to develop new or expand existing customer relationships,
    our ability to grow our business will be impaired.
    If we
    cannot continue to respond to technical innovations we may not
    be able to compete effectively.
    Our
    failure to attract and retain qualified personnel would
    adversely affect our business.
    Our
    business results are adversely affected by increases in labor,
    benefits and related costs.
    Our
    operating results can be adversely affected by changes in the
    cost or availability of raw materials, particularly precious
    metals like gold, platinum and palladium.
   6




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##### Table of Contents



Our
    failure to generate sufficient cash to meet our liquidity needs
    may affect our ability to service our indebtedness and grow our
    business.
      An
    impairment in the carrying value of goodwill or other acquired
    intangibles could negatively affect our operating results and
    net worth.
    Compliance
    with changing regulation of corporate governance, public
    disclosure, and accounting standards may result in additional
    expenses and risks.
     7




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##### Table of Contents



Forward
    Looking Statements
     
  Item 1B.
    Unresolved
    Staff Comments   
  Item 2.
    Properties       
  Item 3.
    Legal
    Proceedings    PSN Illinois, LLC v. Ivoclar Vivadent, Inc. et al.
 8




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##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders   
  PART II
 
  Item 5.
    Market
    for Registrants Common Equity, Related Stockholder Matters
    and Issuer Purchases of Equity Securities  Trading
    Market
      PriceQuarter Ending

Low


High03/31/06

$
19.280


$
25.00006/30/06

$
21.050


$
24.49009/30/06

$
18.400


$
23.25012/31/06

$
17.150


$
23.00003/31/07

$
13.960


$
17.51006/30/07

$
13.010


$
20.95009/30/07

$
14.740


$
19.91012/31/07

$
13.600


$
18.000   Holders
    Dividends
  three-for-two
 9




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##### Table of Contents



Recent
    Sales of Unregistered Securities
    Purchases
    of Equity Securities by the Issuer and Affiliated
    Purchasers
    Issuer
    Purchases of Equity Securities
  Maximum NumberTotal Number of


of Shares thatShares Purchased


May Yet BeTotal Number


Average


as Part of Publicly


Purchased Underof Shares


Price Paid


Announced Plans


the Plans orFiscal Period

Purchased


per Share


or Programs


ProgramsJanuary 1, 2007 - December 31, 2007





$








206,700  10




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##### Table of Contents



Stock
    Performance Graph
      COMPARISON
    OF CUMULATIVE TOTAL RETURN (1) AMONG NATIONAL DENTEX
    (NADX), NASDAQ INDUSTRIAL INDEX AND PEER GROUP INDEX
    (2)
  
  12-31-02


12-31-03


12-31-04


12-31-05


12-31-06


12-31-07NADX



100.00




122.82




155.84




173.03




134.34




122.21NASDAQ



100.00




155.74




180.41




180.62




203.00




211.58Peers



100.00




106.08




139.63




118.16




128.47




155.55   (1)
    
    Assumes $100 invested on December 31, 2002 in our common stock,
    the NASDAQ Industrial Index and the Peer Group Index, including
    reinvestment of any dividends paid on the investment.(2)
    
    The Peer Group Index consists of Dentsply International, Inc.
    and Patterson Companies, Inc. We believe that these companies
    represent the other publicly traded companies within the dental
    service community. 11




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##### Table of Contents



Item 6.
    Selected
    Financial Data    2003


2004


2005


2006


2007(Dollars in thousands, except per share data)Consolidated Statements of Income:Net sales

$
99,274


$
111,753


$
135,843


$
150,107


$
170,361Cost of goods sold


59,534



66,953



78,381



88,269



97,739Gross profit


39,740



44,800



57,462



61,838



72,622Selling, general & administrative expenses


30,102



35,755



44,728



50,097



58,562Operating income


9,638



9,045



12,734



11,741



14,060Other expense


296



405



646



786



771Interest (income) expense


(21
)


42



665



1,523



2,803Income before provision for income taxes


9,363



8,598



11,423



9,432



10,486Provision for income taxes


3,606



3,439



4,334



3,669



3,860Net income

$
5,757


$
5,159


$
7,089


$
5,763


$
6,626Net income per share  basic

$
1.12


$
0.99


$
1.33


$
1.05


$
1.20Net income per share  diluted

$
1.10


$
0.94


$
1.27


$
1.01


$
1.17Weighted average shares outstanding  basic


5,131



5,187



5,334



5,485



5,540Weighted average shares outstanding  diluted


5,216



5,465



5,601



5,732



5,665Consolidated Balance Sheet Data:Working capital

$
12,252


$
13,750


$
11,126


$
6,232


$
6,000Total assets


73,989



81,831



117,119



148,490



155,639Long-term debt, including current portion










18,701



35,458



29,695Stockholders equity

$
60,140


$
66,883


$
76,074


$
82,794


$
91,192  
  Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  The
    following discussion should be read in conjunction with the
    Consolidated Financial Statements
    and the related notes that appear elsewhere in this
    document.
  Certain statements in this Annual Report, particularly
    statements contained in this Item 7,
    Managements Discussion and Analysis of Financial
    Condition and Results of Operations constitute
    forward-looking statements within the meaning of
    Section 27A of the Securities Act of 1933, as amended, and
    Section 21E of the Securities Exchange Act of 1934, as
    amended. The words anticipate, believe,
    estimate, expect, plan,
    intend and other similar expressions are intended to
    identify these forward-looking statements, but are not the
    exclusive means of identifying them. Forward-looking statements
    included in this Annual Report or hereafter included in other
    publicly available documents filed with the Securities and
    Exchange Commission (SEC), reports to our
    stockholders and other publicly available statements issued or
    released by us involve known and unknown risks, uncertainties,
    and other factors which could cause our actual results,
    performance (financial or operating) or achievements to differ
    from the future results, performance (financial or operating) or
    achievements expressed or implied by such forward-looking
    statements. Such future results are based upon our best
    estimates based upon current conditions and the most recent
    results of operations. Various risks, uncertainties and
    contingencies could cause our actual results, performance or
    achievements to differ materially from those expressed in, or
    implied by, the forward-looking statements contained in this
    Annual Report. These include,
 12




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##### Table of Contents



but are not limited to, those described above under
    Item 1A, Risk Factors. We assume no obligation
    to update these forward-looking statements contained in this
    report, whether as a result of new information, future events,
    or otherwise.
  Overview
      Restorative Products.
  Reconstructive Products.
  Cosmetic Products.
  Recent
    Trends
  Technology-based
     13




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##### Table of Contents



,
  Acquisitions
      Overview
    of Results of Operations
      Liquidity
    and Capital Resources
   14




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##### Table of Contents



December 31, 2006


December 31, 2007Total long-term debt

$
35,458,000


$
29,695,000Less: Current maturities


5,769,000



5,064,000Long-term debt, less current portion

$
29,689,000


$
24,631,000     December 31, 2007Principal DueFiscal 2008


5,064,000Fiscal 2009


5,044,000Fiscal 2010


5,004,000Fiscal 2011


14,583,000Total

$
29,695,000      15




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##### Table of Contents



Commitments
    and Contingencies
    Payments Due By PeriodLess Than








Greater ThanTotal


1 Year


1 - 3 Years


4 - 5 Years


5 YearsTerm Loan Facility

$
29,583,000


$
5,000,000


$
10,000,000


$
14,583,000



Interest Expense


5,978,000



2,118,000



3,054,000



806,000



Capital Leases


111,000



64,000



47,000







Operating Leases:Real Estate


21,190,000



3,351,000



6,177,000



5,013,000



6,649,000Vehicles


755,000



572,000



182,000



1,000



Equipment


225,000



105,000



94,000



26,000



Construction Contracts


728,000



728,000











Laboratory Purchase Obligations


1,579,000



1,279,000



300,000







Contingent Laboratory Purchase Price


300,000



300,000











TOTAL

$
60,449,000


$
13,517,000


$
19,854,000


$
20,429,000


$
6,649,000        16




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##### Table of Contents



Results
    of Operations
    Years Ended December 31,2005


2006


2007Net sales


100.0
%


100.0
%


100.0
%Cost of goods sold


57.7



58.8



57.4Gross profit


42.3



41.2



42.6Selling, general and administrative expenses


32.9



33.4



34.3Operating income


9.4



7.8



8.3Other expense


0.5



0.5



0.5Interest expense


0.5



1.0



1.6Income before provision for income taxes


8.4



6.3



6.2Provision for income taxes


3.2



2.5



2.3Net income


5.2
%


3.8
%


3.9
%   Year
    Ended December 31, 2007 Compared with Year Ended
    December 31, 2006
  Net
    Sales
    Cost of
    Goods Sold
     17




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##### Table of Contents



Selling,
    General and Administrative Expenses
      
    Additional operating costs associated with recent
    acquisitions  $7,078,000;
    Increases in salaries and benefits at the corporate level due to
    additional management staff, net of related reductions in
    consulting expense  $895,000;
    Increases in executive incentive compensation 
    $298,000;
    Increases in deferred compensation and post-retirement medical
    benefits, net of increases in related cash surrender value of
    life insurance policies  $158,000;
    Increases in delivery expenses, excluding salaries and
    benefits  $330,000;
    Increases in selling expenses, including $175,000 in increased
    compensation  $251,000; and
    Absence of gains on the sale of fixed assets in 2007, compared
    with the gain recorded in 2006 primarily resulting from the sale
    of our former laboratory facility in Houston, Texas 
    $479,000;    
    Decreases in administrative and delivery salaries and benefits
    at the laboratory level  $655,000;
    Decreases in health insurance expense  $137,000; and
    Decreases in laboratory incentive compensation 
    $209,000.  Operating
    Income
    Interest
    Expense
    Provision
    for Income Taxes
   18




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##### Table of Contents



Net
    Income
    Operating
    Segment Results
    Year Ended December 312006


2007


$ Change


% ChangeRevenue:NDX Laboratories

$
126,543,054


$
127,388,588


$
845,534



.7
%Green Dental


18,817,607



19,859,770



1,042,163



5.5
%Keller


4,863,988



23,843,093



18,979,105



Subtotal


150,224,649



171,091,451



20,866,802



13.9
%Less: Inter-segment Revenues:NDX Laboratories






370,913



370,913



Green Dental


117,242



199,525



82,283



70.2
%Keller






160,384



160,384



Net Sales

$
150,107,407


$
170,360,629


$
20,253,222



13.5
%Laboratory Operating Income:NDX Laboratories

$
16,840,606


$
17,572,491


$
731,885



4.3
%Green Dental


4,820,007



4,665,630



(154,377
)


(3.2
)%Keller


446,151



3,228,640



2,782,489



Laboratory Operating Income

$
22,106,764


$
25,466,761


$
3,359,997



15.2
%   NDX
    Laboratories
       19




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##### Table of Contents



Green
    Dental
    Keller
    Year
    Ended December 31, 2006 Compared with Year Ended
    December 31, 2005
  Net
    Sales
    Cost of
    Goods Sold
     20




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##### Table of Contents



Selling,
    General and Administrative Expenses
      
    Additional operating costs and amortization expense associated
    with recent acquisitions  $3,109,000;
    Increases in salaries and benefits at the corporate and
    laboratory level, in part due to additional finance and
    management staff and increases in health insurance 
    $737,000;
    Increases in rent expense, including additional rent related to
    facilities under construction  $227,000;
    Increases in spending on voluntary OSHA training and maintenance
    programs  $120,000;


    Increases in delivery costs  $1,900,000;


    Increases in selling expenses, including promotional materials
    and customer loyalty programs  $677,000; and
    Impairment of fixed assets in 2006  $161,000;    
    Decreases in laboratory and executive incentive compensation as
    a result of laboratory profit performance  $881,000;
    Decreases in consulting expenses and professional fees,
    including audit and compliance costs   $168,000;
    Decreases in bad debt expense due to collections results and
    current receivable profile  $154,000; and


    The gain from the sale of our former laboratory facility in
    Houston, Texas  $397,000.  Operating
    Income
    Interest
    Expense
    Provision
    for Income Taxes
   21




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##### Table of Contents



Net
    Income
    Operating
    Segment Results
    Year Ended December 312005


2006


$ Change


% ChangeRevenue:NDX Laboratories

$
121,370,004


$
126,543,054


$
5,173,050



4.3
%Green Dental


14,513,115



18,817,607



4,304,492



29.7
%Keller






4,863,988



4,863,988



Subtotal


135,883,119



150,224,649



14,341,530



10.6
%Less: Inter-segment Revenues:


40,445



117,242



76,797



Net Sales

$
135,842,674


$
150,107,407


$
14,264,733



10.5
%Laboratory Operating Income:NDX Laboratories

$
19,586,603


$
16,840,606


$
(2,745,997
)


(14.2
)%Green Dental


3,571,803



4,820,007



1,248,204



34.9
%Keller






446,151



446,151



Laboratory Operating Income

$
23,158,406


$
22,106,764


$
(1,051,642
)


(4.5
)%   NDX
    Laboratories
        Green
    Dental
   22




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##### Table of Contents



Keller
      Critical
    Accounting Policies
    Summary
    of Significant Accounting Policies
  Revenue
    Recognition
  EITF 00-10
  Goodwill
    and Other Indefinite-Lived Intangible Assets Not Subject to
    Amortization
     23




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##### Table of Contents



Intangible
    Assets Subject to Amortization
  02-17 (EITF 02-17),
  Inventories
  (first-in,
  Property,
    Plant and Equipment
    Buildings


25 yearsFurniture and fixtures


5 - 10 yearsLaboratory equipment


5 - 20 yearsComputer equipment


3 - 5 years         Impairment
    of Long-Lived Assets
    Cash
    Surrender of Life Insurance
    Income
    Taxes
   24




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##### Table of Contents



Accounting for Uncertainty in Income Taxes-an
    Interpretation of FASB Statement No. 109 
  Recent
    Accounting Pronouncements
  FAS 157-b, FAS 157-b). FAS 157-b.
     
  Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk     25




---



##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  Quarterly
    Results
    Three Months EndedMarch 31,


June 30,


Sept. 30,


Dec. 31,


March 31,


June 30,


Sept. 30,


Dec. 31,2006


2006


2006


2006


2007


2007


2007


2007(Dollars in thousands except per share data)Net sales

$
36,789


$
38,116


$
34,613


$
40,589


$
43,343


$
44,434


$
41,204


$
41,380Gross profit

$
15,928


$
16,292


$
13,468


$
16,150


$
19,060


$
19,560


$
17,491


$
16,510Gross margin


43.3
%


42.7
%


38.9
%


39.8
%


44.0
%


44.0
%


42.4
%


39.9
%Operating income

$
3,961


$
4,345


$
1,926


$
1,510


$
4,520


$
4,875


$
3,036


$
1,630Operating margin


10.8
%


11.4
%


5.6
%


3.7
%


10.4
%


11.0
%


7.4
%


3.9
%Net income

$
2,150


$
2,320


$
925


$
369


$
2,244


$
2,417


$
1,308


$
656Net income per diluted share

$
0.38


$
0.40


$
0.16


$
0.06


$
0.40


$
0.43


$
0.23


$
0.12     Location
    of Financial Statements
   
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   
  Item 9A.
    Controls
    and Procedures  Conclusion
    Regarding the Effectiveness of Disclosure Controls and
    Procedures
  Rules 13a-15(e) 15d-15(e),
 26




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##### Table of Contents



Managements
    Report on Internal Control over Financial Reporting
  Rules 13a-15(f) 15d-15(f). Internal
    Control  Integrated Framework
  Form 10-K,
  Changes
    in Internal Control over Financial Reporting
  Rules 13a-15(f) 15d-15(f)
 
  Item 9A(T).
    Controls
    and Procedures   
  Item 9B.
    Other
    Information   
  PART III
 
  Item 10.
    Directors,
    Executive Officers and Corporate Governance    www.nationaldentex.com
 
  Item 11.
    Executive
    Compensation   
  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Shareholder Matters   27




---



##### Table of Contents



Equity
    Compensation Plan Information
    Form 10-K
  Number of Shares ofNational Dentex





Number of Shares ofCorporation





National DentexCommon Stock to





CorporationBe Issued Upon


Weighted Average


Common StockExercise of


Exercise Price of


Remaining AvailableOutstanding Options


Outstanding Options


for Future Issuance1992 LTIP


243,565


$
11.79



None2001 Plan


318,000


$
14.53



392,057ESPP










150,000Total


561,565


$
13.34



542,057   
 Item 13.
    Certain
    Relationships and Related Transactions    
 Item 14.
    Principal
    Accountant Fees and Services    
 PART IV
  
 Item 15.
    Exhibits
    and Financial Statement Schedules    page F-1.
        Form 10-K
    Form 10-K
     28




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##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
  PageFinancial Statements:The consolidated financial statements of National Dentex
    Corporation included herein are as listed below:Report of Independent Registered Public Accounting Firm


F-2Consolidated Balance Sheets as of December 31, 2006 and 2007


F-3Consolidated Statements of Income for each of the three years in
    the period ended December 31, 2007


F-4Consolidated Statements of Stockholders Equity for each of
    the three years in the period ended December 31, 2007


F-5Consolidated Statements of Cash Flows for each of the three
    years in the period ended December 31, 2007


F-6Notes to Consolidated Financial Statements


F-7  F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
    Internal Control 
    Integrated Framework
        
   F-2




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##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  CONSOLIDATED
    BALANCE SHEETS
  December 31,


December 31,2006


2007ASSETSCURRENT ASSETS:Cash and cash equivalents

$
648,265


$
1,689,391Accounts receivable:Trade, less allowance of $290,000 in 2006 and $359,000 in 2007


17,022,130



16,073,716Other


915,938



2,484,821Inventories


7,212,975



7,354,062Prepaid expenses


1,905,570



4,298,891Deferred tax asset


1,347,387



964,892Property held for sale






259,000Total current assets


29,052,265



33,124,773PROPERTY, PLANT AND EQUIPMENT:Land and buildings


8,530,593



7,835,015Leasehold and building improvements


13,428,314



16,202,649Laboratory equipment


18,956,508



21,327,055Furniture and fixtures


6,943,244



7,789,75447,858,659



53,154,473Less  Accumulated depreciation and amortization


19,976,182



22,279,229Net property, plant and equipment


27,882,477



30,875,244OTHER ASSETS, net:Goodwill


68,000,747



68,987,397Trade names


9,032,102



8,998,123Customer relationships


6,298,927



5,575,194Non-competition agreements


2,225,431



1,743,867Other assets


5,998,335



6,334,545Total other assets


91,555,542



91,639,126Total assets

$
148,490,284


$
155,639,143LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Revolving line of credit

$
1,343,228


$
4,547,101Current portion of long-term debt


5,768,670



5,064,174Accounts payable


4,344,704



5,810,303Accrued liabilities:Payroll and employee benefits


6,778,395



6,545,770Current portion of deferred acquisition costs


1,517,694



1,278,861Other accrued expenses


3,067,581



3,878,207Total current liabilities


22,820,272



27,124,416LONG-TERM LIABILITIES:Long-term obligations


29,688,696



24,630,801Deferred compensation


4,863,163



5,593,067Other accrued expenses


1,581,494



961,453Deferred tax liability


6,743,027



6,137,143Total long-term liabilities


42,876,380



37,322,464COMMITMENTS AND CONTINGENCIES (Note 8)STOCKHOLDERS EQUITY:Preferred stock, $.01 par valueAuthorized  500,000 sharesNone issued and outstanding






Common stock, $.01 par valueAuthorized  8,000,000 sharesIssued and Outstanding  5,509,412 shares at
    December 31, 2006 and 5,582,119 shares at
    December 31, 2007


55,094



55,821Paid-in capital


17,296,170



18,501,175Retained earnings


65,564,279



72,189,938Other comprehensive income


(121,911
)


445,329Total stockholders equity


82,793,632



91,192,263Total liabilities and stockholders equity

$
148,490,284


$
155,639,143    F-3




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  CONSOLIDATED STATEMENTS OF INCOME
  Years EndedDecember 31,


December 31,


December 31,2005


2006


2007Net sales

$
135,842,674


$
150,107,407


$
170,360,629Cost of goods sold


78,380,380



88,269,509



97,738,785Gross profit


57,462,294



61,837,898



72,621,844Selling, general and administrative expenses


44,728,227



50,096,653



58,561,368Operating income


12,734,067



11,741,245



14,060,476Other expense


646,436



786,292



771,660Interest expense


665,108



1,522,778



2,802,944Income before provision for income taxes


11,422,523



9,432,175



10,485,872Provision for income taxes


4,333,705



3,669,116



3,860,213Net income

$
7,088,818


$
5,763,059


$
6,625,659Net income per share  basic

$
1.33


$
1.05


$
1.20Net income per share  diluted

$
1.27


$
1.01


$
1.17Weighted average shares outstanding  basic


5,333,597



5,484,741



5,540,496Weighted average shares outstanding  diluted


5,601,441



5,732,106



5,665,042   COMPREHENSIVE
    INCOME
  Years EndedDecember 31,


December 31,


December 31,2005


2006


2007Net income

$
7,088,818


$
5,763,059


$
6,625,659Foreign currency translation adjustments






(121,911
)


567,240Total comprehensive income

$
7,088,818


$
5,641,148


$
7,192,899    F-4




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
  Common Stock








CumulativeNumber of


$.01 Par


Paid-in


Retained


TranslationShares


Value


Capital


Earnings


Adjustment


TotalBALANCE, December 31, 2004


5,263,798


$
52,638


$
13,502,786


$
53,327,961






$
66,883,385Issuance of 122,341 shares of common stock under the stock
    option plans


122,341



1,223



1,508,274











1,509,497Issuance of 21,526 shares of common stock under the
    employee stock purchase program


21,526



215



332,832











333,047Tax benefit associated with exercise of stock options










187,362











187,362Net income














7,088,818







7,088,818Issuance of 3,798 shares of common stock as directors
    fees


3,798



38



71,934











71,972BALANCE, December 31, 2005


5,411,463



54,114



15,603,188



60,416,779







76,074,081Cumulative effect of SAB 108 adjustment (see Note 2)














(615,559
)






(615,559
)Issuance of 71,567 shares of common stock under the stock
    option plans


71,567



716



939,227











939,943Issuance of 25,318 shares of common stock under the
    employee stock purchase program


25,318



253



432,377











432,630Tax benefit associated with exercise of stock options










96,105











96,105Net income














5,763,059







5,763,059Issuance of 1,064 shares of common stock as directors
    fees


1,064



11



23,983











23,994Stock compensation expense










201,290











201,290Cumulative translation adjustment


















(121,911
)


(121,911
)BALANCE, December 31, 2006


5,509,412



55,094



17,296,170



65,564,279



(121,911
)


82,793,632Issuance of 42,450 shares of common stock under the stock
    option plans


42,450



425



567,407











567,832Issuance of 24,030 shares of common stock under the
    employee stock purchase program


24,030



240



295,325











295,565Tax benefit associated with exercise of stock options










15,859











15,859Net income














6,625,659







6,625,659Issuance of 6,227 shares of common stock as directors
    fees


6,227



62



165,302











165,364Stock compensation expense










161,112











161,112Cumulative translation adjustment


















567,240



567,240BALANCE, December 31, 2007


5,582,119


$
55,821


$
18,501,175


$
72,189,938


$
445,329


$
91,192,263    F-5




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
 
  CONSOLIDATED
    STATEMENTS OF CASH FLOWS
  Years EndedDecember 31,


December 31,


December 31,2005


2006


2007Cash flows from operating activities:Net income

$
7,088,818


$
5,763,059


$
6,625,659Adjustments to reconcile net income to net cash provided by
    operating activities, net of effects of acquisitions:Depreciation and amortization


3,939,664



4,814,580



5,338,432Loss (gain) on disposal of property, plant and equipment


105,398



(329,215
)


150,109Benefit for deferred income taxes


(487,414
)


(1,379,347
)


(265,149
)Impairment of long-lived assets


10,000



207,847



94,000Tax benefit associated with exercise of stock options


187,362



96,105



15,859Provision for bad debts


163,134



30,702



151,330Losses on write-down of inventories


36,399



162,711



107,791Stock-based compensation expense


71,972



225,284



326,477Other non-cash items






(117,870
)


489,375Changes in operating assets and liabilities, net of effects of
    acquisitions:Increase in accounts receivable


(462,076
)


(479,582
)


(701,142
)Increase in inventories


(146,854
)


(250,830
)


(226,117
)(Increase) decrease in prepaid expenses


(602,853
)


1,269,889



(2,363,317
)Decrease (increase) in other assets


34,596



3,660



(19,635
)Increase in accounts payable and accrued liabilities


2,819,403



1,071,767



2,828,757Net cash provided by operating activities


12,757,549



11,088,760



12,552,429Cash flows from investing activities:Payment for acquisitions, net of cash acquired


(23,456,720
)


(21,402,927
)


Payment of deferred purchase price


(1,575,780
)


(3,205,241
)


(2,158,880
)Premiums paid for life insurance policies


(504,425
)


(498,856
)


(339,921
)Additions to property, plant and equipment


(7,578,413
)


(4,899,460
)


(7,535,578
)Dispositions of property, plant, and equipment






920,333



183,373Net cash used in investing activities


(33,115,338
)


(29,086,151
)


(9,851,006
)Cash flows from financing activities:Borrowings of revolving line of credit






1,343,228



55,370,014Repayments of revolving line of credit


(2,000,000
)






(52,166,141
)Borrowings of long-term debt


19,884,346



19,625,000



Repayments of long-term debt


(1,183,592
)


(4,092,355
)


(5,775,105
)Net proceeds from issuance of common stock


1,842,544



1,372,573



863,396Net cash provided (used) by financing activities


18,543,298



18,248,446



(1,707,836
)Effect of Exchange rate changes on cash






(4,041
)


47,539Net (decrease) increase in cash and cash equivalents


(1,814,491
)


247,014



1,041,126Cash and cash equivalents at beginning of period


2,215,742



401,251



648,265Cash and cash equivalents at end of period

$
401,251


$
648,265


$
1,689,391Supplemental disclosures of cash flow information:Interest paid (net of capitalized interest of $109,000 in 2005,
    $18,000 in 2006 and $37,000 in 2007)

$
689,118


$
1,647,972


$
2,853,706Income taxes paid

$
4,289,112


$
4,468,811


$
5,792,166Supplemental schedule of non-cash investing and financing
    activities:The Company purchased the operations of certain dental
    laboratories in 2005 and 2006. In connection with these
    acquisitions, liabilities were assumed as follows:Fair value of assets acquired including acquired cash

$
32,083,000


$
28,821,000


$
Cash purchase price


(24,582,000
)


(21,725,000
)


Deferred purchase price at date of acquisition


(2,444,000
)


(967,000
)


Liabilities assumed

$
5,057,000


$
6,129,000


$
  F-6




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
 
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
    December 31, 2007
  (1)
    Organization    (2)
    Summary
    of Significant Accounting Policies  Principles
    of Consolidation
    Revenue
    Recognition
  EITF 00-10
  Staff
    Accounting Bulletin No. 108
  Considering the Effects of Prior Year Misstatements
    When Quantifying Misstatements in Current Year Financial
    Statements
   F-7




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Goodwill
    and Other Indefinite-Lived Intangible Assets Not Subject to
    Amortization
      Intangible
    Assets Subject to Amortization
  Business Combinations 02-17 Recognition of Customer Relationship Intangible Assets
    Acquired in a Business Combination
  Advertising
    and Promotional Costs
  93-7,
  Cash
    and Cash Equivalents
   F-8




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Accounts
    Receivable and Allowance for Doubtful Accounts
      2006


2007Trade

$
17,312,122


$
16,432,268Allowance for doubtful accounts


(289,992
)


(358,552
)Employee


74,822



85,850Income Taxes






1,618,647Other


841,116



780,324Total Receivables

$
17,938,068


$
18,558,537     Balance at


Charged to





Acquired in


Balance atBeginning


Costs and





Purchase Business


End ofof Period


Expenses


Write-offs


Combinations


PeriodAllowance for Doubtful Accounts:December 31, 2005

$
181,181



163,134



138,534



94,000



299,781December 31, 2006


299,781



30,702



94,224



53,733



289,992December 31, 2007


289,992



151,330



82,770







358,552   Inventories
    December 31, 2006


December 31, 2007Raw Materials

$
5,853,793


$
5,941,931Work in Process


1,112,467



1,160,686Finished Goods


246,715



251,445$
7,212,975


$
7,354,062   (first-in,
 F-9




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Property,
    Plant and Equipment
    Buildings


25 yearsFurniture and fixtures


5 - 10 yearsLaboratory equipment


5 - 20 yearsComputer equipment


3 - 5 years         Impairment
    of Long-Lived Assets
    Cash
    Surrender of Life Insurance
    Income
    Taxes
    Accounting for Uncertainty in Income
    Taxes-an
    Interpretation of FASB Statement No. 109 
 F-10




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Earnings
    per Share
    Years Ended December 31,2005


2006


2007Weighted average number of shares used in basic earnings per
    share calculation


5,333,597



5,484,741



5,540,496Incremental shares under option and employee stock purchase plans


267,844



247,365



124,546Weighed average number of shares used in diluted earnings per
    share calculation


5,601,441



5,732,106



5,665,042Shares under option plans excluded in computation of diluted
    earnings per share due to anti-dilutive effects


NONE



1,927



1,215   Use of
    Estimates
    Disclosures
    about the Fair Value of Financial Instruments
    Comprehensive
    Income
    Year Ended December 31,2005


2006


2007Net income

$
7,088,818


$
5,763,059


$
6,625,659Foreign currency translation adjustments






(121,911
)


567,240Total comprehensive income

$
7,088,818


$
5,641,148


$
7,192,899  F-11




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Disclosures
    about Segments of an Enterprise
      Recent
    Accounting Pronouncements
  FAS 157-b, FAS 157-b). FAS 157-b.
     F-12




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    (3)
    Acquisitions      Business
    Combinations
    Acquisition

Form of Acquisition

Location

Period AcquiredImpact Dental Laboratory Limited

All Outstanding Capital Stock

Ottawa, ON Canada

October, 2006Keller Group, Incorporated

All Outstanding Capital Stock

St Louis, MO

October, 2006    F-13




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended December 31, 2006Keller


Impact DentalGroup,


Laboratory


TotalIncorporated


Limited


AcquiredTotal Purchase Price

$
19,692,000


$
3,000,000


$
22,692,000Less Fair Market Values Assigned toTangible Assets and Liabilities:Cash


318,000



4,000



322,000Accounts receivable


2,008,000



418,000



2,426,000Inventories


292,000



133,000



425,000Property, plant and equipment


1,571,000



422,000



1,993,000Other assets


122,000



49,000



171,000Accounts payable


(546,000
)


(151,000
)


(697,000
)Accrued and other liabilities


(3,807,000
)


(520,000
)


(4,327,000
)Assumed debt


(1,034,000
)


(71,000
)


(1,105,000
)Less Fair Market Values Assigned toIntangible Assets:Customer relationships


1,000,000



294,000



1,294,000Trade names


3,100,000



348,000



3,448,000Non-compete agreements


500,000



50,000



550,000Goodwill

$
16,168,000


$
2,024,000


$
18,192,000       Years EndedDecember 31, 2006


December 31, 2007Net sales

$
168,019,000


$
170,361,000Net income


6,184,000



6,626,000Net income per share:Basic

$
1.13


$
1.20Diluted

$
1.08


$
1.17  F-14




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (4)
    Goodwill
    and Other Intangible Assets    Years EndedDecember 31, 2006


December 31, 2007Balance as of January 1

$
48,242,000


$
68,001,000Goodwill acquired during the year


18,192,000



Adjustments related to contingent consideration


1,644,000



667,000Adjustments related to the finalization of preliminary purchase
    estimates






(31,000
)Effects of exchange rate changes


(77,000
)


350,000Balance as of December 31

$
68,001,000


$
68,987,000       Trade
    Names
      Years EndedDecember 31, 2006


December 31, 2007Beginning of year

$
5,644,000


$
9,032,000Trade names acquired during the year


3,448,000



Effects of exchange rate changes


(13,000
)


60,000Trade Names


9,079,000



9,092,000Less: Charged to Impairment Expense


(47,000
)


(94,000
)Trade Names  End of year

$
9,032,000


$
8,998,000  F-15




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Customer
    Relationships
  EITF 02-17,
  Years EndedDecember 31, 2006


December 31, 2007Beginning of year

$
6,663,000


$
7,945,000Customer relationships acquired during the year


1,294,000



Effects of exchange rate changes


(12,000
)


48,000Customer Relationships, Gross


7,945,000



7,993,000Less: Accumulated amortization


(1,646,000
)


(2,418,000
)Customer Relationships, Net  End of year

$
6,299,000


$
5,575,000     2008

$
771,0002009


771,0002010


771,0002011


771,0002012


701,000Thereafter


1,790,000$
5,575,000   Non-competition
    Agreements
    Years EndedDecember 31,


December 31,2006


2007Beginning of year

$
9,998,000


$
10,546,000Non-competition agreements acquired during the year


550,000



Non-competition agreements, gross


10,548,000



10,546,000Less: Accumulated amortization


(8,321,000
)


(8,809,000
)Effects of exchange rate changes


(2,000
)


7,000Non-competition agreements, net

$
2,225,000


$
1,744,000  F-16




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      2008

$
296,0002009


274,0002010


266,0002011


225,0002012


170,000Thereafter


513,000$
1,744,000   (5)
    Income
    Taxes    Years EndedDecember 31,


December 31,


December 31,2005


2006


2007Federal Current

$
3,797,588


$
4,229,525


$
2,985,255Deferred


(253,942
)


(1,220,661
)


(189,842
)3,543,646



3,008,864



2,795,413State Current


838,069



818,938



860,500Deferred


(48,010
)


(158,686
)


(25,700
)790,059



660,252



834,800Foreign Current










237,848Deferred










(7,848
)







230,000$
4,333,705


$
3,669,116


$
3,860,213     2006


2007Deferred Tax Assets:Non-compete agreements

$
1,090,582


$
1,046,036Other liabilities


2,449,479



2,703,010Vacation benefits


685,282



714,177Inventory basis differences


271,667



274,563Receivables basis differences


15,442



11,873Total deferred tax assets


4,512,452



4,749,659Deferred Tax Liabilities:Depreciation differences


(2,232,646
)


(2,220,792
)Intangible amortization differences


(7,675,445
)


(7,701,118
)Total deferred tax liabilities


(9,908,092
)


(9,921,910
)Net deferred tax asset/liability

$
(5,395,640
)

$
(5,172,251
)  F-17




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        December 31,


December 31,


December 31,2005


2006


2007Statutory federal income tax rate


35.0
%


35.0
%


35.0
%State income tax, net of federal income tax benefit


4.6



4.6



4.9Other


(1.7
)


(.7
)


(3.1
)Effective income tax rate


37.9
%


38.9
%


36.8
%       Unrecognized tax benefits at January 1, 2007

$
296,000Additions based on tax positions related to the current year


1,599,000Additions for tax positions of prior years


138,000Unrecognized tax benefits at December 31, 2007

$
2,033,000     (6)
    Lines of
    Credit and Term Loan Facility   F-18




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        December 31,


December 31,2006


2007Total long-term debt

$
35,458,000


$
29,695,000Less: Current maturities


5,769,000



5,064,000Long-term debt, less current portion

$
29,689,000


$
24,631,000     Principal DueFiscal 2008


5,064,000Fiscal 2009


5,044,000Fiscal 2010


5,004,000Fiscal 2011


14,583,000Total

$
29,695,000   (7)
    Benefit
    Plans   F-19




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
          (8)
    Commitments
    and Contingencies  Operating
    Leases
    Year

Amount2008


4,029,0002009


3,473,0002010


2,981,0002011


2,669,0002012


2,370,000Thereafter


6,648,000$
22,170,000   Employment
    Contracts and
    Change-in-Control
    Arrangements
  change-in-control change-in-control
 F-20




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (9)  Stock
    Options and Employee Stock Purchase Plan
  Stock
    Option Plans
      2005


2006


2007Weighted Average





Weighted Average





Weighted AverageShares


Exercise Price


Shares


Exercise Price


Shares


Exercise PriceOutstanding at beginning of year


449,069


$
11.95



359,181


$
12.14



308,544


$
12.10Granted






















Exercised


(80,917
)


11.21



(45,592
)


12.35



(39,900
)


13.34Canceled


(8,971
)


10.97



(5,045
)


12.78



(25,079
)


13.15Outstanding at end of year


359,181


$
12.14



308,544


$
12.10



243,565


$
11.79Exercisable at end of year


359,181


$
12.14



308,544


$
12.10



243,565


$
11.79Weighted average fair value of options granted

$







$







$
   Options Outstanding


Options ExercisableNumber


Weighted Average


Weighted Average


Number


Weighted AverageOutstanding at


Remaining


Exercise Price


Exercisable


Exercise PriceExercise Price Range

12/31/07


Contractual Life


per Share


at 12/31/07


Per Share$8.17 to $10.00 per share


56,550



2.3


$
8.67



56,550


$
8.67$10.17 to $11.17 per share


50,640



1.1



10.24



50,640



10.24$13.50 to $16.59 per share


136,375



3.1



13.66



136,375



13.66243,565



2.5


$
11.79



243,565


$
11.79    F-21




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    2005


2006


2007Weighted Average





Weighted Average





Weighted AverageShares


Exercise Price


Shares


Exercise Price


Shares


Exercise PriceOutstanding at beginning of year


407,350


$
14.55



358,925


$
14.52



331,950


$
14.52Granted






















Exercised


(41,425
)


15.04



(25,975
)


14.52



(2,550
)


13.96Canceled


(7,000
)


13.56



(1,000
)


13.37



(11,400
)


14.51Outstanding at end of year


358,925


$
14.52



331,950


$
14.52



318,000


$
14.53Exercisable at end of year


328,741


$
14.62



331,950


$
14.52



318,000


$
14.53Weighted average fair value of optionsgranted

$







$







$
   Options Outstanding


Options ExercisableNumber


Weighted Average


Weighted Average


Number


Weighted AverageOutstanding at


Remaining


Exercise Price


Exercisable


Exercise PriceExercise Price Range

12/31/07


Contractual Life


Per Share


at 12/31/07


Per Share$13.37 to $13.37 per share


168,650



4.1


$
13.37



168,650


$
13.37$13.93 to $16.45 per share


149,350



3.9



15.83



149,350



15.83318,000



4.0


$
14.53



318,000


$
14.53     (10)
    Stock-Based
    Compensation  Share Based Payments
  Accounting for Stock Issued to Employees
 F-22




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    sub-limit
      LTIP Plan


2001 PlanWeighted-





Weighted-Shares


Average


Shares


AverageUnderlying


Exercise


Underlying


ExerciseOptions


Price


Options


PriceOutstanding December 31, 2005


359,181


$
12.14



358,925


$
14.52Granted














Exercised


(45,592
)


12.35



(25,975
)


14.52Forfeited


(5,045
)


12.78



(1,000
)


13.37Outstanding December 31, 2006


308,544


$
12.10



331,950


$
14.52Granted














Exercised


(39,900
)


13.34



(2,550
)


13.96Forfeited


(25,079
)


13.15



(11,400
)


14.51Outstanding December 31, 2007


243,565


$
11.79



318,000


$
14.53Exercisable at end of period:


243,565


$
11.79



318,000


$
14.53    F-23




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Restricted Stock


Restricted Stock UnitsWeighted-Average





Weighted-AverageGrant Date Fair





Grant Date FairNumber of Shares


Value


Number of Shares


ValueNonvested December 31, 2005














Granted


1,596


$
22.55



3,192


$
22.55Vested














Nonvested December 31, 2006


1,596


$
22.55



3,192


$
22.55Granted


6,001


$
17.99



6,003


$
17.99Vested


1,596


$
22.55



3,192


$
22.55Nonvested December 31, 2007


6,001


$
17.99



6,003


$
17.99       January 1-


April 1-March 31,


December 31,2007


2007Weighted-Average Grant Date Fair Value

$
6.69


$
4.18Risk-free interest rate


5.27
%


4.92
%Expected Volatility


33.19
%


30.29
%Expected Holding Period


1.0 Year



1.0 YearExpected Forfeiture Rate


5.70
%


9.67
%Expected Dividends


None



None   F-24




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  January 1-


April 1-March 31,


December 31,2006


2006Weighted-Average Grant Date Fair Value

$
4.41


$
6.69Risk-free interest rate


1.61
%


5.27
%Expected Volatility


26.77
%


33.19
%Expected Holding Period


1.0 Year



1.0 YearExpected Forfeiture Rate


5.70
%


5.70
%Expected Dividends


None



None   at-the-money 1-year at-the-money 1-year
  Accounting for Stock-Based
    Compensation  Transition and Disclosure 
    an amendment of FASB Statement No. 123. Accounting for Stock-Based Compensation
 Year EndedDecember 31, 2005Net income, as reported:

$
7,088,818Add:
    Stock-based
    employee compensation expense included in reported net incomeDeduct: Total
    stock-based
    employee compensation expense determined under
    fair value based method for all awards, net of related tax
    effects


80,149Pro forma net income


7,008,669Earnings per share: As reported, basic

$
1.33Pro forma, basic


1.31As reported, diluted


1.27Pro forma, diluted


1.25   Black-Scholes option-pricing
  January 1-December 31, 2005Weighted-Average
    Grant Date Fair Value

$
4.41Risk-free
    interest rate


1.61
%Expected Volatility


26.77
%Expected Holding Period


1.0 YearExpected Dividends


None  F-25




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  (11)
    Segment
    Information  Disclosures
    about Segments of an Enterprise and Related Information.
   F-26




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2005


2006


2007Revenue:NDX Laboratories

$
121,370,004


$
126,543,054


$
127,388,588Green Dental Laboratory


14,513,115



18,817,607



19,859,770Keller Group






4,863,988



23,843,093Subtotal


135,883,119



150,224,649



171,091,451Inter-segment Revenues:NDX Laboratories










370,913Green Dental Laboratory


40,445



117,242



199,525Keller Group










160,384Net Sales

$
135,842,674


$
150,107,407


$
170,360,629Laboratory Operating Income:NDX Laboratories

$
19,586,603


$
16,840,606


$
17,572,491Green Dental Laboratory


3,571,803



4,820,007



4,665,630Keller Group






446,151



3,228,640$
23,158,406


$
22,106,764


$
25,466,761Total Assets:NDX Laboratories

$
81,747,877


$
87,414,371


$
87,811,020Green Dental Laboratory


26,889,263



26,537,905



26,756,893Keller Group






24,848,553



25,769,930Corporate


8,481,870



9,689,455



15,301,300$
117,119,010


$
148,490,284


$
155,639,143Capital Expenditures:NDX Laboratories

$
6,533,065


$
4,670,309


$
4,604,908Green Dental Laboratory


86,529



350,299



463,763Keller Group






45,073



756,581Corporate


958,819



519,572



1,871,058$
7,578,413


$
5,585,253


$
7,696,310Depreciation & Amortization on Property,
    Plant & Equipment:NDX Laboratories

$
1,625,370


$
2,152,833


$
2,579,090Green Dental Laboratory


205,183



271,476



330,820Keller Group






98,433



452,935Corporate


541,878



611,757



691,769$
2,372,431


$
3,134,499


$
4,054,614  F-27




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Year Ended


Year Ended


Year EndedDecember 31,


December 31,


December 31,2005


2006


2007Laboratory Operating Income

$
23,158,406


$
22,106,764


$
25,466,761Less:Corporate Selling, General and Administrative Expenses


9,503,542



9,623,752



10,894,225Amortization Expense  Intangible Assets


1,567,233



1,528,059



1,283,720Add:Other Expense


646,436



786,292



771,660Consolidated Operating Income

$
12,734,067


$
11,741,245


$
14,060,476  F-28




---



##### Table of Contents



SIGNATURES
      By:
    /s/  DAVID
    L. BROWN        Signature

Title

Date/s/  DAVID
    V. HARKINSDavid
    V. Harkins

Chairman of the Board and Director

March 12, 2008/s/  JACK
    R. CROSBYJack
    R. Crosby

Director

March 12, 2008/s/  THOMAS
    E. CALLAHANThomas
    E. Callahan

Director

March 12, 2008/s/  NORMAN
    F. STRATENorman
    F. Strate

Director

March 12, 2008/s/  JAMES
    E. MULVIHILL, D.M.D.James
    E. Mulvihill, D.M.D.

Director

March 12, 2008/s/  DAVID
    L. BROWNDavid
    L. Brown

President, CEO, and Director
    (Principal Executive Officer)

March 12, 2008/s/  WAYNE
    M. COLLWayne
    M. Coll

Vice President & Chief Financial Officer (Principal
    Financial Officer)

March 12, 2008




---



##### Table of Contents



EXHIBIT INDEX
  Exhibit No.

Description of Exhibit3
.1(5)

Restated Articles of Organization of the Company, filed with the
    Massachusetts Secretary of State on October 14, 1993.3
.2(5)

Articles of Amendment, filed with the Massachusetts Secretary of
    the Commonwealth on September 26, 1995.3
.3(5)

By-Laws of the Company, as amended on December 31, 1982 and
    May 26, 1992.10
.1(3)*

Amended & Restated 2001 Stock Plan, as amended on
    May 16, 2006.10
.2(2)*

Change of Control Severance Agreement between the Company and
    David L. Brown, dated January 23, 2001.10
.3(2)*

Form of Change of Control Severance Agreements between the
    Company and each of Arthur Champagne, Richard G. Mariacher
    and Donald E. Merz dated January 23, 2001, and Lynn D. Dine
    dated May 1, 2004.10
.4(1)*

Employment Agreement between the Company and Donald E. Merz,
    dated November 1, 1983.10
.5(4)*

1992 Long-Term Incentive Plan, as amended.10
.6(4)*

Employment Agreement between the Company and Richard F. Becker,
    Jr., dated April 1, 1995.10
.7(4)*

Change of Control Severance Agreement between the Company and
    Richard F. Becker, Jr., dated April 1, 1995.10
.8(4)*

Employment Agreement between the Company and David L. Brown,
    dated April 1, 1995.10
.9(7)*

National Dentex Corporation Laboratory Incentive Compensation
    Plan, dated May 17, 2001.10
.10(7)*

National Dentex Corporation Key Employee and Corporate Support
    Group Incentive Compensation Plan.10
.11(7)*

National Dentex Corporation Employees Stock Purchase Plan,
    as amended effective April 4, 2000.10
.12(14)*

Second Amendment to National Dentex Corporation Employees
    Stock Purchase Plan.10
.13(11)

Second Amended and Restated Loan Agreement by and between Bank
    of America, N.A., National Dentex Corporation and Green Dental
    Laboratories, Inc. dated November 7, 2006.10
.14(7)*

National Dentex Supplemental Executive Retirement Plan.10
.15(7)*

National Dentex Supplemental Laboratory Executive Retirement
    Plan.10
.16(6)

Stock Purchase Agreement by and among John W. Green IV, Richard
    M. Nordskog and the Company dated as of March 1, 2005.10
.17(8)*

Form of Annual Director Fee Deferral and Restricted Stock/RSU
    Subscription Agreement.10
.18(8)*

Form of Restricted Stock Unit Agreement for Employees and
    Directors Under the Companys Amended and Restated 2001
    Stock Plan.10
.19(8)*

Form of Restricted Stock Agreement (Non-Employee Director).10
.20(9)*

Supplemental Executive Retirement Plan VI effective as of
    August 11, 2006.10
.21(10)*

Stock Purchase Agreement by and among William G. Keller, Thomas
    A. Keller and the Company dated October 5, 2006.10
.21(12)*

Amendment No. 1 to Supplemental Executive Retirement Plan
    dated as of January 17, 2006.10
.22(12)*

Amendment No. 2 to Supplemental Executive Retirement Plan
    dated as of January 17, 2006.10
.23(13)*

Written Summary of Compensation Arrangements with Richard F.
    Becker, Jr., Arthur B. Champagne, Wayne Coll and John W. Green
    effective January 24, 2007.10
.25*

Written Summary of Non-Employee Director Compensation
    Arrangements.10
.26(15)

Amendment dated October 24, 2007 to Second Amended and
    Restated Loan Agreement by and between Bank of America, N.A.,
    National Dentex Corporation, and its subsidiaries listed therein.10
.27(16)

Loan Modification Agreement dated as of March 29, 2007 by
    and between Bank of America, N.A., National Dentex Corporation,
    Green Dental Laboratories, Inc., Keller Group, Inc., Keller
    Laboratories, Incorporation  Midwest, and Keller
    Laboratories, Incorporation  Southwest.10
.28(17)*

Retirement Agreement by and among National Dentex Corporation
    and Donald Merz dated January 2, 2008.




---



##### Table of Contents



Exhibit No.

Description of Exhibit21
(18)

Subsidiaries of the Company.23


Consent of PricewaterhouseCoopers LLP.31
.1

Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act (Chief Executive Officer).31
.2

Certification pursuant to Section 302 of the Sarbanes-Oxley
    Act (Chief Financial Officer).32
.1

Certification pursuant to 18 U.S.C Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act (Chief
    Executive Officer).32
.2

Certification pursuant to 18 U.S.C Section 1350, as adopted
    pursuant to Section 906 of the Sarbanes-Oxley Act (Chief
    Financial Officer).Unless otherwise noted all exhibits are filed herewith.* These exhibits relate to a management contract or to a
    compensatory plan or arrangement.     (1)
    
    Incorporated by reference from the
    Form 10-K
    for the fiscal year ended December 31, 1999 as filed with
    the Commission on March 3, 2000.(2)
    
    Incorporated by reference from the
    Form 10-K
    for the fiscal year ended December 31, 2000 as filed with
    the Commission on March 13, 2001.(3)
    
    Incorporated by reference from the Proxy Statement filed on
    Schedule 14A with the Commission on March 29, 2006.(4)
    
    Incorporated by reference from the
    Form 10-K
    for the fiscal year ended December 31, 2003 as filed with
    the Commission on March 12, 2004.(5)
    
    Incorporated by reference from the Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2004 as filed with
    the Commission on May 24, 2005.(6)
    
    Incorporated by reference from the Current Report on
    Form 8-K/A
    as filed with the Commission on January 26, 2006.(7)
    
    Incorporated by reference from the Annual Report on
    Form 10-K
    for the fiscal year ended December 31, 2005 as filed with
    the Commission on March 16, 2006.(8)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on May 22, 2006.(9)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on August 14, 2006.(10)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on October 6, 2006.(11)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on November 8, 2006.(12)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on December 12, 2006.(13)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on January 29, 2007.(14)
    
    Incorporated by reference from the Registrants
    Registration Statement on
    Form S-8
    as filed on November 16, 2008.(15)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on October 30, 2007.(16)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on April 2, 2007.(17)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on January 1, 2008.(18)
    
    Incorporated by reference from the
    Form 10-K
    for the fiscal year ended December 31, 2006 filed with the
    Commission on March 13, 2007.