##### 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, 2006oro

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

(I.R.S. EmployerIncorporation or
    Organization)

Identification No.)526 Boston Post Road,

01778Wayland, MA

(Zip Code)(Address of Principal Executive
    Offices)   (508) 358-4422 (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
  Rule 12b-2
 o þ o
  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 9B. Other InformationEx-21 Subsidiaries of the RegistrantEx-23 Consent of PricewaterhouseCoopers LLPEx-31.1 Section 302 Certification of the Chief Executive OfficerEx-31.2 Section 302 Certification of the Chief Financial OfficerEx-32.1 Section 906 Certification of the Chief Executive OfficerEx-32.2 Section 906 Certification of the Chief Financial Officer    Table of Contents  
  PART I
 
  Item 1.
    Business  General
    (508) 358-4422. Form 10-K, Form 10-Q, Form 8-K,
  Information
    as to Industry and Operating Segments
    Description
    of Business
      Restorative Products.
  Reconstructive Products.
 1




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##### Table of Contents



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




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##### Table of Contents



tm
  Competition
        Employees
    Intellectual
    Property
   3




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##### Table of Contents



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.
    We
    face increased competitive pressures from larger competitors,
    foreign-sourced products and technology based
    solutions.
   4




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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.    If we
    fail to develop new or expand existing customer relationships,
    our ability to grow our business will be impaired.
    Our
    failure to attract and retain qualified personnel would
    adversely affect our business.
   5




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Our
    business results are adversely affected by increases in labor,
    benefits and related costs.
    If we
    cannot continue to respond to technical innovations we may not
    be able to compete effectively.
    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.
    Our
    failure to generate sufficient cash to meet our liquidity needs
    may affect our ability to service our indebtedness and grow our
    business.
     6




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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.
      Forward
    Looking Statements
   7




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Item 1B.
    Unresolved
    Staff Comments   
  Item 2.
    Properties       
  Item 3.
    Legal
    Proceedings    PSN Illinois, LLC v. Ivoclar Vivadent, Inc.
    et al.
  catch-up
 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


High03/31/05

$
18.648


$
20.66006/30/05

$
15.750


$
20.40009/30/05

$
18.142


$
20.72012/31/05

$
18.980


$
24.28403/31/06

$
19.280


$
25.00006/30/06

$
21.050


$
24.49009/30/06

$
18.400


$
23.25012/31/06

$
17.150


$
23.000   Holders
    Dividends
  three-for-two
  Recent
    Sales of Unregistered Securities
   9




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##### Table of Contents



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, 2006 -
    December 31, 2006





$








206,700   Equity
    Compensation Plan Information
    Form 10-K
  Number of Shares ofCommon Stock to





Number of Shares ofBe Issued Upon


Weighted Average


Common StockExercise of


Exercise Price of


Remaining AvailableOutstanding Options


Outstanding Options


for Future Issuance1992 LTIP


308,544


$
12.10



None2001 Plan


331,950


$
14.52



395,662ESPP










24,030Total


640,494


$
13.33



419,692  10




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Stock
    Performance Graph
    COMPARISON
    OF CUMULATIVE TOTAL RETURN(1) AMONG NATIONAL DENTEX
    (NADX),
    NASDAQ INDUSTRIAL INDEX AND PEER GROUP INDEX(2)
  
  12-31-01


12-31-02


12-31-03


12-31-04


12-31-05


12-31-06NADX



100.00




80.81




99.26




125.94




139.83




108.56NASDAQ



100.00




74.12




115.44




133.73




133.88




150.47Peers



100.00




139.95




148.47




195.42




165.36




179.80   (1)
    
    Assumes $100 invested on December 31, 2001 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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Item 6.
    Selected
    Financial Data    2002


2003


2004


2005


2006(Dollars in thousands, except per share data)Consolidated Statements of
    Income:Net sales

$
95,185


$
99,274


$
111,753


$
135,843


$
150,107Cost of goods sold


56,196



59,534



66,953



78,381



88,269Gross profit


38,989



39,740



44,800



57,462



61,838Selling, general &
    administrative expenses


29,332



30,102



35,755



44,728



50,097Operating income


9,657



9,638



9,045



12,734



11,741Other expense


211



296



405



646



786Interest (income) expense


(80
)


(21
)


42



665



1,523Income before provision for income
    taxes


9,526



9,363



8,598



11,423



9,432Provision for income taxes


3,644



3,606



3,439



4,334



3,669Net income

$
5,882


$
5,757


$
5,159


$
7,089


$
5,763Net income per share 
    basic

$
1.13


$
1.12


$
0.99


$
1.33


$
1.05Net income per share 
    diluted

$
1.10


$
1.10


$
0.94


$
1.27


$
1.01Weighted average shares
    outstanding  basic


5,187



5,131



5,187



5,334



5,485Weighted average shares
    outstanding  diluted


5,330



5,216



5,465



5,601



5,732Consolidated Balance Sheet
    Data:Working capital

$
15,499


$
12,252


$
13,750


$
11,126


$
6,232Total assets


65,817



73,989



81,831



117,119



148,490Long-term debt, including current
    portion














18,701



35,458Stockholders equity

$
53,946


$
60,140


$
66,883


$
76,074


$
82,794  
  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
 12




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##### Table of Contents



expressed in, or implied by, the forward-looking statements
    contained in this Annual Report. These include, but are not
    limited to, those described above under Item 1A, Risk
    Factors.
  Overview
      Restorative Products.
  Reconstructive Products.
  Cosmetic Products.
       13




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, ,
            Liquidity
    and Capital Resources
   14




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December 31, 2005


December 31, 2006Total long-term debt

$
18,701,000


$
35,458,000Less: Current maturities


2,841,000



5,769,000Long-term debt, less current
    portion

$
15,860,000


$
29,689,000  15




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##### Table of Contents



December 31, 2006Principal DueFiscal 2007

$
5,769,000Fiscal 2008


5,062,000Fiscal 2009


5,040,000Fiscal 2010


5,004,000Fiscal 2011


14,583,000Total

$
35,458,000     Commitments
    and Contingencies
    Payments Due By PeriodLess Than








Greater ThanTotal


1 Year


1 - 3 Years


4 - 5 Years


5 YearsTerm Loan Facility

$
35,285,000


$
5,701,000


$
15,000,000


$
14,584,000



Interest Expense


8,943,000



2,534,000



5,471,000



938,000



Capital Leases


173,000



68,000



105,000







Operating Leases:Real Estate


19,560,000



3,392,000



5,794,000



4,466,000



5,908,000Vehicles


986,000



705,000



281,000







Equipment


276,000



128,000



126,000



22,000



Laboratory Purchase Obligations


3,099,000



1,518,000



1,581,000







Contingent Laboratory Purchase
    Price


967,000



667,000



300,000







TOTAL

$
69,289,000


$
14,713,000


$
28,658,000


$
20,010,000


$
5,908,000       non-competition
 16




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##### Table of Contents



Results
    of Operations
    Years Ended December 31,2004


2005


2006Net sales


100.0
%


100.0
%


100.0
%Cost of goods sold


59.9



57.7



58.8Gross profit


40.1



42.3



41.2Selling, general and
    administrative expenses


32.0



32.9



33.4Operating income


8.1



9.4



7.8Other expense


0.4



0.5



0.5Interest expense


0.0



0.5



1.0Income before provision for income
    taxes


7.7



8.4



6.3Provision for income taxes


3.1



3.2



2.5Net income


4.6
%


5.2
%


3.8
%   Year
    Ended December 31, 2006 Compared with Year Ended
    December 31, 2005
  Net
    Sales
    Cost of
    Goods Sold
     17




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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
   18




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Provision
    for Income Taxes
    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
       19




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##### Table of Contents



Green
    Dental
    Keller
      Year
    Ended December 31, 2005 Compared with Year Ended
    December 31, 2004
  Net
    Sales
    Cost of
    Goods Sold
      Selling,
    General and Administrative Expenses
   20




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##### Table of Contents




    additional operating and amortization expense associated with
    acquisitions completed in 2005  $4,970,000;
    increases in salaries and benefits at the corporate and lab
    level, in part due to the addition of financial and management
    staff and increases in health insurance  $1,170,000;
    increases in consulting expenses and professional fees,
    including audit and compliance costs  $651,000;
    increases in laboratory incentive compensation as a result of
    improved laboratory profit performance  $542,000;
    increases in depreciation and maintenance costs related to
    computer systems and software  $232,000;
    increases in bad debt expense associated with credit risk in our
    receivables portfolio  $206,000;
    increases in training and recruiting expenses 
    $130,000; and
    increases in delivery costs, including additional salaries and
    cost increases related to higher fuel prices 
    $715,000.  Operating
    Income
    Interest
    Expense
    Provision
    for Income Taxes
    Net
    Income
    Critical
    Accounting Policies
   21




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Summary
    of Significant Accounting Policies
  Revenue
    Recognition
  00-10
  Goodwill
    and Other Indefinite-Lived Intangible Assets Not Subject to
    Amortization
      Intangible
    Assets Subject to Amortization
  02-17 02-17),
  Inventories
  (first-in,
 22




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##### Table of Contents



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
    Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes-an
    Interpretation of FASB Statement No. 109 Accounting for Income Taxes.
 23




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##### Table of Contents



Item 7A.
    Quantitative
    and Qualitative Disclosures about Market Risk       
  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. 31,2005


2005


2005


2005


2006


2006


2006


2006(Dollars in thousands except per share data)Net sales

$
31,946


$
36,214


$
33,344


$
34,339


$
36,789


$
38,116


$
34,613


$
40,589Gross profit

$
13,928


$
15,978


$
13,544


$
14,013


$
15,928


$
16,292


$
13,468


$
16,150Gross margin


43.6
%


44.1
%


40.6
%


40.8
%


43.3
%


42.7
%


38.9
%


39.8
%Operating income

$
3,164


$
4,650


$
2,506


$
2,414


$
3,961


$
4,345


$
1,926


$
1,510Operating margin


9.9
%


12.8
%


7.5
%


7.0
%


10.8
%


11.4
%


5.6
%


3.7
%Net income

$
1,779


$
2,588


$
1,378


$
1,344


$
2,150


$
2,320


$
925


$
369Net income per diluted share

$
0.32


$
0.47


$
0.25


$
0.24


$
0.38


$
0.40


$
0.16


$
0.06     Location
    of Financial Statements
   24




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##### Table of Contents



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),
  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 9B.
    Other
    Information   25




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##### Table of Contents



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    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
     26




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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, 2005 and 2006


F-4Consolidated
    Statements of Income for each of the three years in the period
    ended December 31, 2006


F-5Consolidated
    Statements of Stockholders Equity for each of the three
    years in the period ended December 31, 2006


F-6Consolidated
    Statements of Cash Flows for each of the three years in the
    period ended December 31, 2006


F-7Notes to
    Consolidated Financial Statements


F-8  F-1




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##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM      Consolidated
    financial statements
    Internal
    control over financial reporting
  Internal Control  Integrated Framework Internal Control 
    Integrated Framework
   F-2




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##### Table of Contents



F-3




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION



CONSOLIDATED
    BALANCE SHEETS  December 31,


December 31,2005


2006ASSETSCURRENT ASSETS:Cash and cash equivalents

$
401,251


$
648,265Accounts receivable:Trade, less allowance of $300,000
    in 2005 and $290,000 in 2006


14,468,140



17,022,130Other


595,481



915,938Inventories


6,700,283



7,212,975Prepaid expenses


3,127,157



1,905,570Deferred tax asset


8,646



1,347,387Property held for sale


508,596



Total current assets


25,809,554



29,052,265PROPERTY, PLANT AND EQUIPMENT:Land and buildings


8,531,337



8,530,593Leasehold and building improvements


10,433,008



13,428,314Laboratory equipment


15,331,829



18,956,508Furniture and fixtures


6,170,476



6,943,24440,466,650



47,858,659Less  Accumulated
    depreciation and amortization


16,854,004



19,976,182Net property, plant and equipment


23,612,646



27,882,477OTHER ASSETS, net:Goodwill


48,242,149



68,000,747Trade names


5,644,443



9,032,102Customer relationships


5,718,864



6,298,927Non-competition agreements


2,656,329



2,225,431Other assets


5,435,025



5,998,335Total other assets


67,696,810



91,555,542Total assets

$
117,119,010


$
148,490,284LIABILITIES AND
    STOCKHOLDERS EQUITYCURRENT LIABILITIES:Revolving line of credit

$



$
1,343,228Current portion of long-term debt


2,840,621



5,768,670Accounts payable


3,449,227



4,344,704Accrued liabilities:Payroll and employee benefits


5,505,811



6,778,395Current portion of deferred
    acquisition costs


1,338,224



1,517,694Other accrued expenses


1,549,703



3,067,581Total current liabilities


14,683,586



22,820,272LONG-TERM LIABILITIES:Long-term obligations


15,860,133



29,688,696Deferred compensation


2,956,417



4,863,163Deferred acquisition costs


2,052,630



1,581,494Deferred tax liability


5,492,163



6,743,027Total long-term liabilities


26,361,343



42,876,380COMMITMENTS 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 
    5,411,463 shares at December 31, 2005 and
    5,509,412 shares at December 31, 2006


54,114



55,094Paid-in capital


15,603,188



17,296,170Retained earnings


60,416,779



65,564,279Other comprehensive income






(121,911
)Total stockholders equity


76,074,081



82,793,632Total liabilities and
    stockholders equity

$
117,119,010


$
148,490,284    F-4




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION



CONSOLIDATED
    STATEMENTS OF INCOME  Years EndedDecember 31,


December 31,


December 31,2004


2005


2006Net sales

$
111,752,547


$
135,842,674


$
150,107,407Cost of goods sold


66,952,585



78,380,380



88,269,509Gross profit


44,799,962



57,462,294



61,837,898Selling, general and
    administrative expenses


35,755,242



44,728,227



50,096,653Operating income


9,044,720



12,734,067



11,741,245Other expense


404,343



646,436



786,292Interest expense


42,324



665,108



1,522,778Income before provision for income
    taxes


8,598,053



11,422,523



9,432,175Provision for income taxes


3,439,221



4,333,705



3,669,116Net income

$
5,158,832


$
7,088,818


$
5,763,059Net income per share 
    basic

$
0.99


$
1.33


$
1.05Net income per share 
    diluted

$
0.94


$
1.27


$
1.01Weighted average shares
    outstanding  basic


5,186,589



5,333,597



5,484,741Weighted average shares
    outstanding  diluted


5,465,106



5,601,441



5,732,106    F-5




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION



CONSOLIDATED
    STATEMENTS OF STOCKHOLDERS EQUITY  Common Stock








CumulativeNumber of


$.01 Par


Paid-in


Retained


Translation


TreasuryShares


Value


Capital


Earnings


Adjustment


Stock


TotalBALANCE, December 31, 2003


5,536,533


$
36,911


$
17,034,343


$
48,187,945






$
(5,118,938
)

$
60,140,261Issuance of 84,553 shares of
    common stock under the stock option plans


84,553



575



1,064,262















1,064,837Issuance of 27,236 shares of
    common stock under the employee stock purchase program


27,236



181



285,171















285,352Tax benefit associated with
    exercise of stock options










139,143















139,143Three-for-two
    stock split, including fractional shares paid out


(125
)


18,815







(18,816
)










(1
)Net income














5,158,832











5,158,832Issuance of 5,008 shares of
    treasury stock as directors fees










34,992











59,969



94,961Treatment of 384,399 shares of
    treasury stock as unissued shares


(384,399
)


(3,844
)


(5,055,125
)










5,058,969



BALANCE, 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
    restricted 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
)





$
82,793,632    F-6




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION



CONSOLIDATED
    STATEMENTS OF CASH FLOWS  Years EndedDecember 31,


December 31,


December 31,2004


2005


2006Cash flows from operating
    activities:Net income

$
5,158,832


$
7,088,818


$
5,763,059Adjustments to reconcile net income
    to net cash provided by operating activities, net of effects of
    acquisitions:Depreciation and amortization


3,131,697



3,939,664



4,814,580Loss (gain) on disposal of
    property, plant and equipment


14,645



105,398



(329,215
)Provision (benefit) for deferred
    income taxes


739,111



(487,414
)


(1,379,347
)Impairment of long-lived assets


140,000



10,000



207,847Tax benefit associated with
    exercise of stock options


139,143



187,362



96,105Issuance of common stock as
    directors fees


94,961



71,972



71,980(Benefit) provision for bad debts


(40,817
)


163,134



30,702Losses on write-down of inventories






36,399



162,711Stock based compensation expense










153,304Other non-cash items










(117,870
)Changes in operating assets and
    liabilities, net of effects of acquisitions:Increase in accounts receivable


(508,070
)


(462,076
)


(479,582
)Decrease (increase) in inventories


315,824



(146,854
)


(250,830
)(Increase) decrease in prepaid
    expenses


(777,307
)


(602,853
)


1,269,889(Increase) decrease in other assets


(1,214,934
)


34,596



3,660Increase in accounts payable and
    accrued liabilities


636,229



2,819,403



1,071,767Net cash provided by operating
    activities


7,829,314



12,757,549



11,088,760Cash flows from investing
    activities:Payment for acquisitions, net of
    cash acquired


(3,679,492
)


(23,456,720
)


(21,402,927
)Payment of deferred purchase price


(3,249,189
)


(1,575,780
)


(3,205,241
)Premiums paid for life insurance
    policies


(607,652
)


(504,425
)


(498,856
)Additions to property, plant and
    equipment


(3,262,898
)


(7,578,413
)


(4,899,460
)Dispositions of property, plant,
    and equipment










920,333Net cash used in investing
    activities


(10,799,231
)


(33,115,338
)


(29,086,151
)Cash flows from financing
    activities:Borrowings of revolving line of
    credit


2,000,000







1,343,228Repayments of revolving line of
    credit






(2,000,000
)


Borrowings of long-term debt






19,884,346



19,625,000Repayments of long-term debt






(1,183,592
)


(4,092,355
)Proceeds from issuance of common
    stock


1,350,188



1,842,544



1,372,573Net cash provided by financing
    activities


3,350,188



18,543,298



18,248,446Effect of Exchange rate changes on
    cash










(4,041
)Net increase ( decrease) in cash
    and cash equivalents


380,271



(1,814,491
)


247,014Cash and cash equivalents at
    beginning of period


1,835,471



2,215,742



401,251Cash and cash equivalents at end of
    period

$
2,215,742


$
401,251


$
648,265Supplemental disclosures of cash
    flow information:Interest paid (net of capitalized
    interest of $109,000 in 2005 and $18,000 in 2006)

$
51,012


$
689,118


$
1,647,972Income taxes paid

$
3,734,480


$
4,289,112


$
4,468,811Supplemental schedule of non-cash
    investing and financing activities:The Company purchased the
    operations of certain dental laboratories in 2004, 2005 and 2006.In connection with these
    acquisitions, liabilities were assumed as follows:Fair value of assets acquired
    including acquired cash

$
5,773,000


$
32,083,000


$
28,821,000Cash purchase price


(4,319,000
)


(24,582,000
)


(21,725,000
)Deferred purchase price at date of
    acquisition


(544,000
)


(2,444,000
)


(967,000
)Liabilities assumed

$
910,000


$
5,057,000


$
6,129,000    F-7




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION



NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006



(1)  Organization



National Dentex Corporation (the Company) owns and
    operates 43 full-service dental laboratories and five branch
    laboratories in 31 states throughout the United States and
    one Canadian province as of December 31, 2006. Working from
    dentists work orders, the Companys dental
    laboratories custom design and fabricate dentures, crowns and
    fixed bridges, and other dental prosthetic appliances.



(2)  Summary
    of Significant Accounting Policies



Principles
    of Consolidation



The Company follows the guidance established in FASB
    Interpretation No. 46, Consolidation of Variable
    Interest Entities, in presenting the consolidated
    financial statements. Acquisitions are reflected from the date
    acquired by the Company (see Note 3) to
    December 31, 2006. All significant inter-company balances
    and transactions have been eliminated in consolidation.



Revenue
    Recognition



Revenue is recognized upon transfer of title and risk of loss,
    generally as the dentists orders are shipped. Commencing
    in the fourth quarter of fiscal 2005, the Company has recorded
    shipping and handling fees charged to customers as revenues in
    accordance with EITF
    00-10
    Accounting for Shipping and Handling Fees and Costs.
    Prior to the fourth quarter, these fees were recorded as a
    reduction to selling, general and administrative expenses. The
    effect of recording these fees as reductions to selling general
    and administrative expenses was not material. Shipping and
    handling costs totaling approximately $9,209,000, $10,852,000
    and $13,365,000 for the years ended December 31, 2004, 2005
    and 2006, respectively, are included in selling, general and
    administrative expense.



Staff
    Accounting Bulletin No. 108



In September 2006, the SEC released SAB 108, Considering
    the Effects of Prior Year Misstatements When Quantifying
    Misstatements in Current Year Financial Statements(SAB 108). SAB 108 permits the Company
    to adjust for the cumulative effect of misstatements related to
    prior years, previously deemed to be immaterial, in the carrying
    amount of assets and liabilities as of the beginning of the
    current fiscal year, with an offsetting adjustment to the
    opening balance of retained earnings in the year of adoption.
    SAB 108 also requires the adjustment of any prior quarterly
    financial statements in future SEC filings within the fiscal
    year of adoption for the effects of such misstatements on the
    quarters when the information is next presented. This adjustment
    does not require reports previously filed with the SEC to be
    amended. In addition, registrants are permitted to utilize
    SAB 108 treatment for errors that had not been previously
    identified in prior periods.



In the fourth quarter of 2006, management identified an error in
    the accounting for the Companys Supplemental Executive
    Retirement Plans. A component of these plans is the recognition
    of compensation expense for the eventual payment to the
    recipient of the retirement benefit. Historically, the Company
    had recognized this expense over the period between the
    inception of the individual agreement to the recipients
    anticipated retirement date, and not over the vesting period,
    which vary up to a maximum of ten years. Generally Accepted
    Accounting Principles (GAAP) requires compensation
    expense for these arrangements to be recognized over the vesting
    period. The Company reviewed all agreements and recalculated the
    correct deferred compensation expense for all affected years,
    specifically 1995 through 2006, and compared the results to
    amounts historically recorded. Based upon that review, the
    Company concluded the errors to be immaterial to all previously
    issued financial statements under the rollover
    method, the method previously utilized by the Company to
    evaluate accounting errors. However, the impact of correcting
    the accumulated error to the current year financial statements
    is material. Accordingly, the Company has applied SAB 108
    and adjusted beginning retained earnings for fiscal 2006, net of
    the related tax effects, in the accompanying consolidated
    financial statements.

F-8




---



##### 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
 F-9




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Advertising
    and Promotional Costs
  93-7,
  Cash
    and Cash Equivalents
    Accounts
    Receivable and Allowance for Doubtful Accounts
      2005


2006Trade

$
14,767,921


$
17,312,122Allowance for doubtful accounts


(299,781
)


(289,992
)Employee


76,739



74,822Other


518,742



841,116Total Receivables

$
15,063,621


$
17,938,068     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, 2004

$
312,680



(40,817
)


90,682







181,181December 31, 2005


181,181



163,134



138,534



94,000



299,781December 31, 2006


299,781



30,702



94,224



53,733



289,992  F-10




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Inventories
    December 31, 2005


December 31, 2006Raw Materials

$
5,482,280


$
5,853,793Work in Process


995,111



1,112,467Finished Goods


222,892



246,715$
6,700,283


$
7,212,975   (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
     F-11




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Cash
    Surrender of Life Insurance
    Income
    Taxes
    Earnings
    Per Share
    Years Ended December 31,2004


2005


2006Weighted average number of shares
    used in basic earnings per share calculation


5,186,589



5,333,597



5,484,741Incremental shares under option
    and employee stock purchase plans


278,517



267,844



247,365Weighed average number of shares
    used in diluted earnings per share calculation


5,465,106



5,601,441



5,732,106Shares under option plans excluded
    in computation of diluted earnings per share due to
    anti-dilutive effects


NONE



NONE



1,927   Use of
    Estimates
    Disclosures
    About the Fair Value of Financial Instruments
   F-12




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Comprehensive
    Income
    Year Ended December 31,2004


2005


2006Net income

$
5,158,832


$
7,088,818


$
5,763,059Foreign currency translation
    adjustments










(121,911
)Total comprehensive income

$
5,158,832


$
7,088,818


$
5,641,148   Disclosures
    about Segments of an Enterprise
      Recent
    Accounting Pronouncements
  Accounting for Uncertainty in Income Taxes-an
    Interpretation of FASB Statement No. 109 Accounting for Income Taxes.
  (3)  Acquisitions
     F-13




---



##### Table of Contents



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

Form of Acquisition

Location

Period AcquiredWornson-Polzin Dental Laboratory

All Outstanding Capital Stock

Mankato, MN

February, 2005Green Dental Laboratories

All Outstanding Capital Stock

Heber Springs, AR

March, 2005Midtown-Brunswick Dental Laboratory

Certain Assets

Brunswick, ME

May, 2005     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-14




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year Ended December 31, 2005


Year Ended December 31, 2006Green








Keller


Impact DentalDental





Total


Group,


Laboratory


TotalLaboratories


All Other*


Acquired


Incorporated


Limited


AcquiredTotal Purchase Price

$
23,443,000


$
3,583,000


$
27,026,000


$
19,692,000


$
3,000,000


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


1,118,000



8,000



1,126,000



318,000



4,000



322,000Accounts receivable


1,418,000



606,000



2,024,000



2,008,000



418,000



2,426,000Inventories


595,000



156,000



751,000



292,000



133,000



425,000Property, plant and equipment


3,592,000



243,000



3,835,000



1,571,000



422,000



1,993,000Other assets


36,000



264,000



300,000



122,000



49,000



171,000Accounts payable


(496,000
)


(28,000
)


(524,000
)


(546,000
)


(151,000
)


(697,000
)Accrued and other liabilities


(3,850,000
)


(587,000
)


(4,437,000
)


(3,807,000
)


(520,000
)


(4,327,000
)Assumed debt


(96,000
)






(96,000
)


(1,034,000
)


(71,000
)


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


2,900,000



699,000



3,599,000



1,000,000



294,000



1,294,000Trade names


2,400,000



435,000



2,835,000



3,100,000



348,000



3,448,000Non-compete agreements


618,000



275,000



893,000



500,000



50,000



550,000Goodwill

$
15,208,000


$
1,512,000


$
16,720,000


$
16,168,000


$
2,024,000


$
18,192,000     *
    
    Certain acquisitions were individually insignificant and are
    presented in the aggregate.   F-15




---



##### Table of Contents



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


December 31,2005


2006(Unaudited)Net sales

$
163,066,000


$
168,019,000Net income


8,153,000



6,184,000Net income per share:Basic

$
1.53


$
1.13Diluted

$
1.46


$
1.08   (4)  Goodwill
    and Other Intangible Assets
  pooling-of-interest
    Years EndedDecember 31,


December 31,2005


2006Balance as of January 1

$
30,385,000


$
48,242,000Goodwill acquired during the year


16,720,000



18,192,000Adjustments related to contingent
    consideration


1,132,000



1,644,000Adjustments related to the
    finalization of preliminary purchase estimates


5,000



Effects of exchange rate changes






(77,000
)Balance as of December 31

$
48,242,000


$
68,001,000      F-16




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   No. 02-17 02-17)
  Trade
    Names
      Years EndedDecember 31, 2005


December 31, 2006Beginning of year

$
2,940,000


$
5,644,000Trade names acquired during the
    year


2,835,000



3,448,000Adjustments related to the
    finalization of preliminary purchase estimates


(121,000
)


Effects of exchange rate changes






(13,000
)Trade Names


5,654,000



9,079,000Less: Charged to Impairment Expense


(10,000
)


(47,000
)Trade Names  End of year

$
5,644,000


$
9,032,000   Customer
    Relationships
  02-17,
  F-17




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  Years EndedDecember 31, 2005


December 31, 2006Beginning of year

$
2,943,000


$
6,663,000Customer relationships acquired
    during the year


3,599,000



1,294,000Adjustments related to the
    finalization of preliminary purchase estimates


121,000



Effects of exchange rate changes






(12,000
)Customer Relationships, Gross


6,663,000



7,945,000Less: Accumulated amortization


(944,000
)


(1,646,000
)Customer Relationships,
    Net  End of year

$
5,719,000


$
6,299,000     2007

$
771,0002008


768,0002009


768,0002010


768,0002011


768,000Thereafter


2,456,000$
6,299,000   Non-competition
    Agreements
    Years EndedDecember 31,


December 31,2005


2006Beginning of year

$
9,121,000


$
9,998,000Non-competition agreements
    acquired during the year


893,000



550,000Non-competition agreements, gross


10,014,000



10,548,000Less: Accumulated amortization


(7,342,000
)


(8,321,000
)Less: Adjustments related to the
    finalization of preliminary purchase estimates


(16,000
)


Effects of exchange rate changes






(2,000
)Non-competition agreements, net

$
2,656,000


$
2,225,000    F-18




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2007

$
433,0002008


305,0002009


283,0002010


274,0002011


234,000Thereafter


696,000$
2,225,000   (5)  Income
    Taxes
    Years EndedDecember 31,


December 31,


December 31,2004


2005


2006Federal Current

$
2,204,266


$
3,797,588


$
4,229,525Deferred


633,091



(253,942
)


(1,220,661
)2,837,357



3,543,646



3,008,864State Current


495,844



838,069



818,938Deferred


106,020



(48,010
)


(158,686
)601,864



790,059



660,252$
3,439,221


$
4,333,705


$
3,669,116     2005


2006Deferred Tax Assets:Non-compete agreements

$
1,025,603


$
1,090,582Other liabilities


1,159,763



2,449,479Vacation benefits


461,628



685,282Inventory basis differences


182,118



271,667Receivables basis differences


16,216



15,442Total deferred tax assets


2,845,328



4,512,452Deferred Tax
    Liabilities:Depreciation differences


(1,923,275
)


(2,232,646
)Intangible amortization differences


(5,754,253
)


(7,675,446
)Other


(651,317
)


Total deferred tax liabilities


(8,328,845
)


(9,908,092
)Net deferred tax asset/liability

$
(5,483,517
)

$
(5,395,640
)  F-19




---



##### Table of Contents



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


December 31,


December 31,2004


2005


2006Statutory federal income tax rate


34.0
%


35.0
%


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


4.6



4.6



4.6Other


1.4



(1.7
)


(.7
)Effective income tax rate


40.0
%


37.9
%


38.9
%   (6)  Lines
    of Credit and Term Loan Facility
       F-20




---



##### Table of Contents



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


December 31,2005


2006Total long-term debt

$
18,701,000


$
35,458,000Less: Current maturities


2,841,000



5,769,000Long-term debt, less current
    portion

$
15,860,000


$
29,689,000     Principal DueFiscal 2007


5,769,000Fiscal 2008


5,062,000Fiscal 2009


5,040,000Fiscal 2010


5,004,000Fiscal 2011


14,583,000Total

$
35,458,000   (7)  Benefit
    Plans
       F-21




---



##### Table of Contents



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

Amount2007

$
4,225,0002008


3,429,0002009


2,773,0002010


2,422,0002011


2,066,000Thereafter


5,908,000$
20,823,000   Legal
    Proceedings
    PSN Illinois, LLC v. Ivoclar
    Vivadent, Inc. et al.
   F-22




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  catch-up
  Employment
    Contracts and
    Change-in-Control
    Arrangements
  change-in-control change-in-control
  (9)  Stock
    Options, Warrants and Employee Stock Purchase Plan
  Stock
    Option Plans
      2004


2005


2006Weighted Average





Weighted Average





Weighted AverageShares


Exercise Price


Shares


Exercise Price


Shares


Exercise PriceOutstanding at beginning of year


511,953


$
11.87



449,069


$
11.95



359,181


$
12.14Granted






















Exercised


(59,353
)


11.27



(80,917
)


11.21



(45,592
)


12.35Canceled


(3,531
)


11.44



(8,971
)


10.97



(5,045
)


12.78Outstanding at end of year


449,069


$
11.95



359,181


$
12.14



308,544


$
12.10Exercisable at end of year


445,020


$
11.91



359,181


$
12.14



308,544


$
12.10Weighted average fair value of
    options granted

$
















   F-23




---



##### Table of Contents



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


Options ExercisableNumber


Weighted Average


Weighted Average


Number


Weighted AverageOutstanding at


Remaining


Exercise Price


Exercisable


Exercise PriceExercise Price Range

12/31/06


Contractual Life


per Share


at
    12/31/06


Per Share$8.17 to $10.00 per share


59,550



3.3


$
8.67



59,550


$
8.67$10.17 to $13.42 per share


55,050



2.0



10.27



55,050



10.27$13.50 to $16.59 per share


193,944



3.1



13.67



193,944



13.67308,544



3.0


$
12.10



308,544


$
12.10       2004


2005


2006Weighted Average





Weighted Average





Weighted AverageShares


Exercise Price


Shares


Exercise Price


Shares


Exercise PriceOutstanding at beginning of year


447,450


$
14.59



407,350


$
14.55



358,925


$
14.52Granted






















Exercised


(25,200
)


15.02



(41,425
)


15.04



(25,975
)


14.52Canceled


(14,900
)


14.64



(7,000
)


13.56



(1,000
)


13.37Outstanding at end of year


407,350


$
14.55



358,925


$
14.52



331,950


$
14.52Exercisable at end of year


289,233


$
14.53



328,741


$
14.62



331,950


$
14.52Weighted 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

12/31/06


Contractual Life


Per Share


at
    12/31/06


Per Share$13.01 to $13.37 per share


172,550



5.1


$
13.37



172,550


$
13.37$13.93 to $16.45 per share


159,400



4.9



15.77



159,400



15.77331,950



5.0


$
14.52



331,950


$
14.52    F-24




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   (10)  Stock-Based
    Compensation
  Share Based Payments
  Accounting for Stock Issued to Employees
    sub-limit
   F-25




---



##### Table of Contents



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


2001 PlanWeighted-





Weighted-Shares


Average


Shares


AverageUnderlying


Exercise


Underlying


ExerciseOptions


Price


Options


PriceOutstanding December 31, 2004


449,069


$
11.95



407,350


$
14.55Granted














Exercised


(80,917
)


11.21



(41,425
)


15.04Forfeited


(8,971
)


10.97



(7,000
)


13.56Outstanding 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


$
14.52Exercisable at end of period:


308,544


$
12.10



331,950


$
14.52       Restricted Stock


Restricted Stock UnitsWeighted-Average





Weighted-AverageGrant Date Fair





Grant Date FairNumber of Shares


Value


Number of Shares


ValueOutstanding December 31, 2005














Granted


1,596


$
22.55



3,192


$
22.55Vested














Outstanding December 31, 2006


1,596


$
22.55



3,192


$
22.55    F-26




---



##### 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  F-27




---



##### Table of Contents



NATIONAL
    DENTEX CORPORATION
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    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   (11)  Segment
    Information
  Disclosures
    about Segments of an Enterprise and Related
    Information.
   F-28




---



##### Table of Contents



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


Year EndedDecember 31,


December 31,2005


2006Revenue:NDX Laboratories

$
121,370,004


$
126,543,054Green Dental Laboratory


14,513,115



18,817,607Keller Group






4,863,988Subtotal


135,883,119



150,224,649Inter-segment
    Revenues:Green Dental Laboratory


40,445



117,242Net Sales

$
135,842,674


$
150,107,407Laboratory Operating
    Income:NDX Laboratories

$
19,586,603


$
16,840,606Green Dental Laboratory


3,571,803



4,820,007Keller Group






446,151$
23,158,406


$
22,106,764Total Assets:NDX Laboratories

$
81,747,877


$
87,414,371Green Dental Laboratory


26,889,263



26,537,905Keller Group






24,848,553Corporate


8,481,870



9,689,455$
117,119,010


$
148,490,284Capital Expenditures:NDX Laboratories

$
6,533,065


$
4,670,309Green Dental Laboratory


86,529



350,299Keller Group






45,073Corporate


958,819



519,572$
7,578,413


$
5,585,253Depreciation &
    Amortization on Property, Plant & Equipment:NDX Laboratories

$
1,625,370


$
2,152,833Green Dental Laboratory


205,183



271,476Keller Group






98,433Corporate


541,878



611,757$
2,372,431


$
3,134,499  F-29




---



##### Table of Contents



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


Year EndedDecember 31,


December 31,2005


2006Laboratory Operating Income

$
23,158,406


$
22,106,764Less:Corporate Selling, General and
    Administrative Expenses


9,503,542



9,623,752Amortization Expense 
    Intangible Assets


1,567,233



1,528,059Add:Other Expense


646,436



786,292Consolidated Operating Income

$
12,734,067


$
11,741,245  F-30




---



##### Table of Contents



SIGNATURES
      By:
    /s/  DAVID
    L. BROWN  David L. Brown, President & CEO
      Signature

Title

Date/s/  DAVID
    V. HARKINSDavid
    V. Harkins

Chairman of the Board and Director

March 16, 2007/s/  JACK
    R. CROSBYJack
    R. Crosby

Director

March 16, 2007/s/  THOMAS
    E. CALLAHANThomas
    E. Callahan

Director

March 16, 2007/s/  NORMAN
    F. STRATENorman
    F. Strate

Director

March 16, 2007/s/  DAVID
    L. BROWNDavid
    L. Brown

President, CEO, and Director 
    (Principal Executive Officer)

March 16, 2007/s/  WAYNE
    M. COLLWayne
    M. Coll

Vice President & Chief
    Financial Officer (Principal Financial Officer)

March 16, 2007




---



##### Table of Contents



EXHIBIT INDEX
  Exhibit No.

Description of Exhibit3
.1(4)

Restated Articles of Organization
    of the Company, filed with the Massachusetts Secretary of State
    on October 14, 1993.3
.2(4)

Articles of Amendment, filed with
    the Massachusetts Secretary of the Commonwealth on
    September 26, 1995.3
.3(4)

By-Laws of the Company, as amended
    on December 31, 1982 and May 26, 1992.10
.1(8)*

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(3)*

1992 Long-Term Incentive Plan, as
    amended.10
.6(3)*

Employment Agreement between the
    Company and Richard F. Becker, Jr., dated April 1,
    1995.10
.7(3)*

Change of Control Severance
    Agreement between the Company and Richard F. Becker, Jr.,
    dated April 1, 1995.10
.8(3)*

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 2006
    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(5)

Amended and Restated Loan
    Agreement by and between Bank of America, N.A., and National
    Dentex Corporation and Green Dental Laboratories, Inc. dated
    August 9, 2005.10
.13(12)

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(9)*

Form of Annual Director Fee
    Deferral and Restricted Stock/RSU Subscription Agreement.10
.18(9)*

Form of Restricted Stock Unit
    Agreement for Employees and Directors Under the Companys
    Amended and Restated 2001 Stock Plan.10
.19(9)*

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

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

Stock Purchase Agreement by and
    among William G. Keller, Thomas A. Keller and the Company dated
    October 5, 2006.10
.21(13)*

Amendment No. 1 to
    Supplemental Executive Retirement Plan dated as of
    January 17, 2006.10
.22(13)*

Amendment No. 2 to
    Supplemental Executive Retirement Plan dated as of
    January 17, 2006.10
.23(14)*

Written Summary of Compensation
    Arrangements with Richard F. Becker, Jr., Arthur B.
    Champagne, Wayne M. Coll and John W. Green effective
    January 24, 2007.21


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).




---



##### Table of Contents



Exhibit No.

Description of Exhibit32
.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
    Form 10-K
    for the fiscal year ended December 31, 2003 as filed with
    the Commission on March 12, 2004.(4)
    
    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.(5)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on August 15, 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 Proxy Statement filed on
    Schedule 14A with the Commission on March 29, 2006.(9)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on May 22, 2006.(10)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on August 14, 2006.(11)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on October 6, 2006.(12)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on November 8, 2006.(13)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on December 12, 2006.(14)
    
    Incorporated by reference from the Current Report on
    Form 8-K
    as filed with the Commission on January 29, 2007.