22

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

                                    FORM 10-Q
(Mark One)

[X]     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

                  For the quarterly period ended     March 31, 2006
                                                     --------------

                                       OR
[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

     For the transition period from                          to

                         Commission file number 0-23367
                                                -------

                     BIRNER DENTAL MANAGEMENT SERVICES, INC.
             (Exact name of registrant as specified in its charter)
             ------------------------------------------------------


                          COLORADO          84-1307044
                                       (IRS Employer
          (State or other jurisdiction of incorporation or organization)
          --------------------------------------------------------------
                               Identification No.)
                               -------------------


                       3801 EAST FLORIDA AVENUE, SUITE 508
                           DENVER, COLORADO     80210
             (Address of principal executive offices)     (Zip Code)
             ----------------------------------------     ----------

                                 (303) 691-0680
              (Registrant's telephone number, including area code)
              ----------------------------------------------------

                                       N/A
    (Former name, former address and former fiscal year, if changed since last
    --------------------------------------------------------------------------
                                     report)
                                     -------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the Registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.
Yes      X  No
     -----

Indicate  by  check mark whether the Registrant is a large accelerated filer, an
accelerated  filer,  or a non-accelerated filer (as defined in Rule 12b-2 of the
Exchange  Act).

Large  accelerated  filer     Accelerated filer      Non-accelerated filer     X
                                                                               -

Indicate  by check mark whether the Registrant is a shell company (as defined in
Rule  12b-2  of  the  Exchange  Act).
Yes  No     X
            -

Indicate  the  number  of  shares outstanding of each of the issuer's classes of
common  stock,  as  of  the  latest  practicable  date.

              Class          Shares Outstanding as of May 10, 2006
               Common Stock, without par value          2,328,681*
               -------------------------------          ----------

*  On  July  13,  2005,  the  Company  announced that its Board of Directors had
declared  a  2-for-1  stock split of its Common Stock.  The 2-for-1 stock split,
which  was  effected  as  a stock dividend, was distributed on August 8, 2005 to
shareholders  of  record  at the close of business on August 1, 2005.  The stock
split  increased  the  number  of  shares  outstanding  on  August  8, 2005 from
1,210,295  to  2,420,590.  All share and earnings per share calculations for all
periods  in  this document have been restated to reflect the effect of the stock
split.

                                       1
<PAGE>


            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
                               INDEX TO FORM 10-Q


PART  I  -  FINANCIAL  INFORMATION
----------------------------------
<TABLE>
<CAPTION>


<S>                                                                               <C>
Item 1.   Financial Statements                                                    Page
                                                                                  ----

     Unaudited Condensed Consolidated Balance Sheets as of December 31, 2005
     and March 31, 2006                                                             3

     Unaudited Condensed Consolidated Statements of Income for the Three
     Months Ended March 31, 2005 and 2006                                           4

     Unaudited Condensed Consolidated Statements of Shareholders' Equity as of
     March 31, 2006                                                                 5

     Unaudited Condensed Consolidated Statements of Cash Flows for the
     Three Months Ended March 31, 2005 and 2006                                     6

     Unaudited Notes to Condensed Consolidated Financial Statements                 8

Item 2.     Management's Discussion and Analysis of Financial Condition
            And Results of Operations                                              13

Item 3.     Quantitative and Qualitative Disclosures About Market Risk             20

Item 4.     Controls and Procedures                                                20


PART  II  -  OTHER  INFORMATION
-------------------------------


Item 1.     Legal Proceedings                                                      21

Item 1A.     Risk Factors                                                          21

Item 2.     Changes in Securities and Use of Proceeds                              21

Item 5.     Other Information                                                      21

Item 6.     Exhibits                                                               22

Signatures                                                                         23
</TABLE>

                                       2
<PAGE>
                                     ------
                         PART I - FINANCIAL INFORMATION
                         ------------------------------
ITEM 1.  FINANCIAL STATEMENTS
-----------------------------

<TABLE>
<CAPTION>

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

                                                                                               December 31,   March 31,
                     ASSETS                                                                       2005          2006
                                                                                              ------------- ------------
                                                                                                   **        (Unaudited)



<S>                                                                                           <C>           <C>
CURRENT ASSETS:
 Cash and cash equivalents                                                                    $   921,742   $   820,311
 Accounts receivable, net of allowance for doubtful
   accounts of $261,031 and $251,423, respectively                                              3,215,369     3,685,600
 Deferred tax asset                                                                               160,411       189,413
 Prepaid expenses and other assets                                                                605,599       701,926
                                                                                              -----------   -----------
   Total current assets                                                                         4,903,121     5,397,250

PROPERTY AND EQUIPMENT, net                                                                     3,939,452     4,802,901

OTHER NONCURRENT ASSETS:
 Intangible assets, net                                                                        13,036,652    12,856,904
 Deferred charges and other assets                                                                154,245       181,810
                                                                                              -----------   -----------
 Total assets                                                                                 $22,033,470   $23,238,865
                                                                                              ===========   ===========
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
 Accounts payable                                                                             $ 2,065,076   $ 1,886,552
 Accrued expenses                                                                             $ 1,110,526   $ 1,299,938
 Accrued payroll and related expenses                                                         $ 1,502,877   $ 2,447,105
 Income taxes payable                                                                             175,259       448,056
 Current maturities of long-term debt                                                             145,150       134,745
                                                                                              -----------   -----------
   Total current liabilities                                                                    4,998,888     6,216,396

LONG-TERM LIABILITIES:
 Deferred tax liability, net                                                                      750,346       779,445
 Long-term debt, net of current maturities                                                      2,887,166     2,200,000
 Other long-term obligations                                                                      195,723       195,527
                                                                                              -----------   -----------
   Total liabilities                                                                            8,832,123     9,391,368

COMMITMENTS AND CONTINGENCIES (Note 10)

SHAREHOLDERS' EQUITY:
 Preferred Stock, no par value, 10,000,000 shares
   authorized; none outstanding                                                                         -             -
 Common Stock, no par value, 20,000,000 shares
   authorized; 2,343,675 and  2,380,261 shares issued and
   outstanding, respectively                                                                    9,628,457     9,800,416
 Deferred equity compensation                                                                    (648,240)     (567,210)
 Retained earnings                                                                              4,221,130     4,614,291
                                                                                              -----------   -----------
   Total shareholders' equity                                                                  13,201,347    13,847,497
                                                                                              -----------   -----------
   Total liabilities and shareholders' equity                                                 $22,033,470   $23,238,865
                                                                                              ===========   ===========
**  Derived from the Company's audited consolidated balance sheet at December 31, 2005.
The accompanying notes are an integral part of these condensed consolidated balance sheets.
</TABLE>


                                       3
<PAGE>
<TABLE>
<CAPTION>

            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)
                                                         Three Months Ended
                                                              March 31,
                                                       ------------------------
                                                          2005          2006
                                                          ----          ----



<S>                                                    <C>          <C>
NET REVENUE:                                           $9,367,731   $10,140,029

DIRECT EXPENSES:
 Clinical salaries and benefits                         3,486,150     3,688,987
 Dental supplies                                          533,338       575,637
 Laboratory fees                                          628,496       641,896
 Occupancy                                                960,216     1,056,733
 Advertising and marketing                                259,442       208,954
 Depreciation and amortization                            424,372       479,775
 General and administrative                               980,113     1,190,869
                                                        7,272,127     7,842,851
                                                       ----------   -----------

 Contribution from dental offices                       2,095,604     2,297,178
                                                       ----------   -----------

CORPORATE EXPENSES:
 General and administrative
   (includes $81,030 of deferred equity
   compensation expense and $87,745
   related to stock-based
   compensation expense in the three
   months ended March 31, 2006)                           900,488     1,081,063
 Depreciation and amortization                             36,674        34,196
                                                       ----------   -----------
 Operating income                                       1,158,442     1,181,919

 Interest expense (income), net                            (7,632)       39,620
                                                       ----------   -----------
 Income before income taxes                             1,166,074     1,142,299
 Income tax expense                                       466,431       439,974
                                                       ----------   -----------
   Net income                                          $  699,643   $   702,325
                                                       ==========   ===========
 Net income per share of Common Stock - Basic          $     0.29   $      0.30
                                                       ==========   ===========
 Net income per share of Common Stock - Diluted        $     0.26   $      0.27
                                                       ==========   ===========
 Cash dividends per share of Common Stock              $     0.10   $      0.13
                                                       ==========   ===========
 Weighted average number of shares of
 Common Stock and dilutive securities:
 Basic                                                  2,380,196     2,372,506
                                                       ==========   ===========
 Diluted                                                2,621,046     2,584,713
                                                       ==========   ===========
The accompanying notes are an integral part of these
condensed consolidated financial statements.
</TABLE>

                                       4
<PAGE>
<TABLE>
<CAPTION>


                  BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
                            CONDENSED CONSOLIDATED STATEMENTS OF
                                    SHAREHOLDERS' EQUITY
                                        (UNAUDITED)

                                  Common Stock        Deferred
                             ----------------------    Equity      Retained   Shareholders'
                               Shares       Amount  Compensation   Earnings       Equity
                             ---------   ---------- ------------  ----------   -----------
<S>                          <C>         <C>          <C>         <C>          <C>
BALANCES, December 31, 2005  2,343,675   $9,628,457   ($648,240)  $4,221,130   $13,201,347
Common Stock options
 exercised                      37,733       87,411           -            -        87,411

Purchase and retirement
 of Common Stock                (1,147)     (20,278)          -            -       (20,278)

Tax benefit of Common Stock
 options exercised                   -       17,081           -            -        17,081

Dividends declared on
 Common Stock                        -            -           -     (309,164)     (309,164)

Stock-based compensation
 expense                             -       87,745           -            -        87,745

Amortization of deferred
  equity compensation                -            -      81,030            -        81,030

Net income                          -            -           -       702,325       702,325
                             ---------   ----------   ----------  ----------   -----------
BALANCES, March 31, 2006     2,380,261   $9,800,416   ($567,210)  $4,614,291   $13,847,497
                             =========   ==========   ==========  ==========   ===========
</TABLE>















The accompanying notes are an integral part of these condensed consolidated
financial statements.


                                       5
<PAGE>



<TABLE>
<CAPTION>

                                                                     Page 1 of 2
                                                                     ===========
            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                       Three Months Ended
                                                            March 31,
                                                     -------------------------
                                                         2005          2006
                                                         ----          ----
<S>                                                  <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income                                          $   699,643   $   702,325
 Adjustments to reconcile net income to net
   cash provided by operating activities:
   Depreciation and amortization                         461,046       513,971
   Stock compensation expense                                  -        87,745
   Loss on disposition of property                           424             -

   Provision for doubtful accounts                        96,791       224,667
   Provision for deferred income taxes                         -            97
   Amortization of debt issuance costs                       882             -
   Amortization of deferred equity compensation                -        81,030
 Changes in assets and liabilities net of effects
 from acquisitions:
   Accounts receivable                                  (819,624)     (694,898)
   Prepaid expenses and other assets                      92,574       (96,327)
   Deferred charges and other assets                           -       (27,565)
   Accounts payable                                      321,105      (178,524)
   Accrued expenses                                     (381,926)      115,372
   Accrued payroll and related expenses                  611,878       944,228
   Income taxes payable                                  466,431       272,797
   Other long-term obligations                              (640)         (196)
                                                     ------------  ------------
   Net cash provided by operating activities           1,548,584     1,944,722
                                                     ------------  ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
 Capital expenditures                                   (158,748)     (682,917)
 Development of new dental centers                       (60,060)     (514,755)
                                                     ------------  ------------
   Net cash used in investing activities                (218,808)   (1,197,672)
                                                     ------------  ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Advances - line of credit                             4,350,000     4,023,409
 Repayments - line of credit                          (4,675,000)   (4,677,014)
 Repayment of long-term debt                             (40,646)      (43,966)
 Proceeds from exercise of Common Stock options          100,271        87,411
 Purchase and retirement of Common Stock                (669,010)      (20,278)
 Tax benefit of Common Stock options exercised                 -        17,081
 Common Stock cash dividends                             (90,638)     (235,124)
                                                     ------------  ------------
   Net cash used in financing activities              (1,025,023)     (848,481)
                                                     ------------  ------------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS                                         304,753      (101,431)
CASH AND CASH EQUIVALENTS, beginning of period           756,181       921,742
                                                     ------------  ------------
CASH AND CASH EQUIVALENTS, end of period             $ 1,060,934   $   820,311
                                                     ===========   ============


The accompanying notes are an integral part of
 these condensed consolidated financial statements.
</TABLE>


                                       6
<PAGE>

<TABLE>
<CAPTION>

                                                                     Page 2 of 2
            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                       Three Months Ended
                                                            March 31,
                                                     -------------------------
                                                         2005          2006
                                                         ----          ----
<S>                                                     <C>           <C>
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:

 Cash paid during the year for interest                 $25,677      $77,139
 Cash paid during the year for income taxes             $     -      $     -
                                                        =======      =======
</TABLE>

















    The accompanying notes are an integral part of these condensed consolidated
                              financial statements.

                                       7
<PAGE>
      BIRNER  DENTAL  MANAGEMENT  SERVICES,  INC.  AND  SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                                 MARCH 31, 2006

(1)     UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

The  financial  statements  included  herein have been prepared by Birner Dental
Management  Services, Inc. (the "Company") pursuant to the rules and regulations
of  the  Securities  and  Exchange Commission.  Certain information and footnote
disclosures  normally  included  in  financial statements prepared in accordance
with  accounting  principles  generally  accepted in the United States have been
condensed  or  omitted  pursuant  to  such  rules  and regulations, although the
Company  believes  that the disclosures included herein are adequate to make the
information  presented not misleading. A description of the Company's accounting
policies and other financial information is included in the audited consolidated
financial statements as filed with the Securities and Exchange Commission in the
Company's  Annual  Report  on  Form  10-K  for the year ended December 31, 2005.

In  the opinion of management, the accompanying unaudited condensed consolidated
financial  statements  contain  all  adjustments necessary to present fairly the
financial  position  of  the  Company  as  of  March 31, 2006 and the results of
operations  and  cash flows for the periods presented.  All such adjustments are
of  a normal recurring nature.  The results of operations for three months ended
March  31,  2006  are  not  necessarily  indicative  of  the results that may be
achieved  for  a  full  fiscal  year  and  cannot  be used to indicate financial
performance  for  the  entire  year.

On July 13, 2005, the Company announced that its Board of Directors had declared
a  2-for-1  stock split of its common stock.  The 2-for-1 stock split, which was
effected  as  a  dividend,  was distributed on August 8, 2005 to shareholders of
record  at  the  close of business on August 1, 2005.  The stock split increased
the  number of shares outstanding on August 8, 2005 from 1,210,295 to 2,420,590.
All  shares and earnings per share calculations for all periods in this document
have  been  restated  to  reflect  the  effect  of  the  stock  split.

(2)          SIGNIFICANT ACCOUNTING POLICIES
             -------------------------------

Intangible Assets

The  Company's dental practice acquisitions involve the purchase of tangible and
intangible  assets  and  the  assumption  of certain liabilities of the acquired
Offices.  As  part  of  the purchase price allocation, the Company allocates the
purchase  price  to the tangible and identifiable intangible assets acquired and
liabilities assumed, based on estimated fair market values. Costs of acquisition
in  excess  of  the  net  estimated  fair  value of tangible assets acquired and
liabilities  assumed  are  allocated to the Management Agreement. The Management
Agreement  represents  the  Company's  right  to  manage  the Offices during the
40-year term of the agreement. The assigned value of the Management Agreement is
amortized  using  the  straight-line  method  over  a  period  of  25  years.
Amortization was $194,749 and $187,610 for the three months ended March 31, 2006
and  2005,  respectively.

The  Management  Agreements  cannot  be  terminated  by the related professional
corporation  without  cause,  consisting  primarily  of  bankruptcy  or material
default  by  the  Company.

In  the  event  that facts and circumstances indicate that the carrying value of
long-lived  and  intangible  assets  may  be  impaired,  an  evaluation  of
recoverability  would  be  performed.  If  an  evaluation  were  required,  the
estimated  future  undiscounted  cash  flows  associated with the asset would be
compared  to  the asset's carrying amount to determine if a write-down to market
value  or  undiscounted  cash  flow  value  would  be  required.

Stock Options

On  January  1,  2006,  the  Company  adopted  Statement of Financial Accounting
Standards  ("SFAS")  No.  123(R), "Share-Based Payments."  This standard revises
SFAS  123,  "Accounting  for Stock-Based Compensation" and supersedes Accounting
Principles Board ("APB") Opinion 25, "Accounting for Stock Issued to Employees."
Under  SFAS  123(R),  the  Company  is  required to measure the cost of employee
services received in exchange for stock options and similar  awards based on the
grant  date  fair  value  of  the  award  and  recognize this cost in the income
statement  over  the  period  during  which  an  employee is required to provide
service  in  exchange  for  the  award.

                                       8
<PAGE>

The  Company  adopted  SFAS  123(R) using the modified prospective method. Under
this  transition  method,  stock-based compensation expense for the three months
ended  March  31,  2006  includes:  (i) compensation expense for all stock-based
compensation  awards granted prior to, but not yet vested as of January 1, 2006,
based  on  the  grant  date fair value estimated in accordance with the original
provision  of  SFAS  123;  and  (ii)  compensation  expense  for all stock-based
compensation  awards  granted  subsequent to January 1, 2006, based on the grant
date  fair  value estimated in accordance with the provision of SFAS 123(R). The
Company  recognizes  compensation  expense  on  a  straight  line basis over the
requisite  service  period  of the award. Total stock-based compensation expense
included  in  the Company's statement of income for the three months ended March
31,  2006 was approximately $88,000 and was recorded as a component of corporate
general  and administrative expense. In accordance with the modified prospective
method,  financial  results  for  prior  periods  have  not  been  restated.
 The  Black-Scholes  option-pricing  model  was used to estimate the option fair
values.  The option-pricing model requires a number of assumptions, of which the
most  significant are, expected stock price volatility, the expected pre-vesting
forfeiture rate, expected dividend rate and the expected option term (the amount
of time from the grant date until the options are exercised or expire). Expected
volatility  was  calculated  based  upon actual historical stock price movements
over  the most recent periods ending March 31, 2006 equal to the expected option
term. Expected pre-vesting forfeitures were estimated based on actual historical
pre-vesting  forfeitures  over the most recent periods ending March 31, 2006 for
the  expected  option  term.  The  expected option term was calculated using the
"simplified"  method  permitted  by  SAB  107.

Prior  to  January  1,  2006,  the Company accounted for stock options using the
intrinsic  value  method  wherein  compensation  expense  is recognized on stock
options  granted only for the excess of the market price of the Company's Common
Stock  over  the  option exercise price on the date of grant. All options of the
Company  are  granted  at  amounts equal to or higher than the fair value of the
Common  Stock,  so  no  compensation  expense  is  recorded.


If  the  Company  had  accounted  for  its  stock-based  compensation  plans  in
accordance  with SFAS No. 123, the Company's net income and net income per share
of  Common  Stock  for  the  three  months  ended March 31, 2005 would have been
reported  as  follows:
<TABLE>
<CAPTION>
                                                               Three Months Ended
                                                                 March 31, 2005
                                                              --------------------
<S>                                                           <C>
Net income, as reported                                       $           699,643
Stock-based compensation included in net income                                 -
Fair value of stock-based compensation,  net of income taxes              (68,729)
                                                              --------------------
Pro forma net income                                          $           630,914
                                                              ====================

Net income per share of Common Stock - Basic:
 As reported                                                  $              0.29
 Stock-based compensation included in net income                                -
 Fair value of stock-based compensation, net of income taxes                (0.03)
                                                              --------------------
 Pro forma                                                    $              0.26
                                                              ====================
Net income per share of Common Stock -  Diluted:
 As reported                                                  $              0.26
 Stock-based compensation included in net income                                -
 Fair value of stock-based compensation, net of income taxes                (0.03)
                                                              --------------------
 Pro forma                                                    $              0.23
                                                              ====================
</TABLE>

Pro-forma  compensation  expense  under  SFAS  123,  among  other  computational
differences,  does  not  consider  potential pre-vesting forfeitures. Because of
these  differences, the pro-forma stock compensation expense presented above for
the  prior  quarterly  period  ended March 31, 2005 under SFAS 123 and the stock
compensation  expense recognized during the current quarterly period ended March
31,  2006  under SFAS 123(R) are not directly comparable. In accordance with the
modified  prospective  transition  method  of SFAS 123(R), the prior comparative
quarterly  results  have  not  been  restated.

                                       9
<PAGE>
(3)          EARNINGS PER SHARE
             ------------------

The  Company  calculates  earnings  per  share  in accordance with SFAS No. 128,
"Earnings  Per  Share."
<TABLE>
<CAPTION>
                                                               Three Months Ended March 31,
                                      --------------------------------------------------------------------------------
                                                       2005                                      2006
                                      ---------------------------------------  ---------------------------------------
<S>                                   <C>       <C>        <C>                 <C>       <C>        <C>
                                      Income    Shares     Per Share Amount    Income    Shares     Per Share Amount
                                      --------  ---------  ------------------  --------  ---------  ------------------
Basic EPS:
 Net income available to
   shares of Common
   Stock                              $699,643  2,380,196  $            0.29   $702,325  2,372,506  $            0.30

Effect of dilutive shares of
   Common Stock from  stock options
   And warrants                              -    240,850             ($0.03)         -    212,207             ($0.03)
                                      --------  ---------  ------------------  --------  ---------  ------------------
Diluted EPS:
 Net income available to
   shares of Common
   Stock                              $699,643  2,621,046  $            0.26   $702,325  2,584,713  $            0.27
                                      ========  =========  =================   ========  =========  ==================
</TABLE>

The difference in weighted average shares outstanding between basic earnings per
share and diluted earnings per share for the three months ended March 31, 2005
and 2006 relates to the effect of 240,850 and 212,207, respectively, of dilutive
shares of Common Stock from stock options, which are included in total shares
for the diluted calculation. For the three months ended March 31 , 2006, stock
options to purchase 60,000 shares of the Company's Common Stock were not
included in the computation of dilutive income per share because their effect
was anti-dilutive.


(4)     STOCK-BASED  COMPENSATION  PLANS
        --------------------------------

At  the  Company's  June  2005  annual meeting of shareholders, the shareholders
approved  the  2005  Equity Incentive Plan ("2005 Plan"), which reserved 300,000
shares  of  Common  Stock  for issuance. The 2005 Plan provides for the grant of
incentive  stock  options,  restricted  stock,  restricted stock units and stock
grants  to  employees  (including  officers  and  employee-directors)  and
non-statutory  stock  options  to  employees,  directors  and  consultants.  The
objectives  of  this  plan  include attracting and retaining the best personnel,
providing  for additional performance incentives by providing employees with the
opportunity  to  acquire  Common  Stock. As of March 31, 2006, there were 67,800
shares available for issuance under the 2005 Plan. The option price of the stock
options issued under the 2005 Plan is equal to the market price, or market price
plus  10%  for shareholders with 10% or more control of the Company, at the date
of grant. These stock options expire seven years, or five years for shareholders
with  10%  or  more  control of the Company, from the date of the grant and vest
annually  over  a service period ranging from three to five years. The 2005 Plan
is  administered  by  a  committee  of  two  or  more outside directors from the
Company's  Board  of  Directors  (the "Committee"). The Committee determines the
eligible  individuals to whom awards under the 2005 Plan may be granted, as well
as  the  time  or  times  at  which awards will be granted, the number of shares
subject  to  awards  to  be  granted to any eligible individual, the life of any
award,  and  any  other  terms  and conditions of the grant in addition to those
contained  in  the  2005  Plan.

The  Employee Stock Option Plan (the ''Employee Plan'') was adopted by the Board
of  Directors  effective  as of October 30, 1995, and as amended on September 4,
1997,  February  28,  2002,  and June 8, 2004, reserved 479,250 shares of Common
Stock  for issuance. The Employee Plan provided for the grant of incentive stock
options  to  employees  (including  officers  and  employee-directors)  and
non-statutory  stock  options  to  employees,  directors  and  consultants.  The
Employee  Plan  expired  by  its terms on October 30, 2005. As of March 31, 2006
there  were  317,983  vested  options  outstanding  and 115,666 unvested options
outstanding  under  the  Employee  Plan.

The  Dental  Center  Stock Option Plan ("Dental Center Plan") was adopted by the
Board of Directors effective as of October 30, 1995, and as amended on September
4, 1997, reserved 160,475 shares of Common Stock for issuance. The Dental Center
Plan  provided  for  the  grant  of  non-statutory stock options to professional
corporations  that  operate the Offices ("P.C.s") that are parties to Management
Agreements with the Company, and to dentists or dental hygienists who are either
employed  by  or  an  owner  of the P.C.s. The Dental Center Plan expired by its
terms on October 30, 2005. As of March 31, 2006 there were 14,000 vested options
outstanding  and  no  unvested options outstanding under the Dental Center Plan.

                                       10
<PAGE>

The  Company  uses the Black-Scholes pricing model to estimate the fair value of
each  option  granted  with  the  following  weighted  average  assumptions:
<TABLE>
<CAPTION>
                                        Three Months Ended
                                              March 31,
                                       ---------------------
Valuation Assumptions (1)                 2005        2006
-------------------------              ---------   ---------
<S>                          <C>                  <C>

Expected life (2)                      3.4 years   5.0 years
Risk-free interest rate (3)                3.54%       4.72%
Expected volatility (4)                      46%         50%
Expected dividend yield                     3.4%        2.9%
</TABLE>

_____________________________
(1)  Beginning  on  the  date  of  adoption  of SFAS 123(R), on January 1, 2006,
     forfeitures  are  estimated based on historical experience. Prior to the of
     adoption  of  SFAS  123(R),  forfeitures  were  recorded  as they occurred.
(2)  The expected life of stock options is estimated using the simplified-method
     calculation.
(3)  The risk-free  interest  rate is based on U.S. Treasury bills whose term is
     consistent  with  the  expected  life  of  the  stock  options.
(4)  The expected volatility is estimated based on historical and current stock
     data for the Company.

A  summary of option activity as of March 31, 2006, and changes during the three
months  then  ended,  is  presented  below:

<TABLE>
<CAPTION>


                                                  Weighted-                            Weighted-Average        Aggregate
                                    Number of      Average            Range of       Remaining Contractual  Intrinsic Value
                                     Options    Exercise Price    Exercise Prices        Term (years)        (thousands)
<S>                                  <C>           <C>             <C>                        <C>              <C>
Outstanding at December 31, 2005     655,382       $10.42          $ 1.00 - $19.37
 Granted                               3,200       $17.75          $17.75 - $17.75
 Exercised                           (37,733)      $ 2.31          $ 1.00 - $ 9.66
 Forfeited                            (1,000)      $17.61          $17.61 - $17.61

Outstanding at March 31, 2006        619,849       $10.94          $ 4.80 - $19.37            4.1              $  4,238
                                     =======       ======          ===============            ===              ========
Exercisable at March 31, 2006        331,983       $ 6.87          $ 4.80 - $ 9.75            2.6              $  3,562
                                     =======       ======          ===============            ===              ========
</TABLE>

The  weighted  average  grant  date  fair value of options granted was $6.87 per
option  and  $2.86  per  option during the three months ended March 31, 2006 and
2005, respectively.  Net cash proceeds from the exercise of stock options during
the  three  months  ended  March  31,  2006  and 2005 were $87,411 and $100,271,
respectively.  The  associated  income  tax benefit from stock options exercised
during  the  three  months ended March 31 2006 and 2005 was $17,081 and $55,198,
respectively.  As  of the date of exercise, the total intrinsic value of options
exercised during the three months ended March 31, 2006 and 2005 was $634,761 and
$144,497,  respectively.  As  of March 31, 2006, there was $1.3 million of total
unrecognized  compensation expense related to non-vested stock options, which is
expected  to  be  recognized  over  a  weighted  average  period  of 1.71 years.


(5)  RESTRICTED STOCK GRANT
     ----------------------

On July 1, 2005, the Company granted 60,000 shares of restricted Common Stock to
the Company's Chairman and Chief Executive Officer (the "Employee"). In
connection with the grant of restricted stock, the Company agreed to reimburse
the Employee an amount equal to the tax liability associated with the grant.
Such reimbursement was made by the Company and totaled approximately $586,000
which was recognized as an expense during the third quarter of 2005. As of March
31, 2006, there was approximately $567,000 of unrecognized compensation expense
related to the restricted stock grant. The expense is expected to be recognized
over a period of 1.75 years.

A  summary  of  the vesting status of the shares of restricted stock as of March
31,  2006,  and  the  changes  during  the three months then ended, is presented
below:



                                       11
<PAGE>

<TABLE>
<CAPTION>
                                       Number of              Weighted-Average
                                  Restricted Shares         Grant-Date Fair Value
                                 ==================         =====================
<S>                                   <C>                          <C>
Non-vested at December 31, 2005       60,000                       $ 13.51
Granted                                    -                             -
Vested                               (20,000)                        13.51
Forfeited                                  -                             -
                                      ------                       -------
Non-vested at March 31, 2006          40,000                       $ 13.51
                                      ======                       =======
</TABLE>



(6)          DIVIDENDS
             ---------

On  March 9, 2004, the Company announced a quarterly cash dividend of $.0375 per
share.  On February 10, 2005, the Company announced an increase in the amount of
the  quarterly  dividend  to  $.10  per  share. On January 10, 2006, the Company
announced an increase in the amount of the quarterly dividend to $.13 per share.
The  payment  of  dividends  in  the  future is subject to the discretion of the
Company's  Board  of Directors, and various factors may prevent the Company from
paying  dividends.  Such  factors  include the Board of Directors' assessment of
financial position, capital requirements and liquidity, the existence of a stock
repurchase  program, loan agreement restrictions, results of operations and such
other  factors  the  Company's  Board  of  Directors  may  consider  relevant.

(7)      LINE OF CREDIT
         --------------

On  April  25,  2006,  the  Company  amended  its  bank  line of credit ("Credit
Facility").  The  amended  Credit  Facility  allows  the Company to borrow, on a
revolving  basis,  an  aggregate principal amount not to exceed $7.0 million (an
increase  from  $5.0  million) at either, or a combination of, the lender's Base
Rate or at LIBOR plus a LIBOR rate margin, at the Company's option. The lender's
Base  Rate  computes  interest at the higher of the lender's "prime rate" or the
Federal  Funds  Rate  plus  one-half  percent (0.5%).  The LIBOR option computes
interest  at  the LIBOR rate as of the date such LIBOR Rate loan was made plus a
LIBOR  rate  margin  of  1.50%.  A  commitment fee of 0.25% on the average daily
unused  amount  of the revolving loan commitment during the preceding quarter is
also  assessed.  The  Company  may prepay any Base Rate loan at any time and any
LIBOR  rate  loan  upon  not  less than three business days prior written notice
given  to  the  lender,  but  the  Company  is  responsible for any loss or cost
incurred  by the lender in liquidating or employing deposits required to fund or
maintain  the  LIBOR  rate  loan. The amended Credit Facility expires on May 31,
2008.  At  March  31,  2006,  the  Company had $2.2 million outstanding and $2.8
million  available  for  borrowing  under  the  Credit Facility. The entire $2.2
million  outstanding  was  borrowed  under  the  LIBOR  rate  option. The Credit
Facility requires the Company to maintain certain financial ratios on an ongoing
basis.  At  March  31,  2006, the Company was in full compliance with all of its
covenants  under  the  Credit  Facility.

 (8)     CAPITAL  COMMITMENTS
         --------------------
At  March 31, 2006, the Company had budgeted capital commitments for the next 12
months  of  approximately  $1.3 million, which includes the development of three
dental  practices  developed internally ("de novo Offices"), and the remodel and
expansion  of  one  existing dental practice ("Office"). The Company anticipates
that  these  capital expenditures will be funded by cash on hand, cash generated
by  operations, or borrowings under the Company's Credit Facility. The Company's
retained  earnings  as of March 31, 2006 were approximately $4.6 million and the
Company  had  a  working capital deficit on that date of approximately $819,000.
During the quarter ended March 31, 2006, the Company had capital expenditures of
$1.2  million  and  purchased  approximately  $20,000  of  Common  Stock  while
decreasing  total  bank  debt  by  $654,000.


                                       12
<PAGE>
------
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
--------------------------------------------------------------------------------
OF  OPERATIONS
--------------

Forward-Looking  Statements

The  statements  contained  in this report that are not historical in nature are
forward-looking  statements  within  the  meaning  of  the  Private  Securities
Litigation  Reform  Act  of  1995.  All  statements,  other  than  statements of
historical  facts,  included  in  this report that address activities, events or
developments  that we expect, believe, intend or anticipate will or may occur in
the  future,  are  forward-looking  statements.  When used in this document, the
words  "estimate," "believe," anticipate," "project" and similar expressions are
intended  to identify forward-looking statements. Forward-looking statements are
inherently subject to risks and uncertainties, many of which cannot be predicted
with  accuracy  and  some  of  which  might  not  even  be  anticipated.  These
forward-looking  statements  include  statements  in  this Item 2, "Management's
Discussion  and  Analysis  of  Financial  Condition  and Results of Operations,"
regarding  intent, belief or current expectations of the Company or its officers
with  respect  to  the development or acquisition of additional dental practices
("Offices")  and  the  successful integration of such Offices into the Company's
network, recruitment of additional dentists, funding of the Company's expansion,
capital  expenditures,  payment  or nonpayment of dividends and cash outlays for
income  taxes  and  other  purposes.

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

General

The  following  discussion  relates to factors that have affected the results of
operations  and  financial  condition  of the Company for the three months ended
March 31, 2005 and 2006. This information should be read in conjunction with the
Company's  condensed consolidated financial statements and related notes thereto
included  elsewhere  in  this  report.

Overview

The Company was formed in May 1995 and currently manages 58 Offices in Colorado,
New  Mexico  and Arizona staffed by 81 general dentists and 26 specialists.  The
Company  derives  all  of  its  Revenue  (as  defined below) from its Management
Agreements  with professional corporations ("P.C.s"), which conduct the practice
at  each  Office.  In addition, the Company assumes a number of responsibilities
when  it  acquires  a  new  practice or develops a de novo Office, which are set
forth  in  a  Management  Agreement,  as  described  below.

The  Company  was  formed with the intention of becoming the leading provider of
business  services  to  dental  practices  in Colorado. The Company's growth and
success  in  the  Colorado  market  led to its expansion into the New Mexico and
Arizona  markets.  The  Company's  growth  strategy  is  to  focus  on  greater
utilization  of  existing physical capacity through recruiting more dentists and
support  staff  and  through  development  of  de  novo  Offices  and  selective
acquisitions.

Critical  Accounting  Policies

The Company's critical accounting policies are set forth in its Annual Report on
Form  10-K  for the year ended December 31, 2005.  There have been no changes to
these  policies  since  the  filing  of  that  report.

Components  of  Revenue  and  Expenses

Total  dental  group  practice revenue ("Revenue") represents the revenue of the
Offices  reported  at  estimated realizable amounts, received from dental plans,
other  third-party  payors  and  patients  for  dental  services rendered at the
Offices.  The  Company's  Revenue  is  derived  principally from fee-for-service
revenue  and  managed  dental  care revenue. Fee-for-service revenue consists of
revenue  received  from  indemnity  dental  plans,  preferred provider plans and
direct  payments by patients not covered by any third-party payment arrangement.
Managed  dental care revenue consists of revenue received from capitated managed
dental  care  plans,  including  capitation  payments  and  patient co-payments.
Capitated  managed  dental  care  contracts  are  between  dental  benefits
organizations  and  the  P.C.s.

                                       13
<PAGE>

Net revenue represents Revenue less amounts retained by the Offices. The amounts
retained  by  the  Offices  represent  amounts  paid as compensation to employed
dentists  and  hygienists. The Company's net revenue is dependent on the Revenue
of  the Offices. Direct expenses consist of the expenses incurred by the Company
in  connection  with  managing  the Offices, including salaries and benefits for
personnel other than dentists and hygienists, dental supplies, dental laboratory
fees,  occupancy costs, advertising and marketing, depreciation and amortization
and  general  and  administrative  (including office supplies, equipment leases,
management  information  systems  and  other expenses related to dental practice
operations).  The  Company  also incurs personnel and administrative expenses in
connection  with  maintaining  a  corporate  function  that provides management,
administrative, marketing, advertising, development and professional services to
the  Offices.

Under  each  of  the Management Agreements, the Company manages the business and
marketing  aspects  of  the  Offices,  including  (i)  providing  capital,  (ii)
designing and implementing marketing and advertising programs, (iii) negotiating
for  the  purchase  of supplies, (iv) staffing, (v) recruiting, (vi) training of
non-dental  personnel,  (vii)  billing  and  collecting  certain fees for dental
services  provided  by  the  Offices,  (viii)  arranging  for  certain legal and
accounting  services,  and  (ix)  negotiating with third party payors. Under the
Management  Agreements,  the  P.C.  is  responsible  for, among other things (i)
supervision of all dentists and dental hygienists, (ii) complying with all laws,
rules  and  regulations  relating  to  dentists and dental hygienists, and (iii)
maintaining  proper  patient records.  The Company has made, and intends to make
in  the future, loans to P.C.s in Colorado, New Mexico and Arizona to fund their
acquisition of dental assets from third parties in order to comply with the laws
of  such  states.

Under  the  typical  Management Agreement used by the Company, the P.C. pays the
Company  a management fee equal to the Adjusted Gross Center Revenue of the P.C.
less  compensation  paid  to  the dentists and dental hygienists employed at the
Office  of  the P.C.  Adjusted Gross Center Revenue is comprised of all fees and
charges  booked  each  month  by  or on behalf of the P.C. as a result of dental
services  provided  to  patients  at  the  Office,  less  any  adjustments  for
uncollectible accounts, professional courtesies and other activities that do not
generate a collectible fee.  The Company's costs include all direct and indirect
costs,  overhead  and expenses relating to the Company's provision of management
services  at each Office under the Management Agreement, including (i) salaries,
benefits  and other direct costs of employees who work at the Office (other than
dentist  and  hygienist salaries), (ii) direct costs of all Company employees or
consultants  who  provide  services  to  or in connection with the Office, (iii)
utilities,  janitorial,  laboratory,  supplies,  advertising  and other expenses
incurred  by  the  Company  in carrying out its obligations under the Management
Agreement,  (iv)  depreciation expense associated with the P.C.'s assets and the
assets  of  the  Company  used at the Office, and the amortization of intangible
asset  value  relating  to  the  Office,  (v)  interest  expense on indebtedness
incurred  by  the Company to finance any of its obligations under the Management
Agreement,  (vi)  general and malpractice insurance expenses, lease expenses and
dentist  recruitment  expenses, (vii) personal property and other taxes assessed
against the Company's or the P.C.'s assets used in connection with the operation
of  the Office, (viii) out-of-pocket expenses of the Company's personnel related
to  mergers  or acquisitions involving the P.C., (ix) corporate overhead charges
or any other expenses of the Company, including the P.C.'s pro rata share of the
expenses  of  the  accounting and computer services provided by the Company, and
(x) a collection reserve in the amount of 5.0% of Adjusted Gross Center Revenue.
As  a  result,  substantially  all costs associated with the provision of dental
services at the Offices are borne by the Company, except for the compensation of
the  dentists  and hygienists who work at the Offices of the P.C.s. This enables
the  Company  to  manage  the  profitability  of  the  Offices.  Each Management
Agreement  is  for  a  term  of  40  years.  Further,  each Management Agreement
generally  may  be  terminated  by  the  P.C.  only  for cause, which includes a
material default by or bankruptcy of the Company. Upon expiration or termination
of a Management Agreement by either party, the P.C. must satisfy all obligations
it  has  to  the  Company.

Under  the  Management  Agreements, the Company negotiates and administers these
contracts  on  behalf  of  the  P.C.s.  Under  a  capitated  managed dental care
contract,  the  dental group practice provides dental services to the members of
the dental benefits organization and receives a fixed monthly capitation payment
for  each  plan member covered for a specific schedule of services regardless of
the  quantity  or  cost  of  services to the participating dental group practice
obligated  to  provide them.  This arrangement shifts the risk of utilization of
these  services  to  the  dental  group  practice providing the dental services.
Because  the  Company assumes responsibility under the Management Agreements for
all aspects of the operation of the dental practices (other than the practice of
dentistry)  and  thus bears all costs of the P.C.s associated with the provision
of  dental  services  at  the  Offices  (other than compensation and benefits of
dentists and hygienists), the risk of over-utilization of dental services at the
Offices  under capitated managed dental care plans is effectively shifted to the
Company.  In  addition,  dental  group  practices  participating  in a capitated
managed  dental  care  plan  often  receive  supplemental  payments  for  more
complicated  or  elective  procedures.  In contrast, under traditional indemnity
insurance  arrangements,  the insurance company pays whatever reasonable charges
are  billed by the dental group practice for the dental services provided. Under
a preferred provider plan, the dental group practice is paid for dental services
provided  based  on a fee schedule that is a discount to the usual and customary
fees  paid  under  an  indemnity  insurance  agreement.

The  Company  seeks  to  increase its fee-for-service business by increasing the
patient  volume  at existing Offices through effective marketing and advertising
programs  and  by  opening de novo Offices. The Company seeks to supplement this
fee-for-service  business  with  revenue  from  contracts with capitated managed
dental care plans.  Although the Company's fee-for-service business generally is
more  profitable  than  its  capitated  managed  dental care business, capitated
managed dental care business serves to increase facility utilization and dentist
productivity.  The  relative  percentage  of  the Company's Revenue derived from
fee-for-service business and capitated managed dental care contracts varies from
market  to market depending on the availability of capitated managed dental care
contracts  in  any  particular  market  and  the  Company's ability to negotiate
favorable contract terms.  In addition, the profitability of managed dental care
Revenue  varies  from  market  to  market  depending  on the level of capitation
payments  and  co-payments in proportion to the level of benefits required to be
provided.

                                       14
<PAGE>

Results  Of  Operations

For  the  three  months ended March 31, 2006, Revenue increased $1.2 million, or
9.2%,  to  $14.6  million  compared  to $13.4 million for the three months ended
March  31,  2005.  For  the  three  months  ended  March  31,  2006, net revenue
increased  $772,000,  or 8.2%, to $10.1 million compared to $9.4 million for the
three  months  ended  March  31,  2005.

Net  income  increased  0.4% to $$702,000, or $.27 per share (net of $104,000 of
after-tax  stock-based  compensation expense versus no such expense in the first
quarter  of 2005) compared to $700,000, or $.26 per share for the same period of
2005.

The  Company  has signed leases for three additional de novo Offices, one in the
Phoenix,  Arizona  market,  one in the Albuquerque, New Mexico market and one in
the  Denver,  Colorado market. These Offices are projected to open in the second
and  third  quarters  of  2006.  The  Company  opened  one de novo Office in the
Phoenix,  Arizona  market  in  March  2006.

The  Company continues to generate strong cash flow from operations.  During the
first  three  months  of  2006, the Company purchased $20,000 of its outstanding
Common  Stock,  incurred  $1.2 million in capital expenditures, paid $235,000 in
dividends,  and  repaid  $44,000  of  long term debt while decreasing borrowings
under  its  bank  line  of  credit  ("Credit  Facility")  by  $654,000.

Revenue  is  total  dental  group  practice  revenue  generated at the Company's
Offices from professional services provided to its patients. Amounts retained by
dental  Offices  represents  compensation expense to the dentists and hygienists
and  is  subtracted  from  total  dental group practice revenue to arrive at net
revenue.  The  Company reports net revenue in its financial statements to comply
with  Emerging  Issues  Task  Force  Issue  No. 97-2, Application of SFAS No. 94
(Consolidation  of  All  Majority  Owned  Subsidiaries)  and  APB Opinion No. 16
(Business  Combinations)  to  Physician Practice Management Entities and Certain
Other  Entities  With  Contractual  Management  Arrangements.  Revenue  is not a
generally  accepted accounting principles measure. The Company discloses Revenue
because  it  is  a  critical  component  for  management's  evaluation of Office
performance. However, investors should not consider this measure in isolation or
as  a  substitute  for  net revenue, operating income, cash flows from operating
activities  or  any  other  measure  for  determining  the  Company's  operating
performance  that is calculated in accordance with generally accepted accounting
principles.  The  following  table  reconciles  Revenue  to  net  revenue.

<TABLE>
<CAPTION>
                                            Three Months Ended
                                                   March 31,
                                           --------------------------
                                              2005          2006
                                           -----------   ------------
<S>                                        <C>                   <C>
Total dental group practice revenue        $13,350,407   $14,579,914
Less - amounts retained by dental Offices   (3,982,676)   (4,439,885)
                                           -----------   -----------
Net revenue                                $ 9,367,731   $10,140,029
                                           ===========   ===========
</TABLE>



                                       15
<PAGE>
The  following  table  sets  forth the percentages of net revenue represented by
certain  items  reflected  in the Company's condensed consolidated statements of
income. The information contained in the table represents the historical results
of  the Company. The information that follows should be read in conjunction with
the  Company's  condensed  consolidated  financial  statements and related notes
thereto  contained  elsewhere  in  this  report.
<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                                                   March 31,
                                                                             -------------------
                                                                                 2005    2006
                                                                                ------  ------
<S>                                                                             <C>     <C>
NET REVENUE:                                                                    100.0%  100.0%

DIRECT EXPENSES:
 Clinical salaries and benefits                                                  37.2%   36.4%
 Dental supplies                                                                  5.7%    5.7%
 Laboratory fees                                                                  6.7%    6.3%
 Occupancy                                                                       10.2%   10.4%
 Advertising and marketing                                                        2.8%    2.1%
 Depreciation and amortization                                                    4.5%    4.7%
 General and administrative                                                      10.5%   11.7%
                                                                                ------  ------
                                                                                 77.6%   77.3%
                                                                                ------  ------

 Contribution from dental Offices                                                22.4%   22.7%

CORPORATE EXPENSES:
 General and administrative (includes $81,030 of deferred equity
   compensation expense and $87,745 related to stock-based
   compensation expense in the three months ended March 31, 2006)                 9.6%   10.7%
 Depreciation and amortization                                                    0.4%    0.3%
                                                                                ------  ------
 Operating income                                                                12.4%   11.7%

 Interest expense (income), net                                                 (0.1)%    0.4%
                                                                                ------  ------
 Income before income taxes                                                      12.5%   11.3%
 Income tax expense                                                               5.0%    4.3%
                                                                                ------  ------
 Net income                                                                       7.5%    7.0%
                                                                                ======  ======
</TABLE>

THREE  MONTHS  ENDED  MARCH  31,  2006  COMPARED TO THREE MONTHS ENDED MARCH 31,
2005:

Net  revenue.  For  the  three  months  March  31,  2006,  net revenue increased
$772,000,  or  8.2%,  to  $10.1  million  compared to $9.4 million for the three
months  ended  March  31, 2005.  This increase is attributable to an increase in
specialty  dentistry  revenues of $579,000 and $142,000 from the addition of two
de  novo  Offices opened since March 31, 2005 and one de novo Office that opened
during  the  three  months  ended  March  31,  2005.

Clinical  salaries  and  benefits.  For  the  three months ended March 31, 2006,
clinical  salaries  and  benefits  increased  $203,000, or 5.8%, to $3.7 million
compared  to  $3.5  million  for  the  three  months  ended March 31, 2005. This
increase  was  primarily  due  to additional employees at the recently opened de
novo Offices and remodeled and expanded Offices as well as annual wage increases
that became effective February 1, 2006. As a percentage of net revenue, clinical
salaries  and  benefits  decreased to 36.4% for the three months ended March 31,
2006  compared  to  37.2%  for  the  three  months  ended  March  31,  2005.

Dental  supplies.  For  the  three  months ended March 31, 2006, dental supplies
increased  to $576,000 compared to $533,000 for the three months ended March 31,
2005, an increase of $43,000 or 7.9%. This increase is attributable to increased
production  and  increased  emphasis  on specialty dentistry which tends to have
higher  dental  supply  costs.  As  a percentage of net revenue, dental supplies
remained  constant  at  5.7% for the three months ended March 31, 2006 and March
31,  2005.
                                       16
<PAGE>

Laboratory  fees.  For  the  three  months  ended March 31 2006, laboratory fees
increased  to  $642,000 compared to $628,000 for the three months ended March 31
2005,  an increase of $14,000 or 2.1%. Laboratory fees associated with specialty
dentistry  are  not as significant, relative to general dentistry, and therefore
this  expense  increase  was  minimal relative to the increased production. As a
percentage  of  net  revenue,  laboratory  fees  decreased to 6.3% for the three
months  ended  March  31, 2006 compared to 6.7% for the three months ended March
31,  2005.

Occupancy. For the three months ended March 31 2006, occupancy expense increased
to  $1.1 million compared to $960,000 for the three months ended March 31, 2005,
an increase of $97,000 or 10.1%.  This increase was primarily due to the opening
of  two de novo Offices since March 2005 and increased rental payments resulting
from  the  renewal  of  Office  leases at current market rates for Offices whose
leases  expired  subsequent  to the 2005 period. As a percentage of net revenue,
occupancy  expense  increased  to 10.4% for the three months ended March 31 2006
compared  to  10.2%  for  the  three  months  ended  March  31,  2005.

Advertising and marketing. For the three months ended March 31 2006, advertising
and  marketing  decreased  to $209,000 compared to $259,000 for the three months
ended  March  31,  2005,  a  decrease  of  $50,000  or  19.5%.  This decrease is
attributable  to  a  shift  in  the  television  and  print advertising from the
relatively  expensive  Denver,  Colorado  market in 2005 to the Albuquerque, New
Mexico  and  Colorado  Springs, Colorado markets in 2006. As a percentage of net
revenue,  advertising and marketing decreased to 2.1% for the three months ended
March  31,  2006  compared  to  2.8%  for the three months ended March 31, 2005.

Depreciation  and  amortization-Offices.  For  the  three months ended March 31,
2006,  depreciation  and  amortization  expenses  attributable  to  the  Offices
increased  to $480,000 compared to $424,000 for the three months ended March 31,
2005, an increase of $56,000 or 13.1%. The increase in the Company's depreciable
asset  base  is a result of purchasing tenant improvements and new equipment for
two  new  de  novo  Offices, the expansion of two existing Offices and increased
capital  purchases  for  specialty  services.  As  a  percentage of net revenue,
depreciation and amortization increased to 4.7% for the three months ended March
31,  2006  compared  to  4.5%  for  the  three  months  ended  March  31,  2005.

General  and  administrative-Offices. For the three months ended March 31, 2006,
general  and  administrative  expenses  attributable to the Offices increased to
$1.2  million compared to $980,000 for the three months ended March 31, 2005, an
increase  of  $211,000  or  21.5%.  This  increase in general and administrative
expenses  is  primarily  attributable  to  higher  write  offs  of uncollectible
accounts  receivable,  increased  office  supplies and increase in use and gross
receipts  tax.  As  a  percentage  of  net  revenue,  general and administrative
expenses increased to 11.7% for the three months ended March 31 2006 compared to
10.5%  for  the  three  months  ended  March  31,  2005.

Contribution  from dental Offices.   As a result of the above, contribution from
dental Offices increased $202,000, or 9.6%, to $2.3 million for the three months
ended  March  31, 2006 compared to $2.1 million for the three months ended March
31,  2005.  As  a  percentage  of  net revenue, contribution from dental offices
increased  to  22.7% for the three months ended March 31, 2006 compared to 22.4%
for  the  three  months  ended  March  31,  2005.

Corporate  expenses  -  general  and  administrative. For the three months ended
March  31,  2006,  corporate  expenses - general and administrative increased to
$1.1  million compared to $900,000 for the three months ended March 31, 2005, an
increase  of $181,000 or 20.1%. This increase is primarily related to $81,000 of
amortization as a result of 60,000 shares of restricted stock granted on July 1,
2005  to  an  Employee. The Company recognized approximately $81,000 of deferred
equity  compensation expense, before taxes, in each subsequent quarter since the
grant  date  and  will  continue  to recognize approximately $81,000 per quarter
through  the quarter ending December 31, 2007. Also the adoption of SFAS 123(R),
"Share-Based Payments" on January 1, 2006 increased corporate expenses - general
and  administrative  by  approximately  $88,000. As a percentage of net revenue,
corporate expenses - general and administrative increased to 10.7% for the three
months  ended  March  31, 2006 compared to 9.6% for the three months ended March
31,  2005.

Corporate  expenses  - depreciation and amortization. For the three months ended
March  31, 2006, corporate expenses - depreciation and amortization decreased to
$34,000  compared  to  $37,000  for  the  three  months  ended March 31, 2005, a
decrease  of  $3,000  or  6.8%.  The  decrease is related to the decrease in the
Company's  depreciable  asset  base.  As  a percentage of net revenue, corporate
expenses  - depreciation and amortization decreased to 0.3% for the three months
ended March 31, 2006 compared to 0.4% for the three months ended March 31, 2005.

Operating  income.   As  a  result of the matters discussed above, the Company's
operating  income  remained  constant at $1.2 million for the three months ended
March  31,  2006  and  2005.  As  a  percentage of net revenue, operating income
decreased  to  11.7% for the three months ended March 31, 2006 compared to 12.4%
for  the  three  months  ended  March  31,  2005.

                                       17
<PAGE>


Interest  expense/(income),  net.  For  the  three  months ended March 31, 2006,
interest  expense increased to $40,000 compared to ($8,000) for the three months
ended  March 31, 2005, an increase of $48,000. This increase in interest expense
is  attributable to higher interest expense on the Company's Credit Facility and
lower charges for late payments on customer accounts receivable. As a percentage
of  net revenue, interest expense/(income), net, increased to 0.4% for the three
months  ended March 31, 2006 compared to (0.1)% for the three months ended March
31,  2005.


Net  income.   As  a  result  of  the  above, the Company reported net income of
$702,000  for  the  three  months ended March 31, 2006 compared to net income of
$700,000  for  the  three  months ended March 31, 2005, an increase of $2,000 or
0.4%.  Net  income  for  the three months ended March 31, 2006 was net of income
tax  expense  of  $440,000 while net income for the three months ended March 31,
2005 was net of income tax expense of $466,000. Income tax expense for the three
months  ended  March  31,  2006  was  less  than  income  tax  expense  for  the
corresponding  quarter of 2005 because the Company currently anticipates a lower
tax  rate  for its fiscal year ended December 31, 2006 compared to the Company's
tax  estimate  in the first quarter of 2005. As a percentage of net revenue, net
income  decreased  to 7.0% for the three months ended March 31, 2006 compared to
7.5%  for  the  three  months  ended  March  31,  2005.

Liquidity  and  Capital  Resources

The  Company  finances  its  operations and growth through a combination of cash
provided  by  operating  activities, the Credit Facility and, from time to time,
seller  notes issued in dental practice acquisitions.  As of March 31, 2006, the
Company  had  a  working  capital  deficit  of  approximately  $819,000.

Net  cash  provided  by  operating activities was approximately $1.9 million and
$1.5  million  for the three months ended March 31, 2006 and 2005, respectively.
During  the  2006  period,  excluding  net income and after adding back non-cash
items,  the  Company's cash provided by operating activities consisted primarily
of  an  increase  in  accounts  payable  and  accrued  expenses of approximately
$881,000  and  an  increase  in  income taxes payable of approximately $273,000,
offset  by  an  increase  in  prepaid expenses and other assets of approximately
$96,000, an increase in accounts receivable of approximately $695,000 (primarily
due  to  higher Revenue) and an increase in deferred charges and other assets of
approximately  $28,000.  During  the 2005 period, excluding net income and after
adding  back non-cash items, the Company's cash provided by operating activities
consisted  primarily  of an increase in accounts payable and accrued expenses of
approximately  $551,000,  an  increase  in income taxes payable of approximately
$466,000  and  a  decrease in prepaid expenses and other assets of approximately
$93,000, partially offset by an increase in accounts receivable of approximately
$820,000  (primarily  due  to  higher  Revenue).

Net  cash  used  in  investing  activities  was  approximately  $1.2 million and
$219,000  for  the three months ended March 31, 2006 and 2005, respectively. For
the  three  months  ended  March  31,  2006,  the Company invested approximately
$683,000  in the purchase of additional property and equipment and approximately
$515,000  in  the  development  of  de novo Offices.  For the three months ended
March  31,  2005,  approximately  $159,000  was  invested  in  the  purchase  of
additional  property  and  equipment  and  $60,000 in the development of de novo
Offices.

Net  cash  used in financing activities was approximately $848,000 for the three
months  ended  March  31, 2006 and $1.0 million for the three months ended March
31,  2005.  During  the  three  months  ended  March  31, 2006, net cash used in
financing  activities  was  comprised of approximately $654,000 used to pay down
the  Company's  Credit  Facility, approximately $20,000 used in the purchase and
retirement of Common Stock, approximately $44,000 for the repayment of long-term
debt  and  approximately $235,000 for the payment of dividends, partially offset
by  approximately  $87,000 in proceeds from the exercise of Common Stock options
and  $17,000  in tax benefit of Common Stock options exercised. During the three
months ended March 31, 2005, net cash used in financing activities was comprised
of  approximately  $325,00  used  to  pay  down  the  Company's Credit Facility,
approximately  $669,000  used  in  the  purchase and retirement of Common Stock,
approximately $91,000 for the payment of dividends and approximately $41,000 for
the  repayment  of  seller  notes, partially offset by approximately $100,000 in
proceeds  from  the  exercise  of  Common  Stock  options.

On  April 25, 2006, the Company amended the Credit Facility.  The amended Credit
Facility  allows  the  Company  to  borrow,  on  a revolving basis, an aggregate
principal  amount  not to exceed $7.0 million (an increase from $5.0 million) at
either,  or  a  combination  of, the lender's Base Rate or at LIBOR plus a LIBOR
rate  margin, at the Company's option.  The lender's Base Rate computes interest
at  the  higher  of  the  lender's  "prime  rate" or the Federal Funds Rate plus
one-half  percent  (0.5%).  The LIBOR option computes interest at the LIBOR rate
as  of the date such LIBOR rate loan was made plus a LIBOR rate margin of 1.50%.
A  commitment  fee  of 0.25% on the average daily unused amount of the Revolving
Loan  commitment during the preceding quarter is also assessed.  The Company may
prepay any Base Rate loan at any time and any LIBOR rate loan upon not less than
three  business  days  prior written notice given to the lender, but the Company
will  be  responsible for any loss or cost incurred by the lender in liquidating
or  employing  deposits  required  to fund or maintain the LIBOR rate loan.  The
amended Credit Facility expires on May 31, 2008.  At March 31, 2006, the Company
had $2.2 million  outstanding and $2.8 million available for borrowing under the
Credit  Facility.  The  entire  $2.2  million outstanding was borrowed under the
LIBOR  rate option. The Credit Facility requires the Company to maintain certain
financial  ratios  on  an  ongoing basis.  At March 31, 2006, the Company was in
full  compliance  with  all  of  its  covenants  under  the  Credit  Facility.

                                       18
<PAGE>


At  March 31, 2006, the Company had budgeted capital commitments for the next 12
months of approximately $1.3 million, which includes the development of three de
novo  Offices, and the remodeling of one existing Office. The Company's retained
earnings  as  of  March  31,  2006 were approximately $4.6 million.  The Company
expects  increased  costs over the next 12 to 18 months as it prepares to comply
with  Sarbanes-Oxley  Act  Section  404.

The  Company's  earnings  before interest, taxes, depreciation, amortization and
non  cash  expense associated with stock-based compensation ("EBITDA") increased
$245,000,  or  15.1%  to  $1.9 million for the three months ended March 31, 2006
compared  to  $1.6  million  for  the  corresponding three month period in 2005.
Although  EBITDA  is  not  a  generally  accepted accounting principles ("GAAP")
measure  of performance or liquidity, the Company believes that it may be useful
to  an  investor  in  evaluating  its performance. However, investors should not
consider  these  measures  in isolation or as a substitute for operating income,
cash  flows  from  operating activities or any other measure for determining the
Company's  operating  performance  or liquidity that is calculated in accordance
with  GAAP.  In  addition,  because  EBITDA is not calculated in accordance with
GAAP, it may not necessarily be comparable to similarly titled measures employed
by  other  companies.  A  reconciliation  of  EBITDA  can  be  made  by  adding
depreciation  and  amortization expense - offices, depreciation and amortization
expense  -  corporate,  amortization  of  equity  compensation,  stock-based
compensation  related  to SFAS 123(R), interest expense/(income), net and income
tax expense to net income as in the table belowBeginning with this report and in
future  reports, the Company intends to include stock-based compensation expense
and  amortization  of  deferred  equity  compensation  expense  as  part  of the
reconciliation  of  EBITDA.
<TABLE>
<CAPTION>
                                                                        Three Months Ended March 31,
                                                                        ----------------------------
                                                                              2005         2006
                                                                          -----------   ----------
<S>                                                                       <C>           <C>
RECONCILIATION OF EBITDA:
 Net income                                                               $   699,643   $  702,325
 Depreciation and amortization - Offices                                      424,372      479,775
 Depreciation and amortization - Corporate                                     36,674       34,196
 Amortization of deferred equity compensation expense                               -       81,030
 Stock-based compensation expense related to
   SFAS 123 (R)                                                                     -       87,745
 Interest expense/(income), net                                                (7,632)      39,620
 Income tax expense                                                           466,431      439,974
                                                                          -----------   ----------
EBITDA                                                                    $ 1,619,488   $1,864,665
                                                                          ===========   ==========
</TABLE>

As  of  March  31,  2006,  the  Company  had  the  following  known  contractual
obligations:
<TABLE>
<CAPTION>
                                                             Payments due by Period
                                               ----------------------------------------------------------------
                                     Total     Less than 1 year     1-3 years     3-5 years   More than 5 years
                                   ----------  ----------------     ---------     ---------   -----------------
<S>                                <C>            <C>               <C>           <C>              <C>
Long-Term Debt Obligations          2,334,745       134,745         2,200,000             -              -
Operating Lease Obligations         8,432,168     2,847,371         3,739,402     1,669,877        175,518
Other Long-Term Liabilities
Reflected  on  the
Balance  Sheet  Under  GAAP           238,826        43,300           108,486        84,344          2,696
                                   ----------     ---------         ---------     ---------        -------
Total                              11,005,739     3,025,415         6,047,888     1,754,221        178,214
                                   ==========     =========         =========     =========        =======
</TABLE>

                                       19
<PAGE>

The  Company from time to time may purchase its Common Stock on the open market.
The  shares purchased and the purchase price per share for transactions prior to
August  1,  2005  have  been adjusted to reflect the 2-for-1 stock split. During
2003,  the Company, in 84 separate transactions, purchased 592,390 shares of its
Common  Stock  for  total  consideration of approximately $3.9 million at prices
ranging  from  $4.77  to  $7.10  per  share.  During 2004, the Company, in seven
separate  transactions,  purchased  108,000 shares of its Common Stock for total
consideration  of  approximately  $778,000 at prices ranging from $6.33 to $9.25
per  share.  During  2005,  the  Company, in 40 separate transactions, purchased
311,961 shares of its Common Stock for total consideration of approximately $4.3
million  at  prices ranging from $9.00 to $19.31 per share. In January 2005, the
Company  purchased  40,000  shares  of  its  Common  Stock  through  a  private
transaction  that was approved by the Board of Directors. On March 17, 2005, the
Board  of  Directors  authorized  the Company to increase by $500,000 the amount
available  to make open market purchases of its Common Stock. In April 2005, the
Company  purchased  127,364  of  Common  Stock in a private transaction that was
previously  approved by the Board of Directors. On September 12, 2005, the Board
of  Directors  authorized  the  Company  to  increase by $1.0 million the amount
available  to  make  open  market purchases of its Common Stock. On November 28,
2005, the Board of Directors authorized the Company to increase by an additional
$1.5  million  the  amount available to make open market purchases of its Common
Stock.  During the three month period ended March 31, 2006, the Company, in five
separate  transactions,  purchased  1,147  shares  of its Common Stock for total
consideration  of  approximately $20,000 at prices ranging from $17.20 to $18.10
per  share.  As  of March 31, 2006, approximately $1.1 million of the previously
authorized  amount  was  available  for  open-market  purchases.  There  is  no
expiration  date on these plans. Such purchases may be made from time to time as
the  Company's  management  deems  appropriate.

On  April  13,  2006,  the  Company agreed to purchase in a private transaction,
54,250  shares  of  its  Common  Stock  from three of its executive officers for
$15.00  per  share.  This purchase, of approximately $814,000, was financed with
the  Company's bank line of Credit. This transaction was negotiated on behalf of
the  Company  by  its  independent  Board members. As a private transaction, the
purchase  of  the  54,250 shares was not counted against the amount available to
the  Company  for public purchases under its announced stock repurchase program.

The  Company  believes  that cash generated from operations and borrowings under
its  Credit  Facility will be sufficient to fund its anticipated working capital
needs,  capital  expenditures  and  dividend  payments  for at least the next 12
months.  In  order  to meet its long-term liquidity needs, the Company may issue
additional  equity  and debt securities, subject to market and other conditions.
There  can  be  no assurance that such additional financing will be available on
terms  acceptable  to  the Company. The failure to obtain the funds necessary to
finance  its  future  cash  requirements  could  adversely  affect the Company's
ability  to  pursue  its  strategy and could negatively affect its operations in
future  periods.

ITEM  3.  QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK
--------------------------------------------------------------------------
Market  risk represents the risk of loss that may impact the financial position,
results  of  operations  or  cash flows of the Company due to adverse changes in
financial  and  commodity  market  prices  and  rates. The Company is exposed to
market  risk  in  the area of changes in interest rates. Historically, and as of
March  31,  2006,  the Company has not used derivative instruments or engaged in
hedging  activities.

Interest  Rate  Risk.  The  interest  payable on the Credit Facility is variable
based upon the lender's Base Rate and the LIBOR rate and, therefore, is affected
by  changes  in  market  interest  rates.  At March 31, 2006, the Company had $0
outstanding  with  an interest rate of 7.75% under the Base Rate option and $2.2
million  outstanding with an interest rate of 6.17% under the LIBOR rate option.
The  Company  does  not  believe  that  reasonably possible near-term changes in
interest  rates will result in a material effect on future earnings, fair values
or  cash flows of the Company. The Company estimates that a 1.0% increase in the
Company's  interest  rate  would have resulted in additional interest expense of
approximately  $6,400  for  the  three  months  ended  March  31,  2006.

ITEM  4.  CONTROLS  AND  PROCEDURES
-----------------------------------
The  effectiveness  of  the  Company's  or any system of disclosure controls and
procedures is subject to certain limitations, including the exercise of judgment
in  designing,  implementing  and  evaluating  the  controls and procedures, the
assumptions  used  in  identifying  the  likelihood  of  future  events, and the
inability  to  eliminate  misconduct  completely.  As  a result, there can be no
assurance  that the Company's disclosure controls and procedures will detect all
errors  or  fraud.  By  their  nature, the Company's or any system of disclosure
controls  and  procedures  can  provide  only  reasonable  assurance  regarding
management's  control  objectives.

Under  the  supervision  and with the participation of the Company's management,
including  the  Chief Executive Officer and Chief Financial Officer, the Company
evaluated the design and operation of its disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934,
or  the  "Exchange Act") as of March 31, 2006.  On the basis of this review, the
Company's  management, including the Chief Executive Officer and Chief Financial
Officer,  concluded  that  the  Company's disclosure controls and procedures are
designed,  and  are effective, to give reasonable assurance that the information
required  to  be  disclosed  by  the  Company in reports that it files under the
Exchange  Act  is  recorded,  processed, summarized and reported within the time
periods  specified  in  the  rules  and  forms  of  the  Securities and Exchange
Commission  and  to  ensure  that  information  required  to be disclosed in the
reports  filed  or  submitted  under  the  Exchange  Act  is  accumulated  and
communicated  to our management, including the Chief Executive Officer and Chief
Financial  Officer, in a manner  that allows timely decisions regarding required
disclosure.  There  were  no  changes  in  the  Company's internal controls over
financial  reporting  that occurred in the first quarter of 2006 that materially
affected,  or  were reasonably likely to materially affect, its internal control
over  financial  reporting.

                                       20
<PAGE>

PART  II.  OTHER  INFORMATION
-----------------------------

ITEM 1.  LEGAL PROCEEDINGS
--------------------------
From  time  to  time  the  Company  is  subject  to litigation incidental to its
business.  The Company is not presently a party to any material litigation. Such
claims,  if  successful,  could  result  in  damage  awards  exceeding,  perhaps
substantially,  applicable  insurance  coverage.

ITEM 1A.  RISK FACTORS
----------------------
There have been no material changes in our risk factors from those disclosed  in
our  Annual  Report  on  Form  10-K  for  the  year  ended  December  31,  2005.

ITEM  2.  CHANGES  IN  SECURITIES  AND  USE  OF  PROCEEDS
---------------------------------------------------------
The following chart provides information regarding Common Stock purchases by the
Company  during  the  period  January  1,  2006  through  March  31,  2006.
<TABLE>
<CAPTION>

ISSUER PURCHASES OF EQUITY SECURITIES
------------------------------------------

                                                                                          Total Number      Approximate
                                                                                           Of Shares        Dollar Value
                                                                                          Purchased as     Of Shares That
                                                                                            Part of          May Yet Be
                                                                                            Publicly         Purchased
                                              Total Number          Average Price           Announced        Under the
                                               Of Shares                 Paid               Plans or          Plans or
Period                                         Purchased              per Share             Programs          Programs
------------------------------------------  ----------------  --------------------------  -------------    ---------------
<S>                                         <C>                      <C>                    <C>              <C>
January 1, 2006 through January 31, 2006              -              $      -                    -           $1,150,832
February 1, 2006 through February 28, 2006            -              $      -                    -           $1,150,832
March 1, 2006 through March 31, 2006              1,147              $  17.68                1,147           $1,130,552
                                                  ------                                     -----
Total                                             1,147              $  17.68                1,147
</TABLE>

The  purchases  of  1,147 shares of Common Stock in March 2006 were made through
open  market  transactions  that  were made pursuant to publicly announced plans
which  were  approved by the Board of Directors. As of March 31, 2006, there was
approximately  $1.1  million  available for the purchase of the Company's Common
Stock  under  publicly  announced plans which have been approved by the Board of
Directors.  There  is  no expiration date on these plans.  Such purchases may be
made  from  time  to  time,  as  the  Company's  management  deems  appropriate.

ITEM  5.  OTHER  INFORMATION
----------------------------

On July 13, 2005, the Company announced that its Board of Directors had declared
a  2-for-1  stock split of its common stock.  The 2-for-1 stock split, which was
effected  as a stock dividend, was distributed on August 8, 2005 to shareholders
of record at the close of business on August 1, 2005.  The stock split increased
the  number of shares outstanding from 1,210,295 on August 8, 2005 to 2,420,590.
All  shares  and  earnings per share calculations for all periods in this report
are  restated  to  reflect  the  effect  of  the  stock  split.

On  April  25, 2006, the Company amended its Credit Facility. The amended Credit
Facility increases the amount the Company may borrow, on a revolving basis, from
$5.0  million  to  $7.0  million  and  extends the expiration date of the credit
agreement  from  May  31,  2007  to  May  31,  2008.

                                       21
<PAGE>
------
ITEM  6.   EXHIBITS
-------------------
EXHIBIT
NUMBER        DESCRIPTION OF DOCUMENT
------        -----------------------

10.46  Third  Amendment of Second Amended and Restated Credit Agreement dated
       April  25,  2006  between  the  Registrant  and  Key  Bank  of  Colorado.

31.1   Rule  13a-14(a)  Certification  of  the  Chief  Executive  Officer.


31.2   Rule  13a-14(a)  Certification  of  the  Chief  Financial  Officer.

32.1   Section  1350  Certifications  of  the  Chief Executive Officer and the
       Chief Financial Officer.


















                                       22
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.




                    BIRNER DENTAL MANAGEMENT SERVICES, INC.


Date:  May 15, 2006            By:    /s/ Frederic W.J. Birner
                                      ------------------------
                             Name:    Frederic W.J. Birner
                            Title:    Chairman of the Board and Chief Executive
                                      Officer
                                      (Principal Executive Officer)


Date:  May 15, 2006            By:    /s/ Dennis N. Genty
                                      -------------------
                             Name:    Dennis N. Genty
                            Title:    Chief Financial Officer, Secretary, and
                                      Treasurer























                                       23