**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,
          2007


**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(State
                or other jurisdiction of incorporation or organization)
            
            (IRS
                Employer
              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 14, 2007*Common
                Stock, without par value
            
            2,124,660




*-
          1
          -*








**BIRNER
      DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES**


**INDEX
      TO FORM 10-Q**














**PART
      I - FINANCIAL INFORMATION**


Item
                  1. Financial Statements
              PageUnaudited Condensed Consolidated Balance Sheets as of December
                  31,
                  2006and
                  March 31, 2007
              3Unaudited
                  Condensed Consolidated Statements of Income for the ThreeMonths
                  Ended March 31, 2006 and 2007
              4Unaudited
                  Condensed Consolidated Statements of Shareholders’ Equity as of March 31,
                  2007
              5Unaudited
                  Condensed Consolidated Statements of Cash Flows for the Three
                  MonthsEnded
                  March 31, 2006 and 2007
              6Unaudited
                  Notes to Condensed Consolidated Financial Statements
              8Item
                  2.Management’s
                  Discussion and Analysis of Financial Condition and
                  Results of Operations
              14Item
                  3.Quantitative
                  and Qualitative Disclosures About Market Risk
              21Item
                  4.Controls
                  and Procedures
              21**PART
                  II - OTHER INFORMATION**Item
                  1.Legal
                  Proceedings
              22Item
                  1A.Risk
                  Factors
              22Item
                  2.Unregistered
                  Sales of Equity Securities and Use of Proceeds
              22Item
                  5.Other
                  Information
              22Item
                  6.Exhibits
              23Signatures
              24




*-
            2
            -*


**PART
      I - FINANCIAL INFORMATION**





**ITEM
      1. FINANCIAL STATEMENTS**




**BIRNER
        DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
  December
                  31,
              
              March
                  31,ASSETS
              
              2006
              
              2007**
              
              (Unaudited)CURRENT
                  ASSETS:Cash
                  and cash equivalents
              
              $
              888,186
              
              $
              713,265Accounts
                  receivable, net of allowance for doubtfulaccounts
                  of $288,513 and $276,303, respectively
              
              
              3,103,922
              
              
              3,908,588Deferred
                  tax asset
              
              
              185,671
              
              
              205,642Prepaid
                  expenses and other assets
              
              
              597,283
              
              
              840,766Total
                  current assets
              
              
              4,775,062
              
              
              5,668,261PROPERTY
                  AND EQUIPMENT, net
              
              
              5,592,672
              
              
              5,340,792OTHER
                  NONCURRENT ASSETS:Intangible
                  assets, net
              
              
              12,272,358
              
              
              12,082,086Deferred
                  charges and other assets
              
              
              181,860
              
              
              173,527Total
                  assets
              
              $
              22,821,952
              
              $
              23,264,666LIABILITIES
                  AND SHAREHOLDERS’ EQUITYCURRENT
                  LIABILITIES:Accounts
                  payable
              
              $
              1,648,498
              
              $
              1,773,412Accrued
                  expenses
              
              
              1,398,267
              
              
              1,476,062Accrued
                  payroll and related expenses
              
              
              1,596,770
              
              
              2,153,813Income
                  taxes payable
              
              
              114,016
              
              
              481,144Current
                  maturities of long-term debt
              
              
              953,561
              
              
              1,150,000Total
                  current liabilities
              
              
              5,711,112
              
              
              7,034,431LONG-TERM
                  LIABILITIES:Deferred
                  tax liability, net
              
              
              734,234
              
              
              846,217Long-term
                  debt, net of current maturities
              
              
              6,502,411
              
              
              5,170,652Other
                  long-term obligations
              
              
              326,550
              
              
              310,946Total
                  liabilities
              
              
              13,274,307
              
              
              13,362,246SHAREHOLDERS'
                  EQUITY:Preferred
                  Stock, no par value, 10,000,000 sharesauthorized;
                  none outstanding
              
              
              -
              
              
              -Common
                  Stock, no par value, 20,000,000 sharesauthorized;
                  2,132,461 and 2,123,660 shares issued andoutstanding,
                  respectively
              
              
              4,515,469
              
              
              4,324,095Deferred
                  equity compensation
              
              
              (324,120
              )
              
              (243,090
              )Retained
                  earnings
              
              
              5,356,296
              
              
              5,821,415Total
                  shareholders' equity
              
              
              9,547,645
              
              
              9,902,420Total
                  liabilities and shareholders' equity
              
              $
              22,821,952
              
              $
              23,264,666**
                  Derived from the Company’s audited consolidated balance sheet at December
                  31, 2006.


The
        accompanying notes are an integral part of these condensed consolidated balance
        sheets.


*-
          3
          -*




**BIRNER
        DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES**


**CONDENSED
        CONSOLIDATED STATEMENTS OF INCOME**
 **(UNAUDITED)**
  Three
                  Months EndedMarch
                  31,2006
              
              
              
              2007NET
                  REVENUE:
              $
              10,140,029
              
              
              
              
              $
              10,838,407DIRECT
                  EXPENSES:Clinical
                  salaries and benefits
              
              
              
              
              
              3,688,987
              
              
              
              
              
              3,840,292Dental
                  supplies
              
              
              
              
              
              575,637
              
              
              
              
              
              560,926Laboratory
                  fees
              
              
              
              
              
              641,896
              
              
              
              
              
              680,206Occupancy
              
              
              
              
              
              1,056,733
              
              
              
              
              
              1,133,052Advertising
                  and marketing
              
              
              
              
              
              208,954
              
              
              
              
              
              148,760Depreciation
                  and amortization
              
              
              
              
              
              479,775
              
              
              
              
              
              610,552General
                  and administrative
              
              
              
              
              
              1,190,869
              
              
              
              
              
              1,176,4967,842,851
              
              
              
              
              
              8,150,284Contribution
                  from dental offices
              
              
              
              
              
              2,297,178
              
              
              
              
              
              2,688,123CORPORATE
                  EXPENSES:General
                  and administrative
              
              
              
              
              
              1,081,063
              (1)
              
              
              
              
              1,246,526
              (1)Depreciation
                  and amortization
              
              
              
              
              
              34,196
              
              
              
              
              
              30,828Operating
                  income
              
              
              
              
              
              1,181,919
              
              
              
              
              
              1,410,769Interest
                  expense
              
              
              
              
              
              39,620
              
              
              
              
              
              106,153Income
                  before income taxes
              
              
              
              
              
              1,142,299
              
              
              
              
              
              1,304,616Income
                  tax expense
              
              
              
              
              
              439,974
              
              
              
              
              
              521,847Net
                  income
              
              
              
              
              $
              702,325
              
              
              
              
              $
              782,769Net
                  income per share of Common Stock - Basic
              
              
              
              
              $
              0.30
              
              
              
              
              $
              0.37Net
                  income per share of Common Stock - Diluted
              
              
              
              
              $
              0.27
              
              
              
              
              $
              0.34Cash
                  dividends per share of Common Stock
              
              
              
              
              $
              0.13
              
              
              
              
              $
              0.15Weighted
                  average number of shares ofCommon
                  Stock and dilutive securities:Basic
              
              
              
              
              
              2,372,506
              
              
              
              
              
              2,126,376Diluted
              
              
              
              
              
              2,584,713
              
              
              
              
              
              2,306,908




(1)
            Corporate expense - general and
                administrative includes $81,030 of deferred equity compensation for
                a
                stock award and $87,745 related to stock-based compensation expense
                in the
                three months ended March 31, 2006, and $81,030 of deferred equity
                compensation expense for a stock award and $90,064 related to stock-based
                compensation expense in the three months ended March 31,
                2007.




The
        accompanying notes are an integral part of these condensed consolidated balance
        sheets.
  *-
            4
            -*




**BIRNER
          DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES**
 **CONDENSED
          CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY**
 **(UNAUDITED)**
 DeferredCommon
                    Stock
                
                
                
                Equity
                
                Retained
                
                Shareholders'Shares
                
                Amount
                
                Compensation
                
                Earnings
                
                EquityBALANCES,
                    December 31, 2006
                
                
                2,132,461
                
                $
                4,515,469
                
                $
                (324,120
                )
                $
                5,356,296
                
                $
                9,547,645Common Stock options exercised
                
                
                10,667
                
                
                78,049
                
                
                -
                
                
                -
                
                
                78,049Purchase
                    and retirement of Common Stock
                
                
                (19,468
                )
                
                (415,893
                )
                
                -
                
                
                -
                
                
                (415,893
                )Tax
                    benefit of Common Stock options exercised
                
                
                -
                
                
                56,406
                
                
                -
                
                
                -
                
                
                56,406Dividends
                    declared on Common Stock
                
                
                -
                
                
                -
                
                
                -
                
                
                (317,650
                )
                
                (317,650
                )Stock-based
                    compensation expense
                
                
                -
                
                
                90,064
                
                
                -
                
                
                -
                
                
                90,064Amortization
                    of deferred equity compensation
                
                
                -
                
                
                -
                
                
                81,030
                
                
                -
                
                
                81,030Net
                    income
                
                
                -
                
                
                -
                
                
                -
                
                
                782,769
                
                
                782,769BALANCES,
                    March 31, 2007
                
                
                2,123,660
                
                $
                4,324,095
                
                $
                (243,090
                )
                $
                5,821,415
                
                $
                9,902,420
  The
        accompanying notes are an integral part of these condensed consolidated balance
        sheets.
   *-
            5
            -*


Page
        1 of
        2
 BIRNER DENTAL MANAGEMENT SERVICES,
      INC. AND
      SUBSIDIARIES **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**
  Three
                  Months EndedMarch
                  31,2006
              
              2007CASH
                  FLOWS FROM OPERATING ACTIVITIES:Net
                  income
              
              $
              702,325
              
              $
              782,769Adjustments
                  to reconcile net income to netcash
                  provided by operating activities:Depreciation
                  and amortization
              
              
              513,971
              
              
              641,379Stock
                  compensation expense
              
              
              87,745
              
              
              90,064Provision
                  for doubtful accounts
              
              
              224,667
              
              
              154,926Provision
                  for (benefit from) deferred income taxes
              
              
              97
              
              
              92,012Amortization
                  of deferred equity compensation
              
              
              81,030
              
              
              81,030Changes
                  in assets and liabilities net of effectsfrom
                  acquisitions:Accounts
                  receivable
              
              
              (694,898
              )
              
              (959,592
              )Prepaid
                  expenses and other assets
              
              
              (96,327
              )
              
              (243,483
              )Deferred
                  charges and other assets
              
              
              (27,565
              )
              
              8,333Accounts
                  payable
              
              
              (178,524
              )
              
              124,914Accrued
                  expenses
              
              
              115,372
              
              
              38,023Accrued
                  payroll and related expenses
              
              
              944,228
              
              
              557,043Income
                  taxes payable
              
              
              272,797
              
              
              367,128Other
                  long-term obligations
              
              
              (196
              )
              
              (15,604
              )Net
                  cash provided by operating activities
              
              
              1,944,722
              
              
              1,718,942CASH
                  FLOWS FROM INVESTING ACTIVITIES:Capital
                  expenditures
              
              
              (682,917
              )
              
              (199,227
              )Development
                  of new dental centers
              
              
              (514,755
              )
              
              -Net
                  cash used in investing activities
              
              
              (1,197,672
              )
              
              (199,227
              )CASH
                  FLOWS FROM FINANCING ACTIVITIES:Advances
                  - line of credit
              
              
              4,023,409
              
              
              5,871,902Repayments
                  - line of credit
              
              
              (4,677,014
              )
              
              (6,973,663
              )Repayment
                  of long-term debt
              
              
              (43,966
              )
              
              (33,559
              )Proceeds
                  from exercise of Common Stock options
              
              
              87,411
              
              
              78,049Purchase
                  and retirement of Common Stock
              
              
              (20,278
              )
              
              (415,893
              )Tax
                  benefit of Common Stock options exercised
              
              
              17,081
              
              
              56,406Common
                  Stock cash dividends
              
              
              (235,124
              )
              
              (277,878
              )Net
                  cash used in financing activities
              
              
              (848,481
              )
              
              (1,694,636
              )NET
                  INCREASE (DECREASE) IN CASH ANDCASH
                  EQUIVALENTS
              
              
              (101,431
              )
              
              (174,921
              )CASH
                  AND CASH EQUIVALENTS, beginning of period
              
              
              921,742
              
              
              888,186CASH
                  AND CASH EQUIVALENTS, end of period
              
              $
              820,311
              
              $
              713,265




The
        accompanying notes are an integral part of these condensed consolidated balance
        sheets.
   *-
            6
            -*




Page
        2 of
        2


BIRNER
      DENTAL MANAGEMENT SERVICES, INC. AND
      SUBSIDIARIES **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **(UNAUDITED)**
  Three
                  Months EndedMarch
                  31,2006
              
              2007SUPPLEMENTAL DISCLOSURE OF CASHFLOW NFORMATION:Cash
                  paid during the year for interest
              
              $
              77,139
              
              $
              126,062Cash
                  paid during the year for income taxes
              
              $
              -
              
              $
              -




The
        accompanying notes are an integral part of these condensed consolidated balance
        sheets.
   *-
            7
            -*







**BIRNER
      DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES**


**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)**


**March
      31, 2007**





(1)  UNAUDITED
      CONDENSED CONSOLIDATED FINANCIAL STATEMENTS





The
      condensed consolidated 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, 2006.





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, 2007 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 the three months ended
      March 31, 2007 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.








(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
      dental offices (“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 related to the Office (“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 $194,704 and $194,749 for the three months ended
      March 31, 2007 and 2006, 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
      discounted 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 Payment." 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
            -*





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, 2007 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, 2007 and 2006 was approximately $90,000 and $88,000, respectively.
      Total stock-based compensation expense was recorded as a component of corporate
      general and administrative expense.




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, 2007 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, 2007 for the expected option
      term.
      The expected option term was calculated using the “simplified” method permitted
      by Staff Accounting Bulletin 107.







Prior
      to
      January 1, 2006, the Company accounted for stock options using the intrinsic
      value method wherein compensation expense was 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
      were granted at amounts equal to or higher than the fair value of the Common
      Stock, so no compensation expense was recorded.





*Income
      Taxes*




Effective
      January 1, 2007, the Company adopted the provisions of FASB Interpretation
      No. 48, *Accounting
      for Uncertainty in Income Taxes* (“FIN
      48”). FIN 48 clarifies the accounting for uncertainty in income taxes
      recognized in a company’s financial statements in accordance with FASB Statement
      No. 109, *Accounting
      for Income Taxes* .
      FIN 48 requires a company to determine whether it is more likely than not
      that a tax position will be sustained upon examination based upon the technical
      merits of the position. If the more-likely-than-not threshold is not met, a
      company must measure the tax position to determine the amount to recognize
      in
      the financial statements. The application of income tax law and regulations
      is
      inherently complex and subject to change. The Company is required to make many
      subjective assumptions and judgments regarding the income tax exposures. Changes
      in these subjective assumptions and judgments can materially affect amounts
      recognized in the Company’s financial statements.




At
      the
      adoption date of January 1, 2007 and at March 31, 2007, the Company had no
      unrecognized tax benefits which would affect the effective tax rate if
      recognized, and as of March 31, 2007, the Company had no accrued interest
      or penalties related to uncertain tax positions.




On
      initial application, FIN 48 was applied to all tax positions for which the
      statute of limitations remained open. The tax year 2006 federal return has
      been
      granted an extension to file until September 15, 2007. The tax years 2003-2006
      remain open to examination by taxing jurisdictions to which the Company is
      subject. The IRS report issued in July 2006, made no changes to the return.
      No
      other federal or state exams are ongoing or have been performed in the past
      three years.








(3)   EARNINGS
      PER SHARE





The
      Company calculates earnings per share in accordance with SFAS No. 128, “Earnings
      Per Share.”


Three
                  Months Ended March 31,2006
              
              2007Income
              
              Shares
              
              Per
                  Share Amount
              
              Income
              
              Shares
              
              Per
                  Share AmountBasic
                  EPS:Net
                  income available to shares of Common Stock
              
              $
              702,325
              
              
              2,372,506
              
              $
              0.30
              
              $
              782,769
              
              
              2,126,376
              
              $
              0.37Effect
                  of dilutive shares of Common Stock from stock options and
                  warrants
              
              
              -
              
              
              212,207
              
              
              (0.03
              )
              
              -
              
              
              180,532
              
              
              (0.03
              )Diluted
                  EPS:Net
                  income available to shares of Common Stock
              
              $
              702,325
              
              
              2,584,713
              
              $
              0.27
              
              $
              782,769
              
              
              2,306,908
              
              $
              0.34


The
      difference in weighted average shares outstanding between basic earnings per
      share and diluted earnings per share for the three months ended March 31, 2007
      and 2006 relates to the effect of 180,532 and 212,207 shares, 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, 2007,
      options to purchase 3,644 shares of the Company’s Common Stock were not included
      in the computation of dilutive income per share because their effect was
      anti-dilutive.







*-
          9
          -*





(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, 2007, there were 30,300 shares available for
      issuance under the 2005 Plan. The exercise price of the stock options issued
      under the 2005 Plan is equal to the market price, or market price plus 10%
      for
      shareholders who own greater than 10% of the Company, at the date of grant.
      These stock options expire seven years, or five years for shareholders who
      own
      greater than 10% 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 independent 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
      to be
      granted to any eligible individual, the life of any award, and any other terms
      and conditions of the awards in addition to those contained in the 2005 Plan. As
      of
      March 31, 2007 there were 21,001 vested options, 188,699 unvested options,
      40,000 vested restricted shares and 20,000 unvested restricted shares
      outstanding under the 2005 Plan. In March 2007 the Board of Directors resolved
      that, subject to approval by the shareholders at the 2007 Annual Meeting of
      Shareholders, the number of authorized shares under the 2005 Plan be increased
      from 300,000 to 425,000.





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, 2007, there were 271,535 vested
      options outstanding and 64,667 unvested options outstanding under the Employee
      Plan.








*-
            10
            -*





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 are an owner of the P.C.s. The Dental Center Plan expired by
      its
      terms on October 30, 2005. As of March 31, 2007, there were 14,000 vested
      options outstanding and no unvested options outstanding under the Dental Center
      Plan.





The
      Company uses the Black-Scholes pricing model to estimate the fair value of
      each
      option granted with the following weighted average assumptions:


Three
                  Months EndedMarch
                  31,Valuation
                  Assumptions
              
              2006
              
              2007Expected
                  life(1)
              
              
              5.0
              
              
              4.5Risk-free
                  interest rate(2)
              
              
              4.72
              %
              
              4.75
              %Expected
                  volatility(3)
              
              
              50
              %
              
              58
              %Expected
                  dividend yield
              
              
              2.90
              %
              
              3.07
              %Expected
                  Forteiture(4)
              
              
              4.49
              %
              
              5.32
              %


_____________________________


(1) The
      expected life, in years, of stock options is estimated using the
      simplified-method calculation.


(2) The
      risk-free interest rate is based on U.S. Treasury bills whose term is consistent
      with the expected life of the stock options.


(3) The
      expected volatility is estimated based on historical and current stock price
      data for the Company.


(4) Forfeitures
      on options granted prior to the Company’s adoption of SFAS 123(R) on January 1,
      2006, are recorded as they occur. Forfeitures on options granted since the
      Company’s adoption of SFAS 123(R), are estimated based on historical experience.




A
      summary
      of option activity as of March 31, 2007, and changes during the three months
      then ended, is presented below:




Number
                  of Options
              
              Weighted-Average
                  Exercise Price
              
              Range
                  of Exercise Prices
              
              Weighted-Average
                  Remaining Contractual Term (years)
              
              Aggregate
                  Intrinsic Value (thousands)Outstanding
                  at December 31, 2006
              
              
              563,235
              
              $
              11.63
              
              $
              4.80
                  - $19.75Granted
              
              
              17,000
              
              $
              21.84
              
              $
              21.75
                  - $21.85Exercised
              
              
              10,667
              
              $
              7.32
              
              $
              5.50
                  - $ 9.66Forfeited
              
              
              9,666
              
              $
              13.30
              
              $
              9.66
                  - $17.61Outstanding
                  at March 31, 2007
              
              
              559,902
              
              $
              11.99
              
              $
              4.80
                  - $21.85
              
              
              3.5
              
              $
              6,715Exercisable
                  at March 31, 2007
              
              
              306,536
              
              $
              8.04
              
              $
              4.80
                  - $19.37
              
              
              1.9
              
              $
              2,466





The
      weighted average grant date fair value of options granted was $9.16 per option
      and $6.87 per option during the three months ended March 31, 2007 and 2006,
      respectively. Net cash proceeds from the exercise of stock options during the
      three months ended March 31, 2007 and 2006 were $78,049 and $87,411,
      respectively. The associated income tax benefit from stock options exercised
      during the three months ended March 31, 2007 and 2006 was $56,406 and $17,081,
      respectively. As of the date of exercise, the total intrinsic value of options
      exercised during the three months ended March 31, 2007 and 2006 was $166,936
      and
      $634,761, respectively. As of March 31, 2007, there was $1.4 million of total
      unrecognized compensation expense related to non-vested stock options, which
      is
      expected to be recognized over a weighted average period of 1.42 years.








*-
            11
            -*





(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”) under the 2005
      Plan. 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, 2007, there was approximately $243,000 of unrecognized compensation
      expense related to the restricted stock grant. The remaining expense is expected
      to be recognized in 2007.





A
      summary
      of the vesting status of the shares of restricted stock as of March 31, 2007,
      and the changes during the three months then ended, is presented
      below:


Three
                  Months EndedMarch
                  31, 2007Number
                  of Restricted Shares
              
              Weighted-Average
                  Grant-Date Fair ValueNon-vested
                  at December 31, 2006
              
              
              40,000
              
              $
              13.51Granted
              
              
              -
              
              
              -Vested
              
              
              (20,000
              )
              
              13.51Forfeited
              
              
              -
              
              
              -Non-vested
                  at March 31, 2007
              
              
              20,000
              
              $
              13.51




(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. On
      January 11, 2007, the Company announced an increase in the amount of the
      quarterly dividend to $.15 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 the Company’s 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
      30, 2007, the Company amended its bank line of credit (“Credit Facility”). The
      amended Credit Facility decreases the LIBOR rate margin from 1.50% to 1.25%
      and
      extends the expiration of the credit agreement from May 31, 2008 to May 31,
      2009. The Credit Facility allows the Company to borrow, on a revolving basis,
      an
      aggregate principal amount not to exceed $7.0 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 1.25%. 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. At March 31, 2007, the Company
      had $2.0 million  outstanding
      and $5.0 million available for borrowing under the Credit Facility. This
      consisted of $1.8 million outstanding under the LIBOR rate option and $151,000
      outstanding under the Base Rate option. The Credit Facility requires the Company
      to maintain certain financial ratios on an ongoing basis. At March 31, 2007,
      the
      Company was in full compliance with all of its covenants under the Credit
      Facility.




(8)  CAPITAL
      EXPENDITURES




The
      Company’s retained earnings as of March 31, 2007 were approximately $5.8
      million, and the Company had a working capital deficit on that date of
      approximately $1.3 million. During the three months ended March 31, 2007, the
      Company had capital expenditures of approximately $199,000 and purchased
      approximately $416,000 of Common Stock while decreasing total bank debt by
      approximately $1.1 million.








*-
            12
            -*





(9)  DUTCH
      AUCTION TENDER OFFER AND TERM LOAN




On
      October 5, 2006, the Company accepted for payment, at a purchase price of $21.75
      per share, 212,396 shares of its Common Stock that were properly tendered and
      not withdrawn pursuant to the Company’s “Dutch Auction” tender offer. The
      212,396 shares purchased were comprised of the 175,000 shares the Company
      offered to purchase and 37,396 shares that were purchased pursuant to the
      Company's right to purchase up to an additional 2% of the outstanding shares
      as
      of August 31, 2006, without extending the Dutch Auction tender offer in
      accordance with applicable securities laws. These shares represented
      approximately 9.2% of the shares outstanding as of September 30, 2006. The
      Dutch
      Auction tender offer was funded from a $4.6 million term loan (“Term Loan”).
      Under the Term Loan, $2.3 million is borrowed at a fixed interest rate of 7.05%
      and the remaining $2.3 million is borrowed at a floating interest rate of LIBOR
      plus 1.5%. The principal amount borrowed will be paid quarterly in 20 equal
      payments of approximately $230,000 plus interest beginning December 31, 2006.
      The Term Loan matures on September 30, 2011. On October 12, 2006, the Company
      entered into a fixed-for-floating interest rate swap transaction on the Term
      Loan and in February 2007 designated it as a cash flow hedge under Statement
      of
      Financial Accounting Standards (“SFAS”) No. 133, "Accounting for Derivatives."
      Under SFAS 133, the Company is required to recognize
      all derivatives as either assets or liabilities in the statement of financial
      position and measure those instruments at fair value unless (i) a hedge of
      the
      exposure to changes in the fair value of a recognized asset or liability or
      an
      unrecognized firm commitment, (ii) a hedge of the exposure to variable cash
      flows of a forecasted transaction, or (iii) a hedge of the foreign currency
      exposure of a net investment in a foreign operation, an unrecognized firm
      commitment, an available-for-sale security, or a foreign-currency-denominated
      forecasted transaction. The swap
      was entered into for purposes other than trading purposes. At March 31, 2007,
      the Company was in full compliance with all of its covenants under the Term
      Loan.








*-
            13
            -*





**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, 2006, 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, 2006 and 2007. 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 60 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**




In
      June 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
      Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in Income Taxes—An
      Interpretation of FASB Statement No. 109,” which prescribes a recognition
      threshold and measurement attribute for the financial statement recognition
      and
      measurement of a tax position taken or expected to be taken in a tax return.
      The
      Company adopted the provisions of FIN 48 on January 1, 2007 and has
      analyzed filing positions in its federal and state jurisdictions where the
      Company is required to file income tax returns, as well as for all open tax
      years in these jurisdictions. The Company believes its income tax filing
      positions and deductions will be sustained under audit and believes it does
      not
      have significant uncertain tax positions that, in the event of adjustment,
      will
      result in a material effect on the results of operations or financial position,
      see Notes to Condensed Consolidated Financial Statements, (2) Significant
      Accounting Policies .








*-
            14
            -*





The
      Company’s critical accounting policies are set forth in its Annual Report on
      Form 10-K for the year ended December 31, 2006. Except for FIN 48, 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.





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.








*-
            15
            -*





Under
      the
      Management Agreements, the Company negotiates and administers the capitated
      managed dental care 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 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.




**Results
      of Operations**




For
      the
      three months ended March 31, 2007, Revenue increased $1.2 million, or 7.9%,
      to
      $15.7 million compared to $14.6 million for the three months ended March 31,
      2006. For the three months ended March 31, 2007, net revenue increased $698,000,
      or 6.9%, to $10.8 million compared to $10.1 million for the three months ended
      March 31, 2006.





For
      the
      three months ended March 31, 2007, net income increased 11.5% to $783,000,
      or
      $.34 per share compared to $702,000, or $.27 per share for the three months
      ended March 31, 2006.





The
      Company continues to generate strong cash flow from operations. During the
      first
      three months of 2007, the Company purchased $416,000 of its outstanding common
      stock, incurred $199,000 in capital expenditures, paid $278,000 in dividends,
      and repaid $34,000 of long term debt while decreasing borrowings under its
      Credit Facility by $1.1 million.





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 U.S.
      generally accepted accounting principles (“GAAP”) measure. The Company discloses
      Revenue and believes it is useful to investors 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.


Three
                  Months EndedMarch
                  31,2006
              
              2007Total
                  dental group practice revenue
              
              $
              14,579,914
              
              $
              15,733,695Less
                  - amounts retained by dental Offices
              
              
              (4,439,885
              )
              
              (4,895,288
              )Net
                  revenue
              
              $
              10,140,029
              
              $
              10,838,407







*-
            16
            -*





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 following 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.




**BIRNER
        DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES**
 **CONDENSED
        CONSOLIDATED STATEMENTS OF INCOME**
 **(UNAUDITED)**
  Three
                  Months EndedMarch
                  31,2006
              
              2007NET
                  REVENUE:
              
              
              100.0
              %
              
              100.0
              %DIRECT
                  EXPENSES:Clinical
                  salaries and benefits
              
              
              36.4
              %
              
              35.4
              %Dental
                  supplies
              
              
              5.7
              %
              
              5.2
              %Laboratory
                  fees
              
              
              6.3
              %
              
              6.3
              %Occupancy
              
              
              10.4
              %
              
              10.5
              %Advertising
                  and marketing
              
              
              2.1
              %
              
              1.4
              %Depreciation
                  and amortization
              
              
              4.7
              %
              
              5.6
              %General
                  and administrative
              
              
              11.7
              %
              
              10.9
              %77.3
              %
              
              75.2
              %Contribution
                  from dental offices
              
              
              22.7
              %
              
              24.8
              %CORPORATE
                  EXPENSES:General
                  and administrative
              
              
              10.7
              %
              
              11.5
              %Depreciation
                  and amortization
              
              
              0.3
              %
              
              0.3
              %Operating
                  income
              
              
              11.7
              %
              
              13.0
              %Interest
                  expense
              
              
              0.4
              %
              
              1.0
              %Income
                  before income taxes
              
              
              11.3
              %
              
              12.0
              %Income
                  tax expense
              
              
              4.3
              %
              
              4.8
              %Net
                  income
              
              
              7.0
              %
              
              7.2
              %




***Three
      Months Ended March 31, 2007 Compared to Three Months Ended March 31,
      2006:***




*Net
      revenue.* For the
      three months March 31, 2007, net revenue increased $698,000, or 6.9%, to $10.8
      million compared to $10.1 million for the three months ended March 31, 2006.
      This increase is attributable to an increase in net revenue of $311,000 at
      the
      56 Offices that were open during each full quarter and $387,000 in net revenue
      from the addition of four *de
      novo* Offices
      opened either during the quarter ended March 31, 2006 or after March 31,
      2006.





*Clinical
      salaries and benefits.* For the
      three months ended March 31, 2007, clinical salaries and benefits increased
      $151,000, or 4.1%, to $3.8 million  compared
      to $3.7 million for the three months ended March 31, 2006. This increase was
      primarily due to additional employees at the four *de
      novo* Offices
      opened either during the quarter ended March 31, 2006 or after March 31, 2006
      and annual wage increases that became effective February 1, 2007. As a
      percentage of net revenue, clinical salaries and benefits decreased to 35.4%
      for
      the three months ended March 31, 2007 compared to 36.4% for the three months
      ended March 31, 2006.







*-
            17
            -*










*Dental
      supplies.* For the
      three months ended March 31, 2007, dental supplies decreased to $561,000
      compared to $576,000 for the three months ended March 31, 2006, a decrease
      of
      $15,000 or 2.6%. As a percentage of net revenue, dental supplies decreased
      to
      5.2% for the three months ended March 31, 2007 compared to 5.7% for the three
      months ended March 31, 2006.




*Laboratory
      fees.* For the
      three months ended March 31, 2007, laboratory fees increased to $680,000
      compared to $642,000 for the three months ended March 31, 2006, an increase
      of
      $38,000 or 6.0%. This increase was primarily related to the addition of the
      four *de
      novo* Offices
      opened either during the quarter ended March 31, 2006 or after March 31, 2006.
      As a percentage of net revenue, laboratory fees remained constant at 6.3% for
      the three months ended March 31, 2007 and 2006.




*Occupancy.* For the
      three months ended March 31, 2007, occupancy expense increased $76,000 or 7.2%
      to $1.1 million. This increase was primarily due to the four *de
      novo* Offices
      opened either during the quarter ended March 31, 2006 or after March 31, 2006
      and increased rental payments resulting from the renewal of Office leases at
      current market rates for Offices whose leases expired subsequent to March 31,
      2006. As a percentage of net revenue, occupancy expense increased to 10.5%
      for
      the three months ended March 31, 2007 compared to 10.4% for the three months
      ended March 31, 2006.




*Advertising
      and marketing.* For the
      three months ended March 31, 2007, advertising and marketing expense decreased
      to $149,000 compared to $209,000 for the three months ended March 31, 2006,
      a
      decrease of $60,000 or 28.8%. This decrease is attributable to a shift away
      from
      a comprehensive television and print advertising campaign in the Albuquerque,
      New Mexico and Colorado Springs, Colorado markets in 2006. The Company began
      a
      television advertising campaign in the Denver, Colorado market in March 2007
      that will increase advertising and marketing expense. As a percentage of net
      revenue, advertising and marketing expense decreased to 1.4% for the three
      months ended March 31, 2007 compared to 2.1% for the three months ended March
      31, 2006.




*Depreciation
      and amortization-Offices.* For
      the
      three months ended March 31, 2007, depreciation and amortization expenses
      attributable to the Offices increased to $611,000 compared to $480,000 for
      the
      three months ended March 31, 2006, an increase of $131,000 or 27.3%. The
      increase in the Company’s depreciable asset base is a result of purchasing
      tenant improvements and new equipment for four *de
      novo* Offices
      and the expansion of one existing Office. As a percentage of net revenue,
      depreciation and amortization increased to 5.6% for the three months ended
      March
      31, 2007 compared to 4.7% for the three months ended March 31, 2006.





*General
      and administrative-Offices.* For the
      three months ended March 31, 2007 and 2006, general and administrative expenses
      attributable to the Offices remained constant at $1.2 million. As a percentage
      of net revenue, general and administrative expenses decreased to 10.9% for
      the
      three months ended March 31, 2007 compared to 11.7% for the three months ended
      March 31, 2006.




*Contribution
      from dental Offices.* As a
      result of the above, contribution from dental Offices increased $391,000, or
      17.0%, to $2.7 million for the three months ended March 31, 2007 compared to
      $2.3 million for the three months ended March 31, 2006. As a percentage of
      net
      revenue, contribution from dental offices increased to 24.8% for the three
      months ended March 31, 2007 compared to 22.7% for the three months ended March
      31, 2006.




*Corporate
      expenses - general and administrative.* For the
      three months ended March 31, 2007, corporate expenses - general and
      administrative ** increased
      to $1.2 million compared to $1.1 million for the three months ended March 31,
      2006, an increase of $165,000 or 15.3%. This increase is primarily related
      to an
      increase in executive bonuses, an increase in employee wages related to the
      addition of key personnel and annual wage increases . As
      a
      percentage of net revenue, corporate expenses - general and administrative
      increased to 11.5% for the three months ended March 31, 2007 compared to 10.7%
      for the three months ended March 31, 2006.




*Corporate
      expenses - depreciation and amortization.* For the
      three months ended March 31, 2007, corporate expenses - depreciation and
      amortization decreased to $31,000 compared to $34,000 for the three months
      ended
      March 31, 2006, a decrease of $3,000 or 9.8%. 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 remained constant
      at
      0.3% for the three months ended March 31, 2007 and 2006.




*Operating
      income.* As a
      result of the matters discussed above, the Company’s operating income increased
      to $1.4 million for the three months ended March 31, 2007 compared to $1.2
      million for the three months ended March 31, 2006, an increase of $229,000
      or
      19.4%. As a percentage of net revenue, operating income increased to 13.0%
      for
      the three months ended March 31, 2007 compared to 11.7% for the three months
      ended March 31, 2006.







*-
            18
            -*










*Interest
      expense.* For the
      three months ended March 31, 2007, interest expense increased to $106,000
      compared to $40,000 for the three months ended March 31, 2006, an increase
      of
      $67,000 . This
      increase in interest expense is attributable to higher interest expense on
      the
      Credit Facility and the addition of a Term Loan to finance the Dutch Auction
      tender offer completed in October 2006. As a percentage of net revenue, interest
      expense, increased to 1.0% for the three months ended March 31, 2007 compared
      to
      0.4% for the three months ended March 31, 2006.




*Net
      income.* As a
      result of the above, the Company reported net income of $783,000 for the three
      months ended March 31, 2007 compared to net income of $702,000 for the three
      months ended March 31, 2006, an increase of $80,000 or 11.5%. Net income for
      the
      three months ended March 31, 2007 was net of income tax expense of $522,000,
      while net income for the three months ended March 31, 2006 was net of income
      tax
      expense of $440,000. As a percentage of net revenue, net income increased to
      7.2% for the three months ended March 31, 2007 compared to 7.0% for the three
      months ended March 31, 2006.




**Liquidity
      and Capital Resources**




The
      Company finances its operations and growth through a combination of cash
      provided by operating activities and the Credit Facility. As of March 31, 2007,
      the Company had a working capital deficit of approximately $1.4 million.




Net
      cash
      provided by operating activities was approximately $1.7 million and $1.9 million
      for the three months ended March 31, 2007 and 2006, respectively. During the
      2007 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 $720,000,
      an
      increase in income taxes payable of approximately $367,000 and a decrease in
      deferred charges and other assets of approximately $8,000, offset by an increase
      in accounts receivable of approximately $960,000 (primarily due to higher
      Revenue), an increase in prepaid expenses and other assets of approximately
      $243,000, and a decrease in other long-term obligations of approximately
      $16,000. 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.




Net
      cash
      used in investing activities was approximately $199,000 and $1.2 million for
      the
      three months ended March 31, 2007 and 2006, respectively. For the three months
      ended March 31, 2007, the Company invested approximately $199,000 in the
      purchase of additional equipment. 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.




Net
      cash
      used in financing activities was approximately $1.7 million for the three months
      ended March 31, 2007 and $848,000 for the three months ended March 31, 2006.
      During the three months ended March 31, 2007, net cash used in financing
      activities was comprised of approximately $1.1 million used to pay down the
      Credit Facility, approximately $416,000 used in the purchase and retirement
      of
      Common Stock, approximately $34,000 for the repayment of long-term debt and
      approximately $278,000 for the payment of dividends, partially offset by
      approximately $78,000 in proceeds from the exercise of Common Stock options
      and
      $56,000 in tax benefit of Common Stock options exercised. 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 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.




On
      April
      30, 2007, the Company amended its bank line of credit (“Credit Facility”). The
      amended Credit Facility decreases the LIBOR rate margin from 1.50% to 1.25%
      and
      extends the expiration of the credit agreement from May 31, 2008 to May 31,
      2009. The Credit Facility allows the Company to borrow, on a revolving basis,
      an
      aggregate principal amount not to exceed $7.0 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 1.25%. 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. At March 31, 2007, the Company
      had $2.0 million  outstanding







*-
            19
            -*





and
      $5.0
      million available for borrowing under the Credit Facility. This consisted of
      $1.8 million outstanding under the LIBOR rate option and $151,000 outstanding
      under the Base Rate option. The Credit Facility requires the Company to maintain
      certain financial ratios on an ongoing basis. At March 31, 2007, the Company
      was
      in full compliance with all of its covenants under the Credit
      Facility.




The
      Company’s retained earnings as of March 31, 2007 were approximately $5.8
      million. The Company expects increased costs over the next 12 to 18 months
      as it
      prepares to comply with Sarbanes-Oxley Act Section 404.




On
      October 5, 2006, the Company entered into a $4.6 million Term Loan to finance
      its Dutch Auction tender offer. Under the Term Loan, $2.3 million is borrowed
      at
      a fixed interest rate of 7.05% and the remaining $2.3 million is borrowed at
      a
      floating interest rate of LIBOR plus 1.5%. The principal amount borrowed will
      be
      paid quarterly in 20 equal payments of approximately $230,000 plus interest
      beginning December 31, 2006. The Term Loan expires September 30, 2011.
      T he
      Company designates this fixed-for-floating interest rate swap as a cash flow
      hedge under SFAS No. 133. The Term Loan requires the Company to maintain certain
      financial ratios on an ongoing basis. At March 31, 2007, the Company was in
      full
      compliance with all of its covenants under the Term Loan.





The
      Company’s earnings before interest, taxes, depreciation, amortization and non
      cash expense associated with stock-based compensation (“Adjusted EBITDA”)
      increased $359,000, or 19.2% to $2.2 million for the three months ended March
      31, 2007 compared to $1.9 million for the corresponding three month period
      in
      2006. Although Adjusted EBITDA is not a GAAP measure of performance or
      liquidity, the Company believes that it may be useful to an investor in
      evaluating the Company’s ability to meet future debt service, capital
      expenditures and working capital requirements. 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 Adjusted 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 Adjusted EBITDA to net income
      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
      below.




Three
                  MonthsEnded
                  March 31,2006
              
              2007RECONCILIATION
                  OF ADJUSTED EBITDA:Net
                  income
              
              $
              702,325
              
              $
              782,769Depreciation
                  and amortization - Offices
              
              
              479,775
              
              
              610,552Depreciation
                  and amortization - Corporate
              
              
              34,196
              
              
              30,828Amortization
                  of deferred equity compensation expense
              
              
              81,030
              
              
              81,030Stock-based
                  compensation expense related to
              
              
              87,745
              
              
              90,064SFAS
                  123 (R)Interest
                  expense/(income), net
              
              
              39,620
              
              
              106,153Income
                  tax expense
              
              
              439,974
              
              
              521,847Adjusted
                  EBITDA
              
              $
              1,864,665
              
              $
              2,223,243


As
      of
      March 31, 2007, the Company had the following known contractual
      obligations:




Less
                  than
              
              
              
              
              
              
              
              
              
              More
                  thanTotal
              
              1
                  year
              
              1-3
                  years
              
              
              
              3-5
                  years
              
              
              
              5
                  yearsLong-term
                  debt obligations
              
              $
              6,320,652
              
              $
              1,150,000
              
              $
              3,560,652
              
              
              
              
              $
              1,610,000
              
              
              
              
              $
              -Operating
                  lease obligations
              
              
              8,132,342
              
              
              2,748,407
              
              
              3,949,228
              
              
              
              
              
              1,385,541
              
              
              
              
              
              49,166Other
                  long-term liabilities reflected on the
                  balance sheet under GAAP
              
              
              387,695
              
              
              76,749
              
              
              203,338
              
              
              
              
              
              105,891
              
              
              
              
              
              1,717Total
              
              $
              14,840,689
              
              $
              3,975,156
              
              $
              7,713,218
              
              
              
              
              $
              3,101,432
              
              
              
              
              $
              50,883


*-
            20
            -*





The
      Company from time to time may purchase its Common Stock on the open market.
      During 2006, the Company, in 67 separate transactions, purchased 305,161 shares
      of its Common Stock for total consideration of approximately $6.1 million at
      prices ranging from $15.00 to $21.75 per share. In April 2006, the Company
      purchased 54,250 shares through a private transaction that was approved by
      the
      Board of Directors. On October 5, 2006, the Company purchased, through a Dutch
      Auction tender offer that was approved by the Board of Directors, 212,396 shares
      of its Common Stock at $21.75 for total consideration of $4.6
      million .
      During
      the three month period ended March 31, 2007, the Company, in 14 separate
      transactions, purchased 19,468 shares of its Common Stock for total
      consideration of approximately $416,000 at prices ranging from $19.00 to $24.00.
      On March 16, 2007, the Board of Directors authorized the Company to increase
      by
      approximately $679,000 the amount available to make open market purchases of
      its
      Common Stock. As of March 31, 2007, approximately $791,000 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.





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. Historically, the Company has not used
      derivative instruments or engaged in hedging activities. On October 12, 2006,
      the Company entered into a fixed-for-floating interest rate swap transaction
      on
      the Term Loan and designated it as a cash flow hedge under SFAS No. 133.





*Interest
      Rate Risk.* The
      interest payable on the Credit Facility and a portion of the Term Loan is
      variable based on floating interest rates (either LIBOR or Base Rate) and,
      therefore is affected by changes in market interest rates. At March 31, 2007,
      the variable portion outstanding under the Term Loan was $2.2 million and $2.0
      million was outstanding under the Credit Facility with either variable LIBOR
      (6.82%) or Base Rate (8.25%). The Company may repay the Credit Facility and
      Term
      Loan balances in full at any time without penalty. As a result, the Company
      does
      not believe that any reasonably possible near-term changes in interest rates
      would 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 interest
      rate
      on the Credit Facility and Term Loan would have resulted in additional interest
      expense of approximately $12,000 for the three months ended March 31,
      2007.




**ITEM
      4. CONTROLS AND PROCEDURES**




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, 2007. 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 three months ended March 31, 2007 that materially affected,
      or
      were reasonably likely to materially affect, its internal control over financial
      reporting.





*-
            21
            -*








**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,
      2006.







**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**




The
      following chart provides information regarding Common Stock purchases by the
      Company during the period January 1, 2007 through March 31, 2007.




**Issuer
                  Purchases of Equity Securities**Period
              
              Total
                  Number Of Shares Purchased
              
              Average
                  Price Paid per Share
              
              Total
                  Number Of Shares Purchased as Part of Publicly Announced Plans
                  or
                  Programs
              
              Approximate
                  Dollar Value Of Shares That May Yet Be Purchased Under the Plans
                  or
                  ProgramsJanuary
                  1, 2007 through January 31, 2007
              
              
              7,750
              
              $
              19.60
              
              
              7,750
              
              $
              376,472February
                  1, 2007 through February 28, 2007
              
              
              1,518
              
              
              21.11
              
              
              1,518
              
              $
              337,717March
                  1, 2007 through March 31, 2007
              
              
              10,200
              
              
              22.74
              
              
              10,200
              
              $
              791,266Total
              
              
              19,468
              
              $
              21.36
              
              
              19,468





All
      purchases were made on the open market pursuant to publicly announced plans
      that
      were approved by the Board of Directors. As of March 31, 2007, there was
      approximately $791,000 available for the purchase of the Company’s Common Stock
      under publicly announced plans that have been approved by the Board of
      Directors. There is no expiration date on these plans. Purchases under these
      plans may be made from time to time, as the Company’s management deems
      appropriate.




**ITEM
      5. OTHER INFORMATION**




On
      April
      30, 2007, the Company amended its Credit Facility. The amended Credit Facility
      decreases the LIBOR rate margin from 1.50% to 1.25% and extends the expiration
      date of the credit agreement from May 31, 2008 to May 31, 2009.





*-
            22
            -*







**ITEM
      6. EXHIBITS**







**Exhibit**
              **Number**
            **Description
                of Document**3.1
            Amended
                and Restated Articles of Incorporation, incorporated herein by reference
                to Exhibit 3.1 to the Company’s Registration Statement of Form S-1 (SEC
                File No. 333-36391), as filed with the Securities and Exchange Commission
                on September 25, 1997.3.2
            Amended
                and Restated Bylaws, incorporated herein by reference to Exhibit
                3.3 to
                the Company’s Registration Statement on Form S-1 (SEC File No. 333-36391),
                as filed with the Securities and Exchange Commission on September
                25,
                1997.4.1
            Reference
                is made to Exhibits 3.1 through 3.2.4.2
            Specimen
                Stock Certificate, incorporated herein by reference to Exhibit 4.2
                to the
                Company’s Registration Statement on Form S-1 (SEC File No. 333-36391), as
                filed with the Securities and Exchange Commission on September 25,
                1997.10.49
            Fifth
                Amendment of Second Amended and Restated Credit Agreement dated April
                30,
                2007 between the Registrant and Key Bank of Colorado.31.1
            Rule
                13a-14(a) Certification of the Chief Executive Officer.31.2
            31.3Rule
                13a-14(a) Certification of the Chief Financial Officer.32.1
            Section
                1350 Certifications of the Chief Executive Officer and the Chief
                Financial
                Officer.








*-
            23
            -*






**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, 2007By:
            /s/ Frederic W.J. BirnerName:
            Frederic W.J. BirnerTitle:
            Chairman of the Board and Chief
              Executive Officer
              *(Principal
                Executive Officer)*




Date:May
                15, 2007By:
              /s/ Dennis N. GentyName:
              Dennis N. GentyTitle:
              Chief Financial Officer, Secretary,
                and
                Treasurer
                (*Principal
                  Financial and Accounting Officer*)


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