UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-K

             FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS
               13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

[X] Annual Report pursuant to Sections 13 or 15 (d) of the Securities Exchange
    Act of 1934 for the year ended December 31, 1997.

[ ] Transition Report pursuant to Section 13 or 15 (d) of the Securities
    Exchange Act of 1934 for the period from _______ to ________________.

                         Commission File Number 0-23219

                           DENTAL CARE ALLIANCE, INC.
              ----------------------------------------------------
             (Exact name of registrant as specified in its charter)

   DELAWARE                                                65-0555126
-------------------------------                         ----------------------
(State or other jurisdiction of                           (IRS Employer 
incorporation or organization)                          Identification Number)


              1343 MAIN STREET, SUITE 700, SARASOTA, FLORIDA 34236
              ----------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                 (941) 955-3150
               --------------------------------------------------
              (Registrant's telephone number, including area code)

          Securities registered pursuant to Section 12 (b) of the Act:

          Securities registered pursuant to Section 12 (g) of the Act:

                          COMMON STOCK, $.01 PAR VALUE.
                          -----------------------------
                                (Title of Class)

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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in Definitive Proxy or Information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

The aggregate market value of the Common Stock held by non-affiliates of the
Registrant, based upon the last sales price of the Common Stock reported on the
Nasdaq market on March 26, 1998 was $33,761,812.

As of March 26, 1998, the number of shares outstanding of the Registrant's
Common Stock, $.01 par value, was 6,977,700.

                      DOCUMENTS INCORPORATED BY REFERENCE

The Company intends to file its Definition Proxy Statement for its 1998 annual
meeting of shareholders with the Securities and Exchange Commission not later
than 120 days after the end of the fiscal year covered by this Form 10-K
pursuant to Rule G (3) of the General Instructions for Form 10-K. Information
from such Definition Proxy Statement will be incorporated by reference into Part
III, Items 11-13 hereof.


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                                     PART I

ITEM 1.        BUSINESS

     THIS REPORT ON FORM 10-K CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21B OF THE
SECURITIES EXCHANGE ACT OF 1934. THE COMPANY'S ACTUAL RESULTS COULD DIFFER
MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING STATEMENTS. CERTAIN
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, AMONG OTHERS, THE PACE OF
DEVELOPMENT AND ACQUISITION ACTIVITY, THE DEPENDENCE ON MANAGEMENT AGREEMENTS,
THE PAS AND AFFILIATED DENTISTS, THE REIMBURSEMENT RATES FOR DENTAL SERVICES,
AND OTHER RISKS DETAILED IN THE COMPANY'S SECURITIES AND EXCHANGE COMMISSION
FILINGS. OTHER RISK FACTORS ARE LISTED IN THE COMPANY'S REGISTRATION STATEMENT
NO.333-34429 AS FILED WITH THE U.S. SECURITIES AND EXCHANGE COMMISSION.

     Dental Care Alliance, Inc. ("DCA") was formed on October 23, 1996 to effect
reorganization among DCA, Golden Care Holdings ("GCH"), the predecessor which
was incorporated in 1993, and its majority owned subsidiaries, (collectively the
"Company"). The Company provides management and licensing services to dental
practices in Florida and Michigan. As of December 31, 1997, the Company provided
services to 32 Dental Centers, 29 to which the Company provided management
services ("Managed Dental Centers"), and three to which the Company only
provided licensing services ("Licensed Dental Centers"). Management services
include financial, accounting, billing, training, efficiency and productivity
enhancement, recruiting, team building, marketing, advertising, purchasing,
collection and other services, as well as the provision of management and
administrative personnel. Licensing services include marketing, advertising and
purchasing. The Company is currently expanding in Florida, Georgia and Michigan
and intends to selectively expand into new markets. See "The Company" and Note 1
to the Consolidated Financial Statements for information relating to the history
of the Company.

SERVICES AND OPERATIONS

     The Company provides management and administrative services to the Managed
Dental Centers but does not provide dental care services. The Company provides,
supervises or facilitates financial, accounting, billing, training, efficiency
and productivity enhancement, recruiting, team building, marketing, advertising,
purchasing, collection and other services for the individual dental professional
corporations or professional associations (the "PAs") and employs the Managed
Dental Centers' management and administrative personnel. The PAs employ and
maintain full control over the general dental and specialty dental practitioners
(such as orthodontists, periodontists, endodontists and oral surgeons) working
at the Managed Dental Centers ("Affiliated Dentists"), hygienists and other
dental professionals and set standards of care in order to promote the provision
of high quality dental care. The individual PAs are responsible for compliance
with state and local regulations of the practice of dentistry and with licensing
and certification requirements, and each PA is responsible for acquiring and
maintaining professional liability insurance. The Company's services can be
grouped into three broad categories: personnel services, operational services
and financial services.

     PERSONNEL SERVICES

     TRAINING AND EDUCATION. The individual PAs employ, supervise and train all
dentists, dental hygienists and other dental professionals at each Managed
Dental Center. The Company, while not 

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engaged in the practice of dentistry, assists the individual PAs in training and
educating professional personnel by providing analyses that allow the PAs to
determine training needs. All personnel, other than dentists, dental hygienists
and other dental professionals, are supervised and trained by the Company or its
subcontractor. The Company also helps to coordinate group meetings and seminars
at which the PAs provide continuing education to their professionals. In
addition, the Company encourages and facilitates team building of the staff
through regularly scheduled staff meetings and social events. Each individual PA
maintains full control over the practice of dentistry by the dental
professionals it employs and sets standards of practice in order to promote
quality dental care.

     RECRUITING. The Company continually assists the PAs in recruiting dentists
to add to its network as Affiliated Dentists. Such recruiting takes place at
dental schools through the Company's contacts at such schools, at regional
dental conventions and through advertising in regional and national dental
publications. Recruitment of general dentists, specialists and other
professionals is the primary responsibility of the Company's Director of
Development.

     HUMAN RESOURCE MANAGEMENT. The Company is responsible for the hiring,
retention, salary and bonus determination, job performance-related training and
other similar matters affecting Company employees, which include non-dental
professionals providing services to the PAs. Services provided by the Company
include: (i) payroll administration, including recordkeeping, payroll
processing, making payroll tax deposits, reporting payroll, taxes and related
matters; (ii) risk management, including on-site safety inspections and
monitoring, training, and workers' compensation claim management and
administration; (iii) administering benefit plans; and (iv) the provision of
human resource materials, consulting and expertise on other human resource
issues. In Florida, a professional employer organization (the "Co-Employer")
assists the Company in providing these services. The Co-Employer arrangements
allow the Company to improve productivity and profitability by relieving it of
certain burdens associated with employee administration, helping it to better
manage certain employment-related risks, improving cash management with respect
to payroll-related expenses and enabling it to provide certain benefits on a
cost-effective basis. The Company intends to assume the responsibilities of the
Co-Employer when it becomes operationally efficient for the Company to do so.
See Item 1 "Business-Employees."

     OPERATIONAL SERVICES

     MANAGEMENT INFORMATION SYSTEMS. The Company utilizes its information
systems to track data related to each Managed Dental Center's operations and
financial performance. Billing and collection information is compiled on a daily
basis, enabling the Company to monitor financial performance and operational
efficiency. The Company generates reports for each Managed Dental Center
containing information as to every visit, charge and procedure. These reports
are reviewed first by the Company's Chief Financial Officer and then by the
Operations Department which analyzes performance and efficiencies, particularly
the ratio of dollars per patient. These reports are also given to the Dental
Director who reviews them for inefficiencies and evaluates how performance may
be improved. The Company provides an analysis of these results to the PAs and
recommends specific measures to improve the financial performance of the Managed
Dental Centers. The analysis enables a Managed Dental Center to improve its
financial performance by making periodic adjustments in marketing and
operations.


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     QUALITY ASSURANCE. Prior to the execution of a Management Agreement with a
new PA, the Company evaluates the dental practice to determine in which areas,
if any, the proficiency level of the dental professionals employed by the PA can
be enhanced. The Company also works closely with the Dental Directors to assure
that quality dental services are being provided. While supervision of dental
services is the responsibility of the Dental Directors, the Company provides
Dental Directors with reports that help them evaluate performance. For example,
certain dental laboratories monitor the case quality of the Affiliated Dentists
in performing particular tasks. Such monitoring allows the Company and the PAs
to notify the appropriate Dental Director if any procedure is being done
inefficiently at a particular Managed Dental Center or by a particular
Affiliated Dentist or other dental professional. The Dental Director then works
directly with the dental professionals at the Managed Dental Center to identify
the reason for the inefficiency and to implement solutions, such as additional
training, to improve performance in that area. The Company also performs patient
surveys to monitor patient satisfaction, and the Dental Directors periodically
audit patient charts and provide advice to the general dentists and dental
specialists employed by the PAs. See Item 1 "Business - Services and Operations
- Management Information Systems" and " - Dental Directors."

     SCHEDULING. The Company implements patient scheduling systems at each of
the Managed Dental Centers. These systems enable the Company to devise daily
patient schedules that maximize the efficiency of the dental professionals.
Patient visits are scheduled in small time increments based upon the Company's
knowledge of the time required for each type of dental procedure. In addition,
the office hours of each Managed Dental Center are tailored to meet the needs of
its patient population. The Company believes that its scheduling systems result
in more efficient patient flow, thereby increasing productivity and patient
volume.

     ADVERTISING AND MARKETING. The Company assists in developing and
implementing customized marketing plans tailored to the specific characteristics
of each Dental Center's market. Such marketing may include the use of local
radio, TV and print advertising, and other marketing promotions. In some
instances the Company seeks to promote brand name recognition of its Managed
Dental Centers through use of regional brand names owned by the PAs. For
example, in Florida, several of the Company's Managed Dental Centers use the
name "Advanced Dental Care." In some cases, Dental Centers are marketed under
the names used by the practices prior to their affiliation with the Company to
take advantage of the practices' existing market position. Most states,
including Florida and Michigan, place certain restrictions on the ability of
corporations such as the Company to provide advertising and marketing services
to the professional associations or corporations organized in such states. Many
states, prohibit dentists from using, except in limited circumstances,
advertising which includes any name other than their own, or from advertising in
any manner that is likely to lead a person to believe that a nondentist is
engaged in the practice of dentistry. Florida law also requires all advertising
to identify the dentist who assumes total responsibility for the advertisement
and may not include the name of a person who is neither actually involved in the
practice of dentistry at the advertised location nor an owner of the practice
being advertised. Similarly, Michigan law requires that the name of each dentist
performing services at a location be clearly disclosed by sign or lettering at
such location. In addition, Michigan and Florida law impose additional
restrictions on advertisements by specialists.


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     PURCHASING AND DISTRIBUTION. The size of the Company's network enables the
Company to purchase dental supplies, laboratory services, equipment, insurance,
management information systems, advertising and office furniture at reduced
costs. Dental equipment supplies are obtained by the Company as directed by the
PAs and administrative supplies are purchased by the Company pursuant to
high-volume supply contracts with favorable price terms. The Company monitors
inventory levels and adjusts distribution to reduce carrying costs on inventory.

     FINANCIAL SERVICES

     THIRD-PARTY PAYOR MANAGEMENT. The Company examines various factors to
determine which third-party payors' assignments it will recommend at each
Managed Dental Center. Factors considered by the Company in making this
recommendation include the types of procedures that are generally performed at
the Managed Dental Centers, the geographic area served by the particular plan
and the demographic characteristics of the typical plan participants. Some
element of managed care is present at most Managed Dental Centers, although
generally not as the primary source of revenues. The Company assists the Managed
Dental Centers in the negotiation of contracts with third-party payors. As a
result of its size, the Company is often able to negotiate better terms for its
Managed Dental Centers with-third party payors than would be available to solo
practitioners or small group dental practices.

     ACCOUNTING SERVICES. The Company provides Managed Dental Centers with a
full range of accounting services, including preparation of financial
statements, management of accounts payable, oversight of accounts receivable,
verification of purchase orders, payroll administration and tax services. In
addition, the Company assists each Managed Dental Center in the preparation of
operating and financial budgets.

     THIRD-PARTY FINANCING. The Company has contracts with multiple non-recourse
third-party financing companies that enable the Managed Dental Centers to offer
various third-party financing options directly to their patients. The Company is
not a party to the financing agreements. At the time a patient receives dental
treatment and upon credit approval of the patient by the third-party financing
company, the PA is paid at varying discounts to the full price of its services,
based upon financing terms. The financing company is subsequently responsible
for all billing to and collection from the patient and has no recourse for
payment against the Company or the Managed Dental Center.


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 DENTAL CENTER LOCATIONS

     The following table lists the locations of the Company's Managed Dental
Centers at December 31, 1997 and the dates on which Management Agreements
between the PAs that own each Managed Dental Center and the Company were first
entered into.

                                                                DATE OF
           LOCATION                                       MANAGEMENT AGREEMENT
           --------                                       --------------------

        Sarasota, Florida                                    November 1993
        Largo, Florida                                       November 1993
        Port Charlotte, Florida                              November 1993
        Englewood, Florida                                   March 1994
        Fort Myers, Florida                                  October 1994
        Sarasota, Florida                                    March 1995
        Kissimmee, Florida                                   April 1995
        Bradenton, Florida                                   July 1995
        Orlando, Florida                                     June 1996
        Tampa, Florida                                       June 1996
        Ocoee, Florida                                       June 1996
        Clearwater, Florida                                  June 1996
        Tampa, Florida (North)                               April 1997
        Flint, Michigan                                      July 1997
        Detroit area, Michigan (4 centers)                   July 1997
        Tallahassee, Florida                                 August 1997
        St. Petersburg, Florida                              September 1997
        Lakeland, Florida                                    December 1997
        Palma Ceia, Florida                                  December 1997
        Rockledge, Florida                                   December 1997
        Palm Beach County, Florida (6 centers)               December 1997

     From December 31, 1997 through March 14, 1998, the Company has entered
into Management Agreements involving ten Managed Dental Centers.

     The following table lists the locations of the Company's Licensed Dental
Centers at December 31, 1997 and the dates on which License Agreements between
the PAs that own each Licensed Dental Center and the Company were first entered
into.

                                                                 DATE OF
            LOCATION                                       LICENSE AGREEMENT
            --------                                       -----------------

        Orlando, Florida                                     September 1994
        Deltona, Florida                                     September 1994
        Winter Springs, Florida                              October 1996


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MANAGEMENT AGREEMENTS

     At December 31, 1997, the Company had entered into Management Agreements
with 24 PAs to manage 29 centers pursuant to which the Company or its assigns
are the exclusive business managers, to the extent allowable by law, of the
associated Managed Dental Centers. Since December 31, 1997, the Company has
entered into Management Agreements with 5 PAs to manage 10 centers. Of the total
39 Management Agreements, 36 are Standard Management Agreements (described
below.) The Company plans to continue to use the Standard Management Agreement
to the extent possible as it enters into arrangements with additional dental
practices. However, the terms of future agreements may differ according to
market conditions and the statutory and regulatory requirements of the
particular state in which the dental practice is located. The Company has
entered into three management agreements with respect to six additional dental
practices on terms different from those of the Standard Management Agreements.
Descriptions of these Management Agreements are set forth below.

     Under the Standard Management Agreements, the Company provides
comprehensive administrative and business services and support to the PAs. The
Company, among other things, (i) assists in the identification of areas in which
the performance of the Managed Dental Centers and their dental professionals can
be improved to increase revenues and operating income, (ii) provides, maintains
and repairs all offices, equipment and furnishings, (iii) employs all
non-professional personnel necessary for the operation of the Managed Dental
Centers, (iv) provides payroll services, (v) implements standard business
systems and procedures and provides or facilitates systems and efficiencies
training, (vi) orders all general business inventory and supplies required by
the Managed Dental Centers and handles accounts payable, (vii) establishes and
maintains information systems and provides accounting and bookkeeping services,
(viii) monitors compliance with rules and regulations applicable to the Managed
Dental Center business, (ix) provides marketing assistance and (x) provides
assistance in billing and collections, all to the extent permitted by law.

     The Standard Management Agreements provide that the PAs are responsible
for, among other things, (i) employing and supervising all Affiliated Dentists
and dental hygienists, (ii) complying with all laws, rules and regulations
relating to Affiliated Dentists and dental hygienists, (iii) participating in
quality assurance/utilization review programs, (iv) maintaining proper dental
patient records, (v) obtaining and maintaining professional liability insurance
with limits of not less than $300,000 per claim and aggregate policy limits of
not less than $1.0 million and (vi) any other requirements to carry out the
practice of dentistry.

     Under the terms of the Standard Management Agreements, the PAs are required
to indemnify, hold harmless and defend the Company from and against any and all
claims from negligent or intentional acts or omissions, including the
performance of dental services, by the PAs and their employees. The Company is
required to indemnify, hold harmless and defend the PAs from and against any and
all claims resulting from negligent or intentional acts or omissions by the
Company.

     As compensation for its management services under the Standard Management
Agreements, the Company earns a management fee equal to 70% - 74% of the Net
Collected Revenues earned by the PA. The Company pays all of the operating and
nonoperating expenses incurred by the PAs except for (i) salaries and benefits
to the Affiliated Dentists and dental hygienists, (ii) licensing fees paid to
the 


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Company, (iii) debt and asset carrying costs related to the acquisition of
the dental practice, and (iv) any other direct cost to the PA not covered under
the Standard Management Agreement.

     The Standard Management Agreements have 25 year terms, with automatic
annual one year renewals thereafter, and are terminable by either party for
cause or upon the insolvency of the other party. In the event of a material
default by the PA or the PA owner, the Company has the option to cause the sale
of all of the stock or all of the assets of the PA to a licensed dentist
designated by the Company. In such an event, the PA owner receives the proceeds
of the sale, subject in certain cases to preset formulas, less any amounts owed
as a result of the default. The PA or the PA owner may terminate the agreement
without cause provided the practice is sold to a dentist acceptable to the
Company. The Standard Management Agreements provide that they shall be amended
by the parties in the event of any regulatory matters affecting the validity of
the Standard Management Agreement in a manner necessary to bring the Standard
Management Agreements into compliance.

     During the terms of the Standard Management Agreements, the Company and the
PAs agree not to disclose certain confidential and proprietary information
regarding the other. The PAs are required under the Standard Management
Agreements to use their best efforts to enter into and enforce written
employment agreements with each of their professional employees containing
covenants not to compete with the PA in a specified geographic area for a
specified period of time, generally from one to three years after termination of
the employment agreement. The employment agreements generally provide for
injunctive relief in the event of a breach of the covenant not to compete.
However, the PAs ability to enforce such covenants is uncertain.

     One PA in Florida is party to a Management Agreement substantially in the
same form as the Standard Management Agreement, except that (i) the PA pays the
Company a monthly management fee of 55% of its net profits (defined as total
collected revenues on a cash basis less any patient refunds and less practice
expenses, including nonprofessional staff expenses), and (ii) this agreement
expires in 2003. In addition, the agreement provides that the PA may, during the
period commencing on October 20, 1998 and ending 90 days thereafter, terminate
the agreement by paying to the Company an amount equal to $185,460 less the
amount by which the aggregate fees paid to the Company pursuant to such
Management Agreement during either or both of the successive one year periods
following October 20, 1996 exceeds $100,000, and satisfying other conditions set
forth therein. The Company earned fees of $121,900 for the year ended December
31, 1997.

     Another PA in Florida is party to a Management Agreement substantially in
the same form as the Standard Management Agreement, except that (i) the PA pays
to the Company a monthly management fee of 50% of its net profits (defined as
total collected revenues on a cash basis less any patient refunds and less
practice expenses, including non-professional staff expenses) and (ii) this
agreement expires in 2003.

     In addition, in July 1997, the Company entered into a global Management
Agreement to manage four Managed Dental Centers in Michigan substantially in the
same form as the Standard Management Agreement, except that it expires in July
2005. The Company subcontracts the day-to-day management functions of the four
Michigan Dental Centers subject to this agreement to an affiliate of the owner
of the applicable PAs. As a result, the Company pays a fee to such subcontractor
equal to 80% of the net 


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profits of these Managed Dental Centers (as defined in
the Administrative Service Subcontract Agreement with such subcontractor), after
certain adjustments.

     The Company intends to continue to devote a substantial amount of time and
resources to identifying suitable dental practices and to negotiating Management
Agreements with such practices. Identifying suitable dental practices and
negotiating Management Agreements with such practices can be a lengthy and
costly process. There can be no assurance that the Company will be able to
identify suitable Managed Dental Center candidates, or that Management
Agreements will be entered into with respect to such candidates on terms
favorable to and within time frames desired by the Company, or at all. In the
event that the execution of a planned Management Agreement fails to occur or is
delayed, the Company's quarterly financial results may be materially lower than
financial analyst's expectations, which like would cause a decline, perhaps
substantial, in the market price of the Common Stock. The foregoing factors
could have a material adverse effect on the Company's results of operations or
financial condition and the Company's ability to continue its expansion
strategy. Moreover, in connection with entering into such Management Agreements,
the Company may be required to incur indebtedness or assume other liabilities
which could have a material adverse effect on the Company's operating results,
liquidity and capital resources, or may cause the Company to issue shares of its
capital stock which could result in dilution to stockholders.

     The integration of Managed Dental Centers into the Company's network is a
difficult, costly and time consuming process which, among other things, requires
the Company to attract and retain competent and experienced management and
administrative personnel and to implement and integrate reporting and tracking
systems, management information systems and other operating systems. In
addition, such integration may require, among other things, the opening of new
facilities or the expansion of existing facilities, the expansion of accounting
controls and procedures and the elimination of duplicate personnel. There can be
no assurance that substantial unanticipated problems, costs or delays associated
with such integration efforts or with such Managed Dental Centers will not arise
or continue. Any such problems, costs or delays could cause the Company's
financial results in the fiscal quarter including and subsequent to the
execution of the relevant Management Agreements to be materially lower than
financial analysts' expectations, which likely would cause a decline, perhaps
substantial, in the market price of the Common Stock. In particular, the
Company's expenses related to any new Managed Dental Center and, accordingly,
the integration of such Managed Dental Center may have a temporary or sustained
negative impact on the Company's results of operations or financial condition.
There can be no assurance that the Company will be able to successfully
integrate new Managed Dental Centers in a timely manner or at all, or that any
new Managed Dental Center will have a positive impact on the Company's results
of operations and financial condition.

     The success of the Company will depend in part on the Company's ability to
effectively manage an increasing number of Managed Dental Centers, some of which
are expected to be located in markets geographically distant from markets in
which the Company presently operates. The addition of Managed Dental Centers may
impair the Company's ability to efficiently and successfully provide management
services to existing Managed Dental Centers and to manage and supervise
adequately the Company's employees. The Company has little experience in
managing more than 20 Managed Dental Centers, and the Company's results of
operations and financial condition could be materially adversely affected if it
is unable to do so effectively.


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The Company's growth will require that substantial capital investment and
adequate financing be available to the Company. Capital is needed for (i) the
acquisition by the Company of the non-dental assets of dental practices, (ii)
entering into Management Agreements, (iii) the integration of operations of
dental practices, (iv) the purchase of additional equipment and technology, and
(v) loans to PAs to purchase the dental assets of dental practices. The Company
believes that the net proceeds from its public offering, cash flow from
operations and borrowings available under the Company's existing credit facility
will be adequate to meet the Company's anticipated capital needs through 1998,
although there can be no assurance to that effect. After 1998, the Company may
be required to obtain financing through additional borrowings or the issuance of
additional equity or debt securities. There can be no assurance that the Company
will be able to obtain such financing or that, if available, such financing will
be on terms acceptable to the Company. Any inability of the Company to obtain
suitable financing could cause the Company to limit or otherwise modify its
expansion strategy, which could have a material adverse effect on the Company's
results of operations and financial condition.

LICENSE AGREEMENTS

     As of December 31, 1997, twenty-two of the Managed Dental Centers had
entered into short form license agreements and seven Managed Dental Centers and
each of the PAs which own the three Licensed Dental Centers had entered into
long form license agreements with the Company (collectively, the "License
Agreements"). The long form license agreements generally have terms of five
years, with automatic five year renewal terms, while the short form license
agreements have terms that are coterminous with the related Management
Agreements. In consideration for the payment of a monthly license fee, which has
generally ranged from $600 to $1,200, the licensee is entitled to identify its
Dental Center as a member of the Company's network, participate in marketing
programs, utilize the Company's discounted purchasing capabilities, and use one
or more of the Company's service marks, logo types and commercial symbols
(collectively, the "Licensed Symbols"). The long form license agreements also
provide for a monthly advertising fee of $1,000 which, if collected would be
used for general marketing, advertising and promotion of the Company's network
and the Licensed Symbols. The Company has not collected any such monthly
advertising fees and does not intend to do so in the future. The manner in which
the licensee intends to use the Licensed Symbols must be approved in advance by
the Company.

     The short form license agreements terminate immediately upon the
termination of the related Management Agreement, and termination is governed by
the provisions thereof. The Company may terminate the long form license
agreements upon cancellation of, or failure to renew, the lease for the premises
of the related Dental Center, the bankruptcy of the associated licensee or upon
the occurrence of certain other events set forth in the License Agreement. The
long form licensees may terminate their license agreements for cause at any time
or without cause during the 30-day period commencing on the first anniversary of
the execution of the agreement. Any other termination by the long form licensee
constitutes a breach of the agreement.

DENTAL DIRECTORS

     The Company divides the geographic areas in which it operates into regions,
each of which is under the supervision of an Affiliated Dentist (each, a "Dental
Director"). At December 31, 1997, there were five regions and five Dental
Directors, each employed by, or owners of, the PAs within their 


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region. The Company has added one region and one Dental Director since December
31, 1997. The Company expects that additional regions and Dental Directors will
be added by the PAs as the Company enters into Management Agreements with
additional PAs in new locations.

     The primary purpose of the Dental Directors is to promote the provision of
high quality dental care and to refine operating efficiencies at the Managed
Dental Centers. Dental Directors continually monitor and evaluate the
performance of the Affiliated Dentists and the Managed Dental Centers within
their region by identifying operational inefficiencies and implementing
solutions to address these inefficiencies. Each Dental Director performs
periodic spot checks in which the performance of each Managed Dental Center is
scrutinized in detail. The Dental Directors also assist the PAs in their region
with the hiring, training and supervision of dental professionals. The Company
believes that close relationships among the Dental Directors, the PAs they
supervise, and the Company allows for the identification of specific
inefficiencies, the quick remediation of such inefficiencies and the realization
of the benefits produced by the Company's management approach.

GOVERNMENTAL REGULATION

     GENERAL OVERVIEW. The Company's operations and relationships are subject to
a variety of governmental and regulatory requirements relating to the conduct of
its business. The Company is also subject to laws and regulations which relate
to business corporations in general. The Company believes that it exercises care
in an effort to structure its practices and arrangements with Dental Centers to
comply with relevant federal and state law and believes that such arrangements
and practices comply in all material respects with all applicable statutes and
regulations. The health care industry and dental practices are highly regulated,
and there can be no assurance that the regulatory environment in which the
Company operates will not change significantly and adversely in the future. In
general, regulation of health care providers and companies is increasing.

     There can be no assurance that the laws and regulations of the states in
which the Company operates or may desire to operate in the future will not
change or be interpreted in the future to restrict or adversely effect the
Company's relationships with Affiliated Dentists or the operation of Managed
Dental Centers. Proposals that may be introduced, could, if adopted, have a
material adverse effect on the Company's financial condition and results of
operations. It is uncertain what legislative programs, if any, will be adopted
in the future, or what actions Congress or state legislatures may take regarding
health care reform proposals or legislation.

     Every state imposes licensing requirements on dentists and on their
facilities and services. In addition, many states require regulatory approval,
including certificates of need, before establishing certain types of health care
facilities, offering certain services or making expenditures in excess of
statutory thresholds for health care equipment, facilities or programs. The
execution of a Management Agreement with a dental practice does not in most
states require any health care regulatory approval on the part of the management
company or the dental practice. However, in connection with the expansion of
existing operations and the entry into new markets, the Company and Dental
Centers may become subject to additional and more restrictive regulation.


                                       11


<PAGE>


     HEALTH CARE REGULATIONS AFFECTING THE COMPANY. Business arrangements
between dentists and business corporations that provide dental practice
management services are regulated extensively at the state and federal levels,
including regulation in the following areas:

               CORPORATE PRACTICE OF DENTISTRY. The laws of many states prohibit
        corporations that are not owned entirely by dentists from employing
        dentists (and in some states, dental hygienists and dental assistants),
        having control over clinical decision-making, or engaging in other
        activities that are deemed to constitute the practice of dentistry.
        Florida law specifically prohibits non-professional for-profit
        corporations from employing dentists and dental hygienists, exercising
        control over patient records, and making decisions relating to clinical
        matters, office personnel, hours of practice, pricing, credit, refunds,
        warranties and advertising. Michigan law imposes similar restrictions on
        the practice of dentistry by non-professional for-profit corporations.

               Most states, including Florida and Michigan, also prohibit
        non-professional corporations from owning, maintaining or operating an
        office for the practice of dentistry. These laws have generally been
        construed to permit arrangements under which the dentists are not
        employed by or otherwise controlled as to clinical matters by the party
        supplying facilities and non-professional services. Both Florida and
        Michigan law require that dentists or their professional corporations
        maintain complete care, custody and control of all equipment and
        materials used in the practice of dentistry. Management Agreements
        provide that the Company shall not exercise control over any matters
        that would violate the requirements of Florida or Michigan law, as
        applicable. However, if the Company is deemed to interfere with the
        practice of dentistry at the PAs or the care, control and custody of the
        materials and equipment used in such practice, the Company could be
        materially adversely affected.

               FEE-SPLITTING AND ANTI-KICKBACK LAWS. Many states also prohibit
        "fee-splitting" by dentists with any party except other dentists in the
        same professional corporation or practice entity. In most cases, these
        laws have been construed as applying to the practice of paying a portion
        of a fee to another person for referring a patient or otherwise
        generating business, and not to prohibit payment of reasonable
        compensation for facilities and services (other than the generation of
        referrals), even if the payment is based on a percentage of the
        practice's revenues. The Florida and Michigan fee-splitting laws
        prohibit paying or receiving any commission, bonus, kickback, or rebate,
        or engaging in any split-fee arrangement in any form with a dentist for
        patient referrals to dentists or other providers of health care goods
        and services. In addition, Florida regulations specifically require that
        fees paid to entities providing management services to dental practices
        be at fair market value rates. The Florida and Michigan courts have not
        considered whether the Florida and Michigan fee-splitting statutes
        prohibit the payment by a dental practice of a management fee that is
        based on a percentage of net income or whether such a fee arrangement
        represents the fair market value of services rendered. However, in
        considering a fee-splitting statute applicable to chiropractors, a
        Florida court of appeals held that such statute does not prohibit the
        payment of a management fee that is based on a percentage of the gross
        income of the professional practice if the managing entity does not make
        referrals to the chiropractic practice.

               The Florida Board of Medicine recently considered the issue of
        whether a physician practice is permitted to enter into a management
        agreement pursuant to which the managing 


                                       12

<PAGE>


        entity earns a management fee which includes a percentage of the
        practice's net income as consideration for providing certain management
        and operational services, including developing relationships with other
        physicians, hospitals and third party payors. The Florida Board of
        Medicine issued an opinion indicating that such a management agreement
        is prohibited by applicable fee-splitting statutes. However, such order
        has been stayed pending its appeal to the Florida courts. Although the
        Florida Board of Medicine's decision, if upheld, will not apply to
        dental practices, a person may be more likely to petition the Board of
        Dentistry seeking a determination as to the application of fee-splitting
        restrictions to dentists in the event that the Board of Medicine's order
        is upheld. In addition, the court considering the appeal of the Board of
        Medicine's order could reach conclusions or make statements that affect
        the application of fee-splitting provisions applicable to dental
        management agreements. Pursuant to the terms of the Management
        Agreements, in the event such a Management Agreement were determined to
        be in violation of applicable law, the agreement would have to be
        amended in a manner that complies with applicable law and preserves, to
        the greatest extent possible, the economic interests of the parties
        thereto.

               In addition, most states have laws prohibiting paying or
        receiving any remuneration, direct or indirect, that is intended to
        induce referrals for health care items or services, including dental
        items and services. Federal law also prohibits the offer, payment,
        solicitation or receipt of any form of remuneration in return for the
        referral of patients covered by federally funded health care programs
        such as Medicaid, or in return for purchasing, leasing, ordering or
        arranging for the purchase, lease or order of any item or service that
        is covered by a federal program. Percentage-based management agreements
        are not within regulatory fraud and abuse safe harbors relating to items
        and services furnished under governmental health care programs. The fact
        that an arrangement is not within a safe harbor does not mean that it
        violates the anti-kickback provisions applicable to services provided
        under governmental health care programs. Rather, such arrangements are
        subject to scrutiny based on the totality of circumstances relating to
        such arrangements. As a result, it is possible that the arrangements
        between the Company and PAs would be challenged by governmental
        enforcement authorities. Because the Management Agreements provide that
        the Company will not engage in direct marketing to potential sources of
        business, but will only assist the individual PAs in these endeavors by
        providing training, marketing materials and technical assistance, the
        Company believes that its services under the Management Agreements
        comply with applicable anti-kickback laws. Such laws would be violated
        and the Company could be materially adversely affected if it were
        determined that the Affiliated Dentists make referrals to entities that
        are related or affiliated to the Company or its owners for the purpose
        of securing, directly or indirectly, payments or other remuneration.

               ADVERTISING RESTRICTIONS. Many states, including Florida and
        Michigan, prohibit dentists from using advertising which includes any
        name other than their own, or from advertising in any manner that is
        likely to lead a person to believe that a non-dentist is engaged in the
        practice of dentistry. Florida law also requires all advertising to
        identify the dentist who assumes total responsibility for the
        advertisement and may not include the name of a person who is neither
        actually involved in the practice of dentistry at the advertised
        location nor an owner of the practice being advertised. In addition,
        Michigan and Florida law impose additional restrictions on
        advertisements by specialists.


                                       13


<PAGE>

               LIMITATIONS ON DELEGATION. Most states, including Florida and
        Michigan, regulate the manner in which dentists delegate certain tasks
        to non-dentists.

               ANTI-FRAUD LAWS. State and federal laws prohibit any person from
        knowingly and willfully making any false statement or misrepresentation
        of a material fact in seeking payment for items or services. In
        addition, federal laws impose civil monetary penalties for filing claims
        that the filing party "should know" are not appropriate under rules
        applicable to governmentally funded health care programs.

               SELF-REFERRAL LAWS. Many states, subject to certain exceptions,
        prohibit referrals for certain health services if the referring dentist
        has an ownership interest in, and/or a compensation arrangement with,
        the entity receiving the referral. Many states require the dentist to
        disclose such interests to patients.

               Federal law, subject to certain exceptions, prohibits certain
        Medicare and Medicaid referrals to entities in which a dentist has an
        ownership interest or with which the dentist has a compensation
        arrangement. Significant prohibition against dentist self-referrals for
        services covered by the Medicaid program was enacted, subject to certain
        exceptions, by Congress in the Omnibus Budget Reconciliation Act of
        1993. These prohibitions, commonly known as Stark II, amended prior
        physician and dentist self-referral legislation known as Stark I (which
        applied only to clinical laboratory referrals) by dramatically enlarging
        the list of services and investment interests to which the self-referral
        prohibitions apply. Effective January 1, 1995, Stark II prohibits a
        physician or dentist, or a member of his or her immediate family, from
        making referrals for certain "designated health services" to entities in
        which the physician or dentist has an ownership or investment interest,
        or with which the physician or dentist has a compensation arrangement.
        "Designated health services" include, among other things, clinical
        laboratory services, radiology and other diagnostic services, radiation
        therapy services, durable medical equipment, prosthetics, outpatient
        prescription drugs, home health services and inpatient and outpatient
        hospital services. Stark II prohibitions include referrals within the
        physician's or dentist's own group practice (unless such practice
        satisfied the "group practice" exception) and referrals in connection
        with the physician's or dentist's employment arrangements with the PA
        (unless the arrangement satisfies the employment exception). Stark II
        also prohibits billing the Medicaid program for services rendered
        following prohibited referrals. Noncompliance with, or violation of,
        Stark II can result in exclusion from the Medicaid program and civil and
        criminal penalties. The Company believes that its and the PAs'
        operations as presently conducted do not pose a material risk under
        Stark II, primarily because the Company and PAs do not provide
        "designated health services." Even if the Company or the PAs were
        determined to provide "designated health services," the Company believes
        its and/or the PAs' activities would be protected under the employment
        and group practice exceptions to Stark II.

               Nevertheless, there can be no assurance that Stark II will not be
        interpreted or hereafter amended in a manner that has a material adverse
        effect on the Company's operations as presently conducted.

               Stark II and most state self-referral laws have exceptions for
        in-office services provided under the direct supervision of the dentist.
        In addition, third-party payor contracts may require 


                                       14


<PAGE>

        dentists to provide an even greater degree of supervision over certain
        in-office ancillary services in order to permit the applicable PA to
        bill for such services. The Company believes that its arrangements with
        Affiliated Dentists comply with these laws and third-party payor
        agreements. There is no assurance that changes in these laws or their
        interpretation will not affect the Company's current or future
        activities.

               Michigan's self-referral law is not limited to certain designated
        health services and it recognizes no statutory safe harbors or
        exceptions. Michigan prohibits directing or requiring an individual to
        purchase or secure a drug, device, treatment, procedure or service from
        another person, place, facility or business in which the referring party
        has a financial interest. Although such law does not provide for
        criminal sanctions, failure to comply with such law by a dentist could
        result in revocation of the dentist's license. The Michigan
        self-referral law has been subject to little interpretation. Currently,
        several different amendments to this law have been proposed, which if
        adopted, may in the future provide additional interpretative guidelines
        as to the application of Michigan's self-referral prohibition. To date,
        however, the term "financial interest" has only been interpreted to mean
        a direct "ownership interest" and has not been interpreted to mean a
        "compensation interest," such as an employment or personal services
        agreement. The legality of the Company's operations under Michigan's
        self-referral law is dependent upon whether the interrelationships among
        the entities are such that they are considered to have "financial
        interest" in each other, and whether the services performed by the
        entities for each other are considered to have been directed or required
        by the referrer. Should Michigan law in the future be interpreted and
        applied in such a way, it would have a material adverse effect on the
        Company.

               REGULATORY COMPLIANCE. The Company believes that health care
        regulations will continue to change, and as a result, regularly monitors
        developments in health care law. The Company expects to modify its
        agreements and operations from time to time as the business and
        regulatory environment change. However, there can be no assurance that
        any such change will not adversely affect the ability of the Company to
        operate as it does currently or to remain profitable in doing so.

     The laws described above provide for civil and criminal penalties for their
violation. These laws have been subject to limited judicial and regulatory
interpretation. They are enforced by regulatory agencies that are vested with
broad discretion in interpreting their meaning. The Company's agreements and
activities have not been examined by federal or state authorities under these
laws and regulations. For these reasons, there can be no assurance that a review
of the Company's business arrangements or the operation of the Managed Dental
Centers will not result in determinations that adversely affect the Company's
operation or that the long-term Management Agreements or certain of their
provisions will be held valid and enforceable. Further, the Company does not
maintain a compliance plan. Compliance plans, which have been adopted by many
health care entities, help such entities prevent, discover and correct
violations or potential violations of law. In addition, the penalties assessed
against an entity that violates applicable laws are likely to be reduced if such
entity maintains and adheres to a compliance plan.

     In addition, these laws and their interpretation vary from state to state.
The laws and regulations of certain states into which the Company seeks to
expand may require the Company to change the form 


                                       15

<PAGE>


of relationships entered into with dental professional associations or
corporations in a manner that restricts the Company's operations in those
states.

INSURANCE

     The Company's business entails inherent risk of liability. The Affiliated
Dentists and dental hygienists employed by the PAs are involved in the delivery
of health care services to the public and accordingly, such individuals, the PAs
and the Company are exposed to the risk of professional liability claims. Claims
of this nature, if successful, could result in substantial damage awards to the
claimants that may exceed the limits of any applicable insurance coverage.
Insurance against losses related to claims of this type can be expensive and
varies widely from state to state. The Company is indemnified under the
Management Agreements for claims against the Company arising from the
performance of medical and dental services provided by the PAs. Successful
malpractice claims, however, could have an adverse effect on the Company's
profitability. The PAs and the Affiliated Dentists and other dental
professionals they employ maintain professional liability insurance with limits
of not less than $300,000 per claim and with aggregate policy limits of not less
than $1 million per dentist. The Company is a named insured in most cases. The
Company does not maintain separate liability insurance. While the Company
believes that the foregoing provides adequate liability insurance coverage,
there can be no assurance that a future claim or claims will not be successful
or, if successful, will not exceed the limits of available insurance coverage or
that such coverage will continue to be available at acceptable costs and on
favorable terms.

COMPETITION

     The dental practice management segment of the dental services industry is
highly competitive and is expected to become increasingly competitive. The
primary bases of competition between dental practice management companies are
management expertise and experience, the elements of its operating strategy, the
opportunity for career enhancement of potential associated dentists and other
dental professionals, the size of the dental care network, the sophistication of
management information systems, liquidity, the terms of the management
agreements and name recognition. The Company currently competes with other
dental practice management companies in its existing markets, including Coast
Dental Services, Inc. and Castle Dental Centers, Inc. in Florida. There are also
a number of dental practice management companies currently operating in other
parts of the country which may enter the Company's existing markets in the
future. Many of such competitors and potential competitors have substantially
greater financial resources than the Company, have established large dental
practice networks, or otherwise enjoy competitive advantages which may make it
difficult for the Company to compete against them or enter into additional
Management Agreements on terms acceptable to the Company. In addition, as the
Company seeks to expand its operations into new markets, it is likely to face
competition from dental practice management companies which already have
established a strong presence in such markets.

     The business of providing dental services is highly competitive in each of
the markets in which the Managed Dental Centers operate or in which operations
are contemplated. The primary bases of such competition are quality of care and
reputation, marketing exposure, convenience and traffic flow of location,
relationships with managed care entities, appearance and usefulness of
facilities and equipment, price of services and hours of operation. The
Affiliated Dentists compete with other dentists


                                       16

<PAGE>


who maintain single or satellite offices, as well as with dentists who maintain
group practices, operate in multiple offices or are members of competing dental
practice management networks. Many of those dentists have established practices
and reputations in their markets. In addition to competing against established
practices for patients, the Dental Centers compete with such practices in the
retention and recruitment of general dentists, specialists and hygienists to
staff the Dental Centers. If the availability of dentists begins to decline in
the Company's existing or targeted markets, it may become increasingly difficult
to attract and retain the dental professionals to staff the Dental Centers.
There can be no assurance that the Dental Centers will be able to compete
effectively with such other practices.

SERVICE MARKS

     The Company has no registered service marks, trademarks, service names,
tradenames, or logo.

EMPLOYEES

     The Company has entered into an agreement with an unrelated third party
co-employer pursuant to which the majority all of the Company's administrative
and support staff located in each Florida Managed Dental Center as well as the
Company's corporate office management and staff are co-employed. In certain
cases, on a temporary basis, the Company will employ the administrative staff
directly until the co-employment arrangement is established. At December 31,
1997, the Company employed or co-employed 84 persons, consisting of 36 dental
assistants, 32 dental office staff, and 16 executive and administrative staff.
In addition, each of the Florida PAs has entered into an agreement with the
co-employer pursuant to which such PA and the co-employer co-employ all
professional staff (all co-employees of the Company and the PAs are referred to
hereinafter as the "Co-Employees"). At December 31, 1997, such PAs, in the
aggregate, employed or co-employed 36 dental professionals, consisting of 20
dentists and 16 dental hygienists. The Company or the PAs, as the case may be,
are responsible for the hiring, retention, salary and bonus determination, job
performance-related training and other similar matters affecting co-employees
while the co-employer is responsible for (i) payroll administration, including
recordkeeping, payroll processing, making payroll tax deposits, reporting
payroll, taxes and related matters, (ii) risk management, including on-site
safety inspections, monitoring, training and workers' compensation claim
management and administration, (iii) administering benefit plans and (iv) human
resource consulting and expertise on other human resource issues. The agreements
with the co-employer are terminable by either party without cause on 30 days
written notice, or for cause on 24 hours written notice. At December 31, 1997,
the Company employed 28 non-professional staff in Michigan and the Company's
subcontractor employed 29 non-professional staff in the Detroit area Managed
Dental Centers. At December 31, 1997, the Michigan PAs employed 31 dental
professionals, consisting of 17 dentists and 14 dental hygienists. See Item 1
"Business - Services and Operations - Human Resource Management."


                                       17

<PAGE>


ITEM 2.        PROPERTIES

     At December 31, 1997, the PAs, or in some cases the Company, leased between
1,200 and 10,000 square feet of office space for each of the Managed Dental
Centers. Rental payments for a leased Managed Dental Center range from
approximately $18,000 per annum to $144,000 per annum. The Company plans to
continue to lease rather than purchase space for the Managed Dental Centers to
preserve the Company's available capital. The Company intends to add Managed
Dental Centers to its network, which will result in additional office space
under lease. See Item 13 "Certain Relationships and Related Transactions."

     The Company leases approximately 7,000 square feet of office space in
Sarasota, Florida for its corporate headquarters at an annual rental of
approximately $75,000. This lease expires in April 2002 and the Company believes
the facility is adequate for its current needs.

ITEM 3.        LEGAL PROCEEDINGS

     There are no material pending legal proceedings involving the Company.
Affiliated Dentists and PAs are from time to time subject to malpractice claims.
To the Company's knowledge, there are no material malpractice claims pending
against any Affiliated Dentist or PA. Any such proceedings or claims, if
successful, could result in damage awards exceeding, perhaps substantially,
applicable insurance coverage.

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

     None.


                                       18

<PAGE>


                                     PART II

ITEM 5.        MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED MATTERS

The Common Stock of the Company is traded and quoted on the NASDAQ National
Market under the symbol DENT. The following table sets forth since November 4,
1997, the date the Company's Common Stock commenced trading, the high and low
per share price of the Company's Common Stock as reported by NASDAQ. The Company
issued 2.0 million shares of Common Stock at $12.00 per share pursuant to its
initial public offering in November 1997. Prior to that date, there was no
established trading market for the Common Stock.

      YEAR ENDED DECEMBER 31, 1997               HIGH          LOW

      Fourth Quarter (November 4, 1997 -       $ 13.88       $ 9.00
          December 31, 1997)

The number of stockholders of record of the Company's Common Stock on March 26,
1998 was approximately 54.

The Company's authorized capital stock consists of 50,000,000 shares of common
stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, $0.01
per share (the "Preferred Stock").

The Company has never declared or paid any cash dividends on its Common Stock.
The Company anticipates that all future earnings will be retained by the Company
for the development of its business. Accordingly, the Company does not
anticipate paying cash dividends on the Common Stock in the foreseeable future.
The Company is subject to certain loan covenants containing certain provisions
restricting the Company's ability to pay dividends.


                                       19


<PAGE>

     No securities that were not registered under the Securities Act have been
issued or sold within the past year except as follows:

<TABLE>
<CAPTION>
                                           DATE OF SALE
AMOUNT AND TYPE OF SECURITIES              OR ENTITLEMENT         PURCHASER(S)         CONSIDERATION
<S>                                         <C>                 <C>                    <C>
Option to purchase 49,576 shares of         January 1997        David P. Nichols            (1)
    Common Stock
163,080 shares of Common Stock             February 1997         Mitchell Olan              (2)
Option to purchase 6,833 shares of
    Common Stock                              April 1997     Dennis Corona, DDS, P.C.       (3)
42,401 shares of Common Stock                June 1997       The Nassau Group, Inc.     $10,000(4)
42,401 shares of Common Stock                June 1997             JF Lavelle           $10,000(5)
Option to purchase 10,938 shares of
    Common Stock                            August 1997       Dennis Corona, DDS, P.C.      (3)
Option to purchase 61,500 shares of
    Common Stock                           November 1997       Employee Option Plan         (6)
Option to purchase 124,000 shares of
    Common Stock                           November 1997     Non-Employee Option Plan       (7)
80,000 shares of Common Stock              December 1997     Marketplace Shareholders       (8)
<FN>
----------------------
(1) Such options were granted pursuant to Mr. Nichols' employment agreement with
    an exercise price of $1.53 per share.

(2) Such shares were issued pursuant to warrants to purchase 81,540 shares of
    Common Stock granted to Mr. Olan on January 26, 1994 and warrants to to
    purchase 81,540 shares of Common Stock granted to Mr. Olan on October 25,
    1996, respectively. Mr. Olan issued promissory notes to the Company in the
    amounts of $147,768 and $125,000, respectively in payment of such shares.

(3) Granted in connection with this PA's purchase of a dental practice and
    exercisable.

(4) Such shares were issued pursuant to warrants to purchase 42,401 shares of
    Common Stock granted to the Nassau Group, Inc. in September 1995.

(5) Such shares were issued pursuant to warrants to purchase 42,401 shares of
    Common Stock granted to Mr. Lavelle in September 1995.
(6) Such shares were issued pursuant to the 1997 Executive Incentive
    Compensation Plan with exercise prices of $12.00 per share. Company
    expects to register these shares in 1998.
(7) Such shares were issued pursuant to the 1997 Non-qualified Stock Option Plan
    with exercise prices of $12.00 per share.
(8) Such shares were issued in conjunction with acquisition of Marketplace
    Dental, Inc.
</FN>
</TABLE>

The aforementioned issuances and sales were made in reliance upon the exemption
from the registration provisions of the 1933 Act afforded by Section 4(2)
thereof and/or Regulation D promulgated thereunder, as transactions by an issuer
not involving a public offering. The purchasers of the securities described
above acquired them for their own account and not with a view to any
distribution thereof to the public. The certificates evidencing the securities
bear legends stating that the securities may not be offered, sold or transferred
other than pursuant to an effective registration statement under the 1933 Act,
or an exemption from such registration requirements.

The Company filed a Registration Statement (No. 333-34429) effective October 31,
1997 for its initial public offering. The offering closed on November 4, 1997.
The managing underwriters for the offering were Raymond James & Associates, Inc.
and William Blair & Company, LLC. Two million shares of the Company's Common
Stock were sold by the Company at $12 per share for an aggregate price of $24
million. Underwriter discounts and commissions were $1.68 million. On December
5, 1997, 300,000 shares of Common Stock were sold by Selling Shareholders for an
aggregate price of $3.6 million which was paid to the Selling Shareholders.
Selling security holders received net proceeds of $3,348,000 after paying
$252,000 in underwriter discount and commissions.

From November 4, 1997 through December 31, 1997 the Company expended an
estimated $2,812,700 for costs incurred in connection with the offering,
including Underwriter discounts and commissions ($1,680,000), legal ($395,000),
accounting ($342,000), printing ($175,000) and miscellaneous expenses. None of
these expenses were payable either directly or indirectly to any directors,
officers or affiliates. After deducting these costs, net proceeds of the
offering to the Company were $21,187,300.

                                       20
<PAGE>

From November 4, 1997 through December 31, 1997, the Company expended an
estimated $950,000 for the purchase of tangible and intangible non-dental assets
and the entering into Management Agreements with dental practices. No portion of
the $950,000 was paid to any directors, officers or affiliates. The balance of
the proceeds remain invested in short-term cash and cash equivalents.

                                       21

<PAGE>


ITEM 6.    SELECTED CONSOLIDATED FINANCIAL DATA

The Company commenced operations in November 1993. The following selected
consolidated financial data for the year ended December 31, 1993 and at December
31, 1993 are derived from the unaudited Consolidated Financial Statements of the
predecessors of Dental Care Alliance, Inc. The following selected consolidated
financial data for the years ended December 31, 1994, 1995, 1996 and 1997 and at
December 31, 1994, 1995, 1996, and 1997 are derived from the Consolidated
Financial Statements of Dental Care Alliance, Inc. and its predecessors which
have been audited by Price Waterhouse LLP, independent certified public
accountants. The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and other financial
information included elsewhere in this Form 10-K.


                                       22


<PAGE>
<TABLE>
<CAPTION>


                      Summary Financial and Operating Data

                                                              YEARS ENDED DECEMBER 31,
                                                 1993       1994        1995           1996           1997
                                               --------   --------   -----------    -----------    --------
                                              (UNAUDITED)
<S>                                           <C>         <C>        <C>            <C>           <C> 
INCOME STATEMENT DATA:
Management fees                                $ 83,700   $673,304   $   513,705    $ 1,289,828    $ 7,588,193
Consulting and licensing fees                      --       42,763       262,769        347,600        290,885
                                               --------   --------   -----------    -----------    -----------
   Total revenues                                83,700    716,067       776,474      1,637,428      7,879,078
                                               --------   --------   -----------    -----------    -----------
Managed dental center expenses (1):
   Staff salaries and benefits                     --         --            --          223,657      2,021,497
   Dental supplies                                 --         --            --           79,448        650,444
   Laboratory fees                                 --         --            --           98,222        971,024
   Marketing                                       --         --            --           38,128        414,519
   Occupancy                                       --         --            --          106,501        998,141
   Other                                           --         --            --           57,182        851,631
                                               --------   --------   -----------    -----------    -----------
      Total managed dental center expenses         --         --            --          603,138      5,907,256
                                               --------   --------   -----------    -----------    -----------
                                                 83,700    716,067       776,474      1,034,290      1,971,822
Salaries and benefits                             8,339    408,716       400,669        521,683        786,795
General administrative                           16,064    204,901       234,577        260,558        600,657
Advisory services (2)                              --         --         127,768           --             --   
Depreciation and amortization                      --       15,150        22,106         27,654        163,681
                                               --------   --------   -----------    -----------    -----------
   Operating income (loss)                       59,297     87,300        (8,646)       224,395        420,689
Interest income, net                                        22,584         6,494         20,781        263,568
                                               --------   --------   -----------    -----------    -----------
   Income before income taxes
   and minority interest                         59,297    109,884        (2,152)       245,176        684,257
Provision for income taxes                         --       19,919          --           35,500        263,952
Minority interest                                  --        2,440         8,654          7,674           --
                                               --------   --------   -----------    -----------    -----------
      Net income (loss)                        $ 59,297   $ 87,525   $   (10,806)   $   202,002    $   420,305
                                               ========   ========   ===========    ===========    ===========
   Adjustment to redemption value of common
      and preferred securities                     --       39,951        85,709       (191,237)       (10,500)
   Cumulative preferred stock dividend             --         --            --           (6,485)      (100,000)
                                               --------   --------   -----------    -----------    -----------
Net income applicable to common stock          $ 59,297   $127,476   $    74,903    $     4,280    $   309,805
                                               ========   ========   ===========    ===========    ===========
Net income (loss) per common share:
   Basic                                                             $      0.02    $      --      $      0.07
   Diluted                                                           $      0.02    $      --      $      0.07
Weighted average common shares outstanding:
   Basic                                                               3,791,610      3,829,029      4,610,331
   Diluted                                                             3,864,291      3,873,747       4,697,80
</TABLE>

                                       23


<PAGE>
<TABLE>
<CAPTION>


                                                                                   AT DECEMBER 31,
                                                        1993         1994         1995          1996           1997
                                                    ------------- ------------ ------------ -------------- --------------
                                                    (UNAUDITED)
Balance Sheet Data:
<S>                                                  <C>           <C>          <C>          <C>           <C>        
Working capital                                      $ 144,497     $113,385     $ 98,676     $ 965,853     $19,756,744
Total assets                                           187,203      466,820      524,543      3,122,939     28,554,487
Long-term debt, including current maturities            22,100      209,437      163,745        214,002      1,012,111
Redeemable common and preferred securities                -           -             -         1,593,799          -
Stockholders' equity                                    47,845      118,400      296,837        632,385     24,553,825

<FN>
----------------------

(1)   Effective October 1996, the Company revised the terms of all of its 12
      then existing Management Agreements such that the Company is responsible
      for the payment of all non-professional expenses of the Managed Dental
      Centers. Ten Management Agreements were also revised to change the base
      for the Company's management fee from a percentage of net profits at each
      PA to a percentage of net patient revenues from each PA. Accordingly,
      prior to these revisions to such 12 Management Agreements, all
      non-professional expenses of the Managed Dental Centers and related
      revenues were reflected in each PA's financial statements. See Item 7
      "Management's Discussion and Analysis of Financial Condition and Results
      of Operations."

(2)   Represents non-cash charges for warrants issued in consideration for
      certain financial advisory services.

</FN>
</TABLE>


                                       24

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

OVERVIEW

     Dental Care Alliance, Inc. ("DCA") was formed on October 23, 1996 to effect
a reorganization among DCA, Golden Care Holdings ("GCH"), the predecessor which
was incorporated in 1993, and its majority owned subsidiaries, (collectively the
"Company"). The Company is a dental practice management company providing
management and licensing services to dental practices in Florida and Michigan.
As of December 31, 1997 the Company provided management and licensing services
to 29 Managed Dental Centers, 24 of which are located in Florida and 5 of which
are located in Michigan. Additionally, at such date, the Company provided
licensing services to 3 Licensed Dental Centers in Florida. Management services
include financial, accounting, billing, training, efficiency and productivity
enhancement, recruiting, team building, marketing, advertising, purchasing,
collection and other services, as well as the provision of management and
administrative personnel. Licensing services include marketing, advertising and
purchasing.

     With respect to management services it provides to dental practices, the
Company enters into Management Agreements with PAs that own the practices. The
Company commenced operations in November 1993 by providing management and
licensing services to five dental practices located in Sarasota, Palmetto,
Largo, Port Charlotte and Venice, Florida. In 1994, the Company entered into its
first Management Agreement for a newly developed practice located in Englewood,
Florida and entered into a Management Agreement to manage an additional existing
practice in Fort Myers, Florida. In 1995, the Company entered into four new
Management Agreements, two of which were with respect to newly developed
practices located in Kissimmee and Bradenton, Florida and the remaining two of
which were with respect to existing practices located in Sarasota and Port
Richey, Florida. The Company entered into four additional Management Agreements
in 1996 to manage practices located in Orlando, Tampa, Ocoee and Clearwater,
Florida. In addition, the Company terminated its Management Agreements with
respect to the Palmetto and Venice Managed Dental Centers in 1995 and with
respect to the Port Richey Managed Dental Center in 1996. In 1997, the Company
entered into seventeen additional Management Agreements to manage five practices
in Michigan and twelve in Florida.

     Prior to October 1996, the management fee paid to the Company pursuant to
the Management Agreements had been equal to a percentage ranging from 50-90% of
the net profits of the individual Managed Dental Centers, as defined in the
Management Agreements, plus reimbursement to the Company of its non-professional
expenses. Effective October 1996, the Company revised all of its 12 then
existing Management Agreements. Ten of these agreements were revised such that
the Company earns management fees based on 74% of total net patient revenues and
payment is based on cash collected minus any patient refunds ("Net Collected
Revenue") and the Company assumes responsibility for the payment of the
non-professional expenses of the Managed Dental Centers (the "Standard
Management Agreements"). The remaining two Management Agreements continue to
have management fee structures based upon 50-55% of the net profit, as defined,
of the two Managed Dental Centers.

     The Company will seek to cause future Management Agreements to be on terms
substantially similar to those of the Standard Management Agreements. The method
by which the Company manages the revenue and profitability of Managed Dental
Centers is fundamentally the same, regardless of whether the Management
Agreement with any particular PA provides for a management fee based upon net
profits or net patient revenue. In the "net profits" type of Management
Agreement, both the


                                       25


<PAGE>


PA owner and the Company share proportionally in the favorable impact of any
initiatives. In the "net patient revenues" type of Management Agreement, the
cost management benefits resulting from such initiatives accrue to the party
responsible for such costs and both parties share proportionally in revenue
enhancements. Period to period comparisons of the Company's results of
operations set forth below should be considered in light of the significant
changes in the Company's growth and in recognition of revenues and expenses
resulting from the revisions to the Management Agreements in October 1996.

     The Company believes that certain of the Management Agreements are material
to the Company as a whole. The Managed Dental Center in Flint, Michigan,
contributed approximately 14% of the Company's aggregate revenue in 1997 and may
contribute in excess of 10% of the Company's aggregate revenue in 1998. Further,
the PA located in Port Charlotte, Florida contributed approximately 18% and 9%
to the Company's revenues in 1996 and 1997. The Flint Management Agreement has a
term of 25 years and provides for a management fee equal to 74% of the Net
Collected Revenues earned by the associated PA. The Port Charlotte Management
Agreement expires in 2003 and provides for a management fee of 55% of the net
profits of the associated PA. In addition, the Port Charlotte Management
Agreement provides that the PA may, during the period commencing on October 20,
1998 and ending 90 days thereafter, terminate the agreement by paying the
Company an amount equal to $185,460 less the amount by which the aggregate fees
paid to the Company pursuant to such Management Agreement during either or both
of the successive one year periods following October 20, 1996 exceeds $100,000,
and satisfying other conditions set forth therein. The Company earned fees of
$121,900 for the year ended December 31, 1997.

     All patient revenues are billed to patients and providers under the
authority and identification numbers of the individual PAs. Patient revenues and
receivables are recorded on the accounts of the PAs. Funds are dispersed
initially to pay all the professional costs of the PAs. Thereafter, funds are
disbursed to the Company under the terms of the Management Agreements. Any
remaining funds are retained by the PA. If funds are insufficient to pay the
Company under the terms of the relevant Management Agreement, a payable from the
PA to the Company is recorded on the Company's books.

     The Company also enters into license agreements with each Dental Center
pursuant to which the Company provides licensing and advertising services to the
Dental Centers. In return for such services, the Company has collected fees
generally ranging from $800 to $1,000 per month from each Managed Dental Center
and $600 from each Licensed Dental Center.

     Historically, in connection with the execution of a Management Agreement, a
PA has typically acquired both the dental and the non-dental assets of a Managed
Dental Center. The Company has either made loans to the acquiring PA or has
assisted the PA in obtaining third-party financing to purchase such assets.
Recently, the Company has begun acquiring certain of the non-dental assets of
Managed Dental Centers while the PAs acquire the dental assets of such Managed
Dental Centers. In addition, due to changing market conditions, the Company has
begun compensating PAs for the execution of Management Agreements.

     The Company from time to time has made loans to newly formed PAs with which
it has entered into Management Agreements to purchase the dental assets of the
related dental practices. In return the PAs execute promissory notes to the
Company in the amount of such loans. At December 31, 1997, the 


                                       26

<PAGE>


total outstanding balance of such loans was $397,462. The notes underlying such
loans generally have terms ranging from two to ten years, bear interest at
rates ranging between 8.5% and 18.5% and are secured by the assets of the
related dental practice. The PAs to which such loans are made are newly formed
and have no assets other than the assets of the dental practices being acquired
and no liabilities other than the liabilities relating to the loans. In
addition, the Company from time to time makes working capital advances to
individual PAs, although it is not obligated contractually or otherwise to make
such advances. The extension of loans and advances to the PAs by the Company is
not considered upon entering into Management Agreements with the Company.
Extension of any such loans or advances is entirely within the Company's
discretion. These advances are due within 12 months of issuance, bear interest
at 8-1/2%, subject to adjustment based on changes in the rates at which the
Company may borrow from its lenders. All advances made to PAs are guaranteed by
the relevant PA owner, although there is no independent collateral for these
working capital advances. A repayment default under such advances is also a
default under the relevant Management Agreement which permits the Company, among
other things, to liquidate the assets of the dental practice. At December 31,
1997, the total outstanding balance of such advances was $483,421. There have
been no revisions to the terms of any such loans or advances. The PAs are
current in the payment of their loans or advances and the Company believes that
the financial condition of the PAs to which it has made loans or advances is
satisfactory. Prior to making any loan or advance, the Company analyzes the
collectibility of the receivables resulting from such loans or advances based on
the projected cash flow of the relevant PA and the estimated fair market value
of the assets to be owned or owned by such PA. The Company, through its
obligations under the Management Agreements, is able to assess on a periodic
basis the collectibility of its receivables since it has access to the billing
and collection information relating to the PAs' patient receivables and
operational cash flow, and evaluate on a periodic basis outstanding receivables
versus accounts payable and revenue trends. Accordingly, the Company is in a
position to quickly assess the ability of each PA to meet its obligations under
the notes and advances. As a result, the Company is able to react quickly in the
event that there is a material change in the creditworthiness of any of the PAs.
The Company also analyzes any historical trends of the PAs relating to bad debts
or the inability of the PAs to generate collectible patient receivables. The
Company assesses the guaranty of its PA owners for financial stability and
creditworthiness through periodic reviews which include analysis of credit
reports, bank references, personal and business tax returns and personal
financial statements. In addition, the reputation of each PA owner in the
business community and the length and quality of the PAs' relationship with the
Company are examined by the Company to assess the PA owners as guarantors of the
loans and advances. The Company may modify the terms of Management Agreements
prospectively if the PA does not perform at a level sufficient to repay the
advances.

     None of the PA owners are officers, directors or employees of the Company.
Dr. Dennis A. Corona, the owner of PAs operating a majority of the Managed
Dental Centers, owns 1% of the Company's Common Stock. In addition, five Managed
Dental Centers in Michigan are owned by PAs commonly controlled by Dr. Ross
Johnson. See Note 13 to the Consolidated Financial Statements.

     The PAs are primarily liable for repayment of the notes and advances to the
Company with the PA owners being secondarily liable for repayment under the
notes and advances. The PAs and PA owners bear the primary risk under the notes
and advances. The Company also bears the risk of non-payment to the extent that
the assets of PAs or PA owners are insufficient to pay the outstanding balances
under the notes or advances upon any default.


                                       27

<PAGE>


The PAs take reserves against, and, when appropriate, write-off bad debts on,
patient receivables. For the year ended December 31, 1997, reserves for bad
debts on patient receivables aggregated to approximately $268,000 on net patient
revenues of $10,588,000. To date, there have been no defaults under, or
write-offs in connection with, notes receivable from or advances to PAs,
although there can be no assurance that there will be no such defaults or
write-offs in the future. Although there has to date been no default or material
delinquency under the notes or advances, the Company has established a reserve
for such defaults in the amount of $86,000 as of December 31, 1997. The Company
will consider establishing reserves against such defaults should future
circumstances demonstrate the need for such reserves.

     The Management Agreements for PAs that have acquisition loans from the
Company and for most PAs with working capital advances provide that the PAs must
meet their repayment obligations under any outstanding indebtedness, whether
owed to the Company or any third party, prior to paying any management fees. A
default under any such obligation is by its terms a default under the Management
Agreement. In the event of such a default, the Company or its designee is
entitled to purchase the assets and liabilities or the capital stock of the
relevant PA at a price equal to 60% of the annualized gross revenues of such PA
owner over the previous 24 months, minus any liabilities, including outstanding
indebtedness, if any, to the Company of the PA at the date of purchase. In such
event, the Company would evaluate whether, at its option, to have another PA
owner or other licensed dentist assume control of the practice and continue to
generate management fees or to liquidate the assets of such PA.

     The Company does not consolidate the balance sheets or the operating
results (including revenue and expenses) of the dental practices under the
Management Agreements since these revenues and expenses are earned and incurred
by the PAs, not the Company. The Company has recorded goodwill and other
intangible assets in cases where the Company has paid a PA in consideration for
a modification to an existing Management Agreement or entering into new
Management Agreements. Where the Company acquires the assets of another
management company, such a transaction constitutes a business combination and
the Company recognizes the related goodwill, if any, in accordance with the
purchase method of accounting.

     Prior to October 1996, the majority of the Company's operations were
performed through limited liability companies. Except for the period from
January through September 1994 with respect to one of the Company's predecessors
in interest, the Company's statements of operations prior to October 1996 do not
include a provision for income taxes. Included in the Company's tax accruals are
amounts related to establishing a deferred tax liability for book/tax
differences arising from its reorganization from limited liability corporation
to C corporation status.

     In October, 1997, the Company expanded its Management Information System
hardware and software in the corporate office. In 1998, the Company has begun
testing of new dental practice management software in several of its Managed
Dental Centers. It is anticipated that all of the dental practices currently
under management will have installed the new software and, where necessary,
upgraded its hardware requirements. The Company believes that the cost for the
hardware and software will not be in excess of $250,000. The new software
installed at several of the Managed Dental Centers and the


                                       28

<PAGE>


corporate offices have addressed the Year 2000 issues for those systems under
the Company's control. The Company has not determined the level of preparedness
of third parties with which it deals nor the implications that a failure on
their part could have on the Company. The Company is in the process of making
that determination. In analyzing potential new affiliations, the Company will
consider the cost and timing of a practice's ability to meet the Year 2000 issue
before executing an agreement.

ACQUISITION

     On December 29, 1997, the Company acquired all of the outstanding capital
stock of Marketplace Dental, Inc. ("Marketplace") pursuant to the merger of
Marketplace with and into Dental Care Alliance of Florida, Inc. , a wholly-owned
subsidiary of the Company. This transaction has been recorded under the purchase
method of accounting.

     Pursuant to the merger, the Company acquired all of the assets of
Marketplace. All shares of Marketplace common stock were converted into the
right to receive, in the aggregate, eighty thousand (80,000) shares of common
stock of the Company and an amount in cash of approximately $500,000. In
addition, the Merger Agreement calls for the issuance of additional common stock
if certain operating results are achieved. Marketplace is a dental practice
management company which manages six dental practices in Palm Beach County,
Florida. The assets consisted primarily of non-dental assets (including dental
equipment) and management agreements.

     The effective date specified in the merger agreement is December 1, 1997,
based upon the assumption of defined net assets per the final November 30, 1997
balance sheet. Since the Articles of Merger were not executed and accepted by
the State of Florida until December 29, 1997, the Company's statement of
operations excludes the revenue and expenses of Marketplace for the period from
December 1, 1997 until December 29, 1997. Had the effective date been December
1, 1997 as specified in the merger agreement, the Company's revenues and Managed
Dental Center expenses for the year ended December 31, 1997 would have been as
follows:

       Total revenue                                    $ 7,970,228
       Total Managed Dental Center expenses               5,970,939


RESULTS OF OPERATIONS

YEAR ENDED DECEMBER 31, 1997 COMPARED TO THE YEAR ENDED DECEMBER 31, 1996

     Management fees. Management fees consist of a percentage of the net
realizable patient-related revenue at the majority of the PAs and a percentage
of the net realizable profits earned by the remaining PAs. Management fees
increased 488% from $1.3 million for the year ended December 31, 1996, to $7.6
million for the year ended December 31, 1997. Of this increase, $3.1 million is
derived from the addition of seventeen Managed Dental Centers during the year,
while the balance primarily relates to the


                                       29

<PAGE>


October 1996 revision to the Management Agreements. Prior to October 1996 the
Company was not responsible for any managed dental center expenses. See Note 1
to the Consolidated Financial Statements.

     CONSULTING AND LICENSING FEES. Consulting and licensing fees consist of
fees earned by the Company for licensing services to all of the Dental Centers
and consulting services to four Managed Dental Centers in Michigan. Consulting
and licensing fees decreased 16.3% from $347,600 for the year ended December 31,
1996, to $290,885 for the year ended December 31, 1997. The decrease is
attributable to the cessation of consulting fees on four Michigan practices
which were converted effective July 1, 1997 into Managed Dental Centers, as
income formerly attributable to these consulting fees are now included in the
management fees, offset by the addition of seventeen Managed Dental Centers in
1997.

     MANAGED DENTAL CENTER EXPENSES. Managed dental center expenses consist of
non-professional expenses at the Managed Dental Centers. Managed dental center
expenses increased 879% from $603,138 for the year ended December 31, 1996, to
$5.9 million for the year ended December 31, 1997. Of this increase, $2.3
million is derived from the addition of seventeen Managed Dental Centers, while
the balance relates to the October 1996 revision to the Management Agreements.
Prior to October 1996, the Company was not responsible for any managed dental
center expenses.

     SALARIES AND BENEFITS. Salaries and benefits consist of costs for salaries
and benefits for employees at the Company's corporate and regional offices.
Salaries and benefits increased 50.8% from $521,683 for the year ended December
31, 1996, to $786,795 for the year ended December 31, 1997. This increase was
attributable primarily to the hiring of additional personnel in the Company's
accounting and business development departments to administer the additional
seventeen Managed Dental Centers.

     GENERAL AND ADMINISTRATIVE EXPENSE. General and administrative expenses
consists of expenses related to the operation of the Company's corporate and
regional offices, such as rent, legal, accounting and travel expenses. General
and administrative expense increased 130.5% from $260,558 for the year ended
December 31, 1996, to $600,657 for the year ended December 31, 1997. This
increase was primarily attributable to the establishment of a regional office in
Michigan, increased legal, insurance and other costs required of a public
company, and increased costs associated with expanding the Company's corporate
office to administer the additional seventeen Managed Dental Centers.

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
consists of the depreciation expense on capital assets owned by the Company and
located at either the corporate offices or at Managed Dental Centers and
amortization expense on Management Agreements or other intangible assets.
Depreciation and amortization expense increased 491.9% from $27,654 for the year
ended December 31, 1996, to $163,681 for the year ended December 31, 1997. This
increase was attributable to the depreciation on the acquired non-dental assets
and amortization on the acquired Management Agreements related to the seventeen
additional Managed Dental Centers, as well as a full year's amortization on the
Management Agreements capitalized in October 1996.

     INTEREST INCOME, NET. Interest income, net increased 1168.3% from $20,781
income for the year ended December 31, 1996, to $263,568 income for the year
ended December 31, 1997. This increase 


                                       30

<PAGE>


was attributable primarily to earnings on cash balances associated with the
Company's public offering in November 1997.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995

     MANAGEMENT FEES. Management fees increased 151.1% from $513,705 in 1995 to
$1.3 million in 1996. This increase resulted primarily from the October 1996
revision to the Management Agreements and, to a significantly lesser extent, the
execution of four new Management Agreements. See Note 3 to the Consolidated
Financial Statements.

     CONSULTING AND LICENSING FEES. Consulting and licensing fees increased
32.3% from $262,769 in 1995 to $347,600 in 1996. This increase was attributable
primarily to an increase in the consulting fees earned from the Michigan
practices, additional license fees earned from four new Managed Dental Centers
and a full year of license fees from four Managed Dental Centers acquired in
1995.

     MANAGED DENTAL CENTER EXPENSES. Managed dental center expenses increased
from $0 in 1995 to $603,138 in 1996. This increase was attributable to the
revisions to the Management Agreements in October 1996. Prior to 1996, the
Company was not responsible for any managed dental center expenses.

     SALARIES AND BENEFITS. Salaries and benefits increased 30.2% from $400,669
in 1995 to $521,683 in 1996. This increase was attributable primarily to the
hiring of additional staff at four new Managed Dental Centers.

     GENERAL AND ADMINISTRATIVE. General and administrative expense increased
11.1% from $234,577 in 1995 to $260,558 in 1996. This increase was attributable
to increased expense associated with the revised Management Agreements and the
cost of incorporating and recapitalizing the Company.

     ADVISORY SERVICES. Advisory services expense relates to non-cash charges
for warrants issued in consideration of certain advisory services rendered to
the Company by a third party. Advisory services expense decreased from $127,768
in 1995 to $0 in 1996 as a result of a one time recognition in 1995 of such
expense.

     DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
increased 25.1% from $22,106 in 1995 to $27,654 in 1996. This increase was
attributable to depreciation of additional equipment, amortization of
incorporation costs and amortization of Management Agreements capitalized in
October 1996 in connection with the revision of the Management Agreements.

     INTEREST INCOME, NET. Interest income, net increased 220.0% from $6,494 in
1995 to $20,781 in 1996. This increase was attributable primarily to earnings on
increased cash balances and earnings on notes receivable from Managed Dental
Centers.

SEASONALITY

     The Company historically has experienced seasonal fluctuations in its
quarterly revenue. Specifically, the first and fourth quarters reflect the
highest patient volume, while the third quarter has traditionally had the lowest
patient volume. The Managed Dental Centers in Florida have traditionally


                                       31

<PAGE>


experienced increased patient visits in November through March due to an
increase in the population base during these months, while patient visits
decrease during the summer. Beginning in July 1997, the Company executed
Management Agreements with Managed Dental Centers in Michigan. The Company
expects that the seasonality in Florida will be offset to some extent by fewer
seasonal fluctuations in Michigan.

QUARTERLY FINANCIAL INFORMATION

     The following table sets forth unaudited quarterly operating results for
each of the Company's last four quarters. This information has been prepared on
a basis consistent with the Company's audited financial statements and includes
all adjustments (consisting only of normal recurring adjustments) that
management considers necessary for a fair presentation of the data. These
quarterly results are not necessarily indicative of future results of
operations. This information should be read in conjunction with the Consolidated
Financial Statements and Notes thereto included in the Company's Prospectus
dated November 4, 1997.

<TABLE>
<CAPTION>

                                                              QUARTER ENDED
                                        -----------------------------------------------------
                                         MARCH 31,     JUNE 30,    SEPTEMBER 30,  DECEMBER 31,
                                           1997          1997          1997          1997
                                           ----          ----          ----          ----

<S>                                     <C>            <C>           <C>          <C>
Number of Managed Dental Centers (1)              12           13           20           29
Net patient revenue at Managed Dental
    Dental Centers (2) ..............   $  1,668,166 $  1,861,076 $  3,190,620 $  3,868,333
Total revenues ......................      1,204,681    1,428,963    2,275,396    2,970,038
Managed dental center expenses ......        921,142    1,102,791    1,753,070    2,130,256
Operating income ....................         28,707       30,440      115,246      246,296
Net income ..........................         26,622       32,989       75,648      285,046

<FN>
----------------------

(1) Presented as of the end of the period.
(2) Net patient revenue is the total amount of revenue  recorded by the PAs
    during the period. Revenue is included from and after the date on which
    the relevant PA executed a Management Agreement with the Company.

</FN>
</TABLE>


LIQUIDITY AND CAPITAL RESOURCES

     Since its inception and until the Company's public offering on November 4,
1997, the Company has financed its operations primarily through internal cash
flow, the sale of equity securities and commercial bank borrowings. Net cash
provided by operations for the years ended December 31, 1995, 1996 and 1997 was
$75,873, $270,121 and $557,767, respectively. Net cash provided by operating
activities for the years ended December 31, 1995, 1996 and 1997 consisted
primarily of net income, adjusted for non-cash expenses, and increases in
accounts payable and accrued liabilities, offset by increases in consulting and
license fee receivables and management fees receivable.

     Cash used in investing activities for the years ended December 31, 1995,
1996 and 1997 was ($5,649), ($487,858) and ($2.0 million), respectively. For the
year ended December 31, 1995, payments on notes receivable offset a $20,000
increase in other assets. For the year ended December 31, 1996, the


                                       32

<PAGE>


investing activities were primarily related to organizational costs associated
with the formation of the Company in October 1996 through a reorganization of
its predecessor entities. For the year ended December 31, 1997, the investing
activities included $1.0 million related primarily to the purchase of Management
Agreements for the four Michigan Managed Dental Centers and $613,006 related
primarily to the purchase of non-dental assets for three additional Managed
Dental Centers and certain equipment purchases for the Corporate office
expansion.

     Cash (used in) provided by financing activities for the years ended
December 31, 1995, 1996 and 1997 was ($69,926), $1,428,803 and $20,572,424,
respectively. In the year ended December 31, 1995, the financing activities
included $45,692 in debt repayments and $40,000 in dividends on Preferred Stock.
For the year ended December 31, 1996, the financing activities were primarily
related to net proceeds on the Company's issuance of preferred stock. For the
year ended December 31, 1997, the Company had $21.2 million in net proceeds on
common stock issuances offset by $466,967 in advances to PAs and $167,945 in net
repayment of debt.

     In August 1997, the Company entered into a revolving line of credit (the
"Credit Agreement") which provides for an aggregate of $1.2 million. Under the
terms of the Credit Agreement, the Company may use up to $600,000 of the credit
line for the purchase of non-dental assets of dental centers provided that each
borrowing is repaid within 45 days of its drawdown. The remaining $600,000 may
be used for general working capital needs. The revolving line of credit bears
interest at 0.75% per annum above the lender's prime rate and is payable on
demand. Interest only is payable monthly. Amounts borrowed pursuant to the
Credit Agreement are secured by a first security interest in most of the
Company's assets, including receivables and equipment. Additionally, any
outstanding balances under the working capital line are guaranteed by the
Company's Chairman of the Board, President and Chief Executive Officer. As of
December 31, 1997, the Company had no outstanding amounts under its line of
credit. In March 1998, the Company executed a non-binding commitment letter for
a new credit facility in the amount of $15 million ("Credit Facility"). The
Credit Facility will provide for an interest rate at 1.75% over LIBOR and will
be collateralized by a majority of the Company's assets.

     The Company has made loans to various PAs in connection with the PAs'
acquisition of assets of dental practices and has made working capital advances
to various PAs for their operations. The loans, which are evidenced by
interest-bearing notes that are payable upon demand and are personally
guaranteed by the PA owners.

     The Company intends to enter into additional Management Agreements with
respect to, as well as purchase the non-dental assets of, additional practices.
In addition, the Company may acquire other dental practice management companies,
expend funds to execute new Management Agreements or lend funds to PAs to
purchase certain assets. The Company plans to finance these activities through a
combination of the net proceeds of its public offering, cash flow from
operations, bank financing and issuances of Common Stock.

     On November 4, 1997, the Company completed the public offering of 2,000,000
shares of Common Stock at $12 per share resulting in proceeds, net of
underwriter commissions and offering costs, of approximately $21.2 million.
Based upon the Company's anticipated needs for acquisition of non-dental assets
of dental practices, working capital and general corporate purposes, management

                                       33

<PAGE>

believes that the combination of existing cash, cash flow from operations and
available credit lines will be sufficient to meet its capital requirements
through 1998.


INFLATION

     Inflation has not had a significant impact on the Company in the past nor
is it expected to have a significant impact in the foreseeable future.


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK.

     Not applicable.


                                       34

<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          INDEX TO FINANCIAL STATEMENTS


                                                                    PAGE
                                                                    ----

Report of Independent Certified Public Accountants.................  36
Consolidated Balance Sheets .......................................  37
Consolidated Statements of Operations  ............................  38
Consolidated Statements of Stockholders' Equity  ..................  39
Consolidated Statements of Cash Flows  ............................  40
Notes to Consolidated Financial Statements  .......................  41


                                       35


<PAGE>


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


To the Board of Directors and
Stockholders of Dental Care Alliance, Inc.


In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Dental Care
Alliance, Inc. (the "Company") successor to Golden Care Holdings, Inc. and its
subsidiaries at December 31, 1997 and 1996, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1997, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.

                                       36

Price Waterhouse LLP
Tampa, Florida
March 30, 1998


<PAGE>
<TABLE>
<CAPTION>


                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)
                          CONSOLIDATED BALANCE SHEETS

                                                                                            DECEMBER 31,
                                                                                         1996         1997
               ASSETS
Current assets:
<S>                                                                                   <C>          <C>        
   Cash and cash equivalents                                                          $1,253,259   $20,367,722
   Consulting and license fees receivable                                                 59,000        64,116
   Management fee receivable from PAs                                                    397,441       914,026
   Advances to PAs, net                                                                   16,454       483,421
   Other current assets                                                                   27,644       254,412
   Current portion of long-term notes receivable from PAs                                 68,460        83,522
                                                                                      ----------   -----------
     Total current assets                                                              1,822,258    22,167,219

Property and equipment, net                                                               40,230     1,113,050
Intangible assets, net                                                                   803,753     4,747,303
Long-term notes receivable from PAs, less current portion                                129,935       313,940
Consulting and license fees receivable, noncurrent                                       251,925          --
Other assets                                                                              74,838       212,975
                                                                                      ----------   -----------
     Total assets                                                                     $3,122,939   $28,554,487
                                                                                      ==========   ===========

              LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:

   Accounts payable                                                                   $  491,509   $   638,030
   Accrued payroll and payroll related costs                                             124,236        64,933
   Other accrued liabilities                                                              31,508       412,952
   Acquisition and affiliation obligations payable                                          --         920,000
   Income taxes payable                                                                   35,500       179,367
   Current portion of long-term debt and capital leases                                  173,652       195,193
                                                                                      ----------   -----------
     Total current liabilities                                                           856,405     2,410,475

Deferred income taxes                                                                       --         773,269
Long-term debt and capital leases, less current portion                                   40,350       816,918
                                                                                      ----------   -----------
     Total liabilities                                                                   896,755     4,000,662
                                                                                      ----------   -----------

Commitments and contingencies (Notes 7 and 18)                                              --            --

Mandatorily redeemable preferred stock, $.01 par value, 15,000 shares
   authorized, issued and outstanding                                                  1,402,562          --
Put rights associated with common stock                                                  191,237          --
                                                                                      ----------   -----------
                                                                                       1,593,799          --
                                                                                      ----------   -----------
Stockholders' equity:

   Common stock, $.01 par value, 50,000,000 shares authorized, 3,995,460
     and 6,977,700 issued and outstanding at December 31, 1996
     and 1997, respectively                                                               39,955        69,777
   Additional paid-in capital, net of $272,268 loan receivable at December 31, 1997      554,696    24,126,009
   Retained earnings                                                                      37,734       358,039
                                                                                      ----------   -----------
     Total stockholders' equity                                                          632,385    24,553,825
                                                                                      ----------   -----------
     Total liabilities and stockholders' equity                                       $3,122,939   $28,554,487
                                                                                      ==========   ===========

</TABLE>

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

                                       37

<PAGE>

<TABLE>
<CAPTION>

                           DENTAL CARE ALLIANCE, INC.
                    (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)
                      CONSOLIDATED STATEMENTS OF OPERATIONS



                                                              FOR THE YEARS ENDED DECEMBER 31,
                                                           1995            1996           1997
                                                        -----------    -----------    -----------
<S>                                                     <C>            <C>            <C>        
Management fees                                         $   513,705    $ 1,289,828    $ 7,588,193
Consulting and licensing fees                               262,769        347,600        290,885
                                                        -----------    -----------    -----------
      Total revenues                                        776,474      1,637,428      7,879,078
                                                        -----------    -----------    -----------

Managed dental center expenses:
   Staff salaries and benefits                                 --          223,657      2,021,497
   Dental supplies                                             --           79,448        650,444
   Laboratory fees                                             --           98,222        971,024
   Marketing                                                   --           38,128        414,519
   Occupancy                                                   --          106,501        998,141
   Other                                                       --           57,182        851,631
                                                        -----------    -----------    -----------
      Total managed dental center expenses                     --          603,138      5,907,256
                                                        -----------    -----------    -----------
Gross profit                                                776,474      1,034,290      1,971,822

   Salaries and benefits                                    400,669        521,683        786,795
   General and administrative                               234,577        260,558        600,657
   Advisory services                                        127,768           --             --
   Depreciation and amortization                             22,106         27,654        163,681
                                                        -----------    -----------    -----------

      Operating income (loss)                                (8,646)       224,395        420,689

   Interest income, net                                       6,494         20,781        263,568
                                                        -----------    -----------    -----------

Income (loss) before income taxes and
   minority interest                                         (2,152)       245,176        684,257

Provision for income taxes                                     --           35,500        263,952
Minority interest                                             8,654          7,674           --
                                                        -----------    -----------    -----------
Net income (loss)                                           (10,806)       202,002        420,305

   Adjustment to redemption value of
      common and preferred securities                        85,709       (191,237)       (10,500)
   Cummulative preferred stock dividend                        --           (6,485)      (100,000)
                                                        -----------    -----------    -----------

Net income applicable to common
   stock                                                $    74,903    $     4,280    $   309,805
                                                        ===========    ===========    ===========
   Basic net income per common share                    $      0.02           --      $      0.07
                                                        ===========    ===========    ===========
   Diluted net income per common share                  $      0.02           --      $      0.07
                                                        ===========    ===========    ===========
   Basic weighted average common shares outstanding       3,791,610      3,829,029      4,610,331
                                                        ===========    ===========    ===========
   Diluted weighted average common shares outstanding     3,864,291      3,907,492      4,697,809
                                                        ===========    ===========    ===========

</TABLE>

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

                                       38

<PAGE>


<TABLE>
<CAPTION>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


                                                                   COMMON      ADDITIONAL
                                                     COMMON        STOCK         PAID-IN       RETAINED
                                                     STOCK       ($.01 PAR)      CAPITAL       EARNINGS        TOTAL
                                                  -------------  -----------  -------------   -----------  ---------------
<S>                                                  <C>          <C>          <C>             <C>          <C>         
Balance, January 1, 1995                             3,791,610    $  37,916    $     12,959    $  67,525    $    118,400
Net loss                                                                                         (10,806)        (10,806)
Cash contribution from shareholder                                                   15,766                       15,766
Common stock - accretion to put value                                                85,709                       85,709
Issuance of warrants                                                                127,768                      127,768
Dividends                                                                                        (40,000)        (40,000)
                                                    ----------    ---------    ------------    ---------    ------------
Balance, December 31, 1995                           3,791,610       37,916         242,202       16,719         296,837
Net Income - January 1 to October 25, 1996                                                       157,783         157,783
Purchase of minority interest                                                        18,768                       18,768
Reclassification of members capital upon
   C-Corporation election (see Note 1)                                              174,502     (174,502)           --
Issuance of common stock                               203,850        2,039         310,461                      312,500
Common stock - accretion to put value                                              (191,237)                    (191,237)
Accrued dividends on mandatorily redeemable                                                       (6,485)         (6,485)
   preferred stock
Net income - October 26 to December 31, 1996                                           --         44,219          44,219
                                                    ----------    ---------    ------------    ---------    ------------
Balance, December 31, 1996                           3,995,460       39,955         554,696       37,734         632,385
Adjustment to redemption value of preferred stock                                                (10,500)        (10,500)
Accrued dividends on mandatorily
   redeemable preferred stock                                                                   (100,000)       (100,000)
Issuance of common stock                               163,080        1,630         271,158                      272,788
Issuance of common stock for marketplace 
   acquisition                                          80,000          800         799,200                      800,000 
Exercise of warrants under advisory agreement           84,802          848          19,152                       20,000
Stock subscription receivable                                                      (272,768)                    (272,768)
Conversion of preferred stock                          654,358        6,544       1,778,492       10,500       1,795,536
Elimination of put rights on common stock                                          (191,237)                    (191,237)
Net proceeds from initial public offering            2,000,000       20,000      21,167,316         --        21,187,316
Net Income                                                                                       420,305         420,305
                                                    ----------    ---------    ------------    ---------    ------------
Balance, December 31, 1997                           6,977,700    $  69,777    $ 24,126,009    $ 358,039    $ 24,553,825
                                                    ----------    ---------    ------------    ---------    ------------
</TABLE>

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

                                       39


<PAGE>

<TABLE>
<CAPTION>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)
                      CONSOLIDATED STATEMENTS OF CASH FLOWS



                                                                         FOR THE YEARS ENDED DECEMBER 31,

                                                                        1995           1996           1997
                                                                     ---------    -----------    ------------
<S>                                                                  <C>           <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                 $ (10,806)   $   202,002    $    420,305
   Adjustments to reconcile net income (loss) to net cash
     (used in) provided by operating activities:
        Depreciation and amortization                                   22,106         27,654         163,681
        Issuance of warrants for advisory services                     127,768           --              --
        Minority interest                                                8,654          7,674            --
   (Increase) decrease in:
     Consulting and license fees receivable                            (72,765)      (147,158)        (53,191)
     Management fee receivable from P.A.s                                2,463       (353,790)       (516,585)
     Other current assets                                               (3,580)       (96,147)         90,896
   Increase (decrease) in:
     Accounts payable                                                   13,324        457,038          86,126
     Other accrued liabilities                                           1,868         29,503         263,702
     Income taxes payable                                                 --           35,500         104,867
     Deferred income taxes                                                --             --            57,269
     Accrued payroll and payroll related costs                         (13,159)       107,845         (59,303)
                                                                     ---------    -----------    ------------
        Net cash provided by operating activities                       75,873        270,121         557,767
                                                                     ---------    -----------    ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Additions to property and equipment                                  (4,703)        (4,444)       (613,006)
   (Advances made) payments received on long-term notes receivable
     from P.A.s                                                         19,054          3,075        (369,957)
   Purchase of intangible and other assets (Notes 4, 5 and 8)          (20,000)      (486,489)     (1,032,765)
                                                                     ---------    -----------    ------------
        Net cash used in investing activities                           (5,649)      (487,858)     (2,015,728)
                                                                     ---------    -----------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Contribution from stockholder                                        15,766           --              --
   Proceeds from issuance of mandatorily redeemable
     preferred stock, net                                                 --        1,395,000            --
   Proceeds from issuance of common stock, net                            --             --        21,207,336
   Payments of long-term debt                                          (45,692)       (67,257)       (494,925)
   Proceeds from issuance of long-term debt                               --          117,514         326,980
   Advances to P.A.s                                                      --          (16,454)       (466,967)
   Dividends                                                           (40,000)          --              --
                                                                     ---------    -----------    ------------
        Net cash (used in) provided by financing activities            (69,926)     1,428,803      20,572,424
                                                                     ---------    -----------    ------------

        Net increase in cash and cash equivalents                          298      1,211,066      19,114,463

Cash and cash equivalents at beginning of period                        41,895         42,193       1,253,259
                                                                     ---------    -----------    ------------
Cash and cash equivalents at end of period                           $  42,193    $ 1,253,259    $ 20,367,722
                                                                     ---------    -----------    ------------

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the year for income taxes                        $  23,903           --      $    127,065
   Cash paid during the year for interest                            $  19,282    $    13,955    $     52,943
   Issuance of common stock for noncash consideration                     --      $   312,500            --
   Assumption of accounts payable and accrued liabilities                                                  
     related to revision of management service agreements                 --      $   438,300            --
   Elimination of minority interest                                       --      $    18,768
   Elimination of put rights on common stock                              --             --      $    191,237
   Conversion of preferred stock                                          --             --      $  1,795,536
   Intangible assets - noncash portion (Notes 4, 5 and 8)                 --             --      $  3,125,429
</TABLE>

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


                                       40

<PAGE>


                           DENTAL CARE ALLIANCE, INC.
                    (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  OPERATIONS AND ORGANIZATION

     Dental Care Alliance, Inc. ("DCA" or the "Company") was formed on October
     23, 1996 with a nominal capital contribution, to effect a reorganization
     (the "Reorganization") among DCA, Golden Care Holdings L.C. ("GCH"), the
     predecessor entity, and its majority owned subsidiaries Golden Care
     Network, L.C.("GCN"), and Prophet Management L.C. ("PM"). DCA and GCH
     completed the Reorganization on October 25, 1996 by transferring
     substantially all of the assets, liabilities and operations of GCH, GCN and
     PM to DCA. Concurrently, shares of DCA were issued in exactly the same
     proportion as the shareholders of GCH. Effective November 4, 1997, the
     Company completed an Initial public offering of its stock. All per share
     amounts have been adjusted retroactively to reflect the stock split
     completed in anticipation of this transaction.

     As the shareholders of DCA and GCH, and their related ownership
     percentages, were identical at the time of the Reorganization, the
     Reorganization has been accounted for in a manner similar to a pooling of
     interests. The effects of the Reorganization, resulting in the recording of
     deferred income taxes upon conversion to C corporation status, have been
     reflected in these financial statements.

     GCH was incorporated in 1993 as a Florida Limited Liability Corporation
     which held 99% of GCN and 90% of PM. Concurrent with the Reorganization,
     the 10% minority shareholder interest of PM transferred his ownership
     interest in the assets of PM in exchange for 81,540 shares of the stock of
     DCA. These shares were issued to the minority shareholder at fair market
     value of $1.53 per share as determined by an independent third party
     appraisal of the common stock of the Company as of this date. As a result
     of this transaction, $125,000 was capitalized and is reflected as a
     component of intangible assets in the underlying financial statements and
     is being amortized over fifteen years. No step up in basis for the 1%
     minority share of GCH has been reflected, as the stockholders and
     stockholders' percentages of DCA and GCH were exactly the same on the date
     of the Reorganization, and the fair value of the 1% ownership interest is
     not material.

     The Company and its predecessor provide management, consulting and
     licensing services to dental practices in Florida, Michigan and, effective
     in March 1998, Georgia. The dental practices are owned by separate
     Professional Associations (the "PAs"), and the Company has entered into
     long-term Administrative Services Agreements ("Management Agreements") with
     the P.A.s to provide administrative, financial and technical support and
     expertise to the P.A.s in exchange for management, consulting and licensing
     fees, as described in Note 3.

     Each P.A. employs and directs the professional dental staff, including the
     dentists and hygienists, and provides all of the clinical services to the
     patients. The Company employs and directs the administrative staff and
     manages in collaboration with the PA owner, all of the remaining
     administrative, financial, marketing and professional services of the
     practice. As of December 31, 1997, the Company provided these management
     services to 29 Managed Dental Centers, 24 located in Florida and 5 in
     Michigan. As of December 31, 1995, 1996 and 1997, of the 9, 12 and 29
     Managed Dental Centers, 6, 10 and 16 centers were owned and controlled by
     

                                       41

<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                    (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

1. OPERATIONS AND ORGANIZATIONS - (Continued)

     the same individual and resulted in $288,000, $1,022,000 and $4,508,000,
     for each of the years then ended, of the Company's management fees,
     respectively. As further described in Note 3, in 1996, the 10 Management
     Agreements were modified concurrent with the Reorganization, in exchange
     for 81,540 shares of the Company's common stock and assumption of the
     existing working capital liabilities of the PAs of $438,300. The fair
     value of these shares ($125,000) and the working capital liabilities
     assumed have been recorded as an intangible asset and are being amortized
     over the 25 year life of the agreements.

     The Company also provides consulting services to other PAs, under
     contracts in which the P.A. employs the administrative staff. Under such
     agreements, the Company reviews and consults on the financial and
     operational efficiencies of the practices. These consulting agreements were
     originally held by an entity which is approximately 80% controlled by the
     Company's President and controlling stockholder. The 20% minority
     stockholder assigned his interest in these agreements to the Company on
     October 25, 1996 in exchange for 40,770 shares of the Company's common
     stock which was valued at $1.53 per share, as determined by an independent
     third party appraisal. As a result of this transaction, $62,500 was
     capitalized and is reflected as a component of intangible assets in the
     underlying financial statements and is being amortized over the eight year
     remaining life of these agreements. As of December 31, 1996, the Company
     provided these consulting services to four Managed Dental Centers, all
     located in Michigan.

     In July 1997, the Company acquired the Management Agreements for these four
     Managed Dental Centers for $846,000, including a credit related to
     outstanding receivables for consulting services of $300,000 (which is
     forgiven ratably over the term of the associated Management Agreements),
     wherein it provides management services to the related practices for eight
     years. The acquired Management Agreements are executed under the net
     revenue contract (see Note 3). Unaudited net practice revenue of the dental
     practice was approximately $3.4 million for the period ended December 31,
     1996. The Company had previously recognized revenue of $160,000 in 1996 and
     $53,000 for six months ended June 30, 1997, for consulting and licensing
     services. The Company has agreed to subcontract the day to day management
     of these four practices for eighty percent of the net profits of the PA,
     subject to certain adjustments to a Michigan based company owned by the
     PA owner resulting, in effect, in the acquisition of a twenty percent
     interest. Costs associated with this subcontract are included in General
     and Administrative. The Company will continue to receive license fees of
     $40,000 per year.


                                       42


<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                    (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


2.   SIGNIFICANT ACCOUNTING POLICIES

     BASIS OF PRESENTATION/BASIS OF CONSOLIDATION
     The accompanying consolidated financial statements have been prepared on
     the accrual basis of accounting and include only those operations which are
     under the ownership and financial control of the Company. All intercompany
     accounts and transactions have been eliminated in consolidation. The
     Company's predecessor subsidiaries were consolidated for the year ended
     1995. The Company does not have any ownership in or exercise control over
     the dentistry activities of the P.A.s and accordingly, the accompanying
     financial statements do not consolidate the results of the PAs.

     STOCK SPLIT
     On October 6, 1997 the Company's Board of Directors authorized a 81.54 to 1
     stock split. The increase in authorized shares and the stock split have
     been retroactively reflected in these financial statements. The Company
     also authorized an increase of its authorized common shares to 50 million.

     REVENUE RECOGNITION
     The Company records its revenue in accordance with Management Agreements
     and other consulting and licensing agreements further described in Note 3.

     ADVERTISING
     The costs of advertising, promotion and marketing, aggregating $14,437,
     $42,272 and $29,502 for the years ended December 31, 1995, 1996 and 1997,
     respectively, are expensed when incurred and are included in general and
     administrative expenses.

     FAIR VALUE OF FINANCIAL INSTRUMENTS
     The estimated fair value of amounts reported in the financial statements
     have been determined by using available market information and appropriate
     valuation methodologies. The carrying value of all current assets and
     current liabilities approximates fair value because of their short-term
     nature. The carrying value of all non-current financial instruments are
     considered to approximate fair value based upon current market rates and
     instruments with similar risks and maturities.

     CASH AND CASH EQUIVALENTS
     The Company considers all highly liquid investments purchased with an
     original maturity of three months or less to be cash equivalents.

     CONSULTING AND LICENSE FEES RECEIVABLE
     Consulting and license fees receivable represents amounts owed to the
     Company from various PAs for consulting and license fees provided under
     contracts. The Company reviews the collectibility of its receivables
     related to consulting and license fees. This review is based upon the cash
     flow of the PAs and the fair market value of the collateral of the assets
     of the PAs.

     MANAGEMENT FEE RECEIVABLE FROM PA
     Management fee receivable from PA consists of amounts owed to the Company


                                       43

<PAGE>


                           DENTAL CARE ALLIANCE, INC.
                    (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES - (Continued)

     related to revenue recorded in accordance with Management Agreements and is
     recorded based upon the net realizable value of patient accounts
     receivable of the PAs. The Company reviews the collectibility of the
     patient accounts receivable of the PAs and adjusts its management fee
     receivable accordingly.

     ADVANCES TO PAS
     Advances to PAs consist of receivables from PAs in connection with working
     capital advances made to affiliated practices. The Company reviews the
     collectibility of its receivables related to advances to PAs. This review
     is based upon the cash flow of the PAs, and the fair market value of the
     collateral of the assets of the PAs. Commencing August 1997, under terms of
     note agreements such advances are repayable under terms calling for
     interest at 8 1/2 %, adjusted for any changes in the Company's borrowing
     rate, and are due within 12 months of issuance. All advances and payables
     between PAs under common ownership have a right of offset included in the
     agreement. The Company has established a reserve for these advances of
     $86,000 as of December 31, 1997.

     NOTES RECEIVABLE FROM PAS
     Notes receivable from PAs relate to financing of capital additions made
     by PAs covering certain medical and non-medical assets. Notes receivable
     from PAs generally have terms of 2 to 10 years, are interest bearing with
     rates between 8 1/2 % and 18 1/2 %, and are secured by the assets of the
     Managed Dental Center and personally guaranteed by the PA owners.

     PROPERTY AND EQUIPMENT
     Property and equipment are stated at cost. Expenditures for maintenance and
     repairs are charged to expenses as incurred and expenditures for additions
     and betterments are capitalized. The cost of assets sold or otherwise
     disposed of and the related accumulated depreciation are eliminated from
     the accounts and any resulting gain or loss is reflected in the statement
     of operations.

     Depreciation is computed by using the straight-line method over the
     estimated useful life of the asset, ranging from 3 to 10 years. Leasehold
     improvements are amortized over their estimated useful life or the
     remaining lease period, whichever is less.

     INTANGIBLE ASSETS
     Intangible assets includes certain organizational costs associated with the
     incorporation of the Company and costs related to consideration given to
     entities in exchange for (i) entering into Management Agreements, (ii)
     waiver by minority stockholder of any rights to receive management fees
     under certain Management Agreements, (iii) revised terms to existing
     Management Agreements and (iv) the purchase of minority stockholder rights
     in PM. Intangible assets are being amortized over periods of 5 to 25 years.


                                       44

<PAGE>


                          DENTAL CARE ALLIANCE, INC.
                    (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES - (Continued)

     STOCK BASED COMPENSATION
     In October 1995 the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 123, Accounting for Stock-Based
     Compensation ("SFAS No. 123"), which is effective for fiscal years
     beginning after December 15, 1995. Under SFAS No. 123, the Company may
     elect to recognize stock-based compensation expense based on the fair value
     of the awards or continue to account for stock-based compensation under
     Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
     Employees ("APB No. 25") and disclose in the financial statements the
     effects of SFAS No. 123 as if the recognition provisions were adopted. The
     Company has elected to continue to account for its stock based compensation
     for employees under APB No. 25 and adopt the disclosure only requirements
     of SFAS No. 123. The Company has adopted a stock based compensation plan
     for certain non-employees which are accounted for under SFAS No. 123.

     USE OF ESTIMATES
     The preparation of financial statements in conformity with generally
     accepted accounting principles requires management to make estimates and
     assumptions that affect the reported amounts of assets and liabilities and
     disclosure of contingent assets and liabilities at the date of the
     financial statements and the reported amounts of revenues and expenses
     during the reporting period. Actual results could differ from those
     estimates.

     DEPENDENCE ON THE PAS 
     The Company receives fees for services provided to the PAs under
     Management Agreements, and Consulting and Licensing Agreements, but does
     not employ dentists or control the practices of the dentists employed by
     the PAs. The Company's revenue is dependent on revenue generated by the
     PAs and, therefore, effective and continued performance of the Managed
     Dental Centers during the term of the Management Agreements is essential to
     the Company's long-term success.

     The Management Agreements are generally for a term of 25 years beginning on
     the effective date of each individual agreement and renewing each and every
     year on the anniversary date of the subsequent year for a period of
     generally 25 years and may be terminated by the PA, or the Company, under
     certain events of default "with cause" as defined, including a material
     default by or bankruptcy of the Company. In the event of a material default
     by the PA, or its owner, the PA can sell the practice to a third party
     mutually agreed to or sell its assets to the Company for a preset formula
     price and assign ownership interest to a PA agreeable to all parties. In
     the event that the proper notification period is given to the Company, the
     PA can terminate the agreement at any time without cause if it sells the
     practice and assigns the agreement to another party to be approved by the
     Company. The sales price in such event will be determined through
     negotiations among the selling PA and the buyer. In no event can the
     Company replace the PA at will or for a nominal fee, except in the event
     of default. Any material loss of revenue by the PAs would have a material
     adverse effect on the Company, including the PAs' ability to repay their
     indebtedness to the Company.

                                       45

<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                    (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

2. SIGNIFICANT ACCOUNTING POLICIES - (Continued)

     IMPAIRMENT OF ASSETS
     Statement of Financial Accounting Standards No. 121, Accounting for the
     Impairment of Long-lived Assets and for Long-lived Assets to be Disposed of
     ("SFAS No. 121"), was implemented by the Company in fiscal 1996. SFAS No.
     121 states that if the carrying value of a long-lived asset, including
     associated intangibles, exceeds the sum of the estimated undiscounted cash
     flows from the operation of the asset, an impairment loss should be
     recognized for the difference between the asset's estimated fair value and
     carrying value. The Company periodically analyzes its financial position
     with regards to the provisions of SFAS No. 121. The Company evaluates
     whether events and circumstances have occurred that indicate the carrying
     amount of these long-lived assets may be impaired, by comparison of
     undiscounted cash flows from operations with related carrying value of the
     assets. At December 31, 1997, the unamortized balance of these assets are
     not considered to be impaired.

     ADOPTION OF NEW ACCOUNTING STANDARDS
     In February, 1997, the Financial Accounting Standards Board issued
     Statement No. 128, Earnings Per Share ("SFAS No. 128"), which requires
     companies to change in fiscal 1997 the way that they calculate and present
     earnings per share. In accordance with those requirements, the Company now
     presents "basic" earnings per share, which is net income divided by
     weighted average shares outstanding during the period, and "diluted"
     earnings per share, which considers the impact of common stock equivalents.
     The Company's common stock equivalents consist of employee and director
     stock options and warrants to purchase common stock. Earnings per share
     presented for prior periods have been restated in accordance with SFAS 128.

     In June 1997, the FASB adopted two standards: SFAS Nos. 130 and 131,
     Reporting Comprehensive Income and Disclosures about Segments of an
     Enterprise and Related Information, respectively. Both of these new
     standards relate to the presentation of financial information and do not
     impact the computation of net income of earnings per share. Both will be
     effective for the Company beginning with its 1998 annual financial
     statements. SFAS 130 requires that companies display "comprehensive
     income", which in addition to the current definition of net income includes
     certain amounts currently recorded directly in equity. SFAS 131 mandates
     the management approach to identifying business segments. Under the
     management approach, segments are defined as the organizational units that
     have been established for internal performance evaluation purposes.
     Management does not believe that the new standard will impact its current
     presentation.

     INCOME TAXES
     Upon its incorporation on October 23, 1996, as described in Note 1, the
     Company terminated its predecessor status as a Limited Liability
     Corporation and is now subject to federal income taxes. Effective October
     25, 1996, the Company accounted for income taxes under the liability method
     in accordance with Statement of Financial Accounting Standards No. 109,
     Accounting for Income Taxes ("SFAS No. 109").


                                       46

<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                    (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


3.   REVENUE RECOGNITION

     MANAGEMENT FEES

     Management fees represent revenue earned from managed dental practices less
     amounts retained by the practices for those PAs where the Company
     provides management services.

     The Company earns management fees from the PAs under two types of
     contracts: net revenue and net profits. Under the net revenue contracts,
     management fees are equal to 70% - 74% of the patient revenues earned by
     the PA Such contracts also stipulate that the Company must pay certain
     expenses, as defined by the Management Agreement. Under the net profits
     contracts, management fees are equal to between 50% and 55% of the
     practice's net profits, as defined. Net profit is calculated by subtracting
     practice expenses (which constitutes both dental and non-dental expenses),
     excluding depreciation and amortization, from net collected practice
     revenue. Contractual revenues and related expenses have, for purposes of
     the accompanying financial statements, been reflected on an accrual basis.

     The amounts contractually retained by the practices under net revenue
     contracts are intended to cover amounts incurred for (1) salary and
     benefits to employ the dentists, hygienists and contracted specialists; (2)
     licensing fees to be paid to the Company; (3) debt and asset carrying costs
     on the acquisition of the practices; and (4) any other direct costs to the
     PA not covered under the Management Agreement.

     The revised structure of the PA contracts is designed to provide the PA
     with the opportunity to achieve profits over the term of the contract, as
     well as for incentives for the PA owners and dental professionals to
     increase productivity and the number of patient encounters, to improve the
     documentation of their services so that appropriate billings can be
     rendered and to increase the opportunity for dental professionals other
     than dentists to provide services.

     Effective October 1996, the Company revised the terms of all of its 12 then
     existing Management Agreements such that the Company is responsible for the
     payment of all non-professional expenses of the Managed Dental Centers. Ten
     Management Agreements were also revised to base the Company's management
     fee from a percentage of net profits at each PA to a percentage of net
     revenue from each PA and two Management Agreements were modified to assign
     additional responsibilities to the Company. Accordingly, prior to the
     revision of these 12 Management Agreements, all non-professional expenses
     of the Managed Dental Centers and related revenues were reflected in each
     PAs financial statements. The Company expects to primarily utilize net
     revenue contracts in the future.

     The PA located in Port Charlotte, Florida, has the right to terminate its
     Management Agreement during a 90-day period beginning in October 1998. Such
     Managed Dental Center contributed approximately 8% and 18% to the Company's
     revenue in 1997 and 1996, respectively. The Management Agreement expires in
     2003.


                                       47

<PAGE>


                           DENTAL CARE ALLIANCE, INC.
                    (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

3. REVENUE RECOGNITION - (Continued)

     The following table sets forth the gross practice revenue earned and
     amounts retained by the PAs, and the management fees earned by the
     Company for the periods ended:

<TABLE>
<CAPTION>

                                                                       DECEMBER 31,
                                                           1995          1996         1997
                                                         ----------   ----------   -----------
<S>                                                      <C>           <C>         <C>
   COMMONLY CONTROLLED PAS - GROUP 1 - NET REVENUE
   CONTRACTS (10/26/96-12/31/97) (NON-TERMINATED):
     Net practice revenue                                  $     --   $  725,215   $ 6,098,141
     Amounts contractually retained by the PAs                   --      188,554     1,589,760
                                                         ----------   ----------   -----------
     Management fees                                       $     --   $  536,661   $ 4,508,381
                                                         ==========   ==========   ===========
   COMMONLY CONTROLLED PAS - GROUP 1 - NET PROFIT 
   CONTRACTS (1/1/94-10/25/96) (NON-TERMINATED):
     Net practice revenue                                $1,115,011   $3,290,171   $      --
     Amounts contractually retained by the PAs              983,864    2,820,871          --
                                                         ----------   ----------   -----------
     Management fees                                     $  131,147   $  469,300   $      --
                                                         ==========   ==========   ===========

   COMMONLY CONTROLLED PAS - GROUP 2 - NET REVENUE
   CONTRACTS
     Net practice revenue                                $     --     $     --     $ 2,928,739
     Amounts contractually retained by PAs                     --           --         758,950
                                                         ----------   ----------   -----------
     Management fees                                     $     --     $     --     $ 2,169,789
                                                         ==========   ==========   ===========
   ALL OTHER PAS (ALL UNDER NET PROFIT CONTRACTS)
   (NON-TERMINATED):
     Net practice revenue                                $2,454,859   $1,459,121   $ 1,561,314
     Amounts contractually retained by the PAs            2,169,545    1,178,370       651,291
                                                         ----------   ----------   -----------
     Management fees                                     $  285,314   $  280,751   $   910,023
                                                         ==========   ==========   ===========
   TERMINATED CONTRACTS (ALL UNDER NET
   PROFIT CONTRACTS):
     Net practice revenue                                $  945,149   $  101,552   $      --
     Amounts contractually retained by the PAs              847,905       98,436          --
                                                         ----------   ----------   -----------
     Management fees                                     $   97,244   $    3,116   $      --
                                                         ==========   ==========   ===========
   ALL PAS COMBINED:
     Net practice revenue                                $4,515,019   $5,576,059   $10,588,194
     Amounts contractually retained by the PAs            4,001,314    4,286,231     3,000,001
                                                         ----------   ----------   -----------
     Management fees                                     $  513,705   $1,289,828   $ 7,588,193
                                                         ==========   ==========   ===========
      Managed dental center expenses                           --        603,138     5,907,286
                                                         ----------   ----------   -----------
        Net management fees                              $  513,705   $  686,690   $ 1,680,937
                                                         ==========   ==========   ===========
</TABLE>

                                       48

<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

3. REVENUE RECOGNITION - (Continued)

     Had the net profits method been in effect for all of fiscal 1996,
     management fees would have been $708,336. Had the contracts been in effect
     for all of fiscal 1996, management fees would have been as follows:

        Management fees                      $4,270,410
        Managed dental center expenses        3,303,710
                                             ----------
        Net management fees                  $  966,700
                                             ==========

     CONSULTING AND LICENSING FEES
     Consulting fees related to training of personnel and other administrative
     services were performed by the Company for four managed dental centers
     which were not serviced under the Management Agreements through June 30,
     1997. Subsequent to June 30, 1997, the Company and the PA owner executed
     8-year Management Agreements for these four managed dental centers. The
     Management Agreements executed are net revenue contracts.

     As of December 31, 1997, the Company also provides separate licensing
     services to the 32 Managed Dental Centers. The licensing agreements
     typically call for a 25 year term, in exchange for an annual fee from each
     practice of approximately $10,000 - $12,000 per year. As part of the
     licensing agreements, the Company will solicit and negotiate managed care
     contracts for the practice and provide opportunities for the licensed
     practice to participate in group purchasing and marketing plans.

4.  AFFILIATIONS

     In April 1997, the Company acquired approximately $200,000 of non-dental
     assets and executed a 25-year Management Agreement with a dental practice
     located in Temple Terrace, Florida. Unaudited net practice revenue of the
     dental practice was approximately $950,000 for the year ended December 31,
     1996. The Management Agreement executed is a net revenue contract.

     In July 1997, the Company executed four Management Agreements for $846,000
     wherein it will provide management services through a subcontractor to the
     PAs for 8 years. The Seller financed $546,000 of this amount with terms of
     monthly principal and interest at 8% per annum for 8 years. The PAs were
     previously subject to consulting and licensing agreements. Unaudited net
     practice revenue of the dental practices was approximately $3.4 million for
     the period ended December 31, 1996. The Management Agreements executed are
     net revenue contracts.

     In July 1997, the Company executed a 25-year Management Agreement with a
     dental practice located in Flint, Michigan. Unaudited net practice revenue
     of the dental practice was approximately $4 million for the year ended
     December 31, 1996. The Management Agreement executed is a net revenue
     contract.

     In August 1997, the Company acquired approximately $175,000 of non-dental
     assets and executed a 25-year Management Agreement with a dental practice
     located in Tallahassee, Florida. Unaudited net practice revenue of the
     dental practice was approximately $900,000 for the year ended December 31,
     1996. The Management Agreement executed is a net revenue contract.


                                       49
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

     In September 1997, the Company acquired approximately $120,000 of
     non-dental assets and executed a 25-year Management Agreement with a dental
     practice located in St. Petersburg, Florida. Unaudited practice revenue of
     the dental practice was approximately $400,000 for the year ended December
     31, 1996. The Management Agreement executed is a net revenue contract.

     In December 1997, the Company executed a 25-year Management Agreement with
     a dental practice located in Tampa, Florida, and acquired non-dental
     equipment of $50,000, $20,000 of which is included in acquisition and
     affiliated obligations payable. Unaudited net practice revenue of the
     dental practice was approximately $600,000 for the year ended December 31,
     1997. The Management Agreement executed is a net revenue contract.

     In December 1997, the Company executed a 25-year Management Agreement with
     a dental practice in Lakeland, Florida. The total cost to the Company was
     $420,000 which was allocated to Management Agreement. Unaudited net
     practice revenue of the dental practice was approximately $800,000 for the
     year ended December 31, 1997. The Management Agreement executed is a net
     revenue contract.

     In December 1997, the Company executed a 25-year Management Agreement with
     a practice located in Rockledge, Florida. The total cost to the Company was
     $1,000,000, of which $800,000 was allocated to Management Agreement and
     $400,000 of which is included in acquisition and affiliation obligations
     payable. Unaudited net practice revenue of the dental practice was
     approximately $1.6 million for the year ended December 31, 1997. The
     Management Agreement executed is a net revenue contract.

5.   ACQUISITIONS

     On December 29, 1997, the Company acquired all of the outstanding capital
     stock of Marketplace Dental, Inc., a Florida corporation ("Marketplace"),
     pursuant to the merger ("Merger"), of Marketplace with and into Dental Care
     Alliance of Florida, Inc. ("DCA Florida"), a wholly-owned subsidiary of the
     Company. Marketplace was the practice management company resulting from the
     reorganization of Childrens Dental Arcade, Inc. and Wellington Marketplace
     Group, PA, on October 1, 1997. The Merger was consummated pursuant to that
     certain Agreement and Plan of Merger dated December 29, 1997 ("Merger
     Agreement") among the Company, Marketplace, DCA Florida and the Marketplace
     shareholders.

                                       50
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

5. ACQUISITIONS - (Continued)

     DCA Florida was the surviving corporation in the Merger. Marketplace was a
     dental practice management company which managed six dental practices in
     Palm Beach County. Pursuant to the Merger the Company acquired all of the
     assets and assumed certain liabilities of Marketplace. Such assets
     consisted primarily of non-dental assets (including dental equipment) and
     management agreements. Pursuant to the Merger, all shares of Marketplace
     common stock were converted into the right to receive, in the aggregate
     80,000 shares of unregistered common stock of the Company and an amount in
     cash of approximately $500,000, which is included in acquisition and
     affiliation obligations payable. In addition, the Merger Agreement calls
     for the issuance of additional common stock if certain operating results
     are achieved.

     As a result of the acquisition, the Company has recorded the following net
     assets:

                     Current assets            $    146,774
                     Property and equipment         505,343
                     Intangible assets            1,760,429
                     Other assets                    21,645
                     Current liabilities            (57,137)
                     Long-term debt                (420,054)
                     Deferred tax liability        (657,000)
                                               ------------
                                               $  1,300,000
                                               ============

     The following unaudited pro forma consolidated results of operations of the
     Company give effect to the Marketplace acquisition for 1996 and 1997 as if
     the acquisition had occurred at the beginning of each respective period.

<TABLE>
<CAPTION>
                                                       PRO FORMA      PRO FORMA
                                                         1996            1997
                                                      ----------      ----------
     <S>                                              <C>             <C>
     Total revenues                                   $2,809,458      $9,083,727
     Net income                                       $   33,140      $  262,633
     Net income per common share:
          Basic                                       $     0.01      $     0.06
          Diluted                                     $     0.01      $     0.06
     Weighted average common shares outstanding:
          Basic                                        3,909,029       4,689,673
          Diluted                                      3,987,492       4,777,151
</TABLE>

                                       51
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

6. PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

                                         1996           1997
                                     -----------    -----------
     Dental and other equipment      $    24,900    $   911,841
     Leasehold improvements               45,027        296,437
     Vehicles                             13,901         13,901
                                     -----------    -----------
                                          83,828      1,222,179
     Less accumulated depreciation       (43,598)      (109,129)
                                     -----------    -----------
                                     $    40,230    $ 1,113,050
                                     ===========    ===========

     Depreciation expense for the periods ended December 31, 1995, 1996 and 1997
     was $17,939, $15,508 and $65,529, respectively.

7. OPERATING LEASES

     The Company leases office space for its corporate offices and, under the
     terms of certain Management Agreements, office space and certain non-dental
     assets on behalf of its Managed Dental Centers.

     Future minimum lease payments under these agreements as of December 31,
     1997 are:

     1998                             $     1,365,240
     1999                                   1,224,496
     2000                                     949,237
     2001                                     838,026
     2002                                     685,097
     Thereafter                             2,871,081
                                       ---------------
                                      $     7,933,177
                                      ===============

     Operating lease expense for the periods ended December 31, 1995, 1996 and
     1997 was $48,079, $118,000 and $856,822, respectively.

8. INTANGIBLE ASSETS

     Intangible assets consists of the following:

                                           1996          1997
                                         --------     ----------

     Organizational costs                $ 60,097     $   74,963
     Deferred financing costs                 --           9,739
     Management Agreements                750,802      4,767,897
                                         --------     ----------
                                          810,899      4,852,599
                                           (7,146)      (105,296)
                                         --------     ----------
                                         $803,753     $4,747,303
                                         ========     ==========

     Amortization expense for the periods ended December 31, 1995, 1996 and 1997
     was $4,167, $12,146 and $98,152, respectively.

                                       52
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

9. DEBT

     Long-term debt and capital leases consists of the following:

<TABLE>
<CAPTION>
                                                                          1996                1997
                                                                        ---------         ------------
<S>                                                                     <C>               <C>
     Note payable to seller, interest rate at 9%, principal
     and interest payable monthly, maturing in
     April 2005, unsecured                                                           $       -         $    546,067

     Capital lease obligations, secured by equipment and leasehold
     improvements at specific dental practices. Various terms ranging
     from five to six years with imputed interest rates of 13.6% - 17.2%                     -             348,652

     Note payable to equipment finance company, secured
     by equipment at specific dental practices, interest at
      11.9%, maturing in 2002                                                                -             117,392

     Note payable to financial institution, interest at prime plus 1%
     (9.5% and 9.25% at December 31, 1995 and 1996, respectively),
     principal and interest payable monthly, maturing in October 1999,
     secured by dental equipment and the other  business assets of the Company          57,805                  -

     Note payable to financial institution, interest at prime plus 1%
     (9.5% and 9.25% at December 31, 1995  and 1996, respectively), 
      principal and interest payable  monthly, maturing in August 1999, unsecured       53,017                  -

     $60,000 line of credit to financial institution, secured principal
     payable due on demand, interest paid quarterly at 9.25% per year
     until first change date then rate will be prime plus 1%,
     guaranteed by the Company's President and Chief Executive
     Officer                                                                            57,260                  -

     $40,000 line of credit to financial institution maturing March 26,
     1997, secured by a money market account of the Company's President
     and Chief Executive Officer, principal due on demand, interest
     paid quarterly at 7.25% per year until first change
     date then rate will be prime plus 1%                                               39,899                 -

     Other                                                                               6,021                 -
                                                                                    ----------        ----------
                                                                                       214,002         1,012,111
     Less current portion                                                              173,652            195,193
                                                                                    ----------        -----------
                                                                                    $   40,350        $   816,918
                                                                                    ==========        ===========
</TABLE>

                                       53
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

9. DEBT - (Continued)

     Future debt payments as of December 31, 1997 are:

        1998                                     $   195,193
        1999                                         192,392
        2000                                         205,366
        2001                                         108,499
        2002                                         102,854
        Thereafter                                   207,807
                                                  -----------
                                                  $1,012,111
                                                  ===========

     The Company has two revolving lines of credit with a financial institution
     which provides for an aggregate of $1.2 million. The Company may use up to
     $600,000 for the purchase of non-dental assets of dental centers provided
     each borrowing is repaid within 45 days of draw down. The $600,000 may be
     used for general working capital needs. The revolving lines of credit bear
     interest at prime plus .75% and are payable on June 1, 1998, and contain
     limitations on acquisition activity without prior approval. The entire $1.2
     million under the lines were available at December 31, 1997.

10.  INCOME TAXES

     As described in Note 1, through October 23, 1996, the Company consisted of
     a group of Limited Liability Corporations ("LLCs") with one subsidiary
     operating as a C Corporation in 1994.

     The provision for income tax related to the C Corporation for the period
     October 23, 1996 through December 31, 1996 and the year ended December 31,
     1997 consists of the following:

                                                 1996            1997
                                             ----------       --------
           Current expense (benefit):
              Federal                        $   17,000       $254,514
              State                               2,900         51,253
           Deferred expense (benefit):
              Federal                            13,600        (36,594)
              State                               2,000         (5,581)
                                             ----------       --------
           Total                             $   35,500       $263,952
                                             ----------       --------

                                       54
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

10. INCOME TAXES - (Continued)

         The reconciliation between the effective income tax rate and the U.S.
         federal statutory rate is as follows:

                                                        YEAR ENDED DECEMBER 31,
                                                        ------------------------
                                                          1996            1997
                                                        --------      ----------
         U.S. federal taxes at statutory rate          $ 83,360      $  230,539
                Increase (decrease) 
                State taxes, net                          3,737          23,841
                Flow through entity income              (51,597)
                Amortization of intangibles                               5,333
                Nondeductible items                                       4,239
                                                       --------      ----------
         Income tax provision                          $ 35,500      $  263,952
                                                       ========      ==========

         Deferred tax assets (liabilities) are as follows:

<TABLE>
<CAPTION>
                                                           YEAR ENDED DECEMBER 31,
                                                          ------------------------
                                                             1996           1997
                                                          ---------      ---------
         <S>                                              <C>            <C>
         Deferred taxes, current:
               Reserve for bad debts                      $    --        $  33,529
                                                          ---------      ---------
         Net deferred tax asset current                        --           33,529
                                                          ---------      ---------
         Deferred taxes, non-current:
              Depreciation                                  (15,600)         4,040
              Amortization of intangibles                                  (10,272)
              Book in excess of tax basis in 
                 tangible assets                                          (767,037)
                                                          ---------      ---------
         Net deferred tax (liability), non-current          (15,600)      (773,269)
                                                          ---------      ---------
         Net deferred tax (liability)                     $ (15,600)     $(739,740)
                                                          =========      =========
</TABLE>

         A deferred tax liability has been recorded for several intangible
         assets related to management agreements entered into during 1997 for
         which book basis exceeded tax basis.

11.      MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCK

         MANDATORILY REDEEMABLE PREFERERED STOCK 
         On October 25, 1996, the Company executed a subscription agreement
         which provided for the issuance of $1.5 million (15,000 shares at
         $100/share) in mandatorily redeemable preferred stock. Under the terms
         of that agreement, $500,000 of preferred stock was issued on October
         25, 1996 and $1,000,000 was issued on December 31, 1996. Proceeds of
         this issuance are reflected net of $105,000 of related offering costs
         paid under the Advisory Agreement described in Note 14.


                                       55
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

11. MANDATORILY REDEEMABLE PREFERRED STOCK AND COMMON STOCK (Continued)

         The Company had authorized 15,000 shares of Series A Convertible
         Preferred Stock with a par value of $0.01 per share. The preferred
         stock accrued cumulative dividends at $8/share, had voting and
         preemptive rights, adjustments for dilutive effects and liquidation
         preferences equal to $100/share plus accrued unpaid dividends.
         Dividends were payable in cash or, at holders' option, one-half in cash
         and one-half in common stock. Upon consummation of the Company's
         initial public offering on November 4, 1997, the preferred stock was
         converted into common stock.

         COMMON STOCK WITH PUT RIGHTS
         In January 1994, GCH sold to a third party an owners interest
         equivalent to 13%. In connection with the sale of this owners interest,
         the owner became a director of the Company and the Company attached
         certain put rights which are exercisable after January 1, 2001, if the
         Company had not completed a public offering of its common stock by that
         date. The per share price applicable to the "put rights" is 6 times
         pre-tax net income for the calendar year immediately preceding the
         exercise of the put times the ownership percentage that will be put
         back to the Company.

         Concurrent with the Reorganization, this ownership interest was
         converted to 530,010 shares of common stock of the Company with put
         rights which are equivalent to those described above. As of December
         31, 1996, the redemption value of these put rights has been
         reclassified to temporary equity, from permanent equity on the
         Company's balance sheet. Upon consummation of the Company's initial
         public offering on November 4, 1997, the put rights provisions were
         eliminated.

12.      EMPLOYEE BENEFITS

         On January 26, 1994 and October 25, 1996, the Company issued to one of
         its officers warrants to purchase 81,540 shares of stock (at each grant
         date), with an exercise price at the then fair market value (aggregate
         value of $147,768 and $125,000 respectively) of the stock, as
         determined by an independent third party appraisal. The warrants became
         fully vested in January 1997. All such warrants were exercised in
         February 1997, and the exercise price was funded by an interest bearing
         note from the Company. This interest bearing note has been offset
         against additional paid-in capital in stockholders' equity at December
         31, 1997.

         On January 21, 1997, the Company issued a stock option for 49,576
         shares of stock to another officer of the Company which are
         exercisable, in whole or in part, immediately. Exercise price is fair
         market value on the grant date ($1.53 per share). In no event shall
         this option be exercisable after January 21, 2002.

         In November 1997, the Company adopted the 1997 Executive Incentive
         Compensation Plan (the "Incentive Plan") which is designed to attract
         and retain employees, officers and Directors. The Incentive Plan is
         administered by the Stock Option and Compensation Committee of the
         Board of Directors and 250,000 shares of common stock have been
         reserved for the Incentive Plan.

         Concurrent with the adoption of the Incentive Plan, the Company issued
         stock options for 61,500 shares to its employees. The options vest over
         a period of 3 to 5 years and must be exercised by February 2003.
         Exercise price is fair market value on grant debt ($12.00 per share).
         Currently any shares issued upon exercise would be unregistered. The
         Company expects to register the shares underlying the Incentive Plan
         before the shares issued in November, 1997 become exercisable.



                                       56
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

12. EMPLOYEE BENEFITS - (Continued)
  
         The following table summarizes the Company's stock option activity
         under the Incentive Plan:

<TABLE>
<CAPTION>
                                                           WEIGHTED       FAIR
                                                           AVERAGE       VALUE
                                                NUMBER     EXERCISE    OF OPTIONS
                                              OF SHARES     PRICE        GRANTED
                                              ---------   ---------    ----------
         <S>                                  <C>         <C>          <C>
         Granted during 1995                     --       $    --       $   --
         Exercised during 1995                   --       $    --       $   --
         Outstanding at December 31, 1995      81,540     $    1.81
         Exercisable at December 31, 1995      40,770     $    1.81     $   1.61

         Granted during 1996                   81,540     $    1.53     $   1.36
         Exercised during 1996                   --       $    --           --
         Outstanding at December 31, 1996     163,080     $    1.67         --
         Exercisable at December 31, 1996     122,310     $    1.67         --

         Granted during 1997                   61,500     $   12.00     $   2.66
         Exercised during 1997                163,080     $    1.67         --
         Outstanding at December 31, 1997      61,500     $   12.00         --
         Exercisable at December 31, 1997        --       $    --           --

         The following table summarizes the stock options outstanding and
         exercisable under the Incentive Plan at December 31, 1996 and 1997:
</TABLE>

<TABLE>
<CAPTION>
                                                                   OUTSTANDING                         EXERCISABLE
                                                     ----------------------------------------   -------------------------
                                                                   WEIGHTED
                                                                    AVERAGE       WEIGHTED                     WEIGHTED
                                   RANGE OF            NUMBER      REMAINING      AVERAGE          NUMBER      AVERAGE
                                   EXERCISE              OF       CONTRACTUAL     EXERCISE           OF        EXERCISE
                                    PRICE              OPTIONS       LIFE          PRICE           OPTIONS      PRICE
                               -----------------     ----------------------------------------   -------------------------
         <S>                   <C>                   <C>          <C>           <C>             <C>            <C>
         December 31, 1996      $1.53 - $1.81          163,080     2 months     $    1.67          122,310      $ 1.67
         December 31, 1997          $12.00              61,500    46 months     $   12.00             --        $  --
</TABLE>

         Pro forma information regarding net income and earnings per share is
         required by SFAS No. 123, and has been determined as if the Company had
         accounted for its employee stock options under the fair value method of
         SFAS No. 123. The fair value of each option grant is estimated on the
         date of grant using the fair value method with the following weighted
         average assumptions: no dividend yield, 11% expected volatility,
         risk-free interest rates ranging from 5.80% and average expected lives
         of four years.

         The Black-Scholes option valuation model was developed for use in
         estimating the fair value of traded options which have no vesting
         restrictions and are fully transferable. In addition, option

                                       57

<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

12. EMPLOYEE BENEFITS - (Continued)

         valuation models require the input of highly subjective assumptions
         including the expected stock price volatility. Because the Company's
         employee stock options have characteristics significantly different
         from those of traded options, and because changes in the subjective
         input assumptions can materially affect the fair value estimate, in
         management's opinion, the existing models do not necessarily provide a
         reliable single measure of the fair value of its employee stock
         options. For purposes of pro forma disclosures, the estimated fair
         value of the options is amortized to expense over the options' vesting
         period. The Company's pro forma net earnings as follows:

                                                  YEAR ENDED DECEMBER 31,
                                           -------------------------------------
                                              1995         1996          1997
                                           ----------     ------     -----------
         Net income                        $   74,903     $4,280     $   270,036
                                           ==========     ======     ===========
         Basic net income per share        $      .02     $ --       $       .06
                                           ==========     ======     ===========
         Diluted net income per share      $      .02     $ --       $       .06
                                           ==========     ======     ===========

         Because the SFAS No. 123 provides for pro forma amounts for options
         granted beginning in 1995, the pro forma expense will likely increase
         in future years as the new option grants become subject to the pricing
         model.

         For periods prior to the registration of the Company's common stock,
         independent valuations were utilized to determine the value of the
         common stock.

13.      NON-EMPLOYEE OPTION PLAN AND WARRANTS

         In November 1997, the Company adopted the 1997 Non-qualified Stock
         Option Plan ("Non-employee Plan") which is designed to provide
         additional incentives for the PAs with which the Company has entered
         into management agreements to attract and retain qualified dentists,
         health care specialists and PA owners. The Non-employee Plan is
         administered by the Stock Option and Compensation Committee of the
         Board of Directors and 425,000 shares of Common Stock have been
         reserved for the  Non-employee Plan.

         Concurrent with the adoption of the Non-employee Plan, the Company
         issued stock options for 124,000 shares. The options vest over a period
         of 3 to 5 years and must be exercised by February 2003. Exercise price
         is fair market value on the grant date ($12.00 per share). Currently
         any shares issued would be unregistered. The Company has not yet
         determined whether the shares underlying the Non-employee Plan will be
         registered.

         In conjunction with work performed under the Advisory Agreement (Note
         14), the Company also granted warrants to advisors.

                                       58
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

13. NON-EMPLOYEE OPTION PLAN AND WARRANTS - (Continued)

         The following table summarizes the Company's stock option activity
         under the Non-employee Plan:

<TABLE>
<CAPTION>
                                                                    WEIGHTED          FAIR
                                                                    AVERAGE           VALUE
                                                   NUMBER           EXERCISE        OF OPTIONS
                                                  OF SHARES           PRICE          GRANTED
                                                  ---------         ---------       ----------
         <S>                                      <C>               <C>             <C>
         Granted during 1995                       137,803          $    1.74       $     --
         Exercised during 1995                          --          $      --       $     --
         Outstanding at December 31, 1995          137,803          $    1.74
         Exercisable at December 31, 1995           84,802          $    1.74       $   1.55

         Granted during 1996                            --          $      --       $     --
         Exercised during 1996                          --          $      --       $     --
         Outstanding at December 31, 1996          137,803          $    1.74
         Exercisable at December 31, 1996           84,802          $    1.74

         Granted during 1997                       124,000          $   12.00       $   2.66
         Exercised during 1997                      84,802          $    1.74
         Outstanding at December 31, 1997          177,001          $    8.93
         Exercisable at December 31, 1997           53,001          $    1.74
</TABLE>

         The following table summarizes the stock options outstanding and
         exercisable at December 31, 1996 and 1997 under the Non-employee Plan:

<TABLE>
<CAPTION>
                                                              OUTSTANDING                      EXERCISABLE
                                                    -----------------------------------   -------------------------
                                                                 WEIGHTED
                                                                 AVERAGE        WEIGHTED                WEIGHTED
                                  RANGE OF           NUMBER      REMAINING      AVERAGE     NUMBER      AVERAGE
                                  EXERCISE             OF       CONTRACTUAL     EXERCISE      OF        EXERCISE
                                   PRICE            OPTIONS        LIFE          PRICE      OPTIONS      PRICE
                                ---------------     ------------------------------------   ------------------------
         <S>                    <C>                 <C>          <C>            <C>         <C>         <C>

         December 31, 1996      $0.24 - $1.74       137,803      6 months       $   1.74    84,802      $   1.74
         December 31, 1997      $1.74 - $12.00      177,001      46 months      $   8.93    53,001      $   1.74
</TABLE>

         The fair value of each option grant is estimated on the date of grant
         using the fair value method with the following weighted average
         assumptions: no dividend yield, 11% expected volatility, risk-free
         interest rates ranging from 5.80% and average expected lives of four
         years.

         The Black-Scholes option valuation model was developed for use in
         estimating the fair value of traded options which have no vesting
         restrictions and are fully transferable. In addition, option valuation
         models require the input of highly subjective assumptions including the
         expected stock price volatility. Because the Company's non-employee
         stock options have characteristics significantly different from those
         of traded options, and because changes in the subjective input
         assumptions can materially affect the fair value estimate, in
         management's opinion, the existing models do not necessarily provide a
         reliable single measure of the fair value of its non-employee stock
         options. For purposes of expense recognition, the estimated fair value
         of the options is amortized to expense over the options' vesting
         period.

                                       59
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

13. NON-EMPLOYEE OPTION PLAN AND WARRANTS - (Continued)

         The Company recorded expense associated with the grant of options and
         warrants totaling $15,993, $0, and $39,769, for the years ending
         December 31, 1995, 1996, and 1997, respectively.

14.      ADVISORY SERVICES

         The Company entered into an exclusive corporate development advisory
         agreement ("Advisory Agreement") in September 1995, as amended on
         April 25, 1996, under which the Company is committed to the following:

/bullet/ A retainer each quarter equal to the greater of $4,000 or 6 percent of
         the Company's quarterly income before income tax expenses in excess of
         $75,000 beginning February 1, 1996, through the date of the initial
         public offering (November 4, 1997), which is recorded as a component of
         general and administrative expenses;

/bullet/ Warrants to purchase an ownership interest (84,802 shares) at an
         exercise price of $20,000 for services rendered in connection with
         business development and other financial management advisory services.
         These warrants were exercised in June 1997;

/bullet/ A fee of $105,000 with respect to the issuance of the mandatorily
         redeemable preferred stock described in Note 11;

/bullet/ A fee of $100,000 and a 5 year warrant to purchase 29,167 shares of
         common stock at an exercise price equal to $12 per share, upon
         consummation of its initial public offering on November 4, 1997; and

/bullet/ Warrants to purchase 53,001 shares of common stock at an exercise price
         of $92,355, which became vested upon the completion of the Company's
         initial public offering for services rendered in connection with
         financial, marketing and administrative support related to the
         initial public offering on November 4, 1997.

                                       60
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

15.      EARNINGS PER SHARE

         RECONCILIATION
         The following is a reconciliation of the numerator and denominator of
         the basic and diluted earnings per share computations for the indicated
         years:

<TABLE>
<CAPTION>
                                                         YEAR ENDED DECEMBER 31,
                                            --------------------------------------------------
                                                1995                1996              1997
                                            -------------     ---------------    -------------
<S>                                         <C>               <C>                <C>
         Basic earnings per share:
            Numerator                       $      74,903     $         4,280    $     309,805
                                            -------------     ---------------    -------------
         Denominator:
            Common shares outstanding           3,791,610           3,829,029        4,610,331
                                            -------------     ---------------    -------------
            Basic earnings per share        $        0.02     $             -    $        0.07
                                            =============     ===============    =============

         Diluted earnings per share:
            Numerator                       $      74,903     $         4,280    $     309,805
                                            -------------     ---------------    -------------
         Denominator:
            Common shares outstanding           3,791,610           3,829,029        4,610,331
            Assumed conversion of options          72,681              78,463           87,478
                                            -------------     ---------------    -------------
            Total shares                        3,864,291           3,907,492        4,697,809
                                            -------------     ---------------    -------------
            Diluted earnings per share      $        0.02     $             -    $        0.07
                                            =============     ===============    =============
</TABLE>

         Options to purchase 81,540 shares of Common Stock at $1.81 per share,
         which were outstanding since October 1994 were not included in the
         computation of diluted earnings per share for 1995 or 1996 because the
         options' exercise price was greater than the average market price of
         the common shares. These options were exercised in 1997.

         PRO FORMA 
         Upon its incorporation on October 23, 1996, as described in Note 1, the
         Company terminated its predecessor status as a limited liability
         corporation and became subject to federal and state income taxes. In
         addition, due to the conversion of the preferred stock into common
         stock and the termination of the common stock put rights concurrent
         with the closing of the initial public offering, pro forma net income
         per share is computed using the pro forma net income of the Company
         before deductions for the adjustment in redemption value of the common
         and preferred securities and preferred stock dividends. Since the
         Company has adopted Financial Accounting Standards Board Statement No.
         128 "Earnings per Share" in 1997, pro forma adjustments for income
         taxes as if the Company had been treated as a C corporation and the
         impact of the preferred stock comversion have not been included in
         historical earnings per share in the Statement of Operations. Had the
         Company not restated prior years' earnings per share, the pro forma
         effect would have been as follows:

                                       61
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

15. EARNINGS PER SHARE - (Continued)

<TABLE>
<CAPTION>
                                                          YEAR ENDED DECEMBER 31,
                                                 ------------------------------------------
                                                    1995           1996             1997
                                                 ---------       ---------      -----------
         <S>                                     <C>             <C>            <C>
         Income (loss) before income taxes
           and minority interest                 $  (2,152)      $ 245,176      $   684,257
         Pro forma provision for income tax           --            94,000             --
         Provision for income tax (after
           conversion to C corporation)                                             263,952
         Minority interest in consolidated
           subsidiaries                              5,343           4,739             --
                                                 ---------       ---------      -----------

         Pro forma net income (loss)             $  (7,495)      $ 146,437      $   420,305
                                                 =========       =========      ===========

         Basic earnings per share                $    --         $    0.04      $      0.09
                                                 ---------       ---------      -----------
         Diluted earnings per share              $    --         $    0.04      $      0.09
                                                 ---------       ---------      -----------
</TABLE>

16.      RELATED PARTY TRANSACTIONS

         The Company's President, Chief Executive Officer and majority
         stockholder owns or controls entities which do business with the
         Company or its Managed Dental Centers. The Company and its Managed
         Dental Centers incurred rent totaling $87,756, $108,110 and $193,900
         for the years ending December 31, 1995, 1996 and 1997, respectively,
         payable to such entities. The Company also paid for certain laboratory
         costs of a related party on behalf of the Company's President and
         controlling stockholder. These amounts totaled $60,700 and $133,448 for
         the years ending December 31, 1996 and 1997, respectively. The amount
         of $60,000, which is personally guaranteed by the Company's President,
         has been reflected in other assets as such amounts have been structured
         as a demand note. The Managed Dental Centers have also incurred capital
         lease obligations payable to a related entity owned 33% by the
         Company's President totaling approximately $119,000, $108,000 and
         $102,000 as of December 31, 1995, 1996 and 1997, respectively. Interest
         expense on such obligations was approximately $16,000, $21,000 and
         $19,000 for the years ending December 31, 1995, 1996 and 1997,
         respectively.

                                       62
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                   (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)

17.     SIGNIFICANT CUSTOMERS

         As described in Note 1, a majority of the Managed Dental Centers are
         owned by PAs commonly controlled by the same individual. All PAs and
         the commonly controlled PAs are indebted to the Company as follows:

<TABLE>
<CAPTION>
                                                                         DECEMBER 31,
                                                                  --------------------------
                                                                     1996            1997
                                                                  ----------      ----------
         <S>                                                      <C>             <C>
         TOTAL ALL PAs:
         Consulting and license fees receivable                   $   59,000      $   64,116
         Management fee receivable from PAs                          397,441         914,026
         Advances to PAs                                              16,454         483,421
         Current portion of long-term notes receivable                68,460          83,522
         Long-term notes receivable from PAs, less
           current portion                                           129,935         313,940
         Consulting and license fees receivable, non current         251,925            --
                                                                  ----------      ----------
                                                                  $  923,215      $1,859,025
                                                                  ==========      ==========
         AMOUNT OWED BY THE COMMONLY CONTROLLED PAs:              $  647,251      $1,535,384
                                                                  ----------      ----------
</TABLE>

         This individual has personally guaranteed this indebtedness in the
         event the receivable cannot be paid by the PAs has pledged the
         ownership interest rights of PAs subordinate to acquisition debt. This
         represents a concentration of credit risk and exposes the Company to
         risk of loss for these amounts should the PAs and the individual be
         unable to pay its debts. Relevant financial data on this PA's practices
         and the Company's commitments on behalf of other PAs for each period
         end are as follows:

<TABLE>
<CAPTION>
                                                               FOR THE YEAR ENDED DECEMBER 31,
                                                          ------------------------------------------
                                                             1995            1996             1997
                                                          ----------      ----------      ----------
         <S>                                              <C>             <C>             <C>

         Net practice revenues                            $1,115,011      $4,116,938      $6,098,141
         Amounts contractually retained by the P.A.s         983,864       3,107,861       1,589,760
                                                          ----------      ----------      ----------
         Management fees                                  $  131,147      $1,009,077      $4,508,381
                                                          ----------      ----------      ----------
</TABLE>

18.      COMMITMENTS AND CONTINGENCIES

         The Company has entered into employment agreements with three of its
         officers, one of whom is also the majority stockholder of the Company.
         The terms of the agreements are from 4 to 5 years and initially expire
         in 1998 and 2001.

         The Company has entered into a staff leasing agreement whereby all of
         the Company's corporate employees and, all of the Managed Dental Center
         non-medical employees are leased.

         In the ordinary course of business, the Company is party to several
         legal proceedings, the outcome of which, individually or in the
         aggregate, is not expected to be material to the Company's financial
         position, results of operations or cash flows.

                                       63
<PAGE>

                           DENTAL CARE ALLIANCE, INC.
                    (SUCCESSOR TO GOLDEN CARE HOLDINGS, L.C.)

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

19.      SUBSEQUENT EVENTS

         In January, 1998, the Company executed a 25-year Management Agreement
         with two practices located in Bradenton, Florida. Unaudited net
         practice revenue of the dental practices was $1.5 million for the year
         ended December 31, 1997. The total cost to the Company was
         approximately $480,000 of which $225,000 is allocated to tangible
         assets and $255,000 is allocated to Management Agreements. The
         Management Agreements executed are net revenue contracts.

         In February, 1998, the Company executed 25-year Management Agreements
         with two practices located in Orlando, Florida. Unaudited net practice
         revenue of the dental practices was approximately $1.3 million for the
         year ended December 31, 1997. The total cost to the Company is
         approximately $500,000 of which $195,000 is allocated to tangible
         assets and $305,000 is allocated to Management Agreements. The
         Management Agreements executed are net revenue contracts.

         In March, 1998, the Company executed a 25-year Management Agreement
         with a practice in Mt. Dora, Florida. Unaudited net practice revenue of
         the dental practice was approximately $1.0 million. The total cost to
         the Company is approximately $349,000 of which $75,000 is allocated to
         tangible assets and $274,000 is allocated to the Management Agreement.
         The Management Agreement executed is a net revenue contract.

         In March, 1998, the Company executed a 25-year Management Agreement
         with a practice in Dalton, Georgia. Unaudited net practice revenue of
         the dental practice was approximately $1.7 million. The total cost to
         the Company is approximately $572,000 of which $100,000 has been
         allocated to tangible assets and $472,000 to the Management Agreement.
         The Management Agreement executed is a net revenue contract.

         In March, 1998, the Company executed 25-year Management Agreements with
         four dental practices in Detroit, Michigan. Unaudited net practice
         revenue of the dental practices was approximately $4.4 million. The
         total cost to the Company is approximately $2.6 million of which
         $400,000 has been allocated to tangible assets and $2.2 million to the
         Management Agreements. The Management Agreements executed are net
         revenue contracts.

                                       64
<PAGE>

ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

         None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The Company's directors and executive officers, their ages and
positions with the Company are as follows:

 NAME                         AGE    POSITION
 ----                         ---    --------
 Dr. Steven R. Matzkin, DDS    39    Chairman of the Board, Chief Executive
                                     Officer, President and Director
 Mr. Mitchell B. Olan          39    Vice President, Chief Operating Officer and
                                     Director
 Mr. David P. Nichols          39    Chief Financial Officer
 Dr. Oscar L. Hausdorff, DDS   62    Director of Development
 Mr. Curtis Lee Smith, Jr.     70    Director
 Mr. Robert F. Raucci          42    Director

         DR. STEVEN R. MATZKIN founded the Company's predecessors in 1992 and
1993 and serves full-time as the Company's Chairman of the Board, Chief
Executive Officer and President. Dr. Matzkin has over 14 years of experience in
the administration and management of dental practices. He practiced dentistry in
Michigan for six years, during which time he owned five dental practices and
managed over 25 dental practices through an affiliate management company. Dr.
Matzkin has also been featured as a guest speaker at regional Practice
Management conferences, including the national meeting for the National
Association of Dental Plans. Dr. Matzkin earned his BA degree in 1980 from the
Indiana School of Biology and his DDS degree in 1984 from Northwestern
University.

         MITCHELL B. OLAN has served as the Company's Vice President, Chief
Operating Officer, and as a director since 1994. From 1991 to 1994, Mr. Olan
served in various capacities, including area Vice President and Regional Vice
President at Optioncare Incorporated, a publicly traded national franchiser of
home infusion therapy businesses. From 1980 to 1990, Mr. Olan served in various
capacities including sales, sales management, general management and
administration with the ORMCO Division of Sybron Corporation. ORMCO is the
leading manufacturer and marketer of dental orthodontic appliances, equipment
and supplies. Mr. Olan earned a BS degree in Business Administration in 1980
from Indiana University School of Business.

         DAVID P. NICHOLS has served as the Company's Chief Financial Officer
since February 1997. From October 1994 until February 1997, Mr. Nichols served
as Chief Financial Officer at Biodynamics International, a publicly traded
company in the biotechnology business. From May 1993 until October 1994, Mr.
Nichols served as Vice President - Finance of Biodynamics. He was also Managing
Director, United States Operations, of Biodynamics from March 1996 until
February 1997. From June 1992 until

                                       65

<PAGE>

May 1993, Mr. Nichols served as Chief Financial Officer of KiMed Corporation, a
medical device company. Prior to joining the Company, Mr. Nichols had over
sixteen years experience in the health care field. He served as Chief Financial
Officer of the long term care division of Trizec Corporation, Ltd., and was in
public accounting with the audit divisions of Price Waterhouse LLP and Deloitte
& Touche LLP. Mr. Nichols earned his BS Degree from the University of Florida in
1979 and a masters degree in Accounting from the University of Florida in 1980.
He is a Certified Public Accountant and a Certified Management Accountant.

         DR. OSCAR L. HAUSDORFF as and independent contractor, has served as the
Company's Director of Development since 1996. From 1988 to 1995, he served as
President, Chief Operating Officer and as a director of Princeton Dental
Management Corporation, a publicly traded dental practice management company.
From 1977 to 1988, Dr. Hausdorff held positions in sales, sales management,
training, development and recruiting for various firms in the stock brokerage
business. From 1960 to 1977, Dr. Hausdorff practiced General Dentistry and
Orthodontics in New York. In addition, he was an instructor in Post-Graduate
orthodontics at New York University from 1960 to 1965. Dr. Hausdorff earned a
DDS degree from New York University in 1958, and a post graduate degree in
Orthodontics from New York University in 1964.

         CURTIS LEE SMITH, JR. has been a director of the Company since 1996.
Beginning in 1986, Mr. Smith served as Chairman of the Board and Chief Executive
Officer of Handex Corporation ("Handex"), an environmental consulting and
remediation company which became a public company in 1989. Handex acquired New
Horizons Computer Learning Centers, a software training company, in 1994. Handex
sold its environmental division in 1996 and now operated as New Horizons
Worldwide, of which Mr. Smith serves as Chairman of the Board and Chief
Executive Officer.

         ROBERT F. RAUCCI has been a director of the Company since 1996. Mr.
Raucci has been a managing member of Newlight Management, LLC, a technology
oriented venture capital fund, since July 1997. Mr. Raucci also has served as
president of RAM Investment Corporation, a venture capital investment and
advisory company, since 1994. Between 1985 and 1994 Mr. Raucci served as a
private equity investment manager for Alliance Capital Management Corporation, a
global investment management company.

                                       66

<PAGE>

ITEM 11.          EXECUTIVE COMPENSATION

                  The information required in response to this item is
                  incorporated by reference to the Company's Proxy Statement to
                  be filed with the Securities and Exchange Commission pursuant
                  to Regulation 14A not later than 120 days after the end of the
                  fiscal year covered by this report. The information included
                  in the proxy statement pursuant to Rule 402(i), (k) and (l) is
                  not incorporated herein by reference.

ITEM 12.          SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                  MANAGEMENT

                  The information required in response to this item is
                  incorporated by reference to the Company's Proxy Statement to
                  be filed with the Securities and Exchange Commission pursuant
                  to Regulation 14A not later than 120 days after the end of the
                  fiscal year covered by this report.

ITEM 13.          CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                  The information required in response to this item is
                  incorporated by reference to the Company's Proxy Statement to
                  be filed with the Securities and Exchange Commission pursuant
                  to Regulation 14A not later than 120 days after the end of the
                  fiscal year covered by this report.

                                       67

<PAGE>

                                     PART IV

ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)               Financial Statements

(1) and (2)       See "Index to Consolidated Financial Statements" at Item 8 of
                  this annual report on Form 10-K

(3)               Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER            DESCRIPTION
------            ------------
<S>               <C>
   3.1            Form of Amended and Restated Articles of Incorporation of the Company.  *
   3.2            Form of Amended and Restated Bylaws of the Company.  *
   4.1            See Exhibits 3.1 and 3.2 for provisions in the Company's Articles of Incorporation and
                  Bylaws defining the rights of holders of the Company's Common Stock.  *
  10.1            Form of Indemnification Agreement between the Company and each of its directors and
                  executive officers.  *
  10.2            Form of Standard Management Agreement.  *
  10.3            Contribution Agreement among the Company, Dental Care Alliance of Michigan, Inc. and
                  Dental Care Alliance of Florida, Inc.  *
  10.4            Management Agreement between Dr. Joseph Gaeta and the Company.  *
  10.5            Administrative Service Subcontract Agreement between the Company and Johnson Dental
                  Development Corporation.  *
  10.6            Administrative Services Agreement between the Company and Eight Mile Dental, P.C.;
                  Gratiot Avenue Dental, P.C.;  Wayne Road Dental, P.C. and Washington Boulevard Dental,
                  P.C.  *
  10.7            Form of License Agreement.  *
  10.8            Employment Agreement dated as of October 25, 1996 between the Company and Dr. Steven
                  R. Matzkin, as amended.  *
  10.9            Employment Agreement dated as of October 25, 1996 between the Company and Mitchell B.
                  Olan.  *
  10.10           Employment Agreement dated as of January 21, 1997 between the Company and David P.
                  Nichols.  *
  10.11           Equity Holders Agreement dated as of October 25, 1996 between the Company and Mitchell
                  B. Olan.  *
  10.12           Equity Holders Agreement dated as of April 30, 1997 between the Company and J. Francis
                  Lavelle.  *
  10.13           Equity Holders Agreement dated as of April 30, 1997 between the Company and The Nassau
                  Group, Inc.  *
  10.14           Option Agreement dates as of January 21, 1997 between the Company and David P.
                  Nichols.  *
  10.15           Form of Warrant between the Company and The Nassau Group, Inc.  *
  10.16           Form of IPO Warrant between the Company and The Nassau Group, Inc.  *

                                       68

<PAGE>

  10.17           Lease Agreement dated as of April 9, 1994 between the Company and Charles E. Githler,
                  III, as Managing Agent for Owner, J. Kevin Drake, as Trustee Under Trust Agreement
                  dated April 15, 1991.  *
  10.18           Stockholders' Agreement dated as of October 25, 1996 among the Company, Steven R.
                  Matzkin, Curtis Lee Smith, Jr., Robert F. Raucci and Crescent International Holdings,
                  Limited, as amended.  *
  10.19           Omnibus Executive Incentive Compensation Plan.  *
  10.20           Form of 1997 Non-Qualified Stock Option Plan.  *
  10.21           Promissory Note in the original principal amount of $147,768 dated as of February 13,
                  1997 from Mitchell B. Olan to the Company.  *
  10.22           Agreement for Services dated as of June 1, 1997 between the Company and Modern
                  Employer, Inc.  *
  10.23           Business Loan Agreement dated August 15, 1997 between the Company and Barnett Bank.  *
  10.24           Letter Agreement dated August 1997 between Nassau and the Company.  *
  10.25           Acknowledgement and Option Agreement between Dennis Corona and Andrew D. Levine.  *
  10.26           Acknowledgement and Option Agreement between Dennis Corona and Jay Walton.  *
  10.27           Credit facility commitment letter dated March 18, 1998 between the Company and
                  NationsBank.
  21.1            List of subsidiaries of the Company.   *
  27.1            Financial Data Schedule
</TABLE>

* Previously filed with the Securities and Exchange Commission as Exhibits to,
and incorporated herein by reference from the Company's Registration Statement
on Form S-1.

(b)      Reports on Form 8-K

         The Company filed a report on Form 8-K on January 13, 1998 disclosing
the acquisition of all the outstanding capital stock of Marketplace Dental, Inc.
on December 29, 1997 pursuant to the merger of Marketplace Dental, Inc. with and
into Dental Care Alliance of Florida, Inc., a wholly-owned subsidiary of the
Company.

         The Company filed a report on Form 8-K on March 16, 1998, as an
amendment to Form 8-K filed on January 13, 1998, to include the financial
statements of Marketplace Dental, Inc. and Pro Forma Financial Statements of the
Company.

         The Company filed a report on Form 8-K on March 20, 1998, as a second
amendment to Form 8-K filed on January 13, 1998, to include the audited
financial statements of Marketplace Dental, Inc. and certain changes to the Pro
Forma Financial Statements of the Company.

(c)      Exhibits

         See (a) (3) above.

                                       69
<PAGE>

(d)     Financial Statement Schedule

         See "Index to Consolidated Financial Statements" at Item 8 of this Form
10-K. Schedules not included herein are omitted because they are not applicable
or the required information appears in the Consolidated Financial Statements or
Notes thereto.

                                       70
<PAGE>

                                   SIGNATURES

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

                                    DENTAL CARE ALLIANCE, INC.

                                      /s/ STEVEN R. MATZKIN
                                      ---------------------
                        Steven R. Matzkin, Chief Executive Officer and President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
had been signed by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.

             SIGNATURE                                    TITLE
DATE

/s/ STEVEN R. MATZKIN                       Chairman of the Board
---------------------------                 Chief Executive Officer
    March 31, 1997                          President
    Steven R. Matzkin

/s/ DAVID P. NICHOLS                        Chief Financial Officer
---------------------------                 Principal Financial and Accounting
    March 31, 1997                          Officer
    David P. Nichols

/s/ MITCHELL B. OLAN                        Director and Secretary
---------------------------
    March 31, 1997
    Mitchell B. Olan

/s/ CURTIS LEE SMITH                        Director
---------------------------
    March 31, 1997
    Curtis Lee Smith

/s/ ROBERT RAUCCI                           Director
--------------------------- 
    March 31, 1997
    Robert Raucci

                                       71

<PAGE>

EXHIBITS

EXHIBIT
NUMBER            DESCRIPTION
-------           -----------

 10.27            Credit facility commitment letter dated March 18, 1998
                  between the Company and Nationsbank.

 27.1             Financial Data Schedule

                                       72