**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**______________________**

 

**FORM 10-KSB**

 

**Annual Report Pursuant**

**to            Section 13 or 15(d) of the**

**Securities Exchange Act of 1934**

 

For            the fiscal year ended

**December 31, 2007**

 

Commission file number

**333-37842**

 

**DENTALPATIENTCAREAMERICA,INC.**

(Exact name of small business issuer as specified in its            charter)

 

| **Utah**                                                                  | **87-0373840**                    |
|---------------------------------------------------------------------------|-----------------------------------|
| (State or other jurisdiction of                            incorporation) | (IRS Employer Identification No.) |
|                                                                      |                              |
| **2150 S. 1300 E., Suite 500**

**Salt Lake City, Utah**                  |  

**84106**                 |
| (Address of principal executive offices)                                  | (Zip Code)                        |

 

**(801) 990-3311**

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:            None

Securities registered pursuant to Section 12(g) of the Act:            None

 

Check            whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of            the Exchange Act: o.

             

Check            whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of            the Exchange Act during the past 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. YesxNoo

             

Check            if there is no disclosure of delinquent filers in response to Item 405 of Regulation            S-B contained in this form, and no disclosure will be contained, to the best of the            registrant’s knowledge, in definitive proxy or information statements            incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form            10-KSB.x

 

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

             

State            issuer’s revenues for its most recent fiscal year:

 

|   | Revenues for the fiscal year ended December 31, 2007                            were $1,446,848 |
|--------|-------------------------------------------------------------------------------------------------|

 

 

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State            the aggregate market value of the voting and non-voting common equity held by            non-affiliates computed by reference to the price at which the common equity was sold,            or the average bid and asked price of such common equity, as of a specified date within            the past 60 days (See definition of affiliate in Rule 12b-22 of the Exchange            Act).

 

As of April 7, 2008, based on the average of the bid and asked            quotations of $0.19 appearing on the OTC Bulletin Board interdealer quotation system on            that date, the aggregate market value of the 15,960,890 shares held by non-affiliates            was$3,032,569.

 

**ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS**

**DURING THE PAST FIVE YEARS**

 

Check whether the issuer has filed all documents and reports required to            be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of            securities under a plan confirmed by a court.

 

| Yes o | No o |
|-------|------|

**APPLICABLE ONLY TO CORPORATE REGISTRANTS**

State            the number of shares outstanding of each of the issuer’s classes of common            equity, as of the latest practicable date.

 

As of March 31, 2008, there were 23,812,397 shares of the issuer’s            common stock outstanding.

             

**DOCUMENTS INCORPORATED BY REFERENCE**

If the following documents are incorporated by reference, briefly            describe them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.)            into which the document is incorporated: (1) any annual report to security holders; (2)            any proxy or information statement; (3) any prospectus filed pursuant to Rule 424(b) or            (c) under the Securities Act of 1933 ("Securities Act"). The list of documents should            be clearly described for identification purposes (e.g., annual report to security            holders for fiscal year ended December 24,            1990).            

             

None.

 

|   | Transitional Small Business Disclosure Format (check                            one): | Yes o; | Nox |
|--------|---------------------------------------------------------------------------------------|--------|-----|

 

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**DENTALPATIENTCAREAMERICA,INC.**

 

**TABLE OF CONTENTS TO ANNUAL REPORT**

**ON            FORM 10-KSB**

 

**YEAR ENDED DECEMBER 31, 2007**

 

PART            I

 

| Item 1. | Description of Business | 4 |
|---------|-------------------------|---|

| Item 2. | Description of Property | 15 |
|---------|-------------------------|----|

| Item 3. | Legal Proceedings | 16 |
|---------|-------------------|----|

| Item 4. | Submission of Matters to a Vote of Security                            Holders | 16 |
|---------|--------------------------------------------------------------------------------|----|

             

             

PART            II

 

| Item 5. | Market for Common Equity and Related Stockholder                            Matters | 16 |
|---------|-------------------------------------------------------------------------------------|----|

| Item 6. | Management’s Discussion and Analysis or Plan of                            Operation | 18 |
|---------|--------------------------------------------------------------------------------------------|----|

| Item 7. | Financial Statements | 36 |
|---------|----------------------|----|

| Item 8. | Changes in and Disagreements with Accountants on                            Accounting and Financial |
|---------|------------------------------------------------------------------------------------------------------|

|   | Disclosures | 36 |
|--------|-------------|----|

| Item 8A. | Controls and Procedures | 36 |
|----------|-------------------------|----|

| Item 8B. | Other Information | 37 |
|----------|-------------------|----|

             

PART            III

 

| Item 9. | Directors, Executive Officers, Promoters and Control                            Persons; Compliance |
|---------|-----------------------------------------------------------------------------------------------------|

|   | With Section 16(a) of the Exchange Act | 37 |
|--------|----------------------------------------|----|

| Item 10. | Executive Compensation | 39 |
|----------|------------------------|----|

| Item 11. | Security Ownership of Certain Beneficial Owners and                            Management and Related Stock- |
|----------|--------------------------------------------------------------------------------------------------------------|

|   | holder Matters | 41 |
|--------|----------------|----|

| Item 12. | Certain Relationships and Related                            Transactions | 42 |
|----------|---------------------------------------------------------------------------|----|

| Item 13. | Exhibits | 43 |
|----------|----------|----|

| Item 14. | Principal Accountant Fees and Services | 43 |
|----------|----------------------------------------|----|

|   |   |   |
|--------|--------|--------|

| SIGNATURES |   | 44 |
|------------|--------|----|

             

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**Forward-Looking Statements**

 

When used in this Form 10-KSB, in our filings with the Securities and            Exchange Commission (“SEC”), in our press releases or other public or            stockholder communications, or in oral statements made with the approval of an            authorized executive officer, the words or phrases “would be,” “will            allow,” “intends to,” “will likely result,” “are            expected to,” “will continue,” “is anticipated,”            “estimate,” “project,” or similar expressions are intended to            identify “forward-looking statements” within the meaning of the Private            Securities Litigation Reform Act of 1995.

 

We caution readers not to place undue reliance on any forward-looking            statements, which speak only as of the date made, are based on certain assumptions and            expectations which may or may not be valid or actually occur, and which involve various            risks and uncertainties, including but not limited to risk of a lack of demand or low            demand for our products and services; competitive products and pricing; changes in the            regulation of our industry; a failure to timely obtain necessary regulatory approvals;            changes to the tax laws; failure to obtain adequate funding; additional costs            associated with compliance with the Securities and Exchange Act of 1934 and the            Sarbanes-Oxley Act of 2002, including any changes in the SEC’s rules, and other            corporate governance requirements; failure of member dentists to timely and accurately            pay management and other fees, changing government regulations and laws applicable to            the delivery of dental services, competitive factors such as pricing pressures and/or            competition to hire and retain employees; the results of current and/or future legal            proceedings and government agency proceedings which may arise out of our operations            (including our dental benefits plan business and the attendant risks of fines,            liabilities, penalties, suspension and/or debarment; undertaking acquisitions that            could increase our costs or liabilities or be disruptive; taking on additional debt to            fund acquisitions or to implement affiliate agreements; failure to adequately integrate            acquired businesses; material changes in laws or regulations applicable to the            Company’s businesses; as well as other factors and other risks set forth in Item            6 “Risk Factors” and elsewhere herein.

 

Unless otherwise required by applicable law, we do not undertake, and            specifically disclaim any obligation, to update any forward-looking statements to            reflect occurrences, developments, unanticipated events or circumstances after the date            of such statement.

 

**PART I**

 

**Item            1. Description of Business**

 

**Overview**

 

Dental Patient Care America, Inc. (“we”, “us”,            “our”, “the Company” and “DPCA”) is incorporated            under the laws of the state of Utah. We are in the business of providing services to            dentists and the dental industry. Our business is conducted through three operating            subsidiaries, Dental Cooperative, Inc., Dental Practice Transition, Inc. and U.S.            DentistDirect, Inc.

 

Dental Cooperative, Inc., our oldest operating subsidiary, was            incorporated in Utah in 1998 for the purpose of organizing dentists into a cooperative            model of contractually networked dental practices, allowing member dentists to access a            variety of benefits from the cooperative structure. Such benefits include programs to            purchase supplies, laboratory and other operating services, insurance and employee            benefits programs, opportunities for profit sharing through the cooperative model and,            more recently, preferential business financing through the Company’s financing            agreements with Stillwater National Bank and Trust Company as described herein. Various            dental patient marketing programs are also provided, such as the organization of its            member dentists into a network, which offers dental care plans to employers and other            groups.

 

Dental Practice Transition, Inc., another subsidiary, was incorporated            in December 2004. During 2007, we commenced implementing dental member practice            transition funding models through Dental Practice Transition, Inc. using the referral            lending agreements we had concluded with Stillwater National

 

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Bank            and Trust Company during 2006. The implementation of these models provides the ability            to member dental practitioners who have chosen to retire or otherwise exit their            practice to obtain financing toward the future transition of their practice to a member            practitioner who wishes to assume the operations of the exiting member. Members who            enter into such financing agreements are sometimes referred to in this report as            “Affiliate Members.” During 2007, we completed our acquisition of two            dental practices and completed our first five dental practice purchase and transition            financing arrangements and one practice sale arrangement. Subsequent to year end, we            completed an additional two dental practice purchase and transition financing            arrangements. We believe that this new line of business will enable us to demonstrate            the capability of the Dental Cooperative model to increase profitability at dental            practices with the intent to profitably finance the enhanced dental practices to new            dentists.

 

U.S. DentistDirect, Inc., another operating subsidiary, was incorporated            in Utah in 2004 to conduct a dental benefits plan business for the purpose of            generating patient flow for the Dental Cooperative member dentists who participate as            the provider panel for the DentistDirect, LLC offerings. This subsidiary did not            generate any revenues during 2007.

 

During the year ended December 31, 2007, we derived $315,147 of our            revenue from our Dental Cooperative business. Our total revenue in 2007 (after            netting member incentives fees of $89,373 in accordance with EITF 01-09) was            $1,446,848, compared to $310,485 in 2006. The increase in revenue resulted primarily            from the consolidation of one acquired dental practice and revenues from our            new Affiliate Members. We also realized $435,238 of income from discontinued operations            resulting from the sale of a practice through our Dental Practice Transition            business.

 

We plan to continue conducting the dental cooperative business of Dental            Cooperative, Inc., and the transitioning of dental practices through Dental Practice            Transition, Inc. In the future, our dental practice transition agreements will be            entered into by Dental Practice Transition, Inc. We also plan to continue the business            relationship between U.S. DentistDirect, Inc. and DentistDirect, LLC for the purpose of            creating and directing patient flow.

 

**Business Development and Promotional Activities**

 

We primarily promote our Dental Cooperative membership agreements by            meeting face-to-face with dentists as a result of referrals from existing members and            other introductions. We also make visual and other presentations at dental association            meetings and in dental industry trade journals. We primarily promote our Dental            Practice Transition arrangements by meeting face-to-face with dentists who are members            of the Cooperative.

 

In 2006 we finalized the lending agreements with Stillwater National            Bank and Trust Company (“SNB”) described herein and during 2007 we began            implementation of our Dental Practice Transition Business by completing our first five            dental practice purchase and transition financing arrangements and one practice sale            arrangement.Subsequent to December 31, 2007, we completed an            additional two dental practice purchase and transition financing arrangements. The            lending agreements with SNB facilitated both our purchase and transition financing            arrangements and our sale arrangement.

 

During the second quarter of 2007, we standardized the practice purchase            and transition financing arrangements entered into in connection with our Dental            Practice Transition Business and we determined that such agreements were no longer            material to the Company on an individual basis. As a result, from and after September            30, 2007, we discontinued our previous practice of filing a current report on Form 8-K            each time a practice purchase and transition financing arrangement was entered into and            of filing copies of such agreements as exhibits.

 

On December 27, 2006, we entered into a Loan, Security and Warrant            Agreement (the “Loan Agreement”) with Heartland Dental Care, Inc.            (“Heartland”). Under the terms of the Loan Agreement, Heartland made loans            to the Company in the aggregate principal amount of five hundred thousand dollars            ($500,000) bearing interest at the rate of ten percent (10%) per annum. The principal            amount is due and payable in full April 30, 2012. As collateral for the loan, we            granted Heartland a security interest in substantially all of our assets. As

             

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additional consideration for the loan, we issued a warrant to Heartland            that is currently exercisable for 4.0% of our issued and outstanding common stock, on a            fully diluted basis. We also agreed to file a registration statement registering the            resale of the warrant and common stock that is issuable upon exercise of the warrants.            We also executed a Benchmark Services Agreement with Heartland whereby Heartland agreed            to provide benchmarking services to dental practices who received funding through            Stillwater National Bank and Trust Company in connection with an effective Affiliate            Member Practice Purchase Agreement to which the Company is a party (a “Covered            Practice”). In consideration for such services, Heartland will be paid an amount            equal to one percent (1%) of the aggregate collected revenues of the Covered Practices            during each quarterly period that the agreement is in effect. The Company and its            directors also entered into a Tag Along Rights Agreement with Heartland whereby the            directors granted Heartland tag along rights should a director enter into an agreement            to transfer shares held by such director. The foregoing summary is qualified in its            entirety by reference to the actual Heartland agreements, copies of which were included            as exhibits to our current report on Form 8-K dated December 27, 2006.

 

Substantially all of our business to date has been conducted in the            state of Utah. With the necessary regulatory approvals and funding arrangements that            are now in place, we plan to expand our business into the adjacent Western States and            subsequently the United States. There can be no assurance, however, that we will be            successful in meeting this objective.

 

**Growth Strategy**

 

|   | **Dental                            Cooperative** |
|--------|---------------------------------------------------|

 

Our Dental Cooperative business has remained fairly stable in the number            of member dental practices agreeing to pay management and other fees for membership            benefits. We intend to continue pursuing quality dental practices to become members of            Dental Cooperative and to continue offering our Affiliate Member products and related            financing sources that were put in place in January 2007.

 

Dental Cooperative now offers both Affiliate Member Agreements and            Associate Member Agreements. Both membership types offer a standard set of benefits            with the primary difference between the two types of cooperative membership being the            provision of financing to Affiliate Members as part of the transition arrangements of            their dental practices with accordingly higher membership fees. The Associate Member            Agreements provide loans only for business financing purposes, again through the            Company’s financing arrangements with Stillwater National Bank and Trust Company.            During 2007, the Associate Member fees were changed from a percentage of the Associate            Member’s monthly collections, to a fixed monthly fee, which greatly simplified            the billing and reporting process for both the Associate Members and the            Company.

 

Management believes Dental Cooperative revenue will continue to grow            through new Affiliate Members and the change of new and existing Associate Members into            Affiliate Members with the increased fees associated with Affiliate            Memberships.

 

|   | **Dental Practice Transition** |
|--------|--------------------------------|

 

In an effort to start our Dental Practice Transition business, on            December 4, 2006, we entered into an agreement (the “SNB Agreement”) with            Stillwater National Bank and Trust Company (the “SNB”). The Agreement            provides that the Company will refer to SNB loans in connection with the            Company’s Affiliate Member Practice Purchase Agreements (the “Purchase            Agreement”). The loans will be made directly to the dental practice or dental            practitioner (the “Provider”) who is a party to the Purchase Agreement. The            Company and SNB have agreed on a standard form of loan package, which is subject to            negotiation between the Provider and SNB. The loans will be secured and guaranteed by            the Provider. SNB has the right, in its sole discretion, to accept or reject any loan            package. As a result, there can be no assurance that there will be any additional loans            generated in connection with the Agreement other than those closed and in process. The            Agreement also provides that the Company and its subsidiaries are required to give SNB            the exclusive right of first refusal to provide various types of third party financing            during the five year period following the Execution of the Agreement. The foregoing            summary is qualified in its entirety by reference to the actual            agreements with Stillwater National Bank and Trust Company, copies of            which were included as exhibits to our current report on Form 8-K dated December 4,            2006.

 

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During 2007, the Company entered into five Affiliate Member dental            practice purchase and transition financing arrangements and one sale arrangement.            Subsequent to December 31, 2007, the Company entered into two additional Affiliate            Member dental practice purchase and transition financing arrangements. The Company            charges Affiliate Members membership fees based upon the margin from the dental            practices that enter into such agreements, the amount of financing obtained by the            practice in the funding transaction, or a percentage of the practice’s valuation            expressed as a function of the annual cash collections of the practice. Membership fees            associated with Affiliate Members are established under the contractual terms entered            into when the financing agreement was concluded and currently range from approximately            $1,700 to approximately $5,300 per month. Since Affiliate Member fees are reasonably            determinable and estimable, such fees are accrued and recognized in the period            earned.

 

|   | Consolidated                            Practices |
|--------|---------------------------------------------------|

 

|   | Acquisition of                            Practice from Dr. Clegg |
|--------|------------------------------------------------------------------------|

 

On November 17, 2006, the Company, through Dental Cooperative, entered            into a Purchase Agreement with Dr. Richard Clegg and Richard R. Clegg DDS PC            providing for the Cooperative’s acquisition of substantially all of the assets of            Dr. Clegg’s dental practice in consideration for a payments in the form of            Company stock and cash. The Purchase Agreement also contains non-compete,            confidentiality and indemnification provisions. The closing of the Purchase Agreement            was subject to various contingencies. On January 20, 2007, the Company and            Dr. Clegg waived all closing contingencies and the parties closed on the Purchase            Agreement. The consideration given for the acquisition was $500,000 cash, which is            payable on the fifth anniversary of the acquisition and 300,000 shares of the            Company’s common stock, of which 60,000 shares were given upon acquisition and            60,000 will be given on the anniversary of the acquisition for the next four years.            Goodwill of $67,833 resulting from the acquisition resulted from the payment of a            premium (i.e. goodwill), over the fair value of the net tangible and identified            intangible assets. The purchased goodwill is not deductible for tax            purposes.

             

In connection with the Purchase Agreement, the Cooperative and            Dr. Clegg executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Dr. Clegg to manage and operate the dental            practice for a five year period in consideration for a percentage of the dental            practice’s margin (i.e., the dental practice’s collections less operating            expenses) plus an additional cash payment. The Management Agreement contains, among            other provisions, (i) requirements with respect to minimum collection and minimum            margin levels that must be maintained during the term of the agreement, (ii)            confidentiality and indemnification provisions, and (iii) a purchase option whereby            Dr. Clegg could purchase the dental practice for (a) the number of shares of the            Company’s common stock that the Company has issued in connection with the            purchase of the dental practice, plus (b) cash in an amount equal to one percent of the            dental practice’s collection during the period during which Dr. Clegg            managed the dental practice while the Management Agreement was effective. The            Management Agreement is effective immediately upon closing of the Purchase            Agreement.

 

Our financial statements for the fiscal year ended December 31, 2007            include consolidated financial information from this acquired practice.

 

|   | Acquisition and                            Subsequent Sale of Practice from DPAT   |
|--------|-----------------------------------------------------------------------------------------|

 

DPAT owns and operates a dental practice. Michael Silva, Marlon Berrett,            and Harry L. “Pete” Peterson (the “Members”), who are officers            and/or directors of the Company, were the sole owners of DPAT. Effective January 22,            2007, the Members assigned their entire membership interest in DPAT to Dental Practice            Transition, Inc. so that after the assignment was effective Dental Practice Transition,            Inc. became the sole member of DPAT. The Members were not paid any consideration in            connection with this transaction.

 

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On September 11, 2007, Dental Practice Transition, Inc., in accordance            with its business model and purpose, assigned its entire membership interest in DPAT to            39th Street Dental, LLC so that after the assignment was effective,            39th Street Dental, LLC became the sole member of DPAT. Dental Practice            Transition, Inc. received $429,000, which included $396,598 in cash and a note            receivable of $32,402, in consideration for the assignment. 39th Street            Dental, LLC borrowed the funds to purchase DPAT from Stillwater National Bank and Trust            Company. The members of 39th Street Dental, LLC personally guaranteed the            loan.

 

Dental Practice Transition, Inc. is in the business of transitioning            dental practices between dental practitioners who are exiting and entering their            practice tenure, as well as providing financing for these transitions. The sale price            of DPAT was evaluated and determined by the parties to the transaction utilizing 1)            national and local comparable data relative to practice values for similarly situated            dental operations of its size, type, historical operations, geographic location and            sale terms; and 2) the relationship with respect to which the Company has financed and            transitioned other practices it assists in similar transactions. The purpose of the            sale was to provide the Company with working capital.

 

In connection with the sale, the company recognized a gain of $419,334.            The sale was effective September 1, 2007. The results of operations for DPAT were            reported within discontinued operations in the 2007 Consolidated of Statements of            Operations. The 2007 Consolidated Statement of Cash Flows reports the cash flows of the            discontinued operations.

 

Marlon R. Berrett, an officer and director of the Company, and Andrew            Eberhardt, an officer of the Company, together own a fifty percent membership interest            in 39th Street Dental, LLC. The remaining fifty percent membership interests            are owned by the independent dentists who provide the 39th Street Dental,            LLC’s dental services.

 

The financial statements for the fiscal year ended December 31, 2007            include, in Discontinued Operations, the consolidated financial information from DPAT            which we acquired during the first quarter of 2007 and sold during the third quarter of            2007.

 

Affiliate Member Practices

 

|   | Acquisition of                            Practice from Dental Associates, Inc. |
|--------|---------------------------------------------------------------------------------|

 

Effective March 9, 2007, the Company, through Dental Cooperative,            entered into a Purchase Agreement with Dental Associates, Inc. and Drs. Jack Rasmussen            and Robert Boyer. Under the Purchase Agreement, the Cooperative may acquire            substantially all of Drs. Rasmussen’s and Boyer’s dental practices in            consideration for payments in the form of cash. The transfer of the practice assets is            not anticipated to occur until the five year anniversary of closing date. In connection            with the initial closing, Dental Associates, Inc. obtained a loan in the principal            amount of one-half of the practice purchase price from Stillwater National Bank and            Trust Company. The Purchase Agreement also contains non-compete, confidentiality and            indemnification provisions.

 

In connection with the Purchase Agreement, the Cooperative, Dental            Associates, Inc. and Drs. Rasmussen and Boyer executed a Management Agreement. Under            the Management Agreement, the Company has retained Dental Associates, Inc. to manage            and operate the dental practice for a five year period in consideration for a            percentage of Dental Associates, Inc.’s margin (i.e., Dental Associates,            Inc.’s collections less operating expenses) plus an additional cash payment. The            Management Agreement contains, among other provisions, (i) requirements with respect to            minimum collection and minimum margin levels that must be maintained during the term of            the agreement, and (ii) confidentiality and indemnification provisions. The Management            Agreement was effective immediately upon initial closing of the Purchase            Agreement.

 

In connection with the loan, the Company and the Cooperative agreed to            subordinate certain rights that may accrue in connection with the Purchase Agreement            and Management Agreement to the amounts owing to Stillwater National Bank and Trust            Company under the loan.

 

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|   | Acquisition of                            Practice from Dr. Packer |
|--------|--------------------------------------------------------------------|

 

Effective April 1, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with P. Berrett Packer DDS, Inc. Dr. Berrett Packer. Under the            purchase agreement, the Cooperative may acquire substantially all of            Dr. Packer’s dental practice in consideration for future cash payments and            120,000 shares of common stock (24,000 were issued at closing and 24,000 will be issued            on each of the first four annual anniversary dates and the closing). The transfer of            the practice assets is not anticipated to occur until the five-year anniversary of            closing date. In connection with the closing, the Provider obtained a loan in the            principal amount of twenty-percent (20%) of the practice purchase price from Stillwater            National Bank and Trust Company (the “Loan”). The Purchase Agreement also            contains confidentiality, indemnification and other provisions.

 

In connection with the Purchase Agreement, the Cooperative, Provider and            Dr. Packer executed a Management Services Agreement. Under the Management            Agreement, the Company has retained the provider to independently manage and operate            the dental practice for a five year period in consideration for a percentage of the            provider’s margin (i.e., the provider’s collections less operating            expenses) plus an additional cash payment. The Management Agreement contains, among            other provisions, (i) requirements with respect to minimum collection and minimum            margin levels that must be maintained during the term of the agreement, and (ii)            confidentiality and indemnification provisions. The Management Agreement is effective            immediately upon closing of the Purchase Agreement.

 

In connection with the loan, the Company and the Cooperative agreed to            subordinate certain rights that may accrue in connection with the purchase agreement            and related management agreement to the amounts owing to Stillwater National Bank and            Trust Company under the loan.

 

|   | Acquisition of                            Practice from Dr. Anderson |
|--------|----------------------------------------------------------------------|

 

Effective June 4, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., closed on an Affiliate Member Practice Purchase            Agreement with Lowell K. Anderson DMD PC and Dr. Lowell K. Anderson. Under the            purchase agreement, the Cooperative may acquire substantially all of            Dr. Anderson’s dental practice in consideration for future cash payments and            stock options exercisable for 1,000,000 shares of common stock. The transfer of the            practice assets is not anticipated to occur until the five-year anniversary of closing            date. In connection with the closing, the provider obtained a loan in the principal            amount of fifty-percent (50%) of the practice purchase price from Stillwater National            Bank and Trust Company. The purchase agreement also contains confidentiality,            indemnification and other provisions.

 

In connection with the Purchase Agreement, the Cooperative, Provider and            Dr. Anderson executed a Management Services Agreement. Under the Management            Agreement, the Company has retained the Provider to independently manage and operate            the dental practice for a five year period in consideration for a percentage of the            provider’s margin (i.e., the provider’s collections less operating            expenses) plus an additional cash payment. The Management Agreement contains, among            other provisions, (i) requirements with respect to minimum collection and minimum            margin levels that must be maintained during the term of the agreement, and (ii)            confidentiality and indemnification provisions. The Management Agreement is effective            immediately upon closing of the Purchase Agreement.

 

In connection with the loan, the Company and the Cooperative agreed to            subordinate certain rights that may accrue in connection with the purchase agreement            and management agreement to the amounts owing to the lender under the loan.

 

|   | Acquisition of Practice from Dr.                            Woodbury |
|--------|----------------------------------------------------------------------|

 

Effective November 1, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with William E. Woodbury, PC, (the “Provider”) and Dr.            William E. Woodbury. Under the Purchase Agreement, the Cooperative may acquire            substantially all of Dr. Woodbury’s dental practice in consideration for future            cash payment. The amount of

             

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such            future cash payment is to be determined by the average of the dental practices’            gross collections during the practices’ two fiscal years immediately preceding            the transfer date, multiplied by a percentage specified in the Purchase Agreement. The            transfer of the practice assets is not anticipated to occur until a mutually agreed            upon date by Dental Cooperative and Provider, at which time all right, title, and            interest in and to the dental practice is transferred from Provider to Dental            Cooperative. This date shall occur approximately 180 days after the date Provider has            given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Woodbury executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Provider to independently manage and operate the            dental practice until such time as the practice may be transferred. In consideration            thereof, Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

 

|   | Acquisition of Practice from Dr. Binns |
|--------|----------------------------------------|

 

Effective November 1, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with Ralph Binns, DDS, (the “Provider”) and Dr. Ralph W.            Binns. Under the Purchase Agreement, the Cooperative may acquire substantially all of            Dr. Binns’ dental practice in consideration for future cash payment. The amount            of such future cash payment is to be determined by the average of the dental            practices’ gross collections during the practices’ two fiscal years            immediately preceding the transfer date, multiplied by a percentage specified in the            Purchase Agreement. The transfer of the practice assets is not anticipated to occur            until a mutually agreed upon date by Dental Cooperative and Provider, at which time all            right, title, and interest in and to the dental practice is transferred from Provider            to Dental Cooperative. This date shall occur approximately 180 days after the date            Provider has given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Binns executed a Management Services Agreement. Under the Management Agreement,            the Company has retained Provider to independently manage and operate the dental            practice until such time as the practice may be transferred. In consideration thereof,            Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

             

|   | Acquisition of Practice from Dr.                            Rockwell |
|--------|----------------------------------------------------------------------|

 

Subsequent to the end of the Company’s 2007 fiscal year, effective            January 1, 2008, the Company, through its wholly owned subsidiary, Dental Cooperative,            Inc., entered into an Affiliate Member Practice Purchase Agreement with Rosewood            Dental, PC, (the “Provider”) and Dr. Michael S. Rockwell. Under the            Purchase Agreement, the Cooperative may acquire substantially all of Dr.            Rockwell’s dental practice in consideration for future cash payment. The amount            of such future cash payment is to be determined by the average of the dental            practices’ gross collections during the practices’ two fiscal years            immediately preceding the transfer date, multiplied by a percentage specified in the            Purchase Agreement. The transfer of the practice assets is not anticipated to occur            until a mutually agreed upon date by Dental Cooperative and Provider, at which time all            right, title, and interest in and to the dental practice is transferred from Provider            to Dental Cooperative. This date shall occur approximately 180 days after the date            Provider has given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Rockwell executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Provider to independently manage and operate the            dental practice until such time as the practice may be transferred. In consideration            thereof, Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve

 

10

 

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months            preceding closing. The Management Agreement contains, among other provisions,            confidentiality and indemnification provisions. The Management Agreement is effective            immediately upon closing of the Purchase Agreement.

 

|   | Acquisition of Practice from Dr.                            Curtis |
|--------|--------------------------------------------------------------------|

 

Subsequent to the end of the Company’s 2007 fiscal year, effective            January 1, 2008, the Company, through its wholly owned subsidiary, Dental Cooperative,            Inc., entered into an Affiliate Member Practice Purchase Agreement with Lindsay S.            Curtis, DDS, (the “Provider”) and Dr. Lindsay S. Curtis. Under the Purchase            Agreement, the Cooperative may acquire substantially all of Dr. Curtis’s dental            practice in consideration for future cash payment. The amount of such future cash            payment is to be determined by the average of the dental practices’ gross            collections during the practices’ two fiscal years immediately preceding the            transfer date, multiplied by a percentage specified in the Purchase Agreement. The            transfer of the practice assets is not anticipated to occur until a mutually agreed            upon date by Dental Cooperative and Provider, at which time all right, title, and            interest in and to the dental practice is transferred from Provider to Dental            Cooperative. This date shall occur approximately 180 days after the date Provider has            given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Curtis executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Provider to independently manage and operate the            dental practice until such time as the practice may be transferred. In consideration            thereof, Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

             

|   | The Company plans to                            enter into additional Purchase and Management Agreements in the                            future. |
|--------|----------------------------------------------------------------------------------------------------------------------------------------------------|

 

|   | **DentistDirect** |
|--------|-------------------|

 

The Company, through its wholly owned subsidiary, U.S. DentistDirect,            entered into a Memo of Understanding (the “Memo”) with Dentist Direct, LLC            on November 9, 2006. The parties have not yet concluded the arrangements described in            the Memo. U.S. DentistDirect intends to pursue an agreement to license the name and            provider panel known as “Dentist Direct” but no agreement has been entered            into and there can be no assurance that such arrangements will be agreed upon. All            development costs and liabilities associated with the organization and formation of            Dentist Direct, LLC have been provided by Harry “Pete” Peterson, a director            of the Company. Mr. Peterson is also the President and an owner of Dentist Direct,            LLC.

 

**Market, Industry Background and Competition**

 

The dental practice management and benefit plan markets are highly            competitive. Many of our competitors have longer operating histories, are substantially            larger and are better financed and better situated in the market than we            are.

 

11

 

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**The Dental Cooperative Business**

 

The dental practice management business of the dental services industry            is highly competitive and is expected to become increasingly more competitive.            Companies engaged in this business are referred to as “Dental Management Service            Organizations” (DMSO’s). DMSO’s are usually characterized by the            participating dentists being employees of the DMSO. We are aware of several            DMSO’s that are currently operating in our Utah markets as well as in other            contemplated United States markets. There many DMSO’s currently operating in            other parts of the United States that may enter our markets in the future. We believe            that our business model will substantively and critically differentiate DPCA from that            of a typical DMSO by allowing dentists to remain completely independent, yet enjoy the            business advantages of operating collectively. Other existing DMSO’s could            attempt to adopt models similar to ours and may be better capitalized or otherwise            enjoy competitive advantages, which may make it difficult for us to compete with them.            The agreements with our member dentists contain non-compete provisions prohibiting our            members from using our business model or any documents or knowledge they may have            gained from us to compete with us for at least a two-year period.

 

The business of providing general and specialty dental services is            highly competitive in the markets in which we operate. Competition for providing dental            services always includes practitioners who have established practices and reputations.            Although Dental Cooperative is in the business of assisting dental practices to compete            more effectively, its member dentists compete against established dental practices in            the retention and recruitment of dentists. If the availability of quality dentists            begins to decline in Dental Cooperative’s markets, it may become more difficult            to attract qualified dentists as members.

 

The members themselves may not be able to compete effectively against            other existing practices or against new single or multi-specialty dental practices that            enter their markets, or to compete against such practices in the recruitment of            qualified dentists.

 

|   | **The DentistDirect Business** |
|--------|--------------------------------|

 

We anticipate that our dental benefit plan business will operate in a            highly competitive environment. Principal competitors will include large insurance            companies, which offer managed dental care and indemnity dental products, and            independent companies including for-profit and not-for-profit HMOs, DHMOs, self-funded            plans, PPOs and reduced fee-for-service dental plans offering dental benefits similar            to some of those U.S. DentistDirect offers through its subcontractors.

 

We believe the principal competitive factors in the dental benefits            industry are the cost of services (based on the level and type of benefits, premiums            and co-payments), the reputation of the plan for providing quality dental care and the            size of the plan’s provider network (including the number of available panel            dentists and the convenience of their locations). Price competition may be especially            relevant in seeking the accounts of governmental employers which award contracts on a            periodic basis through competitive bidding. The dental benefits industry in general has            been subjected to periods of intense price competition in the past, and similar intense            competition in the managed dental care industry may occur in the future. There is            increased competition from indemnity insurance companies through direct entry into the            managed dental care market. It is likely that these efforts will intensify in the            future. Frequently, such plans are offered in tandem with indemnity dental insurance            coverage and/or PPO alternatives. In addition, an increasing number of medically            oriented HMOs and PPOs include dental care benefits as part of their benefit            programs.

 

Indemnity dental insurance coverage offered by insurance carriers may            have a competitive advantage over other dental benefit plans because many such carriers            are better known, are significantly larger and have substantially greater financial and            other resources than we do.

 

Our dental benefits plan business does not require substantial amounts            of capital and, other than government regulation, systems operating costs and the cost            of obtaining and monitoring a dental panel, there are no significant barriers to new            competitors entering the market. There can be no assurance that we will be

able to compete successfully with existing competitors or            new market entrants. Any such additional competition could adversely affect results of            operations from our dental benefits business.

 

12

 

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|   | **Dental Practice Transition** |
|--------|--------------------------------|

 

We are aware of numerous banks and other lending institutions that can            compete with us in the funding of the acquisition of dental practices. We are not aware            of any potential competitors who are in the business of providing funding and            significant operational assistance for dental practices of retiring dentists or            dentists that are relocating. We believe that we are uniquely positioned due to the            operational assistance we can provide to a dental practice. However, the dental market            is highly competitive generally and competition offering the same services as we are            seeking to provide may develop. Many of our potential competitors have longer operating            histories, are substantially larger and are better financed and better situated in the            market than we are. We cannot ensure we will be able to compete successfully against            any competitors in this or any other market.

 

**Government Regulation**

 

**The Dental Cooperative and Dental Practice Transition            Businesses**

 

The practice of dentistry is regulated at both the state and federal            levels. There can be no assurance that the regulatory environment in which Dental            Cooperative operates will not change significantly in the future. In general,            regulation of health care-related companies is increasing. In connection with its            operations in its existing market and expansion into new markets, Dental Cooperative            may become subject to additional laws, regulations and interpretations or enforcement            actions. The ability of Dental Cooperative to operate profitably will depend in part            upon the ability of Dental Cooperative to operate in compliance with applicable health            care regulations.

 

The laws of many states typically permit a dentist to conduct a dental            practice only as an individual, a member of a partnership or an employee of a            professional corporation, limited liability company or limited liability partnership.            These laws typically prohibit, either by specific provision or as a matter of general            policy, non-dental entities, such as Dental Cooperative, from practicing dentistry,            from employing dentists and, in certain circumstances, hygienists or dental assistants,            or from otherwise exercising control over the provision of dental services. As a result            of these laws, Dental Cooperative provides practice management services to its members            but does not employ dentists or control the practice of dentistry. Because under the            Affiliate Member Agreements, Dental Cooperative may become the owner of a dental            practice, at least for a period of time, Dental Cooperative will be under increased            risk of regulatory action against it under these laws regulating the practice of            dentistry.

 

All states have fraud and abuse laws that in many cases apply to            referrals for items or services reimbursable by any insurer, not just by Medicare and            Medicaid. A number of states also impose significant penalties for submitting false            claims for dental services. Many states prohibit or require disclosure of self-referral            arrangements and impose penalties for the violation of these laws. Many states also            prohibit dentists from splitting fees with non-dentists. We believe that our Dental            Cooperative profit sharing arrangements do not violate these laws on referral fees,            although our conclusions have not been tested in any court or administrative            venue.

 

Many states limit the ability of a person other than a licensed dentist            to own or control equipment or offices used in a dental practice. Some of these states            allow leasing of equipment and office space to a dental practice under a bona fide            lease, if the equipment and office remain under the control of the dentist. Some states            prohibit the advertising of dental services under a trade or corporate name. Some            states require all advertisements to be in the name of the dentist. A number of states            also regulate the content of advertisements of dental services and the use of            promotional gift items. In addition, many states impose limits on the tasks that may be            delegated by dentists to hygienists and dental assistants. Some states require entities            designated as “clinics” to be licensed, and may define clinics to include            dental practices that are owned or controlled in whole or in part by non-dentists.            These laws and their interpretations vary from state to state and are enforced by the            courts and by regulatory authorities with broad discretion. We intend to comply with            these lawsas we consider dental practices to fund through our            proposed Dental Practice Transition business.

 

13

 

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Although we believe our operations as currently conducted are in            material compliance with existing applicable laws, there can be no assurance that our            contractual arrangements will not be successfully challenged as violating applicable            fraud and abuse, self-referral, false claims, fee-splitting, insurance, facility            licensure or certificate-of-need laws or that the enforceability of such arrangements            will not be limited as a result of such laws. In addition, there can be no assurance            that the business structure under which Dental Cooperative operates, or the advertising            strategy Dental Cooperative employs, will not be deemed to constitute the unlicensed            practice of dentistry or the operation of an unlicensed clinic or health care            facility.

 

|   | **The DentistDirect Business** |
|--------|--------------------------------|

 

We anticipate that when our dental benefit plan resumes operations it            will be subject to substantial governmental regulation, principally under the insurance            laws of the states in which our subcontractors conduct and will conduct business.            Although specific requirements vary from state to state, these laws generally require            that the plans insuring entity be licensed by the relevant state insurance department            to offer dental care plans, and may also prescribe minimum levels of net worth and            reserves; limit the ability of U.S. DentistDirect to pay dividends to the extent            required regulatory capital would be impaired; establish the manner in which premiums            are determined or structured, require filing for approval of products; certain product            literature, premium levels and contract forms with subscribers, dentists and others            (which may entail substantial delay in implementing changes or introducing new            products), in some cases establish minimum benefit levels for our dental benefit plans;            provide for periodic examinations, including quality assurance review; establish            standards for plan management and other personnel; specify measures for resolving            grievances and generally prohibit the acquisition of more than specified levels (as low            as 5% in certain states) of the voting power over the plan without prior governmental            approval. These regulatory provisions generally grant plenary power to the relevant            agencies in interpreting and administering the applicable laws and regulations. U.S.            DentistDirect, Inc. currently outsources or subcontracts all activities, which fall            under regulatory and licensing obligations, to vendors who are required by agreement to            maintain current and approved status on all licensing and regulatory            requirements.

 

Various state regulatory agencies and legislatures have in the past            considered, are presently considering, and may in the future propose regulatory and            legislative changes, such as the establishment of prescribed minimum loss ratios or            mandated schedules of benefits and the adoption of legislation requiring us to admit            “any willing provider” to the plan’s dental panel, that could            adversely affect both the Dental Cooperative business model and the U.S. DentistDirect            business model. In addition, health care and insurance reform initiatives have been            proposed and may be proposed in the future at the state and federal levels, which may            adversely affect the offering of dental care plans and their profitability. We are            unable to determine the likelihood or effect of any such regulatory or legislative            changes.

 

State regulatory requirements may also limit our ability to operate in            certain existing markets or adversely affect our ability to enter new markets on a de            novo basis or through acquisitions. In some states we can only conduct business through            a contractual arrangement with a licensed indemnity carrier or a full service HMO,            which is generally a less advantageous and more cumbersome arrangement than offering            dental care plans directly.

 

While the regulated nature of our dental benefit plan business may            interfere with management’s plans for further geographic expansion, this            regulatory environment also governs, to a greater or lesser extent, the conduct and            expansion prospects of existing and new competitors.

 

Failure to maintain regulatory compliance and constructive relationships            with relevant regulatory authorities could adversely affect our ability to conduct our            dental benefit plan business, for example, by limiting our ability to obtain required            approvals for new products or premium increases. In an extreme case, failure to comply            with relevant laws and regulations may result in revocation of one or more of our            licenses.

 

14

 

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**Dental Practice Transition**

             

Various state regulatory agencies and legislatures have past legislation            relating to the lending of money. Such legislation varies from state to state and may            regulate the rates at which interest can be charged, required disclosures in connection            with lending funds, collection practices, advertising methods, and other lending            practices. Failure to maintain regulatory compliance could adversely affect our ability            to conduct our dental practice transition business and could result in the imposition            of fines and penalties. In the extreme case, it could result in our inability to            conduct our dental practice transition business in one or more states.

             

We are also subject to the local and federal laws that are applicable to            businesses generally. In the future, we may be subject to additional or different laws            or regulations administered by the federal, state, local or foreign regulatory            authorities. We can neither predict the nature of such future laws, regulations,            interpretations or applications, nor what effect additional governmental regulations or            administrative orders, when and if promulgated, would have on its business. They could,            however, reduce our ability to import product or impose additional record-keeping or            other requirements on us. Any or all such requirements could have a material adverse            effect on our results of operations, liquidity and financial position.

             

**Corporate History**

 

Dental Patient Care America, Inc., formerly known as Mountain Oil, Inc.,            was organized on July 30, 1999, in Utah to acquire and develop oil and gas properties.            On June 30, 2004, Mountain Oil, Inc. acquired Dental Cooperative, Inc., a Utah            corporation organized in 1998 to operate a dental practice cooperative business,            through the merger of a wholly owned subsidiary of Mountain Oil, Inc. with and into            Dental Cooperative, Inc. In addition, Mountain Oil, Inc. changed its name to Dental            Patient Care America, Inc. At the same time as the merger transaction closed, Mountain            Oil, Inc. spun off another of its subsidiaries, in which it held all of its oil and gas            assets and operations, to the shareholders of Mountain Oil, Inc. immediately prior to            the merger transaction, thereby completely exiting the oil and gas business.

 

As of June 30, 2004, the shareholders of Dental Cooperative, Inc. were            issued 18,823,288 shares of DPCA common stock, thus Dental Cooperative’s            shareholders, as a group, owned 89% of the then issued and outstanding shares of DPCA.            All of the members of the management of Mountain Oil, Inc. and its board of directors            resigned as of June 30, 2004, except Mr. Harry L. “Pete” Peterson, a            director. Prior to these resignations, the Mountain Oil, Inc. board of directors            elected Michael Silva as a Director, and as Chairman and Chief Executive Officer; and            elected Marlon Berrett as a Director, and as President and Chief Operating            Officer.

             

In connection with the merger transaction, the former oil and gas            operating subsidiary, the shares of which were spun off on June 30, 2004, executed and            delivered to Dental Cooperative and DPCA an Indemnity Agreement holding them harmless            from any cost, charge, claim or damages associated with the former oil and gas            business.

 

**Seasonality of Business**

 

Our business is subject to minor effects of seasonality caused by the            fact that many dental procedures are elective and some dental patients do not elect to            have dental work done near holidays or during the summer.

 

**Employees**

 

As of March 31, 2008, we employed four people on a full time basis and            utilized the services of a number of independent contractors. Our employees are not            represented by any labor union, and we believe our relations with employees are            good.

 

15

 

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| **Item 2.** | **Description of Property** |
|-------------|-----------------------------|

 

We have been in our current office space since September, 2005. Our            executive offices are located in Salt Lake City, Utah, and consist of approximately            1000 square feet of leased office space on a month to month basis. Our lease also            provides us with common area usage, and certain office support services, such a            receptionist and conference room services. Our base rental expense is approximately            $5,000 per month and is subject to adjustment. We also lease space for our dental            practice from third party pursuant to a lease that expires in June 2013. This lease            currently provides for an annual rent of approximately $27,500 and contains customary            escalation charges from year-to-year. All leased space is considered to be adequate for            the operation of our business, and no difficulties are foreseen in meeting any future            space requirements.

             

| **Item 3.** | **Legal Proceedings** |
|-------------|-----------------------|

             

We are            not involved in any legal proceedings and, to the best of our knowledge, no legal            proceedings against the Company have been threatened.

             

| **Item 4.** | **Submission of Matters to a Vote of Security                            Holders** |
|-------------|------------------------------------------------------------------------------------|

 

No matters were submitted to the vote of security holders for the fourth            quarter of the fiscal year ended December 31, 2007.

 

**PART II**

 

**Item            5.**  **Market for Common            Equity and Related Stockholder Matters and Small Business Issuer Purchases of Equity            Securities**

 

**Dividend Policy**

             

To date, we have not paid dividends on our common stock. The payment of            dividends on our common stock, if any, is at the discretion of the board and will            depend upon our earnings, if any, our capital requirements and financial condition, and            other relevant factors. See Item 6. “Management’s Discussion and Analysis            or Plan of Operation.” We do not intend to declare any dividends in the            foreseeable future, but instead intend to retain all earnings, if any, for use in our            operations.

             

**Share Price History**

 

Our common stock is traded in the over-the-counter market in what is            commonly referred to as the “Electronic” or “OTC Bulletin            Board” or the “OTCBB” under the trading symbol “DPAT.OB.”            The following table sets forth the high and low bid information of our common stock for            the periods indicated. The price information contained in the table was obtained from            the OTCBB. Note that the over-the-counter market quotations reflect inter-dealer            prices, without retail mark-up, markdown or commission, and that the quotations may not            necessarily represent actual transactions in the common stock.

 

| Quarter Ended | High   | Low    |
|---------------|--------|--------|
| 2007          |   |   |
| March 31      | $0.29  | $0.19  |
| June 30       | $0.20  | $0.16  |
| September 30  | $0.19  | $0.15  |
| December 31   | $0.18  | $0.09  |
|          |   |   |
| 2006          |   |   |
| March 31      | $0.20  | $0.20  |
| June 30       | $0.63  | $0.26  |
| September 30  | $0.35  | $0.23  |
| December 31   | $0.45  | $0.20  |

 

 

16

 

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On            April 7, 2008, the closing inside quotations for the Company’s common stock on            the OTC Bulletin Board were $0.16 bid and $0.22 asked. The foregoing quotations            represent inter-dealer prices without retail mark-up, mark-down, or commission, and may            not represent actual            transactions.       

 

**Holders of Record**

 

At March 31, 2008, there were approximately 413 holders of record of our            common stock as reported by our transfer agent. In computing the number of holders of            record, each broker-dealer and clearing corporation holding shares on behalf of its            customers is counted as a single shareholder.

 

**Equity Compensation Plans**

             

On June 9, 2004, the Company granted stock options to five persons            entitling them to purchase up to 264,000 shares of the Company’s common stock at            an exercise price of $2.50 per share. These options expire on June 9, 2009. Such            options are included in the table below as options granted under equity compensation            plans not approved by security holders.

             

On June 6, 2006, the Company’s board of directors approved the            Dental Patient Care America, Inc. 2006 Stock Option Plan (the “2006 Plan”)            pursuant to which the Company authorized the issuance of up to 2,000,000 shares of            common stock upon the exercise of stock options granted under the 2006 Plan. The            purpose of this Plan is to advance the interests of the Company and its shareholders by            helping the Company to obtain and retain the services of employees, officers,            consultants, independent contractors, directors, and others upon whose judgment,            initiative and efforts the Company is substantially dependent, and to provide those            persons with further incentives to advance the interests of the Company. Options may            only be granted under the 2006 Plan to persons who are at the time of grant members of            the Dental Cooperative and such other persons or entities whom the Company’s            board of directors may select from time to time. During June of 2006, the Company            authorized and issued options to its member dentists to purchase 399,914 shares of            common stock at an exercise price equal to eighty percent (80%) of the average closing            price of the Company’s stock for the preceding 20 days prior to the date of            exercise. During June of 2007, the Company authorized and issued options to its member            dentists to purchase 150,000 shares of common stock under terms identical to those            options issued in June of 2006. The variability in the exercise price requires these            options to be treated as variable securities, and they will be revalued at the end of            each reporting period. At the date of issuance, all of these options were fully vested            and could be exercised at any time, therefore 100% of the option value was recognized            during the year. During the years ended December 31, 2006 and 2007, 32,935 and 53,279            respectively of these options were exercised. As these options are variable securities,            the Company revalued the 463,700 outstanding options using Black/Scholes models to            estimate their fair market valuation at December 31, 2007. At December 31, 2007, the            463,700 remaining outstanding options had a Black/Scholes fair market value of            $23,185.

 

On March 8, 2007, the Company’s board of directors approved the            Dental Patient Care America, Inc. 2007 Stock Option Plan (the “2007 Plan”).            A total of 14,000,000 shares of common stock were allocated to the Plan. In addition,            on March 8, 2007, the board of directors granted options exercisable for 12,560,041            shares of common stock at an exercise price of $.30 per share. The effectiveness of the            Plan and the grant of the options under the Plan were subject to shareholder approval.            The option grants provided that the options were void and could not be exercised until            and unless the shareholders of the Company approved the Plan and all grants thereunder            through the date of Plan approval. The Company determined not to seek shareholder            approval of the Plan or the options granted thereunder and to allow the Plan and the            12,56,041 options granted thereunder to terminate. As a result, as of March 8, 2008,            the Plan is no longer in effect and all options granted under the Plan have            terminated.

 

The following table sets forth information as of December 31, 2007 with            respect to compensation plans under which equity securities of the Company are            authorized for issuance. The table includes the 264,000 stock options granted in 2004            but not does not include the 2007 Stock Option Plan or the options granted thereunder            since the 2007 Plan and all options granted thereunder have terminated.

 

17

 

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|                                                                                  |  

Number of securities to be

issued upon exercise of

outstanding options, warrants,

and rights |  

                             

Weighted-average exercise price of outstanding options,                            warrants and rights | Number of securities remaining available for future                            issuance under equity compensation plans (excluding securities                            reflected in column(a)) |
|---------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Equity compensation plans approved by security                            holders     |  

-                                                                                               |  

-                                                                                                                                          |  

-                                                                                                                                                                                        |
| Equity compensation plans not approved by security                            holders |  

727,700                                                                                         |  

$1.00                                                                                                                                      |  

1,450,086                                                                                                                                                                                |
| Total                                                                                 | 727,700                                                                                                 | $1.00                                                                                                                                              | 1,450,086                                                                                                                                                                                        |

 

**Recent Sales of Unregistered Securities**

             

During the fourth quarter of 2007, accredited option holders exercised            options exercisable for 6,699 shares of common stock which resulted in aggregate            proceeds of $938. These transactions were effected in reliance on the exemptions from            registration provided by Rule 506 of Regulation D and Sections 4(2) and 4(6) of the            Securities Act of 1933.

             

**Transfer Agent**

 

Interwest Transfer Co. Inc., 1981 East Murray-Holladay Road, Salt Lake            City, Utah 84117, telephone (801) 272-9294, serves as transfer agent and registrar for            the Company's common stock.

**Issuer Purchases of Equity Securities**

 

The Company has not adopted a stock repurchase plan and it did not            purchase any shares of its equity securities during the last three months of the year            ended December 31, 2007.

             

**Item            6. Management’s Discussion and Analysis or Plan of Operation**

 

The following discussion and analysis provides information which            management believes is relevant to an assessment and understanding of our consolidated            results of operations and financial condition. The discussion should be read in            conjunction with the consolidated financial statements and notes thereto.

 

**Overview**

 

|   | **Dental Cooperative Business** |
|--------|---------------------------------|

 

We earn revenue from our dental cooperative business through management            fees assessed to our members as a percentage of their operating revenues and through            marketing fees for patient referral services. In return, the Cooperative provides            services to its members in the form of centralized purchasing of dental supplies and            lab services, HR benefits, marketing services for patient flow, the opportunity to            participate in profit sharing or bonus pools and, more recently, preferential business            financing through the Company’s financing agreements with Stillwater National            Bank and Trust Company as described herein. Our member dentists remain independent            practitioners wholly responsible and liable for the conduct and performance of their            dental practices. Such member dentists are referred to as Associate Member Dentists. It            is also our intention as a part of our business model to offer practice transition            funding. Such funding is designed to finance the transitional sale of successful dental            practices from retiring dentists into the hands of younger practitioners. Such            financing would involve a new membership fee sufficiently increased to pay the            membership fee and repay the financed amount. Members who enter into such financing            arrangements with the Cooperative are referred to as Affiliate Members. We were not            able to offer loans to Affiliate Members and therefore those prior agreements were not            binding. There can be no assurance that we will provide such services in the            future.

 

18

 

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|   | **Dental Practice Transition Business** |
|--------|-----------------------------------------|

 

Under our Dental Practice Transition business, we earn revenue by            charging Affiliate Members membership fees based upon the margin from the dental            practices that enter into such agreements, the amount of financing obtained by the            practice in the funding transaction, or a percentage of the practice’s valuation            expressed as a function of the annual cash collections of the practice.Membership fees associated with Affiliate Members currently range from            approximately $1,700 to approximately $5,300 per month.During            2007, we entered into five dental practice purchase and transition financing            arrangements and one sale arrangement, as described below. Subsequent to the end of the            2007 fiscal year, we entered into two additional dental practice purchaseand transition financing arrangements.

 

During the second quarter of 2007, we standardized the practice purchase            and transition financing arrangements entered into in connection with our Dental            Practice Transition Business and we determined that such agreements were no longer            material to the Company on an individual basis. As a result, from and after September            30, 2007, we discontinued our previous practice of filing a current report on Form 8-K            each time a practice purchase and transition financing arrangement was entered into and            of filing copies of such agreements as exhibits.

 

Consolidated Practices

 

|   | Acquisition of                            Practice from Dr. Clegg |
|--------|------------------------------------------------------------------------|

 

On November 17, 2006, the Company, through Dental Cooperative, entered            into a Purchase Agreement with Dr. Richard Clegg and Richard R. Clegg DDS PC            providing for the Cooperative’s acquisition of substantially all of the assets of            Dr. Clegg’s dental practice in consideration for a payments in the form of            Company stock and cash. The Purchase Agreement also contains non-compete,            confidentiality and indemnification provisions. The closing of the Purchase Agreement            was subject to various contingencies. On January 20, 2007, the Company and            Dr. Clegg waived all closing contingencies and the parties closed on the Purchase            Agreement. The consideration given for the acquisition was $500,000 cash, which is            payable on the fifth anniversary of the acquisition and 300,000 shares of the            Company’s common stock, of which 60,000 shares were given upon acquisition and            60,000 will be given on the anniversary of the acquisition for the next four years.            Goodwill of $67,833 resulting from the acquisition resulted from the payment of a            premium (i.e. goodwill), over the fair value of the net tangible and identified            intangible assets. The purchased goodwill is not deductible for tax            purposes.

             

In connection with the Purchase Agreement, the Cooperative and            Dr. Clegg executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Dr. Clegg to manage and operate the dental            practice for a five year period in consideration a percentage of the dental            practice’s margin (i.e., the dental practice’s collections less operating            expenses) plus an additional cash payment. The Management Agreement contains, among            other provisions, (i) requirements with respect to minimum collection and minimum            margin levels that must be maintained during the term of the agreement, (ii)            confidentiality and indemnification provisions, and (iii) a purchase option whereby            Dr. Clegg could purchase the dental practice for (a) the number of shares of the            Company’s common stock that the Company has issued in connection with the            purchase of the dental practice, plus (b) cash in an amount equal to one percent of the            dental practice’s collection during the period during which Dr. Clegg            managed the dental practice while the Management Agreement was effective. The            Management Agreement is effective immediately upon closing of the Purchase            Agreement.

 

The financial statements for the fiscal year ended December 31, 2007            include consolidated financial information from Richard R. Clegg DDS PC, which we            acquired during the first quarter of 2007.

 

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|   | Acquisition and                            Subsequent Sale of Practice from DPAT   |
|--------|-----------------------------------------------------------------------------------------|

 

DPAT owns and operates a dental practice. Michael Silva, Marlon Berrett,            and Harry L. “Pete” Peterson (the “Members”), who are officers            and/or directors of the Company, were the sole owners of DPAT. Effective January 22,            2007, the Members assigned their entire membership interest in DPAT to Dental Practice            Transition, Inc. so that after the assignment was effective Dental Practice Transition,            Inc. became the sole member of DPAT. The Members were not paid any consideration in            connection with this transaction.

 

On September 11, 2007, Dental Practice Transition, Inc., in accordance            with its business model and purpose, assigned its entire membership interest in DPAT to            39th Street Dental, LLC so that after the assignment was effective,            39th Street Dental, LLC became the sole member of DPAT. Dental Practice            Transition, Inc. received $429,000, which included $396,598 in cash and a note            receivable of $32,402, in consideration for the assignment. 39th Street            Dental, LLC borrowed the funds to purchase DPAT from Stillwater National Bank and Trust            Company. The members of 39th Street Dental, LLC personally guaranteed the            loan.

 

Dental Practice Transition, Inc. is in the business of transitioning            dental practices between dental practitioners who are exiting and entering their            practice tenure, as well as providing financing for these transitions. The sale price            of DPAT was evaluated and determined by the parties to the transaction utilizing 1)            national and local comparable data relative to practice values for similarly situated            dental operations of its size, type, historical operations, geographic location and            sale terms; and 2) the relationship with respect to which the Company has financed and            transitioned other practices it assists in similar transactions. The purpose of the            sale was to provide the Company with working capital.

 

In connection with the sale, the company recognized a gain of $419,334.            The sale was effective September 1, 2007. The results of operations for DPAT were            reported within discontinued operations in the 2007 Consolidated Statements of            Operations. The 2007 Consolidated Statement of Cash Flows reports the cash flows of the            discontinued operations.

 

Marlon R. Berrett, an officer and director of the Company, and Andrew            Eberhardt, an officer of the Company, together own a fifty percent membership interest            in 39th Street Dental, LLC. The remaining fifty percent membership interests            are owned by the independent dentists who provide the 39th Street Dental,            LLC’s dental services.

 

The financial statements for the fiscal year ended December 31, 2007            include consolidated financial information from DPAT which we acquired during the first            quarter of 2007 and sold during the third quarter of 2007.

 

Affiliate Member Practices

 

|   | Acquisition of                            Practice from Dental Associates, Inc. |
|--------|---------------------------------------------------------------------------------|

 

Effective March 9, 2007, the Company, through Dental Cooperative,            entered into a Purchase Agreement with Dental Associates, Inc. and Drs. Jack Rasmussen            and Robert Boyer. Under the Purchase Agreement, the Cooperative may acquire            substantially all of Drs. Rasmussen’s and Boyer’s dental practices in            consideration for payments in the form of cash. The transfer of the practice assets is            not anticipated to occur until the five year anniversary of closing date. In connection            with the initial closing, Dental Associates, Inc. obtained a loan in the principal            amount of one-half of the practice purchase price from Stillwater National Bank and            Trust Company. The Purchase Agreement also contains non-compete, confidentiality and            indemnification provisions.

 

In connection with the Purchase Agreement, the Cooperative, Dental            Associates, Inc. and Drs. Rasmussen and Boyer executed a Management Agreement. Under            the Management Agreement, the Company has retained Dental Associates, Inc. to manage            and operate the dental practice for a five year period in consideration for a            percentage of Dental Associates, Inc.’s margin (i.e., Dental Associates,            Inc.’s

 

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collections less operating expenses) plus an additional cash payment.            The Management Agreement contains, among other provisions, (i) requirements with            respect to minimum collection and minimum margin levels that must be maintained during            the term of the agreement, and (ii) confidentiality and indemnification provisions. The            Management Agreement was effective immediately upon initial closing of the Purchase            Agreement.

 

In connection with the loan, the Company and the Cooperative agreed to            subordinate certain rights that may accrue in connection with the Purchase Agreement            and Management Agreement to the amounts owing to Stillwater National Bank and Trust            Company under the loan.

 

|   | Acquisition of                            Practice from Dr. Packer |
|--------|--------------------------------------------------------------------|

 

Effective April 1, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with P. Berrett Packer DDS, Inc. Dr. Berrett Packer. Under the            purchase agreement, the Cooperative may acquire substantially all of            Dr. Packer’s dental practice in consideration for future cash payments and            120,000 shares of common stock (24,000 were issued at closing and 24,000 will be issued            on each of the first four annual anniversary dates and the closing). The transfer of            the practice assets is not anticipated to occur until the five-year anniversary of            closing date. In connection with the closing, the Provider obtained a loan in the            principal amount of twenty-percent (20%) of the practice purchase price from Stillwater            National Bank and Trust Company (the “Loan”). The Purchase Agreement also            contains confidentiality, indemnification and other provisions.

 

In connection with the Purchase Agreement, the Cooperative, Provider and            Dr. Packer executed a Management Services Agreement. Under the Management            Agreement, the Company has retained the provider to independently manage and operate            the dental practice for a five year period in consideration for a percentage of the            provider’s margin (i.e., the provider’s collections less operating            expenses) plus an additional cash payment. The Management Agreement contains, among            other provisions, (i) requirements with respect to minimum collection and minimum            margin levels that must be maintained during the term of the agreement, and (ii)            confidentiality and indemnification provisions. The Management Agreement is effective            immediately upon closing of the Purchase Agreement.

 

In connection with the loan, the Company and the Cooperative agreed to            subordinate certain rights that may accrue in connection with the purchase agreement            and related management agreement to the amounts owing to Stillwater National Bank and            Trust Company under the loan.

 

|   | Acquisition of                            Practice from Dr. Anderson |
|--------|----------------------------------------------------------------------|

 

Effective June 4, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., closed on an Affiliate Member Practice Purchase            Agreement with Lowell K. Anderson DMD PC and Dr. Lowell K. Anderson. Under the            purchase agreement, the Cooperative may acquire substantially all of            Dr. Anderson’s dental practice in consideration for future cash payments and            stock options exercisable for 1,000,000 shares of common stock. The transfer of            the practice assets is not anticipated to occur until the five-year anniversary of            closing date. In connection with the closing, the provider obtained a loan in the            principal amount of fifty-percent (50%) of the practice purchase price from Stillwater            National Bank and Trust Company. The purchase agreement also contains confidentiality,            indemnification and other provisions.

 

In connection with the Purchase Agreement, the Cooperative, Provider and            Dr. Anderson executed a Management Services Agreement. Under the Management            Agreement, the Company has retained the Provider to independently manage and operate            the dental practice for a five year period in consideration for a percentage of the            provider’s margin (i.e., the provider’s collections less operating            expenses) plus an additional cash payment. The Management Agreement contains, among            other provisions, (i) requirements with respect to minimum collection and minimum            margin levels that must be maintained during the term of the agreement, and (ii)            confidentiality and indemnification provisions. The Management Agreement is effective            immediately upon closing of the Purchase Agreement.

 

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In connection with the loan, the Company and the Cooperative agreed to            subordinate certain rights that may accrue in connection with the purchase agreement            and management agreement to the amounts owing to the lender under the loan.

 

|   | Acquisition of Practice from Dr.                            Woodbury |
|--------|----------------------------------------------------------------------|

 

Effective November 1, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with William E. Woodbury, PC, (the “Provider”) and Dr.            William E. Woodbury. Under the Purchase Agreement, the Cooperative may acquire            substantially all of Dr. Woodbury’s dental practice in consideration for future            cash payment. The amount of such future cash payment is to be determined by the average            of the dental practices’ gross collections during the practices’ two fiscal            years immediately preceding the transfer date, multiplied by a percentage specified in            the Purchase Agreement. The transfer of the practice assets is not anticipated to occur            until a mutually agreed upon date by Dental Cooperative and Provider, at which time all            right, title, and interest in and to the dental practice is transferred from Provider            to Dental Cooperative. This date shall occur approximately 180 days after the date            Provider has given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Woodbury executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Provider to independently manage and operate the            dental practice until such time as the practice may be transferred. In consideration            thereof, Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

 

|   | Acquisition of Practice from Dr. Binns |
|--------|----------------------------------------|

 

Effective November 1, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with Ralph Binns, DDS, (the “Provider”) and Dr. Ralph W.            Binns. Under the Purchase Agreement, the Cooperative may acquire substantially all of            Dr. Binns’ dental practice in consideration for future cash payment. The amount            of such future cash payment is to be determined by the average of the dental            practices’ gross collections during the practices’ two fiscal years            immediately preceding the transfer date, multiplied by a percentage specified in the            Purchase Agreement. The transfer of the practice assets is not anticipated to occur            until a mutually agreed upon date by Dental Cooperative and Provider, at which time all            right, title, and interest in and to the dental practice is transferred from Provider            to Dental Cooperative. This date shall occur approximately 180 days after the date            Provider has given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Binns executed a Management Services Agreement. Under the Management Agreement,            the Company has retained Provider to independently manage and operate the dental            practice until such time as the practice may be transferred. In consideration thereof,            Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

 

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|   | Acquisition of Practice from Dr.                            Rockwell |
|--------|----------------------------------------------------------------------|

 

Subsequent to the end of the Company’s 2007 fiscal year, effective            January 1, 2008, the Company, through its wholly owned subsidiary, Dental Cooperative,            Inc., entered into an Affiliate Member Practice Purchase Agreement with Rosewood            Dental, PC, (the “Provider”) and Dr. Michael S. Rockwell. Under the            Purchase Agreement, the Cooperative may acquire substantially all of Dr.            Rockwell’s dental practice in consideration for future cash payment. The amount            of such future cash payment is to be determined by the average of the dental            practices’ gross collections during the practices’ two fiscal years            immediately preceding the transfer date, multiplied by a percentage specified in the            Purchase Agreement. The transfer of the practice assets is not anticipated to occur            until a mutually agreed upon date by Dental Cooperative and Provider, at which time all            right, title, and interest in and to the dental practice is transferred from Provider            to Dental Cooperative. This date shall occur approximately 180 days after the date            Provider has given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Rockwell executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Provider to independently manage and operate the            dental practice until such time as the practice may be transferred. In consideration            thereof, Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

 

|   | Acquisition of Practice from Dr.                            Curtis |
|--------|--------------------------------------------------------------------|

 

Subsequent to the end of the Company’s 2007 fiscal year, effective            January 1, 2008, the Company, through its wholly owned subsidiary, Dental Cooperative,            Inc., entered into an Affiliate Member Practice Purchase Agreement with Lindsay S.            Curtis, DDS, (the “Provider”) and Dr. Lindsay S. Curtis. Under the Purchase            Agreement, the Cooperative may acquire substantially all of Dr. Curtis’s dental            practice in consideration for future cash payment. The amount of such future cash            payment is to be determined by the average of the dental practices’ gross            collections during the practices’ two fiscal years immediately preceding the            transfer date, multiplied by a percentage specified in the Purchase Agreement. The            transfer of the practice assets is not anticipated to occur until a mutually agreed            upon date by Dental Cooperative and Provider, at which time all right, title, and            interest in and to the dental practice is transferred from Provider to Dental            Cooperative. This date shall occur approximately 180 days after the date Provider has            given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Curtis executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Provider to independently manage and operate the            dental practice until such time as the practice may be transferred. In consideration            thereof, Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

 

|   | **U.S. Dentist Direct Business** |
|--------|----------------------------------|

 

The Company, through its wholly owned subsidiary, U.S. DentistDirect,            entered into a Memo of Understanding (the “Memo”) with Dentist Direct, LLC            on November 9, 2006. The parties have not yet concluded the arrangements described in            the Memo. U.S. DentistDirect intends to pursue an agreement to license the name and            provider panel known as Dentist Direct but no agreement has been entered into and there            can be no assurance that such arrangements will be agreed. All development costs and            liabilities associated with the organization and formation of Dentist Direct, LLC have            been provided by Harry “Pete” Peterson, a director of the Company. Mr.            Peterson is also the President and an owner of Dentist Direct, LLC.

 

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|   | **Financial Position** |
|--------|------------------------|

 

We had $52,720 in cash as of December 31, 2007. Our working capital as            of December 31, 2007 was $143,363, compared to a working capital deficit of $179,006 at            December 31, 2006. Our net loss for 2007 was $259,918 compared to $498,372 for 2006.            Without respect to the improved working capital of the Company, the ability of the            Company to continue as a going concern is in substantial doubt. The attached financial            statements do not include any adjustments that might result from the outcome of this            uncertainty.

 

**Critical Accounting Policies**

 

The policies discussed below are considered by us to be critical to an            understanding of our financial statements. The application of these policies places            significant demands on the judgment of our management and, when reporting financial            results, cause us to rely on estimates about the effects of matters that are inherently            uncertain. We describe specific risks related to these critical accounting policies            below. A summary of significant accounting policies can be found in Note 1 of the Notes            to Consolidated Financial Statements. Regarding all of these policies, we caution that            future results rarely develop exactly as forecast, and the best estimates routinely            require adjustment. Our critical accounting policies include the following:

 

|   | **•** | Revenue recognition |
|--------|------------|---------------------|

|   | **•** | Stock based compensation |
|--------|------------|--------------------------|

 

*Cooperative Revenue Recognition - Associate Membership*

 

The Company charges its Associate member dentists membership fees,            marketing fees for referrals provided by the Company, and receives rebates from the            suppliers for purchases of dental equipment for its members. These revenues are            recognized when payments are received since that is the earliest date when these            amounts are readily determinable, and collection is reasonably assured. Amounts            received prior to issuance of financial statements but after period ending dates that            are attributable to prior periods are recorded as accounts receivable.

 

*Cooperative Revenue Recognition - Affiliate Membership*

 

During 2007, the Company entered into five Affiliate Member dental            practice purchase and transition financing arrangements and one sale arrangement. The            Company charges Affiliate Members membership fees based upon the margin from the dental            practices that enter into such agreements, or the amount of financing obtained by the            practice in the funding transaction, or a percentage of practices’ valuation            expressed as a function of the annual cash collections of the practice. Membership fees            associated with Affiliate Members are established under the contractual terms entered            into when the financing agreement was concluded. Since Affiliate Member fees are            reasonably determinable and estimable, such fees are accrued and recognized in the            period earned.

             

The Company pays incentives to its members to recognize significant            contributions to Dental Cooperative, based largely on the growth in revenues and            resulting fees to Dental Cooperative. These fees are accounted for as a reduction of            Cooperative revenues.

 

*Practice Revenue Recognition*

 

The Company’s dental practices charge fees to its patients for            dental services performed. Fees are established internally by the practices based upon            billing rates that are considered usual and customary among similarly situated dental            service providers. Revenue is recognized at the time and during the period in which            services are performed. Because a significant percentage of the Companies’            patients are insured or participate in managed care dental plans and programs, the            rates charged by the Company may not be fully realized or collectible under the            contractual payment terms of the managed care programs and insurance plans of            it’s patients. The company therefore makes adjustments to its periodic revenue            based upon the estimated amounts due from the patients and third-party payers in order            that revenues may be fairly stated in accordance with

 

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generally accepted accounting principles. Revenue adjustments are based            on analysis of historical collection rates from amounts due from patients and            third-party payers, including managed care dental plans, commercial insurance companies            and employers.

 

*Stock Based Compensation*

 

On January 1, 2006, we adopted the provisions of Statement 123 (revised            2004) (Statement 123 (R), “Share-Based Payment,” which revises Statement            123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion            25, “Accounting for Stock Issued to Employees.” Statement 123(R) requires            us to recognize expense related to the fair value of our stock-based compensation            awards, including employee stock options.

             

Prior to the adoption of Statement 123(R), we accounted for stock-based            compensation under the recognition and measurement principles of APB Opinion No. 25,            Accounting for Stock Issued to Employees, and related interpretations, and has adopted            the disclosure only provisions of SFAS No. 123, “Accounting for Stock-Based            Compensation”.

 

We have elected to use the modified prospective transition method as            permitted by Statement 123(R) and therefore have not restated our financial results for            prior periods. Under this transition method, we have applied the provisions of            Statement 123(R) to new awards granted, modified, repurchased, or cancelled after            January 1, 2006. Accordingly, since all of the Company’s stock-based awards            issued and outstanding as of December 31, 2007 are fully vested, we have recognized the            associated compensation costs associated with these transactions. Additionally, had any            of the stock-based awards not been vested, we would have recognized compensation cost            for the portion of the awards for which the requisite service had not been rendered            that were outstanding as of January 1, 2007, as the remaining service was            rendered.

 

**Years Ended December 31, 2007 and 2006**

 

Our dental practice management revenues, referred to as            “cooperative revenues” in the financial statements, were $315,147 for 2007            as compared to $310,485 for 2006. Cooperative gross revenues consist of member fees and            marketing fees paid to the Company by member dentists as well as group purchasing            rebates received from vendors for purchases made by our members. The increase in            cooperative revenues resulted primarily from a small decrease in the number of            Associate Members and a reduction in Associate Member fees, which was more than offset            by an increase in the number of Affiliate Members and an increase in Affiliate Member            fees, which are higher than Associate Member fees.

 

Member incentives were $89,373 for 2007 as compared to $117,498 for            2006. These amounts are accounted for as reductions of Cooperative revenues (see Note 1            to the financial statements). As noted earlier, member incentives are profit sharing            distributions through Dental Cooperative to recognize significant contributions to            Dental Cooperative by certain members, based largely on the growth in revenues of the            member practices and the resulting fees to Dental Cooperative. The decline in Member            incentives resulted from a reduction in the volume of referrals from general            practitioners to specialists which is a significant criteria for the payment of Member            incentives, which in turn resulted from a reduction in the number of Members who are            dental specialists. Member incentives are discretionary with the Board of Directors of            Dental Cooperative, and these funds can be redirected to pay operating expenses as            needed.

 

Our dental operation revenues (net of contractual and bad debt            write-offs of $258,834 for the year ended December 31, 2007) were $1,131,701 as            compared to $0 in our 2006 fiscal year. These 2007 revenues include consolidated            financial information from the Richard R. Clegg DDS PC practice, which we acquired            in the first quarter of 2007. The Company did not own any dental practices during            2006.

 

We did not generate any dental benefit plan offering revenues during            2007 or 2006. This is the result of our subcontracting the insurance component to our            subcontractors as described elsewhere herein.

 

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Dental operations expenses were $1,087,099 for the year ended December            31, 2007 as compared to $0 for the prior year. These 2007 expenses related to expenses            incurred in the operation of the Richard R. Clegg DDS PC practice, which practice            was acquired by the Company during 2007. The Company did not own any dental practices            during 2006.

 

General and administrative (“G&A”) expenses were            $923,067 for 2007 as compared to $771,173 for 2006. The increase in G&A expenses is            primarily due to expenses associated with the Company’s salary and benefits.            Management permanently waived approximately $40,000 in salaries in 2007 and $141,000 in            salaries in 2006. Management may not be willing to waive salaries in the            future.

 

Net other expense was $143,644 for the year ended December 31, 2007 as            compared to net other expense of $37,684 for the prior year. The change between the            2007 and 2006 periods is primarily due to the increased interest expense relating to            borrowed funds and the recognition of non-cash interest expense relating to warrants            issued for debt financing.

 

**Liquidity and Capital Resources**

 

To date, we have financed our operations principally through private            placements of equity securities, debt financing, and revenues. We used net cash in            operating activities of $532,066 for 2007 as compared to $467,517 during 2006. We used            net cash in investing activities of $14,672 for the year ended December 31, 2007 as            compared to $0 during the prior year. We also received $90,646 in cash from financing            activities in 2007, as compared to $533,426 in 2006. As of December 31, 2007, our            working capital was $143,363 and we had $52,720 of cash on hand.

 

As of December 31, 2007, we have current assets of $341,024 as compared            to $190,850 as of December 31, 2006. Our current liabilities of $197,661 at December            31, 2007 are lower than the balance of $369,856 at December 31, 2006. The increase in            our current assets and decrease in our current liabilities is primarily a result of the            acquisition and sale of DPAT and the acquisition of Richard R. Clegg DDS PC.

 

We chose to continue to distribute Dental Cooperative member incentives            in 2007, although we have not yet generated positive cash flows from operating            activities, and there can be no assurance that we will be able to generate positive            cash flows in future periods. If we are unable to generate positive cash flows from            operating activities, we will be required to seek financing through additional related            party debt, including but not limited to salary waivers, or through the sale of debt or            equity securities to investors. There can be no assurance that such related party            financing or investor financing will be available to us if needed. We also may need to            reduce or eliminate member incentives in order to maintain the services of our service            providers through payment of their overdue bills.

 

On December 27, 2006, the Company and its subsidiaries entered into a            Loan, Security and Warrant Agreement (the “Loan Agreement”) with Heartland            Dental Care, Inc. (“Heartland”). Under the terms of the Loan Agreement,            Heartland made loans to the Company in the aggregate principal amount of five hundred            thousand dollars ($500,000) and agreed to make additional loans to the Company in a            total aggregate principal amount of up to one million two hundred fifty thousand            dollars ($1,250,000), subject to the satisfaction of certain conditions. The            Company’s right to obtain additional loans under the Heartland Loan Agreement            expired on November 5, 2007 and no additional loans will be obtained by the Company            thereunder. Interest on the principal amount outstanding is due on the first day of            each calendar quarter and interest is payable at the rate of ten percent (10%) per            annum. The principal amount is due and payable in full April 30, 2012. As collateral            for the repayment of the loan, the Company granted Heartland a security interest in            substantially all of its assets. Receipt of the additional loan proceeds is contingent            upon the Company acquiring specified numbers of dental practices. There can be no            assurance that any additional loan proceeds will be received or sought by the Company            and there can be no assurance that the Company will have sufficient funds available to            repay the amounts owing on the loan.

             

As additional consideration for the loan, the Company issued a warrant            to Heartland that is exercisable for a number of shares of common stock equal to ten            percent (10%) of the Company’s issued and outstanding common stock, on a fully            diluted basis, on the date of exercise. Until and unless the principal amount of            one

 

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million            two hundred fifty thousand dollars ($1,250,000) was lent to the Company, the number of            shares of common stock for which the warrant can be exercised is reduced in proportion            to the amount actually lent. As a result, the warrant is currently exercisable for 4.0%            ((500,000/1,250,000) x 10%) of the Company’s issued and outstanding common stock,            on a fully diluted basis. The Company has also agreed to file a registration statement            registering the resale of the warrant and common stock that is issuable upon exercise            of the warrants.

 

In addition, the Company executed a Benchmark Services Agreement with            Heartland whereby Heartland has agreed to provide benchmarking services to dental            practices who have received funding through Stillwater National Bank and Trust Company            in connection with an effective Affiliate Member Practice Purchase Agreement to which            the Company is a party (a “Covered Practice”). In consideration for such            services, Heartland will be paid an amount equal to one percent (1%) of the aggregate            collected revenues of the Covered Practices during each quarterly period that the            agreement is in effect. The agreement terminates on the earlier of the date there are            no Covered Practices or the five year anniversary of the agreement.

             

Finally, the Company and its directors entered into a Tag Along Rights            Agreement with Heartland whereby the directors granted Heartland tag along rights            should a director enter into an agreement to transfer shares held by such director. The            foregoing summary is qualified in its entirety by reference to the actual Heartland            agreements, copies of which were included as exhibits to our current report on Form 8-K            dated December 27, 2006.

             

Except as described above and except for our operating payables, we            currently have no bank lines of credit or third party indebtedness. As our revenues            grow, we plan on seeking one or more bank lines of credit to assist with meeting            ongoing liquidity needs. There can be no assurance that we will be able to secure such            financing in the future. On August 14, 2007 we borrowed $60,000 from a lender. On            September 12, 2007 we repaid the principal amount owing and issued 60,000 shares of            common stock as additional consideration for the loan.

             

Our working capital requirements for the foreseeable future will vary            based upon a number of factors, including, our timing in the implementation of our            business plan, our growth rate and the level of our revenues. We have no commitments to            fund any future capital expenditures. Our current assets, along with cash generated            from anticipated revenues, are not anticipated to provide us with sufficient funding            for the next twelve months. We anticipate that we will need approximately $300,000 in            additional funding to execute our business plan over the next twelve months and            thereafter. We have not entered into any agreement or arrangement for the provision of            such funding and no assurances can be given that such funding will be available to us            on terms satisfactory to us or at all. Failure to raise the required capital could            prevent us from achieving our long-term business objectives and may result in            substantially reducing or even terminating operations.

 

As of December 31, 2007, we have outstanding stock options that are            exercisable for (i) 264,000 shares of common stock at an exercise price of $2.50 per            share and (ii) 463,700 shares of common stock at an exercise price equal to eighty            percent (80%) of the average closing price during the of the Company’s common            stock for the twenty (20) day period prior to exercise. We determined not to seek            shareholder approval for the 2007 Stock Option Plan and the options exercisable for            12,559,791 shares of common stock granted thereunder and, as a result, the 2007 Plan            and all options granted thereunder terminated on March 8, 2008.

 

On March 5, 2008, the Company’s Board of Directors authorized a            private offering of up to 1,000,000 shares of our common stock for sale to qualified            investors. The resolution authorizes the officers of the Company, under the direction            of the President, to finalize and deliver a memorandum evidencing such offering,            incorporating such amendments and modifications as the officers may approve. To date,            the memorandum has not been completed. No assurances can be given that we will be            successful in raising additional funds through the private offering.

 

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**Off-Balance Sheet Arrangements**

 

We do not have any off-balance sheet arrangements that have or are            reasonably likely to have a current or future effect on our financial condition,            changes in financial condition, revenues or expenses, results of operations, liquidity,            capital expenditures or capital resources that are material to investors.

 

**Recent Accounting Pronouncements**

 

In September 2006, the FASB issued SFAS No. 157,*Fair Value Measurements*, (“SFAS            157”). SFAS 157 defines fair value, establishes a framework for measuring fair            value in generally accepted accounting principles and expands disclosures about fair            value measurements. SFAS 157 is effective for financial statements issued for fiscal            years beginning after November 15, 2007 and interim periods within those fiscal            years. The Company does not anticipate adoption of this standard will have a material            impact on its consolidated financial statements.

 

In July 2006, the FASB issued FASB Interpretation No. 48,*“Accounting for Uncertainty in Income Taxes – an            interpretation of FASB Statement No. 109”*(“FIN            48”), which clarifies the accounting and disclosure for Uncertainty in tax            positions, as defined. FIN 48 seeks to reduce the diversity in practice associated with            certain aspects of the recognition and measurement related to accounting for income            taxes. The Company is subject to the provisions of FIN 48 as of January 1, 2007, and            has analyzed filing positions in all of the federal and state jurisdictions where it is            required to file income tax returns. Upon review of the Company’s historical tax            filings and consultation with its tax advisors, the Company believes that it has taken            tax positions in preceding years that could potentially result in reductions to its            cumulative net operating loss carryforwards of approximately $231,535. The Company is            subject to audit by the IRS and the State of Utah for the prior three years. The            Company, as a matter of policy, would record any interest and penalties associated with            taxes as a component of income tax expenses. The Company recorded an immaterial amount            of interest and penalties for the year ended December 31, 2007.

 

In March 2006, the FASB issued SFAS No. 156, “Accounting for            Servicing of Financial Assets”, which will be effective for fiscal years that            begin after December 15, 2006. This statement amends SFAS 140,*Accounting for Transfers and Servicing of Financial Assets and            Extinguishments of Liabilities, a replacement of FASB Statement 125,*or SFAS 140*,*regarding (1) the circumstances under which a servicing asset or            servicing liability must be recognized, (2) the initial and subsequent measurement            of recognized servicing assets and liabilities, and (3) information required to be            disclosed relating to servicing assets and liabilities. The Company does not anticipate            adoption of this standard will have a material impact on its consolidated financial            statements.

 

In February 2006, the FASB issued SFAS No. 155, “Accounting            for Certain Hybrid Financial Instruments”*,*or SFAS 155, which will be effective for fiscal years that begin after            December 15, 2006. This statement amends SFAS No. 133,*Accounting for Derivative Instruments and Hedging            Activities*, to narrow the scope exception for interest-only            and principal-only strips on debt instruments to include only such strips representing            rights to receive a specified portion of the contractual interest or principal cash            flows. SFAS 155 also amends SFAS 140 to allow qualifying special-purpose entities to            hold a passive derivative financial instrument pertaining to beneficial interests that            itself is a derivative financial instrument. The Company does not anticipate adoption            of this standard will have a material impact on its consolidated financial            statements.

 

In May 2005, the FASB issued SFAS No. 154, “Accounting            Changes and Error Corrections*”,*which was adopted effective January 1, 2006. This statement            addresses the retrospective application of such changes and corrections and will be            followed if and when necessary. Adoption of this standard did not have a material            impact on the Company’s consolidated financial statements.

             

In December 2004, the FASB issued Statement No. 123 (revised 2004),            “Share-Based Payment” (“SFAS No. 123(R)”), which            requires the recognition of share based payments cost in earnings. This Statement            replaces Statement No. 123, “Accounting for Stock-Based Compensation”            (“SFAS No. 123”) and supersedes Accounting Principles Board            Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB            No. 25”), which permitted the recognition of compensation expense using the            intrinsic value method. Effective January 1, 2006, the Company adopted the provisions            of SFAS No. 123(R). See Note 11 and Note 12.

 

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In September 2006, the FASB issued SFAS            No. 157,*Fair Value            Measurements*, (“SFAS 157”).  SFAS 157            defines fair value, establishes a framework for measuring fair value in generally            accepted accounting principles, and expands disclosures about fair value measurements.            The provisions of this standard apply to other accounting pronouncements that require            or permit fair value measurements.  FASB Staff Position FAS 157-2,*Effective Date of FASB Statement No. 157,*was issued in February 2008.  This staff position delays the            effective date for implementation of SFAS 157to fiscal years beginning after November            15, 2008.  The Company will adopt SFAS 157 on January 1, 2009. The Company            anticipates that the adoption of SFAS 157 will not have a material impact on the            Company’s consolidated financial statements.

 

In February 2007, the FASB issued SFAS No. 159,            “*The Fair Value Option for Financial Assets and            Financial Liabilities*” (“SFAS 159”). This            statement provides companies with an option to report selected financial assets and            liabilities at fair value. Generally accepted accounting principles have required            different measurement attributes for different assets and liabilities that can create            artificial volatility in earnings.  The statement’s objective is to reduce            both complexity in accounting for financial instruments and the volatility in earnings            caused by measuring related assets and liabilities differently.  SFAS 159 is            effective for the Company beginning January 1, 2008.  The Company anticipates that            the adoption of SFAS 159 will not have a material impact on the Company’s            consolidated financial statements.

             

In December 2007, the FASB issued SFAS No. 141 (revised 2007)            (“SFAS 141R”), “*Business            Combinations*” and SFAS No. 160 (“SFAS            160”), “*Noncontrolling Interests in Consolidated            Financial Statements, an amendment of Accounting Research Bulletin No.            51*". SFAS 141R will change how business acquisitions are            accounted for and will impact financial statements both on the acquisition date and in            subsequent periods. SFAS 160 will change the accounting and reporting for minority            interests, which will be recharacterized as noncontrolling interests and classified as            a component of equity. SFAS 141R and SFAS 160 are effective for the Company beginning            January 1, 2009. Early adoption is not permitted.  The Company is evaluating the            impact these statements will have on its consolidated financial statements.

 

**Our            Outlook and Perspective on the Company’s Prospects**

 

Our acquisition of Dental Patient Care America, Inc. in 2004, coupled            with our complete divestiture or our oil and gas business and the resignation of prior            management at the same time resulted in a new business for the Company, but also a            management team without experience in the regulatory requirements of a public company.            The Company has had very limited operational and administrative personnel. We            anticipate that as the Company continues the substantial growth it experienced during            2007, the increased revenue together with increased capitalization will both require            and enable the hiring and retention of additional qualified personnel. We also            anticipate that increasing revenues will enable us to reduce our            indebtedness.

 

We experienced initial growth and stability in Cooperative membership            even given our skeleton staff and initial inability to offer the financing required to            implement our Practice Transition or “Affiliate” memberships. We continue            to believe that the reason for this was that the perceived value of Cooperative            membership goes beyond the value of specific services and cost reductions and includes            the value of the perception and reality that an independent dental practitioner, as a            member of the Cooperative, is collectively participating in an organization that            competitively empowers and sustains his/her position as an independent dentist. With            our new ability to provide both practice transition and business financing to our            members and thus implement the new “Affiliate” type of membership, we            anticipate to continue and expand the growth seen during 2007. We cannot assure that            others will not adopt similar operating models, but are not aware of any such model            that is currently operating. We continue to believe that time is of the essence and            that the Cooperative must grow and grow on a national scale to take advantage of the            cost and preparation of the past several years.

 

Our U.S. DentistDirect dental plan business is not strategically unique            by virtue of its initial products. We believe it is unique by virtue of its            relationship to its panel of dental providers, most being members of the Dental            Cooperative. This family of dental plans is directed by and for its panel of providers,            who by virtue of

 

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their            interest in the dental plans can make possible the offering of unique products. While            this has been done on a limited scale by others, it has not been combined with the            other services we provide. The Company acknowledges the significant risks associated            with such growth and that there can be no assurance those risks can be successfully            dealt with by the Company or that we will ultimately be successful in our business            objectives.

 

**Inflation**

 

|   | We do not expect the impact of inflation on our                            operations to be significant. |
|--------|----------------------------------------------------------------------------------------------------------|

 

**Risk Factors**

 

In addition to the risks set forth above, we are subject to certain            other risk factors due to the industry in which we compete and the nature of our            operations. These risk factors include the following:

             

***We are dependent on our loan arrangements with Stillwater National            Bank and Trust Company in order to continue our Dental Practice Transition business,            and the loss or curtailment of such arrangements could have a material adverse effect            on our business.***

             

In order to start our Dental Practice Transition business, on December            4, 2006, we entered into an agreement with Stillwater National Bank and Trust Company            (the “SNB”). The Agreement provides that the Company will refer to SNB            loans in connection with the Company’s Affiliate Member Practice Purchase            Agreements (the “Purchase Agreement”). The loans will be made directly to            the dental practice or dental practitioner (the “Provider”) who is a party            to the Purchase Agreement. The Company and SNB have agreed on a standard form of loan            package, which is subject to negotiation between the Provider and SNB. The loans will            be secured and guaranteed by the Provider. SNB has the right, in its sole discretion,            to accept or reject any loan package. As a result, there can be no assurance that there            will be any additional loans generated in connection with the Agreement other than            those closed and in process. If SNB should cease making loans available to the            Company’s Providers, the Company would be required to locate an alternative            source of financing and if it were not successful in such efforts, it may be forced to            discontinue its Dental Practice Transition business, which would be anticipated to have            a material adverse effect on the Company’s operations.

             

***We have a history of losses and may never be            profitable.***

 

We have an accumulated deficit totaling $1,726,371 as of December 31,            2007 and we are not profitable. To date our operations have not generated sufficient            operating cash flows to pay for the expenses we incur on a current basis. Even without            financing agreements now in place, we may not be able to successfully keep or grow our            businesses or achieve profitability from our operations in the near future or at            all.

 

Among other things, our ability to achieve sustainable profitability is            dependent on:

             

|   | **•** | Successful marketing and sale of our dental services and                            plan; |
|--------|------------|-------------------------------------------------------------------------------------------|

             

|   | **•** | Our ability to acquire and operate dental practices                            profitably; |
|--------|------------|--------------------------------------------------------------------------------------------|

             

|   | **•** | Entering into a suitable agreement so that we can earn                            fees from our insurance related products; and |
|--------|------------|---------------------------------------------------------------------------------------------------------------------------------|

 

|   | **•** | Our ability to develop additional services and plans to                            serve dentists and their patients. |
|--------|------------|-----------------------------------------------------------------------------------------------------------------------|

             

There can be no assurance that we will achieve sustainable            profitability.

 

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|   | ***Our cash reserves                            are not sufficient to pay the amounts owing on outstanding                            obligations.*** |
|--------|-------------------------------------------------------------------------------------------------------------------------------------------------------|

 

At December 31, 2007 we had $197,661 in current liabilities and working            capital of only $143,363. These liabilities do not include the loan in the principal            amount of $500,000 that is owed to Heartland which is included in long term            liabilities. We do not have sufficient reserves to pay the amounts owing. As a result,            no assurance can be given that the Company will have the resources to repay any or all            of its current obligations. The failure of the Company to pay its obligations will have            a material adverse effect on the Company, including the possibility of the Company            ceasing to conduct operations.

             

***Our contractual arrangements with member dentists have inherent            uncertainties with respect to accuracy and timeliness of payment.***

             

Our Dental Cooperative member contracts call for a member dentist to pay            a percentage of practice operating revenues monthly. We do not centrally account for            the operating revenues of member practices, and so we rely on the members to compute            operating revenue timely and accurately and to calculate and timely submit the required            percentage management fee. Generally, it may take one or more weeks past the end of            each month for the member dental practice to complete it’s accounting and pay its            management fee.

 

Consequently, estimates are required in order to account for management            fees as of the end of each accounting period. We have the right to audit our            members’ financial records, and make adjustments to the management fees if the            results of the audits so dictate. The lack of timeliness in receiving information            regarding management fees may result in our reporting of such fees being            delayed.

 

***There are risks associated with our intended growth through new            members and new market areas.***

 

The growth of our dental cooperative business will depend on our ability            to attract economically successful dentists into our cooperative business model, and            our DentistDirect dental benefit plan offerings. Because our cooperative business model            relies on attracting the top tier of dentists in a given market, our growth strategy            emphasizes entering selected new markets and entering into member contracts with dental            practices that have a significant market presence or which we believe can achieve such            a presence in the near term, and seeking these practices as a “magnet” or            “core” from which to expand in the market area. Our new market penetration            strategy is relatively untested. So far the members of Dental Cooperative come            primarily from Salt Lake, Utah, Weber and Cache counties. Recent efforts have            successfully brought in additional new members in Davis and Box Elder Counties. All of            these counties are located within the state of Utah. However we have never attempted to            enter a market outside of the State of Utah, and there can be no assurance that Dental            Cooperative will be able to implement its national growth successfully.

 

Our dental benefits plan business depends on the member dentists that            U.S. DentistDirect, Inc. attracts to serve as the panel of dentists providing services            under the plans. Therefore the expansion of our dental benefit plan business will            always be within markets in which Dental Cooperative has a substantial number of            members, and likely will not be as a result of expansion into areas not then served by            Dental Cooperative.

 

We devote substantial time and resources to new Dental Cooperative            member acquisition activities. Identifying appropriate member candidates and            negotiating membership agreements can be a lengthy and costly process. There can be no            assurance that suitable new members will be identified or that new members will be            attracted on terms favorable to Dental Cooperative; or that such new memberships can be            added on a timely basis or at all. In the event that Dental Cooperative is not able to            regularly increase its membership base, and accordingly its aggregate membership fees            in tandem with new member attraction, our financial results may be materially lower            than analysts’ expectations, which likely would cause a decline, perhaps            substantial, in the market price of our common stock.

 

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In addition, increasing competition in the dental services industry from            corporate model competitors or perhaps others attempting to use a cooperative model may            result in an increase in benefits and other costs associated with bringing new members            into Dental Cooperative.

 

The integration of new members and new markets may be a difficult,            costly and time-consuming process. Dental Cooperative may encounter substantial            unanticipated costs or other problems associated with such integration.

 

|   | ***We may not be successful in expanding within                            existing markets.*** |
|--------|-------------------------------------------------------------------------------------------------|

 

Dental Cooperative will seek to increase revenue and profitability in            existing markets by physically expanding the number of its existing members to add more            dentists and hygienists by improving the efficiency of the member dental practices and            helping them establish new practices. Dental Cooperative’s success will be            dependent, in part, upon increasing the revenue from existing members through their            growth and successfully establishing new member locations.

 

There can be no assurance that growth better than or equal to these            historical results can be achieved with existing members or through the attraction of            new members in new markets.

 

|   | ***We may not be able to effectively manage                            growth, should growth occur.*** |
|--------|--------------------------------------------------------------------------------------------------------|

 

To the extent we experience growth, of which there can be no assurance,            it could be strains on our limited staff, management, operations and systems. Our            ability to compete effectively will depend upon our ability to attract, train and            assimilate additional management and other employees and our ability to expand, improve            and effectively utilize our operating, management, marketing and financial systems to            accommodate expanded operations. Any failure by our management to effectively            anticipate, implement and manage the changes required to sustain our growth may have a            material adverse effect on our business, financial condition and operating            results.

 

Concomitantly in order to effectively and efficiently bear the added            costs of being a public company in the United States today, including the costs of            accounting, legal and other professionals helping us to comply with disclosure            obligations and the new requirements of the Sarbanes-Oxley legislation, we must grow            significantly, not only in our existing markets but also in new markets. This growth            also must be managed and will require added management personnel in addition to the            current staff.

 

|   | ***Our success may be hampered by the availability                            of member dentists.*** |
|--------|------------------------------------------------------------------------------------------------------|

 

All members of Dental Cooperative can sever their member relationship at            any time, especially under the Associate Member arrangement in which there is no loan            from Dental Cooperative to the member. Although these member agreements contain            non-compete clauses, there is no assurance that we can retain current members or that            departing members will not have the ability to adversely affect our efforts to recruit            a new member in the area of the departing member.

 

Even given the number of new “Transition” or            “Affiliate” members that came in during 2007 due our new financing capacity            and assuming all current members stay with Dental Cooperative, there is no assurance            that satisfactory new members can be recruited and assimilated in existing, or new            markets.

 

|   | ***Our success may be negatively affected by cost                            containment initiatives.*** |
|--------|----------------------------------------------------------------------------------------------------------|

 

The health care industry, including the dental services market, is            experiencing a trend toward cost containment, as third-party and government payors seek            to impose lower reimbursement rates upon providers. We believe that this trend will            continue and will increasingly affect dental services. This may result in a reduction            in per-patient and per-procedure revenue from historic levels. Significant reductions            in payments to dentists or other changes in reimbursement by third-party payors for            dental services may have a material adverse effect on both our Dental Cooperative            business and on our dental benefit plan business.

 

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|   | ***Our success may be negatively affected by                            health care reform.*** |
|--------|------------------------------------------------------------------------------------------------|

 

There can be no assurance that the laws and regulations of the states in            which we operate will not change or be interpreted in the future either to restrict or            adversely affect our relationships with dentists. Federal and state governments are            currently considering various types of health care initiatives and comprehensive            revisions to the health care and health insurance systems. Some of the proposals under            consideration, or others that may be introduced could, if adopted, have a material            adverse effect on our business, financial condition and operating results. 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. In addition, changes in the health care industry, such as the growth of            managed care organizations and provider networks, may result in lower payments for the            services of our affiliated dental practices.

 

|   | ***Our dental plans may not be accepted by the                            market.*** |
|--------|--------------------------------------------------------------------------------------|

 

The market may not accept our dental plans. We believe acceptance will            be based on our ability to effectively market our plans and the perceived premium and            benefit package offered by our plans as compared to competitive plans. There can be no            assurance that we will be successful in marketing our plans or that the premium/benefit            package of our plans will be perceived favorably by the market when compared to            competing plans.

 

|   | ***We may be subject to professional liability                            claims.*** |
|--------|--------------------------------------------------------------------------------------|

 

In recent years, dentists have become subject to an increasing number of            lawsuits alleging malpractice and related legal theories. Some of these lawsuits            involve large claims and significant defense costs. Dental Cooperative cannot and does            not carry professional malpractice or general liability insurance for itself and            maintains no professional liability insurance covering dentists, hygienists and dental            assistants at its members’ offices, although such coverage is required of our            members in our membership agreements. Malpractice insurance, moreover, can be expensive            and varies from state to state. Successful malpractice claims asserted against the            member dentists or Dental Cooperative may have a material adverse effect on our            member’s ability to pay membership fees and therefore on our business, financial            condition and operating results.

 

Any malpractice suits involving the dentists in our contemplated Dental            Practice Transition business, if successful, could result in substantial damage awards            that may reduce or eliminate our profit expectation from these practices. We anticipate            requiring that malpractice insurance be maintained by all dentists at a Dental Practice            Transition office.

 

|   | ***Our success is dependent on management and key                            personnel.*** |
|--------|--------------------------------------------------------------------------------------------|

 

Our success, including our ability to complete and integrate new            members, depends on the continued services of our management staff. Each of our            managers has a large portfolio of direct responsibilities and there is no redundancy.            The loss of the services of any one of our current management could have a material            adverse effect on our business, financial condition and operating results. On July 1,            2003, we entered into three employment agreements with the Company’s CEO and COO            for five-year terms. We do not, however, maintain key man life insurance policies on            any members of management. Implementation of our business strategy will require the            addition of new qualified management personnel, and there is no assurance we can            attract these new personnel.

 

|   | ***Members of management own a substantial amount                            of our outstanding stock.*** |
|--------|-----------------------------------------------------------------------------------------------------------|

 

Members of our management team, together, own approximately 33.3% of the            total issued and outstanding shares of our common stock. Thus management has the            ability to exert significant influence over the outcome of fundamental corporate            transactions requiring stockholder approval, including mergers and sales of assets and            the election of the members of our Board of Directors.

 

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|   | ***We may not have sufficient personnel to                            effectively market and service our dental benefit                            plans.*** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

We market our dental benefits plans through our subcontractors who            appoint independent agents. This distribution system is designed to reach large groups,            smaller groups and individuals in an efficient and cost effective manner. As the plan            grows, most of the related tasks can be outsourced to our subcontractors, and            third-party plan administrators, but there will be a need to have our employees            available to solve problems and generally conduct public relations for the plan, as            well as to address emergency service issues and relations among the dentists providing            services to the plan.

 

***Because we are significantly smaller than the majority of our            competitors, we may lack the resources needed to capture market            share.***

 

We are engaged in a highly competitive business and will compete            directly with companies that have longer operating histories, more experience,            substantially greater financial resources, greater size, more substantial marketing            organizations, established customer bases and are better situated in the market than            us. Our competitors may use their economic strength to influence the market to continue            to buy their existing products. We are establishing a member base in Utah and have not            begun to establish a member base outside of Utah. Moreover, we have limited experience            in marketing our dental plans. We are likely to encounter a high degree of competition            in expanding our member base and marketing our plans. One or more of these competitors            could use their resources to improve their current services or plans or to develop            services or plans that may compete more effectively with our services and plans. New            competitors may emerge and may develop services or plans that compete with our            business. No assurance can be given that we will be successful in competing in this            industry.

 

|   | ***An economic downturn could harm our                            business.*** |
|--------|--------------------------------------------------------------------------------|

 

Our business, financial condition and results of operations may be            affected by various economic factors. Unfavorable economic conditions may make it more            difficult for us to maintain and continue our revenue growth. In an economic recession,            or under other adverse economic conditions, customers and vendors may be more likely to            be unable to meet contractual terms or their payment obligations. A decline in economic            conditions may have a material adverse effect on our business.

 

***Our employees may engage in misconduct or other improper            activities which could harm our business.***

 

We are exposed to the risk that employee fraud or other misconduct could            occur. Misconduct by employees could include intentional failures to comply with legal            requirements, engaging in unauthorized activities, seeking reimbursement for improper            expenses or falsifying time records. Employee misconduct could also involve the            improper use of our dentist members’ sensitive information, which could result in            serious harm to our reputation. It is not always possible to deter employee misconduct,            and the precautions we take to prevent and detect this activity may not be effective in            controlling unknown or unmanaged risks or losses, which could harm our            business.

 

***If we are unable to manage our growth, our business could be            adversely affected*****.**

             

Sustaining our Company’s growth has placed significant demands on            management, as well as on our administrative, operational and financial resources. To            continue to manage our growth, we must continue to improve our operational, financial            and management information systems and expand, motivate and manage our workforce. If we            are unable to successfully manage our growth without compromising our quality of            service and our profit margins, or if new systems we implement to assist in managing            our growth do not produce the expected benefits, our business, prospects, financial            condition or operating results could be adversely affected.

 

Part of managing growth is the enforcement of proprietary protections            against unfair competition. We have proprietary value in our names, in our business            structures, in our legal documents, and in our markets. We have undertaken trade name            protection of our names and have provided for noncompetition covenants in our member            agreements. Our ability to enforce these protections will depend on the resources            we have. Our inability to enforce our proprietary protections will            result in adverse consequences and increased competitive            disadvantage.

 

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***We may undertake acquisitions that could increase our costs or            liabilities or be disruptive to our operations.***

 

One of our key operating strategies is to selectively pursue            acquisitions. We may not be able to locate suitable acquisition candidates at prices we            consider appropriate or to finance acquisitions on terms that are satisfactory to us.            If we do identify an appropriate acquisition candidate, we may not be able to            successfully negotiate the terms of an acquisition, finance the acquisition or, if the            acquisition occurs, integrate the acquired business into our existing business.            Negotiations of potential acquisitions and the integration of acquired business            operations could disrupt our business by diverting management away from day-to-day            operations. Acquisitions of businesses or other material operations may require            additional debt or equity financing, resulting in additional leverage or dilution of            ownership. The difficulties of integration may be increased by the necessity of            coordinating geographically dispersed organizations, integrating personnel with            disparate business backgrounds and combining different corporate cultures. We also may            not realize cost efficiencies or synergies that we anticipated when selecting our            acquisition candidates. In addition, we may need to record write-downs from future            impairments of intangible assets, which could reduce our future reported earnings. At            times, acquisition candidates may have liabilities or adverse operating issues that we            fail to discover through due diligence prior to the acquisition, but which we generally            assume as part of an acquisition. Such liabilities could have a material adverse effect            on our financial condition.

 

|   | ***We may be subject to liabilities relating to                            our prior mining activities.*** |
|--------|------------------------------------------------------------------------------------------------------------|

 

The Company was previously engaged in mining activities. Mining            activities are subject to extensive federal and state laws and regulations designed to            conserve and prevent the degradation of the environment. These laws and regulations            require obtaining various permits before undertaking certain exploration activities.            These requirements also necessitate significant capital outlays and may result in            liability to the owner and operator of the property for damages that may result from            specific operations or from contamination of the environment, all of which may prevent            us from continuing to operate. Should we become subject to any such liabilities, it            could materially and adversely affect our ability to continue our business.

 

|   | ***We do not anticipate paying dividends in the                            foreseeable future.*** |
|--------|---------------------------------------------------------------------------------------------------|

 

We have never paid dividends on our common stock. The payment of            dividends, if any, on the common stock in the future is at the discretion of the board            of directors and will depend upon our earnings, if any, capital requirements, financial            condition and other relevant factors. The board of directors does not intend to declare            any dividends on our common stock in the foreseeable future.

 

|   | ***No assurance of a liquid public market for our                            common stock.*** |
|--------|-----------------------------------------------------------------------------------------------|

 

There can be no assurance as to the depth or liquidity of any market for            our common stock or the prices at which holders may be able to sell their shares. As a            result, an investment in our common stock may not be totally liquid, and investors may            not be able to liquidate their investment readily or at all when they need or desire to            sell.

 

***Applicability of low priced stock risk disclosure requirements may            adversely affect the prices at which our common stock trades.***

 

Our common stock may be considered a low priced security under rules            promulgated under the Securities Exchange Act of 1934 (the “Exchange Act”).            Under these rules, broker-dealers participating in transactions in low priced            securities must first deliver a risk disclosure document which describes the risks            associated with such stocks, the broker-dealer’s duties, the customer’s            rights and remedies, and certain market and other information, and make a suitability            determination approving the customer for low priced stock transactions based on the            customer’s financial situation, investment experience and objectives.            Broker-

 

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dealers            must also disclose these restrictions in writing to the customer, obtain specific            written consent of the customer, and provide monthly account statements to the            customer. With these restrictions, the likely effect of designation as a low priced            stock will be to decrease the willingness of broker-dealers to make a market for the            stock, to decrease the liquidity of the stock and to increase the transaction cost of            sales and purchases of such stock compared to other securities.

 

**Item            7. Financial Statements**

 

|   | See index to consolidated financial statements beginning                            on page F-1 hereof. |
|--------|---------------------------------------------------------------------------------------------------------|

 

**Item            8. Changes in and Disagreements with Accountants on Accounting and Financial            Disclosure**

 

|   | None. |
|--------|-------|

 

**Item            8A. Controls and Procedures**

 

*Evaluation of Disclosure Controls and            Procedures.*  Under the supervision and with the            participation of our management, including our Chief Executive Officer, President and            Chief Financial Officer, we evaluated the effectiveness of the design and operation of            our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e)            under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of the            end of the period covered by this report.  Based upon that evaluation, our Chief            Executive Officer, President and Chief Financial Officer concluded that our disclosure            controls and procedures as of the end of the period covered by this report were            effective such that the information required to be disclosed by us in reports filed            under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized            and reported within the time periods specified in the SEC’s rules and forms and            (ii) accumulated and communicated to our management, including our Chief Executive            Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding            disclosure. A controls system cannot provide absolute assurance, however, that the            objectives of the controls system are met, and no evaluation of controls can provide            absolute assurance that all control issues and instances of fraud, if any, within a            company have been detected.

 

*Management’s Annual Report on Internal Control over Financial            Reporting.*  Our management is responsible for            establishing and maintaining adequate internal control over financial reporting (as            defined in Rule 13a-15(f) under the Exchange Act). Our internal control over            financial reporting is a process designed to provide reasonable assurance regarding the            reliability of financial reporting and the preparation of financial statements for            external purposes of accounting principles generally accepted in the United            States.

             

Because of its inherent limitations, internal control over financial            reporting may not prevent or detect misstatements. Therefore, even those systems            determined to be effective can provide only reasonable assurance of achieving their            control objectives.

 

Our management, with the participation of the Chief Executive Officer,            President and Chief Financial Officer, evaluated the effectiveness of the            Company’s internal control over financial reporting as of December 31,            2007.  In making this assessment, our management used the COSO framework, an            integrated framework for the evaluation of internal controls issued by the Committee of            Sponsoring Organizations of the Treadway Commission.  Based on this evaluation,            our management, including the Chief Executive Officer, President and Chief Financial            Officer concluded that, as of December 31, 2007, our internal control over            financial reporting was effective.

             

This annual report does not include an attestation report of the            company’s registered public accounting firm regarding internal control over            financial reporting.  Management’s report was not subject to attestation by            the company’s registered public accounting firm pursuant to temporary rules of            the Securities and Exchange Commission that permit the company to provide only            management’s report in this annual report.

             

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*Changes in Internal Control Over Financial Reporting.*During the most recent quarter ended December 31, 2007, there has been            no change in our internal control over financial reporting (as defined in Rule            13a-15(f) and 15d-15(f) under the Exchange Act) ) that has materially affected, or is            reasonably likely to materially affect, our internal control over financial            reporting.

 

**Item            8B. Other Information**

 

|   | None. |
|--------|-------|

 

**PART III**

**Item            9. Directors, Executive Officers, Promoters and Control Persons; Compliance With            Section 16(a) of the Exchange Act**

 

Set forth below is certain information concerning each of our directors            and executive officers as of March 24, 2008.

 

|  

                             

Name |  

                             

Age |  

                             

Position |  

DirectorTerm Expires | With theCompanySince |
|--------------------------------------------------|-------------------------------------------------|------------------------------------------------------|------------------------------|----------------------|
| Michael Silva                                    | 56                                              | CEO and Chairman                                     | 2008                         | 2004                 |
| Marlon Berrett                                   | 66                                              | President and Director                               | 2008                         | 2004                 |
| Harry L. “Pete” Peterson             | 63                                              | Director                                             | 2008                         | 2001                 |
| Andrew Eberhardt                                 | 36                                              | Vice President                                       |                         | 2004                 |
| Brad Berrett                                     | 53                                              | Chief Financial Officer                              |                         | 2004                 |
|                                                  |                                                 |                                                      |                              |                      |  |

          

            The            following sets forth the business experience, principal occupations and employment of            each of the directors.

 

*Michael Silva*has served as a Director of            Dental Patient Care America since June 2004, and has been a director of our subsidiary,            Dental Cooperative, since it was formed in 1998. His term as a director expires at the            next annual meeting of shareholders. He has acted as Chief Executive of the Company            since June 2004 and of Dental Cooperative since 1998. In addition to his roles at the            Company and Dental Cooperative, Mr. Silva is also Director of Wirthlin Worldwide            Consulting from 2002 to the present. Prior to joining Wirthlin Worldwide, Mr. Silva was            an independent business crisis consultant. Mr. Silva spends a substantial amount of his            available business time working for the Company.

 

*Marlon Berrett*has served as a Director of            the Company since June 2004, and has been our President since that time. His term as a            director expires at the next annual meeting of shareholders. He has been a director of            our subsidiary, Dental Cooperative, since October 1998, and also acted as President and            Secretary of Dental Cooperative for the same period of time. In addition, Mr. Berrett            is the managing partner of Executive Alliance Group LLC, a consulting partnership,            where he serves as a U.S. spokesperson and representative of the German State of            Saarland’s Economic Promotion Corporation. He is a retired partner of Ernst &            Young LLC. Mr. Berrett spends substantially all of his available business time working            for the Company.

 

*Harry L. “Pete” Peterson*has            been one of our Directors since 2001 and took over as President of our DentistDirect            subsidiary in 2004. His term as a director expires at the next annual meeting of            shareholders. Mr. Peterson is President of Business Insurance Group, Inc. a Utah            corporation in business since 1989 doing business under the trade name “Big            Benefits”. Big Benefits offers health insurance, claims administration,            underwriting and plan design to employer groups primarily in the self-funded market.            Mr. Peterson spends a substantial amount of his available business time working for the            Company.

 

37

 

----

*Andrew Eberhardt*was appointed Vice            President of the Company in June 2004 and has been in the same capacity at Dental            Cooperative since July 2002. Mr. Eberhardt has been employed by Dental Cooperative            since April 1999. Mr. Eberhardt was formerly employed at Redman Van and Storage in a            sales manager position. Mr. Eberhardt spends substantially all of his available            business time working for the Company.

 

*Brad Berrett*became our Chief Financial            Officer in June 2004. He joined Dental Cooperative as Comptroller on a part time basis            as an independent contractor in June 2001. From 2001 to 2006, Mr. Berrett was also            President of Pediatric Care, Inc., a pediatric clinic in Utah County, Utah. Mr. Berrett            also works as an independent contractor for various other clients. Mr. Berrett spends            substantially all of his available business time working for the Company.

 

Our executive officers are elected by the board of directors on an            annual basis and serve at the discretion of the board.

 

**Family Relationships**

 

Mr. Marlon Berrett and Mr. Brad Berrett are brothers. There are no other            family relationships among our directors, executive officers or persons nominated or            chosen to become directors or executive officers.

 

**Stockholder Meeting Attendance**

 

Our policy is to encourage, but not require, members of the Board of            Directors to attend annual stockholder meetings. We did not have an annual stockholder            meeting during the prior year.

 

**Board Committees**

 

Our Board of Directors does not have a standing, audit, nominating or            compensation committee. The Board of Directors, which includes each member of the Board            who is then serving, participates in the consideration of director nominees. The Board            of Directors has not yet established a policy with regard to the consideration of            director candidates recommended by security holders and the minimum qualifications of            such candidates. Two of the members of the board of directors are also officers of the            Company and the third director is an officer of a subsidiary of the Company so that            none of our directors are considered “independent” as defined by Rule            4200(a) of the NASD’s Marketplace Rules. While the Company does not have an audit            committee, the Company believes that Mr. Marlon Berrett, who is not an independent            director, qualifies as a “financial expert” as defined in Item 401 of            Regulation S-B.

 

The Board of Directors met on numerous occasions during 2007 for formal            meetings and informal discussions, including meetings held via telephone conference            call.

 

**Code of Ethics**

 

The Company has adopted a Code of Ethics that applies to our principal            executive officer, principal financial officer, principal accounting officer and other            senior financial officers. Our Code of Ethics is being filed as an exhibit to this            report.

 

**Section 16(a) Beneficial Ownership Reporting            Compliance**

 

We do not have a class of equity securities registered pursuant to            Section 12 of the Securities Exchange Act of 1934. As a result, our executive officers,            directors and persons who beneficially own more than 10% of our common stock are not            required to file initial reports of ownership and reports of changes in ownership with            the SEC pursuant to Section 16(a) of the Securities Exchange Act of 1934.

             

38

 

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**Item            10. Executive Compensation**

 

The table below sets forth certain information concerning compensation            we paid to our president, chief executive officer and all other executive officers with            annual compensation in excess of $100,000, determined for the year ended December 31,            2007 (the “Named Executive Officers”).

 

**Summary Compensation            Table*****.***The following            table provides certain information regarding compensation paid to the Named Executive            Officers.

 

**SUMMARY COMPENSATION TABLE**

 

|  

                             

Name andPrincipalPosition |  

                             

                             

Year |  

                             

                             

Salary ($) |  

                             

                             

Bonus ($) |  

StockAwards($) |  

OptionAwards($) | Non-EquityIncentive PlanCompensation($) | NonqualifiedDeferredCompensationEarnings ($) |  

All OtherCompensation ($) |  

                             

                             

Total ($) |
|-----------------------------------------------------------------------|--------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------|------------------------|-------------------------|-----------------------------------------|----------------------------------------------|-----------------------------------|-------------------------------------------------------------------------------------------|
| Michael Silva (1)                                                     | 2006                                                                                 | 141,250                                                                                    | 32,442                                                                                    | ---                    | ---                     | ---                                     | ---                                          | ---                               | 173,692                                                                                   |
| Chairman and CEO                                                      | 2007                                                                                 | 200,000                                                                                    | 0                                                                                         | ---                    | ---                     | ---                                     | ---                                          | ---                               | 200,000                                                                                   |
|                                                                  |                                                                                 |                                                                                       |                                                                                      |                   |                    |                                    |                                         |                              |                                                                                      |
| Marlon Berrett (2)                                                    | 2006                                                                                 | 102,000                                                                                    | 24,143                                                                                    | ---                    | ---                     | ---                                     | ---                                          | ---                               | 126,143                                                                                   |
| President and COO                                                     | 2007                                                                                 | 159,600                                                                                    | 0                                                                                         | ---                    | ---                     | ---                                     | ---                                          | ---                               | 159,600                                                                                   |
|                                                                  |                                                                                 |                                                                                       |                                                                                      |                   |                    |                                    |                                         |                              |                                                                                      |
| Andrew Eberhardt (3)                                                  | 2006                                                                                 | 83,750                                                                                     | 18,198                                                                                    | ---                    | ---                     | ---                                     | ---                                          | ---                               | 101,948                                                                                   |
| Vice President                                                        | 2007                                                                                 | 120,000                                                                                    | 0                                                                                         | ---                    | ---                     | ---                                     | ---                                          | ---                               | 120,000                                                                                   |

_______________

|   | (1) | Mr. Silva became on officer and director on June 30,                            2004, in connection with the merger. Compensation prior to this date                            was paid to him by Dental Cooperative, Inc. Mr. Silva is entitled to an                            annual salary of $240,000. Mr. Silva agreed to permanently waive salary                            amounts to which he was entitled because of the Company’s lack of                            operating capital. |
|--------|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (2) | Mr. Marlon Berrett became on officer and director on                            June 30, 2004, in connection with the merger. Compensation prior to                            this date was paid to him by Dental Cooperative, Inc., Mr. Berrett is                            entitled to an annual salary of $180,000. Mr. Berrett agreed to                            permanently waive salary amounts to which he was entitled because of                            the Company’s lack of operating capital. |
|--------|-----|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

|   | (3) | Mr. Eberhardt became on officer on June 30, 2004, in                            connection with the merger. Compensation prior to this date was paid to                            him by Dental Cooperative, Inc. Mr. Eberhardt is entitled to an annual                            salary of $120,000. Mr. Eberhardt agreed to permanently waive salary                            amounts to which he was entitled because of the Company’s lack of                            operating capital. |
|--------|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

             

Mr. Brad Berrett acts as the Company’s Chief Financial Officer and            he became an employee of the Company effective January 1, 2007. Under current            arrangements, Mr. Brad Berrett is entitled to an annual salary of $90,000 per            year.

 

**Equity Incentive Plans**

 

On June 9, 2004, the Company granted stock options to five persons            entitling them to purchase up to 264,000 shares of the Company’s common stock at            an exercise price of $2.50 per share. These options expire on June 9, 2009.

             

On June 6, 2006, the Company’s board of directors approved the            Dental Patient Care America, Inc. 2006 Stock Option Plan (the “2006 Plan”)            pursuant to which the Company authorized the issuance of up to 2,000,000 shares of            common stock to its Members upon the exercise of stock options granted under the 2006            Plan. The purpose of this Plan is to advance the interests of the Company and its            shareholders by helping the Company to obtain and retain the services of employees,            officers, consultants, independent contractors, directors, and others upon whose            judgment, initiative and efforts the Company is substantially dependent, and to provide            those persons with further incentives to advance the interests of the Company. Options            may only be granted under the 2006 Plan to persons who are at the time of grant members            of the Dental Cooperative and such other persons or entities whom the Company’s            board of directors may select from time to time. During June of 2006, the Company            authorized and issued options to its member dentists to purchase 399,914 shares of            common stock at

             

39

 

----

an            exercise price equal to eighty percent (80%) of the average closing price of the            Company’s stock for the preceding 20 days prior to the date of exercise. During            June of 2007, the Company authorized and issued options to its member dentists to            purchase 150,000 shares of common stock under terms identical to those options issued            in June of 2006. The variability in the exercise price requires these options to be            treated as variable securities, and they will be revalued at the end of each reporting            period. At the date of issuance, all of these options were fully vested and could be            exercised at any time, therefore 100% of the option value was recognized during the            year. During the years ended December 31, 2006 and 2007, 32,935 and 53,279 respectively            of these options were exercised. As these options are variable securities, the Company            revalued the 463,700 outstanding options using Black/Scholes models to estimate their            fair market valuation at December 31, 2007. At December 31, 2007, the 463,700 remaining            outstanding options had a Black/Scholes fair market value of $23,185.

             

On March 8, 2007, the Company’s board of directors approved the            Dental Patient Care America, Inc. 2007 Stock Option Plan (the “Plan”). A            total of 14,000,000 shares of common stock are allocated to the Plan. In addition, on            March 8, 2007, the board of directors granted options exercisable for 12,559,791 shares            of common stock at an exercise price of $.30 per share. The effectiveness of the Plan            and the grant of the options under the Plan were subject to shareholder approval and            the option grants provided that the options are void and may not be exercised until and            unless the shareholders of the Company approved the Plan and all grants that occurred            through the date of Plan approval. The Company determined not to seek shareholder            approval of the Plan or the options granted thereunder and to allow the Plan and the            12,56,041 options granted thereunder to terminate. As a result, the Plan is no longer            in effect and all options granted under the Plan have terminated.

             

Of the option granted under the Plan, options exercisable for 3,503,682            shares were granted to Mr. Michael Silva, the Company’s CEO and Chairman;            options exercisable for 2,407,000 shares were granted to Mr. Marlon Berrett, the            Company’s president and a director; options exercisable for 1,480,668 shares were            granted to Mr. Andrew Eberhardt, the Company’s vice president; options            exercisable for 600,000 shares were granted to Mr. Bradley Berrett, the            Company’s CFO; options exercisable for 833,441 shares were granted to            Mr. Harry L. “Pete” Peterson, a Company director; and options            exercisable for the remaining 3,735,000 shares were granted to consultants to the            Company. All of such options have terminated and are of no further force or            effect.

             

**Compensation of Directors**

 

We paid no cash fees or other consideration to our directors for service            as directors during the last fiscal year. We have made no agreements regarding future            compensation of directors. All directors are entitled to reimbursement for reasonable            expenses incurred in the performance of their duties as members of the Board of            Directors.

 

**Employment Agreements**

 

We have entered into employment agreements with Michael Silva and Marlon            Berrett for terms expiring in July 2008. The employment agreements provide that these            officers shall receive (i) an annual salary of $220,000 and $180,000, respectively,            (ii) discretionary bonuses, and (iii) they may participate in other benefits offered to            Company employees generally.

 

**Indemnification for Securities Act Liabilities**

 

Utah law authorizes, and our Bylaws and Articles of Incorporation            provide for, indemnification of our directors and officers against claims, liabilities,            amounts paid in settlement and expenses in a variety of circumstances. Insofar as            indemnification for liabilities arising under the Securities Act of 1933 may be            permitted for directors, officers and controlling persons pursuant to the foregoing, or            otherwise, we have been advised that in the opinion of the Securities and Exchange            Commission such indemnification is against public policy as expressed in the Securities            Act of 1933 and is, therefore, unenforceable.

 

40

 

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**Compensation Committee Interlocks and Insider            Participation**

 

None of our executive officers serve on our compensation committee (or            in a like capacity) or on the compensation committees of any other entity.

**Item 11. Security Ownership of Certain Beneficial Owners and            Management**

The following table sets forth certain information with respect to the            beneficial ownership of our common stock as of March 31, 2008, for: (i) each person who            is known by us to beneficially own more than five percent of our common stock, (ii)            each of our directors, (iii) each of our Named Executive Officers, and (iv) all            directors and executive officers as a group. On March 31, 2008 the Company had            23,812,397 shares of Common Stock outstanding.

 

|  

**Name and Address****of Beneficial Owner(1)**          | **Shares****Beneficially****Owned(2)** |  

**Percentage of****Total(2)** |  

                             

**Position** |
|-----------------------------------------------------------------|----------------------------------------|---------------------------------------|----------------------------------------------------------|
| Michael Silva (3)                                               | 2,768,682                              | 11.6%                                 | CEO and Chairman                                         |
| Marlon Berrett (4)                                              | 2,357,000                              |  9.9%                            | President and director                                   |
| Harry L. Peterson (5)                                           | 1,445,157                              | 6.1%                                  | Director                                                 |
| Andrew Eberhardt                                                | 1,080,668                              | 4.5%                                  | Vice President                                           |
| Brad Berrett                                                    |   200,000                    | *                                     | CFO                                                      |
| Executive Officers and Directors as a Group(5 persons)          | 7,851,507                              | 33.0%                                 |                                                     |
| LK Anderson Family (6)

2848 N. Foothill Dr.

Provo, UT 84604   | 1,995,737                              | 8.4%                                  |                                                     |
| Jack Rasmussen

1667 E. Hidden ValleyClub Road

Sandy, UT 84092 | 1,509,111                              | 6.3%                                  |                                                     |
|                                                            |                                   |                                  |                                                     |

* Less            than 1%.

______________

 

| (1) | Except where otherwise indicated, the address of the                            beneficial owner is deemed to be the same address as the                            Company. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (2) | Beneficial ownership is determined in accordance with                            SEC rules and generally includes holding voting and investment power                            with respect to the securities. Shares of common stock subject to                            options or warrants currently exercisable, or exercisable within 60                            days, are deemed outstanding for computing the percentage of the total                            number of shares beneficially owned by the designated person, but are                            not deemed outstanding for computing the percentage for any other                            person. |
|-----|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (3) | These shares are owned by Northshore Family Trust, an                            entity controlled by Mr. Silva. |
|-----|------------------------------------------------------------------------------------------------------------------|

| (4) | Include 1,000,000 shares held by an affiliate of Mr.                            Berrett. |
|-----|------------------------------------------------------------------------------------------|

| (5) | Includes 1,270,990 shares of common stock owned by PK                            Investments Ltd. and an entity controlled by Mr. Peterson. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------------|

| (6) | Includes 645,737 shares owned directly by Mr. Lowell K.                            Anderson, an affiliate of LK Anderson Family. |
|-----|----------------------------------------------------------------------------------------------------------------------------------|

 

41

 

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**Item            12. Certain Relationships and Related Transactions Advances from            Officers**

 

Since the inception of Dental Cooperative, Messrs. Michael Silva, Marlon            Berrett and Andrew Eberhardt each have advanced money to Dental Cooperative from time            to time to cover expenses of the Company. As of December 31, 2007, any such advances            had been repaid and the Company was not indebted to such persons.

 

|   | **Dentist Direct, LLC** |
|--------|-------------------------|

 

The Company, through its wholly owned subsidiary, U.S. DentistDirect,            entered into a Memo of Understanding (the “Memo”) with Dentist Direct, LLC            on November 9, 2006. The parties have not yet concluded the arrangements described in            the Memo. U.S. DentistDirect intends to pursue an agreement to license the name and            provider panel known as Dentist Direct but no agreement has been entered into and there            can be no assurance that such arrangements will be agreed. U.S. Dentist Direct and            Dentist Direct, LLC are entities owned by separate parties. All development costs and            liabilities associated with the organization and formation of Dentist Direct, LLC have            been provided by Harry “Pete” Peterson, a director of the Company. Mr.            Peterson is also the President and an owner of Dentist Direct, LLC.

 

|   | **Acquisition and                            Disposition of DPAT** |
|--------|--------------------------------------------------------------------|

 

Effective January 22, 2007, Michael Silva, Marlon Berrett, and Harry L.            “Pete” Peterson (the “Members”), who are officers and/or            directors of the Company, assigned 100% of the membership interests in a DPAT, a dental            practice, to Dental Practice Transition, Inc. so that after the assignment was            effective Dental Practice Transition, Inc. became the sole member of DPAT. The Members            were not paid any consideration in connection with this transaction.

 

On September 11, 2007, Dental Practice Transition, Inc., in accordance            with its business model and purpose, assigned its entire membership interest in DPAT to            39th Street Dental, LLC so that after the assignment was effective,            39th Street Dental, LLC became the sole member of DPAT. Dental Practice            Transition, Inc. received $429,000, which included $396,598 in cash and a note            receivable of $32,402, in consideration for the assignment. 39th Street            Dental, LLC borrowed the funds to purchase DPAT from Stillwater National Bank and Trust            Company. The members of 39th Street Dental, LLC personally guaranteed the            loan. Marlon R. Berrett, an officer and director of the Company, and Andrew Eberhardt,            an officer of the Company, together own a fifty percent membership interest in            39th Street Dental, LLC. The remaining fifty percent membership interests            are owned by the independent dentists who provide the 39th Street Dental,            LLC’s dental services.

 

Dental Practice Transition, Inc. is in the business of transitioning            dental practices between dental practitioners who are exiting and entering their            practice tenure, as well as providing financing for these transitions. The sale price            of DPAT was evaluated and determined by the parties to the transaction utilizing 1)            national and local comparable data relative to practice values for similarly situated            dental operations of its size, type, historical operations, geographic location and            sale terms; and 2) the relationship with respect to which the Company has financed and            transitioned other practices it assists in similar transactions. The purpose of the            sale was to provide the Company with working capital.

 

In connection with the sale, the company recognized a gain of $419,334.            The sale was effective September 1, 2007. The results of operations for DPAT were            reported within discontinued operations in the 2007 Consolidated of Statements of            Operations. The 2007 Consolidated Statement of Cash Flows reports the cash flows of the            discontinued operations.

 

**Item            13. Exhibits and Reports on Form 8-K**

 

**Exhibits**

 

The Index to Exhibits appears on pages 45 and 46 hereof.

 

42

 

----

             

**Item            14. Principal Accountant Fees and Services**

 

**Audit Fees**

 

The aggregate fees billed for professional services rendered by our            principal accountant for the audit of our financial statements, review of financial            statements included in our quarterly reports and other fees that are normally provided            by the accountant in connection with statutory and regulatory filings or engagements            for the fiscal years ended December 31, 2007 and 2006 were $46,000 and $27,500,            respectively.

 

**Audit-Related Fees**

 

The aggregate fees billed for assurance and related services by our            principal accountant that are reasonably related to the performance of the audit or            review of our financial statements, other than those previously reported in this Item            14, for the fiscal years ended December 31, 2007 and 2006 were $0 and $0,            respectively.

 

**Tax            Fees**

 

There were no fees billed for professional services rendered by our            principal accountant for tax compliance, tax advice and tax planning for the fiscal            years ended December 31, 2007 and 2006.

 

**All            Other Fees**

 

The aggregate fees billed for all other fees by the principal            accountant, other than those previously reported in this Item 14, for the fiscal years            ended December 31, 2007 and 2006 were $0 and $0, respectively.

 

**Audit Committee**

 

The Company’s Board of Directors functions as its audit committee.            It is the policy of the Company for all work performed by our principal accountant to            be approved in advance by the Board of Directors. All of the services described above            in this Item 14 were approved in advance by our Board of Directors.No items were approved by the Board of Directors pursuant to paragraph            (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.

 

43

 

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**SIGNATURES**

             

In accordance with Section 13 or 15(d) of the Exchange Act, the            registrant caused this report to be signed on its behalf by the undersigned, thereunto            duly authorized.

             

| Date: April 9, 2008 | **DENTALPATIENTCAREAMERICA,INC.**

(Registrant)

                             

                             

By   /s/ Michael                            Silva

Michael Silva

Chief Executive Officer and Director

                              |
|---------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

 

In accordance with the Exchange Act, this report has been signed below            by the following persons on behalf of the registrant and in the capacities and on the            dates indicated.

 

| Signature                                                                                                          | Title                                                                                                   | Date                          |
|--------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------|-------------------------------|
|   /s/ Michael                            Silva

Michael Silva                                            | Chief Executive Officer, Chairman and Director                            (Principal Executive Officer) |  

 

April 9, 2008 |
|   /s/ Brad                            BerrettBrad Berrett                                                | Chief Financial Officer (Principal Financial and                            Accounting Officer)         |  

 

April 9, 2008 |
|   /s Marlon                            BerrettMarlon Berrett                                             | President and Director                                                                                  |  

 

April 9, 2008 |
|   /s/ Harry L                            “Pete” PetersonHarry L. “Pete” Peterson | Director                                                                                                |  

 

April 9, 2008 |

 

44

 

----

 

**EXHIBIT INDEX**

 

| EXHIBIT NO. | DESCRIPTION OF EXHIBIT

                              |
|-------------|------------------------------------------------------------|
|        | 2.1                                                        | Agreement and Plan of Reorganization as of January 22,                            2004, by and among Mountain Oil, Inc., Mt. Oil Enterprises, Inc.,                            Oakridge Resources, Inc., and Dental Cooperative, Inc. (Incorporated by                            reference to Exhibit 2.1 of the Company’s Form 10-KSB, dated                            December 31, 2004). |
|        | 3(i).1                                                     | Articles of Incorporation of Dental Patient Care                            America, Inc. ((Incorporated by reference to Exhibit 3 of the                            Company’s Registration Statement on Form SB-2 filed May 25, 2000                            (File No. 333-37842)). |
|        | 3(i).2                                                     | Amendment to the Articles of Incorporation of Dental                            Patient Care America, Inc. ((Incorporated by reference to Exhibit 3 of                            the Company’s Registration Statement on Form SB-2 filed May 25,                            2000 (File No. 333-37842)). |
|        | 3(i).3                                                     | Articles of Amendment to the Articles of Incorporation                            of Dental Patient Care America, Inc. (Incorporated by reference to                            Exhibit 3(i).3 of the Company’s Form 10-QSB, dated September 30,                            2005). |
|        | 3(ii).1                                                    | Bylaws of Dental Patient Care America, Inc.                            ((Incorporated by reference to Exhibit 3 of the Company’s                            Registration Statement on Form SB-2 filed May 25, 2000 (File No.                            333-37842)). |
|        | 10.1                                                       | Employment Agreement between Dental Patient Care                            America, Inc. and Michael Silva (Incorporated by reference to Exhibit                            10.1of the Company’s Form 10-KSB/A, dated December 31,                            2004). |
|        | 10.2                                                       | Employment Agreement between Dental Patient Care                            America, Inc. and Marlon Berrett (Incorporated by reference to Exhibit                            10.1 of the Company’s Form 10-KSB/A, dated December 31,                            2004). |
|        | 10.3                                                       | Affiliate Member Practice Purchase Agreement, effective                            November 16, 2006, by and between Dental Cooperative, Inc., Dr. Richard                            Clegg and Richard R. Clegg DDS PC (Incorporated by reference to Exhibit                            10.1 of the Company’s Current Report on Form 8-K, dated November                            16, 2006). |
|        | 10.4                                                       | Management Services Agreement by and between Dental                            Cooperative, Inc. and Dr. Richard Clegg (Incorporated by reference to                            Exhibit 10.2 of the Company’s Current Report on Form 8-K, dated                            November 17, 2006). |
|        | 10.5                                                       | Exclusive Referral Agreement, effective December 4,                            2006, by and between the Company and certain of its affiliates and                            Stillwater National Bank and Trust Company (Incorporated by reference                            to Exhibit 10.1 of the Company’s Current Report on Form 8-K,                            dated December 4, 2006). |
|        | 10.6                                                       | Loan, Security and                            Warrant Agreement, by and between the Company and Heartland Dental                            Care, Inc., dated December 27, 2006 (Incorporated by reference to                            Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated                            December 27, 2006). |
|        | 10.7                                                       | Secured Subordinated Note, by and between the Company                            and Heartland Dental Care, Inc., dated December 27, 2006 (Incorporated                            by reference to Exhibit 10.2 of the Company’s Current Report on                            Form 8-K, dated December 27, 2006). |
|        | 10.8                                                       | Benchmark Services Agreement, by and between the Company                            and Heartland Dental Care, Inc., dated December 27, 2006 (Incorporated                            by reference to Exhibit 10.3 of the Company’s Current Report on                            Form 8-K, dated December 27, 2006). |
|        | 10.9                                                       | Warrant, by and between the Company and Heartland Dental                            Care, Inc., dated December 27, 2006 (Incorporated by reference to                            Exhibit 10.4 of the Company’s Current Report on Form 8-K, dated                            December 27, 2006). |
|             |                                                            |  |  |

 

45

 

----

 

| 10.10 | Tag Along Rights                            Agreement, by and between the Company and Heartland Dental Care, Inc.,                            dated December 27, 2006 (Incorporated by reference to Exhibit 10.5 of                            the Company’s Current Report on Form 8-K, dated December 27,                            2006).                                                          |
|-------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| 10.11 | Assignment of Membership                            Interests in DPAT-1, LLC, effective January 22, 2007 (Incorporated by                            reference to Exhibit 10.1 of the Company’s Current Report on Form                            8-K, dated January 20, 2007).                                                                                                                        |
| 10.12 | 2006 Stock Option                            Plan                                                                                                                                                                                                                                                                                                                                                            |
| 10.13 | 2007 Stock Option Plan                            (Incorporated by reference to Exhibit 10.13 of the Company’s 2006                            Annual Report on Form 10-KSB filed April 2, 2007).                                                                                                                                                                                                      |
| 10.14 | Affiliate Member Practice Purchase Agreement, by and                            between Dental Cooperative, Inc., Dental Associates, Inc., Dr. Jack                            Rasmussen and Dr. Robert Boyer, dated March 7, 2007 (Incorporated by                            reference to Exhibit 10.1 of the Company’s Current Report on Form                            8-K, dated March 9, 2007). |
| 10.15 | Management Services Agreement, by and between Dental                            Cooperative, Inc., Dental Associates, Inc., Dr. Jack Rasmussen and Dr.                            Robert Boyer, dated March 7, 2007 (Incorporated by reference to Exhibit                            10.1 of the Company’s Current Report on Form 8-K, dated March 9,                            2007).                |
| 10.16 | Affiliate Member Practice Purchase Agreement, by and                            between Dental Cooperative, Inc., P. Berrett Packer DDS, Inc., and                            Dr. Packer, dated March 30, 2007 (Incorporated by reference to                            Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated                            March 30, 2007).               |
| 10.17 | Management Services Agreement, by and between Dental                            Cooperative, Inc., P. Berrett Packer DDS, Inc., and Dr. Packer,                            dated March 30, 2007 (Incorporated by reference to Exhibit 10.2 of the                            Company’s Current Report on Form 8-K, dated March 30,                            2007).                              |
| 10.18 | Affiliate Member Practice Purchase Agreement, by and                            between Dental Cooperative, Inc., Lowell K. Anderson DMD PC, and                            Dr. Anderson, dated May 17, 2007 (Incorporated by reference to                            Exhibit 10.1 of the Company’s Current Report on Form 8-K, dated                            June 4, 2007).                   |
| 10.19 | Management Services Agreement, by and between Dental                            Cooperative, Inc., Lowell K. Anderson DMD PC, and Dr. Anderson,                            dated May 17, 2007 (Incorporated by reference to Exhibit 10.2 of the                            Company’s Current Report on Form 8-K, dated June 4,                            2007).                                  |
| 10.20 | Assignment of Membership Interest, dated September 11,                            2007 (Incorporated by reference to Exhibit 10.1 of the Company’s                            Current Report on Form 8-K, dated September 11, 2007).                                                                                                                                                                   |
| 14.1  | Code of Ethics (Incorporated by reference to Exhibit                            14.1 of the Company’s Form 10-KSB/A, dated December 31,                            2003).                                                                                                                                                                                                                              |
| 21.1  | Schedule of subsidiaries (Incorporated by reference to                            Exhibit 21 of the Company’s Form 10-KSB, dated December 31,                            2004).                                                                                                                                                                                                                        |
| 31.1  | Certification by Michael Silva under Section 302 of                            the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                          |
| 31.2  | Certification by Brad Berrett under Section 302 of                            the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                            |
| 32.1  | Certification of Michael Silva pursuant to 18 U.S.C.                            Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley                            Act of 2002.                                                                                                                                                                                                               |
| 32.2  | Certification of Brad Berrett pursuant to 18 U.S.C.                            Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley                            Act of 2002.                                                                                                                                                                                                                |

 

 

46

 

----

**DENTAL PATIENT CARE AMERICA, INC. AND SUBSIDIARIES**

 

INDEX            TO CONSOLIDATED FINANCIAL STATEMENTS

 

 

             

|   | Page |
|--------|------|

 

 

| Report of Independent Registered Public Accounting                            Firm | F - 2 |
|------------------------------------------------------------------------------------|-------|

 

| Consolidated Balance Sheet as of December 31,                            2007 | F - 3 |
|-------------------------------------------------------------------------------|-------|

 

Consolidated Statements of Operations for the Years

|   | Ended December 31, 2007 and 2006 | F - 4 |
|--------|----------------------------------|-------|

 

Consolidated Statement of Stockholders’ Deficit

|   | for the Years Ended December 31, 2007 and                            2006 | F - 5 |
|--------|---------------------------------------------------------------------------|-------|

 

Consolidated Statements of Cash Flows for the Years Ended

|   | December 31, 2007 and 2006 | F - 6 |
|--------|----------------------------|-------|

 

| Notes to Consolidated Financial Statements | F - 7 |
|--------------------------------------------|-------|

 

F-1

----

 

 

 

 

 

**Report of Independent Registered Public Accounting            Firm**

 

To the            Board of Directors and Stockholders of

Dental            Patient Care America

Salt            Lake City, Utah

 

We            have audited the consolidated balance sheet of Dental Patient Care America, Inc. as of            December 31, 2007, and the related statements of operations, stockholders’ equity            (deficit) and cash flows for the years ended December 31, 2007 and 2006. These            consolidated financial statements are the responsibility of the Company's management.            Our responsibility is to express an opinion on these consolidated financial statements            based on our audits.

 

We            conducted our audits in accordance with the standards of the Public Company Accounting            Oversight Board (United States). Those standards require that we plan and perform the            audit to obtain reasonable assurance about whether the consolidated 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. An            audit also includes assessing the accounting principles used and significant estimates            made by management, as well as evaluating the overall financial statement presentation.            We believe that our audits provide a reasonable basis for our opinion.

 

In            our opinion, the consolidated financial statements referred to above present fairly, in            all material respects, the financial position of Dental Patient Care America, Inc. as            of December 31, 2007 and the results of their operations and their cash flows for the            years ended December 31, 2007 and 2006 in conformity with U.S. generally accepted            accounting principles.

 

The            accompanying consolidated financial statements have been prepared assuming that the            Company will continue as a going concern. As discussed in Note 1 to the consolidated            financial statements, the Company’s recurring operating losses and lack of            working capital raise substantial doubt about the Company's ability to continue as a            going concern. Management's plans in regard to these matters are also described in Note            1. The consolidated financial statements do not include any adjustments that might            result from the outcome of this uncertainty.

 

We            were not engaged to examine management's assertion about the effectiveness of Dental            Patient Care America’s internal control over financial reporting as of December            31, 2007 and, accordingly, we do not express an opinion thereon.

 

/s/ HJ            & Associates, LLC

HJ            & Associates, LLC

Salt            Lake City, Utah

April            9, 2008

 

 

F-2

----

| **Dental Patient Care America, Inc.**                                                                              |
|--------------------------------------------------------------------------------------------------------------------|
| **Consolidated Balance Sheet**                                                                                     |
| **December 31, 2007**                                                                                              |
|                                                                                                               |
| **Assets**                                                                                                         |   |   |
|                                                                                                               |   |   |
| Current assets:                                                                                                    |   |   |
| Cash                                                                                                               |   | $              52,720 |
| Accounts receivable, (net of allowance for contractual                            and other write-offs of $45,697) |   | 197,818 |
| Current portion of long term deferred debt issuing                            costs                                |   | 41,420 |
| Notes receivable from employees or affiliated                            enterprises                               |   | 40,000 |
| Prepaids and other assets                                                                                          |   | 9,066 |
|                                                                                                               |   |   |
| Total current assets                                                                                               |   | 341,024 |
|                                                                                                               |   |   |
| Property and equipment, net                                                                                        |   | 29,185 |
| Long term deferred debt issuing costs                                                                              |   | 138,105 |
| Other assets                                                                                                       |   | 34,661 |
| Goodwill                                                                                                           |   | 67,833 |
|                                                                                                               |   |   |
| Total Assets                                                                                                       |   | $         610,808 |
|                                                                                                               |   |   |
|                                                                                                               |   |   |
| **Liabilities and Stockholders'                            Deficit**                                               |   |   |
|                                                                                                               |   |   |
| Current liabilities:                                                                                               |   |   |
| Accounts payable                                                                                                   |   | $             99,454 |
| Accrued payroll liabilities                                                                                        |   | 35,685 |
| Accrued expenses                                                                                                   |   | 12,066 |
| Other accrued interest                                                                                             |   | 40,993 |
| Member deposit payable                                                                                             |   | 9,463 |
|                                                                                                               |   |   |
| Total current liabilities                                                                                          |   | 197,661 |
|                                                                                                               |   |   |
| Long-term liabilities:                                                                                             |   |   |
| Long term notes payable                                                                                            |   | 500,000 |
| Long term practice acquisition liabilities                                                                         |   | 383,625 |
|                                                                                                               |   |   |
| Total long term liabilities                                                                                        |   | 883,625 |
|                                                                                                               |   |   |
|                                                                                                               |   |   |
| Total liabilities                                                                                                  |   | 1,081,286 |
|                                                                                                               |   |   |
| Stockholders' deficit:                                                                                             |   |   |
| Preferred stock, no par value, authorized                            10,000,000                                    |   |   |
| shares; no shares issued or outstanding                                                                            |   | - |
| Common stock, no par value, 50,000,000 shares                                                                      |   |   |
| authorized; 23,587,691 shares issued and                            outstanding                                    |   | 1,255,893 |
| Accumulated deficit                                                                                                |   | (1,726,371) |
|                                                                                                               |   |   |
| Total stockholders' deficit                                                                                        |   | (470,478) |
|                                                                                                               |   |   |
| Total Liabilities and stockholders deficit                                                                         |   | $             610,808 |

 

F-3

----

| **Dental Patient Care America, Inc.**                                                                                 |
|-----------------------------------------------------------------------------------------------------------------------|
| **                                    Consolidated Statements of Operations** |   |   |
|                                                                                                                  |   |   |   |   |   |
|                                                                                                                  |   | **Years Ended** |   |   |
|                                                                                                                  |   | **December 31** |   |   |
|                                                                                                                  |   | **2007** | **2006** |   |   |
|                                                                                                                  |   |   |   |   |   |
| Cooperative revenues (net of member incentives                            of                                          |   |   |   |   |   |
|   $89,373, and $117,498                            respectively)                                            |   | $                                   315,147  | $        310,485  |   |   |
| Dental operations revenues (net of contractual                            and                                         |   |   |   |   |   |
|   bad debt write-offs of $258,834)                                                                          |   | 1,131,701  | - |   |   |
| Total revenues                                                                                                        |   | 1,446,848  | 310,485  |   |   |
|                                                                                                                  |   |   |   |   |   |
| Costs and Expenses:                                                                                                   |   |   |   |   |   |
| Dental operations expenses                                                                                            |   | 1,087,099  | - |   |   |
| General and administrative expense                                                                                    |   | 923,067  | 771,173  |   |   |
|                                                                                                                  |   |   |   |   |   |
| Total costs and expenses                                                                                              |   | 2,010,166  | 771,173  |   |   |
|                                                                                                                  |   |   |   |   |   |
| Loss from operations                                                                                                  |   | (563,318) | (460,688) |   |   |
|                                                                                                                  |   |   |   |   |   |
| Other income (expense):                                                                                               |   |   |   |   |   |
| Other income/(expense), net                                                                                           |   | 4,379  | 22,155  |   |   |
| Interest income/(expense), net                                                                                        |   | (132,489) | (36,268) |   |   |
| Related party interest expense                                                                                        |   | (15,534) | (23,571) |   |   |
|                                                                                                                  |   |   |   |   |   |
| Net other income/(expense)                                                                                            |   | (143,644) | (37,684) |   |   |
|                                                                                                                  |   |   |   |   |   |
| Income (Loss) from continued                                                                                          |   |   |   |   |   |
| operations                                                                                                            |   | (706,962) | (498,372) |   |   |
|                                                                                                                  |   |   |   |   |   |
| Income tax benefit (provisions)                                                                                       |   | -  | - |   |   |
|                                                                                                                  |   |   |   |   |   |
| Income/(Loss) before discontinued operations                                                                          |   |   |   |   |   |
| and extraordinary gain                                                                                                |   | (713,805) | (498,372) |   |   |
|                                                                                                                  |   |   |   |   |   |
| Gain on sale of discontinued operations                                                                               |   | 419,334  | - |   |   |
| Income from discontinued operations                                                                                   |   | 15,904  | - |   |   |
|                                                                                                                  |   |   |   |   |   |
| Total income from discontinued operations                                                                             |   | 435,238  | - |   |   |
|                                                                                                                  |   |   |   |   |   |
| Loss before extraordinary items                                                                                       |   | (271,724) | (498,372) |   |   |
|                                                                                                                  |   |   |   |   |   |
| Extraordinary gain - negative goodwill                                                                                |   | 11,806  | - |   |   |
|                                                                                                                  |   |   |   |   |   |
| Net Loss                                                                                                              |   | $      (259,918) | $      (498,372) |   |   |
|                                                                                                                  |   |   |   |   |   |
| Basic income (loss) per common share                                                                                  |   |   |   |   |   |
| - continued operations                                                                                                |   | $            (0.03) | $            (0.02) |   |   |
| - discontinued operations                                                                                             |   | 0.02  | - |   |   |
| - extraordinary gains                                                                                                 |   | 0.00  | - |   |   |
| Net income (loss) per share                                                                                           |   | $            (0.01) | $            (0.02) |   |   |
|                                                                                                                  |   |   |   |   |   |
|                                                                                                                  |   |   |   |   |   |
| Diluted income (loss) per common share                                                                                |   |   |   |   |   |
| - continued operations                                                                                                |   | $            (0.03) | $            (0.02) |   |   |
| - discontinued operations                                                                                             |   | 0.02  | - |   |   |
| - extraordinary gains                                                                                                 |   | 0.00  | - |   |   |
| Net income (loss) per common share                                                                                    |   | $            (0.01) | $            (0.02) |   |   |
|                                                                                                                  |   |   |   |   |   |
|                                                                                                                  |   |   |   |   |   |
|                                                                                                                  |   |   |   |   |   |
| Weighted average shares outstanding - basic                                                                           |   | 23,470,298  | 23,081,443  |   |   |
| Weighted average shares outstanding - diluted                                                                         |   | 23,651,535  | 23,081,443  |   |   |

 

F-4

----

 

| **Dental Patient Care America, Inc.**                                              |
|------------------------------------------------------------------------------------|
| **Consolidated Statement of Stockholders'                            Deficit**     |
|                                                                               |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |
|                                                                               | Preferred Stock | Common Stock | Accumulated |   |   |
|                                                                               | Shares | Amount | Shares | Amount | Deficit | Total |   |
|                                                                               |   |   |   |   |   |   |   |
| Balance, December 31, 2005                                                         | - | $     - | 22,169,762 | $    668,517  | $   (968,081) | $   (299,564) |   |
|                                                                               |   |   |   |   |   |   |   |
| Common Stock Issued for Cash                                                       | - | - | 1,120,000 | 240,000  | -  | 240,000  |   |
|                                                                               |   |   |   |   |   |   |   |
| Common Stock Options Issued for Member Dentist                            Services | - | - | - | 103,978  | -  | 103,978  |   |
|                                                                               |   |   |   |   |   |   |   |
| Common Stock Options Excercised for Cash                                           | - | - | 32,935 | 8,018  | -  | 8,018  |   |
|                                                                               |   |   |   |   |   |   |   |
| Common Stock Issued for Services                                                   | - | - | 7,715 | 2,315  | -  | 2,315  |   |
|                                                                               |   |   |   |   |   |   |   |
| Common Stock Warrants                                                              | - | - | - | 178,634  | -  | 178,634  |   |
|                                                                               |   |   |   |   |   |   |   |
| Outstanding Stock Options Revalued at                            12/31/06          | - | - | - | (65,657) | -  | (65,657) |   |
|                                                                               |   |   |   |   |   |   |   |
| Net Loss                                                                           | - | - | - | -  | (498,372) | (498,372) |   |
|                                                                               |   |   |   |   |   |   |   |
| Balance, December 31, 2006                                                         | - | - | 23,330,412 | 1,135,805  | (1,466,453) | (330,648) |   |
|                                                                               |   |   |   |   |   |   |   |
| Common Stock Issued for Practice Acquisition                                       | - | - | 84,000 | 17,280  | -  | 17,280  |   |
|                                                                               |   |   |   |   |   |   |   |
| Common Stock Issued for Services                                                   | - | - | 60,000 | 12,000  | -  | 12,000  |   |
|                                                                               |   |   |   |   |   |   |   |
| Common Stock Options Excercised for Cash                                           | - | - | 53,279 | 8,054  | -  | 8,054  |   |
|                                                                               |   |   |   |   |   |   |   |
| Common Stock Issued for Debt Financing                                             | - | - | 60,000 | 11,400  | -  | 11,400  |   |
|                                                                               |   |   |   |   |   |   |   |
| Common Stock Warrants                                                              | - | - | - |  76,645  | -  | 76,645  |   |
|                                                                               |   |   |   |   |   |   |   |
| Stock Offering Costs                                                               | - | - | - |  (1,484) | -  | (1,484) |   |
|                                                                               |   |   |   |   |   |   |   |
| Outstanding Stock Options Revalued at                            12/31/07          | - | - | - | (3,807) | -  | (3,807) |   |
|                                                                               |   |   |   |   |   |   |   |
| Net Loss                                                                           | - | - | - | -  | (259,918) | (259,918) |   |
|                                                                               |   |   |   |   |   |   |   |
|                                                                               |   |   |   |   |   |   |   |
| Balance, December 31, 2007                                                         | - | $                                     - | 23,587,691 | $ 1,313,215  | $ (1,733,214) | $ (470,478) |   |

 

F-5

----

 

| **Dental Patient Care America, Inc.**                                                           |
|-------------------------------------------------------------------------------------------------|
| **Consolidated Statement of Cash Flows**                                                        |
|                                                                                            | **Years Ended** |
|                                                                                            | **December 31,** |
|                                                                                            | **2007** | **2006** |
|                                                                                            |   |   |
| **Cash flows from operating activities:**                                                       |   |   |
| Net Loss                                                                                        | $    (259,918) | $    (498,372) |
| Adjustments to reconcile net (loss) income to                            net                    |   |   |
| cash (used in) provided by operating                            activities:                     |   |   |
| Net income from discontinued operations                                                         | (15,904) | -  |
| Extraordinary Gain                                                                              | (11,806) | -  |
| Gain on sale of discontinued operations                                                         | (419,334) | -  |
| Depreciation                                                                                    | 10,671  | 933  |
| Common stock issued for services                                                                | 12,000  | 2,315  |
| Common stock issued for debt financing                                                          | 11,400  | -  |
| Stock options issued for services                                                               | -  | 38,321  |
| Amortization of deferred debt issuing costs                                                     | 36,465  | -  |
| Revaluation of stock options issued for                            services                     | (3,807) | -  |
| Stock warrants issued for debt financing                                                        | 7,714  | 30,091  |
| Accretion of practice acquisition liabilities                                                   | 31,730  | -  |
| Decrease (increase) in:                                                                         |   |   |
| Accounts receivable                                                                             | (14,913) | 10,237  |
| Prepaid and other assets                                                                        | 2,175  | (219) |
| Increase (decrease) in:                                                                         |   |   |
| Accounts payable                                                                                | 46,861  | (81,850) |
| Accrued liabilities                                                                             | (9,801) | 30,367  |
| Related party accrued interest                                                                  | (4,970) | (20,425) |
| Other accrued interest                                                                          | 39,908  | 1,085  |
| Member deposits                                                                                 | 9,463  | 20,000  |
|                                                                                            |   |   |
| Net cash used in                                                                                |   |   |
| operating activities                                                                            | (532,066) | (467,517) |
|                                                                                            |   |   |
| **Cash flows from investing activities:**                                                       |   |   |
| Notes receivable from employees and affiliated                            enterprises | (40,000) | -  |
| Purchase of property and equipment                                                              | (6,540) | -  |
| Cash received in connection with acquisitions                                                   | 31,868  | -  |
|                                                                                            |   |   |
| Net cash used in investing activities                                                           | (14,672) | -  |
|                                                                                            |   |   |
| **Cash flows from financing activities:**                                                       |   |   |
| Proceeds from issuance of stock                                                                 | -  | 248,018  |
| Proceeds from exercise of stock options                                                         | 8,054  | -  |
| Payments of related party notes and advances                                                    | (117,408) | (14,592) |
| Proceeds from other notes and advances                                                          | -  | 50,000  |
| Payments of other notes and advances                                                            | (25,000) | (25,000) |
| Proceeds from long term notes payable                                                           | 225,000  | 275,000  |
|                                                                                            |   |   |
| Net cash provided by                                                                       |   |   |
| financing activities                                                                            | 90,646  | 533,426  |
|                                                                                            |   |   |
| Cash provided by operating activities of                                                        |   |   |
| discontinued operations                                                                         | 26,978  | -  |
| Cash provided by investing activities of                                                        |   |   |
| discontinued operations                                                                         | 395,885  | -  |
|                                                                                            |   |   |
| Net increase (decrease) in cash and                                                             |   |   |
| cash equivalents                                                                                | (33,229) | 65,909  |
| Change in cash and cash equivalents from                                                        |   |   |
| discontinued operations                                                                         | (25,161) | -  |
| Cash and cash equivalents at beginning of                            period                     | 111,110  | 45,201  |
|                                                                                            |   |   |
| Cash and cash equivalents at end of period                                                      | $       52,720  | $     111,110  |

 

F-6

----

 

**DENTAL PATIENT CARE AMERICA, INC. AND SUBSIDIARIES**

**NOTES TO CONSOLIDATED FINANCIAL STATEMENTS**

 

**1.            Summary of Significant Accounting Policies**

             

*Organization and Nature of Business*

 

Dental Patient Care America, Inc. (the Company) was organized in 1998            for the purpose of organizing dentists into a cooperative model of contractually            networked practices, allowing member dentists to access a variety of benefits. These            benefits include programs to purchase supplies, laboratory and other operating            services, insurance and employee benefits programs, opportunities for profit sharing            through this business model, and more recently to offer preferential business funding            to our members. Various dental patient marketing programs are also provided, such as            the organization of its member dentists into a network, which offers dental care plans            to employers and other groups through the Company’s subsidiary U.S.            DentistDirect, Inc. under the trade name “Dentist Direct”.

             

During 2007, the Company commenced implementing dental member practice            transition funding models through its referral lending agreements that the Company            concluded with Stillwater National Bank during 2006 (See note 15). The implementation            of these models provides the ability to member dental practices to obtain financing            toward the future transition of their practices from members who have chosen to retire            or otherwise exit their practice, to a member practitioner who wishes to assume the            operations of the exiting member. Members who enter into such financing agreements are            referred to as Affiliate Members. (See note 7)

 

On June 30, 2004, Mountain Oil, Inc. (MOLI), a publicly traded company,            changed its name to Dental Patient Care America, Inc. (DPCA), and executed a merger and            plan of share exchange, whereby MOLI agreed to acquire 100 percent of the issued and            outstanding shares of Dental Cooperative, Inc. (DCI) in exchange for 18,823,288 shares            (or approximately 89%) of MOLI’s issued and outstanding common stock. Because the            owners of DCI became the principal shareholders of the Company through the merger, DCI            is considered the acquirer for accounting purposes and this merger is accounted for as            a reverse acquisition or recapitalization of DCI.

 

In connection with the merger, DCPA issued stock options to replace the            outstanding DCI stock options at the time of the merger

 

*Principles of Consolidation*

 

As of the date of the reverse acquisition, all assets and liabilities            related to the former operations of MOLI were spun off to the former shareholders of            MOLI. Therefore, the consolidated financial statements do not include any of the            assets, liabilities, or operations related to the oil and gas business previously            conducted by MOLI.

             

F-7

----

The consolidated financial statements include the operations of Dental            Patient Care America, Inc. (the accounting acquirer) and its wholly owned subsidiaries            Dental Cooperative, Inc., U.S. DentistDirect, Inc. and Dental Practice Transition, Inc.            Intercompany transactions and balances have been eliminated in            consolidation.

 

*Going Concern*

 

The accompanying financial statements have been prepared assuming that            the Company will continue as a going concern. For the years ended December 31,            2007 and 2006, the Company had negative cash flows from operating activities, recurring            operating losses, and negative equity. These conditions raise substantial doubt about            the ability of the Company to continue as a going concern. The financial statements do            not include any adjustments that might result from the outcome of these            uncertainties.

 

Management’s plans to overcome its working capital deficit,            negative cash flows from operating activities and recurring operating losses include            (1) further implementation of the new membership models made possible by the            Company’s successful conclusion of the referral lending agreement with Stillwater            National Bank during December 2006 (See Note 15),

(2)            continued improvements and implementation of its product and service offerings, which            now include the ability to offer expanded member financing opportunities through the            Company’s association with Stillwater National Bank, and (3) aggressive expansion            of its member population into additional state markets which management believes will            increase membership and profitability.

             

Despite management’s confidence in the execution of items 1            through 3 above, management realizes, based on commonly recognized business risks, that            there can be no guarantee that the Company will accomplish these objectives.

 

*Use            of Estimates*

 

The preparation of financial statements in conformity with U.S.            generally accepted accounting principles requires management to make estimates and            assumptions that affect the reported amounts of assets and liabilities and the            disclosure of contingent assets and liabilities at the date of the financial statements            and the reported amounts of revenues and expenses during the reporting            periods.

 

*Concentration of Risk*

 

Financial instruments that potentially subject the Company to            concentration of credit risk consist primarily of accounts receivable. In the normal            course of business, the Company provides credit terms to its customers. Accordingly,            the Company performs ongoing credit evaluations of its customers and maintains            allowances for possible losses which, when realized, have been within the range of            management’s expectations.

 

F-8

----

The Company maintains cash in bank deposit accounts, which at times may            exceed federally insured limits. The Company has not experienced any losses in such            accounts and believes it is not exposed to any significant credit risk with respect to            its cash.

 

*Cash            Equivalents*

 

The Company considers all highly liquid debt instruments with initial            maturities of three months or less to be cash equivalents.

 

*Accounts Receivable*

 

*1) Cooperative Accounts Receivable*

 

Management prepares its estimates of receivables from member dentists by            reviewing amounts collected subsequent to any accounting period and determining what            amount should be recorded to the previous period. No allowance for doubtful amounts is            provided since bad debts are netted in the estimates of accounts receivable.

 

*2) Dental Operations Accounts Receivable*

 

Dental operations accounts receivable are recorded at invoiced amounts.            Receivables are reserved based upon historical contractual write-off’s,            adjustments, and bad debt. A significant majority of the revenue received for services            provided are paid by insurance companies with whom the Company has entered into            provider contracts which prescribes the amount the Company will be reimbursed for            services.

 

*Impairment of Long-Lived Assets*

 

The Company reviews its long-lived assets for impairment whenever events            or changes in circumstances indicate that the carrying amount of the assets may not be            recoverable based on an estimate of future undiscounted cash flows. If the carrying            amount of an asset exceeds its estimated future undiscounted cash flows, an impairment            charge is recognized for the amount by which the carrying amount exceeds the estimated            fair value of the asset. Impairment of long-lived assets is assessed at the lowest            level for which there are identifiable cash flows. As of December 31, 2007 and 2006,            the Company does not consider any of its long-lived assets to be impaired.

 

*Property and Equipment*

             

Property and equipment are recorded at cost. Depreciation on property            and equipment is computed using the straight-line method over the estimated useful            lives of the assets, which range from two to seven years. Maintenance, repairs, and            renewals, which neither materially add to the value of the assets nor appreciably            prolong their lives, are charged to expense as incurred. Gains and losses from            dispositions of property and equipment are reflected in the statement of            operations.

 

F-9

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*Revenue Recognition*

 

*Cooperative Revenue Recognition - Associate            Membership*

 

The Company charges its Associate member dentists membership fees,            marketing fees for referrals provided by the Company, and receives rebates from the            suppliers for purchases of dental equipment for its members. These revenues are            recognized when payments are received since that is the earliest date when these            amounts are readily determinable, and collection is reasonably assured. Amounts            received prior to issuance of financial statements but after period ending dates that            are attributable to prior periods are recorded as accounts receivable.

 

*Cooperative Revenue Recognition - Affiliate            Membership*

 

During 2007, the Company entered into five Affiliate member dental            practice purchase and transition financing arrangements and one sale arrangement (See            Notes 6 & 7). The Company charges Affiliate members membership fees based upon the            margin from the dental practices that enter into such agreements, or the amount of            financing obtained by the practice in the funding transaction, or a percentage of            practices’ valuation expressed as a function of the annual cash collections of            the practice. Membership fees associated with Affiliate members are established under            the contractual terms entered into when the financing agreement was concluded. Since            Affiliate member fees are reasonably determinable and estimable, such fees are accrued            and recognized in the period earned.

             

The Company pays incentives to it’s members to recognize            significant contributions to Dental Cooperative, based largely on the growth in            revenues and resulting fees to Dental Cooperative. These fees are accounted for as a            reduction of Cooperative revenues.

 

*Practice Revenue Recognition*

 

The Company’s dental practices charge fees to its patients for            dental services performed. Fees are established internally by the practices based upon            billing rates that are considered usual and customary among similarly situated dental            service providers. Revenue is recognized at the time and during the period in which            services are performed. Because a significant percentage of the Companies’            patients are insured or participate in managed care dental plans and programs, the            rates charged by the Company may not be fully realized or collectible under the            contractual payment terms of the managed care programs and insurance plans of            it’s patients. The company therefore makes adjustments to its periodic revenue            based upon the estimated amounts due from the patients and third-party payers in order            that revenues may be fairly stated in accordance with generally accepted accounting            principles. Revenue adjustments are based on analysis of historical collection rates            from amounts due from patients and third-party payers, including managed care dental            plans, commercial insurance companies and employers.

             

F-10

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*Stock Based Compensation*

 

On January 1, 2006, we adopted the provisions of Statement 123 (revised            2004) (Statement 123 (R), “Share-Based Payment,” which revises Statement            123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion            25, “Accounting for Stock Issued to Employees.” Statement 123(R) requires            us to recognize expense related to the fair value of our stock-based compensation            awards, including employee stock options.

             

Prior to the adoption of Statement 123(R), we accounted for stock-based            compensation under the recognition and measurement principles of APB Opinion No. 25,            Accounting for Stock Issued to Employees, and related interpretations, and has adopted            the disclosure only provisions of SFAS No. 123, “Accounting for Stock-Based            Compensation”.

 

We have elected to use the modified prospective transition method as            permitted by Statement 123(R) and therefore have not restated our financial results for            prior periods. Under this transition method, we have applied the provisions of            Statement 123(R) to new awards granted, modified, repurchased, or cancelled after            January 1, 2006. Accordingly, since all of the Company’s stock-based awards            issued and outstanding as of December 31, 2007 are fully vested, we have recognized the            associated compensation costs associated with these transactions. Additionally, had any            of the stock-based awards not been vested, we would have recognized compensation cost            for the portion of the awards for which the requisite service had not been rendered            that were outstanding as of January 1, 2007, as the remaining service was            rendered.

 

*Earnings Per Share*

 

Basic earnings (loss) per common share (“EPS”) is calculated            by dividing net loss by the weighted average number of common shares outstanding for            the period. Diluted EPS is calculated by dividing net loss by the weighted average            number of common shares outstanding, plus the assumed exercise of all dilutive            securities using the treasury stock or “as converted” method, as            appropriate. During periods of net loss, all common stock equivalents are excluded from            the diluted EPS calculation because they are antidilutive. The Company had stock            options outstanding to purchase 727,700 shares of common stock as of December 31, 2007,            and 630,979 as of December 31, 2006 (See Note 12).

 

**2.            Stock Transactions**

 

During the first quarter of 2007, the Company issued 84,000 shares of            common stock to two member dentists associated with the acquisition of their practices.            During the second, third and fourth quarter of 2007, option holders exercised 53,279            options to purchase common stock which resulted in aggregate proceeds of $8,054. The            Company additionally issued 60,000 shares of common stock in exchange for debt            financing during the third quarter of 2007, at a valuation of $0.19 per share, and            another 60,000 shares during the third quarter of 2007 in exchange for services            rendered to the Company at a valuation of $0.20 per share.

 

F-11

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**3.            Property and Equipment**

 

                            Property and equipment consists of the following as of December 31, 2007:

 

| Furniture and equipment       | $      | 110,494  |
|-------------------------------|--------|---------------|
| Less accumulated depreciation |   | (81,309)      |
|                          |   |          |
|                          | $      | 29,185   |

 

Depreciation expense totaled $10,671 for the year ended December 31,            2007, and $933 for the year ended 2006.

 

**4.            Member Deposits Payable**

 

The Company previously entered into contingent “affiliate            agreements” with dentist members that would provide for increased management fees            in return for the Company to make loans to the dentist members. These agreements were            contingent upon the Company obtaining financing and establishing a formal policy to            implement these provisions and issue the loans.

 

On November 17, 2006, the Company entered into an agreement to purchase            the dentist member’s practice, subject to various contingencies, in consideration            for payments in the form of Company stock and cash. Effective January 2007, the Company            concluded the acquisition of this dental practice and has consolidated the operations            of this practice within the accompanying financial statements. As of December 31, 2006,            and December 31, 2007, the Company held such deposit amounts of $135,770 and $108,616            respectively, which amount is eliminated in consolidation. The deposit held is being            amortized and recognized as a reduction in the dentist members’ management fees            payable to the Company over the life of the Management Services Agreement which was            entered into with the dentist member concurrent with the agreement to purchase the            practice. Amortization of this deposit totaled $27,154 during the year ended            2007.

 

The remaining member deposits payable in the accompanying balance sheet            consists of prepayments of the contractual final month member fees paid by member            dentists who have entered into Affiliate Membership agreements. Such deposits will be            recognized as income during the final month of these member agreements.

 

**5.            Notes Payable**

 

On December 27, 2006, the Company and its subsidiaries entered into a            Loan, Security and Warrant Agreement (the “Loan Agreement”) with Heartland            Dental Care, Inc. (“Heartland”). Under the terms of the Loan Agreement,            Heartland has advanced loans to the Company in the amount of five hundred thousand            dollars ($500,000) and may make additional loans to the Company in the total aggregate            principal amount of up to one million two hundred fifty thousand dollars ($1,250,000).            Interest on the principal amount outstanding is due on the first day of each calendar            quarter and interest is payable at the rate of ten percent (10%) per annum. The Company            recognized $40,692 of interest expense associated with this note payable during the            year ended 2007.

 

F-12

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 No accrued interest has been paid. The principal amount is due and            payable in full April 30, 2012. As collateral for the repayment of the loan, the            Company granted Heartland a security interest in substantially all of its assets.            Receipt of the additional loan proceeds is contingent upon the Company acquiring            specified numbers of dental practices. Additionally, the Security Agreement contains            provisions that additional funds may not be available to be advanced to the Company            after November 15, 2007. There can be no assurance that any additional loan proceeds            will be received or sought by the Company and there can be no assurance that the            Company will have sufficient funds available to repay the amounts owing on the            loan.

 

As additional consideration for the loan, the Company issued a warrant            to Heartland that is exercisable for a number of shares of common stock equal to ten            percent (10%) of the Company’s issued and outstanding common stock, on a fully            diluted basis, on the date of exercise (See Note 13). Until and unless the principal            amount of one million two hundred fifty thousand dollars ($1,250,000) is lent to the            Company, the number of shares of common stock for which the warrant can be exercised is            reduced in proportion to the amount actually lent. For example, the warrant is            currently exercisable for 4.0% ((500,000/1,250,000) x 10%) of the Company’s            issued and outstanding common stock, on a fully diluted basis. The Company has also            agreed to file a registration statement registering the resale of the warrant and            common stock that is issuable upon exercise of the warrants.

 

**6.            Consolidated Acquisitions**

             

Acquisition of Practice from Dr. Clegg

 

In January 2007, the Company acquired 100% of Richard R. Clegg, DDS PC            (the “Clegg Practice”) in a transaction accounted for under FAS 141. The            results of operations of the Clegg Practice are included in the accompanying            consolidated statement of operations.

 

The consideration given for the acquisition was $500,000 cash, which is            payable on the fifth anniversary of the acquisition and 300,000 shares of the            Company’s common stock, of which 60,000 shares were given upon acquisition and            60,000 will be given on the anniversary of the acquisition for the next four            years.

 

The estimated fair values of assets acquired and liabilities assumed in            the acquisition are as follows:

             

| Current Assets            | $      | 289,179 |
|---------------------------|--------|---------|
| Fixed Assets              |   | 31,405  |
| Goodwill                  |   | 67,833  |
| Total Assets Acquired     |   | 388,418 |
| Total Liabilities Assumed |   | 24,523  |
|                      |   |    |
| Net Assets Acquired       | $      | 363,895 |

 

F-13

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Goodwill of $67,833 resulting from the acquisition resulted from the            payment of a premium (i.e. goodwill), over the fair value of the net tangible and            identified intangible assets. The purchased goodwill is not deductible for tax            purposes.

 

|   | Acquisition and Sale of DPAT-1, LLC |
|--------|-------------------------------------|

 

In January 2007, 100% of membership interests in DPAT-1, LLC (DPAT), was            acquired through the assignment of those interests to Dental Practice Transition, Inc.,            a wholly owed subsidiary of the Company, who became the sole member of DPAT. The            results of operations of DPAT for the period January through August 2007, are included            in the consolidated statement of operations.

 

As the membership interests of DPAT were assigned to Dental Practice            Transition, Inc., there was no consideration given for the membership interests. The            acquisition was accounted for under FAS 141. The purchase price was allocated to            identifiable assets acquired and liabilities assumed based on their estimated fair            values. The estimated fair value of DPAT net assets acquired exceeded the acquisition            costs by $11,805.

 

The following table summarizes the fair value of assets acquired and            liabilities assumed and extraordinary gain recognized at the date of            acquisition:

 

| Current Assets            | $      | 76,739 |
|---------------------------|--------|--------|
| Total Assets Acquired     |   | 76,739 |
| Total Liabilities Assumed |   | 64,934 |
|                      |   |   |
| Extraordinary Gain        | $      | 11,805 |

 

Effective September 1, 2007, Dental            Practice Transition, Inc., in accordance with its business model and purpose, assigned            its entire membership interests in DPAT to 39th Street Dental, LLC, so that            after the assignment was effective, 39th Street Dental, LLC became the sole            member of DPAT. Dental Practice Transition, Inc., received four hundred twenty-nine            thousand dollars ($429,000) in consideration for the assignment. 39th Street            Dental, LLC borrowed the funds to purchase DPAT from Stillwater National Bank and Trust            Company. The members of 39th Street Dental, LLC personally guaranteed the            loan. The parties to the transaction determined the sale price. The purpose of the sale            was to provide the Company with working capital. Marlon R. Berrett, an officer and            director of the Company, and Andrew Eberhardt, an officer of the Company, together own            a fifty percent membership interest in 39th Street Dental, LLC. The            remaining fifty percent membership interest is owned by the independent dentists who            provide dental services to 39th Street Dental, LLC. (See note 8)

 

**7.            Practice acquisitions, Affiliate Memberships, and loan            fundings**.

 

During 2007, under the Company’s dental practice transition            business, we have entered into five Affiliate Membership and dental practice purchase            arrangements as described below:

 

F-14

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|   | Acquisition of Practice from Dental Associates,                            Inc. |
|--------|---------------------------------------------------------------------------------|

 

Effective March 9, 2007, the Company, through Dental Cooperative,            entered into a Purchase Agreement with Dental Associates, Inc. and Drs. Jack Rasmussen            and Robert Boyer. Under the Purchase Agreement, the Cooperative may acquire            substantially all of Drs. Rasmussen’s and Boyer’s dental practices in            consideration for payments in the form of cash. The transfer of the practice assets is            not anticipated to occur until the five year anniversary of the closing date. In            connection with the initial closing, Dental Associates, Inc. obtained a loan in the            principal amount of one-half of the practice purchase price from Stillwater National            Bank and Trust Company. The Purchase Agreement also contains non-compete,            confidentiality and indemnification provisions.

 

In connection with the Purchase Agreement, the Cooperative, Dental            Associates, Inc. and Drs. Rasmussen and Boyer executed a Management Agreement. Under            the Management Agreement, the Company has retained Dental Associates, Inc. to manage            and operate the dental practice for a five year period in consideration a percentage of            Dental Associates, Inc.’s margin (i.e. Dental Associates, Inc.’s            collections less operating expenses) plus an additional cash payment. The Management            Agreement contains, among other provisions, (i) requirements with respect to minimum            collection and minimum margin levels that must be maintained during the term of the            agreement, and (ii) confidentiality and indemnification provisions. The Management            Agreement was effective immediately upon initial closing of the Purchase            Agreement.

 

In connection with the loan, the Company and the Cooperative agreed to            subordinate certain rights that may accrue in connection with the Purchase Agreement            and Management Agreement to the amounts owing to Stillwater National Bank and Trust            Company under the loan.

 

|   | Acquisition of Practice from Dr.                            Packer |
|--------|--------------------------------------------------------------------|

 

Effective April 1, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with P. Berrett Packer DDS, Inc., (the “Provider”) and            Dr. Berrett Packer. Under the Purchase Agreement, the Cooperative may acquire            substantially all of Dr. Packer’s dental practice in consideration for future            cash payments and 120,000 shares of common stock (24,000 were issued at closing and            24,000 will be issued on each of the first four annual anniversary date and the            closing). The transfer of the practice assets is not anticipated to occur until the            five-year anniversary of the closing date. In connection with the closing, the Provider            obtained a loan in the principal amount of twenty percent (20%) of the practice            purchase price from Stillwater National Bank and Trust Company (the            “Loan”). The Purchase Agreement also contains confidentiality,            indemnification and other provisions.

 

In connection with the Purchase Agreement, the Cooperative, Provider and            Dr. Packer executed a Management Agreement. Under the Management Agreement, the Company            has retained the Provider to independently manage and operate the dental practice for a            five-year period in consideration for a percentage of the Provider’s margin            (i.e., the Provider’s collections less operating expenses) plus an additional            cash payment.

             

F-15

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The            Management Agreement contains, among other provisions, (i) requirements with respect to            minimum collection and minimum margin levels that must be maintained during the term of            the agreement, and (ii) confidentiality and indemnification provisions. The Management            Agreement is effective immediately upon closing of the Purchase Agreement.

 

In connection with the loan, the Company and the Cooperative agreed to            subordinate certain rights that may accrue in connection with the Purchase Agreement            and related Management Agreement to the amounts owing to Stillwater National Bank and            Trust Company under the loan.

 

|   | Acquisition of Practice from Dr.                            Anderson |
|--------|----------------------------------------------------------------------|

 

Effective June 4, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with Lowell K. Anderson DMD PC (the “Provider”) and Dr.            Lowell K. Anderson. Under the Purchase Agreement, the Cooperative may acquire            substantially all of Dr. Anderson’s dental practice in consideration for future            cash payments and stock options exercisable for 1,000,000 shares of common stock. The            options will be granted under the Company’s 2007 Stock Option Plan (the            “Plan”). The Plan is subject to shareholder approval and if such approval            is not obtained then any options granted under the Plan will be null, void and of no            force or effect. The transfer of the practice assets is not anticipated to occur until            the five-year anniversary of the closing date. In connection with the closing, the            Provider obtained a loan in the principal amount of fifty-percent (50%) of the practice            purchase price from Stillwater National Bank and Trust Company. The Purchase Agreement            also contains confidentiality, indemnification and other provisions.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Anderson executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Provider to independently manage and operate the            dental practice for a five-year period in consideration for a percentage of the            Provider’s margin (i.e. the Provider’s collections less operating expenses)            plus an additional cash payment. The Management Agreement contains, among other            provisions, (i) requirements with respect to minimum collection and margin levels that            must be maintained during the term of the Agreement, and (ii) confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

 

In connection with the loan, the Company and the Cooperative agreed to            subordinate certain rights that may accrue in connection with the Purchase Agreement            and Management Agreement to the amounts owing to Stillwater National Bank and Trust            Company under the loan.

 

Acquisition of Practice from Dr. Woodbury

 

Effective November 1, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with William E. Woodbury, PC, (the “Provider”) and Dr.            William E. Woodbury. Under the Purchase Agreement, the Cooperative may acquire            substantially all of Dr. Woodbury’s dental practice in consideration for future            cash payment. The amount of

             

F-16

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such            future cash payment is to be determined by the average of the dental practices’            gross collections during the practices’ two fiscal years immediately preceding            the transfer date, multiplied by a percentage specified in the Purchase Agreement. The            transfer of the practice assets is not anticipated to occur until a mutually agreed            upon date by Dental Cooperative and Provider, at which time all right, title, and            interest in and to the dental practice is transferred from Provider to Dental            Cooperative. This date shall occur approximately 180 days after the date Provider has            given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Woodbury executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Provider to independently manage and operate the            dental practice until such time as the practice may be transferred. In consideration            thereof, Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

 

|   | Acquisition of Practice from Dr. Binns |
|--------|----------------------------------------|

 

Effective November 1, 2007, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with Ralph Binns, DDS, (the “Provider”) and Dr. Ralph W.            Binns. Under the Purchase Agreement, the Cooperative may acquire substantially all of            Dr. Binn’s dental practice in consideration for future cash payment. The amount            of such future cash payment is to be determined by the average of the dental            practices’ gross collections during the practices’ two fiscal years            immediately preceding the transfer date, multiplied by a percentage specified in the            Purchase Agreement. The transfer of the practice assets is not anticipated to occur            until a mutually agreed upon date by Dental Cooperative and Provider, at which time all            right, title, and interest in and to the dental practice is transferred from Provider            to Dental Cooperative. This date shall occur approximately 180 days after the date            Provider has given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Binns executed a Management Services Agreement. Under the Management Agreement,            the Company has retained Provider to independently manage and operate the dental            practice until such time as the practice may be transferred. In consideration thereof,            Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

 

F-17

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**8.            Discontinued Operations and Related Party Transactions**

 

On September 11, 2007, Dental Practice Transition, Inc., in accordance            with its business model and purpose, assigned its entire membership interest in DPAT to            39th Street Dental, LLC so that after the assignment was effective,            39th Street Dental, LLC became the sole member of DPAT (See note 6). Dental            Practice Transition, Inc. received four hundred twenty-nine thousand dollars            ($429,000), which included $396,597 in cash and a note receivable of $32,403, in            consideration for the assignment. 39th Street Dental, LLC borrowed the funds            to purchase DPAT from Stillwater National Bank and Trust Company. The members of            39th Street Dental, LLC personally guaranteed the loan.

 

Dental Practice Transition, Inc. is in the business of transitioning            dental practices between dental practitioners who are exiting and entering their            practice tenure, as well as providing financing for these transitions. The sale price            of DPAT was evaluated and determined by the parties to the transaction utilizing 1)            national and local comparable data relative to practice values for similarly situated            dental operations of its size, type, historical operations, geographic location and            sale terms; and 2) the relationship with respect to which the Company has financed and            transitioned other practices it assists in similar transactions. The purpose of the            sale was to provide the Company with working capital.

 

In connection with the sale, the company recognized a gain of $419,334.            The sale was effective September 1, 2007. The results of operations for DPAT were            reported within discontinued operations in the accompanying Consolidated of Statements            of Operations. The 2007 Consolidated Statement of Cash Flows reports the cash flows of            the discontinued operations.

 

Marlon R. Berrett, an officer and director of the Company, and Andrew            Eberhardt, an officer of the Company, together own a fifty percent membership interest            in 39th Street Dental, LLC. The remaining fifty percent membership interest            is owned by the independent dentists who provide the 39th Street Dental,            LLC’s dental services.

 

As explained previously, the operations of DPAT were reported within            discontinued operations in the accompanying Consolidated Statements of Operations.            Operations of DPAT ceased effective August 31, 2007. A summarization of DPAT operations            for the eight month period ended August 31, 2007 is as follows:

 

|                                | Eight Months EndedAugust 31, 2007 |
|-------------------------------------|-----------------------------------|
| Dental operations revenues          | $                                 | 434,168  |
| Dental operations expense           |                              | (421,735) |
|                                |                              |   |
| Income from dental operations       |                              | 12,433  |
|                                |                              |   |
| Other income/(expense), net         |                              | 3,843  |
| Interest income/(expense), net      |                              | (372) |
|                                |                              |   |
| Income from discontinued operations | $                                 | 15,904  |

 

F-18

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**9.            Commitments and Contingencies**

 

*Employment Agreements*

 

The Company has employment agreements with its Chief Executive Officer            and Chief Operating Officer which obligate the Company to pay an aggregate sum of            approximately $400,000 per year in salaries, plus discretionary bonuses, beginning June            1999 and continuing through June 2008. The Chief Executive Officer and Chief Operating            Officer have permanently waived the Company’s obligation and any claims on these            agreements through December 31, 2007.

 

*Operating Leases*

 

The Company’s corporate office leases office space and equipment            under cancelable month-to-month operating leases. Total rent expense related to these            operating leases for the years ended December 31, 2007 and 2006 was approximately            $55,297 and $49,844, respectively.

             

The Company’s dental operations office has a lease with a third            party through June 2013, for office space that contains customary escalation charges            from year-to-year. At December 31, 2007, future minimum lease payments under this            non-cancelable operating lease are as follows:

             

| Year Ending December 31:            |   |    |
|-------------------------------------|--------|---------|
| 2008                                | $      | 27,444  |
| 2009                                |   | 27,804  |
| 2010                                |   | 28,056  |
| 2011                                |   | 28,308  |
| 2012                                |   | 28,308  |
| 2013                                |   | 14,154  |
| Total future minimum lease payments | $      | 154,074 |

 

*Environmental Contingencies*

 

The Company was previously engaged in mining activities. Mining            activities are subject to extensive federal and state laws and regulations designed to            conserve and prevent the degradation of the environment. These laws and regulations            require obtaining various permits before undertaking certain exploration activities.            These requirements also necessitate significant capital outlays and may result in            liability to the owner and operator of the property for damages that may result from            specific operations or from contamination of the environment, all of which may prevent            the Company from continuing to operate. Should the Company become subject to any such            liabilities, it could materially and adversely affect its ability to continue its            operations. Management, after consultation with legal counsel, believes that any            potential legal actions are not probable or estimable.

 

F-19

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**10.            Income Taxes**

 

                              The provision (benefit) for income taxes differs from the amount computed by applying            the statutory federal income tax rate to loss before income taxes as follows at            December 31:

 

|                           | **2007** | **2006**     |
|--------------------------------|----------|--------------|
| Book Loss                      | $        | (101,368)    | $ | (194,365) |
| Federal income tax (provision) |     |         |   |   |
| benefit at statutory rate      |     | -       |   | -   |
| Accretion                      |     | 12,375  |   | -   |
| M & E                      |     | 1,794   |   | 700   |
| Stock for services             |     | 4,680   |   | 903   |
| Accrued expenses               |     | -       |   | 7,965   |
| Options and warrants expense   |     | (1,485)      |   | 14,945   |
| Change in valuation allowance  |     | 84,004  |   | 169,852   |
|                           | $        | -       | $ | -   |

 

Deferred income tax assets (liabilities) are comprised of the following            as of December 31:

 

|                | **2007** | **2006**      |
|---------------------|----------|---------------|
|                |     |          |   |   |
| Net operating loss  | $        | 464,812  | $ | 448,906  |
| Depreciation        |     | (50)          |   | -  |
| Other               |     | -        |   | 1,938  |
| Valuation allowance |     | (464,762)     |   | (450,844) |
|                | $        | -        | $ | -  |

 

At December 31, 2007, the Company has net operating loss carry forwards            available to offset future taxable income if any of approximately $1,100,000, which            will begin to expire in 2019. The utilization of the net operating loss carry forwards            is dependent upon the tax laws in effect at the time the net operating loss carry            forwards can be utilized. The Tax Reform Act of 1986 significantly limits the annual            amount that can be utilized for certain of these carry forwards as a result of the            changes in ownership.

 

In July 2006, the FASB issued FASB Interpretation No. 48,            “Accounting for Uncertainty in Income Taxes – an interpretation of FASB            Statement No. 109” (“FIN 48”, which clarifies the accounting and            disclosure for Uncertainty in tax positions, as defined. FIN 48 seeks to reduce the            diversity in practice associated with certain aspects of the recognition and            measurement related to accounting for income taxes. The Company is subject to the            provisions of FIN 48 as of January 1, 2007, and has analyzed filing positions in all of            the federal and state jurisdictions where it is required to file income tax returns.            Upon review of the Company’s historical tax filings and consultation with its tax            advisors, the Company believes that it has taken tax positions in preceding years that            could potentially result in reductions to it’s cumulative net operating loss            carryforwards of approximately $231,535. The Company is subject to audit by the IRS and            the State of Utah for the prior three years.

 

F-20

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The Company, as a matter of policy, would record any interest and            penalties associated with taxes as a component of income tax expenses. The Company            recorded an immaterial amount of interest and penalties for the year ended December 31,            2007.

 

**11.            Stock-Based Compensation**

 

On January 1, 2006, we adopted the provisions of Statement 123 (revised            2004) (Statement 123 (R), “Share-Based Payment,” which revises Statement            123, “Accounting for Stock-Based Compensation,” and supersedes APB Opinion            25, “Accounting for Stock Issued to Employees.” Statement 123(R) requires            us to recognize expense related to the fair value of our stock-based compensation            awards, including employee stock options.

 

Prior to the adoption of Statement 123(R), we accounted for stock-based            compensation under the recognition and measurement principles of APB Opinion No. 25,            Accounting for Stock Issued to Employees, and related interpretations, and has adopted            the disclosure only provisions of SFAS No. 123, “Accounting for Stock-Based            Compensation”.

 

We have elected to use the modified prospective transition method as            permitted by Statement 123(R) and therefore have not restated our financial results for            prior periods. Under this transition method, we have applied the provisions of            Statement 123(R) to new awards granted, modified, repurchased, or cancelled after            January 1, 2006. Accordingly, since all of the Company’s stock-based awards            issued and outstanding as of December 31, 2007 are fully vested, we have recognized the            associated compensation costs associated with these transactions. Additionally, had any            of the stock-based awards not been vested, we would have recognized compensation cost            for the portion of the awards for which the requisite service had not been rendered            that were outstanding as of January 1, 2006, as the remaining service was            rendered.

 

**12.            Stock Options**

 

In December 2004, the Financial Accounting Standard Board            (“FASB”) issued SFAS 123R, “Share-Based Payments” (“SFAS            No. 123R”), a revision of SFAS No. 123, “Accounting for Stock-Based            Compensation” (“SFAS No. 123”), which requires companies to measure            all employee stock-based compensation awards using a fair value method and record such            expense in their financial statements. The Company adopted this standard effective            January 1, 2006 and elected the modified-prospective transition method. Under the            modified-prospective transition method, awards that are granted, modified, repurchased            or cancelled after the date of adoption should be measured and accounted for in            accordance with SFAS No. 123R. Stock-based awards that are granted prior to the            effective date should continue to be accounted for in accordance with SFAS No. 123,            except that stock option expense for unvested options must be recognized in the            statement of operations.

 

As of December 31, 2006, the Company had options outstanding to purchase            264,000 shares of common stock at an exercise price of $2.50 per share. Because these            particular options were fully vested prior to January 1, 2006, there is no expense            required to be recognized attributable to these options for the period ended December            31, 2007.

 

F-21

----

During June of 2006, the Company authorized and issued options to its            member dentists to purchase 399,914 shares of common stock at an exercise price equal            to eighty percent (80%) of the average closing price of the Company’s stock for            the preceding 20 days prior to the date of exercise. During June 0f 2007, the Company            authorized and issued options to its member dentists to purchase 150,000 shares of            common stock under terms identical to those options issued in June of 2006. The            variability in the exercise price requires these options to be treated as variable            securities, and they will be revalued at the end of each reporting period. At the date            of issuance, all of these options were fully vested and could be exercised at any time,            therefore 100% of the option value was recognized during the year. During the years            ended December 31, 2006 and 2007, 32,935 and 53,279 respectively of these options were            exercised. As these options are variable securities, the Company revalued the 463,700            outstanding options using Black/Scholes models to estimate their fair market valuation            at December 31, 2007. At December 31, 2007, the 463,700 remaining outstanding options            had a Black/Scholes fair market value of $23,185.

             

On March 8, 2007, the Company’s board of directors approved the            Dental Patient Care America, Inc. 2007 Stock Option Plan (the “Plan”). A            total of 13,000,000 shares of common stock are allocated to the Plan. In addition, on            March 8, 2007, the board of directors granted options exercisable for 12,559,791 shares            of common stock at an exercise price of $.30 per share. The effectiveness of the Plan            and the grant of the options under the Plan are subject to shareholder approval. The            option grants provide that the options are void and may not be exercised until and            unless the shareholders of the Company approve the Plan and all grants that have            occurred through the date of Plan approval. As of December 31, 2007, shareholder            approval for the Plan had not been sought or obtained.

             

Of the option grants to date, options exercisable for 3,503,682 shares            were granted to Mr. Michael Silva, the Company’s CEO and Chairman; options            exercisable for 2,407,000 shares were granted to Mr. Marlon Berrett, the            Company’s president and a director; options exercisable for 1,480,668 shares were            granted to Mr. Andrew Eberhardt, the Company’s vice president; options            exercisable for 600,000 shares were granted to Mr. Bradley Berrett, the            Company’s CFO; options exercisable for 833,441 shares were granted to            Mr. Harry L. “Pete” Peterson, a Company director; and options            exercisable for the remaining 3,735,000 shares were granted to consultants to the            Company.

             

The purpose of this Plan is to advance the interests of the Company and            its shareholders by helping the Company obtain and retain the services of employees,            officers, consultants, independent contractors and directors, upon whose judgment,            initiative and efforts the Company is substantially dependent, and to provide those            persons with further incentives to advance the interests of the Company.

             

The Plan permits the Company to grant “non-qualified stock            options” and/or “incentive stock options” to acquire the            Company’s common stock. The total number of shares authorized for the Plan may be            allocated by the board between non-qualified stock options and incentive stock options            from time to time, subject to certain requirements of the Internal Revenue Code of            1986, as amended (the “Code”).

             

F-22

----

Until and unless the Company files a registration statement relating to            the Plan, securities issued under the Plan will be exempt from registration under Rule            506 of Regulation D and Section 4(2) of the Securities Act of 1933. The Company did not            use an underwriter in connection with these transactions.

 

The Company used the Black-Scholes valuation model to estimate the fair            value of its stock-based awards. Use of the Black-Scholes valuation model to estimate            the fair value of our stock-based awards requires various judgmental assumptions            including estimated stock price volatility, forfeiture rates, and expected life. Our            computation of expected volatility is based on a combination of historical and            market-based implied volatility. Our calculation of the fair market value of each            option award on the date of grant, using the Black-Scholes option-pricing model, used            the following assumptions for this group of options outstanding at December 31,            2007:

 

|   | Risk-free interest rate | 3.45% |
|--------|-------------------------|-------|

|   | Expected life in years | 3.78 |
|--------|------------------------|------|

|   | Dividend yield | 0 |
|--------|----------------|---|

|   | Expected volatility | 166.90% |
|--------|---------------------|---------|

 

A            summary of the status of the Company’s stock option plans as of December 31, 2007            and changes during the year is presented below:

 

|                                     |  

**Options** |     | **Weighted Average****Exercise Price** |
|------------------------------------------|---------------------|----------|----------------------------------------|
|                                     |                |     |
| Outstanding options at December 31, 2006 |                | 630,979  | $                                      |                                                                      1.17 |
|                                     |                |     |                                   |   |
| Granted                                  |                | 150,000  |                                   | 0.14 |
| Cancelled / Expired                      |                | -        |                                   | - |
| Exercised                                |                | (53,279) |                                   | 0.15 |
|                                     |                |     |                                   |   |
| Outstanding, December 31, 2007           |                | 727,700  | $                                      | 1.00 |
|                                     |                |     |                                   |   |
| Exercisable, December 31, 2007           |                | 727,700  | $                                      | 1.00 |

 

| **Outstanding**                                                                                          |                                                                                | **Exercisable**                                                                       |                                                                            |
|----------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|
|  

                             

                             

**Exercise**

**Prices** |  

                             

**Number Outstanding**

**at 12/31/06** | **Weighted Average Remaining Contractual Life (in                            years)** |  

                             

**Weighted Average Exercise Price** |  

                             

**Number of Options Exercisable** |  

                             

**Weighted Average Exercise Price** |   |
| $                                                                                                        | 2.50                                                                                | 264,000                                                                               | 1.50                                                                            | $ | 2.50 | 264,000 | $ | 2.50 |
|                                                                                                     | 0.14                                                                                | 463,700                                                                               | 3.78                                                                            |   | 0.14 | 463,700 |   | .14 |
| $                                                                                                        | 2.50 – 0.14                                                                   | 727,700                                                                               | 3.00                                                                            | $ | 1.00 | 727,700 | $ | 1.00 |
|                                                                                                          |                                                                                     |                                                                                       |                                                                                 |  |  |  |  |  |  |  |  |  |  |  |  |

 

F-23

----

 

**13.            Stock Warrants**

 

On December 27, 2006, the Company and its subsidiaries entered into a            Loan, Security and Warrant Agreement (the “Loan Agreement”) with Heartland            Dental Care, Inc. (“Heartland”). Under the terms of the Loan Agreement,            Heartland has made initial loans to the Company in the amount of five hundred thousand            dollars ($500,000) and may make additional loans to the Company in the total aggregate            principal amount of up to one million two hundred fifty thousand dollars ($1,250,000).            Interest on the principal amount outstanding is due on the first day of each calendar            quarter and interest is payable at the rate of ten percent (10%) per annum. The            principal amount is due and payable in full April 30, 2012. As collateral for the            repayment of the loan, the Company granted Heartland a security interest in            substantially all of its assets. Receipt of the additional loan proceeds is contingent            upon the Company acquiring specified numbers of dental practices and is subject to            other provisions (See note 5).

 

As additional consideration for the loan, the Company issued a warrant            to Heartland that is exercisable for a number of shares of common stock equal to ten            percent (10%) of the Company’s issued and outstanding common stock, on a fully            diluted basis, on the date of exercise. An exercise price for the warrants is a fixed            price of twenty-five cents ($0.25), and the warrants expire on November 15, 2011. Until            and unless the principal amount of one million two hundred fifty thousand dollars            ($1,250,000) is lent to the Company, the number of shares of common stock for which the            warrant can be exercised is reduced in proportion to the amount actually lent. For            example, the warrant is currently exercisable for 4.0% ((500,000/1,250,000) x 10%) of            the Company’s issued and outstanding common stock, on a fully diluted basis. The            Company has also agreed to file a registration statement registering the resale of the            warrant and common stock that is issuable upon exercise of the warrants.

 

For the years ended December 31, 2007 and December 31, 2006, the Company            recognized, as non-cash interest expense, the amounts of $36,465 and $305,            respectively. This amount represents the amortized portion of the deferred debt issuing            costs associated with the number of warrants exercisable under the warrant agreement            with Heartland, valued utilizing the Black/Scholes model.

 

In September 2006, we borrowed $50,000 from Messrs. Byron Barkley and            Lyle Davis. One-half of the principal was due on November 15, 2006 and the remaining            amounts owed were paid in full on June 1, 2007.

             

As additional consideration for the loan, the Company agreed to issue to            the lenders on January 31, 2007, warrants exercisable for one hundred twenty five            thousand shares of common stock at an exercise price of $.10 per share. The warrants            will expire on December 31, 2010. During the year ended December 31, 2007, the Company            recognized, as non-cash interest expense, an aggregate amount of $7,714 representing            the pro-rata number of warrants obligated to be issued at January 31, 2007 from January            1, 2007.

 

F-24

----

The Company used the Black-Scholes valuation model to estimate the fair            value of its warrants established at the date the warrant agreement was entered into.            Use of the Black-Scholes valuation model to estimate the fair value of our warrants            requires various judgmental assumptions including estimated stock price volatility,            forfeiture rates, and expected life. Our computation of expected volatility is based on            a combination of historical and market-based implied volatility. Our calculation of the            fair market value of each warrant on the date of grant, using the Black-Scholes            option-pricing model, used the following assumptions for warrants issued during the            year ended December 31, 2007:

 

|                               | **Heartland**     | **Barkley / Davis** |
|------------------------------------|-------------------|---------------------|
| Risk-free interest rate            | 4.86% - 3.45%     | 4.89%               |
| Remaining life in years       | 4.00              | 3.00                |
| Dividend yield                     | 0                 | 0                   |
| Expected volatility                | 166.90% - 163.50% | 165.53%             |
| Weighted average value per warrant | $0.17             | $0.30               |

 

**A            summary of the status of the Company’s common stock warrants as of December 31,            2007, and changes during the year is presented below:**

 

 

|                                      |  

**Warrants** |      | **Weighted Average****Exercise Price** |
|-------------------------------------------|----------------------|-----------|----------------------------------------|
|                                      |                 |      |
| Outstanding Warrants at December 31, 2006 |                 | 513,269   | $                                      | 0.25 |
|                                      |                 |      |                                   |   |
| Issued                                    |                 | 555,239   |                                   | 0.22 |
| Cancelled / Expired                       |                 | -         |                                   | - |
| Exercised                                 |                 | -         |                                   | - |
|                                      |                 |      |                                   |   |
| Outstanding, December 31, 2007            |                 | 1,068,508 |                                   | 0.23 |
|                                      |                 |      |                                   |   |
| Exercisable, December 31, 2007            |                 | 1,068,508 | $                                      | 0.23 |

 

 

| **Outstanding**                                                                                          |                                                                                | **Exercisable**                                                                       |
|----------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------|
|  

                             

                             

**Exercise**

**Prices** |  

                             

**Number Outstanding**

**at 12/31/06** | **Weighted Average Remaining Contractual Life (in                            years)** |  

                             

**Weighted Average Exercise Price** |  

                             

**Number of Warrants Exercisable** |  

                             

**Weighted Average Exercise Price** |
| $                                                                                                        | 0.25                                                                                | 943,508                                                                               | 4.00 | $ | 0.25 | 943,508 | $ | 0.25 |
| $                                                                                                        | 0.10                                                                                | 125,000                                                                               | 3.00 | $ | 0.10 | 125,000 | $ | 0.10 |
|                                                                                                          |                                                                                     |                                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |

 

F-25

----

**14.            Supplemental Disclosure of Cash Flow Information**

 

During            the years ended December 31, 2007 and 2006 the Company paid the following amounts for            interest and income taxes:

 

|           | **2007** | **2006** |
|----------------|----------|----------|
|           |     |     |   |   |
| Cash paid for: |     |     |   |   |
| Interest       | $        | 23,068   | $ | 44,048 |
|           |     |     |   |   |
| Income taxes   | $        | -        | $ | - |

 

**15.            Loan Funding for Dental Practice Transition and Acquisition**

 

On December 4, 2006, we finalized and entered into an agreement (the            “SNB Agreement”) with Stillwater National Bank and Trust Company (the            “SNB”). The Agreement provides that the Company will refer to SNB loans in            connection with the Company’s Affiliate Member Practice Purchase Agreements (the            “Purchase Agreement”). The loans will be made directly to the dental            practice or dental practitioner (the “Provider”) who is a party to the            Purchase Agreement. The Company and SNB have agreed on a standard form of loan package,            which is subject to negotiation between the Provider and SNB. The loans will be secured            and guaranteed by the Provider. SNB has the right, in its sole discretion, to accept or            reject any loan package. The Agreement also provides that the Company and its            subsidiaries are required to give SNB the exclusive right of first refusal to provide            various types of third party financing during the five year period following the            Execution of the Agreement.

 

**16.            Recent Accounting Pronouncements**

 

In September 2006, the FASB issued SFAS No. 157,*Fair Value Measurements*, (“SFAS            157”). SFAS 157 defines fair value, establishes a framework for measuring fair            value in generally accepted accounting principles and expands disclosures about fair            value measurements. SFAS 157 is effective for financial statements issued for fiscal            years beginning after November 15, 2007 and interim periods within those fiscal            years. The Company does not anticipate adoption of this standard will have a material            impact on its consolidated financial statements.

 

In July 2006, the FASB issued FASB Interpretation No. 48,            “*Accounting for Uncertainty in Income            Taxes* *— an            interpretation of FASB Statement No.* *109*” (“FIN 48“),            which clarifies the accounting and disclosure for uncertainty in tax positions, as            defined.  FIN 48 seeks to reduce the diversity in practice associated with            certain aspects of the recognition and measurement related to accounting for income            taxes. The Company is subject to the provisions of FIN 48 as of January 1,            2007, and has analyzed filing positions in all of the federal and state jurisdictions            where it is required to file income tax returns.  Upon review of the            Company’s historical tax filings and consultation with its tax advisors, the            Company believes that it has taken tax positions in preceding years that could            potentially result in reductions to it’s cumulative net operating loss            carryforwards of approximately $231,535. The Company is subject to audit by the IRS and            the State of Utah for the prior three years. The Company’s policy for recording            interest and penalties associated with taxes is to recognize it as a component of            income tax expense. 

 

----

In March 2006, the FASB issued SFAS No. 156, “Accounting for            Servicing of Financial Assets”, which will be effective for fiscal years that            begin after December 15, 2006. This statement amends SFAS 140,*Accounting for Transfers and Servicing of Financial Assets and            Extinguishments of Liabilities, a replacement of FASB Statement 125,*or SFAS 140*,*regarding (1) the circumstances under which a servicing asset or            servicing liability must be recognized, (2) the initial and subsequent measurement            of recognized servicing assets and liabilities, and (3) information required to be            disclosed relating to servicing assets and liabilities. The Company does not anticipate            adoption of this standard will have a material impact on its consolidated financial            statements.

 

In February 2006, the FASB issued SFAS No. 155, “Accounting            for Certain Hybrid Financial Instruments”*,*or SFAS 155, which will be effective for fiscal years that begin after            December 15, 2006. This statement amends SFAS No. 133,*Accounting for Derivative Instruments and Hedging            Activities*, to narrow the scope exception for interest-only            and principal-only strips on debt instruments to include only such strips representing            rights to receive a specified portion of the contractual interest or principal cash            flows. SFAS 155 also amends SFAS 140 to allow qualifying special-purpose entities to            hold a passive derivative financial instrument pertaining to beneficial interests that            itself is a derivative financial instrument. The Company does not anticipate adoption            of this standard will have a material impact on its consolidated financial            statements.

 

In May 2005, the FASB issued SFAS No. 154, “Accounting            Changes and Error Corrections*”,*which was adopted effective January 1, 2006. This statement            addresses the retrospective application of such changes and corrections and will be            followed if and when necessary. Adoption of this standard did not have a material            impact on the Company’s consolidated financial statements.

             

In December 2004, the FASB issued Statement No. 123 (revised 2004),            “Share-Based Payment” (“SFAS No. 123(R)”), which            requires the recognition of share based payments cost in earnings. This Statement            replaces Statement No. 123, “Accounting for Stock-Based Compensation”            (“SFAS No. 123”) and supersedes Accounting Principles Board            Opinion No. 25, “Accounting for Stock Issued to Employees” (“APB            No. 25”), which permitted the recognition of compensation expense using the            intrinsic value method. Effective January 1, 2006, the Company adopted the provisions            of SFAS No. 123(R). See Note 11 and Note 12.

 

In September 2006, the FASB issued SFAS            No. 157,*Fair Value            Measurements*, (“SFAS 157”).  SFAS 157            defines fair value, establishes a framework for measuring fair value in generally            accepted accounting principles, and expands disclosures about fair value measurements.            The provisions of this standard apply to other accounting pronouncements that require            or permit fair value measurements.  FASB Staff Position FAS 157-2,*Effective Date of FASB Statement No. 157,*was issued in February 2008.  This staff position delays the            effective date for implementation of SFAS 157to fiscal years beginning after November            15, 2008.  The Company will adopt SFAS 157 on January 1, 2009. The Company            anticipates that the adoption of SFAS 157 will not have a material impact on the            Company’s consolidated financial statements.

 

F-27

----

In February 2007, the FASB issued SFAS No. 159,            “*The Fair Value Option for Financial Assets and            Financial Liabilities*” (“SFAS 159”). This            statement provides companies with an option to report selected financial assets and            liabilities at fair value. Generally accepted accounting principles have required            different measurement attributes for different assets and liabilities that can create            artificial volatility in earnings.  The statement’s objective is to reduce            both complexity in accounting for financial instruments and the volatility in earnings            caused by measuring related assets and liabilities differently.  SFAS 159 is            effective for the Company beginning January 1, 2008.  The Company anticipates that            the adoption of SFAS 159 will not have a material impact on the Company’s            consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141 (revised 2007)            (“SFAS 141R”), “*Business            Combinations*” and SFAS No. 160 (“SFAS            160”), “*Noncontrolling Interests in Consolidated            Financial Statements, an amendment of Accounting Research Bulletin No.            51*". SFAS 141R will change how business acquisitions are            accounted for and will impact financial statements both on the acquisition date and in            subsequent periods. SFAS 160 will change the accounting and reporting for minority            interests, which will be recharacterized as noncontrolling interests and classified as            a component of equity. SFAS 141R and SFAS 160 are effective for the Company beginning            January 1, 2009. Early adoption is not permitted.  The Company is evaluating the            impact these statements will have on its consolidated financial statements.

 

**17.            Subsequent Events**

 

Issuance of Stock

 

On January 2, 2008, the Company authorized and issued 83,333 shares of            common stock to Dr. Michael S. Rockwell in connection with the Company’s profit            sharing program. Profit sharing distributions are discretionary on the part of the            Board of Directors, and granted to certain members who are deemed to have made            significant contributions to Dental Cooperative through their membership and            participation.

 

On March 19,2008, the Company issued 60,000 shares of common stock to            Dr. Richard R. Clegg in connection with the first anniversary of the Practice            Acquisition Agreement executed between the Company and Dr. Clegg (See Note            6).

 

On March 20, 2008, the Company issued 24,000 shares of common stock to            Dr. P. Berrett Packer in connection with the first anniversary of the Affiliate Member            Practice Purchase Agreement executed between the Company and Dr. Packer (See Note            7).

 

Issuance and Exercise of Stock Options

 

On January 2, 2008, the Company authorized and issued options to its            member dentists to purchase an additional 45,000 shares of common stock under terms            identical to those options issued in June of 2006 (See note 12). The variability in the            exercise price requires these options to be treated as variable securities, and they            will be revalued at the end of each reporting period. At the date of issuance, all of            these options were fully vested and could be exercised at any time.

 

F-28

----

During January, February and March of 2008, accredited            member dentist option holders exercised options exercisable for 57,373 shares of common            stock which resulted in aggregate proceeds of $7,790.

 

Acquisition of Practice from Dr. Rockwell

 

Effective January 1, 2008, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with Rosewood Dental, PC, (the “Provider”) and Dr.            Michael S. Rockwell. Under the Purchase Agreement, the Cooperative may acquire            substantially all of Dr. Rockwell’s dental practice in consideration for future            cash payment. The amount of such future cash payment is to be determined by the average            of the dental practices’ gross collections during the practices’ two fiscal            years immediately preceding the transfer date, multiplied by a percentage specified in            the Purchase Agreement. The transfer of the practice assets is not anticipated to occur            until a mutually agreed upon date by Dental Cooperative and Provider, at which time all            right, title, and interest in and to the dental practice is transferred from Provider            to Dental Cooperative. This date shall occur approximately 180 days after the date            Provider has given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Rockwell executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Provider to independently manage and operate the            dental practice until such time as the practice may be transferred. In consideration            thereof, Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions. The Management Agreement is effective immediately upon            closing of the Purchase Agreement.

 

Acquisition of Practice from Dr. Curtis

 

Effective January 1, 2008, the Company, through its wholly owned            subsidiary, Dental Cooperative, Inc., entered into an Affiliate Member Practice            Purchase Agreement with Lindsay S. Curtis, DDS, (the “Provider”) and Dr.            Lindsay S. Curtis. Under the Purchase Agreement, the Cooperative may acquire            substantially all of Dr. Curtis’s dental practice in consideration for future            cash payment. The amount of such future cash payment is to be determined by the average            of the dental practices’ gross collections during the practices’ two fiscal            years immediately preceding the transfer date, multiplied by a percentage specified in            the Purchase Agreement. The transfer of the practice assets is not anticipated to occur            until a mutually agreed upon date by Dental Cooperative and Provider, at which time all            right, title, and interest in and to the dental practice is transferred from Provider            to Dental Cooperative. This date shall occur approximately 180 days after the date            Provider has given notice of its intention to transfer the dental practice.

 

In connection with the Purchase Agreement, the Cooperative, Provider,            and Dr. Curtis executed a Management Services Agreement. Under the Management            Agreement, the Company has retained Provider to independently manage and operate the            dental practice until such time as the practice may be transferred. In consideration            thereof, Provider is entitled to the dental practices’ annual profit margin            (Provider’s collections less operating expenses), less an amount equal to 5% of            the Provider’s annual collections during the twelve months preceding closing. The            Management Agreement contains, among other provisions, confidentiality and            indemnification provisions.The Management Agreement is effective            immediately upon closing of the Purchase Agreement.

 

F-29

----

 

Private Stock Offering

 

On March 5, 2008, the Company’s Board of Directors authorized a            private offering of up to one million (1,000,000) shares of the Company’s common            stock for sale to qualified investors.

The            resolution of the board authorizes the officers of the Company, under the direction of            the President, to finalize and deliver a memorandum evidencing such offering,            incorporating such amendments and modifications as the officers may approve.

 

F-30