UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q




(Mark
One)


x
            QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the Quarterly Period Ended June
30, 2009




Or




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




For
the transition period from 
to




Commission
file number: 000 – 52077





MEDPRO
SAFETY PRODUCTS, INC.


(Exact
name of registrant as specified in its charter)




Nevada
                
                91-2015980(State
      or other jurisdiction of
                  incorporation
      or organization)
                
                (I.R.S.
      Employer
                  Identification
      No.)817
      Winchester Road, Suite 200,
                  Lexington,
      KY
                
                40505(Address
      of principal executive offices)
                
                (Zip
      Code)





(859)
225-5375


(Registrant’s
telephone number, including area code)








Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.


Yes x     No   ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes o No o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer  ̈
              Accelerated
      filer  ̈Non-accelerated
      filer  ̈
              Smaller
      reporting company x





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





Indicate
the number of shares outstanding of each of the issuer’s class of common stock,
as of the latest practicable date.13,267,891 shares of Common Stock were
outstanding at July 31, 2009.











INDEX





PagePART
      I
                        FINANCIAL
      INFORMATIONItem
      1.
                        Financial
      Statements
                        
                        2Item
      2.
                        Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                        
                        21Item
      3.
                        Quantitative
      and Qualitative Disclosures About Market Risk
                        
                        28Item
      4.
                        Controls
      and Procedures
                        
                        28PART
      II
                        OTHER
      INFORMATIONItem
      1.
                        Legal
      Proceedings
                        
                        29Item
      1A.
                        Risk
      Factors
                        
                        29Item
      2.
                        Unregistered
      Sales on Equity Securities and Use of Proceeds
                        
                        29Item
      3.
                        Defaults
      Upon Senior Securities
                        
                        29Item
      4.
                        Submission
      of Matters to a Vote of Security Holders
                        
                        29Item
      5.
                        Other
      Information
                        
                        29Item
      6.
                        Exhibits
                        
                        29











PART
I – FINANCIAL INFORMATION





Item
1. Financial Statements





The
following financial statements of MedPro Safety Products, Inc. are
submitted:





Balance
      Sheets as of June 30, 2009 and December 31, 2008
                  
                  3Statements
      of Operations for the three months and six months ended June 30, 2009 and
      2008
                  
                  5Statements
      of Changes in Shareholders’ Equity for the six months ended June 30, 2009
      and the year ended December 31, 2008
                  
                  6Statements
      of Cash Flows for the six months ended June 30, 2009 and
    2008
                  
                  7Notes
      to Unaudited Financial Statements
                  
                  8





2





MEDPRO
SAFETY PRODUCTS, INC.





Balance
Sheets


June
30, 2009 and December 31, 2008





June
      30, 2009(Unaudited)
                
                
                December 31, 2008ASSETSCurrent
      AssetsCash
                
                $
                9,129,461
                
                
                $
                11,636,843Accounts
      receivable, net of allowance of $15,837 for 2009
                
                
                341
                
                
                
                -Inventory
                
                
                288,784
                
                
                
                288,414Accrued
      interest income
                
                
                10,956Prepaid
      expenses and other current assets
                
                
                28,069
                
                
                
                9,350Prepaid
      investor relations costs
                
                
                57,769
                
                
                
                228,660Prepaid
      costs of automation equipment
                
                
                452,855
                
                
                
                452,855Total
      current assets
                
                
                9,968,235
                
                
                
                12,616,122Property
      and EquipmentEquipment
      and tooling
                
                
                923,581
                
                
                
                751,725Leasehold
      improvements
                
                
                192,377
                
                
                
                114,831Computers,
      network and phones
                
                
                152,505
                
                
                
                126,061Furniture
      and fixtures
                
                
                116,943
                
                
                
                81,213Trade
      show booth
                
                
                7,341
                
                
                
                7,3411,392,747
                
                
                
                1,081,171Less:
      accumulated depreciation
                
                
                185,080
                
                
                
                146,680Property
      and equipment, net
                
                
                1,207,667
                
                
                
                934,491Other
      AssetsIntangible
      assets
                
                
                9,109,547
                
                
                
                9,109,547Deferred
      financing costs
                
                
                76,603
                
                
                
                97,489Total
      other assets
                
                
                9,186,150
                
                
                
                9,207,036Total
      assets
                
                $
                20,362,052
                
                
                $
                22,757,649





See notes
to financial statements.





3





MEDPRO
SAFETY PRODUCTS, INC.





Balance
Sheets (Continued)


June
30, 2009 and December 31, 2008





June
      30, 2009(Unaudited)
                            
                            
                            December 31, 2008LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued expenses
                            
                            $
                            124,548
                            
                            
                            $
                            261,325Accrued
      interest payable
                            
                            
                            15,827
                            
                            
                            
                            34,276Current
      portion of long term debt
                            
                            
                            3,267,883
                            
                            
                            
                            3,262,660Deferred
      revenue
                            
                            
                            452,855
                            
                            
                            
                            464,900Notes
      payable to and advances from shareholders
                            
                            
                            -
                            
                            
                            
                            383,333Derivative
      liabilities - fair value of warrants
                            
                            
                            3,180,234
                            
                            
                            
                            -Current
      portion of technology transfer payments
                            
                            
                            1,250,000
                            
                            
                            
                            2,000,000Total
      current liabilities
                            
                            
                            8,291,347
                            
                            
                            
                            6,406,494Long-Term
      LiabilitiesNotes
      payable - long term portion
                            
                            
                            1,722,781
                            
                            
                            
                            2,607,435Long-term
      portion of technology transfer payments
                            
                            
                            -
                            
                            
                            
                            250,0001,722,781
                            
                            
                            
                            2,857,435Total
      liabilities
                            
                            
                            10,014,128
                            
                            
                            
                            9,263,929Shareholders’
      EquityPreferred
      stock $.01 par value: 10,000,000 shares authorized:Series
      A Preferred6,668,229
      shares issued and outstanding. Liquidation preference $910,415 and
      $610,260, respectively.
                            
                            
                            66,682
                            
                            
                            
                            66,682Series
      B Preferred1,493,779
      shares issued and outstanding.
                            
                            
                            14,938
                            
                            
                            
                            14,938Series
      C Preferred1,571,523
      and 0 shares issued and outstanding, respectively.
                            
                            
                            15,715
                            
                            
                            
                            -Common
      stock$.001
      par value; 90,000,000 shares authorized; 13,320,391 and 13,320,366 shares
      issued and outstanding, respectively.
                            
                            
                            13,320
                            
                            
                            
                            13,320Additional
      paid-in capital
                            
                            
                            61,643,527
                            
                            
                            
                            43,667,689Unearned
      share-based compensation
                            
                            
                            (21,885
                            )
                            
                            
                            (21,885
                            )Accumulated
      deficit
                            
                            
                            (51,384,373
                            )
                            
                            
                            (30,247,024
                            )Total
      shareholders’ equity
                            
                            
                            10,347,924
                            
                            
                            
                            13,493,720Total
      liabilities and shareholders’ equity
                            
                            $
                            20,362,052
                            
                            
                            $
                            22,757,649





See notes
to financial statements.





4





MEDPRO
SAFETY PRODUCTS, INC.





Statements
of Operations


For
the Three and Six Months Ended June 30, 2009 and 2008




For
      the Three
                  
                  
                  For
      the Three
                  
                  
                  For
      the Six
                  
                  
                  For
      the SixMonths
      Ended
                  
                  
                  Months
      Ended
                  
                  
                  Months
      Ended
                  
                  
                  Months
      EndedJune
      30, 2009
                  
                  
                  June
      30, 2008
                  
                  
                  June
      30, 2009
                  
                  
                  June
      30, 2008(Unaudited)
                  
                  
                  (Unaudited)
                  
                  
                  (Unaudited)
                  
                  
                  (Unaudited)SalesNeedlyzer
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  1,180Safe-Mate
                  
                  
                  -
                  
                  
                  
                  2,114
                  
                  
                  
                  -
                  
                  
                  
                  18,373Automation
      Services and Equipment
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  12,045
                  
                  
                  
                  -Total
      sales
                  
                  
                  -
                  
                  
                  
                  2,114
                  
                  
                  
                  12,045
                  
                  
                  
                  19,553Cost
      of goods sold and automation
                  
                  
                  4,610
                  
                  
                  
                  49,875
                  
                  
                  
                  12,045
                  
                  
                  
                  53,226Gross
      profit
                  
                  
                  (4,610
                  )
                  
                  
                  (47,761
                  )
                  
                  
                  -
                  
                  
                  
                  (33,673
                  )Operating
      ExpensesSalaries,
      wages, and payroll taxes (including share-based compensation of $1,829,005
      and $0; $3,651,505 and $0, respectively)
                  
                  
                  2,268,187
                  
                  
                  
                  274,008
                  
                  
                  
                  4,509,676
                  
                  
                  
                  492,392Qualified
      profit sharing plan
                  
                  
                  18,316
                  
                  
                  
                  -
                  
                  
                  
                  36,804
                  
                  
                  
                  -Advertising
      and promotion
                  
                  
                  143,602
                  
                  
                  
                  -
                  
                  
                  
                  275,729
                  
                  
                  
                  -Product
      development costs
                  
                  
                  240,395
                  
                  
                  
                  21,835
                  
                  
                  
                  413,657
                  
                  
                  
                  59,604Professional
      and insurance
                  
                  
                  288,425
                  
                  
                  
                  204,933
                  
                  
                  
                  623,170
                  
                  
                  
                  482,848General
      and administrative
                  
                  
                  92,155
                  
                  
                  
                  141,774
                  
                  
                  
                  171,600
                  
                  
                  
                  289,425Travel
      and entertainment
                  
                  
                  66,581
                  
                  
                  
                  106,818
                  
                  
                  
                  168,922
                  
                  
                  
                  197,152Depreciation
      and amortization
                  
                  
                  31,498
                  
                  
                  
                  28,205
                  
                  
                  
                  59,286
                  
                  
                  
                  54,399Total
      operating expenses
                  
                  
                  3,149,159
                  
                  
                  
                  777,573
                  
                  
                  
                  6,258,845
                  
                  
                  
                  1,575,820Loss
      from operations
                  
                  
                  (3,153,769
                  )
                  
                  
                  (825,334
                  )
                  
                  
                  (6,258,845
                  )
                  
                  
                  (1,609,493
                  )Other
      Income (Expenses)Interest
      expense
                  
                  
                  (65,886
                  )
                  
                  
                  (142,014
                  )
                  
                  
                  (141,083
                  )
                  
                  
                  (307,734
                  )Interest
      income
                  
                  
                  15,945
                  
                  
                  
                  11,854
                  
                  
                  
                  22,861
                  
                  
                  
                  43,499Other
      Income (Expenses)
                  
                  
                  -
                  
                  
                  
                  100
                  
                  
                  
                  -
                  
                  
                  
                  53,141Change
      in fair value of derivative liabilities
                  
                  
                  (1,929,325
                  )
                  
                  
                  -
                  
                  
                  
                  20,320,832
                  
                  
                  
                  -Total
      other income (expenses)
                  
                  
                  (1,979,266
                  )
                  
                  
                  (130,060
                  )
                  
                  
                  20,202,610
                  
                  
                  
                  (211,094
                  )Provision
      for income taxes
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Net
      income/(loss)
                  
                  $
                  (5,133,035
                  )
                  
                  $
                  (955,394
                  )
                  
                  $
                  13,943,765
                  
                  
                  $
                  (1,820,587
                  )Net
      earnings/(loss) per common shareBasic
      net earnings/(loss) per share
                  
                  $
                  (0.39
                  )
                  
                  $
                  (0.07
                  )
                  
                  $
                  1.05
                  
                  
                  $
                  (0.14
                  )Fully
      diluted net earnings/(loss) per share
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  0.33
                  
                  
                  $
                  -Shares
      used in computing earnings per shareWeighted
      average number of shares outstanding - basic
                  
                  
                  13,320,386
                  
                  
                  
                  13,285,072
                  
                  
                  
                  13,320,386
                  
                  
                  
                  13,285,072Weighted
      average number of shares outstanding - diluted
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  42,316,278
                  
                  
                  
                  -See
      notes to financial statements.





5




MEDPRO
SAFETY PRODUCTS, INC.





Statements
of Changes in Shareholders’ Equity


For
the Six Months Ended June 30, 2009


and
the Year Ended December 31, 2008





AdditionalCommon
      Stock
                            
                            
                            Preferred
      Stock
                            
                            
                            Unearned
                            
                            
                            Paid-In
                            
                            
                            AccumulatedShares
                            
                            
                            Amount
                            
                            
                            Shares
                            
                            
                            Amount
                            
                            
                            Compensation
                            
                            
                            Capital
                            
                            
                            Deficiency
                            
                            
                            TotalBalance,
      December 31, 2007
                            
                            
                            13,285,072
                            
                            
                            $
                            3,285
                            
                            
                            
                            6,668,229
                            
                            
                            $
                            66,682
                            
                            
                            $
                            (21,885
                            )
                            
                            $
                            27,628,366
                            
                            
                            $
                            (23,707,458
                            )
                            
                            $
                            3,978,990Series
      B convertible preferred shares issued for cash
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            1,493,779
                            
                            
                            
                            14,938
                            
                            
                            
                            -
                            
                            
                            
                            13,010,815
                            
                            
                            
                            -
                            
                            
                            
                            13,025,753Options
      granted to employees and Directors
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (14,580,000
                            )
                            
                            
                            14,580,000
                            
                            
                            
                            -
                            
                            
                            
                            -Earned
      portion of employee and director options
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,693,250
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,693,250Unearned
      portion of share based compensation
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            11,886,750
                            
                            
                            
                            (11,886,750
                            )
                            
                            
                            -
                            
                            
                            
                            -Common
      shares issued in exchange for services
                            
                            
                            35,294
                            
                            
                            
                            35
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            335,258
                            
                            
                            
                            -
                            
                            
                            
                            335,293Net
      loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (6,539,566
                            )
                            
                            
                            (6,539,566
                            )Balance,
      January 1, 2009
                            
                            
                            13,320,366
                            
                            
                            
                            13,320
                            
                            
                            
                            8,162,008
                            
                            
                            
                            81,620
                            
                            
                            
                            (21,885
                            )
                            
                            
                            43,667,689
                            
                            
                            
                            (30,247,024
                            )
                            
                            
                            13,493,720Cumulative
      effect of change in accounting principle (see Note 10)
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (6,321,081
                            )
                            
                            
                            (35,081,114
                            )
                            
                            
                            (41,402,195
                            )January
      1, 2009, as adjusted
                            
                            
                            13,320,366
                            
                            
                            
                            13,320
                            
                            
                            
                            8,162,008
                            
                            
                            
                            81,620
                            
                            
                            
                            (21,885
                            )
                            
                            
                            37,346,608
                            
                            
                            
                            (65,328,138
                            )
                            
                            
                            (27,908,475
                            )Series
      C convertible preferred shares issued for cash and exchange of warrants,
      net of issuance costs of $240,000 (fractional shares issued in common
      stock)
                            
                            
                            25
                            
                            
                            
                            -
                            
                            
                            
                            1,571,523
                            
                            
                            
                            15,715
                            
                            
                            
                            -
                            
                            
                            
                            20,645,414
                            
                            
                            
                            -
                            
                            
                            
                            20,661,129Unearned
      portion of share based compensation
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (11,886,750
                            )
                            
                            
                            11,886,750
                            
                            
                            
                            -
                            
                            
                            
                            -Incentive
      stock options granted
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (355,106
                            )
                            
                            
                            355,106
                            
                            
                            
                            -
                            
                            
                            
                            -Earned
      portion of employee and director options
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            3,651,505
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            3,651,505Unearned
      portion of share based compensation
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            8,590,351
                            
                            
                            
                            (8,590,351
                            )
                            
                            
                            -
                            
                            
                            
                            -Net
      income through June 30, 2009
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            13,943,765
                            
                            
                            
                            13,943,765Balance
      June 30, 2009
                            
                            
                            13,320,391
                            
                            
                            $
                            13,320
                            
                            
                            
                            9,733,531
                            
                            
                            $
                            97,335
                            
                            
                            $
                            (21,885
                            )
                            
                            $
                            61,643,527
                            
                            
                            $
                            (51,384,373
                            )
                            
                            $
                            10,347,924





See notes
to financial statements.





6





MEDPRO
SAFETY PRODUCTS, INC.





Statements
of Cash Flows


For
the Six Months Ended June 30, 2009 and 2008





For
      the Six
                
                
                For
      the SixMonths
      Ended
                
                
                Months
      EndedJune
      30, 2009
                
                
                June
      30, 2008(Unaudited)
                
                
                (Unaudited)Cash
      Flows From Operating ActivitiesNet
      income (loss)
                
                $
                13,943,765
                
                
                $
                (1,820,587
                )Adjustments
      to reconcile net loss to net cash flows from operating
      activities:Depreciation
                
                
                38,400
                
                
                
                33,513Amortization
      of financing costs
                
                
                20,886
                
                
                
                20,886Share
      based compensation
                
                
                3,651,505
                
                
                
                -Change
      in fair value of warrants (derivative liabilities)
                
                
                (20,320,832
                )
                
                
                -Changes
      in operating assets and liabilitiesAccounts
      receivable
                
                
                (11,228
                )
                
                
                5,132Inventory
                
                
                (370
                )
                
                
                (4,086
                )Other
      current assets
                
                
                151,896
                
                
                
                (47,921
                )Accounts
      payable and accrued expenses
                
                
                (136,776
                )
                
                
                (1,783,900
                )Accrued
      interest payable
                
                
                (18,449
                )
                
                
                (338,786
                )Deferred
      revenue
                
                
                (12,045
                )
                
                
                -Net
      cash flows from operating activities
                
                
                (2,693,248
                )
                
                
                (3,935,749
                )Cash
      Flows From Investing ActivitiesAdvances
      (to)/from SGPF, LLC
                
                
                -
                
                
                
                (12,466
                )Purchases
      of property, equipment
                
                
                (311,576
                )
                
                
                (175,017
                )Net
      cash flows from investing activities
                
                
                (311,576
                )
                
                
                (187,483
                )Cash
      Flows From Financing ActivitiesCollection
      of notes receivable
                
                
                -
                
                
                
                2,000,000Payments
      on note – technology transfer payments
                
                
                (1,000,000
                )
                
                
                -Payment
      of bank fees
                
                
                -
                
                
                
                (150,000
                )Proceeds
      from bank borrowings
                
                
                1,500,000
                
                
                
                -Repayments
      on bank borrowings
                
                
                (2,379,433
                )
                
                
                (177,157
                )Proceeds
      from notes payable to and advances from shareholders
                
                
                208
                
                
                
                -Payments
      on notes payable to and advances from shareholders
                
                
                (383,333
                )
                
                
                (2,145,352
                )Net
      cash from issuance of preferred shares
                
                
                2,760,000
                
                
                
                -Net
      cash flows from financing activities
                
                
                497,442
                
                
                
                (472,509
                )Net
      increase (decrease) in cash
                
                
                (2,507,382
                )
                
                
                (4,595,741
                )Cash
      at the beginning of the period
                
                
                11,636,843
                
                
                
                6,341,132Cash
      at the end of the period
                
                $
                9,129,461
                
                
                $
                1,745,391Supplemental
      Disclosures of Cash Flow Information:Cash
      paid for interest
                
                $
                191,186
                
                
                $
                796,521Non-cash
      Activity:Non-cash
      proceeds from issuance of Series C preferred shares - derivative liability
      exchanged for shares
                
                $
                17,901,129
                
                
                $
                -


See notes
to financial statements.





7




MEDPRO
SAFETY PRODUCTS, INC.


Notes
to Financial Statements


(Unaudited)





NOTE 1 –
BASIS OF PRESENTATION AND NATURE OF BUSINESS





The
accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 8 of Regulation
S-X.  Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements.  In the opinion of management, all adjustments
(consisting of only normal recurring accruals) considered necessary for a fair
presentation have been included.  Operating results for the six months
ended June 30, 2009 are not necessarily indicative of the results that may be
expected for the year ended December 31, 2009.  For further
information, refer to the Company’s financial statements and footnotes thereto
included in the Company’s annual report on Form 10-K for the year ended December
31, 2008.





NOTE 2 –
INCOME TAXES





Income
tax expense is provided for the tax effects of transactions reported in the
financial statements and consist of taxes currently due plus deferred
taxes.  Deferred taxes are recognized for differences between the
basis of assets and liabilities for financial statement and income tax
purposes.  The differences relate primarily to the effects of net
operating loss carry forwards and differing basis, depreciation methods, and
lives of depreciable assets. The deferred tax assets represent the future tax
return consequences of those differences, which will be deductible when the
assets are recovered.




No income
tax benefit (expense) was recognized for the six months ended June 30, 2009 as a
result of tax losses in this period and because deferred tax benefits, derived
from the Company’s prior net operating losses, were previously fully reserved
and the Company has cumulative net operating losses for tax purposes in excess
of $12 million.  Income from the change in derivative liabilities
reflected in the period ended June 30, 2009 did not result in taxable income and
without such income, the Company would have a loss for the period.




The
Company currently has tax return periods open beginning with December 31, 2005
through December 31, 2008.




NOTE 3 –
EARNINGS PER SHARE




In
accordance with Statement of Financial Accounting Standards (SFAS) No. 128,
“Earnings Per Share”, basic earnings per share were computed using weighted
average shareholdings of 13,320,391 for the three months and 13,320,386 for the
six months ended June 30, 2009 and 13,285,072 for the three months and six
months and ended June 30, 2008.  There were 25 new common shares
issued in 2009.  The basic earnings per share is based on the weighted
average number of common shares outstanding.  Diluted earnings per
share are based on the weighted average number of common shares outstanding and
all dilutive potential common shares outstanding.  Weighted average
common shares outstanding assuming full dilution were 42,316,278 at June 30,
2009.  Because the Company had a net loss for the six months and the
three months ended June 30,2008 and the three months ended June 30, 2009, there
is no dilutive effect and both the basic and diluted losses per share are the
same.




NOTE 4 -
RECENT ACCOUNTING PRONOUNCEMENTS




Recent Accounting Pronouncements In September 2006, the FASB issued SFAS 157, “Fair Value
Measurements” (“SFAS 157”).  This standard defines fair value,
establishes the framework for measuring fair value in accounting principles
generally accepted in the United States and expands disclosure about fair value
measurements.  This pronouncement applies under other accounting
standards that require or permit fair value measurements. Accordingly, this
statement does not require any new fair value measurement. This statement is
effective for fiscal years beginning after November 15, 2007 and interim periods
within those fiscal years.  The adoption of SFAS 157 did not have a
material impact on our financial statements.





In
February 2007, the FASB issued SFAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities - including an amendment of FAS 115 (“SFAS
159”).  SFAS 159 allows companies to choose, at specified election
dates, to measure eligible financial assets and liabilities at fair value that
are not otherwise required to be measured at fair value.  Unrealized
gains and losses shall be reported on items for which the fair value option has
been elected in earnings at each subsequent reporting date.  SFAS 159
also establishes presentation and disclosure requirements.  We are
continuing to evaluate the desirability of adopting SFAS 159.  SFAS
159 was effective for fiscal years beginning after November 15, 2007 and will be
applied prospectively.  The Company has elected not to adopt SFAS
159.




8


In
December 2007, the FASB issued SFAS No. 141 (revised 2007), “Business
Combinations” (“SFAS 141R”). SFAS 141R retains the fundamental requirements in
SFAS 141, “Business Combinations”  that the acquisition method of
accounting (which SFAS 141 called the purchase method) be used for all business
combinations and for an acquirer to be identified for each business combination.
SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any noncontrolling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions
specified in the Statement. That replaces SFAS 141’s cost-allocation process,
which required the cost of an acquisition to be allocated to the individual
assets acquired and liabilities assumed based on their estimated fair values.
SFAS 141R retains the guidance in SFAS 141 for identifying and recognizing
intangible assets separately from goodwill. SFAS 141R will now require
acquisition costs to be expensed as incurred, restructuring costs associated
with a business combination must generally be expensed prior to the acquisition
date and changes in deferred tax asset valuation allowances and income tax
uncertainties after the acquisition date generally will affect income tax
expense. SFAS 141R applies prospectively to business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008.  We expect SFAS 141R will
have an impact on our accounting for future business combinations once adopted,
but the effect will depend on the terms of such future
transactions.


In
December 2007, the FASB issued SFAS 160, “Noncontrolling Interests in
Consolidated Financial Statements,” (“SFAS 160”). SFAS 160 requires all entities
to report noncontrolling (minority) interests in subsidiaries as equity in the
consolidated financial statements. SFAS 160 also eliminates the diversity that
currently exists in accounting for transactions between an entity and
noncontrolling interests by requiring they be treated as equity transactions.
SFAS 160 became effective for fiscal years beginning after December 15, 2008.
The adoption of this pronouncement did not have a material impact on the
Company's financial position or results of operations.




In April
2008, the FASB issued EITF 07-05, Determining whether an Instrument (or Embedded
Feature) is indexed to an Entities Own Stock ("EITF 07-05").  The
cashless exercise provision of the Company's Series A, B and C warrants as well
as an exercise price protection feature that expires at December 31, 2009 caused
the reclassification of the warrants from equity to a derivative liability based
on fair value of the warrants at January 1, 2009.  The cumulative
effect of this change in accounting for these warrants was reflected in the
opening balance sheet as of January 1, 2009. The derivative
liability was adjusted to market at March 24, 2009 for warrants exchanged
for Series C preferred stock by two Series A preferred stockholders and at June
30, 2009 for the remaining Series A and B warrants then outstanding (See Note
10).




As of
June 30, 2009, the derivative liability for the remaining warrants was adjusted
to market value.  The impact of this adjustment was reflected in the
Statement of Operations for the three and six months ended June 30, 2009
and the Balance Sheet as of June 30, 2009.  The impact was a charge to
earnings of $(1,929,325) in the three months ended June 30, 2009 and to income
of $20,320,832 for the six months ended June 30, 2009.




FASB
Staff Position (FSP) “SFAS
142-3, Determination of the Useful Life of Intangible Assets” amends the
factors that should be considered in developing renewal or extension assumptions
used to determine the useful life of a recognized intangible
asset.  The FSP provides that in addition to considering the entity
specific factors in paragraph 11 of Statement No. 142, an entity shall consider
its own historical experience in renewing or extending similar
arrangements.  Alternatively, if an entity lacks historical
experience, it shall consider the assumptions a market participant would use
consistent with the highest and best use of the asset, adjusted for the entity
specific factors in paragraph 11 of Statement No. 142.  The FSP is
effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal
years.  Adoption of this FSP had no material impact on our results of
operations or financial position.
 
 FSP EITF
03-6-1 is effective for fiscal years beginning after December 15, 2008 and is to
be applied retrospectively.  This FSP requires share based
compensation awards that qualify as participating securities to be included in
basic EPS using the two-class method.  A share based compensation award is
considered a participating security if it receives non-forfeitable
dividends.  A non-forfeitable
dividend would be a dividend that the participant receives before the award is
vested and if the participant forfeits the actual shares awarded the dividends
he/she has received do not have to be paid back to the
company.  This guidance was adopted in the first quarter and has been
applied to all periods shown.  See Note 7 for further
discussion.
 
 The FASB
finalized four FSPs regarding the accounting treatment for investments including
mortgage-backed securities. These FSPs changed the method for determining if an
Other-than-temporary impairment (“OTTI”) exists and the amount of OTTI to be
recorded through an company’s income statement. The changes brought about by the
FSPs provide greater clarity and reflect a more accurate representation of the
credit and noncredit components of an OTTI event. The four FSPs
are:
 
 ·
              FSP“SFAS 157-3 Determining the
      Fair Value of a Financial Asset When the Market for That Asset Is Not
      Active” clarifies the application of SFAS 157, “Fair Value
      Measurements,” in a market that is not active and provides an
      example to illustrate key considerations in determining the fair value of
      a financial asset when the market for that financial asset is not
      active.
 
 ·
              FSP“SFAS 157-4 Determining Fair
      Value When the Volume and Level of Activity for the Assets or Liability
      Have Significantly Decreased and Identifying Transactions That Are Not
      Orderly”  provides guidelines for making fair value
      measurements more consistent with the principles presented in SFAS
      157,“Fair
      Value Measurements.”
 
 ·
              FSP
      “SFAS 115-2 and SFAS
      124-2, Recognition and Presentation of Other-than-temporary
      impairments” provides additional guidance designed to create
      greater clarity and consistency in accounting for and presenting
      impairment losses on securities.
 
 ·
              FSP“SFAS 107-1 and APB 28-1,
      Interim Disclosures about Fair Value of Financial Instruments”
      enhances consistency in financial reporting by increasing the frequency of
      fair value disclosures.
   9
 
 These
staff positions are effective for financial statements issued for periods ending
after June 15, 2009.
 
 In May
2009, the FASB issued Statement No. 165, "Subsequent Events" which establishes
general standards of accounting for and disclosures of events that occur after
the balance sheet date but before financial statements are issued or are
available to be issued. In particular, this Statement sets forth the period
after the balance sheet date during which management of a reporting entity
should evaluate events or transactions that may occur for potential recognition
or disclosure in the financial statements, the circumstances under which an
entity should recognize events or transactions occurring after the balance sheet
date in its financial statements, and the disclosures that an entity should make
about events or transactions that occurred after the balance sheet date. In
accordance with this Statement, an entity should apply the requirements to
interim or annual financial periods ending after June 15, 2009.  The
Company evaluated subsequent events for recognition or disclosure through August
13, 2009, which is the date the financial statements were issued.
  Effect
of Newly Issued But Not Yet Effective Accounting Standards
 
 In June
2009, the FASB issued Statement No. 166, "Accounting for Transfers of Financial
Assets-an amendment of FASB Statement No. 140." This statement removes the
concept of a qualifying special-purpose entity from Statement 140 and removes
the exception from applying FASB Interpretation No. 46 (revised December 2003),
Consolidation of Variable Interest Entities, to qualifying special-purpose
entities. The objective in issuing this Statement is to improve the relevance,
representational faithfulness, and comparability of the information that a
reporting entity provides in its financial statements about a transfer of
financial assets; the effects of a transfer on its financial position, financial
performance, and cash flows; and a transferor's continuing involvement, if any,
in transferred financial assets. This Statement must be applied as of the
beginning of each reporting entity's first annual reporting period that begins
after November 15, 2009, for interim periods within that first annual reporting
period and for interim and annual reporting periods thereafter. Management is
currently evaluating this standard but does not expect the impact of adoption to
be material to the results of operations or financial position of the
Company.
 
 In June
2009, the FASB issued Statement No. 168, "The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles-a
replacement of FASB Statement No. 162." This statement will become the source of
authoritative U.S. generally accepted accounting principles (GAAP) recognized by
the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the Securities and Exchange Commission (SEC) under authority of
federal securities laws are also sources of authoritative GAAP for SEC
registrants. On the effective date of this Statement, the Codification will
supersede all then-existing non-SEC accounting and reporting standards. All
other non-grandfathered non-SEC accounting literature not included in the
Codification will become non-authoritative. This Statement is effective for
financial statements issued for interim and annual periods ending after
September 15, 2009. Management is currently evaluating this standard but does
not expect the impact of adoption to be material to the results of operations or
financial position of the Company.


Certain
amounts in the 2008 financial statements have been reclassified to conform with
classifications used to prepare the 2009 financial statements.  These
reclassifications had no material impact on the Company’s financial position,
results of operations, or cash flow as previously reported.




NOTE 5 –
INVENTORY




The
Company discontinued the sale of its legacy product, NeedlyzerTM in 2004 and is
continuing to liquidate its inventory completely.  A customer that
expressed interest in purchasing the remaining inventories from the Company
purchased 72 devices and related equipment in 2006 and an additional 75 units in
2007.  The Company had previously reduced the value of this inventory
from its original cost to an amount equivalent to its estimated net realizable
value less all applicable disposition costs that resulted in a write down of the
inventory from its original cost in 2004 of $394,474.




In the
third quarter of 2008, the Company reevaluated its inventory of NeedlyzerTM
units.  Several units were determined to be scrap or were
unsalable.  Non saleable or incomplete units were scrapped or written
off.




The
Company discontinued the sale of its other legacy product, SafemateTM as of the
second quarter 2008.  All remaining inventory was scrapped and written
off in 2008.




NOTE 6 –
INTANGIBLE ASSETS




The
Company’s intangible assets consist primarily of intellectual properties
(medical device patents) that give the Company the right to produce and exploit,
commercially, certain medical devices.  Intangible assets are
amortized using the straight line method over the estimated period that they are
expected to contribute to future cash flows.  We evaluate the
recoverability of intangible assets periodically and take into account
in-service date, timing of revenue generation, expected future revenue, and
other events or circumstances that warrant revising estimated useful lives or
indicate that impairment exists. To date, none of the existing patents have
been commercially exploited.  The Company expects to begin delivering
product in the second half of 2009.  Marketing may be delayed until
late 2009 due to product ageing studies, sterilization tests and other
verification and validation testing requirements.  These various
patents include two Vacu-Mate models with a cost of $2,525,425 and the Key-LokTM
patent at $489,122.




10




In
September 2008, the Company acquired the patent rights to the Syringe Guard and
Prefilled (“SGPF”) products from SGPF, LLC, a limited liability company wholly
owned by the Company’s Chairman and CEO.  The cash portion of the
purchase price was $3,345,000. An additional 690,608 shares of common stock will
be issued to SGPF, LLC if the Company achieves certain revenue milestones from
SGPF product sales or certain other conditions or events trigger payment of the
share-based component. The Company also assumed the obligation to pay Visual
Connections, Inc. $1,500,000, the remaining technology transfer payments on the
SGPF products.  The Company recorded the purchase at $4,845,000, equal
to the cash paid plus the debt assumed.  The cost of the purchase will
increase if the conditions for the contingent issuance of shares are
satisfied.




The
Company also entered into an agreement with Visual Connections, Inc. to acquire
a winged infusion active safety sheathing system.  We have signed a
product development agreement for the blood draw modality of this product which
provides for 75,000,000 units to be sold under a minimum volume contract over a
six year period.  We agreed to pay Visual Connections $1,250,000 as
technology transfer payments.




The
following schedule shows the Company’s payment obligations to Visual Connections
as of June 30, 2009 with respect to both the SGPF and winged blood collection
technologies:





Quarter
                        
                        SGPF
                        
                        
                        Wing
                        
                        
                        Payable
      at 6/30/092009Third
                        
                        
                        250,000
                        
                        
                        
                        250,000
                        
                        
                        
                        500,000Fourth
                        
                        
                        250,000
                        
                        
                        
                        250,000
                        
                        
                        
                        500,0002010First
                        
                        
                        250,000
                        
                        
                        
                        —
                        
                        
                        
                        250,000Total
                        
                        $
                        750,000
                        
                        
                        $
                        500,000
                        
                        
                        $
                        1,250,000





Amortization
expense also includes the annual charge off of prepaid loan fees of $41,772 per
year.





Estimated
future amortization of these intangibles for future twelve month periods ended
on June 30 is as follows:





12
      Months Ending
                    June 30
                  
                  Amount2010
                  
                  $
                  599,0652011
                  
                  $
                  1,832,2842012
                  
                  $
                  1,821,9092013
                  
                  $
                  1,821,909After
      6/30/13
                  
                  $
                  3,110,982





NOTE 7 –
NOTES PAYABLE TO AND ADVANCES FROM SHAREHOLDERS





Notes
payable to and advances from shareholders represent loans and advances received
from officers, directors, shareholders and entities they control. They were
comprised of the following:




June 30, 2009
                  
                  
                  December 31, 2008Short
      term advances with no stated terms settled in the ordinary course of
      business
                  
                  $
                  177
                  
                  
                  $
                  1,656Demand
      and promissory notes with varying interest rates, conversion features and
      accrued compensation
                  
                  
                  
                  
                  
                  
                  468,445Less
      amounts reflected in accounts payable
                  
                  
                  (177
                  )
                  
                  
                  (86,768
                  )$
                  -
                  
                  
                  $
                  383,333




11




Short
term advances at December 31, 2008 were owed to various related parties
including a company controlled by our Chairman for unsettled advances and
services.





Demand
and promissory notes payable to related parties at December 31, 2008 included
$85,112 of accrued back pay included in accounts payable.  Of this
amount, our Chief Operating Officer was due $68,420 and $16,692 was due to
another employee.  The remaining $383,333 of the notes payable is
comprised of accrued management fees of $87,500 due to our Chairman, an accrued
loan guarantee fee of $250,000 due to our Chairman, and accrued management fees
of $45,833 due to our Chief Operating Officer.





There was
a contingent share-based purchase price component due SGPF, LLC a single member
limited liability company owned by the Company Chairman.  This amount
has not been recorded since milestones necessary for payment have not been
achieved.





NOTE 8 –
RELATED PARTY TRANSACTIONS




On March
6, 2008, the Company entered into a consulting agreement with SC Capital
Partners, LLC to assist it with future capital requirements, strategic financial
planning and support of the Company’s efforts to build shareholder
liquidity.  The agreement calls for a retainer of $15,000 per month,
plus out-of-pocket expenses, beginning March 6, 2008, the date of
execution.  The agreement may be terminated by the Company with
appropriate notice or upon satisfaction of the goals of the
agreement.  The agreement also contains certain fees for future
capital transactions. The Company paid SC Capital $240,000 as compensation
when warrant holders exercised Series C warrants for cash in March
2009. Warren Rustand, a Director of the Company, is a principal of SC
Capital Partners, LLC.




Total
accounts payable to officers and employees of the Company, including accrued
management fees of $133,333 in 2008, totaled $470,101 at December 31, 2008 and
$177 at June 30, 2009.  These amounts do not include the contingent
issuance of shares to SGPF, LLC, a company owned by MedPro’s Chairman and CEO,
and the assumption of future technology transfer payments in connection with our
purchase of the SGPF technology in September 2008, which is discussed in Note
6.  There were no other amounts payable to employees or related
parties.




NOTE 9 –
LONG-TERM DEBT





Long-term
debt at June 30, 2009 and December 31, 2008 was as follows:





June 30, 2009
                            
                            
                            December 31, 2008Term
      loan, interest payable at prime plus 2%, monthly principal payments of
      $138,889 beginning June 2008, maturing August 1, 2011, collateralized by
      an assignment of intellectual properties
                            
                            $
                            3,194,444
                            
                            
                            $
                            4,027,777Revolving
      line of credit, interest at prime plus 2%, payable monthly beginning in
      April 2007, due April 1, 2009
                            
                            
                            —
                            
                            
                            
                            1,498,475Term
      loan, interest at 3.65% payable monthly, maturing March 31, 2010, secured
      by $1,500,000 interest bearing deposit account.
                            
                            
                            1,500,000
                            
                            
                            
                            —Draw
      loan, interest payable at 7.5%, monthly payments of principal and interest
      of $10,000 due through July 23, 2010, secured by certain inventory of the
      Company and personally guaranteed by its Chairman, CFO and two other
      shareholders
                            
                            
                            296,220
                            
                            
                            
                            343,8434,990,664
                            
                            
                            
                            5,870,095Less:
      current portion
                            
                            
                            3,267,883
                            
                            
                            
                            3,262,660Long-term
      portion
                            
                            $
                            1,722,781
                            
                            
                            $
                            2,607,435




12




The
revolving line of credit, as amended in November 2008, permits the Company to
draw up to $1,500,000.  The credit agreement was also amended in 2008
to remove financial covenants and include cross-collateral agreements and a
pledge of intangible assets.  The revolving line of credit facility
was paid in full on June 30, 2009 through a new one year term note with
Traditional Bank, Inc.





The
following table summarizes the maturities of long-term debt:





12
      month periods
                    ended June 302010
                  
                  $
                  3,267,8832011
                  
                  
                  1,636,8522012
                  
                  
                  85,929Total
                  
                  $
                  4,990,664





NOTE 10 –
SHAREHOLDERS’ EQUITY





The
Company is authorized to issue 90,000,000 shares of common stock with a par
value of $0.001 per share, and 10,000,000 shares of preferred stock with a par
value of $.01 per share, which is issuable in series.  Of the
10,000,000 shares of preferred stock authorized, 6,668,229 shares are designated
as Series A Convertible Preferred Stock (“Series A Stock”), 1,493,779 shares are
designated as Series B Convertible Preferred Stock (“Series B Stock”) and
1,571,523 shares are designated as Series C Convertible Preferred Stock (“Series
C Stock”).





At June
30, 2009, the Company’s issued and outstanding shares consisted of 13,320,391
shares of common stock, 6,668,229 shares of Series A Stock, 1,493,779 shares of
Series B Stock, and 1,571,523 shares of Series C Stock.  In addition,
warrants to purchase 1,559,340 shares of common were outstanding at June 30,
2009.





In the
private placement to four investment funds completed on December 28, 2007,
MedPro issued a total of 6,668,229 shares of Series A Stock and warrants to
purchase a total of 25,286,692 shares of common stock.  Our reverse
merger with Dentalserv.com as of that date was a condition to the purchase of
the preferred stock and stock purchase warrants under the terms of the preferred
stock purchase agreement with these institutional investors.





The
Series A Stock has 5% cumulative dividends, based on the termination value of
the preferred at the issue date, payable in the event of liquidation,
dissolution and certain other events.  The Preferred Stock is also
convertible, at the option of the holder, at any time into an equal number of
shares of the common stock of the Company, subject to adjustment.  As
of June 30, 2009, if the Company were to liquidate, dissolve or engage in
certain other transactions, the Company would owe the Preferred Shareholders a
liquidation preference dividend of $910,415.  This amount has not been
recorded in the financial statements.





In
accounting for the conversion feature embedded within the Series A Stock, the
Company considered FASB SFAS 133, Accounting for Derivative
Instruments and Hedging Activities; EITF 00-19, Accounting for Derivative Financial
Instruments Indexed to, and Potentially Settled in a Company’s Own Stock;
EITF 98-5, Accounting for
Convertible Securities with Beneficial Conversion Features or Contingently
Adjustable Features; and EITF 00-27, Application of Issue No. 98-5 to
Certain Convertible Instruments.  Based on an analysis of this
accounting literature described in Note 10 to its audited financial statements,
the Company concluded that the embedded conversion option would not be
separately accounted for as a derivative liability from the Series A Stock
because it can only be settled in shares of the Company’s own
stock.  The Company recorded a deemed dividend in accordance with this
guidance in the amount of $3,975,120 by increasing the retained deficit and
increasing additional paid in capital.  This amount was determined
based on the relative estimated fair value of the embedded conversion feature in
the preferred shares and the detachable warrants.




13




The
Company’s original four Series A Stockholders were issued one Series “A” warrant
and one Series “B” warrant for each of the 6,668,229 shares of preferred stock
they held.  In addition, for making a total investment of at least $5
million, one Series A Stockholder also received one “J” warrant and one “C”
warrant for each of the 5,975,116 shares of preferred stock it
held.  See Note 10 to the notes to the audited financial statements
included in the Company’s annual report on 10-K for a description of the rights
of the four series of warrants issued with the Series A Stock.  See
Note 13 for details on the valuation of these warrants pursuant to the
Black-Scholes method.





The
Company also issued Series AA warrants to purchase 533,458 common shares to SC
Capital Partners, LLC for $1.81 per share as compensation for financial advisory
services in connection with the December 28, 2007 private
placement.  The terms of these warrants are comparable to the terms of
the “A” warrants and expire on December 28, 2012.  None of the AA
warrants have been or are eligible to be exercised as of the date of the
financial statements.





On August
18, 2008, Vision Opportunity Master Fund, Ltd. (“VOMF”), then the sole holder of
J warrants, and the Company amended the J warrants to give VOMF the right to
purchase 1,493,779 shares of newly designated Series B Convertible Preferred
Stock (“Series B Stock”) at a purchase price of $8.72.  The J warrants
originally had given the holder the right to purchase 5,975,116 shares of common
stock at a purchase price of $2.18.  VOMF and its affiliate Vision
Capital Advantage Fund, LLC (“VCAF”, to whom VOMF transferred a portion of its
holdings in September 2009) exercised the J warrants in full in September and
October 2008, and the Company received $13,025,000 in cash for the issuance of
1,493,779 shares of Series B Stock.





Each
share of Series B Stock converts into 4 shares of common stock at the present
conversion price of $2.18 per share, which is subject to
adjustment.  The Series B Stock ranks equal to the Company’s common
stock, but ranks junior to the Series A Stock and to our
indebtedness.  If the Company declares dividends, the Series B
Stockholders will receive dividends on a pro rata basis with the common
stockholders.  Upon liquidation, dissolution or winding up of the
Company, the holder of Series B Stock is entitled to an amount equal to the
amount distributable per share of common stock multiplied by the number of
shares of common stock into which the Series B Stock can be
converted.  The Series B Stock has no general voting
rights.





In March
2009, VOMF and VCAF exercised a portion of their Series C Warrants for cash
totaling $3,000,000 and exchanged the balance of their Series C Warrants plus
all of their Series A and Series B Warrants for shares of newly designated
Series C Convertible Preferred Stock (“Series C Stock”). The two funds acquired
1,571,523 shares of Series C Stock as a result of the warrant exercise and
exchange.





Each
share of Series C Stock is convertible into 10 shares of common stock, which
ratio is subject to adjustment. The Series C Stock ranks equal to the Company’s
Series B Stock and common stock, but junior to the Series A Stock and to our
indebtedness.  If the Company declares dividends, the Series C
Stockholders will receive dividends on a pro rata basis with the Series B
Stockholders and the common stockholders. Upon liquidation, dissolution or
winding up of the Company, the holder of Series C Stock is entitled to an amount
equal to the amount distributable per share of common stock multiplied by the
number of shares of common stock into which the Series C Stock can be converted.
The Series C Stock has no general voting rights.





The
exchange of warrants for Series C Stock was the equivalent of a cashless
exercise of the warrants at an assumed market value of $13.00 per common
share.  The warrant exercise and exchange reduced the total common
share equivalents issuable upon the exercise of the warrants held by the two
Vision Funds from 18,285,692 common shares to 15,715,230 common
shares.





In April
2008, the FASB issued EITF 07-05, Determining whether an Instrument
(or Embedded Feature) Is indexed to an Entities Own Stock, ("EITF
07-05").  The cashless exercise provision of the Company's Series A, B
and C warrants, as well as an exercise price protection feature that expires at
December 31, 2009, required the reclassification of the warrants pursuant to
EITF 07-05 from equity to a liability based on fair value of the warrants at
January 1, 2009.  The warrants provide that the exercise price adjusts
if the Company issues common stock at a lower price.  The warrants
also authorize cashless exercise by the holder until such time as a registration
statement for the shares underlying the warrants becomes
effective.  The Company reduced Additional Paid in Capital by
$6,321,081, increased Accumulated Deficiency by $35,081,115 and recorded a
liability of $41,402,196 as of January 1, 2009 to reflect the cumulative effect
of EITF 07-05.  The amount recorded was determined by reference to the
fair value of the warrants at January 1, 2009 under SFAS 157, as described
below.




14




In March
2009, two Series A preferred stockholders exchanged all of their Series A, B and
C warrants, exercisable for a total of 18,285,692 common shares, for $3,000,000
of cash and a total of 1,571,523 shares of new Series C preferred
stock.  Each Series C preferred share converts into 10 common shares,
a ratio equivalent to $2.18 per common share.  The Company issued
137,614 shares of Series C preferred stock upon the exercise of a portion of the
Series C warrants for the cash, plus an additional 1,433,909 shares of Series C
preferred stock in exchange for all of the remaining Series A, B and C warrants
held by the two stockholders.  A small number of common shares were
issued in lieu of fractional shares of Series C preferred.  The
liability for the warrants exchanged in March 2009 was recomputed under SFAS 157
using the Black-Scholes method with updated inputs.  The difference
was recorded as income from the decline in debt due to the reduction in fair
value of the outstanding warrants at March 24, 2009 immediately before the
exchange.  The valuation difference on these warrants was
$21,237,919.  The Series C preferred shares were recorded at
$17,901,129, the liability based on fair value at March 24, 2009 for the
warrants exchanged, plus the $3,000,000 cash paid, or $20,901,129 before
issuance costs of $240,000.





A total
of 1,025,882 Series A and B warrants remained outstanding at June 30,
2009.  These warrants were originally recorded as a $2,263,147
liability at January 1, 2009.  Based on the market price of the common
stock at March 31, 2009, the warrant liability decreased to $1,250,909,
resulting in income for the first quarter of $1,012,238 for these
warrants.





The
amount recorded for EITF 07-05 as of January 1, 2009, was adjusted to market at
March 24, 2009 for the warrants exchanged for Series C preferred shares and at
June 30, 2009 for the remaining Series A and B warrants held by the Company's
Series A preferred stockholders.  Total income recognized based on
market value differences in the derivative liability of the warrants for the
first quarter was $22,250,157.  The derivative liability at June 30,
2009 was $3,180,234.  Loss for the second quarter based on the change
in fair value of the derivative liability was $1,929,325.  The income
from derivative liabilities adjusted to fair value was a net of $20,320,832 for
the six months ended June 30, 2009.




SFAS 157
defines fair value as the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants at
the measurement date.  SFAS 157 establishes a fair value hierarchy
that prioritizes the use of inputs used in valuation methodologies into the
following three levels:





·
            Level
      1: Quoted prices (unadjusted) for identical assets or liabilities in
      active markets. A quoted price in an active market provides the most
      reliable evidence of fair value and must be used to measure fair value
      whenever available.





·
            Level
      2: Significant other observable inputs other than Level 1 prices such as
      quoted prices for similar assets or liabilities; quoted prices in markets
      that are not active; or other inputs that are observable or can be
      corroborated by observable market
data.





·
            Level
      3: Significant unobservable inputs that reflect a reporting entity's own
      assumptions about the assumptions that market participants would use in
      pricing an asset or liability. For example, level 3 inputs would relate to
      forecasts of future earnings and cash flows used in a discounted future
      cash flows method.





We
concluded there was insufficient trading frequency and volume in MedPro’s shares
to use level 1 inputs to value our warrants in a Black-Scholes calculation under
SFAS 157 as of January 1, 2009.  In particular, we noted that nearly
99% of our outstanding common shares were restricted securities under Rule 144
that could not be traded in public markets through January 4, 2009, and our
stock continued to trade sporadically thereafter.  According, we used
the following level 2 inputs and level 3 inputs for purposes of our EITF 07-05
and SFAS 157 analysis:





·
            MedPro
      share prices ranging from $7.88 at January 1, 2009 to $5.00 at March 24,
      2009.  The January price was based on a trailing 20-day average
      from the first trade in 2009 due to an extremely thin market and price
      volatility.  These values were then discounted by 50% to more
      closely approximate the only observable input for the warrant values — the
      exercise of the Series C warrants for $2.18 per common share equivalent in
      March 2009.





·
            The
      time it would take for the market to absorb the influx of over 19,000,000
      common shares underlying the warrants, based on the average daily trading
      volume of fewer than 700 shares during the first quarter of
      2009.




15




·
            Transfer
      restrictions on the Series C preferred stock issued in exchange for
      warrants in March 2009, as well as the 14,339,090 underlying shares of
      common stock, which cannot be transferred for one year, and are subject to
      additional “leak-out” restrictions during the subsequent twelve
      months.





·
            Share
      price volatility rates of 50% in January 2009 and 55% in March 2009 for
      comparable companies.





·
            A
      discount rate based on comparable term U.S. Treasury rates of 0.76% and
      0.81%, respectively for January and March
2009.





·
            Average
      share prices using volatility inputs from similar companies, and taking
      into account common shares underlying the warrants based on then current
      trading volumes.





The
factors used to value the remaining derivative liability associated with the
remaining A and B warrants as of June 30, 2009 included the Company’s own
volatility calculated based on month end observations for the first six months
of 2009 of approximately 55%.  The Company’s share price at June 30,
2009 was $5.00.  The risk free return rate for the remaining life of
the derivatives was based on U S Treasury rates of 1.11% for the 1.75 years of
estimated remaining life of the warrants.  The A warrant was valued at
$3.19 and the B warrant was valued at $3.01.





On June
25, 2009, the Company announced that its Board of Directors had authorized the
repurchase of up to one million shares of the Company’s common
stock.  The Company had not repurchased any of its shares as of June
30, 2009.





NOTE 11 –
LEASE COMMITMENT WITH RELATED PARTY




The
Company leases its office and storage facility in Lexington, Kentucky, under a
non-cancelable operating lease with a related party.  On January 10,
2007, the Company signed a lease addendum that extended the term of the original
1998 lease through August 2012 with two five-year extension
options.  The amended lease provides for lease payments of $3,500 per
month from January 1, 2007, through July 31, 2007, and $6,500 per month from
August 1, 2007, through January 31, 2008.  Beginning on February 1,
2008, the lease payment increased to $6,975 per month ($83,700 per year) for the
remainder of the term when the Company increased its leased space by an
additional 1,063 square feet.





Total
lease expense was $41,850 and $41,375 for the six months ended June 30, 2009 and
2008, respectively.  Future minimum annual lease payments at June 30,
2009, were as follows:





12
      month period
                          ended
      June 302010
                        
                        $
                        83,7002011
                        
                        
                        83,7002012
                        
                        
                        83,7002013
                        
                        
                        13,950Total
                        
                        $
                        265,050





NOTE 12 –
STOCK OPTIONS AND STOCK PURCHASE WARRANTS





Stock
Purchase Warrants





The
Company’s original four Series A Stockholders were issued one Series A warrant
and one Series B warrant for each of the 6,668,229 shares of preferred stock
they held.  In addition, for making a total investment of at least $5
million, one Series A Stockholder (VOMF) also received one Series J warrant and
one Series C warrant for each of the 5,975,116 shares of preferred stock it
held.  See Note 11 to the notes to the audited financial statements
included in our 2008 Annual Report of Form 10-K for a description of the rights
of the four series of warrants issued with the Series A Stock and the values
recorded for our warrants using the Black-Scholes method.





See Note
10 above for a description of the exercise of all of the Series J warrants and a
portion of the Series C warrants by VOMF and its affiliate VCAF, and the
exchange of the remaining Series A, Series B and Series C warrants held by VOMF
and VCAF for preferred stock.




16




The
Company also issued Series AA warrants to purchase 533,458 common shares for
$1.81 per share as compensation for financial advisory services in connection
with the sale of the Series A Stock and related warrants in December
2007.  The terms of the Series AA warrants are comparable to the terms
of the Series A warrants and expire on December 28, 2012.  None of the
Series AA warrants have been exercised as of June 30, 2009.  The
Company has valued the warrants at $211,928 utilizing the Black-Scholes
method.




At
December 31, 2007, the Company had no written or unwritten stock ownership or
option plans for employees.  The September 2007 preferred stock
purchase agreement among the Company and the Series A Stockholders authorized
the Company to award rights to purchase 3,000,000 common shares to its
management and employees at $1.81 per share, the agreed upon valuation of the
Common Stock in the September 2007 agreement, under an employee stock option
program.  At December 31, 2007, the terms of the purchase rights had
not been established, nor had they been assigned or allocated to any members of
management, directors or employees.





Employee
Stock Options





On August
18, 2008, the Company adopted the MedPro Safety Products, Inc. 2008 Stock and
Incentive Compensation Plan (“2008 Plan”) and issued stock options to its
directors and employees in the amounts and on the terms agreed upon in the
September 2007 stock purchase agreement with the Series A
Stockholders.  The Company’s employees, including its three executive
officers, were granted a total of 2,800,000 options.  The two
non-employee directors each were granted 100,000 options.  The options
may be exercised at an exercise price of $1.81 per share only on the earliest of
January 1, 2013, the date of the holder’s death or 100% disability, termination
of employment or service as a director, and the date of a change in control of
the Company.  Because the exercise price was less than market price of
MedPro stock on the date of grant, the Company set a date certain for the
exercise of the options in order to qualify for exemptions from excise taxes
under IRS deferred compensation rules.





The
Company recorded unearned compensation expense of $14,580,000, or $4.86 per
underlying share, for the grant of 3,000,000 employee and director stock
options.  We valued the options according to the Black-Scholes
model.  On the option grant date, MedPro’s common shares traded at
$9.00 per share, which was also the median trading price for the 30 day period
ending on the grant date.  However, we concluded that there was
insufficient trading frequency and volume in MedPro’s shares to use the grant
date trading price of the shares.  MedPro has 13,285,000 million
shares outstanding, but in August 2008 only 134,000 were not restricted under
SEC Rule 144 and freely tradable. An average of 1,481 shares traded each day
during the 30 days ending on the option grant date, with a median of 200 shares.
This period included seven trading days where no transactions
occurred.





The $9.00
price per share was discounted by 16% to reflect a lack of liquidity arising
chiefly because the options can be exercised only during a 30 day period during
January 2013.  The 16% discount represents the estimated cost under
the Black-Scholes model of a put option that would protect an investor from the
decline in value of an appreciated security until restrictions on sale expire.
Other assumptions used in the valuation included an expected option term of 2.48
years, volatility of 60% based on trading data of comparable public companies,
and an equivalent bond yield of 2.5%.





The value
of the options was further discounted to reflect the dilutive effect of the
exercise of 3,000,000 options in a thin trading market. SFAS 123(R) provides
that no adjustment for potential dilution is usually needed if the market for
the underlying stock is reasonably efficient, because the potential dilutive
effect of option exercises will be reflected in the market
price.  However, an adjustment was warranted for the MedPro options
because an efficient trading market for the underlying shares did not exist when
only 1% of the shares then outstanding was publicly traded float.  The
additional discount was determined through an iterative process based on the
number of shares outstanding, the number of options, the value of the underlying
shares and the value of the options.





The
unearned compensation is being charged to earnings over 24 months beginning on
August 18, 2008.  The 24 month period coincides with the term of a
non-competition covenant included in the option agreement. The Company recorded
$2,693,250 of compensation expense for the period from August 18 through
December 31, 2008. The balance of the unearned compensation was $11,886,750 at
December 31, 2008.  The Company recorded $3,645,000 of compensation
expense for these options in the six months ended June 30, 2009, leaving
$8,241,750 of unearned compensation remaining at June 30, 2009.




17




On May
27, 2009, the Company awarded incentive stock options to purchase 185,714 common
shares to its employees.  The exercise price of the options is $3.85
per share, the market price at the close of trading on the grant date, except
that the exercise price for the options to purchase 25,974 shares awarded to the
Company’s Chairman is $4.24 (110% of the market price) because he is a greater
than 10% shareholder.  The options are exercisable immediately and
have a ten year term, except for the Chairman’s options, which are limited to a
five-year term.  The Company recorded $6,505 of compensation expense
for the May 27, 2009 awards as of June 30, 2009.  Unearned
compensation was $348,601 as of June 30, 2009.





The value
of the Incentive Stock Options granted May 27, 2009 was computed under the
Black-Scholes method in three groups.  The groups were comprised of
the 25,974 options granted to the Company’s chairman for a five year term at an
exercise price of $4.24 per common share; the 51,948 options granted to the
remaining officers for a ten year term at an exercise price of $3.85 per common
share; and the remaining options granted to other employees at $3.85 per common
share for a ten year term.  The Company’s volatility based on month
end closing prices for the six months of 2009 was 55%.  The estimated
lives of the options were 2.5, 5 and 6 years for the respective
groups.  The Company estimated the life of the options based on half
of the exercise period plus one year for the employees in Group 3, and one-half
of the exercise periods for the officers.  The officers are subject to
limitations on sale under SEC rules and contractual lock up
terms.  They have holding periods that would require an earlier
exercise to satisfy holding period requirements.





Under
SFAS 123(R), the requisite service period is usually the vesting
period.  The options issued on August 18, 2008 and May 27, 2009 were
fully vested on the grant date because they can be exercised upon termination of
employment or termination of service on the board of directors (as the case may
be) for the August 18, 2008 options and immediately for the May 27, 2009
options.  However, if employment was terminated immediately, the
recipient would remain subject to a non-competition covenant in the award
agreement during the 24 months following termination, which is an implicit
service period other than the vesting period.  The options issued May
27, 2009 are be amortized to expense over there expected life by group (2.5, 5
and 6 years, respectively).





SFAS
123(R) requires consideration of the following: (a) all vesting and
exercisability conditions; (b) all explicit, implicit, and derived service
periods; and (c) the probability that performance or service conditions will be
satisfied. In this case, the non-compete period is assumed to be the explicit
requisite service period and management believes the probability of the service
conditions being met is nearly 100 percent.





SFAS
123(R) requires that compensation cost be recognized on a straight-line basis
over the requisite service period for each separately vesting portion or over
the requisite service period for the entire award. In this case, the vesting
period is immediate, therefore compensation expense can only be recognized for
the entire award.





The
following table summarizes stock option activity for the periods
indicated:





Six
      Months Ended
                    June
      30, 2009
                  
                  
                  Twelve
      Months Ended
                    December
      31, 2008Shares
                  
                  
                  Average
                    weighted
                    exercise price
                  
                  
                  Shares
                  
                  
                  Average
                    weighted
                    exercise priceOutstanding
      , beginning
                  
                  
                  3,000,000
                  
                  
                  $
                  1.81
                  
                  
                  
                  0
                  
                  
                  
                  n/aGranted
                  
                  
                  185,174
                  
                  
                  $
                  3.90
                  
                  
                  
                  3,000,000
                  
                  
                  $
                  1.81Exercised
                  
                  
                  0
                  
                  
                  
                  n/a
                  
                  
                  
                  0
                  
                  
                  
                  n/aExpired/cancelled
                  
                  
                  0
                  
                  
                  
                  n/a
                  
                  
                  
                  0
                  
                  
                  
                  n/aOutstanding,
      ending
                  
                  
                  3,185,174
                  
                  
                  $
                  1.93
                  
                  
                  
                  3,000,000
                  
                  
                  $
                  1.81


The
following table summarizes information about stock options outstanding and
exercisable at June 30, 2009:





Weighted
      average
                  exercise price
                
                Options
                  outstanding
                
                
                Average
      weighted
                  remaining
      contractual
                  life (years)
                
                
                Options
                  exercisable$1.93
                
                
                3,185,174
                
                
                
                3.6
                
                
                
                185,174





18





NOTE 13 –
DISTRIBUTION AGREEMENTS




On July
15, 2008, the Company entered into two Medical Supply Manufacturing Agreements
with Greiner Bio-One GmbH, a division of Greiner Bio-One International AG, an
international manufacturer and supplier of medical products with locations in
Austria, Germany, Hungary, United States and Brazil as well as a worldwide
distribution network.  The two agreements grant Greiner the right to
manufacture, market and distribute MedPro’s Vacuette tube-activated and
skin-activated blood collection systems and its winged blood collection
set.  Each agreement extends for six years from the commencement of
initial commercial manufacturing of the applicable product.




The July
2008 agreements required the Company to perform multiple revenue generating
activities, which are independent and distinct phases of the
project.




·
            First,
      the Company provided services, preparing and delivering the production
      line design for the Vacuette devices and the initial design and
      pre-production plan for the Wing product.  The design plans
      include the design and specifications of the medical devices the lines
      would actually produce, thereby allowing a different contractor to use the
      plans to construct the production line.  The arrangements
      contemplated the design plans would be delivered by October 1, 2008, and
      the Company would earn a $1 million fee for design services when the
      distributor accepted each of the
plans.




·
            Second,
      the Company was to construct the production lines.  Payment was
      based on the estimated cost to manufacture the components and assemble the
      production line, plus a potential margin.  Installments were to
      become payable upon achievement of agreed-upon
  milestones.




·
            Third,
      the Company granted an exclusive license to the distributor to manufacture
      and sell the product, for which the Company would receive a royalty per
      unit sold.




The July
2008 agreement for our tube-activated blood collection system and our skin
activated blood collection device superseded and replaced a prior distribution
agreement solely for the tube-activated blood collection system.  The
July 2008 agreement provided that the Company would design, construct, complete
and successfully test an initial automated production line (“IPL”) for delivery
at a mutually acceptable date not earlier than March 31,
2009.  Payment was to be made in three installments, beginning October
1, 2008 with the final payment due March 31, 2009.  MedPro also agreed
to build a secondary automated production line approximately 24 months after
completion of the IPL, depending on the distributor’s volume requirements, with
the date for completion and delivery to be determined by the
parties.  Payment for the second product line would be made in three
installments, the first of which would be due upon initiation of the design
review by the distributor.




The July
2008 agreement provides for production of a designated minimum number of units
each year during the first five years of the agreement.  The
distributor is obligated to pay the Company a production royalty per unit,
totaling $33 million over this period. The distributor has the right to continue
to manufacture the products and pay the production royalty in year
six.




The July
2008 agreement for our winged blood collection set provided that the Company
would produce an initial design plan for the product for review and the
distributor’s approval by October 1, 2008.  Payment of the fee for
design services was due upon delivery and acceptance of the initial design plan,
at which time the Company was to initiate the construction of the production
line.  Payment for the construction phase was to be made in three
equal installments upon the achievement of certain milestones leading to
validation of the final production line.The July 2008 agreement for the winged
blood collection set also provides for production of a designated minimum number
of units each year during the first five years of the agreement.  The
distributor is obligated to pay the Company a production royalty per unit,
totaling $10.8 million over this period.  The distributor has the
right to continue to manufacture the products and pay the production royalty in
year six.




In
September 2008, the Company delivered the Vacuette automation plan and the
initial Wing design plan and invoiced the distributor $2,700,000.  The
Company recorded $1,000,000 of revenue for the service fee for the Wing design
plan, $333,333 of revenue representing one-third of the fee for the Vacuette
design plan, $158,000 of revenue based on construction costs incurred through
September 30, 2008, and the $1,209,000 balance as deferred revenue representing
an advance toward future construction costs.




19




In
November 2008, the distributor informed the Company that it had decided to
change the production lines to incorporate greater computerization and would
modify the design plans and construct the production lines itself.  As
the parties discussed how to formally modify their July 2008 agreements, they
reached a final agreement in December 2008 that the Company (a) would retain the
$2,700,000 paid under the initial agreements, (b) had fulfilled its obligations
during the design phase of both contracts, and (c) would apply the $700,000
balance against its construction costs incurred on behalf of the
distributor.  Reflecting this agreement, in its year-end financial
statements, the Company reclassified $666,667 of the deferred revenue as the
unpaid balance of its fee for design services, and recognized an additional
$530,000 of revenue in the fourth quarter based on further construction costs.
The parties are negotiating the final ownership and ultimate disposition of
assets the Company acquired on behalf of the distributor.





20





Item
2. Management’s Discussion and Analysis of Financial Condition and Results of
Operations





The
following discussion and analysis of the financial condition and results of
operations of MedPro Safety Products, Inc. as of and for the six months ended
June 30, 2009 should be read in conjunction with our audited financial
statements and the notes to those financial statements that are included
elsewhere in this report. References in this Management’s Discussion and
Analysis or Plan of Operations to “us,” “we,” “our,” and similar terms refers to
MedPro Safety Products, Inc. This discussion includes forward-looking statements
based upon current expectations that involve risks and uncertainties, such as
plans, objectives, expectations and intentions. Actual results and the timing of
events could differ materially from those anticipated in these forward-looking
statements as a result of a number of factors. Words such as “anticipate,”
“estimate,” “plan,” “continuing,” “ongoing,” “expect,” “believe,” “intend,”
“may,” “will,” “should,” “could,” and similar expressions are used to identify
forward-looking statements.





Overview





MedPro
Safety Products, Inc. has developed and acquired a portfolio of medical device
safety products incorporating proprietary needlestick prevention technologies
that deploy with minimal or no user activation. We believe that the Federal
Needlestick Safety and Prevention Act, which requires the use of passive
prevention devices, has fostered substantial market demand for products similar
to those we are developing.





Our
present strategy focuses on developing and commercializing five products in four
related product segments: clinical, phlebotomy, pharmaceutical, and
intravenous.  Our objective is to enter into strategic partnership
agreements with major medical products distribution partners, which whenever
possible would be fixed minimum volume contracts. We have entered into two such
agreements for three of our products. In addition, we are discussing the terms
of a similar distribution arrangement with potential partners for a proprietary
safety syringe product with an “anti-blunting” feature and a prefilled
pharmaceutical safety syringe.  Our product development plans also include
a needleless intravenous line based on patents and designs we
control.





Our
financial results and operations in future periods will depend upon our ability
to enter into and fulfill distribution agreements for our products currently
under development so that we can generate sustained revenues from our portfolio
of products and technologies.  Our operations are currently funded
principally from the proceeds from the sales of securities described below and
borrowing from commercial lenders and related parties.





While we
expect to realize significant revenue from the launch of the first of two models
of our blood collection product, the amount of revenue realized in the next
several fiscal quarters depends on how soon we can complete our production
arrangements so we can commence product delivery.  We expect to begin
product assembly and delivery in 2009, but the products will not be launched by
the distributor until the fourth quarter  of 2009.  As a
result, we expect to record revenue from the sale of products in the fourth
quarter of 2009.





On
December 28, 2007, we completed a reverse takeover merger with Dentalserv.com
(DSRV), a Nevada corporation with nominal assets and no active business whose
shares were registered under the Securities Exchange Act.  The reverse
takeover merger was a condition to a $13 million investment by four
institutional investors. On that date, the following transactions occurred
concurrently:





·
            The
      5,625,550 shares of DSRV common stock then outstanding were combined into
      approximately 1,406,400 common shares in a 1-for-4 reverse stock
      split.





·
            Our
      predecessor, MedPro, Inc., merged into DSRV. The combined company issued
      11,284,754 of its common shares to former shareholders of our predecessor
      corporation in the merger and 593,931 common shares as a financial
      advisory fee. The combined company, a Nevada corporation, changed its name
      from “Dentalserv.com” to “MedPro Safety Products,
  Inc.”




21




·
            Four
      funds invested $13 million and received newly issued shares of Series A
      Convertible Preferred Stock and warrants to purchase our common stock. We
      received approximately $11.6 million in proceeds from the sale of these
      securities, net of offering fees and
expenses.





We
accounted for these transactions as capital transactions in which we
issued:





·
            Approximately
      1,406,400 shares of common stock to the DRSV shareholders for the net
      monetary assets of the shell
corporation;





·
            6,668,229
      shares of Series A Stock and four series of warrants to purchase a
      total of 25,286,690 common shares to the investors for $13,000,000;
      and





·
            593,931
      shares of common stock and warrants to purchase 533,458 shares of common
      stock and also paid $1,040,000 in cash as an advisory
  fee.





We valued
the warrants according to the Black-Scholes method, based on the assumptions
described in Note 11 of the Notes to Financial Statements as of December 31,
2008. We also increased the retained deficit by $3,975,120 and increased
additional paid in capital by the same amount effective on December 28, 2007 to
reflect the intrinsic value of the right to convert the Series A Stock into
common stock. The $3,975,120 was determined based on the relative estimated fair
value of the embedded conversion feature in the preferred shares and the
detachable warrants. This amount would normally be amortized over the period
between the issue date and the conversion date, but because the Series A Stock
is convertible immediately upon issuance, the entire amount was charged to
retained earnings as a deemed dividend and an increase to additional paid in
capital.





In August
2008, we amended the then outstanding Series J warrants to give Vision
Opportunity Master Fund, Ltd. (“VOMF”), our largest preferred stockholder and
the sole holder of J warrants, the right to purchase 1,493,779 shares of newly
designated Series B Stock at a purchase price of $8.72.  Each share of
Series B Stock converts into 4 shares of common stock.  The original
Series J warrants had given VOMF the right to purchase 5,975,116 shares of
common stock at a purchase price of $2.18 no later than December 31,
2008.  VOMF and Vision Capital Advantage Fund (“VCAF”), an affiliate
to whom VOMF transferred a portion of its holdings in September 2008, exercised
the J warrants in full in September and October 2008, and we received
$13,025,000 in cash for our issuance of 1,493,779 shares of Series B
Stock.





In March
2009, we completed transactions in which VOMF and VCAF exercised a portion of
their Series C Warrants for cash and also exchanged the balance of their Series
C Warrants plus all of their Series A and Series B Warrants for shares of newly
designated Series C Stock.  Each share of Series C Stock converts into
10 shares of common stock.  The two funds acquired 1,571,523 shares of
Series C Stock as a result of the warrant exercise and exchange.  The
exchange of warrants for Series C Stock was the equivalent of a cashless
exercise of the warrants at an assumed market value of $13.00 per common
share.  The warrant exercise and exchange reduced the total common
shares issuable to the two Vision Funds by 2,570,462 common shares, and we
received cash proceeds of $2,760,000 ($3,000,000 less $240,000 in fees to SC
Capital).





Critical
Accounting Estimates and Judgments





Our
financial statements are prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”). The preparation of our
financial statements requires management to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenues, expenses and
related disclosures. We base our estimates on historical experience and various
other assumptions that are believed to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates. The significant
accounting policies that are believed to be the most critical to fully
understanding and evaluating the reported financial results are described
below.




22




Revenue
Recognition





We
recognize sales and associated cost of sales when delivery has occurred and
collectability is probable. There have been minimal returns for credit, so no
reserve for product returns has been established. We provide for probable
uncollected amounts through a charge to earnings and a credit to the allowance
for doubtful accounts based on our assessment of the current status of
individual accounts. We have fully reserved our only receivable from the sale of
the Needlyzer devices to a customer in Africa.





Valuation
of Inventory





We
determine our inventory value at the lower of cost (first-in, first-out method)
or market value. In the case of slow moving items, we may write down or
calculate a reserve to reflect a reduced marketability for the item. The actual
percentage reserved depends on the total quantity on hand, its sales history,
and expected near term sales prospects. When we discontinue sales of a product,
we will write down the value of inventory to an amount equal to its estimated
net realizable value less all applicable disposition costs.





Valuation
of Intangible Assets





Our
intangible assets consist principally of intellectual properties such as
regulatory product approvals and patents.  We amortize our intangible
assets over their estimated useful lives, which is the period over which we
expect the asset to contribute to our cash flows.  Because products
that incorporate our Vacu-Mate, Key-Lok, Syringe Guard and Winged Safety
set proprietary technologies are currently not in production for
distribution, we have not begun to amortize these patents. We expect to use the
straight line method to amortize these intellectual properties over their
estimated period of benefit, ranging from one to ten years, when our products
are placed in full production and we can better evaluate market demand for our
technology. We evaluate the recoverability of intangible assets periodically and
take into account events or circumstances that warrant revised estimates of
useful lives or indicate that impairment exists. Once our intellectual property
has been placed into productive service, we expect to utilize a net present
value of future cash flows analysis to calculate carrying value after an
impairment determination.  As of June 30, 2009, future expected
revenue for our patented technologies is expected to exceed carrying value of
these properties by a substantial amount, and therefore no impairment has been
recorded.   Additionally, since revenue recorded to date on our
Vacuette and winged technologies have not been related to manufacture of
saleable units for human use, no amortization has been recorded.





Valuation
of Warrants as Derivative Liabilities





We
originally recorded warrants issued in connection with the sale of our Series A
preferred stock as equity, and the value of the warrants was reflected in
Additional Paid in Capital based on a Black-Scholes formula
calculation.  Effective for financial statements issued for fiscal
periods beginning after December 15, 2008, or interim periods therein, EITF
07-05 requires that warrants and convertible instruments with certain conversion
or exercise price protection features be recorded as derivative liabilities on
the balance sheet based on the fair value of the instruments.  See
Note 10 for a full discussion of our outstanding warrants and the recording of
derivative liabilities during 2009.  If any of the assumptions used to
value our warrants change significantly, it could result in material changes to
our assets, liabilities, shareholders’ equity and results of operations from
quarter to quarter.





23





Income
Taxes





As part
of the process of preparing our financial statements, we must estimate our
actual current tax liabilities together with assessing temporary differences
resulting from differing treatment of items for tax and accounting
purposes.  These differences result in deferred tax assets and
liabilities, which are included within the balance sheet.  We must
assess the likelihood that the deferred tax assets will be recovered from future
taxable income and, to the extent we believe that recovery is not likely, a
valuation allowance must be established.  To the extent we establish a
valuation allowance or increase or decrease this allowance in a period, the
impact will be included in the tax provision in the statement of
operations.





Share-based
Employee Compensation





We
account for share-based compensation in accordance with Statement of Financial
Accounting Standards (“SFAS”) No. 123(R) “Share-Based Payment (Revised
2004).”  As required by SFAS 123R, share-based compensation expense is
estimated for equity awards at fair value at the grant date.  We
determine the fair value of equity awards using the Black-Scholes option pricing
model.  The Black-Scholes option pricing model requires various highly
judgmental assumptions including the expected dividend yield, stock price
volatility and expected term of the award.  If any of the assumptions
used in the model change significantly, share-based compensation expense may
differ materially in the future from that recorded in the current
period.  See Note 12 to the June 30, 2009 Financial Statements for
further discussion of share-based employee compensation.








Results
of Operations for the Six months ended June 30, 2009 and 2008





MedPro
recorded net income of $13,943,765 for the six months ended June 30,
2009, as compared to a loss of $(1,820,587) for the six months ended June
30, 2008.  Losses from operations were $(6,258,845) for the first two
quarters of 2009 and $(1,609,493) for the same period in 2008.  The
net losses for these periods included net other income of $20,202,610 for 2009
and net other expense of $(211,094) for 2008.  Net other income /
(expense) included interest expense of $(141,083) and $(307,734) for the 2009
and 2008 periods, respectively.  As a result of the implementation of
EITF 07-05 as of January 1, 2009, other income for the first six months of 2009
included $20,320,832 for the change in fair value of derivative liabilities
associated with our stock purchase warrants.  We recorded other income
at March 31, 2009 to reflect the following events during the first quarter of
2009: (i) the exchange of warrants to purchase 18,285,692 shares of common stock
and $3,000,000 in cash for preferred stock, and (ii) a decrease in the market
price of our common stock.  In the second quarter we recorded other
expense of $(1,929,325) to reflect the increase in the valuation of the
derivative liability from $1,250,909 at March 31, 2009 to $3,180,234 as of June
30, 2009.




The most
substantial differences in the losses from operations between 2009 and 2008 were
increases in payroll costs (including share-based compensation), product
development costs, advertising and promotion costs, professional and insurance
costs, qualified profit sharing costs and travel expenses.  Other
income/(expense) reflected a $20,320,832 increase in income from the net decline
in the derivative liability from January 1, 2009 to June 30,
2009.  Other expenses, net, declined $92,872 from 2008 to
2009.  Interest expense declined $166,651 and other income declined
$73,779.




Professional
and insurance costs increased $140,322 over the same period in 2008 primarily
from patent work, FDA and SEC compliance, and appropriate insurance
coverage.  Compensation expense increased to $4,509,676 for the
six months ended June 30, 2009 compared to $492,392 for the 2008
period.  Payroll was higher in 2009 than in 2008 due to the addition
of four new full time employees in late 2008 and one new employee in the first
quarter of 2009.  Most of the increase came from the $3,645,000 of
compensation expense recognized during the first half of 2009 from share-based
options granted in August 2008.  Share-based compensation recorded for
options granted on May 27, 2009 added $6,505 to this total for a combined
share-based compensation amount of $3,651,505.




24




Travel
expenses decreased slightly ($28,230) in 2009, reflecting increased focus on
manufacturing and product-focused activities and less travel to meet with
customers and suppliers.  Our suppliers are predominantly within 125
miles of our offices, reducing air travel.  Product development costs
were $354,053 higher in 2009 than 2008.  Advertising and promotion
costs were $275,729 for the first half of 2009 due to the engagement of an
investor relations firm in June of 2008.  Finally, our profit sharing
plan established in September 2008 resulted in costs of $36,804 in 2009 versus
no such costs for the same period in 2008.




We
recorded no product sales in the first half of 2009 compared to sales
of $19,553 for the six months ended June 30, 2008.  The decline
in sales was principally due to our decision to discontinue sales of the
Safe-Mate device in April 2008 and no 2009 sales of the Needlyzer device, as we
focused exclusively on developing our passive needlestick prevention products.





Other
revenue recorded in the first six months of 2009 included $12,045 of revenue
from recognition of income from customer advances for specific product
enhancement requests.





Total
operating expenses were $6,258,845 during the first six months of 2009
compared to $1,575,820 for the same period in 2008.  The $4,683,025
increase during 2009 reflected the activity in product development, higher
salary expense, and higher professional fees in connection with the new
products, and SEC compliance costs.  Other income and expenses in
both periods included interest income of $22,861 and $43,499 for 2009 and 2008,
respectively.  Net other income/(expense) were $20,202,610 and
$(211,094) in 2009 and 2008, respectively.  Interest expense declined
from $307,734 in the first six months of 2008 to $141,083 for the first two
quarters of 2009.  This was primarily due to paying off shareholder notes
and bank debt during 2008 and early 2009.




Liquidity
and Capital Resources





Total
assets were $20,362,052 as of June 30, 2009 and $22,757,649 as of December 31,
2008. The $2,395,597 decrease in total assets reflects the impact of the second
quarter operating loss of $(5,133,035) on the balance sheet.  The
Company added $107,161 of fixed assets in the second quarter of
2009.  Total fixed asset additions in 2009 totaled
$311,576.  Decreases in current assets of $2,647,887 reflect the
consumption of cash funding losses and supporting debt
service.  Depreciation and amortization totaled $59,286 in the first
half of 2009.  The remaining differences in total assets consist
primarily of cash used to pay debt.





In
March 2009, preferred shareholders exchanged warrants and cash for Series
C Preferred Stock.  We received cash proceeds of $3,000,000, less
$240,000 of issuance costs, which increased our assets, equity and available
cash.  Some of the cash was used to fund operating losses in the first six
months of 2009.





Total
liabilities of $10,014,128 as of June 30, 2009 were $750,199 greater than the
$9,263,929 as of December 31, 2008.  MedPro paid off or settled various
accounts payable, accrued interest and shareholder debt during
2009.  Current liabilities have increased by $1,884,853 since the end
of 2008.  Overall bank debt has declined by $879,431 during the six
months ended June 30, 2009.  Technology transfer payment obligations
were reduced by $1,000,000, and $469,924 of net shareholder payables were paid
off in 2009.  Accounts payable were $136,777 lower at June 30, 2009
than at December 31, 2008.  Other debts and deferred revenue declined
by $30,494 in the first half of 2009.





We
recorded derivative liabilities as of January 1, 2009 pursuant to EITF
07-05.  Our opening liabilities increased by $41,402,195 based on the
fair value of our warrants with cashless exercise and certain price protection
features.  Due to the decline in the trading price of our stock during
the first quarter, we recorded gain of $22,250,157 to reflect the decreased
value of the derivative liabilities.  Of the remaining $19,152,038 of
derivative liability, $17,901,129 was credited to Additional Paid in Capital
when we issued preferred stock in exchange for warrants and cash.  The
derivative liability totaled $1,250,909 at March 31, 2009, representing
1,025,882 Series A and B warrants that remained outstanding.  The
derivative liability was increased by $1,929,325 in the second quarter of 2009
to $3,180,234, reflecting a change in valuation of the warrants based on the
market value of our stock that has been recorded as other expense on the
statement of operations.  The entire derivative liability will be
recorded as income when the registration of the shares underlying the warrants
becomes effective and the cashless exercise feature of the warrants
expires.




25




The
additions to fixed assets during the first six months of 2009 totaled
$311,576 and included $77,546 of office leasehold improvements, $171,856 of new
equipment, $26,444 of new office equipment and $35,730 of new
furniture.





The
$11,593,000 in net proceeds from our private placement of the Series A Stock and
warrants in December 2007 and the $15,785,000 of net cash proceeds from stock
purchase warrant exercises during 2008 and 2009 provided working capital and
will continue to be the principal source of funding for our operations through
December 31, 2009.  We had $9,129,461 in cash at June 30, 2009.  Other
sources of funds include revenues from the sale of our medical safety products,
including anticipated revenues from the sale of blood collection products we
expect to launch in the fourth quarter of 2009, and the commitment for funding
made by our Chairman.  In addition, our Series A Stockholders have the
right to fund our future financing needs, but we can seek alternative financing
if they do not exercise their rights.





In July
2008, we entered into two new agreements with a worldwide medical products
company to manufacture and distribute three of our medical safety products,
replacing an earlier agreement for the distribution of our tube-activated blood
collection system.  Both agreements continue for five years from the date
we make an initial commercial shipment of the product.  The distributor has
agreed to purchase minimum annual quantities of both models of the safety
needles and our winged blood collection set over the five-year term of the
contract, for royalties totaling over $43 million under both
agreements.





These arrangements
originally provided that we would receive program fees upon delivering an
automation plan for the production line for the Vacuette product and the initial
production design plan for the Wing product. The arrangements also
provide for up to $8.7 million in capital for equipment, engineering, and
tooling necessary to build the production lines.  The balance was to
be payable in installments upon the achievement of certain milestones leading to
validation of the final production lines. We received initial payments
totaling $2.7 million on October 3, 2008 upon delivery and acceptance of the
automation plan and the initial design plan by the distributor.





As of the
date of this filing, we are negotiating modifications to our agreement to allow
the distributor to redesign and build computerized automation lines for our
three products at its own plant in Austria.  Although no new contract
has been finalized, by agreement of the parties we applied the $2,700,000
payment in October 2008 to the full $1,000,000 program fee for each project
pursuant to our prior arrangement and allocated the remaining $700,000 to pay
our out-of-pocket costs incurred on behalf of the distributor, which had
exceeded $700,000 through June 30, 2009.  Of the total $700,000
allocated to expenses incurred on behalf of our customer, $452,855 was expended
for equipment and has been recorded as a prepaid item with an offsetting amount
of deferred revenue.  The balance of $235,100 was booked as income in
late 2008 and $12,045 was booked as income in the first quarter of
2009.





We expect
the definitive agreement to transfer responsibility for completing the
automation line to the distributor will not provide for further payments to us
for building production lines.  These payments were intended to
reimburse us for the cost of equipment, molds and fixtures acquired on behalf of
our customer, which we would no longer have to incur.  Instead, we
will bill only for any services requested by the distributor and will pass both
costs incurred for time, materials and third party payments on to the
distributor as incurred at their request.  Certain ongoing product
design and enhancements will remain our responsibility as the owner of the
technology and be performed at our expense.




26




On
September 30, 2008, we exercised an option to purchase patents and related
rights to anti-blunting syringe technology from a related party. Thepurchase
price is $3,345,000 payable in cash, our assumption of $1,500,000 of technology
transfer payment obligations, and the contingent issuance of 690,608 shares of
our common stock. Our
obligation to issue the stock portion of the purchase price is contingent upon
our collecting $5,000,000 in revenue from the sale of products utilizing the
technology, the sale or license of all or part of the product to a third party
or a change in control of the Company.





Our
current credit agreement with one lender included a $5,000,000 term loan
and a $1,500,000 revolving line of credit.  As of June 30, 2009, the
amount payable on the term note was $3,194,444 and the revolving line of
credit had been repaid in full.  The term loan bears interest at
the prime rate plus 2% and matures on August 1, 2011. We pay monthly principal
payments of approximately $138,889 plus interest.  We also have
a $1,500,000 term note with a second lender that bears interest at 3.65%,
payable monthly, and matures on March 31, 2010. It is secured by an interest
bearing $1,500,000 deposit account.





The
credit agreement contains various usual and customary terms and conditions of a
revolving line of credit and term loan facility, including limitations on the
payment of cash dividends and other restricted payments, limitations on the
incurrence of additional debt, and prohibitions on a merger or the sale of
assets. Prior financial covenants under the term loan and revolver have been
replaced with cross-collateral agreements and a pledge of our intangible
assets.





We
estimate that funding our continued development and launches of our planned
products, meeting current capital support requirements, and pursuing other
projects as may be determined by the Board of Directors for the six nine
months will not require any additional funding in addition to our cash on hand
and the payments due us under our distribution agreements. Whether we commit
resources to optional projects will depend upon our cash position from time to
time. Our primary cash requirements will be to fund (a) launching our blood
collection products for distribution, (b) continuing development of our safety
syringe products and other medical device safety products based on the
technology for which we hold rights, and (c) increasing our administrative
capability as needed to support expanded day-to-day operations.





We will
require additional funding to complete the development of and launch all of the
safety products for which we currently own intellectual property rights.
 In addition, development or production costs may increase beyond the
amounts on which we have based our current funding assumptions.  If we
cannot find sources of additional funds on reasonable terms, we may be forced to
limit our product development plans, which could adversely affect our efforts to
achieve profitability and to continue our business.





Although
we plan to continue to outsource our developmental and manufacturing resource
needs, we also plan to expand our in-house capabilities. We expect to employ a
senior product development manager and have hired two project engineers to
direct the development of our portfolio of products and to work directly with
our external product development firm.  This will allow our current
management personnel to focus on production and marketing as our products
complete the regulatory approval process and distribution can
begin.





We will
monitor our cash flow carefully and will maintain limited, but necessary,
employment levels required to sustain operations and advance product
development.  During the next several months, we expect to add
additional administrative support personnel and infrastructure as necessary to
support the planned expansion of our operations.  We will need to add
personnel and substantially increase the related administrative expenses to
continue product development, increase sales and marketing activities, support
our ISO 13485 Quality Certification and comply with periodic reporting and
internal control requirements.





We
continue to add computer systems and related equipment (currently in excess of
$152,500) to support our data and communications requirements.  In
addition, we employ an outside, full service, information technology support
firm to ensure appropriate support of our systems, telephone, and backup of
corporate records for a total of approximately $30,000 over the next twelve
months.  We have also purchased product inspection equipment for
approximately $100,000 in connection with the expected launch of our blood
collection product.  We have purchased and are implementing a document
control system in compliance with our ISO 13485 Quality System.




27




Our
current sales estimates are exclusively for product sales in the United States.
We do not anticipate revenue from the marketing of the tube-activated blood
collection device in Europe, although its distributor has received preliminary
favorable interest from pre-launch marketing and demonstration activities. Our
ability to generate future European and other foreign sales will depend upon
applicable regulatory approvals for our products in Europe.





Item
3. Quantitative and Qualitative Disclosures about Market Risk





We are
not party to any forwards and futures, options, swaps, or other instruments that
would expose us to market risk associated with activities in derivative
financial instruments, other financial instruments, and derivative commodity
instruments.  Our bank indebtedness is priced at interest rates geared
to the Prime Rate.  Therefore, our interest expense may increase or
decrease due to changes in the interest rate environment.





Item
4. Controls and Procedures





As of the
end of the period covered by this Quarterly Report on Form 10-Q for the quarter
ended June 30, 2009, we carried out an evaluation, under the supervision and
with the participation of our management, including our chief executive officer
and chief financial officer, of the effectiveness of the design and operation of
our disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934).  Based on this
evaluation, our chief executive officer and chief financial officer concluded
that, as of the end of the fiscal quarter covered by this report, these
disclosure controls and procedures are effective to ensure that information
required to be disclosed by us in the reports we file or submit under the
Exchange Act is: (a) recorded, processed, summarized and reported within the
time periods specified in the rules and forms of the Securities and Exchange
Commission, and (b) accumulated and communicated to our management, including
our chief executive officer and chief financial officer, as appropriate to allow
timely decisions regarding required disclosure.





There
were no changes in our internal control over financial reporting during the
quarter ended June 30, 2009 that have materially affected, or are reasonably
likely to materially affect, internal control over financial
reporting.





28





PART
II – OTHER INFORMATION





Item
1. Legal Proceedings





We
are not a party to any pending legal proceedings as of this
date.





Item
1A. Risk Factors





Information
regarding risk factors appears our Annual Report on Form 10-K for the year ended
December 31, 2008 under Item 1A – Risk Factors.  There have been no
material changes from the risk factors previously discussed in our Form
10-K.





Item
2. Unregistered Sales of Equity Securities and Use of Proceeds





During
the quarter ended June 30, 2009, there were no unregistered sales of equity
securities by the Company, nor did Company or any affiliated purchaser acting on
behalf of the Company repurchase any of the Company’s equity
securities.





Item
3. Default Upon Senior Securities





Not
applicable.





Item
4. Submission of Matters to a Vote of Securities Holders





Not
applicable.





Item
5. Other Information





On June
25, 2009, the Company announced that its Board of Directors has authorized the
repurchase of up to one million shares of the Company’s common
stock.





Item
6. Exhibits





(a)           Exhibits





The
following exhibits are filed or furnished as part of this
report:





29




Exhibit
      No.
                              
                              Description
      of Exhibit10.18
                              
                              Employment
      Agreement with W. Craig Turner, dated July 17, 2009 (incorporated by
      reference to Exhibit 10.1 to Form 8-K filed on July 22,
    2009).31.1
                              
                              Certification
      of Principal Executive Officer, pursuant to Rule
  13a–14(a).31.2
                              
                              Certification
      of Principal Financial Officer, pursuant to Rule
  13a–14(a).32.1
                              
                              Certification
      of Principal Executive Officer, pursuant to 18 U.S.C. Section
      1350.32.2
                              
                              Certification
      of Principal Financial Officer, pursuant to 18 U.S.C. Section
      1350.


30
  SIGNATURES
 
 Pursuant
to the requirements of the Securities Exchange Act if 1934, the Registrant had
duly caused this amendment to be signed on its behalf by the undersigned
thereunto duly authorized.
 
 MEDPRO
      SAFETY PRODUCTS, INC.(Registrant)August
      13, 2009
                By:
                /s/ W. Craig TurnerW.
      Craig TurnerChief
      Executive Officer, Chairmanof
      the Board of Directors(Principal
      Executive Officer)August
      13, 2009
                By:
                /s/ Marc T. RayMarc
      T. RayVice
      President Finance, Chief Financial Officer and Chief(Principal
      Financial and Accounting
Officer)
  31
  INDEX
TO EXHIBITS
 
 Exhibit No.
                
                Description of Exhibit10.18
                
                Employment
      Agreement with W. Craig Turner, dated July 17, 2009 (incorporated by
      reference to Exhibit 10.1 to Form 8-K filed on July 22,
    2009).31.1
                
                Certification
      of Principal Executive Officer, pursuant to Rule
  13a–14(a).31.2
                
                Certification
      of Principal Financial Officer, pursuant to Rule
  13a–14(a).32.1
                
                Certification
      of Principal Executive Officer, pursuant to 18 U.S.C Section
      1350.32.2
                
                Certification
      of Principal Financial Officer, pursuant to 18 U.S.C Section
      1350.
  32