UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


WASHINGTON,
D.C. 20549





FORM
10-Q




(Mark
One)


x
              QUARTERLY
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934
  For
the Quarterly Period Ended March 31, 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,
            
            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.13,320,391 shares of Common Stock were
outstanding at April 30, 2009.










INDEX





PagePART
      I –
                                                                    FINANCIAL
      INFORMATIONITEM
      1.
                                                                    FINANCIAL STATEMENTS
                                                                    
                                                                    2ITEM
      2.
                                                                    MANAGEMENT’S DISCUSSION AND ANALYSIS OF
      FINANCIALCONDITION AND RESULTS OF
      OPERATIONS
                                                                    
                                                                    18ITEM
      3.
                                                                    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
      MARKET RISK
                                                                    
                                                                    25ITEM
      4.
                                                                    CONTROLS AND PROCEDURES
                                                                    
                                                                    25PART
      II –
                                                                    OTHER
      INFORMATIONITEM
      1.
                                                                    LEGAL PROCEEDINGS
                                                                    
                                                                    26ITEM
      1A.
                                                                    RISK FACTORS
                                                                    
                                                                    26ITEM
      2.
                                                                    UNREGISTERED SALES ON EQUITY SECURITIES AND USE OF
      PROCEEDS
                                                                    
                                                                    26ITEM
      3.
                                                                    DEFAULTS UPON SENIOR
    SECURITIES
                                                                    
                                                                    26ITEM
      4.
                                                                    SUBMISSION OF MATTERS TO A VOTE OF SECURITY
      HOLDERS
                                                                    
                                                                    26ITEM
      5.
                                                                    OTHER INFORMATION
                                                                    
                                                                    26ITEM
      6.
                                                                    EXHIBITS
                                                                    
                                                                    26















PART
I – FINANCIAL INFORMATION





Item
1. Financial Statements





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





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





2





MEDPRO
SAFETY PRODUCTS, INC.





Balance
Sheets


March
31, 2009 and December 31, 2008





March 31, 2009(Unaudited)
                
                
                December 31, 2008ASSETSCurrent
      AssetsCash
                
                $
                11,796,242
                
                
                $
                11,636,843Accounts
      receivable, net of allowance of $15,837 for 2009
                
                
                -
                
                
                
                -Inventory
                
                
                288,289
                
                
                
                288,414Prepaid
      expenses and other current assets
                
                
                25,158
                
                
                
                9,350Prepaid
      investor relations costs
                
                
                156,420
                
                
                
                228,660Prepaid
      costs of automation equipment
                
                
                452,855
                
                
                
                452,855Total
      current assets
                
                
                12,718,964
                
                
                
                12,616,122Property
      and EquipmentEquipment
      and tooling
                
                
                824,958
                
                
                
                751,725Leasehold
      improvements
                
                
                192,377
                
                
                
                114,831Computers,
      network and phones
                
                
                147,081
                
                
                
                126,061Furniture
      and fixtures
                
                
                113,829
                
                
                
                81,213Trade
      show booth
                
                
                7,341
                
                
                
                7,3411,285,586
                
                
                
                1,081,171Less:
      accumulated depreciation
                
                
                164,026
                
                
                
                146,680Property
      and equipment, net
                
                
                1,121,560
                
                
                
                934,491Other
      AssetsIntangible
      assets
                
                
                9,109,547
                
                
                
                9,109,547Deferred
      financing costs
                
                
                87,046
                
                
                
                97,489Total
      other assets
                
                
                9,196,593
                
                
                
                9,207,036Total
      assets
                
                $
                23,037,117
                
                
                $
                22,757,649





See notes
to financial statements.




3




MEDPRO
SAFETY PRODUCTS, INC.





Balance
Sheets (Continued)


March
31, 2009 and December 31, 2008





March 31, 2009(Unaudited)
                                    
                                    
                                    December 31, 2008LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      LiabilitiesAccounts
      payable and accrued expenses
                                    
                                    $
                                    437,477
                                    
                                    
                                    $
                                    261,325Accrued
      interest payable
                                    
                                    
                                    16,345
                                    
                                    
                                    
                                    34,276Current
      portion of long term debt
                                    
                                    
                                    3,266,012
                                    
                                    
                                    
                                    3,262,660Deferred
      revenue
                                    
                                    
                                    452,855
                                    
                                    
                                    
                                    464,900Notes
      payable to and advances from shareholders
                                    
                                    
                                    46,154
                                    
                                    
                                    
                                    383,333Derivative
      liabilities - fair value of warrants
                                    
                                    
                                    1,250,909
                                    
                                    
                                    
                                    -Current
      portion of technology transfer payments - Visual Connections,
      Inc.
                                    
                                    
                                    1,750,000
                                    
                                    
                                    
                                    2,000,000Total
      current liabilities
                                    
                                    
                                    7,219,752
                                    
                                    
                                    
                                    6,406,494Long-Term
      LiabilitiesNotes
      payable - long term portion
                                    
                                    
                                    2,165,411
                                    
                                    
                                    
                                    2,607,435Long-term
      portion of technology transfer payments - Visual Connections,
      Inc.
                                    
                                    
                                    -
                                    
                                    
                                    
                                    250,0002,165,411
                                    
                                    
                                    
                                    2,857,435Total
      liabilities
                                    
                                    
                                    9,385,163
                                    
                                    
                                    
                                    9,263,929Shareholders’
      EquityPreferred
      stock $.01 par value: 10,000,000 shares authorized:Series
      A Preferred6,668,229
      shares issued and outstanding.  Liquidation preference $759,508
      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 13,285,072 sharesissued
      and outstanding, respectively.
                                    
                                    
                                    13,320
                                    
                                    
                                    
                                    13,320Additional
      paid-in capital
                                    
                                    
                                    59,814,522
                                    
                                    
                                    
                                    43,667,689Unearned
      share-based compensation
                                    
                                    
                                    (21,885
                                    )
                                    
                                    
                                    (21,885
                                    )Accumulated
      deficit
                                    
                                    
                                    (46,251,338
                                    )
                                    
                                    
                                    (30,247,024
                                    )Total
      shareholders’ equity
                                    
                                    
                                    13,651,954
                                    
                                    
                                    
                                    13,493,720Total
      liabilities and shareholders’ equity
                                    
                                    $
                                    23,037,117
                                    
                                    
                                    $
                                    22,757,649




See notes
to financial statements.




4




MEDPRO
SAFETY PRODUCTS, INC.





Statements
of Operations


For
the Three Months Ended March 31, 2009 and 2008




For the Three
                    
                    
                    For the ThreeMonths Ended
                    
                    
                    Months EndedMarch 31, 2009
                    
                    
                    March 31, 2008(Unaudited)
                    
                    
                    (Unaudited)SalesNeedlyzer
                    
                    $
                    -
                    
                    
                    $
                    1,180Safe-Mate
                    
                    
                    -
                    
                    
                    
                    15,848Automation
      Services and Equipment
                    
                    
                    12,045
                    
                    
                    
                    -Total
      sales
                    
                    
                    12,045
                    
                    
                    
                    17,028Cost
      of goods sold and automation
                    
                    
                    12,045
                    
                    
                    
                    3,350Gross
      profit
                    
                    
                    -
                    
                    
                    
                    13,678Operating
      ExpensesSalaries,
      wages, and payroll taxes (including share-based compensation of $1,822,500
      and$0)
                    
                    
                    2,241,539
                    
                    
                    
                    218,385Qualified
      profit sharing plan
                    
                    
                    18,489
                    
                    
                    
                    -Advertising
      and promotion
                    
                    
                    132,127
                    
                    
                    
                    12,290Product
      development costs
                    
                    
                    169,517
                    
                    
                    
                    46,164Professional
      and insurance
                    
                    
                    334,746
                    
                    
                    
                    269,440General
      and administrative
                    
                    
                    78,529
                    
                    
                    
                    149,369Travel
      and entertainment
                    
                    
                    102,341
                    
                    
                    
                    88,518Depreciation
      and amortization
                    
                    
                    27,788
                    
                    
                    
                    26,194Total
      operating expenses
                    
                    
                    3,105,076
                    
                    
                    
                    810,360Loss
      from operations
                    
                    
                    (3,105,076
                    )
                    
                    
                    (796,682
                    )Other
      Income (Expenses)Interest
      expense
                    
                    
                    (75,197
                    )
                    
                    
                    (165,719
                    )Other
      Income (Expenses)
                    
                    
                    -
                    
                    
                    
                    65,152Income
      from debt forgiveness
                    
                    
                    -
                    
                    
                    
                    410Interest
      income
                    
                    
                    6,916
                    
                    
                    
                    31,645Change
      in fair value of derivative liabilities
                    
                    
                    22,250,157
                    
                    
                    
                    -Total
      other income (expenses)
                    
                    
                    22,181,876
                    
                    
                    
                    (68,512
                    )Provision
      for income taxes
                    
                    
                    -
                    
                    
                    
                    -Net
      income/(loss)
                    
                    $
                    19,076,800
                    
                    
                    $
                    (865,194
                    )Net
      earnings/(loss) per common shareBasic
      net earnings/(loss) per share
                    
                    $
                    1.43
                    
                    
                    $
                    (0.07
                    )Fully
      diluted net earnings/(loss) per share
                    
                    $
                    0.49
                    
                    
                    $
                    -Shares
      used in computing earnings per shareWeighted
      average number of shares outstanding - basic
                    
                    
                    13,320,380
                    
                    
                    
                    13,285,072Weighted
      average number of shares outstanding - diluted
                    
                    
                    38,993,163
                    
                    
                    
                    -




See
notes to financial statements.




5




MEDPRO
SAFETY PRODUCTS, INC.





Statements
of Changes in Shareholders’ Equity


For
the Three Months Ended March 31, 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
                    
                    
                    
                    -
                    
                    
                    
                    -Earned
      portion of employee and director options
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,822,500
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    1,822,500Unearned
      portion of share based compensation
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    10,064,250
                    
                    
                    
                    (10,064,250
                    )
                    
                    
                    -
                    
                    
                    
                    -Net
      income through March 31, 2009
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    -
                    
                    
                    
                    19,076,800
                    
                    
                    
                    19,076,800Balance
      March 31, 2009
                    
                    
                    13,320,391
                    
                    
                    $
                    13,320
                    
                    
                    
                    9,733,531
                    
                    
                    $
                    97,335
                    
                    
                    $
                    (21,885
                    )
                    
                    $
                    59,814,522
                    
                    
                    $
                    (46,251,338
                    )
                    
                    $
                    13,651,954





See notes
to financial statements.




6




MEDPRO
SAFETY PRODUCTS, INC.





Statements
of Cash Flows


For
the Three Months Ended March 31, 2009 and 2008





For the three
                    
                    
                    For the threeMonths Ended
                    
                    
                    Months EndedMarch 31, 2009
                    
                    
                    March 31, 2008(Unaudited)
                    
                    
                    (Unaudited)Cash
      Flows From Operating ActivitiesNet
      income (loss)
                    
                    $
                    19,076,800
                    
                    
                    $
                    (865,194
                    )Adjustments
      to reconcile net loss to net cash flows from operating
      activities:Depreciation
                    
                    
                    17,345
                    
                    
                    
                    15,751Amortization
      of financing costs
                    
                    
                    10,443
                    
                    
                    
                    10,443Share
      based compensation
                    
                    
                    1,822,500
                    
                    
                    
                    -Change
      in fair value of warrants (derivative liabilities)
                    
                    
                    (22,250,157
                    )
                    
                    
                    -Changes
      in operating assets and liabilitiesAccounts
      receivable
                    
                    
                    70
                    
                    
                    
                    (628
                    )Inventory
                    
                    
                    125
                    
                    
                    
                    2,998Other
      current assets
                    
                    
                    56,156
                    
                    
                    
                    (5,134
                    )Accounts
      payable and accrued expenses
                    
                    
                    222,305
                    
                    
                    
                    (1,841,398
                    )Accrued
      interest payable
                    
                    
                    (17,931
                    )
                    
                    
                    (332,903
                    )Deferred
      revenue
                    
                    
                    (12,045
                    )
                    
                    
                    -Net
      cash flows from operating activities
                    
                    
                    (1,074,389
                    )
                    
                    
                    (3,016,065
                    )Cash
      Flows From Investing ActivitiesAdvances
      (to)/from SGPF, LLC
                    
                    
                    -
                    
                    
                    
                    (10,446
                    )Purchases
      of property, equipment
                    
                    
                    (204,414
                    )
                    
                    
                    (105,477
                    )Net
      cash flows from investing activities
                    
                    
                    (204,414
                    )
                    
                    
                    (115,923
                    )Cash
      Flows From Financing ActivitiesCollection
      of notes receivable
                    
                    
                    -
                    
                    
                    
                    2,000,000Payments
      on note – technology transfer payments
                    
                    
                    (500,000
                    )
                    
                    
                    -Proceeds
      from bank borrowings
                    
                    
                    1,501,827
                    
                    
                    
                    -Repayments
      on bank borrowings
                    
                    
                    (1,940,500
                    )
                    
                    
                    (21,846
                    )Proceeds
      from notes payable to and advances from shareholders
                    
                    
                    208
                    
                    
                    
                    (1,559,912
                    )Payments
      on notes payable to and advances from shareholders
                    
                    
                    (383,333
                    )
                    
                    
                    -Net
      cash from issuance of preferred shares
                    
                    
                    2,760,000
                    
                    
                    
                    -Net
      cash flows from financing activities
                    
                    
                    1,438,202
                    
                    
                    
                    418,242Net
      increase (decrease) in cash
                    
                    
                    159,399
                    
                    
                    
                    (2,713,746
                    )Cash
      at the beginning of the period
                    
                    
                    11,636,843
                    
                    
                    
                    6,341,132Cash
      at the end of the period
                    
                    $
                    11,796,242
                    
                    
                    $
                    3,627,386Supplemental
      Disclosures of Cash Flow Information:Cash
      paid for interest
                    
                    $
                    93,128
                    
                    
                    $
                    648,623Non-cash
      Activity:Non-cash
      proceeds from issuance of Series  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 three
months ended March 31, 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 three months ended March 31, 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 $11 million.  Income from the change in derivative
liabilities reflected in the period ended March 31, 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 13,320,380 for the three months ended March 31, 2009
and 13,285,072 for the three months ended March 31, 2008,
respectively.  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 39,641,146 at March 31,
2009.  Because the Company had a net loss for the period ended March
31,2008, there is no dilutive effect and both the basic and diluted losses per
share are the same for 2008.




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 141(R), “Business Combinations,”
(“SFAS 141(R)”) and SFAS 160, “Noncontrolling Interests in Consolidated
Financial Statements,” (“SFAS 160”).  These standards were
designed to improve, simplify and converge internationally the accounting for
business combinations and the reporting of noncontrolling interests in
consolidated financial statements.  SFAS 141(R) requires an
acquiring entity in a business combination to recognize all (and only) the
assets acquired and liabilities assumed in the transaction; establishes the
acquisition-date fair value as the measurement objective for all assets acquired
and liabilities assumed; and requires the acquirer to disclose to investors and
other users all of the information needed to evaluate and understand the nature
and financial effect of the business combination.  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 141(R) and SFAS 160 became effective for
fiscal years beginning after December 15, 2008.  The adoption of
these pronouncements 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 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 as of the opening
balance sheet as of January 1, 2009. It was adjusted to market at March 24, 2009
for warrants exchanged for Series C preferred stock by two Series A preferred
stockholders and at March 31, 2009 for the remaining Series A and B warrants
then outstanding (See Note 10).




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.  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 March due to product ageing studies and sterilization 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.




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.




9




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 March 31, 2009 with respect to both the SGPF and winged blood collection
technologies:





Quarter
                            
                            SGPF
                            
                            
                            Wing
                            
                            
                            Payable
      at 3/31/092009Second
                            
                            $
                            250,000
                            
                            
                            $
                            250,000
                            
                            
                            $
                            500,000Third
                            
                            
                            250,000
                            
                            
                            
                            250,000
                            
                            
                            
                            500,000Fourth
                            
                            
                            250,000
                            
                            
                            
                            250,000
                            
                            
                            
                            500,0002010First
                            
                            
                            250,000
                            
                            
                            
                            --
                            
                            
                            
                            250,000Total
                            
                            $
                            1,000,000
                            
                            
                            $
                            750,000
                            
                            
                            $
                            1,750,000





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 March 31 is as follows:





12
      Months Ending
                    March 31,
                  
                  Amount2010
                  
                  $
                  599,0652011
                  
                  $
                  1,839,2252012
                  
                  $
                  1,825,4112013
                  
                  $
                  1,821,909After
      3/31/14
                  
                  $
                  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:





March 31, 2009
                              
                              
                              December 31, 2008Short
      term advances with no stated terms settled in the ordinary course of
      business
                              
                              $
                              241,005
                              
                              
                              $
                              1,656Demand
      and promissory notes with varying interest rates, conversion features and
      accrued compensation
                              
                              
                              46,154
                              
                              
                              
                              468,445Less
      amounts reflected in accounts payable
                              
                              
                              (241,005
                              )
                              
                              
                              (86,768
                              )$
                              46,154
                              
                              
                              $
                              383,333




10




Short
term advances 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. As of March 31, 2009, the Company
owed the Chief Financial Officer $46,154 for a pay adjustment effective January
1, 2009 and a bonus payable March 31, 2009 of a total of $46,154.





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




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.  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.




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.  Warren Rustand, a Director of the Company, is a
principal of SC Capital Partners, LLC.




As of
March 31, 2009 total accounts payable to employees and officers totaled $1,005
included in accounts payable, for employee expenses reimbursements, $46,154 in
accrued compensation to the Company Chief Financial Officer and $240,000 due to
SC Capital Partners as issuance costs for the exchange of Vision warrants and
cash for preferred Series C stock.  There were no other amounts
payable to employees or related parties.




NOTE 9 –
LONG-TERM DEBT





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





March
      31, 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
                        
                        $
                        3,611,111
                        
                        
                        $
                        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
                        
                        
                        320,312
                        
                        
                        
                        343,8435,431,423
                        
                        
                        
                        5,870,095Less:
      current portion
                        
                        
                        3,266,012
                        
                        
                        
                        3,262,660Long-term
      portion
                        
                        $
                        2,165,411
                        
                        
                        $
                        2,607,435




11




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 March 31, 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 March 31,2010
                  
                  $
                  3,266,0122011
                  
                  
                  1,773,7252012
                  
                  
                  391,686Total
                  
                  $
                  5,431,423





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 March
31, 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 March 31,
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 March 31, 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 $759,508.  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.




12




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.




13




The
amount recorded as the cumulative effect of EITF 07-05 was determined by
reference to the fair value of the warrants at January 1,
2009.  Approximately 1% of the Company’s outstanding common was freely
tradable at January 1, 2009.  The thinly traded market for the
Company’s shares at January 1, 2009, and the volatility of its trading price
made the use of level one inputs (quoted market prices in active markets for the
warrants or the Company’s shares) under SFAS 157 inappropriate. (See Note 12 for
a discussion of SFAS 157.)  The Company used average share prices in a
Black-Scholes calculation using volatility inputs from similar companies and
taking into account the time it would take for the market to absorb the influx
of over 19,000,000 common shares underlying the warrants based on then current
trading volumes.  As a result, some level two inputs, such as sales of
warrants for cash, and some level three inputs, unobservable inputs developed
using estimates and assumptions expected to be utilized by market participants,
were used to determine fair value of the warrants for the derivative liability
analysis.





After
consideration of all the factors necessary to determine the value of the
warrants as of January 1, 2009 for purposes of EITF 07-05 and SFAS 157 and the
Company-specific issues regarding trading prices and trading volume, including
the restricted status of nearly 99% of the Company’s common shares under Rule
144 through January 4, 2009, the following inputs were used to value the
warrants.  Share prices ranged from $7.88 at January 1, 2009 to $5.00
at March 24, 2009 and $5.50 at March 31, 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.  The Company used a 50%
discount from these quoted values in the Black-Scholes calculation in order to
more closely approximate the only observable input for the warrant values based
on the exercise of the Series C warrants for $2.18 per common share equivalent
in March 2009.  Also considered was the expected inefficient market
absorption of the common shares underlying the Series C preferred stock in the
warrant exercise, reflecting the average daily trading volume of fewer than 700
shares during the first quarter of 2009.  In addition, the Series C
preferred issued in exchange for warrants in March 2009 as well as the
14,339,090 underlying shares of common stock cannot be transferred for one year,
and are subject to additional “leak-out” transfer restrictions during the
subsequent twelve months.  The Company used comparable company
volatility rates of 50% in January 2009 and 55% in March 2009.  The
discount rate was based on comparable term U.S. Treasury rates of 0.76% and
0.81%, respectively for January and March 2009.


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 using the
Black-Scholes method with updated inputs and 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 March 31,
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 a gain of $1,012,238.





The
cumulative effect of this change in accounting for the Company’s warrants was
reflected as of the opening balance sheet on January 1, 2009 and was adjusted to
market at March 24, 2009 for the warrants exchanged for Series C preferred
shares and at March 31, 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 remaining
derivative liability at March 31, 2009 was $1,250,909.




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 $20,925 and $20,450 for the three months ended March 31, 2009
and 2008, respectively.  Future minimum annual lease payments at March
31, 2009, were as follows:




14





12
      month period
                          ended
      March 31,2010
                        
                        $
                        83,7002011
                        
                        
                        83,7002012
                        
                        
                        83,7002013
                        
                        
                        34,875Total
                        
                        $
                        285,975





NOTE 12 –
STOCK OPTIONS AND 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.





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 March 31, 2009.  The
Company has valued the warrants at $211,928 utilizing the Black-Scholes
method.




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.  For more information, see the
Company’s Form 8-K filed August 22, 2008, which includes the 2008
Plan.





The
Company recorded unearned compensation of $14,580,000, or $4.86 per underlying
share, for the grant of 3,000,000 employee and director stock
options.  We used a market approach to value the common stock
underlying the options.  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.




15




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 that there was insufficient trading frequency and volume in MedPro’s
shares to use level 1 inputs under SFAS 157.  The average number of
MedPro shares traded during the 30 days ending on the option grant date was
1,481, with a median of 200 shares. This period included seven trading days
where no transactions occurred. In addition, MedPro has 13,285,000 million
shares outstanding, but in August 2008 only 134,000 were not restricted under
SEC Rule 144 and freely tradeable (float).




We
concluded that MedPro’s trading price qualified as a level 2 input in the fair
value hierarchy outlined by SFAS 157 described above. 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.  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. 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 the publicly traded float for MedPro shares was only 1% of the
13,285,072 shares then outstanding, such that an efficient trading market did
not exist.  The amount of the 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 which coincides with the term of a noncompetition covenant
included in the option agreement.  For the three months ended March
31, 2009, the Company recorded compensation expense of $1,822,500 for the
options.  The balance of the unearned compensation totaled $10,064,250
at March 31, 2009.




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 a six-year term from the commencement
of initial commercial manufacturing of the applicable
product.  Greiner agreed to pay MedPro a production royalty per unit
on a minimum volume of units of each product over the term of the agreements
plus additional cash amounts to acquire the production lines for the
products.




The
agreement with Greiner for the exclusive right to manufacture, market and
distribute our tube-activated blood collection system and our skin activated
blood collection device supersedes and replaces our prior distribution agreement
with Greiner for the tube-activated blood collection system.  Under
the agreement, MedPro was required to use commercially reasonable efforts to
design, construct, complete and successfully test an initial automated
production line (“IPL”) for delivery to Greiner at a mutually acceptable date
not before March 31, 2009.  The IPL includes molds, automation,
packaging and associated engineering as required.  Greiner agreed to
pay MedPro an amount not to exceed $5.1 million for the IPL in three
installments, beginning October 1, 2008 with the final payment due March 31,
2009.  In addition, MedPro was required to use commercially reasonable
efforts to commence production of a secondary automated production line
approximately 24 months after completion of the IPL, depending on volume
requirements determined by Greiner.  The date for completion and
shipment will be determined by the parties.  Greiner agreed to pay
MedPro an amount not to exceed $3.5 million for the second product line in three
installments, the first of which would be due upon initiation of the design
review with Greiner.




16




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




Greiner
also entered into an agreement with us for the exclusive right to manufacture,
market and distribute our winged blood collection set on similar
terms.  Under the agreement for the winged product, MedPro was
required to use commercially reasonable efforts to produce an initial design
plan for the product, including estimate of component costs, production line
costs, automation line costs, and a cost estimate of the fully designed product
for review and approval by Greiner by October 1, 2008.  Greiner agreed
to make an initial payment of $1 million on or before October 1, 2008 upon
delivery and acceptance by Greiner of the initial design plan for an automated
production line.  Upon approval, MedPro was to initiate the
construction of the production line, for which Greiner agreed to pay an amount
not to exceed $4 million in three equal installments upon the achievement of
certain milestones leading to validation of the final production
line.




Greiner
is expected to produce a designated minimum number of units each year during the
first five years of the agreement.  Greiner is obligated to pay us a
production royalty per unit, totaling $10.8 million over this
period.  Greiner 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 Greiner $2,700,000.  This
represented the $1,000,000 fee for the initial Wing design plan and the first
installment of the $1,700,000 due on the Vacuette project.  In late
November 2008, Greiner and the Company came to an oral understanding that
Greiner would assume future responsibilities to redesign and assemble
computerized production lines for the MedPro devices.  Pending
completion of written amendments to their agreements, the parties reached an
oral understanding allocating $2,000,000 of the $2,700,000 received in 2008 to
the $1,000,000 program fee for each of the two projects payable under their
original arrangement upon the deliveries by the Company in September
2008.  The balances of the expected payments under the contracts have
been suspended and may be terminated.




The
Company has recognized $2,000,000 of income from the program fees.  Of
the additional $700,000 collected in 2008, the Company recorded $247,145 as
income to offset the expenses incurred on Greiner’s behalf for these
projects.  The balance of $452,855 was recorded as prepaid assets and
deferred revenue, reflecting the cost of a packaging machine acquired on behalf
of Greiner for the Vacuette automation line.  The parties are
negotiating the final ownership and ultimate disposition of the packaging
machines.




17




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 three months ended
March 31, 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. Our present strategy focuses on
developing and commercializing five products in four related product segments:
clinical, phlebotomy, pharmaceutical, and intravenous.





Our
strategy for the next 18 months focuses on completing the steps necessary to
attain pre-market product development milestones and to commence the
distribution of up to five products in these sectors. 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.





On
December 28, 2007, we completed a reverse takeover merger with Dentalserv.com, 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 the purchase of our preferred stock purchase and stock purchase
warrants by four institutional investors for $13 million under the terms of our
stock purchase agreement with them. 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, a Delaware corporation, 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.”





·
            Four
      investment funds purchased $13 million of 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;


18





·
            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
2009, we amended the then outstanding Series J warrant 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 warrant 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 2009, 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 $3,000,000.





In prior
years, we generated revenues from sales of two legacy products — the Safe-Mate
Dental Safety Needle, a single-patient, multi-injection safety needle designed
for the dental market, and the Needlyzer, a legacy needle disposal device. We
discontinued marketing the Needlyzer in 2004, and have subsequently been
liquidating our inventory through sales from time to time to a distributor in
Africa. We ceased marketing Safe-Mate effective as of the end of the first
quarter of 2008. All of the products that MedPro currently has under development
or is planning for the future incorporate passive safety designs.





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 sales of securities, revenue from operations and
borrowing from commercial lenders and related parties.




19


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.





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.  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 March 31, 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
Notes 10 and 12 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.




20




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
March 31, 2009 Financial Statements for further discussion of share-based
employee compensation.





Results
of Operations for the Three Months Ended March 31, 2009 and 2008





MedPro
recorded income of $19,076,800 for the three months ended March 31, 2009,
as compared to a loss of $(865,194) for the three months ended March 31,
2008.  Losses from operations were $(3,105,076) for the first quarter of
2009 and $(796,682) for the first quarter of 2008.  The net losses for
these periods included net other income of $22,181,876 for 2009 and net other
expense of $(68,512) for 2008.  Net other income / (expense) included
interest expense of $(75,197) and $(165,719) 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 quarter of 2009 included $22,250,157
for the change in fair value of derivative liabilities associated with our stock
purchase warrants.




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.




Professional
and insurance costs increased $65,306 over the same period in 2008 primarily
from patent work, FDA and SEC compliance, and appropriate insurance
coverage.  Compensation expense increased to $2,241,539 for the
three months ended March 31, 2009 compared to $218,385 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 $1,822,500 of
compensation expense recognized during the first quarter of 2009 from
share-based options granted in August 2008.  Travel expenses
increased, reflecting increased board of directors’ travel costs and heightened
activity with customers and suppliers.  Product development costs were
$123,353 higher in 2009 than 2008.  Travel costs were $13,823 higher
in the three months of 2009 versus 2008.  Advertising and promotion
costs were $119,837 higher in 2009 due to the engagement of an investor
relations firm in the second quarter of 2008.  Finally, our profit
sharing plan established in September 2008 resulted in costs of $18,489 in 2009
versus no such costs for the same period in 2008.




21




We
recorded no product sales in the first three months of 2009 compared
to sales of $17,028 for the three months ended March 31,
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 quarter of 2009 included $12,045 of revenue from
recognition of income from customer advances for specific product enhancement
requests.





Total
operating expenses were $3,105,076 during the first quarter of 2009 compared to
$810,360 for the same period in 2008.  The $2,294,716 increase during
2009 reflected the activity in product development, higher salary expense, more
significant travel costs, 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 $6,916 and $31,645 for 2009
and 2008, respectively.  Net other income/(expenses) were
$22,181,876 and $(68,512) in 2009 and 2008, respectively.  Interest
expense declined from $165,719 in the first quarter of 2008 to $75,197 for
the first quarter of 2009.  This was primarily due to paying off
shareholder notes and bank debt during 2008.




Liquidity
and Capital Resources





Total
assets were $23,037,117 as of March 31, 2009 and $22,757,649 as of December 31,
2008. The $279,468 increase in total assets reflected the addition of $204,415
of new property purchases, increases in current assets of $102,842 and the
effect of depreciation and amortization totaling $27,789.  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
three months of 2009.





Total
liabilities of $9,385,163 as of March 31, 2009 were $121,234 more 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 increased by $813,258.  Bank debt
declined by $438,672 during the three months ended March 31,
2009.  Technology transfer payment obligations were reduced by
$500,000, and $337,179 of net shareholder payables were paid off in the 2009
first quarter.  Accounts payable were $176,152 higher at March 31,
2009, primarily due to the $240,000 amount due to our financial
advisor.  Other debts and deferred revenue declined by $29,976 in the
first quarter.





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.  This left $1,250,909 of derivative liability associated with
the remaining 1,025,882 Series A and B warrants still outstanding at March 31,
2009.





The
additions to fixed assets during the first three months of 2009 totaled
$204,415 and included $77,546 of office leasehold improvements, $73,233 of new
equipment, $21,020 of new office equipment and $32,616 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 $11,796,242 in cash at March 31, 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.




22





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 March 31, 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
2009.





If we
reach a final agreement to transfer responsibility for completing the automation
line to the distributor, we would not receive subsequent installments totaling
$8.2 million for building the Vacuette and Wing production lines, plus $3.5
million for a second Vacuette® line.  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 and be performed at our
expense.





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 an original $5,000,000
term loan and a $1,500,000 revolving line of credit.  As of March 31,
2009, the amount payable on the term note was $3,611,111 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.




23




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 areas
of corporate interest as may be determined by the Board of Directors for the
next twelve 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.





During
the next year, 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 have hired a
support person in the quality function in early 2009 in addition to an
accounting manager, two engineers and an administrative support person in the
last four months of 2008.





We
continue to add computer systems and related equipment (currently in excess of
$147,000) 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.  We
are in the software validation phase of this conversion.





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 late in the third quarter or the fourth quarter of
2009.  As a result, we expect to record revenue from the products in the
fourth quarter of 2009.  We will also continue to develop products from our
portfolio.




24




We
believe there is a well defined market for our products, encouraged by the
Federal Needlestick Safety and Prevention Act, which requires the use of
products similar to those we are developing. We are optimistic about the
prospects for our blood collection products based upon our pre-marketing
activities over the past two years, general interest in the skin activated
product, and our existing minimum volume distribution contracts. We will monitor
our cash flow carefully and will maintain limited, but necessary, employment
levels required to sustain operations.




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 March 31, 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 March 31, 2009 that have materially affected, or are reasonably
likely to materially affect, internal control over financial
reporting.


25


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





On March
27, 2009, we completed a warrant exercise and exchange with VOMF and VCAF in
which the two funds exercised a portion of their Series C Warrants for cash
totaling $3,000,000 less $240,000 of issuance costs 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.  In
the warrant exercise and exchange, we issued 1,571,523 shares of Series C Stock
and 12 shares of common stock to the two funds and received $3,000,000 in
cash.  Each share of Series C Stock converts into 10 shares of common
stock.  The warrant exercise for cash was exempt from the registration
requirements of the Securities Act by virtue of Section 4(2) thereof, and the
exchange portion of the transaction was exempt by virtue of Section
3(9).





In the
first quarter of 2009 our transfer agent determined that an additional 13 shares
had been issued to round up for fractional shares resulting from a 1-for-4
reverse stock split of DentalServ.com shares in accordance with Nevada
law.  At $.001 par value, these shares were recorded at approximately
$0.01.





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





Not
applicable.





Item
6. Exhibits





(a)           Exhibits





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


26





Exhibit No.
                
                Description of Exhibit10.14
                
                Promissory
      Note dated March 31, 2009 with Traditional Bank, Inc.10.15
                
                Employment
      Agreement with Marc T. Ray, dated April 1, 2009 (incorporated by reference
      to Exhibit 10.1 to Form 8-K filed on April 7, 2008).10.16
                
                Form
      of Lock-up Agreement dated December 27, 2007, between MedPro Safety
      Products, Inc. and each of its directors and officers.10.17
                
                Lock-up
      Agreement dated as of March 13, 2009, by and among MedPro Safety Products,
      Inc., Warren Rustand and Vision Opportunity Master Fund,
    Ltd.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.


27


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)May
      20, 2009
              By:
              /s/W.
      Craig TurnerW.
      Craig TurnerChief
      Executive Officer, Chairman
                of
      the Board of Directors(Principal
      Executive Officer)May
      20, 2009
              By:
              /s/Marc T.
      RayMarc
      T. RayVice
      President Finance, Chief Financial
                Officer
      and Chief(Principal
      Financial and Accounting
                Officer)




28


INDEX
TO EXHIBITS





Exhibit No.
              
              Description of Exhibit10.14
              
              Promissory
      Note dated March 31, 2009 with Traditional Bank, Inc.10.15
              
              Employment
      Agreement with Marc T. Ray, dated April 1, 2009 (incorporated by reference
      to Exhibit 10.1 to Form 8-K filed on April 7, 2008).10.16
              
              Form
      of Lock-up Agreement dated December 27, 2007, between MedPro Safety
      Products, Inc. and each of its directors and officers.10.17
              
              Lock-up
      Agreement dated as of March 13, 2009, by and among MedPro Safety Products,
      Inc., Warren Rustand and Vision Opportunity Master Fund,
    Ltd.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.


29