10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended June 30, 2008

o 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: 000-50638

GRAYMARK HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

OKLAHOMA	20-0180812
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	Identification No.)

101 N. Robinson, Ste. 920
Oklahoma City, Oklahoma 73102
(Address of principal executive offices)
(405) 601-5300
(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 Exchange Act during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ 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. (Check one):

Large accelerated filer o  Accelerated filer o  Non-accelerated filer   o
(Do not check if a smaller reporting company) Smaller Reporting Company þ 

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

As of August 13, 2008, 27,463,438 shares of the registrant’s common stock, $.0001 par value, were outstanding.

GRAYMARK HEALTHCARE, INC.
FORM 10-Q
For the Quarter Ended June 30, 2008

TABLE OF CONTENTS

Part I.	Financial Information
Item 1.	Consolidated Condensed Financial Statements (Unaudited)	1
	a) Balance Sheets	2
	b) Statements of Operations	3
	c) Statements of Operations	4
	d) Statements of Cash Flows	5
	e) Notes to Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 4.	Controls and Procedures and Item 4T. Controls and Procedures	26
Part II.	Other Information
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	28
Item 3.	Defaults Upon Senior Securities	28
Item 4.	Submission of Matters to a Vote of Security Holders	28
Item 5.	Other Information	28
Item 6.	Exhibits	28
SIGNATURES		30
Registrant's Restated Certificate of Incorporation
Registrant's Bylaws
Certification of Stanton Nelson, Chief Executive Officer
Certification of Rick D. Simpson, Chief Financial Officer and Controller
Certification Pursuant to Section 1350 - Chief Executive Officer
Certification Pursuant to Section 1350 - Chief Financial Officer

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

     Certain statements under the captions and “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Item 1A. Risk Factors,” and elsewhere in this report constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology such as “anticipates,” “believes,” “expects,” “may,” “will,” or “should” or other variations thereon, or by discussions of strategies that involve risks and uncertainties. Our actual results or industry results may be materially different from any future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include general economic and business conditions; our ability to implement our business strategies; competition; availability of key personnel; increasing operating costs; unsuccessful promotional efforts; changes in brand awareness; acceptance of new product offerings; and changes in, or the failure to comply with, and government regulations.

     Throughout this report the first personal plural pronoun in the nominative case form “we” and its objective case form “us”, its possessive and the intensive case forms “our” and “ourselves” and its reflexive form “ourselves” refer collectively to Graymark Healthcare, Inc. and its subsidiaries, including SDC Holdings LLC and ApothecaryRx LLC, and their executive officers and directors.

-i-

PART I. FINANCIAL INFORMATION

Item 1. Graymark Healthcare, Inc. Consolidated Condensed Financial Statements

     The consolidated condensed financial statements included herein have been prepared by us pursuant to the rules and regulations of the Securities and Exchange Commission. The Consolidated Condensed Balance Sheets as of June 30, 2008 and December 31, 2007, the Consolidated Condensed Statements of Operations for the three and six months ended June 30, 2008 and 2007, and the Consolidated Condensed Statements of Cash Flows for the six months ended June 30, 2008 and 2007, have been prepared without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to those rules and regulations, although we believe that the disclosures are adequate to make the information presented not misleading. It is suggested that these consolidated condensed financial statements be read in conjunction with the financial statements and the notes thereto included in our latest annual report on Form 10-K.

     In the opinion of management, the consolidated condensed statements for the unaudited interim periods presented include all adjustments, consisting of normal recurring adjustments, necessary to present a fair statement of the results for such interim periods. Because of the influence of seasonal and other factors on our operations, net earnings for any interim period may not be comparable to the same interim period in the previous year, nor necessarily indicative of earnings for the full year.

-1-

GRAYMARK HEALTHCARE, INC.

Consolidated Condensed Balance Sheets
(Unaudited)

	June 30,			December 31,
	2008			2007
ASSETS
Cash and cash equivalents	$	17,204,120		$	2,072,866
Accounts receivable, net of allowance for sales adjustments and doubtful accounts of $10,329,582 and $5,946,788, respectively		12,161,595			6,485,267
Inventories		8,342,677			4,238,670
Other current assets		106,596			133,791
Total current assets		37,814,988			12,930,594
Property and equipment, net		4,397,418			2,069,685
Intangible assets, net		8,681,088			5,609,326
Goodwill		29,370,483			20,247,905
Other assets		161,207			275,127
Total assets	$	80,425,184		$	41,132,637
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable	$	4,353,547		$	4,423,324
Accrued liabilities		5,169,458			2,474,404
Short-term debt		935,494			13,993,015
Current portion of long-term debt		3,153,367			2,394,512
Total current liabilities		13,611,866			23,285,255
Long-term debt, net of current portion		44,224,951			15,354,584
Total liabilities		57,836,817			38,639,839
Minority interests		499,025			629,916
Shareholders’ Equity:
Preferred stock $0.0001 par value, 10,000,000 authorized; no shares issued and outstanding		—			—
Common stock $0.0001 par value, 500,000,000 shares authorized; 27,455,314 and 22,190,400 issued and outstanding at June 30, 2008 and December 31, 2007, respectively		2,746			2,219
Paid-in capital		26,759,013			7,286,636
Accumulated deficit		(4,672,417	)		(5,425,973	)
Total shareholders’ equity		22,089,342			1,862,882
Total liabilities and shareholders’ equity	$	80,425,184		$	41,132,637

See Accompanying Notes to Consolidated Condensed Financial Statements

-2-

GRAYMARK HEALTHCARE, INC.

Consolidated Condensed Statements of Operations
For the Three Months Ended June 30, 2008 and 2007
(Unaudited)

	2008			2007
Revenues:
Product sales	$	20,141,262		$	9,144,658
Services		3,131,934			2,035,492
		23,273,196			11,180,150
Costs and Expenses:
Cost of sales		15,136,505			7,006,557
Cost of services		1,190,884			724,498
Selling, general and administrative		5,253,802			2,669,134
Depreciation and amortization		360,711			179,677
		21,941,902			10,579,866
Income from continuing operations		1,331,294			600,284
Other Income (Expense):
Interest expense, net		(492,361	)		(456,253	)
Other expense		(6,553	)		—
		(498,914	)		(456,253	)
Net income before minority interests and provision for income taxes		832,380			144,031
Minority interests		(253,992	)		(144,727	)
Net income before provision for income taxes		578,388			(696	)
Provision for income taxes		(219,787	)		—
Net income from continuing operations		358,601			(696	)
Income from discontinued operations		9,501			—
Net income	$	368,102		$	(696	)
Net earnings per common share (basic and diluted):
Net income from continuing operations	$	0.01		$	—
Income from discontinued operations		—			—
Net earnings per share	$	0.01		$	—
Average common shares outstanding		25,051,905			20,400,000
Dilutive effect of stock warrants and options		677,300			—
Average common shares outstanding assuming dilution		25,729,205			20,400,000

See Accompanying Notes to Consolidated Condensed Financial Statements

-3-

GRAYMARK HEALTHCARE, INC.

Consolidated Condensed Statements of Operations
For the Six Months Ended June 30, 2008 and 2007
(Unaudited)

	2008			2007
Revenues:
Product sales	$	36,657,156		$	16,461,303
Services		5,659,365			3,221,073
		42,316,521			19,682,376
Costs and Expenses:
Cost of sales		27,439,429			12,517,373
Cost of services		2,162,596			1,086,850
Selling, general and administrative		9,359,030			4,655,641
Depreciation and amortization		667,698			308,715
		39,628,753			18,568,579
Income from continuing operations		2,687,768			1,113,797
Other Income (Expense):
Interest expense, net		(1,019,540	)		(756,927	)
Other expense		(6,553	)		—
		(1,026,093	)		(756,927	)
Net income before minority interests and provision for income taxes		1,661,675			356,870
Minority interests		(618,877	)		(291,373	)
Net income before provision for income taxes		1,042,798			65,497
Provision for income taxes		(320,263	)		—
Net income from continuing operations		722,535			65,497
Income from discontinued operations		31,021			—
Net income	$	753,556		$	65,497
Net earnings per common share (basic and diluted):
Net income from continuing operations	$	0.03		$	—
Income from discontinued operations		—			—
Net earnings per share	$	0.03		$	—
Average common shares outstanding		24,211,407			20,400,000
Dilutive effect of stock warrants		677,300			—
Average common shares outstanding assuming dilution		24,888,707			20,400,000

See Accompanying Notes to Consolidated Condensed Financial Statements

-4-

GRAYMARK HEALTHCARE, INC.

Consolidated Condensed Statements of Cash Flows
For the Six Months Ended June 30, 2008 and 2007
(Unaudited)

	2008			2007
Operating activities:
Net income	$	753,556		$	65,497
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		667,698			308,715
Minority interests		618,877			291,373
Stock option compensation		158,000			—
Loss on disposition of fixed assets		64,796			—
Changes in assets and liabilities -
Accounts receivable		(4,634,266	)		(1,899,703	)
Inventories		(450,423	)		(279,507	)
Other assets		141,115			(61,246	)
Accounts payable		(69,777	)		1,146,345
Accrued liabilities		2,695,057			1,343,453
Net cash provided by (used in) operating activities		(55,367	)		914,927
Investing activities:
Cash received from acquisitions		3,000			395,038
Deposit on acquisition		—			1,310,500
Purchase of businesses		(11,156,165	)		(20,544,017	)
Purchase of property and equipment		(500,157	)		(411,952	)
Net cash used in investing activities		(11,653,322	)		(19,250,431	)
Financing activities:
Issuance of common stock		15,988,547			—
Capital contributions		—			2,990,000
Debt proceeds		12,740,901			16,722,115
Debt payments		(1,757,381	)		(666,266	)
Distributions to minority interests		(132,124	)		(254,037	)
Net cash provided by financing activities		26,839,943			18,791,812
Net change in cash and cash equivalents		15,131,254			456,308
Cash and cash equivalents at beginning of period		2,072,866			805,220
Cash and cash equivalents at end of period	$	17,204,120		$	1,261,528
Noncash Investing and Financing Activities:
Seller-financing of acquisitions	$	4,227,772		$	1,790,000
Common stock issued to pay-off convertible debt	$	750,000		$	—
Common stock and stock options issued to purchase business	$	960,000		$	—
Common stock issued to purchase minority interests	$	1,616,357		$	—
Cash Paid for Interest and Income Taxes:
Interest expense	$	781,853		$	628,815
Income taxes	$	—		$	—

See Accompanying Notes to Consolidated Condensed Financial Statements

-5-

GRAYMARK HEALTHCARE, INC.

Notes to Consolidated Condensed Financial Statements

For the Periods Ended June 30, 2008 and 2007

Note 1 – Nature of Business

     Graymark Healthcare, Inc. (the “Company”) is organized in Oklahoma. Prior to December 31, 2007, the Company was named Graymark Productions, Inc. and was an independent producer and distributor of film entertainment content. On December 31, 2007, the Company completed the acquisition of ApothecaryRx, LLC, (“ApothecaryRx”) and SDC Holdings, LLC (“SDC Holdings”), collectively referred to as the “Graymark Acquisition.” For financial reporting purposes, ApothecaryRx and SDC Holding were considered the acquiring entities and historical financial statements prior to December 31, 2007 reflect the activities of ApothecaryRx and SDC Holdings as adjusted for the effect of the recapitalization which occurred at the date of the Graymark Acquisition. Activities of Graymark Productions, Inc. prior to the acquisition date are no longer reflected in the historical financial statements as Graymark Productions was considered to be the acquired entity. In conjunction with the Graymark Acquisition, the Company suspended all operations related to its film production activities. The Company will continue to actively distribute the motion picture projects that it previously completed.

Note 2 – Summary of Significant Accounting Policies

     For a complete list of the Company’s significant accounting policies, please see the Company’s 2007 Annual Report on Form 10-K.

     Interim Financial Information – The unaudited consolidated condensed financial statements included herein have been prepared in accordance with generally accepted accounting principles for interim financial statements and with Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three and six months ended June 30, 2008 are not necessarily indicative of results that may be expected for the year ended December 31, 2008. The consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K for the year ended December 31, 2007. The December 31, 2007 consolidated condensed balance sheet was derived from audited financial statements.

     Consolidation – The accompanying consolidated financial statements include the accounts of the Company and its wholly owned, majority owned and controlled subsidiaries. All significant inter-company accounts and transactions have been eliminated in consolidation.

     Use of estimates – The preparation of financial statements in conformity with generally accepted accounting principles requires management of the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

     Revenue recognition –

     Pharmacy product sales from the Company’s ApothecaryRx operating segment are recorded at the time the customer takes possession of the merchandise. Customer returns are immaterial and are recorded at the time merchandise is returned.

     Sleep center services and product sales from the Company’s SDC operating segment are recognized in the period in which services and related products are provided to customers and are

-6-

recorded at net realizable amounts estimated to be paid by customers and third-party payers. Insurance benefits are assigned to the Company and, accordingly, the Company bills on behalf of its customers. The Company has established an allowance to account for sales adjustments that result from differences between the amount billed and the expected realizable amount. Actual adjustments that result from differences between the payment amount received and the expected realizable amount are recorded against the allowance for sales adjustments and are typically identified and ultimately recorded at the point of cash application or when otherwise determined pursuant to the Company’s collection procedures. Revenues in the accompanying consolidated financial statements are reported net of such adjustments.

     Due to the nature of the healthcare industry and the reimbursement environment in which the Company operates, certain estimates are required to record net revenues and accounts receivable at their net realizable values at the time products or services are provided. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payers may result in adjustments to amounts originally recorded.

     Included in accounts receivable are earned but unbilled receivables. Unbilled accounts receivable represent charges for services delivered to customers for which invoices have not yet been generated by the billing system. Prior to the delivery of services or equipment and supplies to customers, the Company performs certain certification and approval procedures to ensure collection is reasonably assured and that unbilled accounts receivable is recorded at net amounts expected to be paid by customers and third-party payers. Billing delays, ranging from several weeks to several months, can occur due to delays in obtaining certain required payer-specific documentation from internal and external sources, interim transactions occurring between cycle billing dates established for each customer within the billing system and new sleep labs awaiting assignment of new provider enrollment identification numbers. In the event that a third-party payer does not accept the claim for payment, the customer is ultimately responsible.

     We perform analysis to evaluate the net realizable value of accounts receivable on a quarterly basis. Specifically, we consider historical realization data, accounts receivable aging trends, other operating trends and relevant business conditions. Because of continuing changes in the healthcare industry and third-party reimbursement, it is possible that our estimates could change, which could have a material impact on our operating results and cash flows.

     Accounts receivable – Accounts receivable are reported net of allowances for sales adjustments, rental returns and uncollectible accounts of $10,329,582 and $5,946,788 as of June 30, 2008 and December 31, 2007, respectively. The majority of the Company’s accounts receivable is due from Medicare, private insurance carriers and other third-party payors, as well as from customers under co-insurance and deductible provisions.

     The Company’s allowance for sales adjustments and uncollectible accounts is primarily attributable to the Company’s SDC operating segment. Third-party reimbursement is a complicated process that involves submission of claims to multiple payers, each having its own claims requirements. In some cases, the ultimate collection of accounts receivable subsequent to the service dates may not be known for several months. The Company has established an allowance to account for sales adjustments that result from differences between the amounts billed to customers and third-party payers and the expected realizable amounts. The percentage and amounts used to record the allowance for doubtful accounts are supported by various methods including current and historical cash collections, sales adjustments, and aging of accounts receivable.

     Goodwill and Intangible Assets – Goodwill is the excess of the purchase price paid over the fair value of the net assets of the acquired business. Goodwill and other indefinitely-lived intangible assets are not amortized, but are subject to annual impairment reviews, or more frequent reviews if events or circumstances indicate there may be an impairment of goodwill.

     Intangible assets other than goodwill which consist primarily of customer files and covenants not

-7-

to compete are amortized over their estimated useful lives. The remaining lives range from three to fifteen years. The Company evaluates the recoverability of identifiable intangible asset whenever events or changes in circumstances indicate that an intangible asset’s carrying amount may not be recoverable.

     Discontinued Operations – In conjunction with the Graymark Acquisition, management of the Company elected to discontinue its film production and distribution operations. As of June 30, 2008, the Company had film assets of approximately $92,000 that are included in other assets in the accompanying consolidated balance sheets. The income and expense from the ongoing marketing and distribution of the current film assets will be accounted for as discontinued operations.

RECENT ACCOUNTING PRONOUNCEMENT

     SFAS 141(R) and SFAS 160 – In December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations” (“SFAS 141 (R)”), replacing SFAS No. 141, “Business Combinations” (“SFAS 141”), and SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51” (“SFAS 160”). SFAS 141 (R) retains the fundamental requirements of SFAS 141, and broadens its scope by applying the acquisition method to all transactions and other events in which one entity obtains control over one or more other businesses, and requires, among other things,

• that assets acquired and liabilities assumed be measured at fair value as of the acquisition date,

• that liabilities related to contingent consideration be recognized at the acquisition date and remeasured at fair value in each subsequent reporting period,

• that acquisition-related costs be expensed as incurred, and

• that income be recognized if the fair value of the net assets acquired exceeds the fair value of the consideration transferred.

     SFAS 160 establishes accounting and reporting standards for noncontrolling interests (i.e. minority interests) in a subsidiary, including changes in a parent’s ownership interest in a subsidiary and requires, among other things, that noncontrolling interests in subsidiaries be classified as a separate component of equity. Except for the presentation and disclosure requirements of SFAS 160, which are to be applied retrospectively for all periods presented, SFAS 141 (R) and SFAS 160 are to be applied prospectively in financial statements issued for fiscal years beginning after December 15, 2008. We are assessing the impact SFAS 160 will have on our consolidated financial statements and anticipate that shareholders equity will increase by the minority interest in our subsidiaries.

Note 3 – Acquisitions

     During the six months ended June 30, 2008, the Company’s Apothecary and SDC operating segments made the following acquisitions:

				Amount
Acquisition	Business	Purchase		Financed by
Date	Acquired	Price		Seller
Apothecary:
January 12, 2008	Rambo Drug (“Rambo”)	$	2,558,564	$	1,020,215
February 29, 2008	Thrifty White Store 726 (“Thrifty”)		824,910		99,444
March 26, 2008	Newt’s Pharmacy (“Newt’s”)		1,381,066		486,209
March 26, 2008	Professional Pharmacy (“Professional”)		942,809		263,100
June 1, 2008	Parkway Drug (“Parkway”)		7,360,998		1,489,814
SDC:
April 15, 2008	Minority interests in sleep centers (“Minority”)		1,616,356		—
	Sleep Center of Waco, Ltd.,
	Plano Sleep Center, Ltd. and
June 1, 2008	Southlake Sleep Center, Ltd. (“Texas Labs”)		960,000		—
June 1, 2008	Nocturna Sleep Center, LLC (“Nocturna”)		2,172,790		726,190

     The results of operations from the businesses acquired have been included in the Company’s consolidated condensed statements of operations prospectively from the date of acquisition. Purchase accounting was used to account for all of these acquisitions. Below is the purchase price allocation used to record each of these purchases:

     Apothecary:

	Rambo		Thrifty		Newt’s		Professional		Parkway
Cash	$	1,000	$	—	$	—	$	—	$	2,000
Accounts receivable		7,027		—		3,626		1,412		13,706
Inventory		350,537		161,950		395,546		398,982		2,346,569
Total current assets		358,564		161,950		399,172		400,394		2,362,275
Property and equipment		33,683		—		7,500		5,000		113,812
Intangible assets		973,990		662,960		462,209		162,415		1,062,636
Goodwill		1,192,327		—		512,185		375,000		3,822,275
Net assets acquired	$	2,558,564	$	824,910	$	1,381,066	$	942,809	$	7,360,998

-8-

SDC:

	Minority		Texas Labs			Nocturna
Accounts receivable	$	—	$	805,627		$	210,664
Total current assets		—		805,627			210,664
Property and equipment		—		1,707,978			289,651
Intangible assets		—		—			150,000
Goodwill		998,712		556,804			1,522,475
Total assets acquired		998,712		3,070,409			2,172,790
Minority interest in net tangible assets		617,644		—			—
Less: debt assumed		—		(2,110,409	)		—
Net assets acquired	$	1,616,356	$	960,000		$	2,172,790

     The following unaudited pro forma combined results of operations for the six months ended June 30, 2008 have been prepared as if the 2008 acquisitions had occurred on January 1, 2008:

	2008
Pro forma:
Net sales	$	56,993,000
Net income	$	2,352,000

The pro forma information is presented for informational purposes only and is not necessarily indicative of the results of operations that actually would have been achieved had the acquisition been consummated as of that date, nor is it intended to be a projection of future results.

Note 4 – Goodwill and Other Intangibles

     Changes in the carrying amount of goodwill by operating segment during the six months ended June 30, 2008 were as follows:

	Apothecary		SDC		Total
December 31, 2007	$	7,044,551	$	13,203,354	$	20,247,905
Business acquisitions		5,901,787		2,079,279		7,981,066
Business acquisitions – contingent consideration		142,800		—		142,800
Purchase of minority interests		—		998,712		998,712
June 30, 2008	$	13,089,138	$	16,281,345	$	29,370,483

     As of June 30, 2008, the Company had $29.3 million of goodwill resulting from business acquisitions and other purchases. Goodwill and intangibles assets with indefinite lives must be tested for impairment at least once a year. Carrying values are compared with fair values, and when the carrying value exceeds the fair value, the carrying value of the impaired asset is reduced to its fair value. The Company tests goodwill for impairment on an annual basis in the fourth quarter or more frequently if management believes indicators of impairment exist. The performance of the test involves a two-step process. The first step of the impairment test involves comparing the fair values of the applicable reporting units with their aggregate carrying values, including goodwill. The Company generally determines the fair value of its reporting units using the income approach methodology of valuation that includes the discounted cash flow method as well as other generally accepted valuation methodologies. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the Company performs the second step of the goodwill impairment test to determine the amount of impairment loss. The second step

-9-

of the goodwill impairment test involves comparing the implied fair value of the affected reporting unit’s goodwill with the carrying value of that goodwill.

     Intangible assets as of June 30, 2008 include the following:

	Useful
	Life		Gross		Accumulated
	(Years)		Amount		Amortization			Net
Apothecary:
Customer files		15	$	7,483,136	$	(490,637	)	$	6,992,499
Covenants not to compete		3 – 5		1,469,244		(362,266	)		1,106,978
SDC:
Customer relationships		15		480,000		(45,333	)		434,667
Trademark		15		50,000		(278	)		49,722
Covenants not to compete		3		100,000		(2,778	)		97,222
Total			$	9,582,380	$	(901,292	)	$	8,681,088

     Amortization expense for the three months ended June 30, 2008 and 2007 were approximately $223,000 and $94,000, respectively. Amortization expense for the six months ended June 30, 2008 and 2007 were approximately $402,000 and $168,000, respectively. Amortization expense for the next five years related to these intangible assets is expected to be as follows:

Year ended June 30,
2009	$	885,047
2010		819,047
2011		816,269
2012		734,603
2013		601,698

Note 5 – Borrowings

     The Company’s borrowings by operating segment as of June 30, 2008 are as follows:

				Maturity
	Rate (1)			Date	2008
Apothecary:
Senior bank debt		5	%	May 2014	$	17,403,625
$15 million (consolidated) bank line of credit		5	%	July 2014		5,217,541
Seller financing		4.1 – 7.25	%	July 2009 – June 2011		5,832,064
Non-compete agreements		0.0 – 7.65	%	Dec. 2009 – May 2013		1,207,458
						29,660,688
SDC:
Senior bank debt		5	%	May 2014		12,582,730

-10-

				Maturity
	Rate (1)			Date	2008
$15 million (consolidated) bank line of credit		5	%	June 2014		4,055,798
Seller financing		5	%	June 2009		728,174
Sleep center working capital notes payable		6.0 – 8.0	%	Apr. 2010 – Oct. 2011		774,071
Short-term equipment leases		—		Feb. 2009		207,320
Capital leases		11.0 –17.0	%	Nov. 2012 – Oct. 2011		189,468
Notes payable on vehicles		3.0	%	Nov. 2012		115,563
						18,653,124
Total borrowings						48,313,812
Less:
Short-term debt						(935,494	)
Current portion of long-term debt						(3,153,367	)
Long-term debt					$	44,224,951

(1) Effective rate as of June 30, 2008

     At June 30, 2008, future maturities of long-term debt were as follows:

Year ended June 30,
2009	$	3,153,367
2010		3,118,499
2011		3,041,981
2012		4,959,052
2013		5,241,153
Thereafter		27,864,266

     As of June 30, 2008 the Company had availability under the bank line of credit of $5,726,661. As of June 30, 2008, the Company had one outstanding letter of credit obligation in the amount of $500,000 which was issued as collateral for payment of a seller financing obligation.

Note 6 – Income Taxes

     Prior to December 31, 2007, the taxable income and expenses of ApothecaryRx and SDC Holdings (collectively, the reporting entity for financial reporting purposes) flowed through and was reported at the member level.

Note 7 – Capital Structure

     On June 4, 2008, the Company completed a private placement of common stock and issued 3,344,447 shares of common stock. The proceeds of the private placement offering were $15,050,047 ($4.50 per share). There were no offering costs incurred.

     On June 1, 2008, the Company issued 130,435 shares of common stock in conjunction with the purchase of Texas Labs. The common stock shares issued were valued at $900,000 ($6.90 per share). In connection with the purchase of Texas Labs, the Company issued common stock options exercisable for the purchase of 35,000 common stock shares for $5.00 each.

     On April 15, 2008, the Company concluded a private placement of common stock and issued 404,089 shares of common stock to certain minority interest holders in subsidiaries of SDC Holdings. The shares were issued at a price of $4.00 per share.

     On January 11, 2008, the Company concluded a private placement of common stock and issued

-11-

599,999 shares of common stock (2,999,996 shares before effect of reverse stock split – see Note 8). The net proceeds of the private placement offering were $938,500 ($1.56 per share) after deduction of $111,500 in offering costs. In conjunction with the private placement, the Company issued common stock purchase warrants exercisable for the purchase of 90,000 common stock shares for $1.93 each.

     During January 2008, in conjunction with the closing of the Company’s private placement of common stock, the Company paid-off one of its convertible notes for $750,000 in cash and exchanged the remaining convertible note for 750,000 shares of the Company’s common stock (3,750,000 shares before effect of reverse stock split – see Note 8). In connection with the exchange of shares, the Company issued common stock purchase warrants exercisable for the purchase of 112,500 common stock shares for $1.10 each.

     Effective May 20, 2008, certain placement agent warrant holders exercised their warrants. These warrants were exercisable for the purchase of 83,850 common stock shares and were issued in connection with our 2003 private placement and expire in October 2008. The warrant holders elected to use the “cashless exercise” provisions and, accordingly, were not required to pay the $5.50 per share exercise price. We issued 35,931 common stock shares, $0.0001 par value, pursuant to these warrant exercises.

Note 8 – Reverse Stock Split

     On March 13, 2008, the Company’s board of directors approved a reverse split of the Company’s common stock at a ratio of 1 – 5 shares. The effective date of the reverse split was April 11, 2008. The effect of the reverse split was a reduction of our outstanding common stock shares from 117,701,997 to 23,540,399 shares, subject to adjustment for elimination of fractional shares. All references to shares in the consolidated condensed financial statements and the accompanying notes, including but not limited to the number of shares and per share amounts, unless otherwise noted, have been adjusted to reflect the reverse split retroactively. Previously awarded options and warrants to purchase shares of the Company’s common stock have also been retroactively adjusted to reflect the stock split.

Note 9 – Stock Options and Warrants

     Information with respect to stock options and warrants outstanding follows:

				Average
				Exercise
	Shares			Price
Outstanding at December 31, 2007		1,064,650		$	7.15
Granted – warrants		202,500			1.47
Granted – options		125,000			4.10
Exercised		(83,850	)		(5.50	)
Forfeited		—			—
Outstanding at June 30, 2008		1,308,300		$	6.07

Note 10 – Segment Information

     The Company operates in two reportable business segments: Apothecary and SDC. The Apothecary operating segment operates retail pharmacy stores throughout the central United States. The SDC operating segment operates sleep diagnostic testing labs in Nevada, Oklahoma and Texas. The Company’s film production and distribution activities are included in discontinued operations. The Company’s remaining operations that primarily involve administrative activities associated with operating as a public company are identified as “Other.”

-12-

     Reportable business segment information follows:

	Three Months Ending						Six Months Ending
	June 30,						June 30,
	2008			2007			2008			2007
Sales to external customers:
Apothecary	$	19,494,459		$	8,700,009		$	35,375,161		$	15,741,888
SDC		3,778,737			2,480,141			6,941,360			3,940,488
Total	$	23,273,196		$	11,180,150		$	42,316,521		$	19,682,376
Segment operating profit (loss):
Apothecary	$	117,793		$	(137,458	)	$	181,431		$	(68,354	)
SDC		427,869			136,762			904,116			133,851
Discontinued operations		9,501			—			31,021			—
Other		(187,061	)		—			(363,012	)		—
Total	$	368,102		$	(696	)	$	753,556		$	65,497

	June 30,		December 31,
	2008		2007
Segment assets:
Apothecary	$	38,080,425	$	21,583,680
SDC		28,188,179		18,730,505
Discontinued operations		209,400		335,507
Other		13,947,180		482,945
Total	$	80,425,184	$	41,132,637

Note 11 – Subsequent Events

     On July 23, 2008, the Company’s board of directors granted options to two new board members for the purchase of 30,000 shares of the Company’s common stock at a price of $3.75. The options expire in July 2013.

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

Overview

     Graymark Healthcare, Inc. (“Graymark”) is organized in Oklahoma. Prior to December 31, 2007, we were named Graymark Productions, Inc. and an independent producer and distributor of film entertainment content. On January 2, 2008, we completed the acquisition of ApothecaryRx, LLC, (“ApothecaryRx”) and SDC Holdings, LLC (“SDC Holdings”), collectively referred to as the “Graymark Acquisition.” For financial reporting purposes, Graymark was deemed acquired by ApothecaryRx and SDC Holdings and, accordingly, the historical financial statements prior to December 31, 2007 are those of ApothecaryRx and SDC Holdings as adjusted for the effect of the Graymark Acquisition. The activities of Graymark prior to the Graymark Acquisition are no longer reflected in the historical financial statements as it was considered to be the acquired entity. Goodwill of $5,426,815 was recorded as a result of the Graymark Acquisition reflecting the fair market value of the outstanding common stock and liabilities assumed in excess of Graymark’s identifiable assets at the date of the Graymark Acquisition. In conjunction with the Graymark Acquisition, all motion picture production operations were discontinued. We will continue to actively distribute the motion pictures produced by Graymark.

     On March 13, 2008, our board of directors approved a reverse split of our common stock at a ratio of 1 – 5 shares. The effective date of the reverse split was April 11, 2008. The effect of the reverse split was a reduction of our outstanding common stock shares from 117,701,997 to 23,540,399 shares, subject to adjustment for elimination of fractional shares.

-13-

     ApothecaryRx is organized in Oklahoma and began its operations on July 3, 2006. Through ApothecaryRx, we acquire and operate independent retail pharmacy stores selling prescription drugs and a small assortment of general merchandise including diabetic merchandise, over the counter drugs, beauty products and cosmetics, seasonal merchandise, greeting cards, and convenience foods. We operate stores in Colorado, Illinois, Minnesota, Missouri and Oklahoma. We expect to expand our operations to additional states in the future, primarily in the central United States. The results of operations from our retail pharmacy locations are included in our “Apothecary” operating segment.

     SDC Holdings is organized in Oklahoma and began its operations on February 1, 2007. Through SDC Holdings, we provide diagnostic sleep testing services and treatment for sleep disorders at sleep diagnostic testing labs in Nevada, Oklahoma and Texas. Our products and services are used primarily by patients with obstructive sleep apnea. These labs provide monitored sleep diagnostic testing services to determine sleep disorders in the patients being tested. The majority of the sleep testing is to determine if a patient has obstructive sleep apnea. Positive airway pressure provided by sleep/personal ventilation (or “CPAP”) equipment is the American Academy of Sleep Medicines preferred method of treatment for obstructive sleep apnea. Our sleep diagnostic facilities also determine the correct pressure settings for patient treatment with positive airway pressure. We sell CPAP equipment and supplies to patients who have tested positive for sleep apnea and have had their positive airway pressure determined. The CPAP equipment is a medical device and can only be dispensed pursuant to a physician’s prescription. There are minority ownership interests in our testing facilities. The minority owners are physicians in the geographical area being served by the diagnostic sleep testing facility. The results of operations from our sleep diagnostic testing labs are included in our “SDC” operating segment.

Apothecary Operating Segment

     As of June 30, 2008, we owned and operated 18 retail pharmacies located in Colorado, Illinois, Missouri, Minnesota, and Oklahoma. We acquire financially successful independently-owned retail pharmacies from long-term owners that are approaching retirement. Our acquired pharmacies have successfully maintained market share due to the convenient proximity to health care providers and services, high customer service levels, longevity in the community, competitive pricing and supportive services and products such as compounded pharmaceuticals, durable medical equipment, and assisted and group living deliveries. Our acquired and target acquisition stores are in mid-size, economically-stable communities. We believe that a significant amount of the value of the acquired pharmacies resides in their name and key staff relationships in the community. Following acquisition, we maintain the historic store name and key staff personnel.

     In our Apothecary operating segment, we derive our revenue primarily from the retail sale of prescription drugs, non-prescription over-the-counter drugs and health related products. We are unlike traditional full-line retail pharmacies in that most of our stores offer a very limited amount of what is known as “front-end” merchandise (that is, cosmetics, gift and sundry items and photographic development services). Two of our 18 pharmacies provide pharmaceutical compounded prescriptions. Compounded pharmaceuticals are physician prescribed and are specifically mixed and blended from bulk chemicals for patients’ treatment; generally for conditions that the attending physician deems are not effectively treated by manufactured pharmaceuticals available in standard formats or dosages or to which the patient has some form of sensitivity. Our pharmacies are generally located within or closely adjacent to hospitals and major medical complexes, and cater to patients of those healthcare providers. Other than some compounded prescriptions, our pharmacy services do not typically include intravenous infusion and injectable medications that are offered by hospital or home infusion pharmacies.

     Following their acquisition, all of our pharmacies are converted to a standardized computer platform. The computer platform we use is commercially available and represents modest investment but it allows for standardized pricing models, comparison of site metrics, low cost training and ease of reporting. Our pharmacy computer system profiles customer medical and other relevant information, supplies customers with information concerning their drug purchases for income tax and insurance

-14-

purposes and prepares prescription labels and receipts. The computer platform also expedites transactions with third-party plans by electronically transmitting prescription information directly to the third-party plan and providing on-line adjudication. At the time a prescription is filled, on-line adjudication confirms customer eligibility, prescription coverage, pricing and co-payment requirements and automatically bills the respective plan. On-line adjudication also reduces losses from rejected claims and eliminates a portion of the administrative burden related to the billing and collection of receivables and related costs.

     Our pharmacy front-end merchandising strategy is to provide a limited selection of competitively priced branded drugstore healthcare products and gift items, unlike the larger pharmacy chains that carry a variety of non-healthcare products. To further enhance customer service and loyalty, we attempt to maintain a consistent in-stock position in our offered healthcare merchandise. We offer primarily brand name healthcare care products, including over-the-counter items, and some gift product items.

SDC Operating Segment

     As of June 30, 2008, we operated 14 sleep diagnosis centers in Nevada, Oklahoma and Texas. Each sleep center located in Nevada and Oklahoma is owned by a limited liability company and each of the sleep centers located in Texas is owned by a limited partnership. The limited liability companies and some of the limited partnerships are not wholly-owned by us. We are the manager of each limited liability company and the general partner of each limited partnership.

     At these sleep centers, we conduct sleep studies to determine whether the patients referred to us suffer from sleep disorders and if so the severity of their condition. Our facilities are designed to diagnose and assist in the treatment of the full range of sleep disorders (there are currently over 80 different possible diagnoses of sleep disorders); however, the most common referral to our facilities is Obstructive Sleep Apnea (“OSA”). If a patient is determined to suffer from obstructive sleep apnea, the patient and the patient’s referring physician are offered a comprehensive sleep program. This includes diagnosis, titration procedure (that is, the process of determining the optimal pressure to prescribe for the Continuous Positive Airway Pressure, or CPAP device), and therapeutic intervention. This offering provides a one-stop-shop approach to servicing patient’s needs. The principal sleep disorder products we currently market are personal non-invasive ventilation support systems and the associated disposable supplies that are used in the treatment of obstructive sleep apnea to prevent temporary airway closure during sleep.

     Obstructive sleep apnea is considered to be one of the most common sleep problems. OSA, is a condition that causes the soft tissue in the rear of the throat to narrow and repeatedly close during sleep. Oxygen deficiency, elevated blood pressure and increased heart rate associated with OSA are related to increased risk of cardiovascular morbidity, stroke and heart attack. Additionally, OSA may result in excessive daytime sleepiness, reduced cognitive functions, including memory loss, lack of concentration, depression and irritability. According to National Heart, Lung and Blood Institute of the National Institutes of Health, approximately 80% of people in the United States who suffer from sleep apnea remain undiagnosed. Increased awareness of OSA among doctors and patients in recent years is expected to continue fueling growth of the OSA diagnostic and treatment market at a rate of 15% to 20%.

     The diagnosis of obstructive sleep apnea typically requires monitoring a patient during sleep. During overnight testing, which usually takes place in a clinical setting, respiratory parameters and sleep patterns are monitored along with other vital signs, providing information about the quality of an individual’s sleep. At the end of 2005, it was estimated that there were approximately 3,000 sleep laboratories and centers in the United States.

     Continuous positive airway pressure therapy, commonly referred to as CPAP therapy, has evolved as the primary method for the treatment of obstructive sleep apnea, in part because it is less invasive and more cost-effective than surgery. Unlike surgery, which may only result in reduced snoring, CPAP therapy actually reduces or eliminates the occurrence of obstructive sleep apnea. During this therapy, a patient sleeps with a nasal or facial mask connected by a tube to a small portable airflow

-15-

generator that delivers room air at a predetermined continuous positive pressure. The continuous air pressure acts as a pneumatic splint to keep the patient’s upper airway open and unobstructed. As a result, the cycle of airway closures that leads to the disruption of sleep and other symptoms that characterize obstructive sleep apnea, is prevented or dramatically reduced.

     CPAP is generally not a cure but a therapy for managing the chronic condition of obstructive sleep apnea, and therefore, must be used on a daily basis as long as treatment is required. Patient compliance has been a major factor in the efficacy of CPAP treatment. Early generations of CPAP units provided limited patient comfort and convenience. More recently, product innovations to improve patient comfort and compliance have been developed.

     The primary product we sell is a continuous positive airway pressure systems, commonly referred to as CPAP systems, that consist of a compact flow generator connected to a dual-port, air-filled cushion face mask and are used as therapy for obstructive sleep apnea. The face mask is attached to a single-patient use positive end expiratory pressure valve designed to maintain positive airway pressure with the objective of increasing patient comfort and acceptance of the treatment. The CPAP systems provide a non-invasive and more comfortable way for treating obstructive sleep apnea.

     CPAP flow generators are electro-mechanical devices that deliver continuous positive airway pressure through a nasal or full face mask to a patient suffering from obstructive sleep apnea in order to keep the patient’s airway open during sleep. Given the importance of patient compliance in treating obstructive sleep apnea, the products are easy to use, lightweight, small and quiet, making them relatively unobtrusive at the bedside. The latest generation of these products are self-adjusting CPAP devices that use pattern recognition technology to respond to changes in breathing patterns, as individual patient needs change. It is the responsibility of the physician prescribing the CPAP to determine the appropriate type of device that we will supply for each patient.

     For patients with more severe or complex obstructive sleep apnea, the bi-level CPAP is available. These electro-mechanical devices allow inspiratory and expiratory pressures to be independently adjusted.

Mergers and Acquisitions

     On January 2, 2008, the Graymark Acquisition was completed. Although the Graymark Acquisition was completed on January 2, 2008, we accounted for the Graymark Acquisition as though it occurred on December 31, 2007 because our shareholders approved the Graymark Acquisition in December 2007 and effectively consummated the associate change in control. As part of the Graymark Acquisition, we delivered 102,000,000 shares of our common stock to the former equity interest owners of ApothecaryRx and SDC Holdings. Roy T. Oliver and Stanton Nelson received 33,875,730 and 12,861,180 shares of common stock, respectively, as a result of their direct and indirect equity ownership interests in ApothecaryRx and SDC Holdings. Prior to the Graymark Acquisition, Mr. Nelson served on our Board of Directors and Mr. Oliver was one of our greater than 10% shareholders.

     During the six months ended June 30, 2008, our Apothecary and SDC operating segments completed the following acquisitions:

				Amount
Acquisition	Business	Purchase		Financed
Date	Acquired	Price		by Seller
Apothecary:
January 12, 2008	Rambo Pharmacy (“Rambo”)	$	2,558,564	$	1,020,215
February 29, 2008	Thrifty White Store 726 (“Thrifty”)		824,910		99,444
March 26, 2008	Newt’s Pharmacy (“Newt’s”)		1,381,066		486,209
March 26, 2008	Professional Pharmacy (“Professional”)		942,809		263,100

-16-

				Amount
Acquisition	Business	Purchase		Financed
Date	Acquired	Price		by Seller
June 1, 2008	Parkway Drug (“Parkway”)		7,360,998		1,489,814
SDC:
April 15, 2008	Minority interests in sleep centers (“Minority”)		1,616,356		—
	Sleep Center of Waco, Ltd.,
	Plano Sleep Center, Ltd. and
June 1, 2008	Southlake Sleep Center, Ltd. (“Texas Labs”)		960,000		—
June 1, 2008	Nocturna Sleep Center, LLC (“Nocturna”)		2,172,790		726,190

Impairment of Acquisition Goodwill

     Goodwill and other indefinite-lived assets are not amortized, but are subject to impairment reviews annually, or more frequent if necessary. We are required to evaluate the carrying value of goodwill during the fourth quarter of each year and between annual evaluations if events occur or circumstances change that would more likely than not reduce the fair value of the related operating unit below its carrying amount. These circumstances may include without limitation

• a significant adverse change in legal factors or in business climate,

• unanticipated competition, or

• an adverse action or assessment by a regulator.

     In evaluating whether goodwill is impaired, we compare the fair value of the operating unit to which the goodwill is assigned to the operating unit’s carrying amount, including goodwill. The fair value of the operating unit will be estimated using a combination of the income, or discounted cash flows, approach and the market approach that utilize comparable companies’ data. If the carrying amount of the operating unit (i.e., pharmacy or sleep center lab) exceeds its fair value, then the amount of the impairment loss must be measured. The impairment loss would be calculated by comparing the implied fair value of an operating unit to its carrying amount. In calculating the implied fair value of the operating unit goodwill, the fair value of the operating unit will be allocated to all of the other assets and liabilities of that operating unit based on their fair values. The excess of the fair value of an operating unit over the amount assigned to its other assets and liabilities will be the implied fair value of goodwill. An impairment loss will be recognized when the carrying amount of goodwill exceeds its implied fair value.

Results of Operations

     The following table sets forth selected results of our operations for the three and six months ended June 30, 2008. We operate in two reportable business segments: Apothecary and SDC. The Apothecary operating segment includes the operations of our retail pharmacy stores. The SDC operating segment includes the operations from our sleep diagnostic testing labs and related equipment sales. Our film production and distribution activities are included as discontinued operations. The following information was derived and taken from our unaudited financial statements appearing elsewhere in this report.

-17-

Comparison of the Three-Month and Six-Month Periods Ended June 30, 2008 and 2007

Consolidated Totals

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Net revenues	$	23,273,196		$	11,180,150		$	42,316,521		$	19,682,376
Cost of sales and services		16,327,389			7,731,055			29,602,025			13,604,223
Operating expenses		5,614,513			2,848,811			10,026,728			4,964,356
Operating income		1,331,294			600,284			2,687,768			1,113,797
Net other (expense)		(498,914	)		(456,253	)		(1,026,093	)		(756,927	)
Net income before minority interests and provision for income taxes		832,380			144,031			1,661,675			356,870
Minority interests		(253,992	)		(144,727	)		(618,877	)		(291,373	)
Provision for income taxes		(219,787	)		—			(320,263	)		—
Net income (loss) from continuing operations		358,601			(696	)		722,535			65,497
Income from discontinued operations		9,501			—			31,021			—
Net income (loss)	$	368,102		$	(696	)	$	753,556		$	65,497

Discussion of Three Month Periods Ended June 30, 2008 and 2007

     Net revenues increased $12.1 million during the three months ended June 30, 2008 compared with the 2nd quarter of 2007. The increase in net revenues was primarily due to:

• the seven acquisitions made by our Apothecary operating segment during the six months ended December 31, 2007 and the six months ended June 30, 2008 resulted in an increase in revenue of $11.3 million and

• the two acquisitions made by our SDC operating segment in June 2008 resulted in an increase of revenue of $0.6 million related to the one month of operations in the 2nd quarter of 2008. See the “Segment Analysis”, below, for additional information.

     Cost of sales and services increased $8.6 million during the three months ended June 30, 2008 compared with the 2nd quarter of 2007. The increase in cost of sales and services was primarily due to:

• the seven acquisitions made by our Apothecary operating segment during the six months ended December 31, 2007 and the six months ended June 30, 2008 resulted in an increase in cost of sales and services of $8.2 million and

• the two acquisitions made by our SDC operating segment in June 2008 resulted in an increase of cost of sales and services of $0.2 million related to the one month of operations in the 2nd quarter of 2008. See the “Segment Analysis”, below, for additional information.

     Operating expenses increased $2.8 million during the three months ended June 30, 2008, compared with the 2nd quarter of 2007. The increase in operating expenses is partly due to the acquisitions made by our Apothecary operating segment which resulted in an increase in operating expenses of $2.0 million. In addition, operating expenses at our SDC operating segment increased $0.4 million due to additional overhead needed to support increased operations and an increase in the allowance for doubtful accounts. Included in the consolidated operating expenses is approximately $0.3 million of overhead incurred at the parent-company level that includes our a public-company costs. See the “Segment Analysis” below, for additional information.

     Net other expense increased approximately $43,000 during the three months ended June 30, 2008, compared with the 2nd quarter of 2007. The increase in net other expense was primarily due to an increase in interest expense resulting from an increase in borrowings which was offset by a reduction in the interest rate paid on our borrowings and an increase in interest income.

-18-

     Minority interests increased approximately $109,000 during the three months ended June 30, 2008 compared with the 2nd quarter of 2007. The minority interests are the equity ownership interests in our SDC subsidiaries that are not wholly-owned. The increase in minority interests was primarily due to the increased net income of our SDC subsidiaries attributable to the equity ownership interests we do not own, which was offset in part as a result of the acquisition of certain minority interest by the company in April of 2008.

     Provision for income taxes was approximately $220,000 during the three months ended June 30, 2008. During the 2nd quarter of 2007, we were classified as a partnership for federal and state income tax purposes and were not subject to income tax.

     Income from discontinued operations was approximately $9,500 during the three months ended June 30, 2008 and represent the net income from our film operations which were discontinued on January 1, 2008.

     Net Income or Loss. Our operations results achieved net income of approximately $368,000 (1.6% of approximately $23.3 million of net revenues) during the second quarter of 2008, compared to a net loss of $696 (on net revenues of approximately $11.2 million) during the 2007 second quarter.

Discussion of Six Month Periods Ended June 30, 2008 and 2007

     Net revenues increased $22.6 million during the six months ended June 30, 2008 compared with the first six months of 2007. The increase in net revenues was primarily due to:

• the seven acquisitions made by our Apothecary operating segment during the six months ended December 31, 2007 and the six months ended June 30, 2008 which resulted in an increase in revenue of $20.1 million,

• the two acquisitions made by our SDC operating segment in June 2008 resulted in an increase of revenue of $0.6 million related to the one month of operations in the first six months of 2008 and

• the acquisition made by our SDC operating segment on January 31, 2007 resulted in an increase of revenue of $1.0 million related to six months of operations in 2008 versus five months in the 1st half of 2007. See the “Segment Analysis” below, for additional information.

     Cost of sales and services increased $16.0 million during the six months ended June 30, 2008, compared with the 2nd quarter of 2007. The increase in cost of sales and services was primarily due to:

• the seven acquisitions made by our Apothecary operating segment during the six months ended December 31, 2007 and the six months ended June 30, 2008 which resulted in an increase in cost of sales and services of $15.7 million,

• the two acquisitions made by our SDC operating segment in June 2008 resulted in an increase of cost of sales and services of $0.2 million related to the one month of operations in the first six months of 2008 and

• the acquisition made by our SDC operating segment on January 31, 2007 resulted in an increase of cost of sales and services of $0.3 million related to six months of operations in 2008 versus five months in the 1st half of 2007. See the “Segment Analysis”, below, for additional information.

     Operating expenses increased $5.1 million during the six months ended June 30, 2008 compared with the first six months of 2007. The increase in operating expenses was partly due to the acquisitions made by our Apothecary operating segment which resulted in an increase in operating expenses of $3.5. In addition, operating expenses at our SDC operating segment increased $0.5 million due to additional overhead needed to support increased operations and an increase in the allowance for doubtful accounts. Included in the consolidated operating expenses is approximately $550,000 of

-19-

overhead incurred at the Graymark level which includes the costs of being a public company. See the “Segment Analysis” below, for additional information.

     Net other expense increased approximately $269,000 during the six months ended June 30, 2008, compared with the first six months of 2007. The increase in net other expense was primarily due to an increase in borrowings resulting from the acquisitions made by our Apothecary and SDC operating segments, which was offset by a reduction in the interest rate paid on our borrowings and an increase in interest income.

     Minority interests increased approximately $328,000 during the six months ended June 30, 2008 compared with the first six months of 2007. The minority interests are the equity ownership interests in our SDC subsidiaries that are not wholly-owned. The increase in minority interests was primarily due to the increased net income of ours SDC subsidiaries attributable to the equity ownership interests we do not own, which was offset in part as a result of the acquisition of certain minority interests by the Company in April of 2008.

     Provision for income taxes was approximately $320,000 during the six months ended June 30, 2008. During the first six months of 2007, we were classified as a partnership for federal and state income tax purposes and were not subject to income tax.

     Income from discontinued operations was approximately $31,000 during the six months ended June 30, 2008 and represent the net income from our film operations which were discontinued on January 1, 2008.

     Net income was approximately $753,556 (1.8% of approximately $42.3 million of net revenues) during the first six months of 2008, compared to net income of approximately $65,000 (0.3% of approximately $19.7 million in net revenues) during the 2007 first six months.

Apothecary Operating Segment

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Net revenues	$	19,494,459		$	8,700,009		$	35,375,161		$	15,741,888
Cost of sales		15,023,016			6,770,341			27,213,643			12,213,912
Operating expenses		3,976,932			1,875,813			7,309,353			3,264,252
Operating income		494,511			53,855			852,165			263,724
Net other (expense)		(304,523	)		(191,313	)		(590,314	)		(332,078	)
Net income (loss) before provision for income taxes	$	189,988		$	(137,458	)	$	261,851		$	(68,354	)

Discussion of Three Month Periods Ended June 30, 2008 and 2007

     Net revenues increased $10.8 million during the three months ended June 30, 2008 compared with the 2nd quarter of 2007. During the three months ended June 30, 2008, we operated 14 pharmacy locations until June 1, 2008 when we acquired four additional pharmacy locations for a total of 18 locations. During the three months ended June 30, 2007, we operated seven pharmacy locations. The increase in our pharmacy locations resulted in an increase in net revenues of $11.3 million. Revenues during the three months ended June 30, 2008 from existing (or same store) pharmacy locations decreased $0.5 million compared with the 2nd quarter of 2007. The decrease in same store revenues was due to a continued shift in the drug mix from brand to generic. Total prescription volumes have remained consistent, but generic drugs generate a lower average revenue per prescription.

     Cost of sales increased $8.3 million during the three months ended June 30, 2008, compared with the 2nd quarter of 2007. This increase was primarily due to the increase in pharmacy locations operated in

-20-

2008. Cost of sales as a percentage of net revenues was 77% and 78%, respectively, during each of the three months ended June 30, 2008 and 2007.

     Operating expenses increased $2.1 million during the three months ended June 30, 2008, compared with the 2nd quarter of 2007. This increase was primarily due to:

• approximately $2.0 million in additional expenses associated with new pharmacy locations,

• $0.1 million in decreased costs at existing (or same store) locations and

• $0.2 million in increased operational overhead.

     Net other expense increased approximately $113,000 during the three months ended June 30, 2008 compared with the 2nd quarter of 2007. The increase in net interest expenses was primarily due to the increase in borrowings resulting from acquisitions. Total borrowings for our Apothecary operating segment were approximately $30.0 million and $12.5 million at June 30, 2008 and 2007, respectively.

     Net income or loss before provision for income taxes. Our Apothecary operating segment operations resulted in net income before provision for income taxes of approximately $190,000 (1.0% of approximately $19.5 million of net revenues) during the second quarter of 2008, compared to a net loss before provision for income taxes of $137,458 (on net revenues of approximately $8.7 million) during the 2007 second quarter.

Discussion of Six Month Periods Ended June 30, 2008 and 2007

     Net revenues increased $19.6 million during the six months ended June 30, 2008 compared with the first six of 2007. During the six months ended June 30, 2008, we operated 12 pharmacy locations until February 29, 2008 when we acquired the customer files from another pharmacy which were incorporated into our existing facilities and until March 26, 2008 when we acquired two pharmacy locations for a total of 14 locations until June 1, 2008 when we acquired four additional pharmacy locations for a total of 18 locations. During the six months ended June 30, 2007, we operated 5 to 8 pharmacy locations. The increase in our pharmacy locations resulted in an increase in net revenues of $20.1 million. Revenues during the six months ended June 30, 2008 from existing (or same store) pharmacy locations decreased $0.5 million compared with the first six months of 2007. The decrease in same store revenues was due to a continued shift in the drug mix from brand to generic. Total prescription volumes have remained consistent, but generic drugs generate a lower average revenue per prescription.

     Cost of sales increased $15.0 million during the six months ended June 30, 2008, compared with the first six months of 2007. This increase was primarily due to the increase in pharmacy locations operated in 2008. Cost of sales as a percentage of net revenues was 77% and 78%, respectively, during each of the six months ended June 30, 2008 and 2007.

     Operating expenses increased $4.0 million during the six months ended June 30, 2008, compared with the first six months of 2007. This increase was primarily due to:

• approximately $3.5 million in additional expenses associated with new pharmacy locations,

• $0.1 million in increased costs at existing (or same store) locations and

• $0.4 million in increased operational overhead.

     Net other expense increased approximately $258,000 during the six months ended June 30, 2008, compared with the first six months of 2007. The increase in net interest expenses was primarily due to the increase in borrowings resulting from pharmacy acquisitions. Total borrowings for our Apothecary operating segment were approximately $30.0 million and $12.5 million at June 30, 2008 and 2007, respectively.

-21-

     Net income or loss before provision for income taxes. Our Apothecary operating segment operations resulted in net income before provision for income taxes of approximately $262,000 (0.7% of approximately $35.4 million of net revenues) during the first six months of 2008, compared to a net loss before provision of income taxes of $68,354 (on net revenues of approximately $15.7 million) during the 2007 first six months.

SDC Operating Segment

	For the Three Months Ended						For the Six Months Ended
	June 30,						June 30,
	2008			2007			2008			2007
Net revenues	$	3,778,737		$	2,480,141		$	6,941,360		$	3,940,488
Cost of sales and services		1,304,373			960,714			2,388,382			1,390,311
Operating expenses		1,308,741			972,998			2,167,400			1,700,104
Operating income		1,165,623			546,429			2,385,578			850,073
Net other (expense)		(221,519	)		(264,940	)		(461,836	)		(424,849	)
Net income before minority interests and provision for income taxes		944,104			281,489			1,923,742			425,224
Minority interests		(253,992	)		(144,727	)		(618,877	)		(291,373	)
Net income (loss) before provision for income taxes	$	690,112		$	136,762		$	1,304,865		$	133,851

Discussion of Three Month Periods Ended June 30, 2008 and 2007

     Net revenues increased $1.3 million during the three months ended June 30, 2008, compared with the 2nd quarter of 2007. This increase was primarily due to:

• the acquisition of Nocturna and Texas Labs on June 1, 2008 resulted in an increase in net revenues of approximately $0.6 million and

• an increase in the number of sleep studies performed, in existing locations, in the 2nd quarter of 2008, compared with the same period in 2007, resulted in an increase in net revenues of approximately $0.7 million.

     Cost of sales and services increased approximately $0.3 million during the three months ended June 30, 2008 compared with the 2nd quarter of 2007. This increase was primarily due to:

• the acquisition of Nocturna and Texas Labs on June 1, 2008 resulted in an increase in cost of sales and services of approximately $0.2 million and

• an increase in the number of sleep studies performed, in existing locations, in the 2nd quarter of 2008 compared with the same period in 2007, resulted in an increase in cost of sales and services of approximately $0.1 million.

     Cost of sales and services as a percent of net revenues was 35% and 39% during the three months ended June 30, 2008 and 2007, respectively.

     Operating expenses increased approximately $0.3 million during the three months ended June 30, 2008, compared with the 2nd quarter of 2007. The increase in operating expenses was primarily due to additional overhead needed to support increased operations and an increase in the allowance for sales adjustments and doubtful accounts.

     Net other expense decreased approximately $43,000 during the three months ended June 30, 2008 compared with the 2nd quarter of 2007. The decrease in net other expenses is primarily due to other income of approximately $58,000 earned in 2nd quarter of 2008 from research projects and a

-22-

reduction in the interest rate paid on borrowings. This decrease was offset by an increase in the total borrowings for our SDC operating segment and a loss on the disposition of fixed assets of approximately $65,000.

     Minority interests increased approximately $109,000 during the three months ended June 30, 2008 compared with the 2nd of 2007. The minority interests are the equity ownership interests in our SDC subsidiaries that are not wholly-owned. The increase in minority interests was primarily due to the increased net income of ours SDC subsidiaries attributable to the equity ownership interests we do not own, which was offset by the minority interest ownerships we purchased in April 2008.

     Net income or loss before provision for income taxes of our SDC operating segment was approximately $690,000 (18.3% of approximately $3.8 million of net revenues) during the second quarter of 2008, compared to a net income before provision for income taxes of approximately $137,000 (5.5% of approximately $2.5 million net revenues) during the 2007 second quarter.

Discussion of Six Month Periods Ended June 30, 2008 and 2007

     Net revenues increased $3.0 million during the six months ended June 30, 2008, compared with the first six months of 2007. This increase was primarily due to:

• the acquisition of our sleep operations on January 31, 2007 that resulted in only five months of operations during the first six months of 2007, compared with six months of operations ended June 30, 2008, resulted in an increase in net revenues of approximately $1.0 million,

• the acquisition of Nocturna and Texas Labs on June 1, 2008 resulted in an increase in net revenues of approximately $0.6 million and

• an increase in the number of sleep studies performed, in existing locations, in the five months ended June 30 2008, compared with the same period in 2007, resulted in an increase in net revenues of approximately $1.4 million.

     Cost of sales and services increased approximately $1.0 million during the six months ended June 30, 2008 compared with the first six months of 2007. This increase was primarily due to:

• the acquisition of our sleep operations on January 31, 2007, which resulted in only five months of operations during the first six months of 2007, compared with six months of operations ended June 30, 2008, resulted in an increase in cost of sales and services of approximately $0.3 million,

• the acquisition of Nocturna and Texas Labs on June 1, 2008 resulted in an increase in cost of sales and services of approximately $0.2 million and

• an increase in the number of sleep studies performed, in existing locations, in the five months ended June 30 same period in 2007, resulted in an increase in cost of sales and services of approximately $0.5 million.

     Cost of sales and services as a percent of net revenues was 34% and 35% during the six months ended June 30, 2008 and 2007, respectively.

     Operating expenses increased approximately $0.5 million during the six months ended June 30, 2008, compared with the first six months of 2007. This increase was primarily due to an increase in operating expenses associated with having six months of operation in the first half of 2008 versus only five months in the 1st half of 2007. In addition, there was an increase in overhead associated with increased operations and the allowance for sales adjustments and doubtful accounts.

-23-

     Net other expense increased approximately $37,000 during the six months ended June 30, 2008, compared with the first six months of 2007. The increase in net other expenses was primarily due to an increase in the total borrowings for our SDC operating segment, which was offset by other income of approximately $58,000 earned in 2nd quarter of 2008 from research projects and a reduction in the interest rate paid on borrowings.

     Minority interests increased approximately $328,000 during the six months ended June 30, 2008, compared with the first six months of 2007. The minority interests are the equity ownership interests in our SDC subsidiaries that are not wholly-owned. The increase in minority interests was primarily due to the increased net income of our SDC subsidiaries attributable to the equity ownership interests we do not own, which was offset by the amount of minority interest ownerships we purchased in April 2008.

     Net income or loss before provision for income taxes of our SDC operating segment was approximately $1,305,000 (18.8% of approximately $6.9 million of net revenues) during the first half of 2008, compared to a net income before provision for income taxes of approximately $134,000 (3.4% of approximately $3.9 million net revenues) during the first half of 2007.

Liquidity and Capital Resources

     Our liquidity and capital resources are provided principally through cash generated from operations, loan proceeds and equity offerings. Our cash and cash equivalents at June 30, 2008 totaled approximately $17.2 million. As of June 30, 2008, we had working capital of approximately $24.2 million.

     Our operating activities during the six months ended June 30, 2008 used net cash of approximately $55,000 compared to operating activities in the first half of 2007 that provided approximately $915,000. The decrease in cash flows used by operating activities was primarily attributable to an increase in accounts receivable, inventories, and a decrease in accounts payable. These cash uses were offset by an increase in accrued liabilities. During the six months ended June 30, 2008, our operating activities included net income of $753,556 that was increased by depreciation and amortization of $667,698, minority interests of $618,877, stock option compensation of $158,000 and a loss on disposition of fixed assets of $64,796.

     Our investing activities during the six months ended June 30, 2008 used net cash of approximately $11,653,000 compared to the 1st half of 2007 during which we used approximately $19,250,000 for investing activities. The decrease in the cash used in investing activities was attributable to a decrease in the amount of our business acquisitions. During the six months ended June 30, 2008, we used $11,156,165 for the purchases of businesses compared to $20,544,017 in the 1st half of 2007.

     Our financing activities during the six months ended June 30, 2008 provided net cash of approximately $26,840,000 compared to the 1st half of 2007 during which financing activities provided approximately $18,792,000. The increase in net cash provided by financing activities was due to proceeds from the issuance of common stock of $15,988,547, which was offset by a reduction in the amount of debt proceeds. Debt proceeds were $12,740,901 during the six months ended June 30, 2008, compared with debt proceeds of $16,722,115 during the 1st half of 2007. Debt payments were $1,757,381 during the six months ended June 30, 2008, compared with debt payments of $666,266 during the 1st half of 2007.

     We expect to meet our obligations as they become due through available cash and funds generated from our operations, supplemented as necessary by debt financing. We expect to generate positive working capital through our operations. However, there are no assurances that we will be able to either achieve a level of revenues adequate to generate sufficient cash flow from operations or obtain additional financing through debt financing to support our capital commitments and working capital requirements. Our principal capital commitments during the next 12 months primarily involve payments of our indebtedness and lease obligations of approximately $7.1 million as of June 30, 2008.

-24-

     Financial Commitments

     We do not have any capital commitments that we cannot meet with our current capital resources. We expect to meet our obligations as they become due through available cash and funds generated from our operations supplemented as necessary by debt financing. We neither have any plans nor anticipate the need to raise additional equity capital during the next 12 months; however, we may receive additional funds from the exercise of outstanding warrants and stock options, the exercise of which is generally not within our control.

     Our future commitments under contractual obligations by expected maturity date at June 30, 2008 are as follows:

	< 1 year		1-3 years		3-5 years		> 5 years		Total
Short-term debt	$	935,494	$	—	$	—	$	—	$	935,494
Long-term debt		5,084,310		8,309,650		13,734,847		32,127,964		59,256,771
Operating leases		1,113,298		2,047,966		655,649		693,494		4,510,407
	$	7,133,102	$	10,357,616	$	14,390,496	$	32,821,458	$	64,702,672

Accounting Methods

     The application of the following accounting policies, which are important in presenting our financial position and results of operations, requires significant judgments and estimates on the part of our management. For a summary of all of our accounting policies, including the accounting policies discussed below, see Note 2 to the audited consolidated financial statements appearing in our 2007 Annual Report on Form 10-K.

     Our consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (or U.S. GAAP).

Recent Accounting Pronouncements

     SFAS 141(R) and SFAS 160 – In December 2007, the FASB issued SFAS No. 141 (Revised), “Business Combinations” (“SFAS 141 (R)”), replacing SFAS No. 141, “Business Combinations” (“SFAS 141”), and SFAS 160, “Noncontrolling Interests in Consolidated Financial Statements – an Amendment of ARB No. 51” (“SFAS 160”). SFAS 141(R) retains the fundamental requirements of SFAS 141, and broadens its scope by applying the acquisition method to all transactions and other events in which one entity obtains control over one or more other businesses, and requires, among other things,

-25-

• that assets acquired and liabilities assumed be measured at fair value as of the acquisition date,

• that liabilities related to contingent consideration be recognized at the acquisition date and remeasured at fair value in each subsequent reporting period,

• that acquisition-related costs be expensed as incurred, and

• that income be recognized if the fair value of the net assets acquired exceeds the fair value of the consideration transferred.

     SFAS 160 establishes accounting and reporting standards for noncontrolling interests (i.e., minority interests) in a subsidiary, including changes in a parent’s ownership interest in a subsidiary and requires, among other things, that noncontrolling interests in subsidiaries be classified as a separate component of equity. Except for the presentation and disclosure requirements of SFAS 160, which are to be applied retrospectively for all periods presented, SFAS 141 (R) and SFAS 160 are to be applied prospectively in financial statements issued for fiscal years beginning after December 15, 2008. We are assessing the impact SFAS 160 will have on our consolidated financial statements and anticipate that shareholders equity will increase by the minority interest in our subsidiaries.

Cautionary Statement Relating to Forward Looking Information

     We have included some forward-looking statements in this section and other places in this report regarding our expectations. These forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, levels of activity, performance or achievements, or industry results, to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Some of these forward-looking statements can be identified by the use of forward-looking terminology including “believes,” “expects,” “may,” “will,” “should” or “anticipates” or the negative thereof or other variations thereon or comparable terminology, or by discussions of strategies that involve risks and uncertainties. You should read statements that contain these words carefully because they

• discuss our future expectations;

• contain projections of our future operating results or of our future financial condition; or

• state other “forward-looking” information.

     We believe it is important to discuss our expectations; however, it must be recognized that events may occur in the future over which we have no control and which we are not accurately able to predict. Readers are cautioned to consider the specific business risk factors described in this report and our Annual Report on Form 10-K and not to place undue reliance on the forward-looking statements contained in this report or our Annual Report, which speak only as of the date of this report or the date of our Annual Report. We undertake no obligation to publicly revise forward-looking statements to reflect events or circumstances that may arise after the date of this report.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

     Management does not believe that there is any material market risk exposure with respect to derivative or other financial instruments that would require disclosure under this item.

Item 4. Controls and Procedures and Item 4T. Controls and Procedures.

     Our Chief Executive Officer and Chief Financial Officer are responsible primarily for establishing and maintaining disclosure controls and procedures designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the U.S. Securities and Exchange Commission. These controls and procedures are designed to ensure that information required to be

-26-

disclosed in our reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

     Furthermore, our Chief Executive Officer and Chief Financial Officer are responsible for the design and supervision of our internal controls over financial reporting that are then effected by and through our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. These policies and procedures

• pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets,

• provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

• provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

     Our Chief Executive Officer and Chief Financial Officer, based upon their evaluation of the effectiveness of our disclosure controls and procedures and the internal controls over financial reporting as of the last day of the period covered by this report, concluded that our disclosure controls and procedures and internal controls over financial reporting were not fully effective as of the last day of the period covered by this report due to the material weakness noted below. We reported to our auditors and board of directors that, other than the changes taken to remediate the material weakness noted below, no change occurred in our disclosure controls and procedures and internal control over financial reporting occurred during the period covered by this report that would materially affect or is reasonably likely to materially affect our disclosure controls and procedures or internal control over financial reporting. In conducting their evaluation of our disclosure controls and procedures and internal controls over financial reporting, these executive officers did not discover any fraud that involved management or other employees who have a significant role in our disclosure controls and procedures and internal controls over financial reporting. Furthermore, there were no significant changes, other than the material weakness noted below, in our disclosure controls and procedures, internal controls over financial reporting, or other factors that could significantly affect our disclosure controls and procedures or internal controls over financial reporting subsequent to the date of their evaluation.

Accounts Receivable Billing and Reporting at SDC Holding

     Our processing and recording of accounts receivable, the associated third-party billings and the estimate of contractual allowances at SDC Holding are key determinants of material revenues and expenses in our financial statements. Subsequent to the close of our reporting period ending June 30, 2008, we identified the following weaknesses in our controls and procedures:

• Our billing system was aging the accounts receivable based on date of billing rather than date of service and

• Lack of appropriate collection procedures needed to identify and follow-up on insurance company and patient receivables that are not collected in a timely manner.

     We have remediated the billing system issue by adding the flexibility to properly age accounts receivable which provides management with the needed information to properly monitor the level of accounts receivable and monitor the estimate of contractual allowances. In addition, we have implemented additional internal review procedures to monitor the timely follow-up on aged receivables and the effectiveness of our collection efforts. During the third quarter of 2008, we will continue to strengthen our internal controls over this area and anticipate that all of our remediation efforts will be completed by September 30, 2008.

-27-

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

     We do not have any legal proceedings to report.

Item 1A. Risk Factors

     There have been no material changes from the risk factors previously disclosed in our 2007 Annual Report on Form 10-K.

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

     On May 30, 2008, we completed the Texas Labs acquisition. In connection this acquisition we issued 130,435 common stock shares, $0.0001 par value, for $900,000 (or $6.50 per share) as a portion of the purchase consideration. In connection with this the issuance of these common stock shares, no underwriting discounts or commissions were paid or will be paid. The common stock shares were sold without registration under the Securities Act of 1933, as amended, in reliance on the registration exemption afforded by Regulation D and more specifically Rule 506 of Regulation D. In connection with this sale, the purchasers were provided disclosure information that principally consisted of a description of our common stock shares and our Annual Report on Form 10-K for the year ended December 31, 2007 and our Quarterly Report on Form 10-Q for the three months ended March 31, 2008. There were four purchasers of the common stock shares and each represented that it qualified as an accredited investor within the meaning of Rule 501(a) of Regulation D.

     Effective May 20, 2008, 12 of the holders of the placement agent warrants exercised their warrants. These warrants were exercisable for the purchase of 83,850 common stock shares and were issued in connection with our 2003 private placement and expire in October 2008. The warrant holders elected to use the “cashless exercise” provisions and, accordingly, were not required to payment the $5.50 per share exercise price. We issued 35,931 common stock shares, $0.0001 par value, pursuant to these warrant exercises. In connection with this the issuance of these common stock shares, no underwriting discounts or commissions were paid or will be paid. The common stock shares were sold without registration under the Securities Act of 1933, as amended, in reliance on the registration exemption afforded by Regulation D and more specifically Rule 506 of Regulation D. It is believed that each warrant holder qualified as an accredited investor within the meaning of Rule 501(a) of Regulation D.

Item 3. Defaults Upon Senior Securities

     We do not have any thing to report under this Item.

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

     We do not have any thing to report under this Item.

Item 5. Other Information.

     We do not have any thing to report under this Item.

Item 6. Exhibits

(a) Exhibits:

Exhibit No.	Description
3.1.1	Registrant’s Restated Certificate of Incorporation, incorporated by reference to Exhibit 3.1 of Registrant’s Registration Statement on Form SB-2 (No. 333-111819) as filed with the Commission on January 9, 2004.

-28-

Exhibit No.	Description
3.2	Registrant’s Bylaws, incorporated by reference to Exhibit 3.2 of Registrant’s Registration Statement on Form SB-2 (No. 333-111819) as filed with the Commission on January 9, 2004.
4.1	Form of Certificate of Common Stock of Registrant, incorporated by reference to Exhibit 4.1 of Registrant’s Registration Statement on Form SB-2 (No. 333-111819) as filed with the Commission on January 9, 2004.
4.2	Redeemable Warrant Agreement between UMB Bank, N.A. and Registrant, incorporated by reference to Exhibit 4.4 of Registrant’s Registration Statement on Form SB-2 (No. 333-111819) as filed with the Commission on January 9, 2004.
4.3	Form of Redeemable Warrant Certificate, incorporated by reference to Exhibit 4.5 of Registrant’s Registration Statement on Form SB-2 (No. 333-111819) as filed with the Commission on January 9, 2004.
4.4	Stock Option Agreement between E. Peter Hoffman, Jr. and Registrant , incorporated by reference to Exhibit A of Exhibit 10.8 of Registrant’s Registration Statement on Form SB-2 (No. 333-111819) as filed with the Commission on January 9, 2004.
4.5	Form of Common Stock Purchase Warrant Agreement attached as Exhibit A-1 to the Form of Senior Promissory Note dated August 5, 2005, incorporated by reference to Exhibit 4.2 of Form 8-K filed with the Commission on August 11, 2005.
4.6	Form of Common Stock Purchase Warrant Agreement attached as Exhibit A-2 to the Form of Senior Promissory Note dated August 5, 2005, incorporated by reference to Exhibit 4.3 of Form 8-K filed with the Commission on August 11, 2005.
4.7	Form of Common Stock Purchase Warrant Agreement attached as Exhibit A-1 to the Form of Senior Promissory Note dated October 24, 2005, incorporated by reference to Exhibit 4.2 of Form 8-K filed with the Commission on November 1, 2005.
4.8	Form of Common Stock Purchase Warrant Agreement attached as Exhibit A-2 to the Form of Senior Promissory Note dated October 24, 2005, incorporated by reference to Exhibit 4.3 of Form 8-K filed with the Commission on November 1, 2005.
31.1	Certification of Stanton Nelson, Chief Executive Officer of Registrant.
31.2	Certification of Rick D. Simpson, Chief Financial Officer and Controller of Registrant.
32.1	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 of Stanton Nelson, Chief Executive Officer of Registrant.
32.2	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of Sarbanes-Oxley Act of 2002 of Rick D. Simpson, Chief Financial Officer and Controller of Registrant.

-29-

SIGNATURES

     In accordance with the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized

	GRAYMARK HEALTHCARE, INC. (Registrant)
	By:	/S/STANTON NELSON
		Stanton Nelson
Date: August 13, 2008		Chief Executive Officer
	By:	/S/RICK D. SIMPSON
		Rick D. Simpson
Date: August 13, 2008		Chief Financial Officer and Controller

-30-

EX-3.1.1

EXHIBIT 3.1.1

RESTATED CERTIFICATE OF INCORPORATION
OF
GRAYMARK HEALTHCARE, INC.

     Graymark Healthcare, Inc., an Oklahoma corporation (this “Corporation”), does hereby certify that

1. This Corporation hereby restates its Certificate of Incorporation pursuant to Section 1080C of the Oklahoma General Corporation Act.

2. This Corporation was incorporated on August 18, 2003 under the name “GrayMark Productions and amended its Certificate of Incorporation on December 31, 2007.

3. This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of this Corporation’s Certificate of Incorporation as up to the date and time hereof as previously amended, and that there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation, except as permitted pursuant to Section 1080C of the Oklahoma General Corporation Act.

4. This Corporation’s Certificate of Incorporation is restated as follows:

     FIRST: The name of the Corporation is Graymark Healthcare, Inc.

     SECOND: The address of its registered office in the State of Oklahoma is Graymark Healthcare, Inc., 101 North Robinson, Suite 920, Oklahoma City, Oklahoma 73102. The name of its registered agent at such address is John Simonelli.

     THIRD: The nature of the business or purposes to be conducted or promoted are to conduct any lawful business, to exercise any lawful purpose and power, and to engage in any lawful act or activity for which corporations may be organized under the Oklahoma General Corporation Act (the “Act”), and in general, to possess and exercise all the powers and privileges granted by the Act or by any other law of Oklahoma or by this Certificate of Incorporation together with any powers incidental thereto, so far as such powers and privileges are necessary or convenient to the conduct, promotion or attainment of the businesses or purposes of the Corporation.

     FOURTH: The total number of shares of Common Stock which this Corporation shall have authority to issue is Five Hundred Million (500,000,000) shares. The par value of each such share of Common Stock shall be One-Hundredth of One Cent ($0.0001), amounting in the aggregate to Fifty Thousand Dollars ($50,000). The shares of Common Stock shall have no preemptive or preferential rights of subscription concerning further issuance or authorization of the Corporation’s shares of Common Stock. Each share of Common Stock shall entitle the holder thereof to one vote, in person or by proxy, on any matter upon which holders of Common Stock are entitled to vote.

The total number of shares of Preferred Stock which this Corporation shall have authority to issue is Ten Million (10,000,000) shares. The par value of each such share of Preferred Stock shall be One-Hundredth of One Cent ($0.0001), amounting in the aggregate to One Hundred Dollars ($1,000). The Preferred Stock may be issued from time to time in one or more series and (a) may have such voting powers, full or limited, or may be without voting powers; (b) may be subject to redemption at such time or times and at such prices; (c) may be entitled to receive dividends (which may be cumulative or non-cumulative) at such rate or rates, on such conditions, and at such times, and payable in preference to, or in such relation to, the dividends payable on any other class or classes or series of stock; (d) may have such rights upon the dissolution of, or upon any distribution of the assets of, the Corporation; (e) may be made convertible into, or exchangeable for, shares of any other class or classes or of any other series of the same or any other class or classes of stock of the corporation, at such price or prices or at such rates of exchange, and with such adjustments; and (f) shall have such other relative, participating, optional or special rights, qualifications, limitations or restrictions thereof as

shall hereafter be stated and expressed in the resolution or resolutions providing for the issue of such Preferred Stock from time to time adopted by the Board of Directors pursuant to authority so to do which is hereby vested in the Board of Directors.

At any time and from time to time when authorized by resolution of the Board of Directors and without any action by its shareholders, the Corporation may issue or sell any shares of its stock of any class or series, whether out of the unissued shares thereof authorized by the Certificate of Incorporation as originally filed, or by an amendment thereof, and whether or not the shares thereof so issued or sold shall confer upon the holders thereof the right to exchange or convert such shares for or into other shares of stock of the Corporation of any class or classes or any series thereof. When similarly authorized, but without any action by its shareholders, the Corporation may issue or grant rights, warrants or options, in bearer or registered or such other form as the Board of Directors may determine, for the purchase of shares of the stock of any class or series of the Corporation within such period of time, or without limit as to time, to such aggregate number of shares, and at such price per share, as the Board of Directors may determine. Such rights, warrants or options may be issued or granted separately or in connection with the issue of any bonds, debentures, notes, obligations or other evidences of indebtedness or shares of the stock of any class or series of the Corporation and for such consideration and on such terms and conditions as the Board of Directors, in its sole discretion, may determine. In each case, the consideration to be received by the Corporation for any such shares so issued or sold shall be such as shall be fixed from time to time by the Board of Directors.

     FIFTH: The name and mailing address of the incorporator is Michael E. Dunn, 2800 Oklahoma Tower, 210 Park Avenue, Oklahoma City, Oklahoma 73102-5604.

     SIXTH: Except as may otherwise be provided in this Certificate or in the Bylaws of the Corporation, as the same may be amended from time to time, the Board of Directors shall have all powers and authority which may be granted to a board of directors of a corporation under the Act, including but not limited to the following:

     (a) To adopt, amend or repeal the Bylaws of the Corporation.

     (b) To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation.

     (c) To set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created.

     (d) To designate one or more committees.

     (e) To sell, lease or exchange all or substantially all of the property and assets of the Corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property including shares of stock in, and/or other securities of, any other corporation or corporations, as the Board of Directors shall deem expedient and for the best interest of the Corporation, when and as authorized by the shareholders entitled to vote thereon.

     (f) To provide indemnification for directors, officers, employees, and/or agents of the Corporation to the fullest extent permitted by law, subject however, to the rules against limitation on liability of directors as set forth in Section 1006 of the Act, as amended from time to time.

     (g) To determine from time to time whether and to what extent, and at what times and places and under what conditions and regulations, the accounts and books of the Corporation or any of them, shall be opened to the inspection of the shareholders, and no shareholder shall have any right to inspect any account or book or document of the Corporation, except as conferred by the Act or authorized by the Board of Directors, or by a resolution of the shareholders.

     SEVENTH: The Board of Directors of the Corporation shall consist of one or more members. The number of directors shall be fixed by, or in the manner provided in the Bylaws.

     EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its shareholders or any class of them, any court of equitable jurisdiction within the State of Oklahoma, on the application in a summary way of this Corporation or of any creditor or shareholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 1106 of Title 18 of the Oklahoma Statutes or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 1100 of Title 18 of the Oklahoma Statutes order a meeting of the creditors or class or creditors, and/or of the shareholders or class of shareholders of this Corporation, as the case may be, to be summoned in such manner as the court directs. If a majority in number representing three-fourths (3/4) in value of the creditors or class of creditors, and/or of the shareholders or class of shareholders of this Corporation, as the case may be, agree to any compromise or arrangement and the reorganization shall, if sanctioned by the court to which the application has been made, be binding on all the creditors or class of creditors and/or on all the shareholders or class of shareholders of this Corporation, as the case may be, and also on this Corporation.

     NINTH: To the extent permitted by law, no contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have, a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the board or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purposes, if:

     (a) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or the committee, and the Board of Directors or committee authorizes the contract or transaction by the affirmative vote of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or

     (b) the material facts as to his relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved by vote of the shareholders; or

     (c) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof, or the shareholders.

     Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

     TENTH: The Corporation reserves the right to amend or repeal any provision contained herein, add any additional provisions hereto, increase or decrease the number of authorized shares of stock, or restate this Certificate of Incorporation in its entirety in the manner now or hereafter prescribed by the Act.

     ELEVENTH: Except as otherwise required by law or as otherwise provided in this Certificate of Incorporation or in the Bylaws of the Corporation, any matter properly submitted to a vote of the shareholders at a meeting of shareholders duly convened at which there is a quorum present shall be deemed approved upon an affirmative vote of a majority of the outstanding shares of Common Stock present at the meeting, in person or by proxy. No holders of any class of stock other than Common Stock shall be entitled to vote upon any matter, except as may be required by law, this Certificate of Incorporation, or the Bylaws of the Corporation. Written ballots shall not be required for the election of directors.

     TWELFTH: (a) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding whether

-3-

civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture or other enterprise against expenses (including attorney’s fees), judgment, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interest of the Corporation and with respect to any criminal action or proceeding had reasonable cause to believe that his conduct was unlawful.

     (b) The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against expenses (including attorney’ s fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit, if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interest of the Corporation; except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine, upon application, that despite the adjudication of liability, but in the view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

     (c) Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized herein.

     (d) The Corporation may purchase (upon resolution duly adopted by the board of directors) and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership , joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability.

     (e) To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit, or proceeding referred to herein or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection therewith.

     (f) Every such person shall be entitled, without demand by him upon the Corporation or any action by the Corporation, to enforce his right to such indemnity in an action at law against the Corporation. The right of indemnification and advancement of expenses hereinabove provided shall not be deemed exclusive of any rights to which any such person may now or hereafter be otherwise entitled and specifically, without limiting the generality of the foregoing, shall not be deemed exclusive of any right pursuant to statute or otherwise, of any such person in any such action, suit or proceeding to have assessed or allowed in his favor against the Corporation or otherwise, his costs and expenses incurred therein or in connection therewith or any part thereof.

     THIRTEENTH: In addition to any other indemnification granted to directors of the Corporation contained in this Certificate of Incorporation, the Bylaws of the Corporation, or adopted by resolution of the

-4-

shareholders or directors of the Corporation, no director of the Corporation shall be personally liable to the Corporation or its shareholders for monetary damages for breach of fiduciary duty as a director, provided, however, that this indemnification shall not eliminate or limit the liability of a director for any breach of the director’s duty of loyalty to the Corporation or its shareholders, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, or payment of any unlawful dividend or for any unlawful stock purchase or redemption, or for any transaction from which the director derived an improper personal benefit.

     FOURTEENTH: The Corporation elects that the Control Share Acquisition Act as set forth in Sections 1145 through 1155 of Title 18 of the Oklahoma Statutes shall not apply to the corporation. Furthermore, the Corporation elects not to be governed by Section 1090.3 of Title 18 of the Oklahoma Statutes.

     IN WITNESS WHEREOF, this Corporation has caused this Restated Certificate of Incorporation to be signed by its Chief Executive Officer and attested by its Secretary this 30th day of January 2008.

GRAYMARK HEALTHCARE, INC.
By:	/S/STANDON NELSON
	Stanton Nelson, Chief Executive Officer

ATTEST:

/S/MARK R. KIDD
Mark R. Kidd, Secretary

-5-

EX-3.2

EXHIBIT 3.2

BYLAWS

OF

GRAYMARK HEALTHCARE, INC.,

an Oklahoma Corporation

(Amended and Restated for Name Change on December 31, 2007)

TABLE OF CONTENTS

	Page
ARTICLE I – OFFICES	-1-
Section 1.1 Principal Office	-1-
Section 1.2 Registered Office	-1-
Section 1.3 Other Offices	-1-
ARTICLE II – MEETINGS OF SHAREHOLDERS	-1-
Section 2.2 Annual Meeting	-1-
Section 2.3 Special Meetings	-3-
Section 2.4 Notice of Meetings	-3-
Section 2.5 Quorum	-3-
Section 2.6 Adjournment and Notice of Adjourned Meetings	-4-
Section 2.7 Voting Rights	-4-
Section 2.8 Joint Owners of Stock	-5-
Section 2.9 List of Shareholders	-5-
Section 2.10 Action Without Meeting	-5-
Section 2.11 Organization	-6-
Section 2.12 Voting of Shares	-7-
Section 2.13 Votes Required	-7-
ARTICLE III – BOARD OF DIRECTORS	-8-
Section 3.1 General Powers	-8-
Section 3.2 Number, Qualifications and Tenure	-8-
Section 3.3 Vacancies	-8-
Section 3.4 Resignation	-9-
Section 3.5 Removal	-9-
Section 3.6 Chairman of Board	-9-
Section 3.7 Compensation	-9-
Section 3.8 Organization	-9-
ARTICLE IV – MEETINGS OF DIRECTORS	-9-
Section 4.1 Annual Meetings	-9-
Section 4.2 Regular Meetings	-10-
Section 4.3 Special Meetings	-10-
Section 4.4 Notice	-10-
Section 4.5 Waiver by Attendance	-10-
Section 4.6 Quorum	-10-
Section 4.7 Manner of Acting	-10-
Section 4.8 Presumption of Assent	-11-

-i-

	Page
Section 4.9 Informal Action by Directors	-11-
Section 4.10 Participation in Meetings by Conference Telephone	-11-
Section 4.11 Executive Sessions	-11-
Section 4.12 Reliance on Others	-11-
ARTICLE V – COMMITTEES	-11-
Section 5.1 Executive Committee	-11-
Section 5.2 Audit Committee	-12-
Section 5.3 Compensation Committee	-13-
Section 5.4 Other Committees	-13-
Section 5.5 Term	-14-
Section 5.6 Meetings	-14-
Section 5.7 Minutes	-14-
Section 5.8 Responsibility of Directors	-14-
ARTICLE VI – OFFICERS	-14-
Section 6.1 Officers Designated	-14-
Section 6.2 Tenure and Duties of Officers	-15-
Section 6.3 Delegation of Authority	-17-
Section 6.4 Resignations	-17-
Section 6.5 Removal	-17-
Section 6.6 Compensation of Officers	-17-
Section 6.7 Bonds	-17-
ARTICLE VII – EXECUTION OF INSTRUMENTS AND VOTING OF SECURITIES HELD BY THE CORPORATION	-17-
Section 7.1 Execution of Instruments	-17-
Section 7.2 Voting of Securities Owned by the Corporation	-18-
ARTICLE VIII – CERTIFICATES FOR SHARES AND THEIR TRANSFER; OTHER SECURITIES	-18-
Section 8.1 Form and Execution of Certificates	-18-
Section 8.2 Lost Certificates	-19-
Section 8.3 Transfers	-19-
Section 8.4 Fixing Record Dates	-19-
Section 8.5 Registered Shareholders	-20-
Section 8.6 Treasury Shares	-20-
Section 8.7 Execution of Other Securities	-20-
ARTICLE IX – INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS	-20-
Section 9.1 Right to Indemnification	-20-
Section 9.2 Right to Advancement of Expenses	-22-
Section 9.3 Non-Exclusivity of Rights	-23-
Section 9.4 Insurance	-23-
Section 9.5 Right of Indemnitee to Bring Suit	-23-
Section 9.6 Survival of Rights	-23-
Section 9.7 Amendments	-24-
Section 9.8 Savings Clause	-24-
Section 9.9 Certain Definitions	-24-
ARTICLE X – NOTICES	-24-
Section 10.1 Notice to Shareholders	-24-
Section 10.2 Notice to Directors	-24-
Section 10.3 Address Unknown	-24-
Section 10.4 Affidavit of Mailing	-24-
Section 10.5 Time of Notices Deemed Given	-25-
Section 10.6 Failure to Receive Notice	-25-

-ii-

	Page
Section 10.7 Notice to Person with Whom Communication Shall Be Unlawful	-25-
Section 10.8 Notice to Person with Undeliverable Address	-25-
ARTICLE XI – DIVIDENDS	-25-
Section 11.1 Declaration of Dividends	-25-
Section 11.2 Dividend Reserve	-26-
ARTICLE XII – AMENDMENTS	-26-
Section 12.1 Amendments	-26-
Section 12.2 Application of Bylaws	-26-
ARTICLE XIII – OTHER PROVISIONS	-26-
Section 14.1 Loans to Directors and Officers	-26-
Section 14.2 Annual Report	-26-
Section 14.3 Fiscal Year	-27-
Section 14.4 Charter Provisions	-27-
Section 14.5 Corporate Seal	-27-
Section 14.6 Code of Conduct	-27-

-iii-

BYLAWS

OF

GRAYMARK HEALTHCARE, INC.

ARTICLE I

OFFICES

Section 1.1	Principal Office. The principal office of the Corporation shall be located within or without the State of Oklahoma and as may be designated from time to time by the Board of Directors.
Section 1.2	Registered Office. The registered office of the Corporation required by law to be maintained in the State of Oklahoma may be, but need not be, identical with the principal office of the Corporation. The address of the registered office may be changed from time to time by the Board of Directors in the manner provided by law.
Section 1.3	Other Offices. The Corporation may have offices at such other places as the Board of Directors may from time to time determine or as the business of the Corporation may require. The books and record of the Corporation may be kept (subject to any provision contained in the corporate law of the State of Oklahoma) at such place or places as may be determined from time to time by the Board of Directors or in these Bylaws.

ARTICLE II

MEETINGS OF SHAREHOLDERS

Section 2.1	Place of Meetings. Meetings of the shareholders of the Corporation shall be held at such place as may be designated from time to time by the Board of Directors, or, if not so designated, then at the principal executive offices of the Corporation.
Section 2.2	Annual Meeting. (a) The annual meeting of the shareholders of the Corporation, for the purpose of election of Directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors.
	(b) At an annual meeting of the shareholders, only such business as shall have been properly brought before the meeting shall be conducted. All proxy solicitations by the Corporation or its management shall be conducted in accordance with the Regulation 14A promulgated under the Securities Exchange Act of 1934, as amended (the “1934 Act”). To be properly brought before an annual meeting, business must be: (A) specified in the notice of meeting and proxy statement (or any supplement thereto) given and delivered by or at the direction of the Board of Directors; (B) otherwise properly brought before the meeting by or at the direction of the Board of Directors; or (C) otherwise properly brought before the meeting by a shareholder. For business to be properly brought before an annual meeting by a shareholder, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder’s notice must be delivered to or mailed and received at the principal executive offices of the Corporation not less than one

-1-

hundred twenty (120) calendar days in advance of the date of the Notice of Annual Meeting released to shareholders in connection with the previous year’s annual meeting of shareholders; provided, however, that in the event that an annual meeting was not held in the previous year or the date of the annual meeting has been changed by more than thirty (30) days from the date contemplated at the time of the previous year’s Notice of Annual Meeting, notice by the shareholder to be timely must be so received a reasonable time before the Notice of Annual Meeting is released to shareholders. A shareholder’s notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the annual meeting: (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting; (ii) the name and address, as they appear on the Corporation’s books, of the shareholder proposing such business; (iii) the class and number of shares of the Corporation that are beneficially owned by the shareholder; (iv) any material interest of the shareholder in such business; and (v) any other information that is required to be provided by the shareholder pursuant to Regulation 14A promulgated under the 1934 Act in such shareholder’s capacity as a proponent of a shareholder proposal.

Notwithstanding anything in these Bylaws to the contrary, no shareholder proposal shall be considered at any annual meeting except in accordance with the procedures set forth in this Section. The chairman of the annual meeting shall, if the facts warrant, determine and declare at the meeting that business was not properly brought before the meeting and in accordance with the provisions of this Section, and, if the chairman should so determine, the chairman shall so declare at the meeting that any such business not properly brought before the meeting shall not be transacted.

(c) Only persons who are nominated in accordance with the procedures set forth in this Section shall be eligible for election as Directors. Nominations of persons for election to the Board of Directors of the Corporation may be made at a meeting of shareholders by or at the direction of the Board of Directors or by any shareholder of the Corporation entitled to vote in the election of Directors at the meeting who complies with the notice procedures set forth in this paragraph. Such nominations, other than those made by or at the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary of the Corporation in accordance with the provisions of paragraph (b) of this Section 3.2. Such shareholder’s notice shall set forth (i) as to each person, if any, whom the shareholder proposes to nominate for election or re-election as a Director: (A) the name, age, business address and residence address of such person; (B) the principal occupation or employment of such person; (C) the class and number of shares of the Corporation which are beneficially owned by such person; (D) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nominations are to be made by the shareholder; and (E) any other information relating to such person that is required to be disclosed in solicitations of proxies for election of Directors, or is otherwise required in each case pursuant to Regulation 14A promulgated under the 1934 Act (including without limitation such person’s written consent to being named in the proxy statement, if any, as a nominee and to serving as a Director if elected); and (ii) as to such shareholder giving notice, the information required to be provided pursuant to subsection (b) of this Section 2.2. At the request of the Board of Directors, any person nominated by a shareholder for election as a Director shall furnish to the Secretary of the Corporation that information required to be set forth in the shareholder’s notice of nomination which pertains to the nominee. No person shall be eligible for election as a Director of the Corporation unless nominated in

-2-

	accordance with the procedures set forth in this paragraph. The chairman of the meeting shall, if the facts warrant, determine and declare at the meeting that a nomination was not made in accordance with the procedures prescribed by these Bylaws, and if the chairman should so determine, the chairman shall so declare at the meeting, and the defective nomination shall not be recognized and the nominee shall not be entitled to appear on the ballot.
Section 2.3	Special Meetings. (a) Special meetings of the shareholders of the Corporation may only be called, for any purpose or purposes, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized Directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption). All proxy solicitations by the Corporation or its management shall be conducted in accordance with the Regulation 14A promulgated under the 1934 Act.
	(b) If a special meeting shall be called pursuant to subsection (a) above by any person or persons other than the Board of Directors, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the Chairman of the Board of Directors, the President, or the Secretary of the Corporation. No business may be transacted at such special meeting otherwise than specified in such notice and the accompanying proxy statement and in accordance with Regulation 14A promulgated under the 1934 Act. The Board of Directors shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the officer receiving the request shall cause notice to be given to the shareholders entitled to vote, in accordance with the provisions of Section 2.4 of these Bylaws. If the notice is not given within sixty (60) days after the receipt of the request, the person or persons requesting the meeting may set the time and place of the meeting and give the notice. Nothing contained in this subsection (b) shall be construed as limiting, fixing or affecting the time when a meeting of shareholders called by action of the Board of Directors may be held.
Section 2.4	Notice of Meetings. Except as otherwise provided by law or the certificate of incorporation of the Corporation, as the same may be amended or restated from time to time and including any certificates of designation thereunder (hereinafter, the “Certificate of Incorporation”), written notice of each meeting of shareholders shall be given not less than twenty (20) nor more than sixty (60) days before the date of the meeting to each shareholder entitled to vote at such meeting, such notice to specify the place, date, time and purpose or purposes of the meeting and the means of remote communications, if any, by which shareholders and proxy holders may be deemed to be present in person and vote at the meeting. Notice of any meeting of shareholders may be waived in writing, signed by the person entitled to notice thereof, either before or after such meeting, and will be waived by any shareholder by his or her attendance thereat in person or by proxy, except when the shareholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. Any shareholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.
Section 2.5	Quorum. At all meetings of shareholders, except where otherwise provided by

-3-

	statute or by the Certificate of Incorporation, or by these Bylaws, the presence, in person or by proxy duly authorized, of the holders of one-third (1/3rd) of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of shareholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The shareholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. Except as otherwise provided by law, the Certificate of Incorporation or these Bylaws, all action taken by the holders of a majority of the votes cast, excluding abstentions, at any meeting at which a quorum is present shall be valid and binding upon the Corporation; provided, however, that Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of Directors. Where a separate vote by a class or classes is required, a majority of the outstanding shares of such class or classes, present in person or represented by proxy, shall constitute a quorum entitled to take action with respect to that vote on that matter and the affirmative vote of the majority (plurality, in the case of the election of Directors) of shares of such class or classes present in person or represented by proxy at the meeting shall be the act of such class.
Section 2.6	Adjournment and Notice of Adjourned Meetings. Any meeting of shareholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares casting votes, excluding abstentions. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business that may have been transacted at the original meeting. If the adjournment shall be for more than thirty (30) days or if after the adjournment a new record date shall be fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each shareholder of record entitled to vote at the meeting.
Section 2.7	Voting Rights. For the purpose of determining those shareholders entitled to vote at any meeting of the shareholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the Corporation on the record date, as provided in Section 2.9 of these Bylaws, shall be entitled to vote at any meeting of shareholders. Shares may be voted either in person or by one or more agents authorized by a written proxy executed by the shareholder or by the shareholder’s duly authorized attorney-in-fact. The appointment of a proxy shall be filed in writing with the Secretary at, or before, the meeting. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to this Section may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.
	A proxy is not valid after the expiration of three years from the date of its execution, unless the person executing it specifies thereon the length of time for which it is to continue in force, or limits its use to a particular meeting. The termination of a proxy’s authority by act of the shareholder shall, subject to the time limitation set forth herein, be ineffective until written notice of the termination has been received

-4-

	by the Secretary. A proxy’s authority shall not be revoked by the death or incapacity of the maker unless, before the vote shall have been cast or the authority shall have been exercised, written notice of such death or incapacity shall have been received by the Corporation.
Section 2.8	Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, such person’s act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; or (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the district court to appoint an additional person to act with the persons so voting the shares, which shall then be voted as determined by a majority of such persons and the person appointed by the court. If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of clause (c) shall be a majority or even-split in interest.
Section 2.9	List of Shareholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of shareholders, a complete list of the shareholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each shareholder and the number of shares registered in the name of each shareholder. Such list shall be open to the examination of any shareholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten (10) days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not specified, at the place where the meeting is to be held. The Corporation shall not be required to include electronic mail addresses or other electronic contact information on the list. The list shall be open to the examination of any shareholder, for any purpose germane to the meeting for a period of at least ten (10) days prior to the meeting:(A) on a reasonably accessible electronic network; provided that the information required to gain access to the list is provided with the notice of the meeting; or (B) during ordinary business hours, at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that the information is available only to shareholders of the Corporation. If the meeting is to be held at a place, then the list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any shareholder present at the meeting. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any shareholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access the list shall be provided with the notice of the meeting.
Section 2.10	Action Without Meeting. The shareholders of the Corporation may take action by written consent without a meeting to the extent and in the manner permitted by law. Any action taken by the shareholders of the Corporation shall be in shall be conducted in accordance with the Regulation 14C promulgated under the 1934 Act. Any action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum

-5-

	number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Oklahoma, it principal place of business, or the Secretary. Delivery shall be made by hand or by certified or registered mail, return receipt requested.
	Each written consent shall bear the date of signature of each shareholder who signs the consent and no written consent shall be effective to take the corporate action referred to therein unless, within sixty (60) days of the date of the earliest dated consent delivered to the Corporation, a written consent or consents signed by a sufficient number of holders to take action are delivered to the Corporation in the manner prescribed in the first paragraph of this Section.
	In order that the Corporation may determine the shareholders entitled to consent to corporate action in writing without a meeting, the Board of Directors of the Corporation may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which date shall not be more than ten (10) days after the date upon which the resolution fixing the record date adopted by the Board of Directors. If no record date has been fixed by the Board of Directors, the record date for determining shareholders entitled to consent to corporate action in writing without a meeting, when no prior action by the Board of Directors shall be required by the Oklahoma General Corporation Act, shall be the first date on which a signed written consent setting forth the action taken or proposed to be taken shall have been received by the Corporation by delivery to the Secretary of the Corporation. If no record date has been fixed by the Board of Directors and prior action by the Board of Directors shall be required by the Oklahoma General Corporation Act, the record date for determining shareholders entitled to consent to corporate action in writing without a meeting shall be at the close of business on the day on which the Board of Directors adopts the resolution taking action.
Section 2.11	Organization. (a) At every meeting of shareholders, unless another officer of the Corporation has been appointed by the Board of Directors, the Chairman of the Board of Directors shall act as chairman unless another officer of the Corporation has been appointed by the Board of Director, or, if a Chairman has not been appointed, shall be absent, or designates the next senior officer present to so act, the Chief Executive Office, or if the Chief Executive Officer shall be absent, the President, or, if the President shall be absent, the most senior Vice President present, or, in the absence of any such officer, a chairman of the meeting chosen by a majority in interest of the shareholders entitled to vote, present in person or by proxy, shall act as chairman. The Secretary, or, in his or her absence, an Assistant Secretary directed to do so by the Chief Executive Officer, or if the Chief Executive Officer shall be absent, by the President, shall act as secretary of the meeting.
	(b) The Board of Directors of the Corporation shall be entitled to make such rules or regulations for the conduct of meetings of shareholders as it deems necessary, appropriate or convenient. Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to shareholders of record of the Corporation and their duly authorized and

-6-

	constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters that are to be voted on by ballot. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with rules of parliamentary procedure.
Section 2.12	Voting of Shares. Each outstanding share of capital stock entitled to vote shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders, subject to the voting rights and privileges, lack thereof, or limitations thereon, of the class or series of capital stock. At each election for Directors, every shareholder entitled to vote at such election shall have the right to vote, in person or by proxy, the number of shares standing of record in his or her name for each person nominated as a Director to be elected and for whose election he or she has a right to vote.
	Treasury shares, or other shares not at the time outstanding, shall not, directly or indirectly, be voted at any shareholders’ meeting or counted in calculating the actual voting power of shareholders at any given time, but shares of Corporation stock held by the Corporation in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares and the actual voting power of the shareholders at any given time.
	Every stock vote at a meeting of shareholders shall be taken by written ballots, each of which shall state the name of the shareholder or proxy voting and such other information as may be required under the procedure established for the meeting. The Corporation may, and to the extent permitted by law, shall, in advance of any meeting of shareholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate shall be able to act at a meeting of shareholders, the person presiding at the meeting may, and to the extent required by law, shall, appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. Every vote taken by ballots shall be counted by an inspector or inspectors appointed by the chairman of the meeting.
Section 2.13	Votes Required. The vote of a majority of the shares voted at a meeting of shareholders, duly held at which a quorum shall be present, shall be sufficient to take or authorize action upon any matter which may properly come before the meeting, except as otherwise provided by law or by these Bylaws.

-7-

ARTICLE III

BOARD OF DIRECTORS

Section 3.1	General Powers. The powers of the Corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by law or by the Certificate of Incorporation. If any provision shall be made in the Certificate of Incorporation, the powers and duties conferred or imposed upon the Board of Directors by the provisions of the Oklahoma General Corporation Act shall be exercised or performed to the extent and by the person or persons stated in the Certificate of Incorporation.
Section 3.2	Number, Qualifications and Tenure. (a) The number of Directors constituting the Board of Directors shall be at least one and such number as the Directors may from time to time determine by resolution of the Board of Directors or election by the Board of Directors.
	(b) Directors need not be residents of the State of Oklahoma or shareholders of the Corporation, unless so required by the Certificate of Incorporation. During any period that the Corporation shall be subject to the reporting obligations of the 1934 Act, the majority of the members of the Board of Directors shall be “independent directors” within the meanings of the 1934 Act and the rules and regulations promulgated thereunder by the U.S. Securities and Exchange Commission (the “SEC”) and the rules and regulations of Financial Industry Regulatory Authority, Inc. (“FINRA”) and Nasdaq Stock Market, Inc. (“Nasdaq”). In the event a Nominating Committee shall not be in existence at the applicable time, all nominees for election to the Board of Directors shall be approved by a majority of the “independent directors” within the meanings of the 1934 Act and the rules and regulations promulgated thereunder by the SEC and the rules and regulations of FINRA and Nasdaq.
	(c) The Directors shall be elected at the annual or adjourned annual meeting of the shareholders (except as herein otherwise provided for the filling of vacancies) and each Director shall hold office until the Director’s death, resignation, retirement, removal, disqualification, or the Director’s successor shall have been elected and qualified. If, for any reason, the Directors shall not have been elected at an annual meeting, the Directors may be elected as soon thereafter as convenient at a special meeting of the shareholders called and held for that purpose in the manner provided in these Bylaws and in accordance with the Oklahoma General Corporation Act.
Section 3.3	Vacancies. Vacancies occurring on the Board of Directors for any reason may be filled by vote of a majority of the remaining members of the Board of Directors, although less than a quorum, at any meeting of the Board of Directors, or by a sole remaining Director. Each Director so elected shall hold office for the unexpired portion of the term of the Director whose place shall be vacant and until his or her successor shall have been duly elected and qualified or until such Director’s earlier death, resignation or due removal. A vacancy in the Board of Directors shall be deemed to exist under this Section 3.3 in the case of the death, removal or resignation of any Director, or if the shareholders fail at any meeting of shareholders at which Directors are to be elected (including any meeting referred to in Section 4.1, 4.2 or 4.3 below) to elect the number of Directors then constituting the whole Board of Directors.
	At a special meeting of shareholders, the shareholders may elect a Director to fill any vacancy not filled by the Board of Directors.

-8-

Section 3.4	Resignation. Any Director may resign at any time by delivering his or her written resignation to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board of Directors. If no such specification shall be made, it shall be deemed effective at the pleasure of the Board of Directors. When one or more Directors shall resign from the Board of Directors, effective at a future date, a majority of the Directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each Director so chosen shall hold office for the unexpired portion of the term of the Director whose place shall be vacated and until his or her successor shall have been duly elected and qualified.
Section 3.5	Removal. The entire Board of Directors, or any individual Director, may be removed at any time, with or without cause, by a vote of the shareholders holding a majority of the outstanding shares entitled to vote at an annual or special meeting of shareholders. Whenever the holders of any class or series of capital stock of the Corporation are entitled to elect one or more Directors by the provisions of the Certificate of Incorporation, the provisions of this Section 3.4 shall apply with respect to the removal of a Director or Directors so elected, to the vote of the holders of the outstanding shares of that class or series and not to the vote of the outstanding shares as a whole.
Section 3.6	Chairman of Board. There may be a Chairman of the Board of Directors elected by the Directors from their number at the annual meeting of the Board of Directors. The Chairman shall preside at all meetings of the Board of Directors and perform such other duties as may be directed by the Board.
Section 3.7	Compensation. Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors. Nothing in these Bylaws shall be construed to preclude any Director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation for service in the capacity.
Section 3.8	Organization. The Chairman of the Board shall preside at the meetings of the Board of Directors, if present. In the case of any meeting, if there shall be no Chairman of the Board or if the Chairman shall not be present, the Vice Chairman (if there be one) shall preside, or if there be no Vice Chairman or if the Vice Chairman shall not be present, a chairman chosen by a majority of the Directors present shall act as chairman of such meeting. The Secretary of the Corporation or, in the absence of the Secretary, any person appointed by the Chairman shall act as secretary of the meeting.

ARTICLE IV

MEETINGS OF DIRECTORS

Section 4.1 Annual Meetings. Unless the Board of Directors shall determine otherwise, the annual meeting of the Board of Directors shall be held immediately before or after the annual meeting of shareholders and at the place where such meeting shall be held. No notice of an annual meeting of the Board of Directors shall be necessary and such meeting shall be held for the purpose of electing officers and transacting any

-9-

	other business as may lawfully come before it. At its annual meeting the Board of Directors shall conduct a self-evaluation to determine whether its standing committees are functioning effectively.
Section 4.2	Regular Meetings. Except as hereinafter otherwise provided by law or in these Bylaws, regular meetings of the Board of Directors shall be held in the principal executive offices of the Corporation. Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may also be held at any time or place as designated by resolution of the Board of Directors (without other notice than the resolution) or the written consent of all Directors.
Section 4.3	Special Meetings. Special meetings of the Board of Directors may be called by the President or by a majority of the Directors. The person or persons authorized to call special meetings of the Board of Directors may fix any time and place, either within or without the State of Oklahoma, as the time and place for holding any special meeting of the Board of Directors called by them.
Section 4.4	Notice. Notice of special meetings of the Board of Directors shall be given to each Director not less than three (3) days before the date of the meeting by any usual means of communication. All business to be transacted at, and all purposes of, any regular or special meeting of the Board of Directors must be specified in the notice or waiver of notice of the meeting, except as may otherwise be required by law or provided for in the Certificate of Incorporation or these Bylaws. Notice of any meeting may be waived in writing at any time before or after the meeting and will be deemed waived by any Director by attendance thereat, except when the Director attends the meeting solely for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened.
Section 4.5	Waiver by Attendance. Attendance of a Director at a meeting of the Board of Directors shall constitute a waiver of notice of such meeting, except where a Director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened. The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though had at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the Directors not present shall sign a written waiver of notice, or a consent to holding such meeting, or an approval of the minutes the meeting. All such waivers, consents or approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Section 4.6	Quorum. A quorum of the Board of Directors shall consist of a majority of the exact number of Directors fixed from time to time in accordance with Section 3.2 of these Bylaws, but not less than one (1); provided, however, at any meeting whether a quorum be present or otherwise, a majority of the Directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.
Section 4.7	Manner of Acting. Except as otherwise provided in these Bylaws, the act of the majority of the Directors present at a meeting at which a quorum was present shall be the act of the Board of Directors, unless a different vote shall be required by law, the Certificate of Incorporation or these Bylaws.

-10-

Section 4.8	Presumption of Assent. A Director of the Corporation present at a meeting of the Board of Directors at which action on any corporate matter was taken shall be presumed to have assented to the action taken unless his or her contrary vote or abstention shall be recorded or his or her dissent shall have been otherwise entered in the minutes of the meeting or unless he or she shall file his or her written dissent of such action with the person acting as the Secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary promptly after the adjournment of the meeting. An abstention shall be deemed a negative vote. Such right to dissent shall not apply to a Director who voted in favor of such action.
Section 4.9	Informal Action by Directors. Any action that may be taken at a meeting of the Board of Directors may be taken without a meeting if a record or memorandum thereof be made in writing and signed by all of the members of the Board. Such writing or memorandum shall be filed with the Secretary as part of the corporate records.
Section 4.10	Participation in Meetings by Conference Telephone. Members of the Board of Directors, or any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone or similar communications equipment by means of which persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.
Section 4.11	Executive Sessions. Preceding or following each meeting of the Board of Directors, the “independent directors” shall meet in executive sessions without the Corporation’s executive officers and other employees, unless the executive officer or employee shall be appearing before the executive session by invitation or request. A Director shall be designated to preside at the executive sessions, although there shall be no requirement to designate a single Director who will preside at all executive sessions.
Section 4.12	Reliance on Others. A member of the Board of Directors, or a member of any committee designated by the Board of Directors, in the performance of the member’s duties, shall be fully protected in relying in good faith upon the records of the Corporation and upon information, opinions, reports, or statements presented to the Corporation by any of the Corporation’s officers or employees, or committees of the Board of Directors, or by any other person as to matters the member reasonably believes are within the competence of the officer, employee, committee or other person and who have been selected with reasonable care by or on behalf of the Corporation.

ARTICLE V

COMMITTEES

Section 5.1 Executive Committee. The Board of Directors may by resolution passed by a majority of the whole Board of Directors appoint an Executive Committee to consist of two (2) or more members of the Board of Directors. The Executive Committee, to the extent permitted by law and specifically granted by the Board of Directors, shall have, and may exercise when not session, all powers of the Board of Directors in the management of the business and affairs of the Corporation, except such committee shall not have the power or authority to amend the Certificate of Incorporation, to adopt an agreement of merger or consolidation, to recommend to the shareholders the sale, lease or exchange of all or substantially all of the Corporation’s property and

-11-

	assets, to recommend to the shareholders of the Corporation a dissolution of the Corporation or a revocation of a dissolution, or to amend these Bylaws.
Section 5.2	Audit Committee. (a) The Board of Directors shall by resolution passed by a majority of the whole Board of Directors appoint an Audit Committee to consist of three (3) or more members of the Board of Directors, each of whom shall meet the independence and experience requirements of the 1934 Act and the rules and regulations promulgated thereunder by the SEC and the rules and regulations of FINRA and Nasdaq, including one of the members qualifying as a “financial expert.” The members of the Committee shall be elected annually at the meeting of the full Board following the Corporation’s annual shareholders meeting and will be listed in the annual report and proxy statement to shareholders. One of the members will be elected Committee Chair by the Board.
	(b) The Board of Directors shall adopt an Audit Committee Charter setting forth the required membership of the Audit Committee and the purposes, duties and responsibilities of the Audit Committee, which Charter may be amended from time to time by the Board of Directors. In accordance with the Audit Committee Charter, the Audit Committee’s primary function shall be to assist the Board of Directors in fulfilling and improving its oversight responsibilities with respect to (i) the appointment, compensation, and over-sight of the work of the Corporation’s independent accountants (including resolution of disagreements between management and the independent accountants regarding financial reporting) for the purpose of preparing or issuing an audit report or related work; (ii)the annual and quarterly financial information and corporate disclosures to be provided to shareholders and the SEC and the accuracy and reliability of the financial information and disclosures; (iii) the system of internal controls that management has established; and (iv) the internal and external audit process. In addition, the Audit Committee shall provide a line of communication between the Corporation’s independent accountants, accounting staff, financial management and the Board of Directors. The Committee shall establish a clear understanding with the Board of Directors and the independent accountants that the ultimate accountability of the independent accountants shall be to the Board and the Audit Committee. The independent accountants shall be required to report directly to the Audit Committee. The Audit Committee shall make regular reports to the Board of Directors concerning its activities.
	(c) The Audit Committee’s duties shall not include the planning or conduct of audits or determination that the Corporation’s financial statements are in accordance with generally accepted accounting principles. This shall be the responsibility of the Corporation’s Chief Executive Officer and Chief Financial Officer and independent accountants. Furthermore, unless otherwise authorized and approved by the Board of Directors, the Audit Committee’s duties shall not require the Committee to assure compliance with laws and regulations and the Corporation’s business conduct guidelines.
	(d) The Audit Committee shall have the authority to investigate any matter or activity involving financial accounting and financial reporting, as well as the internal controls of the Corporation. In that regard, the Audit Committee will have the authority to approve the retention of external professionals to render advice and counsel in such matters. All employees of the Corporation shall be directed to cooperate with respect thereto as requested by members of the Audit Committee. Furthermore, the Audit Committee shall have the authority to resolve disagreements, if any, between the Corporation’s management and the independent accountants.
	(e) The Audit Committee shall meet as frequently as the Audit Committee deems necessary, but not less than four times each year, to carry out it duties and responsibilities. Content of the agenda for each meeting shall be cleared by the Committee Chair. The Committee shall be to meet in separate executive sessions with the Chief Financial Officer, independent accountants and internal accounting staff of the Corporation at least once each year and more frequently as considered appropriate by the Audit Committee.

-12-

	(f) The Audit Committee shall establish procedures for Directors, officers, and employees of the Company to report complaints regarding accounting, internal accounting controls or auditing matters or to obtain help with a potential accounting or auditing complaint.
	(g) The Audit Committee shall be authorized in its discretion to engage and retain independent legal counsel and other professional advisers as it determines necessary, in its sole discretion, to carry out the Audit Committee’s duties and responsibilities.
	(h) The Corporation shall provide for appropriate funding, as determined by the Audit Committee, in its capacity as a committee of the Board of Directors, for payment of compensation to the Corporation’s independent accountants for the purpose of rendering or issuing an audit report and any professional advisers employed by the Audit Committee.
Section 5.3	Compensation Committee. (a) The Board of Directors shall by resolution passed by a majority of the whole Board of Directors appoint a Compensation Committee to consist of three (3) or more members of the Board of Directors and shall meet the independence requirements of the 1934 Act and the rules and regulations promulgated thereunder by the SEC and the rules and regulations of FINRA and Nasdaq. The members of the Compensation Committee shall be elected annually at the meeting of the full Board following the Corporation’s annual shareholders meeting and will be listed in the annual report and proxy statement to shareholders. One of the members will be elected Committee Chair by the Board.
	(b) The Compensation Committee shall be responsible for determining the compensation of the Corporation’s senior management and establishing compensation policies for the Corporation’s employees generally; provided, however, that at any time the compensation of the Chief Executive Officer or President shall be under review and consideration, the Compensation Committee shall be comprised solely of “independent directors” (within the meaning of the 1934 Act and the rules and regulations promulgated thereunder and the rules and regulations promulgated by the Nasdaq and FINRA) and approval of the compensation of the Chief Executive Officer or President shall be pursuant to the majority vote of the independent directors in executive session.
Section 5.4	Other Committees. The Board of Directors, by resolution adopted by a majority of Directors, may designate one or more additional committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority to (i) amend the Certificate of Incorporation (except that a committee, to the extent authorized in the resolution or resolutions providing for the issuance of shares of stock adopted by the Board of Directors may fix the designations and any of the preferences or rights of such shares relating to dividends, redemption, dissolution, any distribution of assets of the Corporation or the conversion into, or the exchange of such shares for, shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation or fix the number of shares of any series of stock or authorize the increase or decrease of the shares of any series), (ii) adopt an agreement of merger or consolidation, (iii) recommend to the shareholders the sale, lease or exchange of all or substantially all of the Corporation’s property and assets, (iv) recommend to the shareholders the dissolution of the Corporation or the revocation of a dissolution, or (v) amend the Bylaws of the Corporation, and (vi) unless

-13-

	by resolution of the Board of Directors, declare a dividend, authorize the issuance of stock, or to adopt a certificate of ownership and merger.
Section 5.5	Term. Each member of a committee of the Board of Directors shall serve a term on the committee coexistent with such member’s term on the Board of Directors. The Board of Directors, subject to the provisions of Sections 5.1, 5.2, 5.3 and 5.4 may at any time increase or decrease the number of members of a committee or terminate the existence of a committee. The membership of a committee member shall terminate on the date of his or her death or voluntary resignation from the committee or from the Board of Directors. The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee. The Board of Directors may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
Section 5.6	Meetings. Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee, Audit Committee, Compensation Committee or any other committee appointed pursuant to this Section 5.4 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter. Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any Director who shall be a member of such committee, upon written notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of written notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors. Notice of any special meeting of any committee may be waived in writing at any time before or after the meeting and will be waived by any Director by attendance thereat, except when the Director attends such special meeting solely for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting was not lawfully called or convened. A majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum shall be present shall be the act of such committee. As necessary or desirable, the Committee may request that members of management and representatives of the independent accountants and internal accounting staff be present at committee meetings.
Section 5.7	Minutes. Each committee shall keep regular minutes of its proceedings and report the same to the Board when required.
Section 5.8	Responsibility of Directors. The designation of a committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility or liability imposed by law.

ARTICLE VI

OFFICERS

Section 6.1 Officers Designated. The officers of the Corporation shall include, if and when designated by the Board of Directors, a Chairman of the Board of Directors, a Chief Executive Officer,

-14-

	President, Chief Financial Officer, one or more executive and non-executive Vice Presidents (any one or more of which executive Vice Presidents may be designated as Executive Vice President or Senior Vice President or a similar title), a Secretary and a Treasurer. The Board of Directors may, at its discretion, create additional offices and assign such duties to those offices as it may deem appropriate from time to time, which offices may include a Vice Chairman of the Board of Directors, a Chief Operating Officer, one or more Assistant Secretaries and Assistant Treasurers, and one or more other offices which may be created at the discretion of the Board of Directors. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the Corporation shall be fixed by or in the manner designated by the Board of Directors.
Section 6.2	Tenure and Duties of Officers.
	(a) General. All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors. Except for the Chairman of the Board and the Vice Chairman of the Board, no officer need be a Director.
	(b) Duties of Chairman of the Board of Directors. The Chairman of the Board of Directors, when present, shall preside at all meetings of the Board of Directors and, unless the Chairman has designated the next senior officer to so preside, at all meetings of the shareholders. The Chairman of the Board of Directors shall perform other duties commonly incident to such office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time.
	(c) Powers and Duties of the Vice Chairman of the Board. The Board of Directors may but shall not be required to assign areas of responsibility to a Vice Chairman of the Board, and, in such event, and subject to the overall direction of the Chairman of the Board and the Board of Directors, the Vice Chairman of the Board shall be responsible for supervising the management of the affairs of the Corporation and its subsidiaries within the area or areas assigned and shall monitor and review on behalf of the Board of Directors all functions within such corresponding area or areas of the Corporation and each such subsidiary of the Corporation. In the absence of the Chief Executive Officer, or in the event of the Chief Executive Officer’s inability or refusal to act, the Vice Chairman of the Board shall perform the duties of the Chief Executive Officer, and when so acting shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. Furthermore, the Vice Chairman of the Board shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to the Vice Chairman of the Board by the Board of Directors or the Chairman of the Board.
	(d) Duties of the Chief Executive and Chief Operating Officers. Subject to the control of the Board of Directors, the Chief Executive Officer shall have general executive charge, management and control, of the properties, business and operations of the Corporation with all such powers as may be reasonably incident to such responsibilities; and subject to the control of the Chief Executive Officer, the Chief Operating Officer shall have general operating charge, management and control, of the properties, business and operations of the Corporation with all such powers as may be reasonably incident to such responsibilities. The Chief Executive Officer and, if and to the extent designated by the Chief Executive Officer or the Board, the Chief Operating Officer, may agree upon and execute all leases, contracts, evidences of indebtedness and other obligations in the name of the Corporation and may sign all certificates for shares of capital stock of the Corporation, and each shall have such other powers and duties as are designated in accordance with these Bylaws and as from time to time may be assigned to each by the Board of Directors. Unless the Board of Directors

-15-

otherwise determines, the Chief Executive Officer shall, in the absence of the Chairman of the Board, or Vice Chairman of the Board, or if there be no Chairman of the Board or Vice Chairman of the Board, preside at all meetings of the shareholders and (should he or she be a Director) of the Board of Directors.

(e) Duties of President. Unless the Board of Directors otherwise determines and subject to the provisions of subsection (d) above, the President shall be the Chief Operating Officer of the Corporation. Unless the Board of Directors otherwise determines, the President shall, in the absence of the Chairman of the Board, Vice Chairman of the Board, or Chief Executive Officer, or if there be no Chairman of the Board, Vice Chairman of the Board or Chief Executive Officer, preside at all meetings of the shareholders and (should he or she be a Director) of the Board of Directors. The President shall have such other powers and duties as designated in accordance with these Bylaws and as from time to time may be assigned to him or her by the Board of Directors.

(f) Duties of Vice Presidents. Vice Presidents, by virtue of their appointment as such, shall not necessarily be deemed to be executive officers of the Corporation, such status as an executive officer only being conferred if and to the extent such Vice President shall be placed in charge of a principal business unit, division or function (e.g., sales, administration or finance) or performs a policy-making function for the Corporation (within the meaning of Section 16 of the 1934 Act and the rules and regulations promulgated thereunder). Each executive Vice President shall at all times possess, and upon the authority of the Chief Executive Officer or President any non-executive Vice President shall from time to time possess, power to sign all certificates, contracts and other instruments of the Corporation, except as otherwise limited pursuant to Article VII hereof or by the Chairman of the Board, the Chief Executive Officer, President, or the Vice Chairman of the Board. The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.

(g) Duties of Secretary. The Secretary shall keep the minutes of all meetings of the Board of Directors, committees of the Board of Directors and the shareholders, in books provided for that purpose; shall attend to the giving and serving of all notices; may in the name of the Corporation affix the seal of the Corporation to all contracts and attest the affixation of the seal of the Corporation thereto; may sign with the other appointed officers all certificates for shares of capital stock of the Corporation; and shall have charge of the certificate books, transfer books and stock ledgers, and such other books and papers as the Board of Directors may direct, all of which shall at all reasonable times be open to inspection of any Director upon application at the office of the Corporation during business hours. The Secretary shall perform all other duties given in these Bylaws and other duties commonly incident to such office and shall also perform such other duties and have such other powers as the Board of Directors shall designate from time to time. The Chief Executive Officer or President may direct any Assistant Secretary to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to such office and shall also perform such other duties and have such other powers as the Board of Directors, Chief Executive Officer or President shall designate from time to time.

(h) Assistant Secretaries. Each Assistant Secretary shall have the usual powers and duties pertaining to such offices, together with such other powers and duties as designated in these Bylaws and as from time to time may be assigned to an Assistant Secretary by the Board of Directors, Chairman of the Board, Chief Executive Officer, Vice Chairman of the Board, President or Secretary. The Assistant Secretaries shall exercise the powers of the Secretary during that officer’s absence or inability or refusal to act.

-16-

	(i) Duties of Treasurer. The Treasurer shall keep or cause to be kept the books of account of the Corporation in a thorough and proper manner and shall render statements of the financial affairs of the Corporation in such form and as often as required by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Vice Chairman of the Board or the President. The Treasurer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the Corporation. The Treasurer shall perform other duties commonly incident to such office and shall also perform such other duties and have such other powers as the Board of Directors, the Chairman of the Board, the Vice Chairman of the Board, Chief Executive Officer or the President shall designate from time to time. The Chief Financial Officer of the Corporation may, but need not, serve as the Treasurer.
	(j) Assistant Treasurers. Each Assistant Treasurer shall have the usual powers and duties pertaining to such office, together with such other powers and duties as designated in these Bylaws and as from time to time may be assigned to each Assistant Treasurer by the Board of Directors, the Chairman of the Board, the Chief Executive Officer, the Vice Chairman of the Board, the President or the Treasurer. The Assistant Treasurers shall exercise the powers of the Treasurer during that officer’s absence or inability or refusal to act.
Section 6.3	Delegation of Authority. For any reason that the Board of Directors may deem sufficient, the Board of Directors may, except where otherwise provided by statute, delegate the powers or duties of any officer to any other person, and may authorize any officer to delegate specified duties of such office to any other person. Any such delegation or authorization by the Board shall be effected from time to time by resolution of the Board of Directors.
Section 6.4	Resignations. Any officer may resign at any time by giving written notice to the Board of Directors, the Chief Executive Officer, the President or the Secretary. Any such resignation shall be effective when received by the person or persons to whom such notice shall have been given, unless a later time shall be specified in the notice, in which event the resignation shall become effective at such later time. Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective. Any resignation shall be without prejudice to the rights, if any, of the Corporation under any contract with the resigning officer.
Section 6.5	Removal. Any officer may be removed from office at any time, either with or without cause, by the vote or written consent of a majority of the Directors in office at the time, or by any committee or superior officers upon whom such power of removal may have been conferred by the Board of Directors.
Section 6.6	Compensation of Officers. The compensation of all officers of the Corporation shall be fixed by the Board of Directors or a committee of the Board of Directors, and no officer shall serve the Corporation in any other capacity and receive compensation therefor unless such additional compensation shall be authorized by the Board of Directors.
Section 6.7	Bonds. The Board of Directors may, by resolution, require any officer, agent, or employee of the Corporation to give bond to the Corporation, with sufficient sureties, conditioned on the faithful performance of the duties of his or her respective office or position, and to comply with such other conditions as may from time to time be required by the Board of Directors.

ARTICLE VII

EXECUTION OF INSTRUMENTS AND VOTING
OF SECURITIES HELD BY THE CORPORATION

Section 7.1 Execution of Instruments. The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute

-17-

	on behalf of the Corporation any corporate instrument or document, or to sign on behalf of the Corporation the corporate name without limitation, or to enter into contracts on behalf of the Corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the Corporation.
	Unless otherwise specifically determined by the Board of Directors or otherwise required by law, promissory notes, deeds of trust, mortgages and other evidences of indebtedness of the Corporation, and other corporate instruments or documents requiring the corporate seal, and certificates of shares of stock owned by the Corporation, shall be executed, signed or endorsed by the Chairman of the Board of Directors, Chief Executive Officer, the President or any executive Vice President, and upon the authority conferred by the Chief Executive Officer, the President or any non-executive Vice President, and by the Secretary or Chief Financial Officer, if any be designated, or Treasurer or any Assistant Secretary or Assistant Treasurer. All other instruments and documents requiring the corporate signature, but not requiring the corporate seal, may be executed as aforesaid or in such other manner as may be directed by the Board of Directors.
	No loan shall be contracted on behalf of the Corporation and no evidences of indebtedness shall be issued in its name unless authorized by a resolution of the Board of Directors. Such authority may be general or confined to specific instances. All funds of the Corporation not otherwise employed shall be deposited from time to time to the credit of the Corporation in such depositories as the Board of Directors may select. All checks and drafts drawn on banks or other depositories on funds to the credit of the Corporation or in special accounts of the Corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do.
	Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the Corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
Section 7.2	Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the Corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such authorization, by the Chairman or Vice Chairman of the Board of Directors, Chief Executive Officer, the President, or any Vice President.

ARTICLE VIII

CERTIFICATES FOR SHARES AND THEIR TRANSFER; OTHER SECURITIES

Section 8.1 Form and Execution of Certificates. Certificates for the shares of stock of the Corporation shall be in such form as shall be consistent with the Certificate of Incorporation and applicable law. Every holder of stock in the Corporation shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman or Vice Chairman of the Board of Directors, the Chief Executive Officer, the President or any Vice President and by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, certifying the number of shares and the class or series owned by holder in the Corporation. With respect to any certificate properly countersigned by a transfer agent or a registrar other than the Corporation or its employee, all other signatures on the certificate may be a facsimile signature. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent,

-18-

	or registrar before such certificate shall be issued, it may be issued with the same effect as if he or she were such officer, transfer agent, or registrar at the date of issue.
Section 8.2	Lost Certificates. A new certificate or certificates shall be issued in place of any certificate or certificates previously issued by the Corporation and that are represented to be lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person or persons claiming the certificates of stock were lost, stolen, or destroyed. The Corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or his or her legal representative, to advertise the same in such manner as it shall require or to give the Corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.
Section 8.3	Transfers. (a) Transfers of record of shares of stock of the Corporation shall be made only on its books by the holders thereof, in person or by attorney duly authorized and upon the surrender of a properly endorsed certificate or certificates for a like number of shares. Upon surrender to the Corporation or a transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. The Board of Directors shall have the power and authority to make all such other rules and regulations as it deems expedient concerning the issue, transfer and registration or the replacement of certificates for shares of capital stock of the Corporation.
	(b) The Corporation shall have power to enter into and perform any agreement with any number of shareholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such shareholders in any manner not prohibited by the Oklahoma General Corporation Act.
Section 8.4	Fixing Record Dates.
	(a) In order that the Corporation may determine the shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date shall be adopted by the Board of Directors, and which record date shall not be more than sixty (60) nor less than twenty (20) days before the date of such meeting. If no record date shall be fixed by the Board of Directors, the record date for determining shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day next preceding the day on which notice shall be given, or if notice shall be waived, at the close of business on the day next preceding the day on which the meeting shall be held. A determination of shareholders of record entitled to notice of or to vote at a meeting of shareholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
	(b) In order that the Corporation may determine the shareholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the shareholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of

-19-

	Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date was adopted, and which record date shall be not more than sixty (60) days prior to such action. If no record date shall be fixed by the Board of Directors, the record date for determining shareholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
Section 8.5	Registered Shareholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Oklahoma.
Section 8.6	Treasury Shares. Treasury shares of the Corporation shall consist of such shares as have been issued and thereafter reacquired but not canceled by the Corporation. Treasury shares shall not carry voting or dividend rights.
Section 8.7	Execution of Other Securities. All bonds, debentures and other corporate securities of the Corporation, other than stock certificates (covered in Section 8.1), may be signed by the Chairman or Vice Chairman of the Board of Directors, the Chief Executive Officer, the President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons. Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the Corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person. In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest coupon, shall have ceased to be such officer before any bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the Corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the Corporation.

ARTICLE IX

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS

Section 9.1

Right to Indemnification.

(a) The Corporation shall indemnify any person who was or shall be a party or shall be threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the fact that he or she serves or served as a Director, officer, employee or agent of the Corporation, or serves or served at the request of the Corporation as a Director, officer, manager, employee or agent of another corporation or a limited liability company, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines, excise taxes and amounts paid in

-20-

settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful (“Indemnitee”). The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent shall not, of itself, create a presumption that the Indemnitee did not act in good faith and in a manner which Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonably cause to believe that Indemnitee’s conduct was unlawful.

(b) The Corporation shall indemnify any Indemnitee who was or shall be a party or shall be threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in his or her favor by reason of the fact that Indemnitee serves or served as a Director, officer, employee or agent of the Corporation, or serves or served at the request of the Corporation as a Director, officer, manager, employee or agent of another corporation or a limited liability company, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which Indemnitee shall have been adjudged to be liable to the Corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee shall be fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

(c) To the extent that Indemnitee was successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsection (a) or (b) of this Section, or in defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by Indemnitee in connection therewith.

(d) Any indemnification under the provisions of subsection (a) or (b) of this Section (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the Indemnitee shall be proper in the circumstances because Indemnitee has met the applicable standard of conduct set forth in subsection (a) or (b) of this Section. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of Directors who were not parties to such action, suit or proceedings, (ii) if such a quorum shall not have been obtainable, or, even if obtainable a quorum of disinterested Directors so directs, by independent legal counsel in a written opinion, or (iii) by the shareholders.

(e) For purposes of this Article, references to “the Corporation” shall include, in addition to the resulting corporation, any constituent corporation, including any constituent of a constituent, absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its Directors, officers, and employees or agents, so that any person who serves or served as a Director, officer, manager, employee or agent of such constituent corporation, or serves or serve at the request of such constituent corporation, as a Director, officer, manger, employee or agent of another corporation or a limited liability company, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued.

-21-

(f) For purposes of this Article, references to (i) “other enterprises” shall include, without limitation, an “employee benefit plan” within the meaning of the Employee Retirement Income Security Act of 1974 (“ERISA”) or otherwise, (ii) “fines” shall include any excise taxes or penalties assessed on Indemnitee with respect to an employee benefit plan under ERISA or otherwise, and (iii) “serving or served at the request of the Corporation” shall include any service of Indemnitee as a Director, officer, manager, manager, employee or agent of another corporation or a limited liability company, partnership, joint venture, trust or other enterprise which imposes duties on, or involves services, by Indemnitee as a Director, officer, manager, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries. Furthermore, for purposes of this subsection (f) of this Section, in the event Indemnitee acted in good faith and in a manner that Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interest of the Corporation” as referred to in this Article.

(g) The indemnification and advancement of expenses provided by or granted pursuant to this Article, unless otherwise provided when authorized or ratified, shall continue as to an Indemnitee who has ceased to be a Director, officer, manager, employee or agent and shall inure to the benefit of the heirs, executors, guardians, custodians, personal representatives and administrators of Indemnitee.

(h) For purposes of this Article, Indemnitee shall be deemed to have “acted in good faith” and in a manner reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, to have had no reasonable cause to believe that Indemnitee’s conduct was unlawful, if Indemnitee’s action was based on information, opinions, reports and statements, including financial statements and other financial data, in each case prepared or presented by:

(i) one or more officers or employees of the Corporation whom Indemnitee believed to be reliable and competent in the matters presented;

(ii) counsel, independent accountants or other persons as to matters that Indemnitee believed to be within such person’s professional competence; or

(iii) with respect to an Indemnitee’s service as a Director, a committee of the Board of Directors upon which Indemnitee did not serve, as to matters within such committee’s designated authority, which committee Indemnitee believed to merit confidence;

	so long as, in each case, Indemnitee acted without knowledge that would cause such reliance to be unwarranted.
	(g) The provisions of this Article shall not be deemed to be exclusive or to limit in any way the circumstances in which Indemnitee may be deemed to have met the applicable standard of conduct set forth by the Oklahoma General Corporation Act or under any agreement and entitlement to indemnity.
Section 9.2	Right to Advancement of Expenses. The Corporation shall advance, prior to the final disposition of any proceeding, promptly following request therefor, all expenses incurred by an Indemnitee in connection with such proceeding upon receipt of an undertaking by or on behalf of such person to repay said amounts if it should be determined ultimately that such person shall not be entitled indemnification under this Article IX or otherwise.
	Notwithstanding the foregoing, unless otherwise determined pursuant to Section 9.5, no advance shall be made by the Corporation if a determination shall be reasonably and promptly made (i) by the Board of Directors by a majority vote of a quorum consisting of

-22-

	Directors who are or were not parties to the proceeding, or (ii) if such quorum shall be unobtainable, or, even if obtainable, a quorum of disinterested Directors so directs, or (iii) by independent legal counsel in a written opinion, that the facts known to the decision-making party at the time of such determination demonstrate clearly and convincingly that Indemnitee acted in bad faith or in a manner that reasonably believed to be not in the best interests of the Corporation or reasonably believed to be opposed to the best interests of the Corporation.
Section 9.3	Non-Exclusivity of Rights. The indemnification and advancement of expenses provided by or granted pursuant to this Article shall not be deemed exclusive of any other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any Bylaw, agreement, vote of shareholders or disinterested directors or otherwise, both as to action in Indemnitee’s official capacity and as to action in another capacity while holding such office or serving as a Director.
Section 9.4	Insurance. The Corporation shall have the power to purchase and maintain insurance on behalf of any individual who serves or served as a Director, officer, employee or agent of the Corporation, or serves or served at the request of the Corporation as a Director, officer, manager, employee or agent of another corporation or a limited liability company, partnership, joint venture, trust or other enterprise against any liability asserted against the individual and incurred by the individual in any such capacity, or arising out of the individual’s status as such, whether or not the Corporation would have the power to indemnify the individual against such liability under the provisions of this Article.
Section 9.5	Right of Indemnitee to Bring Suit. In the event a claim under this Article shall be unpaid in full by the Corporation within thirty (30) days after the written claim was received by the Corporation, the Indemnitee may at any time thereafter bring suit or take other legal action against the Corporation to recover the unpaid amount of the claim. If successful in whole or in part in any such suit, the Indemnitee, in addition to indemnification pursuant to this or other provisions of this Article, shall be entitled to be paid the expenses of prosecuting such suit against the Corporation, including reasonable attorneys’ fees and costs. The Corporation shall be entitled to assert as a defense that the Indemnitee has not met any applicable standard for indemnification set forth in the Oklahoma General Corporation Act and the Corporation shall be entitled to recover any advancement of expenses upon a final adjudication in (i) any suit brought by the Indemnitee to enforce a right to indemnification under the Article (but not in a suit brought by the Indemnitee to enforce a right to an advancement of expenses), and (ii) in any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking by the Indemnitee. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or shareholders) to have made a determination prior to the commencement of such suit that indemnification of the Indemnitee shall be proper in the circumstance because the Indemnitee has met the applicable standard of conduct set forth in the Oklahoma General Corporation Act, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or shareholders) that the Indemnitee has not met such applicable standard of conduct, shall create a presumption that the Indemnitee has not met the applicable standard of conduct or, in the case of such a suit brought by the Indemnitee, be a defense to such suit. In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking by the Indemnitee, the burden of proving that the Indemnitee was not entitled to indemnification or to such advancement of expenses under this Article or otherwise shall be the Corporation’s burden.
Section 9.6	Survival of Rights. The rights conferred on Indemnitee by this Article IX shall continue following Indemnitee having ceased to be a Director, officer, manager, employee or other agent and shall inure to the benefit of the heirs, executors, custodians, guardians, personal representatives and administrators of Indemnitee.

-23-

Section 9.7	Amendments. Any repeal or modification of this Article IX shall only be prospective and shall not affect the rights under this Article IX in effect at the time of the alleged occurrence of any action or omission to act that shall be the cause of any proceeding against any Indemnitee.
Section 9.8	Savings Clause. If this Article IX or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee to the full extent not prohibited by any applicable portion of this Article IX that shall not have been invalidated, or by any other applicable law.
Section 9.9	Certain Definitions. For the purposes of this Article IX, the following definitions shall apply:
	(a) The term “proceeding” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.
	(b) The term “expenses” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.
	(c) References to a “director,” “officer,” “employee,” or “agent” of the Corporation shall include without limitation, situations where such person serves or served at the request of the Corporation as a Director, officer, manager, employee, trustee or agent of another corporation or a limited liability company, partnership, joint venture, trust or other enterprise.

ARTICLE X

NOTICES

Section 10.1	Notice to Shareholders. Unless the Certificate of Incorporation requires otherwise, whenever, under any provisions of these Bylaws, notice shall be required to be given to any shareholder, it shall be given in writing, timely and duly deposited in the United States mail, postage prepaid, and addressed to such shareholder’s last known post office address as shown by the stock record of the Corporation or its transfer agent.
Section 10.2	Notice to Directors. Any notice required to be given to any Director may be given by the method stated in Section 10.1, or by facsimile, telex or telegram, except that such notice (other than one delivered personally) shall be sent to such address as such Director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such Director. It shall not be necessary that the same method of giving notice be employed in respect of all Directors, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.
Section 10.3	Address Unknown. If no address of a shareholder or Director be known, notice may be sent to the principal executive office of the Corporation.
Section 10.4	Affidavit of Mailing. An affidavit of mailing, executed by a duly authorized and competent employee of the Corporation or its transfer agent appointed with respect to the class of stock affected, specifying the name and address or the names and addresses of the shareholder or shareholders, or Director or Directors, to whom any such notice or notices was or were given,

-24-

	and the time and method of giving the same, shall be conclusive evidence of the statements therein contained.
Section 10.5	Time of Notices Deemed Given. All notices given by mail, as above provided, shall be deemed to have been given as at the time of mailing, and all notices given by facsimile, telex or telegram shall be deemed to have been given as of the sending time recorded at the time of transmission.
Section 10.6	Failure to Receive Notice. The period or limitation of time within which any shareholder may exercise any option or right, or enjoy any privilege or benefit, or be required to act, or within which any Director, officer, manager, employee, trustee or agent may exercise any power or right, or enjoy any privilege, pursuant to any notice sent such person in the manner above provided, shall not be affected or extended in any manner by the failure of such shareholder or such Director, officer, manager, employee, trustee or agent to receive such notice.
Section 10.7	Notice to Person with Whom Communication Shall Be Unlawful. Whenever notice shall be required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the Corporation, to any person with whom communication shall be unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting that shall be taken or held without notice to any such person with whom communication shall be unlawful shall have the same force and effect as if such notice had been duly given. In the event that the action taken by the Corporation shall be such as to require the filing of a certificate under any provision of the Oklahoma General Corporation Act, the certificate shall state, if such shall be the fact and if notice shall be required, that notice was given to all persons entitled to receive notice except such persons with whom communication shall be unlawful.
Section 10.8	Notice to Person with Undeliverable Address. Whenever notice shall be required to be given, under any provision of law or the Certificate of Incorporation or these Bylaws, to any shareholder to whom (i) notice of two consecutive annual meetings, and all notices of meetings to such person during the period between such two consecutive annual meetings, or (ii) all, and at least two, payments (if sent by first class mail) of dividends or interest on securities during a twelve-month period, have been mailed addressed to such person at such person’s address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any action or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the Corporation a written notice setting forth such person’s then current address, the requirement that notice be given to such person shall be reinstated. In the event that the action taken by the Corporation shall be such as to require the filing of a certificate under any provision of the Oklahoma General Corporation Act, the certificate need not state that notice was not given to persons to whom notice was not required to be given pursuant to this Section.

ARTICLE XI

DIVIDENDS

Section 11.1 Declaration of Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation.

-25-

Section 11.2 Dividend Reserve. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the Corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.

ARTICLE XII

AMENDMENTS

Section 12.1

Amendments. Except as otherwise set forth in Section 9.7 of these Bylaws, these Bylaws may be amended or repealed and new Bylaws adopted by the Board of Directors or by the shareholders entitled to vote.

Section 12.2

Application of Bylaws. In the event that any provisions of these Bylaws shall be or may be in conflict with any law of the United States or the State of Oklahoma or of any other governmental body or power having jurisdiction over this Corporation, or over the subject matter to which such provision of these Bylaws applies, or may apply, such provision of these Bylaws shall be inoperative to the extent only that the operation thereof unavoidably conflicts with such law, and shall in all other respects be in full force and effect.

ARTICLE XIII

OTHER PROVISIONS

Section 14.1	Loans to Directors and Officers. (a) The Corporation shall not directly or indirectly, including through any subsidiary, extend or maintain credit, arrange for the extension of credit, or renew an extension of credit, in the form of a personal loan to or for any Director or executive officer (within the meaning of Section 16 of the 1934 Act and the rules and regulations promulgated thereunder) of the Corporation, except as may be permitted under Section 13(k) of the 1934 Act and the rules and regulations promulgated thereunder.
	(b) Except as provided in subsection (a) above, the Corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the Corporation or of its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the Corporation. The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the Corporation. Nothing in this Bylaw shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the Corporation at common law or under statute.
Section 14.2	Annual Report. At such time as the Corporation becomes subject to the reporting requirements of the 1934 Act, the Board of Directors shall cause an annual report to accompany the proxy solicitation materials sent to the shareholders of the Corporation for the Corporation’s annual meeting of shareholders or not later than two hundred seventy (270) days after the close of the Corporation’s fiscal year. The annual report shall include a balance sheet as of the end of such fiscal year and an income statement and statement of changes in financial position for such fiscal year, accompanied by any report thereon of independent accounts or, if there shall be no such report, the certificate of an authorized officer of the Corporation that such statements were prepared without audit from the books and records of the Corporation.

-26-

Section 14.3	Fiscal Year. Unless otherwise fixed by the Board of Directors, the fiscal year of the Corporation shall be the fiscal year beginning on the first day of January of each year and ending on the last day of December.
Section 14.4	Charter Provisions. In case of conflict between a provision in these Bylaws and a provision in the charter of the Corporation, the charter provision shall govern.
Section 14.5	Corporate Seal. The corporate seal of the Corporation shall consist of a die bearing the name of the Corporation. The corporate seal may be used by causing it, or a facsimile thereof, to be impressed or affixed or reproduced or otherwise.
Section 14.6	Code of Conduct. The Corporation shall adopt and maintain a code of conduct that shall at lease be in accordance with the rules and regulations promulgated under the 1934 Act requiring the adoption and maintenance a code of ethics.

-27-

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Stanton Nelson, certify that:

1. I have reviewed this Form 10-Q for the three months ended June 30, 2008 of Graymark Healthcare, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, was made known to us by others within those entities, particularly during the period in which this report was being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2008

/S/STANTON NELSON
Stanton Nelson Chief Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Rick D. Simpson, certify that:

1. I have reviewed this Form 10-Q for the three months ended June 30, 2008 of Graymark Healthcare, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, was made known to us by others within those entities, particularly during the period in which this report was being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal year that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 13, 2008

/S/RICK D. SIMPSON
Rick D. Simpson Chief Financial Officer
and Controller

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), I, the undersigned Chief Executive Officer of Graymark Healthcare, Inc. (the “Company”), hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of the Company for the three months ended June 30, 2008 (the “Quarterly Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 13, 2008	/S/STANTON NELSON
	Chief Executive Officer

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), I, the undersigned Chief Financial Executive Officer and Controller of Graymark Healthcare, Inc. (the “Company”), hereby certify that, to the best of my knowledge, the Quarterly Report on Form 10-Q of the Company for the three months ended June 30, 2008 (the “Annual Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 13, 2008	/S/RICK D. SIMPSON
	Chief Financial Officer
	and Controller