COAST DENTAL SERVICES INC, S-1/A, 1997-02-10

COAST DENTAL SERVICES INC
S-1/A, 1997-02-10
OFFICES & CLINICS OF DOCTORS OF MEDICINE

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1997

REGISTRATION NO. 333-13613
================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 5

FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------

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

<TABLE>
<S> <C> <C>
DELAWARE 8741 59-3136131
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

------------------------

<TABLE>
<C> <C>
COAST DENTAL SERVICES, INC. TEREK DIASTI, CEO
6200 COURTNEY CAMPBELL CAUSEWAY, COAST DENTAL SERVICES, INC.
SUITE 690 6200 COURTNEY CAMPBELL CAUSEWAY,
TAMPA, FL 33607 SUITE 690
(813) 288-1999 TAMPA, FL 33607
(Address, including zip code, and telephone (813) 288-1999
number, including area code, of registrant's (Name, address, including zip code, and
principal executive offices) telephone number,
including area code, of agent for service)
</TABLE>

------------------------
With Copies to:

<TABLE>
<C> <C>
DARRELL C. SMITH, ESQUIRE JEFFREY M. STEIN, ESQUIRE
SHUMAKER, LOOP & KENDRICK, LLP KING & SPALDING
101 E. KENNEDY BLVD., SUITE 2800 191 PEACHTREE STREET, N.E.
TAMPA, FLORIDA 33602 ATLANTA, GEORGIA 30303-1763
(813) 229-7600 (404) 572-4600
</TABLE>

------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon
as practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
================================================================================
<PAGE> 2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION -- DATED FEBRUARY 10, 1997

PROSPECTUS
- --------------------------------------------------------------------------------
2,200,000 Shares

COAST DENTAL SERVICES, INC. LOGO

Common Stock

- --------------------------------------------------------------------------------

All of the 2,200,000 shares of common stock, par value $.001 per share (the
"Common Stock"), offered hereby are being sold by Coast Dental Services, Inc.
(the "Company"). Prior to this offering (the "Offering"), there has been no
public market for the Common Stock of the Company. It is currently anticipated
that the initial public offering price will be between $8.00 and $10.00 per
share. See "Underwriting" for a discussion of the factors to be considered in
determining the initial public offering price.

The Common Stock has been approved for inclusion in The Nasdaq Stock Market's
National Market (the "Nasdaq National Market") under the symbol "CDEN."

SEE "RISK FACTORS" ON PAGES 7 TO 15 FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS
THAT SHOULD BE CONSIDERED IN CONNECTION WITH AN INVESTMENT IN THE COMMON STOCK
OFFERED HEREBY.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
=======================================================================================================================
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share................................... $ $ $
- -----------------------------------------------------------------------------------------------------------------------
Total(3).................................... $ $ $
=======================================================================================================================
</TABLE>

(1) The Company and its three founding and controlling stockholders, Terek
Diasti, Adam Diasti, and Tim Diasti (the "Selling Stockholders"), have
agreed to indemnify the several Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933. See "Principal and
Selling Stockholders" and "Underwriting."

(2) Before deducting expenses payable by the Company estimated to be $800,000.

(3) The Selling Stockholders have granted the several Underwriters 30-day
over-allotment options to purchase up to 330,000 additional shares of Common
Stock on the same terms and conditions as set forth above. The Company will
not receive any proceeds from the sale of additional shares by the Selling
Stockholders. If all such additional shares are purchased by the
Underwriters, the total Price to Public will be $ , the total
Underwriting Discounts and Commissions will be $ , the total
Proceeds to Company will be $ and the total Proceeds to Selling
Stockholders will be $ . See "Principal and Selling Stockholders"
and "Underwriting."

- --------------------------------------------------------------------------------

The shares of Common Stock are offered by the several Underwriters subject to
delivery by the Company and the Selling Stockholders and acceptance by the
Underwriters, to prior sale and to withdrawal, cancellation or modification of
the offer without notice. Delivery of the shares to the Underwriters is expected
to be made at the office of Prudential Securities Incorporated, One New York
Plaza, New York, New York, on or about , 1997.

PRUDENTIAL SECURITIES INCORPORATED RAYMOND JAMES & ASSOCIATES, INC.

, 1997

<PAGE> 3

Coast DENTAL LOGO

MAP

[Description]
of
[Inside front Cover Page]
[Map of Florida Depicting Company Headquarters and Dental Office locations]

------------------------------

IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.

2
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus and information under "Risk Factors." Unless the
context otherwise requires, references in this Prospectus to "Coast Dental" or
the "Company" refer to Coast Dental Services, Inc. and its predecessor; "Dental
Centers" refers to dental offices with a dental practice managed or to be
managed by the Company pursuant to a services and support agreement; the "Coast
Florida P.A." refers to the Florida professional association which employs the
dentists providing dental services at the Dental Centers in Florida pursuant to
a services and support agreement with the Company (the "Services and Support
Agreement"); "Coast P.A." refers to any professional dental association outside
the State of Florida, with which the Company may enter into a services and
support agreement; "internally developed Dental Centers" refers to Dental
Centers which are initially opened, developed and managed by the Company
pursuant to a services and support agreement with the Coast Florida P.A. or
Coast P.A.; "acquired Dental Centers" refers to Dental Centers resulting from
the acquisition of an existing dental facility by the Company, combined with the
acquisition by the Coast Florida P.A. or Coast P.A. of the existing dental
practice located at that facility; "Coast Dentists" refers to the licensed
dentists employed by the Coast Florida P.A. or Coast P.A. who provide dental
services at the Dental Centers; and "Coast Dental Network" refers collectively
to the Dental Centers and the Coast Dentists. Except as otherwise indicated, the
information contained in this Prospectus (i) assumes that the Underwriters'
over-allotment options will not be exercised and (ii) gives retroactive effect
to reverse stock splits resulting in an exchange of 1 share for 3.857 shares of
Common Stock issued and outstanding. Unless otherwise indicated, industry
information used in this Prospectus has been obtained from sources identified in
the "Industry Information" section at the end of this Prospectus Summary.

THE COMPANY

Coast Dental Services, Inc. provides management services to 29 Dental
Centers located in central Florida. Of the 29 Dental Centers, 12 were internally
developed and 17 were acquired by the Company. As of January 1, 1997, 42 Coast
Dentists were employed by the Coast Florida P.A., serving over 237,500 patients.
The Company, supported by several major dental managed care providers, believes
that, based upon the number of Dental Centers managed and patients served, it is
the largest dental practice management company for general dentistry practices
in Florida. The Company expects to add a combined total of at least 25
internally developed and acquired Dental Centers in 1997.

The United States dental industry is highly fragmented, consisting of more
than 110,000 dental practices with approximately 88% of these practices operated
by dentists working alone or with one other dentist. According to the Health
Care Financing Administration, expenditures for all dental services in the
United States were an estimated $45.2 billion in 1995 and are expected to grow
at a rate of 6.6% per year through 2000. Based upon a 1990 Survey by the
American Dental Association ("ADA"), general dentistry was estimated to
represent approximately 83% of all dental services performed in the United
States. The Company believes several factors are driving the overall industry
growth. First, as the "baby boom" generation ages, the demand for many higher
priced dental maintenance products and procedures (such as crowns, bridges and
dentures) will increase relative to the demand for other more routine, lower
priced dental products and procedures (such as cleanings and fillings). Second,
increasing attention to dental health and, in particular, to personal appearance
has increased the demand for general dentistry services and cosmetic dental
products and procedures (such as bonding and whitening). Finally, a greater
percentage of the population is now covered by private or government funded
dental health insurance thereby facilitating increased dental office visits and
a greater utilization of general dentistry services.

The Company's goal is to develop a leadership position in the management of
general dentistry practices throughout Florida and the southeastern United
States. The Company earns fees paid by the Coast Florida P.A. for providing
management services and support to the Dental Centers. Pursuant to the Services
and Support Agreement, the Company receives 76% of the Coast Florida P.A.'s
gross patient revenue. A uniform operating model (the "Coast Operating Model")
developed by the Company is utilized at the Dental Centers

3
<PAGE> 5

to increase productivity and maintain the low cost delivery of quality general
dentistry services. The key elements of the Coast Operating Model are: (i)
affiliating with general dental providers that focus on the most common, high
volume dental products and procedures which lend themselves to cost-effective
delivery; (ii) centralizing management and administrative responsibilities, thus
allowing Coast Dentists to concentrate on delivering high quality dental care;
(iii) facilitating the training of the Dental Center staff, including Coast
Dentists and hygienists, in the most efficient techniques for managing the
delivery of high volume, quality dental services; and (iv) assisting with the
implementation of marketing programs designed to meet the needs of each Dental
Center. The Company plans to expand the Coast Dental Network to maximize
economies of scale in management and administration, materials procurement and
marketing, and to facilitate contracting with managed care companies. The
Company plans to increase penetration in currently served regions and to expand
into new contiguous markets in the southeastern United States through the
addition of internally developed and acquired Dental Centers.

For the twelve months ended September 30, 1996, the average patient revenue
production for the ten Coast Dentists affiliated with the Company for the entire
period was approximately $488,000. In addition, for the same period, the Coast
Dentists averaged 112 patient visits per week (including hygienist visits).
Based upon data contained in the ADA's survey conducted in 1994 and accounting
for hygienist visits, the Company believes that Coast Dentists have achieved
substantially higher patient revenue production and patient visits than the
national average for general practitioners, although there can be no assurance
that such industry data is representative of current productivity by the average
general dental practitioner. For internally developed Dental Centers, the
Company has attained profitability (determined by subtracting from the services
and support fee earned by the Company at an internally developed Dental Center
the amount of the Company's expenditures incurred at such Dental Center,
excluding corporate overhead) in an average of three to four months from
opening. Acquired Dental Centers which the Company has managed for at least six
months have experienced an average aggregate increase of 14.8% in gross patient
revenue in the six month period following the acquisitions of the dental
practices as compared to the six month period preceding the acquisition,
attributable to increased patient flow resulting from implementation of
marketing programs, incremental managed care business and increased operating
efficiencies.

As the Coast Dental Network has grown, an increasing percentage of the
Coast Dentist's patient revenue has been derived from a growing managed care
patient base. The Coast Dentists began to provide dental services under managed
care contracts in 1995 and, for the nine months ended September 30, 1996,
managed care business had grown to represent an average of 31% of patient
revenue. The Company believes that managed care companies are presently focused
on increasing their revenue and gaining market share by offering a full range of
health insurance options, including dental insurance. As a result, managed care
companies are aggressively seeking to contract with dental providers that offer
extensive regional coverage, have the ability to deliver dental services at
managed care pricing levels, and possess the necessary management information
systems and contract administration expertise. Accordingly, the Coast Dentists
enjoy a competitive advantage over sole practitioners and small dental group
practices that generally do not have the resources to develop such capabilities
or managed care relationships.

THE OFFERING

<TABLE>
<CAPTION>
<S> <C>
Common Stock Offered by the Company......................... 2,200,000 shares
Common Stock to be Outstanding after the Offering(1)........ 5,700,000 shares
Use of Proceeds............................................. To finance the addition of internally
developed and acquired Dental
Centers; to repay outstanding
indebtedness; and for general
corporate purposes. See "Use of
Proceeds."
Proposed Nasdaq National Market Symbol...................... CDEN
</TABLE>

- ---------------

(1) Excludes an aggregate of 900,000 shares of Common Stock reserved for
issuance under the Company's stock plans (the "Plans"), of which options for
approximately 186,000 shares have been granted. See "Management -- The
Plans."
4
<PAGE> 6

SUMMARY FINANCIAL AND OPERATING DATA

Historical Financial Data. In 1996, the Company added 17 acquired Dental
Centers, including one dental office in January 1996, seven dental offices in
April 1996 (the "Volusia Acquisition"), three separate acquisitions of single
dental offices in September 1996, three dental offices in November 1996 (the
"Seminole Acquisition") and three separate acquisitions of single dental offices
in December 1996 (referred to collectively as the "Recent Acquisitions"). Each
of the Recent Acquisitions was accounted for using the purchase method of
accounting, so that the Company's historical statement of operations data
include results of operations of the acquired Dental Centers from their
respective acquisition dates. See "Business -- Recent Acquisitions" and Notes 4
and 12 to the Notes to Financial Statements of the Company appearing elsewhere
in this Prospectus.

Pro Forma Financial Data. The pro forma financial data are derived from
the Unaudited Pro Forma Combined Financial Information of the Company appearing
elsewhere in this Prospectus. The Pro Forma Statement of Operations Data
presented in the following table for the year ended December 31, 1995 and the
nine months ended September 30, 1996 give effect to (i) the Recent Acquisitions,
including the Company's entering into a new Services and Support Agreement with
the Coast Florida P.A., and (ii) issuance of 2,200,000 shares of Common Stock in
the Offering at an assumed initial public offering price of $9.00 per share and
the application of the net proceeds therefrom (the "Statement of Operations
Adjustments"). The Pro Forma Balance Sheet Data presented in the following table
at September 30, 1996 give effect to (i) the Seminole Acquisition in November
1996, the three separate acquisitions of single dental offices in December 1996
and the S Corporation Distribution (the "Balance Sheet Adjustments"), and (ii)
As Adjusted, the consummation of the Offering and the application of the
estimated net proceeds therefrom as described under "Use of Proceeds."

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
---------------------------------------- ------------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1995(1) 1995 1996 1996(1)
------- ------- ------- ---------- ------- ------- ----------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue...................... $ 1,195 $ 1,868 $ 3,325 $ 9,916 $ 2,368 $ 5,342 $ 8,813
Dental Center expenses........... 853 1,433 2,353 7,537 1,787 3,517 6,031
------- ------- ------- ---------- ------- ------- ----------
Gross profit..................... 342 435 972 2,379 581 1,825 2,782
General and administrative
expenses....................... 306 585 697 1,504 431 718 1,056
Net income(loss)(2).............. 4 (109) 135 456 60 607 1,002
Pro forma earnings per
share(3)....................... $ 0.11 $ 0.25
Pro forma weighted average shares
outstanding(3)................. 3,970,111 3,970,111
SELECTED OPERATING DATA:
Number of Dental Centers(4)...... 4 8 11 10 22
Gross revenue per Dental
Center(5)...................... NA $ 535 $ 590 $ 433 $ 468
Number of dental chairs(4)....... 22 38 48 48 103
Number of Coast Dentists(4)...... 4 8 10 10 25
Patient visits................... 11,881 19,346 42,005 30,539 65,392
Number of patient visits per
dental chair(6)................ 735 736 918 672 859
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------------------------
PRO FORMA
ACTUAL PRO FORMA(7) AS ADJUSTED(8)
------ ------------ -----------------
(IN THOUSANDS)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit)................................. $ (182) $ (564) $13,740
Total assets.............................................. 4,639 6,329 19,350
Long-term debt, including current maturities.............. 2,534 4,734 503
Stockholders' equity...................................... 1,055 545 18,145
</TABLE>

- ---------------

(1) After giving effect to the Statement of Operations Adjustments, as
described above, as if such adjustments had occurred at the beginning of
the respective periods presented.

(2) Pro forma adjusted to reflect a 39% income tax rate as if the Company was
taxed as a C Corporation during the periods presented.
5
<PAGE> 7

(3) Reflects the pro forma earnings per share assuming an increase in the
weighted average number of outstanding shares to the extent necessary to
repay the existing indebtedness as described in "Use of Proceeds."

(4) Presented as of the end of the period.

(5) Includes only Dental Centers open for at least one year as of the beginning
of the period, so that two Dental Centers are included for 1994, four
Dental Centers are included for 1995, four Dental Centers are included for
the nine months ended September 30, 1995 and eight Dental Centers are
included for the nine months ended September 30, 1996.

(6) Includes only Dental Centers that were open for the entire period.

(7) After giving effect to the Balance Sheet Adjustments, as described above,
as if such adjustments had occurred as of September 30, 1996. See Note 2 to
the Notes to Financial Statements of the Company for a description of the S
Corporation Distribution.

(8) After giving effect to the consummation of the Offering and the application
of the estimated net proceeds therefrom. See "Selected Pro Forma Financial
Data."

INDUSTRY INFORMATION

Unless otherwise indicated, industry information used in this Prospectus is
derived from the most recent available American Dental Association ("ADA")
Survey Center publications, including "Key Dental Facts," the "1995 Survey of
Dental Fees," the "1995 Survey of Dental Practices" and the "1990 Survey of
Dental Services Rendered," which represent historical statistics that may not
necessarily be representative of current industry statistics. The estimated
percentage of general dentistry services performed in the United States is
calculated from a table titled "Estimates of Dental Services Completed in 1990
by Private Practitioners, By Dental Specialty" which is contained in the 1990
Survey of Dental Services Rendered and is determined by dividing the total
number of services performed by general practitioners by the total number of
services performed by all dental practitioners. Information related to the
number of practicing dentists and dental practices was obtained from the "1995
Survey of Dental Practices -- Dentists in Solo and Nonsolo Practices"
publication and is based upon an ADA survey conducted in 1994. Percentage
breakdowns for the number of dentists per dental practice, average annual gross
billings and patient visits per week (including hygienist visits) per solo and
nonsolo dentists were obtained from the 1995 Survey of Dental Practices
published by the ADA in February 1996, which provides nationwide dental industry
statistics for 1994. Price comparisons were made by comparing national average
fees charged for crowns and dentures, obtained from the 1995 Survey of Dental
Fees published in July 1996 which provides national average fees charged per
procedure during 1994, to fees charged by the Company for those same procedures
during 1996. All ADA surveys are based on a statistically significant stratified
random sample of a U.S. sampling frame including 120,394 general practitioners
and 26,294 specialists. Results are restricted to responses from dentists who
reported that they were in private practice as a primary occupation and had been
in their current practice for at least one year. Information in this Prospectus
related to estimates made by the National Association of Dental Plans
("NADP(R)") is based upon preliminary estimates from a survey of 80 companies
contained in an August 5, 1996 NADP(R) press release.

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<PAGE> 8

RISK FACTORS

An investment in the shares of Common Stock offered hereby involves a high
degree of risk. Prospective investors should carefully consider the following
risk factors, in addition to the other information set forth in this Prospectus,
in connection with an investment in the Common Stock offered hereby.

This Prospectus contains forward looking statements that involve risks and
uncertainties. Those statements appear in a number of places in this Prospectus
and include statements regarding the intent, belief or current expectations of
the Company, its directors or its officers with respect to, among other things:
(i) potential acquisitions or internal development of Dental Centers and the
successful integration of such acquisitions and internally developed Dental
Centers into the Coast Dental Network; (ii) the use of the proceeds of the
Offering; (iii) the Company's financing plans; (iv) trends affecting the
Company's financial condition or results of operations; (v) the Company's growth
strategy and operating strategy; (vi) trends in the health care, dental care and
managed care industries; (vii) trends in governmental regulations; and (viii)
the declaration and payment of dividends. Prospective investors are cautioned
that any such forward looking statements are not guarantees of future
performance and involve risks and uncertainties, and that actual results may
differ materially from those projected in the forward looking statements as a
result of various factors. The accompanying information contained in this
Prospectus, including without limitation the information set forth under the
headings "Risk Factors," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Business," identifies important
factors that could cause such differences.

RISKS ASSOCIATED WITH EXPANSION STRATEGY. From its inception in 1992
through 1994, the Company opened eight internally developed Dental Centers. In
1995, the Company added three internally developed Dental Centers. The Company
added one internally developed and 17 acquired Dental Centers in 1996. The
Company expects to add a combined total of at least 25 internally developed and
acquired Dental Centers in 1997. The success of the Company's expansion strategy
will depend on factors which include the following:

Ability to Identify and Consummate Suitable Acquisitions. The Company
intends to devote a substantial amount of time and expense in attempting to
acquire the assets of suitable dental practices. Identifying appropriate
acquisitions and proposing, negotiating and consummating acquisitions can
be a lengthy and costly process. Furthermore, the Company may compete for
acquisition opportunities with companies that have greater resources than
the Company. There can be no assurance that suitable acquisition candidates
are available or can be identified or that acquisitions can be consummated
on terms favorable to the Company.

Integration of Acquisitions. Acquisitions require the Company to
attract and retain competent and experienced management personnel and
require the implementation of reporting and tracking systems, management
information systems and other operating systems. There can be no assurance
that the Company will be able to attract suitable management or other
personnel or effectively implement the Company's operating systems.
Further, the Company's financial results in fiscal quarters immediately
following a material acquisition may be adversely impacted while the
Company attempts to integrate the acquired Dental Center. While full
integration of an acquired Dental Center generally takes approximately six
months, there can be no assurance that there will not be substantial
unanticipated costs or problems associated with the integration effort.
During the first few months after an acquisition, the Company's expenses
related to the acquired Dental Center may exceed the revenues it realizes
from the acquired Dental Center and according any such acquisitions may
have a negative effect on the Company's operating results. As the Company
pursues its expansion strategy, there can be no assurance that the Company
will be able to continue to successfully integrate acquired Dental Centers
and any failure or inability to do so may have a material adverse effect on
the Company's results of operations or financial condition and the
Company's ability to implement its expansion strategy.

Ability to Internally Develop Dental Centers. The Company intends to
devote a substantial amount of time and expense in identifying locations in
suitable markets for the development of new internally developed Dental
Centers. Identifying locations in suitable geographical markets and
negotiating the necessary leases can be a lengthy and costly process.
Furthermore, the Company will need to provide the

7
<PAGE> 9

new facility with the appropriate equipment, furnishings, materials and
supplies. The average cost to the Company to open an internally developed
Dental Center has been approximately $125,000. Additionally, the new
internally developed Dental Center must be staffed with a suitable dentist
employed by the Coast Florida P.A. The Company will be required to obtain
the consent of the Coast Florida P.A., or a Coast P.A., prior to adding an
internally developed Dental Center. Since an internally developed Dental
Center may be staffed with a dentist with no previous patient base,
significant advertising and marketing expenditures may be required to
attract patients. There can be no assurance that an internally developed
Dental Center will ever become profitable for the Company.

Availability of Funds for Expansion Strategy. The Company's expansion
strategy will require that substantial capital investment and adequate
financing be available to the Company. Capital is needed not only for the
acquisition of assets of dental practices, but also for the internal
development of Dental Centers, integration of operations and the addition
of equipment and technology. The Company currently believes that the net
proceeds from this Offering, cash flow from operations and borrowings
available under the Company's bank credit facility will be adequate to meet
the Company's anticipated capital needs through 1997. After 1997, the
Company may be required to obtain financing through additional borrowings
or the issuance of additional equity or debt securities which could have
any adverse effect on the value of the shares of Common Stock of the
Company. There can be no assurance that the Company will be able to obtain
such financing or that, if available, such financing will be on terms
acceptable to the Company. Any inability of the Company to obtain suitable
additional financing could cause the Company to change its expansion
strategy which could have a material affect on the Company.

Ability to Manage Dental Centers. The success of the Company's
expansion strategy will depend on the Company's ability to effectively
manage an increasing number of new Dental Centers while continuing to
manage existing Dental Centers. The addition of new Dental Centers through
acquisitions and internal development may impair the Company's ability to
efficiently and successfully provide its management services to the Dental
Centers and to also adequately manage and supervise the Company's
employees. The Company expects to add at least 25 Dental Centers in 1997
which would bring the total number of Dental Centers managed by the Company
to 54 Dental Centers by the end of 1997. The Company has no experience in
managing such volume of Dental Centers and the Company's future results
could be materially adversely affected if it is unable to effectively
manage such number of Dental Centers.

STATE LAW RESTRICTIONS ON THE COMPANY'S ACQUISITIONS. The laws of certain
states, including Florida, prohibit non-dentist entities from practicing
dentistry or exercising control over dentists and dental hygienists. As a
result, the Company only acquires those assets of a dental practice which are
allowable by law, which generally includes all of the assets of the dental
practice except for patient lists, patient records and related assets which are
acquired by the Coast Florida P.A. The purchase price of the dental practice
acquisitions are allocated so that the Coast Florida P.A. pays for the patient
list, patient records and related assets while the Company pays for the
remaining assets. The dentist from whom the dental practice is acquired is
employed by the Coast Florida P.A. Florida law prohibits the Company from
employing dentists or dental hygienists. While the Company purchases all
equipment and materials used in the dental practice, the dentist and the Coast
Florida P.A. maintain complete care, custody and control of all of the equipment
and materials used in the practice of dentistry as required by Florida law.
There can be no assurance that the Company will not be further restricted from
acquiring certain assets of the dental practices under the laws of the State of
Florida or under the laws of any other states in which the Company may desire to
operate in the future. Such restrictions could have a material adverse affect on
the Company.

RELIANCE ON THE REVENUES OF THE COAST FLORIDA P.A. The Company's revenue
depends on revenue generated by the Coast Dentists employed by the Coast Florida
P.A. In fiscal year ended December 31, 1995, 100% of the Company's revenue was
attributable to management fees paid by the Coast Florida P.A. There can be no
assurance that the Coast Florida P.A. and the Coast Dentists will continue to
maintain successful dental practices, that the Services and Support Agreement
will not be terminated or that the Coast Dentists will continue to be employed
by the Coast Florida P.A. The Company has, in the State of Florida, no intention
of entering into services and support agreements with other entities. Under the
Services and Support

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Agreement, the Company has agreed with the Coast Florida P.A. that it will not
provide services and support for any other dental practice in the market area
where the Dental Centers are located without first obtaining the express written
consent of the Coast Florida P.A.

DEPENDENCE ON THE COAST FLORIDA P.A. AND THE COAST DENTISTS. The Company
receives fees for services provided to the Coast Florida P.A. under a services
and support agreement, but does not employ dentists or hygienists or control the
practices of the Coast Dentists. The Company's revenue is dependent on revenue
generated by the Coast Dentists and, therefore, effective and continued
performance of the Coast Dentists during the term of the Services and Support
Agreement is essential to the Company's long term success. Under the current
Services and Support Agreement, the Company receives a monthly fee from the
Coast Florida P.A. equal to 76.0% of the Dental Centers' gross revenue. Prior to
October 1, 1996, the services and support fee paid by the Coast Florida P.A. to
the Company averaged 78.5% of the Dental Centers' gross revenue from which the
Company pays the operating expenses incurred by the Coast Florida P.A. excluding
certain costs incurred by the Coast Florida P.A. As a result of the change in
the services and support fee, there can be no assurance that the prior economic
performance of the Company will be indicative of future results. The Company
pays all of the operating and nonoperating expenses incurred by the Coast
Florida P.A. at the Dental Centers, except for the salaries and benefits of the
Coast Dentists and hygienists, federal and state income taxes, bad debt and
other expense designated as an expense of the Coast Florida P.A. Any material
loss of revenue by the Coast Florida P.A. would have a material adverse effect
on the Company. In the event of a breach of the Services and Support Agreement
by the Coast Florida P.A., there can be no assurance that the legal remedies
available to the Company will be adequate to compensate the Company for its
damages resulting from such breach. See "Business -- Services and Support
Agreement."

POTENTIAL CONFLICTS OF INTEREST OF THE COMPANY'S PRESIDENT AND CHIEF
OPERATING OFFICER RELATING TO THE COAST FLORIDA P.A. The Company's President,
Chief Operating Officer and Director, Dr. Adam Diasti, is the sole owner of the
Coast Florida P.A. Dr. Diasti is the brother of the Company's Chairman and Chief
Executive Officer, Terek Diasti, and Vice President of Operations, Tim Diasti.
As a result of Dr. Diasti's ownership of Coast Florida P.A. and his family
relationships, potential conflicts of interest may arise in certain matters
including, but not limited to, matters related to the Services and Support
Agreement. Although Dr. Diasti has a fiduciary duty to the Company, there can be
no assurances that the Company will not be affected by matters in which Dr.
Diasti has a potential conflict of interest. The Company believes, however, that
the terms of the Services and Support Agreement, including the management fee,
are fair to the Company and on terms no less favorable to the Company than would
have been reached through arm's-length negotiations with an unrelated third
party. In addition, the Company and Dr. Diasti have entered into a stock
transfer and pledge agreement whereby upon the death or disability of Dr. Diasti
or a breach by Dr. Diasti or the Coast Florida P.A. of the Services and Support
Agreement with the Company, the Company may require Dr. Diasti to sell his
ownership interest in the Coast Florida P.A. to a third party designated by the
Company at fair market value. Under the stock transfer and pledge agreement, Dr.
Diasti is permitted to sell his ownership interest in the Coast Florida P.A.
provided that the purchaser agrees to be bound by the terms of the stock
transfer and pledge agreement. The Company has established an audit committee
with two independent directors as members effective upon completion of the
Offering who will review and approve any transactions with Dr. Diasti or the
Coast Florida P.A. in the future including any amendments or modifications to
the Services and Support Agreement. See "Business -- Services and Support
Agreement," "Management" and "Certain Transactions".

LIMITED OPERATING HISTORY. The Company has been providing dental practice
management services since May of 1992. Although the Company currently provides
management services for 29 Dental Centers, the Company has been providing
management services to 18 of the Dental Centers for a period of less than one
year. Historically, the Company's current liabilities have exceeded its current
assets but there can be no assurance that the Company will have sufficient
liquidity to implement its expansion plans. Prior to April 1996, the Company
provided dental practice management services exclusively in the Tampa Bay,
Florida area and the Company currently provides its services in a limited
geographic area.

OBLIGATIONS OF THE COAST FLORIDA P.A. The Company has previously loaned
capital to the Coast Florida P.A. to enable the Coast Florida P.A. to purchase
patient lists and related assets and may continue to do so in

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<PAGE> 11

the future. Additionally, the Company has loaned certain funds to the Coast
Florida P.A. under the Services and Support Agreement for certain expenses of
the Coast Florida P.A. and may do so in the future. Since January 1, 1996, the
Coast Florida P.A. has acquired the patient lists and the related assets for
eight existing dentist's practices, located in 16 existing dental offices. As a
result of these acquisitions, the Coast Florida P.A. has accumulated an
obligation to pay $1,069,000 in acquisition debt consisting of principal and
interest obligations declining from $393,723 for 1997 to $164,276 for 2001.
Pursuant to its arrangement with the Company, the Coast Florida P.A. has
retained the agreed upon sums of $34,750, $50,000, $44,833 and $55,708 for the
years ending December 31, 1993, 1994 and 1995 and the nine month period ended
September 30, 1996. Through December 31, 1996, the Company had advanced $227,000
to Coast Florida P.A. in order to enable to repay a portion of such acquisition
debt. A material failure of the Coast Florida P.A. to pay its current and future
debts as they become due could have a material adverse effect on the business of
the Company and its ability to expand.

DENTIST REMEDIES REGARDING ACQUISITION DEBT. If the Coast Florida P.A.
defaults on notes it has issued to certain of the Coast Dentists in connection
with certain acquired Dental Centers and those Coast Dentists were to exercise
their remedies under the acquisition documents, there could be an adverse effect
on the continued operations of the Company at those Dental Centers as well as an
adverse effect on the revenues of the Company. In the event of such default by
the Coast Florida P.A., four Coast Dentists (who accounted for an aggregate of
$4,345,905 of the Company's 1995 pro forma net revenue) could avail themselves
of a remedy resulting in the release from their covenants not to compete.
Furthermore, in the event of such default, two of the Coast Dentists (who
accounted for an aggregate of $3,425,056 of the Company's 1995 pro forma net
revenue) who could be excused from their covenants not to compete and three
additional Coast Dentists (who accounted for an aggregate of $3,574,758 of the
Company's 1995 pro forma net revenue) could avail themselves of a remedy
regaining ownership of patient lists and related assets acquired by the Coast
Florida P.A. Pursuant to a second priority security interest, one Coast Dentist
(who accounted for an aggregate of $190,070 of the Company's 1995 pro forma net
revenue) could regain ownership of the assets of his dental practice purchased
by the Company. Any such exercise of remedies by Coast Dentist and resulting
loss of revenue by the Company could have a material adverse effect on the
continued operations of the Company as well as the revenues of the Company.
Included in the Company's September 30, 1996 pro forma balance sheet are
intangible assets totalling $3,084,677 relating to the acquisitions of the
dental practices of the above dentists, which could be written off by the
Company as a result of the Coast Florida P.A.'s default on its payments to such
dentists. See "Risk Factors -- Risks Related to Intangible Assets,"
"Management's Discussion of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Certain Information on the
Coast Florida P.A." and "Certain Transactions."

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

Corporate Practice of Dentistry. The laws of many states prohibit
corporations that are not owned entirely by dentists from employing
dentists (and in some states, dental hygienists and dental assistants),
having control over clinical decision-making, or engaging in other
activities that are deemed to constitute the practice of dentistry. Florida
law specifically prohibits non-professional corporations from employing
dentists and dental hygienists, exercising control over patient records,
and making decisions relating to clinical matters, office personnel, hours
of practice, pricing, credit, refunds, warranties and advertising. The
Company does not employ dentists or dental hygienists and does not exercise
control over any prohibited areas. While Dr. Adam Diasti, the sole
shareholder of Coast Florida P.A., is also a shareholder, director and
officer of the Company, he acts independently when making decisions in
these areas on behalf of Coast Florida P.A., and the Company has no control
over his decisions in these areas.

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<PAGE> 12

and materials used in the practice of dentistry. The Services and Support
Agreement between the Company and Coast Florida P.A. expressly provides
that the Company shall not exercise control over any matters that would
violate the requirements of Florida law.

Fee-Splitting and Anti-kickback Laws.

State Law. Many states also prohibit "fee-splitting" by dentists
with any party except other dentists in the same professional
corporation or practice entity. In most cases, these laws have been
construed as applying to the practice of paying a portion of a fee to
another person for referring a patient or otherwise generating business,
and not to prohibit payment of reasonable compensation for facilities
and services (other than the generation of referrals), even if the
payment is based on a percentage of the practice's revenues. The Florida
fee-splitting law prohibits paying or receiving any commission, bonus,
kickback, or rebate, or engaging in any split-fee arrangement in any
form with a dentist for patient referrals to dentists or other providers
of health care goods and services. According to a Florida court of
appeals decision interpreting this law, it does not prohibit a
management fee that is based on a percentage of gross income of a
professional practice if the manager does not refer patients to the
practice.

In addition, most states have laws prohibiting paying or receiving
any remuneration, direct or indirect, that is intended to induce
referrals for health care items or services, including dental items and
services.

Federal Law. Federal law prohibits the offer, payment,
solicitation or receipt of any form of remuneration in return for the
referral of patients covered by federally funded health care programs
such as Medicare and Medicaid, or in return for purchasing, leasing,
ordering or arranging for the purchase, lease or order of any item or
service that is covered by a federal program. For this reason, the
Services and Support Agreement provides that the Company will not engage
in direct marketing to potential sources of business, but will only
assist Coast Florida, P.A. personnel in these endeavors by providing
training, marketing materials and technical assistance.

Advertising Restrictions. Many states, including Florida, prohibit
dentists from using advertising which includes any name other than their
own, or from advertising in any manner that is likely to lead a person to
believe that a nondentist is engaged in the practice of dentistry. The
Services and Support Agreement provides that all advertising shall conform
to these requirements. Florida law also requires all advertising to
identify the Florida dentist who assumes total responsibility for the
advertisement and may not include the name of a person who is not either
actually involved in the practice of dentistry at the advertised location
or an owner of the practice being advertised. All of the advertisements
include the name of Dr. Adam Diasti who owns the dental practice through
the Coast Florida P.A.

Limitations on Delegation. Some states, including Florida, regulate
the manner in which dentists delegate certain tasks to nondentists. In
Florida, if a dentist uses a nonlicensed person to prepare orthodontic or
prosthetic devices such as dentures, certain record keeping requirements
must be met. The Company follows these requirements whenever such
activities are performed by its employees.

These laws have civil and criminal penalties. Shumaker, Loop & Kendrick,
LLP, counsel for the Company, has advised the Company that the Services and
Support Agreement is consistent with the Florida and federal legal requirements
discussed above, so long as the fees paid to the Company do not exceed
reasonable levels for the facilities and services provided, and the Company
believes that the fee arrangement under the Services and Support Agreement is
reasonable. Nonetheless, these laws have been subject to limited judicial and
regulatory interpretation. They are enforced by regulatory agencies that are
vested with broad discretion in interpreting their meaning. The Company's
agreements and activities have not been examined by federal or state authorities
under these laws and regulations. For these reasons, there can be no assurance
that review of the Company's business arrangements or the operation of the
Dental Centers will not result in determinations that adversely affect the
Company's operations or that the long-term Services and Support Agreement or
certain of its provisions will not be held invalid and unenforceable. In
addition, these laws and their interpretation vary from state to state. The laws
and regulations of certain states into which the Company

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<PAGE> 13

seeks to expand may require the Company to change the form of relationships
entered into with dentists in a manner that restricts the Company's operations
in those states. See "Business -- Governmental and State Regulations."

NON-COMPETITION COVENANTS. The Services and Support Agreement requires the
Coast Florida P.A. to use its best efforts to enter into employment agreements
with the Coast Dentists that include covenants not to compete with Coast Florida
P.A. for a period of two years after termination of employment, and which
require the dentists to pay certain specified amounts to Coast Florida P.A. if
this provision is breached. In most states, including Florida, a covenant not to
compete will be enforced only to the extent it is necessary to protect a
legitimate business interest of the party seeking enforcement, does not
unreasonably restrain the party against whom enforcement is sought, and is not
contrary to the public interest. This determination is made based on all the
facts and circumstances of the specific case at the time enforcement is sought.
For this reason, one cannot predict with certainty whether a court will enforce
such a covenant in a given situation. In addition, no judicial precedents have
addressed whether a management company's interest under a management agreement
will be viewed as the type of protectable business interest that would permit it
to enforce such a covenant or to require the Coast Florida P.A. to enforce such
covenants against the Coast Dentists. Furthermore, liquidated damages provisions
will not be enforced unless the court determines that the amount is a reasonable
estimate of actual damages that would be difficult to ascertain exactly. Since
the intangible value of the Services and Support Agreement depends primarily on
the ability of Coast Florida P.A. to preserve its business, which could be
harmed if employed dentists went into competition with Coast Florida P.A., a
determination that these provisions will not be enforced could have a
significant adverse impact on the Company. See Business -- Services and Support
Agreement.

COMPETITION. The Company must compete with other companies which seek to
acquire the allowable business assets of, provide management and other services
to, and affiliate with existing dental practices. The Company is aware of
several other companies which are actively engaged in businesses similar to that
of the Company, some of which have substantially greater financial resources and
longer operating histories than the Company and are located in areas where the
Company may seek to expand in the future. The Company assumes that additional
companies with similar objectives may enter the Company's markets and compete
with the Company and there can be no assurance that the Company will be able to
compete effectively with such companies. The business of providing dental
services is highly competitive in each of the markets in which the Dental
Centers operate. The Coast Dentists compete with other dentists who maintain
single offices or operate a single satellite office, as well as with dentists
who maintain group practices or operate in multiple offices. Many of these
dentists have more established practices in their markets. There can be no
assurance that the Coast Dentists will be able to compete effectively with such
other dentists. See "Business -- Competition."

RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS AND CAPITATED FEE
ARRANGEMENTS. As an increasing percentage of the population is covered by
managed care organizations that provide dental coverage, the Company believes
that its success will, in part, be dependent upon its ability to assist the
Coast Florida P.A. in negotiating contracts with HMOs and health insurance
companies and other third party payors pursuant to which services will be
provided on a risk-sharing or capitated basis. Managed care contracts accounted
for 31% of the Coast Florida P.A.'s revenue for the nine month period ended
September 30, 1996. Most of these contracts are for one year terms which
automatically renew and are terminable by either party on 90 days notice. Under
some of these agreements, the health care provider may accept a pre-determined
amount per month per patient in exchange for providing all necessary covered
services to the patients covered under the agreement. These contracts pass much
of the risk of providing care from the payor to the provider. The Company has
limited experience in managing capitated fee arrangements and there can be no
assurance that the Company will be successful in managing such arrangements. The
proliferation of these contracts in markets served by the Company could result
in greater predictability of revenue, but less certainty with respect to
profitability. There can be no assurance, however, that the Coast Florida P.A.
will be able to negotiate satisfactory arrangements on a risk-sharing or
"capitated basis". In addition, to the extent that patients or enrollees covered
by these contracts require, in the aggregate, more frequent or extensive care
than is anticipated, operating margins may be reduced or the revenue derived
from these contracts may be insufficient to cover the costs of the services
provided. In such circumstances, the Company could incur losses. Any such

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<PAGE> 14

reduction of earnings or losses could have a material adverse affect on the
Company's results of operations. See "Business -- Governmental and State
Regulations."

RISKS ARISING FROM HEALTH CARE REFORM. There can be no assurance that the
laws and regulations of the states in which the Company operates will not change
or be interpreted in the future either to restrict or adversely affect the
Company's relationships with dentists or the operation of Dental Centers.
Federal and state governments are currently considering various types of health
care initiatives and comprehensive revisions to the health care and health
insurance systems. Some of the proposals under consideration, or others that may
be introduced, could, if adopted, have a material adverse effect on the
Company's financial condition and results of operations. It is uncertain what
legislative programs, if any, will be adopted in the future, or what actions
Congress or state legislatures may take regarding health care reform proposals
or legislation. In addition, changes in the health care industry, such as the
growth of managed care organizations and provider networks, may result in lower
payments for the services of the Coast Dentists. See "Business -- Governmental
and State Regulations".

COST CONTAINMENT AND REIMBURSEMENT TRENDS. The Company estimates that 51%
of the revenue of the Coast Florida P.A. are derived from government sponsored
health care programs and private third-party payors. The health care industry
has experienced a trend toward cost containment as government and private
third-party payors seek to impose lower reimbursement and utilization rates and
negotiate reduced payment schedules with service providers. The Company believes
that these trends may result in a reduction from historical levels in per
patient revenue of the Dental Centers. Further reductions in payments to
dentists or other changes in reimbursement for health care services could have
an adverse affect on the Company's revenue, unless the Dental Centers is
otherwise able to offset such payment reductions. There can be no assurance that
any of the reduced revenues and operating margins could be offset through cost
reductions, increased volume, introduction of new procedures or otherwise. See
"Business -- Governmental and State Regulations."

RISKS OF PROVIDING DENTAL SERVICES. The Coast Dentists provide dental
services to the public and are exposed to the risk of professional liability and
other claims. Such claims, if successful, could result in substantial damage
awards to the claimants which may exceed the limits of any applicable insurance
coverage. The Company does not control the practice of dentistry by the Coast
Dentists or the compliance with regulatory and other requirements directly
applicable to the Coast Dentists and their practices. Each Coast Dentist has
undertaken, however, to comply with all applicable regulations and requirements,
and the Company is indemnified under its Services and Support Agreement for
claims against the Company arising from the performance of dental services
provided by the Coast Dentists. The Company maintains liability insurance for
itself and is named as an additional insured party on the liability insurance
policy of the Coast Dentists. In addition, under the Services and Support
Agreement, the Coast Florida P.A. is required to indemnify the Company for
losses or liability relating to claims against the Coast Dentists. While the
Company believes it has adequate liability insurance coverage, there can be no
assurance that a pending or future claim or claims will not be successful and,
if successful, will not exceed the limits of available insurance coverage, that
such coverage will continue to be available at acceptable costs and on favorable
terms. See "Business -- Services and Support Agreement."

RISKS OF BECOMING SUBJECT TO LICENSURE. Federal and state laws regulate
insurance companies, HMOs and certain other managed care organizations. Many
states also regulate the establishment and operation of networks of health care
providers. In most states, including Florida, these laws do not apply to
discounted fee-for-service arrangements. These laws also do not generally apply
to networks that are paid on a "capitated" basis, i.e. based on the number of
covered persons the network is required to serve without regard to the cost of
service actually rendered, unless the entity with which the network provider is
contracting is not a licensed health insurer or HMO. There are exceptions to
these rules in some states. For example, certain states require a license for a
capitated arrangement with any party unless the risk-bearing entity is a
professional corporation that employs the professionals. The Company believes
that it is in compliance with the laws of the State of Florida with respect to
the operation of the Dental Centers and the Company in Florida, but there can be
no assurance that interpretations of these laws by the regulatory authorities in
Florida or in the states in which the Company expands will not require licensure
or a restructuring of some or all of the Company's operations. In

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<PAGE> 15

the event that the Company is required to become licensed under these laws, the
licensure process can be lengthy and time consuming and, unless the regulatory
authority permits the Company to continue to operate while the licensure process
is progressing, the Company could experience a material adverse change in its
business while the licensure process is pending. In addition, many of the
licensing requirements mandate strict financial and other requirements which the
Company may not immediately be able to meet. Further, once licensed, the Company
would be subject to continuing oversight by and reporting to the respective
regulatory agency. The regulatory framework of certain jurisdictions may limit
the Company's expansion into, or ability to continue operations within, such
jurisdictions if the Company is unable to modify its operational structure to
conform with such regulatory framework. Any limitation on the Company's ability
to expand could have an adverse effect on the Company. See
"Business -- Governmental and State Regulations."

RISKS ASSOCIATED WITH REGULATION OF MANAGED CARE CONTRACTS BY STATE
INSURANCE LAWS. There are state insurance law regulatory risks associated with
the Company's role in negotiating and administering managed care contracts on
behalf of the Coast Florida P.A. State insurance laws are subject to broad
interpretation by regulators and, in some states, state insurance regulators may
determine that the Company or the Coast Florida P.A. is engaged in the business
of insurance because of the capitation features contained in managed care
contracts. In the event that the Company or the Coast Florida P.A. is determined
to be engaged in the business of insurance, the Company could be required to
either seek licensure as an insurance company or change the form of its
relationships with the third-party payors. There can be no assurances that the
Company's operations would not be adversely affected if the Company or the Coast
Dental P.A. were to become subject to state insurance regulations. See
"Governmental and State Regulations."

DEPENDENCE ON KEY INDIVIDUALS. The success of the Company is dependent
upon the continued services of the Company's senior management. The loss of the
services of one or more of these individuals, including the Company's Chairman
and Chief Executive Officer, Terek Diasti; its President, Chief Operating
Officer and sole owner of the Coast Florida P.A., Adam Diasti; or its Chief
Financial Officer, Joseph R. Smith, could have a material adverse effect on the
Company. The Company believes that its future success will also depend in part
upon its ability to attract and retain qualified management personnel.
Competition for such personnel is intense and the Company competes for qualified
personnel with numerous other employers, some of whom have greater financial and
other resources than the Company. There can be no assurance that the Company
will be successful in attracting and retaining such personnel. See "Management."

CONTROL BY PRINCIPAL STOCKHOLDER. Upon completion of the Offering, Terek
Diasti, Adam Diasti and Tim Diasti, through the Diasti Nevada Family Limited
Partnership, will own approximately 51.0% of the outstanding shares of Common
Stock. Accordingly, these individuals, as a group, will have the ability to
control all matters requiring stockholder approval, including the election of
the Company's directors and any amendments to the Company's Certificate of
Incorporation and Bylaws, and to control the business of the Company. Such
control could preclude any acquisition of the Company and could adversely affect
the market price of the Common Stock. See "Principal and Selling Stockholders"
and "Description of Capital Stock."

RISKS RELATED TO INTANGIBLE ASSETS. The Company's pro forma total assets
reflect substantial intangible assets in the form of non-compete agreements and
dental service agreements. These intangible assets are being amortized over
their expected useful lives. There can be no assurance that the value of such
intangible assets will ever be realized by the Company. The dental service
agreements amount is being amortized on a straight-line basis over 25 years and
the non-compete agreements amount is being amortized on a straight-line basis
over nine years. The Company's policy is to evaluate on a regular basis whether
events and circumstances have occurred that indicate all or a portion of the
carrying amount of such assets may no longer be recoverable, in which case an
additional charge to earnings would become necessary. Any future determination
requiring the write-off of a significant portion of such unamortized assets
would adversely affect the Company's results of operations. See Unaudited Pro
Forma Combined Financial Information of the Company.

SHARES ELIGIBLE FOR FUTURE SALE. Upon completion of the Offering, the
Company will have outstanding 5,700,000 shares of Common Stock, of which the
2,200,000 shares sold in the Offering and an additional 105,000 shares will be
freely tradeable without restriction or further registration under the
Securities Act of

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<PAGE> 16

1933 (the "Securities Act"). The remaining 3,395,000 shares (the "Restricted
Shares") are subject to certain restrictions described below. Holders of
3,255,000 of the Restricted Shares will be eligible to sell a portion of such
shares pursuant to Rule 144 ("Rule 144") under the Securities Act beginning in
90 days following the completion of this offering, subject to manner of sale,
volume, notice and information requirements of Rule 144. Notwithstanding the
eligibility of certain shares to be sold following the completion of the
Offering, such shares are subject to certain additional restrictions on transfer
pursuant to certain agreements described below. Holders of the 140,000 remaining
Restricted Shares will be eligible to sell a portion of such shares pursuant to
Rule 144 beginning in April 1998. See "Shares Eligible for Future Sales."

The Company and its executive officers and directors have agreed that they
will not, directly or indirectly, offer, sell, offer to sell, contract to sell,
pledge, grant any option to purchase or otherwise sell or dispose (or announce
any offer, sale, offer of sale, contract of sale, pledge, grant of any option to
purchase or other sale or disposition) of any shares of Common Stock or any
securities convertible into, or exercisable or exchangeable for, Common Stock or
other capital stock of the Company, or any right to purchase or acquire Common
Stock or other capital stock of the Company, for a period of 180 days after the
date of this Prospectus, without the prior written consent of Prudential
Securities Incorporated, on behalf of the Underwriters, except for bona fide
gifts or transfers affected by such stockholders other than on any securities
exchange or in the over-the-counter market to donees or transferees that agree
to be bound by similar agreements (the "Lock-up Agreements") and except for
sales made by Selling Stockholders pursuant to options granted to the
Underwriters to purchase an additional 330,000 shares to cover over-allotments,
if any. Sales of substantial amounts of Common Stock in the public market, or
the availability of such shares for future sale, could adversely affect the
market price of the Common Stock and could impair the Company's future ability
to raise additional capital through an offering of its equity securities. See
"Shares Eligible for Future Sale" and "Underwriting."

Additionally, the Company intends to file several registration statements
under the Securities Act to register all shares of Common Stock subject to then
outstanding stock options and Common Stock issuable pursuant to the Plans. The
Company expects to file these registration statements promptly following the
closing of the Offering, and such registration statements are expected to become
effective upon filing. Shares covered by these registration statements will
thereupon be eligible for sale in the public markets, subject to the Lock-up
Agreements relating to shares held by executive officers. See "Management" and
"Shares Eligible for Future Sale."

Following the Offering the Company may issue its Common Stock from time to
time in connection with the acquisition of stock or assets of other companies.
Such securities may be issued in transactions exempt from registration under the
Securities Act.

IMMEDIATE AND SUBSTANTIAL DILUTION. Purchasers of shares of Common Stock
in the Offering will experience immediate and substantial dilution,
approximately $6.37 per share, in the net tangible book value per share of
Common Stock from the assumed initial public offering price. See "Dilution."

NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE. Prior to the
Offering, there has been no public market for the Company's Common Stock and
there can be no assurance that an active public market for the Common Stock will
develop or, if a trading market does develop, continue after the Offering. The
initial public offering price will be determined by negotiations among the
Company and the representatives (the "Representatives") of the Underwriters. See
"Underwriting" for a description of the factors that will be considered in
determining the initial public offering price. The market price of the Common
Stock could be subject to significant fluctuations in response to variations in
financial results or announcements of material events by the Company or its
competitors. Quarterly operating results of the Company, changes in general
conditions in the economy or the health care industry, or other developments
affecting the Company or its competitors, could cause the market price of the
Common Stock to fluctuate substantially. The equity markets have, on occasion,
experienced significant price and volume fluctuations that have affected the
market prices for many companies' securities and that have often been unrelated
to the operating performance of these companies. Concern about the potential
effects of health care reform measures has contributed to the volatility of
stock prices of companies in health care and related industries and may
similarly affect the price of the

15
<PAGE> 17

Common Stock following the Offering. Any such fluctuations that occur following
completion of the Offering may adversely affect the market price of the Common
Stock.

CERTAIN ANTI-TAKEOVER PROVISIONS. Certain provisions in the Company's
Certificate of Incorporation and Bylaws and Delaware law may make a change in
control of the Company more difficult to effect, even if a change in control
were in the stockholders' interest. Such provisions include certain
supermajority voting requirements contained in the Company's Certificate of
Incorporation. The Company's Certificate of Incorporation also provides that the
Board of Directors is divided into three classes of directors, elected for
staggered three-year terms. In addition, the Company's Certificate of
Incorporation allows the Board of Directors to determine the terms of preferred
stock which may be issued by the Company without approval of the holders of the
Common Stock, and thereby enables the Board of Directors to inhibit the ability
of the holders of the Common Stock to effect a change in control of the Company.
See "Description of Capital Stock -- Certain Provisions of Delaware Law."

The Company has entered into employment agreements with three executive
officers. Such agreements require the Company to pay certain amounts to such
employees upon their termination following certain events including a change in
control of the Company. Such agreements may inhibit a change in control of the
Company. See "Management -- Employment Agreements."

RESTRICTIONS ON PAYMENT OF DIVIDENDS. The Company's current bank credit
facility places certain restrictions on the future payment of dividends.
Although the current credit facility will be paid off from the proceeds of the
Offering, the Company expects to enter into a new credit facility which is
expected to impose similar restrictions on the Company's payment of dividends.
Furthermore, the Company currently intends to retain all future earnings for the
operation and expansion of its business and, accordingly, the Company does not
anticipate that any dividends will be declared or paid for the foreseeable
future. See "Dividend Policy."

ANTITRUST. The Company and its associated professional associations are
subject to a range of antitrust laws that prohibit anti-competitive conduct,
including price fixing, concerted refusals to deal and divisions of markets.
Among other things, these laws limit the ability of the Company to enter into
services and support agreements with separate practice groups that compete with
one another in the same geographic market. This does not apply to dentists
within the same practice group, such as the Coast Florida P.A. In addition,
these laws prevent acquisitions of practices that would be integrated into
existing professional groups such as the Coast Florida P.A. if such acquisitions
substantially lessen competition or tend to create a monopoly.

16
<PAGE> 18

THE COMPANY

The Company was incorporated in August 1992 as Sunshine Health Services
Inc., a Florida corporation, and changed its name to Coast Dental, Inc. ("CDI")
in August 1994. Effective March 31, 1996, CDI was merged into Coast Dental
Services, Inc., a Delaware corporation, for the purpose of reincorporating the
Company in the State of Delaware and changing its corporate name. See Note 1 to
the Financial Statements of the Company. The Company obtains its revenue from
the Coast Florida P.A. for providing management services and support to the
general dentistry practices at the Dental Centers.

As of January 1, 1997, the Company was managing 29 Dental Centers located
in central Florida, 12 of which were internally developed and 17 of which were
acquired. The Company opened two internally developed Dental Centers in both
1992 and 1993, four in 1994, three in 1995 and one in 1996. The Company added 17
acquired Dental Centers in 1996, including a single dental office in January
1996, seven dental offices in April 1996 through the Volusia Acquisition, three
separate single dental offices in September 1996, three dental offices in
November 1996 through the Seminole Acquisition, and three separate single dental
offices in December 1996. The total purchase prices for the Volusia Acquisition
and the Seminole Acquisition were $1.8 million and $2.5 million, respectively,
and the purchase prices for the other acquisitions completed in 1996 aggregated
approximately $1.0 million. See Notes 4 and 12 to Notes to Financial Statements
of the Company and the Unaudited Pro Forma Combined Financial Information of the
Company.

The address of the Company's executive offices is 6200 Courtney Campbell
Causeway, Suite 690, Tampa, Fl. 33607 and its telephone number is (813)
288-1999.

RELATIONSHIP BETWEEN THE COMPANY AND THE COAST FLORIDA P.A.

The Company provides management services to 29 Dental Centers located in
central Florida pursuant to the Services and Support Agreement with the Coast
Florida P.A., which is wholly owned and controlled by Dr. Adam Diasti. The Coast
Florida P.A. receives its revenue from payments by or for the account of
patients, while the Company receives fees from the Coast Florida P.A. for
providing management services and support to the Dental Centers pursuant to the
Services and Support Agreement. The Coast Dentists and dental hygienists
practicing in the Dental Centers are employed and compensated by the Coast
Florida P.A. The Company employs and compensates all administrative and support
staff, including receptionists, office managers and dental assistants located in
each Dental Center.

The Company provides management and administrative functions to the Dental
Centers thus allowing the Coast Dentists to focus exclusively on the provision
of general dental care. The Coast Florida P.A. maintains full control over the
dental practices of the Coast Dentists and sets prices for all dental services.
The Coast Florida P.A. makes all final decisions regarding advertising and
marketing programs related to its practices while the Company assists in the
development and implementation of advertising and marketing programs. The
Company purchases all non-dental inventory and supplies and, as directed by the
Coast Florida P.A., all dental inventory and supplies for each Dental Center.

The Company assists in marketing the Coast Dental Network to HMOs, health
insurance companies and other third party payors who have an established
presence in regional markets served, or expected to be served, by the Coast
Florida P.A. The Company assists the Coast Florida P.A. in negotiating managed
care contracts with managed care companies, to be entered into by, and at the
sole discretion of, the Coast Florida P.A.

17
<PAGE> 19

The Company has expanded and expects to continue to expand through the
addition of internally developed and acquired Dental Centers. When the Company
acquires an existing dental office, the Company acquires the assets to the
extent permitted by law. Typically, the Company acquires the dental office lease
as well as all dental and office equipment. The Coast Florida P.A. acquires the
patient lists, patient records and related assets, and enters into an employment
agreement with the acquired practice's dentists and hygienists to staff the
Dental Center. Of the 17 acquired Dental Centers, 23 dentists located at the
acquired practices have continued as employees of the Coast Florida P.A. In
addition, all dentists practicing at an acquired Dental Center become subject to
the Services and Support Agreement. The Company also opens internally developed
Dental Centers in conjunction with the Coast Florida P.A. which Dental Centers
also become subject to the Services and Support Agreement. When opening
internally developed Dental Centers, the Company provides the dental office and
all the necessary equipment and support staff while the Coast Florida P.A.
provides dentists and dental hygienists. The patient lists and records are the
property of the Coast Florida P.A.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the 2,200,000 shares of
Common Stock offered by the Company, at an assumed initial public offering price
of $9.00 per share, are estimated to be approximately $17.6 million (after
deducting underwriting discounts and commissions and estimated offering
expenses).

The Company intends to use the net proceeds from the Offering as follows:
(a) an aggregate of $12.0 million to finance the expansion of the Company
through the addition of internally developed Dental Centers and acquired Dental
Centers; (b) an aggregate of approximately $4.1 million to repay outstanding
indebtedness as follows: (i) $1.1 million of notes payable to banks utilized as
consideration for acquisitions by the Company, which bear interest at rates
currently ranging between 9.25% and prime plus 2% per annum and mature from
November 1997 to February 2000, (ii) notes payable of $1.1 million issued as
part of the consideration for the Volusia Acquisition, which bear interest at 9%
per annum and mature at various dates through October 2003, (iii) notes payable
of $1.3 million issued as part of the consideration for the Seminole
Acquisition, which bear interest at 8% per annum and mature November 1, 2001,
(iv) notes payable of $345,000 as part of the consideration for the addition of
six acquired Dental Centers occurring after June 30, 1996, which bear interest
at rates ranging between 8% and 9% per annum and mature at October 2001, and (v)
$220,000 of equipment lease obligations, which bear interest at rates currently
ranging between 15% and 21% per annum; and (c) the balance of approximately $1.5
million for miscellaneous working capital and general corporate purposes. Terek
Diasti and Adam Diasti provided personal guarantees in connection with certain
indebtedness being repaid with the net proceeds from the Offering, and such
guarantees will be released upon such repayment. See "Certain Transactions."
Pending such uses, the net proceeds will be invested in short-term, investment
grade securities, certificates of deposit or direct or guaranteed obligations of
the United States government.

If the Underwriters' over-allotment options are exercised, the Company will
not receive any of the proceeds from the sale of the shares of Common Stock by
the Selling Stockholders. See "Principal and Selling Stockholders."

18
<PAGE> 20

DIVIDEND POLICY

The Company has not paid or declared any dividends since its inception
other than distributions of $141,146 to stockholders for taxable income earned
by the Company through September 30, 1996 as an S Corporation. In addition, the
Company intends to distribute to stockholders, out of its available cash
balances, sufficient cash to pay federal income taxes on the earnings of the
Company through the date of the closing of the Offering, as described in Note 2
to Notes to Financial Statements. At September 30, 1996, the amount of such
distribution would have been approximately $338,000. The Company currently
intends to retain all future earnings for the operation and expansion of its
business and, accordingly, the Company does not anticipate that any dividends
will be declared or paid on the Common Stock for the foreseeable future. Any
future determination to pay cash dividends will be at the discretion of the
Board of Directors and will be dependent upon the Company's financial condition,
results of operations, capital requirements and such other factors as the Board
of Directors deems relevant. The Company's current bank credit facilities place
certain restrictions on the future payment of dividends. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."

CAPITALIZATION

The following table sets forth the capitalization of the Company as of
September 30, 1996, (i) on an actual basis, (ii) on a pro forma basis to give
effect to the Seminole Acquisition in November 1996, the acquisitions of three
separate single dental offices in December 1996 and the payment of the S
Corporation Distribution, and (iii) as adjusted for the issuance of 2,200,000
shares of Common Stock in the Offering at an assumed initial public offering
price of $9.00 per share and the application of the estimated net proceeds
therefrom, which are estimated to be approximately $17.6 million (after
deducting underwriting discounts and commissions and estimated offering
expenses). This table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Financial Statements and Unaudited Pro Forma Combined Financial Information
and related Notes thereto included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------ --------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Current portion of long-term debt and capital lease
obligations............................................... $ 540 $ 584 $ --
====== ====== =======
Long-term debt and capital lease obligations................ $1,994 $4,150 $ 503
------ ------ -------
Stockholders' equity(1):
Common Stock: $.001 par value; 50,000,000 shares
authorized, 3,500,000 shares outstanding and 5,700,000
shares outstanding, pro forma as adjusted.............. 3 3 5
Additional paid-in capital................................ 25 542 18,140
Retained earnings......................................... 1,027 -- --
------ ------ -------
Total stockholders' equity........................... 1,055 545 18,145
------ ------ -------
Total capitalization.............................. $3,049 $4,695 $18,648
====== ====== =======
</TABLE>

- ---------------

(1) Excludes 900,000 shares of Common Stock reserved for future issuance
pursuant to the Plans. At September 30, 1996, options to purchase 116,243
shares of Common Stock have been granted under the Plans which are
exercisable at the Offering price, none of which are presently exercisable.
See "Management -- The Plans," "Shares Eligible for Future Sale," and Note
12 to the Notes to Financial Statements of the Company.

19
<PAGE> 21

DILUTION

Purchasers of Common Stock offered hereby will experience an immediate and
substantial dilution in the net tangible book value of the Common Stock from the
initial public offering price. At September 30, 1996, the pro forma net tangible
book value (deficit) of the Company was $(2.5 million), or $(0.71) per share.
Pro forma net tangible book value per share is determined by dividing the
Company's net tangible book value (tangible assets less total liabilities, after
giving effect to the three dental offices acquired in November 1996, the three
separate single dental centers acquired in December 1996, and the S Corporation
Distribution as if they occurred as of September 30, 1996) by the number of
shares of Common Stock outstanding. After giving effect, as of such date, to the
sale of 2,200,000 shares of Common Stock offered hereby at an assumed initial
public offering price of $9.00 per share and after deducting underwriting
discounts and commissions and estimated offering expenses, the pro forma net
tangible book value of the Company would have been $15.0 million or $2.63 per
share. This represents an immediate increase in pro forma net tangible book
value of $3.34 per share to existing stockholders and an immediate dilution in
net tangible book value of $6.37 per share to new investors purchasing shares of
Common Stock in the Offering. The following table illustrates this per share
dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price....................... $9.00
Net tangible book value (deficit) at September 30,
1996(1)................................................ $ (0.71)
-------
Increase attributable to new investors.................... 3.34
-------
Pro forma net tangible book value after the Offering........ 2.63
-----
Dilution in net tangible book value to new investors........ $6.37
=====
</TABLE>

The following table sets forth, on a pro forma basis at September 30, 1996,
the differences between the existing stockholders and the new investors
purchasing shares in the Offering with respect to the number of shares of Common
Stock purchased from the Company, the total consideration paid to the Company
and the average price per share at an assumed initial public offering price of
$9.00 per share, without giving effect to the underwriting discounts and
commissions and offering expenses:

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
------------------- --------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 3,500,000 61.4% $ 545,405 2.7% $ 0.16
--------- ----- ----------- -----
New investors....................... 2,200,000 38.6 19,800,000 97.3 9.00
--------- ----- ----------- -----
Total(1).................. 5,700,000 100.0% $20,345,405 100.0%
========= ===== =========== =====
</TABLE>

- ---------------

(1) Excludes 900,000 shares of Common Stock reserved for issuance under the
Plans. To the extent that such stock options are eventually exercised, there
may be further dilution to new investors. See "Management -- The Plans,"
"Shares Eligible for Future Sale" and Note 12 of Notes to Financial
Statements. Assuming the Underwriters' over-allotment options are exercised
in full, the number of shares held by existing stockholders will be reduced
to 3,170,000 shares, or 55.6% of the total number of shares outstanding
after the Offering, and the number of shares held by new investors will
increase by 330,000 shares to 2,530,000 shares, or 44.3% of the total shares
of Common Stock outstanding after the Offering. See "Principal and Selling
Stockholders."

20
<PAGE> 22

SELECTED PRO FORMA FINANCIAL DATA

The pro forma financial data are derived from the Unaudited Pro Forma
Combined Financial Information of the Company appearing elsewhere in this
Prospectus. The Pro Forma Statement of Operations Data presented in the
following table for the year ended December 31, 1995 and the nine months ended
September 30, 1996 give effect to (i) the Recent Acquisitions, including the
Company's entering into a new Services and Support Agreement with the Coast
Florida P.A., and (ii) the issuance of 2,200,000 shares of Common Stock in the
Offering at an assumed initial public offering price of $9.00 per share and the
application of the net proceeds therefrom, as if they had occurred at the
beginning of the respective periods presented. The Pro Forma Balance Sheet Data
presented in the following table at September 30, 1996 give effect to (i) the
Seminole Acquisition in November 1996, (ii) the three separate acquisitions of
single dental offices in December 1996, (iii) the S Corporation Distribution,
and (iv) the consummation of the Offering and the application of the estimated
net proceeds therefrom as described under "Use of Proceeds", as if they had
occurred as of September 30, 1996.

The pro forma financial data should be read in conjunction with the
Unaudited Pro Forma Combined Financial Information of the Company and the
related notes thereto included elsewhere in this Prospectus. Management believes
the assumptions used in the Unaudited Pro Forma Combined Financial Information
provide a reasonable basis on which to present the pro forma financial data. The
pro forma financial data are provided for informational purposes only and should
not be construed to be indicative of the Company's financial position or results
of operations had the transactions and events described in the notes thereto
been consummated on the dates assumed and are not intended to project the
Company's financial condition or results of operations on any future date or for
any future period.

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, 1995 SEPTEMBER 30, 1996
----------------- ------------------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C>
PRO FORMA STATEMENT OF OPERATIONS DATA:
Net revenue................................................. $9,916 $ 8,813
Dental Center expenses:
Staff salaries............................................ 3,002 2,683
Dental supplies and lab fees.............................. 1,397 1,177
Advertising............................................... 826 622
Rent...................................................... 992 858
Depreciation and other.................................... 1,320 691
------- -------
Total Dental Center expenses................................ 7,537 6,031
------- -------
Gross profit................................................ 2,379 2,782
General and administrative expenses....................... 1,263 866
Depreciation and amortization............................. 241 190
------- -------
Operating income............................................ 875 1,726
Interest expense -- net................................... 115 83
------- -------
Income before income taxes.................................. 760 1,643
Income tax (expense) benefit.............................. (304) (641)
------- -------
Net income................................................ $ 456 $ 1,002
======= =======
Earnings per share.......................................... $ 0.11 $ 0.25
======= =======
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
------------------
(IN THOUSANDS)
<S> <C>
PRO FORMA BALANCE SHEET DATA:
Working capital............................................. $13,740
Total assets................................................ 19,350
Total long-term debt, including current maturities.......... 503
Stockholders' equity........................................ 18,145
</TABLE>

See Notes to the Unaudited Pro Forma Combined Financial Information.

21
<PAGE> 23

SELECTED FINANCIAL DATA

The following selected financial data with respect to the Company's
statements of operation's for the years ended December 31, 1993, 1994 and 1995
and for the nine months ended September 30, 1996 and the balance sheet data as
of December 31, 1994, 1995 and September 30, 1996 are derived from the Financial
Statements of the Company which have been audited by Deloitte & Touche LLP,
independent accountants. The selected financial data presented below for the
year ended December 31, 1992 and for the nine months ended September 30, 1995 is
unaudited and was prepared by management of the Company on the same basis as the
audited Financial Statements included elsewhere herein and, in the opinion of
management of the Company, include all adjustments necessary to present fairly
the information set forth therein. The results for the nine months ended
September 30, 1996 are not necessarily indicative of the results to be expected
for the full year ending December 31, 1996 or future periods. The following data
should be read in conjunction with the Financial Statements of the Company and
the related notes thereto and "Management's Discussion and Analysis of Financial
Condition and Results of Operations," and "Business -- Coast Dental Center
Locations" included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
----------------------------------- ------------------
1992 1993 1994 1995 1995 1996
---- ------ ------ ------- ------- -------
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue............................... $398 $1,194 $1,868 $ 3,325 $ 2,367 $ 5,342
Dental Center expenses:
Staff salaries.......................... 63 291 446 863 662 1,520
Dental supplies and lab fees............ 35 166 385 557 411 742
Advertising............................. 71 155 221 351 286 448
Rent.................................... 33 140 218 296 244 524
Other................................... 52 100 163 286 184 283
---- ------ ------ ------- ------- -------
Total Dental Center expenses.............. 254 852 1,433 2,353 1,787 3,517
---- ------ ------ ------- ------- -------
Gross profit............................ 144 342 435 972 580 1,825
General and administrative expenses....... -- 296 580 682 417 634
Depreciation and amortization............. 11 10 5 15 14 84
---- ------ ------ ------- ------- -------
Operating income (loss)................. 133 36 (150) 275 149 1,107
Interest expense -- net................... 9 30 32 50 50 113
---- ------ ------ ------- ------- -------
Income (loss) before income taxes......... 124 6 (182) 225 99 994
Pro forma income tax (expense)
benefit(1).............................. (50) (2) 73 (90) (39) (387)
---- ------ ------ ------- ------- -------
Pro forma net income (loss)............... $ 74 $ 4 $ (109) $ 135 $ 60 $ 607
==== ====== ====== ======= ======= =======
Pro forma net earnings per common share... $ 0.04 $ 0.17
======= =======
Weighted average shares outstanding
(000s).................................. 3,500 3,500
======= =======
SELECTED OPERATING DATA:
Number of Dental Centers(2)............... 2 4 8 11 10 22
Gross revenue per Dental Center(3)........ NA NA $ 535 $ 590 $ 433 $ 468
Number of dental chairs(2)................ 11 22 38 48 48 103
Number of Coast Dentists(2)............... 2 4 8 10 10 25
Patient visits............................ NA 11,881 19,346 42,005 30,539 65,392
Number of patient visits per dental
chair(4)................................ NA 735 736 918 672 859
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------- SEPTEMBER 30,
1992 1993 1994 1995 1996
---- ----- ----- ------ --------------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficit).................. $(24) $(228) $(496) $ (168) $ (182)
Total assets............................... 376 583 914 1,198 4,639
Long-term debt, including current
maturities............................... 172 210 385 608 2,534
Stockholders' equity....................... 126 132 (50) 175 1,055
</TABLE>

- ---------------
(1) Pro forma adjusted to reflect a 39% income tax rate as if the Company was
taxed as a C Corporation during the periods presented.

(2) Presented as of the end of the period.

(3) Includes only Dental Centers open for at least one year as of the beginning
of the period, so that two Dental Centers are included for 1994, four
Dental Centers are included for 1995, four Dental Centers are included for
the nine months ended September 30, 1995 and eight Dental Centers are
included for the nine months ended September 30, 1996.

(4) Includes only Dental Centers that were open for the entire period.

22
<PAGE> 24

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS

OVERVIEW

The Company opened its first Dental Center in May 1992 and to date has
opened 12 internally developed Dental Centers and added 17 acquired Dental
Centers. The Company derives its revenue through fees earned from the Coast
Florida P.A. for providing management services and support at the Dental
Centers. The Company currently manages a network of 29 Dental Centers in central
Florida, staffed by 42 Coast Dentists and serving over 237,500 patients. The
Company expects to expand the Coast Dental Network in new and existing markets
through the addition of internally developed and acquired Dental Centers.

Pursuant to the Services and Support Agreement with the Coast Florida P.A.,
the Company provides management services and support to facilitate the
development and growth of Dental Centers. Operating expenses at the Dental
Centers, with the exception of compensation paid to the Coast Dentists and
dental hygienists, are expenses of the Company and are recognized as incurred.
Under the current Services and Support Agreement, the Coast Florida P.A. pays a
fee to the Company equal to approximately 76.0% of the Dental Centers' gross
revenue. Prior to October 1996, the services and support fee paid to the Company
averaged 78.5% of gross revenue from which the Company pays the operating
expenses incurred by the Coast Florida P.A. excluding certain costs incurred by
the Coast Florida P.A. The cost incurred by the Coast Florida P.A. include
primarily dentists and hygienist salaries, as described in Note 1 of the
Company's Notes to Financial Statements. In the event the current fee of 76.0%
had been charged by the Company instead of the previous agreed fee for the years
ended 1993, 1994 and 1995, the fees earned by the Company would have been
reduced by approximately $35,000, $128,000, $74,000, respectively, and would
have remained approximately the same for the nine months ended September 30,
1996. See "Risk Factors -- Dependence on the Coast Florida P.A. and the Coast
Dentists" and "Certain Transactions".

The Company opened two internally developed Dental Centers in both 1992 and
1993, four in 1994, three in 1995 and one in 1996. The average cost to the
Company of an internally developed Dental Center has been approximately
$125,000, which includes the cost of equipment, leasehold improvements and
working capital associated with initial operations. At internally developed
Dental Centers, profitability to the Company has been attained in an average of
three to four months from opening.

The Company completed its first acquisition of one Dental Center in January
1996 for a purchase price of $40,000 and added seven acquired Dental Centers on
April 1996 through the Volusia Acquisition for a purchase price of $1.8 million.
The gross revenue for the eight dental practices located in these acquired
Dental Centers was approximately $3.5 million for the year ended December 31,
1995. Coast Dentists located at acquired Dental Centers have experienced an
average increase of 14.8% in productivity (patient revenue) in the six month
period following the acquisition of the dental practice compared to the six
month period preceding the acquisition. The Company believes implementation of
the Coast Operating Model at each acquired Dental Center has driven these
increases in patient revenue. See Notes 4 and 12 of the Notes to Financial
Statements of the Company.

In September 1996, the Company added a total of three separately acquired
Dental Centers located in Tampa, Wesley Chapel and Orlando, Florida. The
combined purchase price for these three acquired Dental Centers was $620,000.
For the year ended December 31, 1995 and the six months ended June 30, 1996,
these three acquired dental practices had combined gross revenue of $1.1 million
and $558,000 respectively. In November 1996, the Company added a total of three
acquired Dental Centers located in Casselberry, Apopka and Waters Edge, Florida
through the Seminole Acquisition. The combined purchase price for these three
acquired Dental Centers was $2.5 million. For the year ended December 31, 1995
and the nine months ended September 30, 1996, these three acquired dental
practices had combined gross revenue of $3.4 million and $2.4 million,
respectively. In December 1996, the Company added a total of three separately
acquired Dental Centers located in Gainesville, Kissimmee and Orlando, Florida.
The combined purchase price for these three acquired Dental Centers was
$375,000. For the year ended December 31, 1995 and the nine months ended
September 30, 1996, these three acquired dental practices had combined gross
revenue of $600,000 and

23
<PAGE> 25

$500,000 respectively. See the Financial Statements and Unaudited Pro Forma
Combined Financial Information of the Company.

The Coast Florida P.A. currently derives its revenue from a combination of
sources, including fees paid by private pay patients, indemnity insurance
reimbursements and capitation payments from managed care companies. Medicaid
reimbursements currently account for approximately three percent of the revenue
of the Coast Florida P.A. The Coast Florida P.A. currently maintains 11
capitated managed care contracts.

The following table outlines the payor mix for the Coast Florida P.A.
revenue for the periods presented:

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
---------------- NINE MONTHS ENDED
1994 1995 SEPTEMBER 30, 1996
----- ----- ------------------
<S> <C> <C> <C>
Self-pay........................................... 100.0% 65.0% 49.0%
HMOs............................................... -- 22.0 31.0
Private insurers................................... -- 12.0 17.0
Medicaid........................................... -- 1.0 3.0
----- ----- ------
Total............................................ 100.0% 100.0% 100.0%
===== ===== ======
</TABLE>

The Company has been an S Corporation for federal income tax purposes. The
Company's S Corporation status will terminate upon the consummation of the
Offering.

RESULTS OF OPERATIONS

The following table sets forth, as a percentage of net revenue (consisting
of management fees derived pursuant to the Services and Support Agreement),
certain items in the Company's statements of operations for the periods
indicated:

<TABLE>
<CAPTION>
NINE MONTHS
YEARS ENDED DECEMBER 31, ENDED SEPTEMBER 30,
------------------------ -------------------
1993 1994 1995 1995 1996
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Net revenue................................ 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Dental Center expenses:
Staff salaries........................... 24.3 23.9 26.0 28.0 28.5
Dental supplies and lab fees............. 13.9 20.6 16.7 17.4 13.9
Advertising.............................. 13.0 11.8 10.6 12.1 8.4
Rent..................................... 11.8 11.7 8.9 10.3 9.8
Other.................................... 8.4 8.7 8.6 7.7 5.2
----- ----- ----- ----- -----
Total Dental Center expenses............. 71.4 76.7 70.8 75.5 65.8
----- ----- ----- ----- -----
Gross profit............................. 28.6 23.3 29.2 24.5 34.2
----- ----- ----- ----- -----
General and administrative expense......... 24.8 31.0 20.5 17.6 11.9
Depreciation and amortization.............. 0.8 0.3 0.5 0.6 1.6
----- ----- ----- ----- -----
Operating income (loss).................. 3.0 (8.0) 8.2 6.3 20.7
Interest expense........................... 2.5 1.7 1.5 2.1 2.1
----- ----- ----- ----- -----
Income (loss) before income taxes.......... 0.5 (9.7) 6.7 4.2 18.6
Pro forma provision income tax (expense)
benefit.................................. (0.2) 3.9 (2.7) (1.7) (7.4)
----- ----- ----- ----- -----
Pro forma net income (loss)................ 0.3% (5.8)% 4.0% 2.5% 11.2%
===== ===== ===== ===== =====
</TABLE>

Nine Months Ended September 30, 1996 Compared to Nine Months Ended September 30,
1995

Net Revenue. Net revenue increased 125.7% from $2.4 million for the nine
months ended September 30, 1995 to $5.3 million for the nine months ended
September 30, 1996. This increase was caused primarily by a 45.3% increase in
net revenue attributable to the eight comparable Dental Centers (Dental Centers
that were open throughout the periods being compared), which accounted for
$913,000 of the net revenue increase; the three internally developed Dental
Centers opened in 1995, which accounted for $732,000

24
<PAGE> 26

of the increase; and the eight acquired Dental Centers added in 1996, which
accounted for $1.3 million of the increase. Capitation payments received from 11
managed care contracts during the nine months ended September 30, 1996 accounted
for $628,000 of this increase. Increases in net revenue are primarily driven by
increases in patient visits. Patient visits increased 114.1% from 30,539 for the
nine months ended September 30, 1995 to 65,392 for the nine months ended
September 30, 1996. This increase was caused primarily by an increase of 9,524
patient visits at the eight comparable Dental Centers, an increase of 9,522
patient visits at the three internally developed Dental Centers and 15,807
patient visits at the eight acquired Dental Centers.

Staff Salaries. Staff salaries increased 129.6% from $662,000 for the nine
months ended September 30, 1995 to $1.5 million for the nine months ended
September 30, 1996. This increase in staff salaries was caused primarily by an
increase in salaries of $178,000 for the eight comparable Dental Centers,
$197,000 increase for the three internally developed Dental Centers and $481,000
for the eight acquired Dental Centers. Staff salaries include the compensation
paid to the administrative staff at each Dental Center, including the dental
assistants, office managers, sterilization technicians and front desk managers.
As a percentage of net revenue, staff salaries remained relatively constant,
increasing from 28.0% for the nine months ended September 30, 1995 to 28.5% for
the nine months ended September 30, 1996. The increase was caused primarily by
staff levels at the eight comparable Dental Centers remaining relatively
constant, while net revenue increased, which more than offset the increase in
staffing due to the addition of internally developed and acquired Dental
Centers. While an internally developed Dental Center can operate with a
relatively limited dental staff in the early stages of its development, the
services of a dentist, dental hygienist, dental assistant and front desk manager
are still necessary. As a result, staff salaries as a percentage of net revenue
will typically be higher in the first six months of operation until patient
visits are increased. In addition, for acquired Dental Centers, staff salaries
as a percentage of net revenue will typically be higher in the first three
months following acquisition as the Company implements the Coast Operating Model
to increase productivity and efficiency.

Dental Supplies and Lab Fees. Dental supplies and lab fees increased 80.5%
from $411,000 for the nine months ended September 30, 1995 to $742,000 for the
nine months ended September 30, 1996. This increase was caused primarily by the
increase in patient visits and dental services provided at the eight comparable
Dental Centers and the three internally developed and the eight acquired Dental
Centers. As a percentage of net revenue, dental supplies and lab fees decreased
from 17.4% for the nine months ended September 30, 1995 to 13.9% for the nine
months ended September 30, 1996. This decrease was caused primarily by the
Company changing suppliers in October 1995 and negotiating a more favorable
supply agreement. In addition, as the Coast Dental Network expands into new
markets, changing demographics have caused crowns and dentures as a percentage
of total product mix to decrease. Crowns and dentures result in lab fees not
incurred with other dental products and procedures.

Advertising. Advertising expense increased 60.0% from $286,000 for the
nine months ended September 30, 1995 to $448,000 for the nine months ended
September 30, 1996. This increase was caused primarily by implementation of a
more aggressive advertising program for the eight acquired Dental Centers. As a
percentage of net revenue, advertising expense decreased from 12.1% for the nine
months ended September 30, 1995 to 8.4% for the nine months ended September 30,
1996. This decrease was caused primarily by an increase in market penetration by
comparable Dental Centers while advertising expenses remained relatively
constant.

Rent. Rent expense increased 115.0% from $244,000 for the nine months
ended September 30, 1995 to $524,000 for the nine months ended September 30,
1996. This increase was caused primarily by the addition of the three internally
developed Dental Centers and the eight acquired Dental Centers. As a percentage
of net revenue, rent expense remained relatively constant, decreasing from 10.3%
for the nine months ended September 30, 1995 to 9.8% for the nine months ended
September 30, 1996. This decrease was caused primarily by a greater increase in
net revenue at the eight comparable Dental Centers offsetting higher rent
expense associated with the eight acquired Dental Centers.

Other Expenses. Other expenses increased 53.6% from $184,000 for the nine
months ended September 30, 1995 to $283,000 for the nine months ended September
30, 1996. This increase was caused primarily by increases in insurance costs,
credit card discounts and other costs, which accounted for $58,000 of the

25
<PAGE> 27

increase, and depreciation expense, associated with the addition of the nine
Dental Centers, which accounted for $41,000 of the increase. As a percentage of
net revenue, other expenses decreased from 7.8% for the nine months ended
September 30, 1995 to 5.3% for the nine months ended September 30, 1996. This
decrease was caused primarily by increased economies of scale associated with
the increasing number of patient visits.

General and Administrative Expenses. General and administrative expenses
increased 52.0% from $417,000 for the nine months ended September 30, 1995 to
$634,000 for the nine months ended September 30, 1996. This increase was caused
primarily by corporate administrative salaries increasing, which accounted for
$242,000 of the increase, and a decrease in other general and administrative
expenses of $25,000. As a percentage of net revenue, general and administrative
expenses decreased from 17.6% for the nine months ended September 30, 1995 to
11.9% for the nine months ended September 30, 1996. This decrease was caused
primarily by economies of scale realized through the centralization of Dental
Center management. General and administrative expenses primarily consist of
expenses incurred at the corporate office.

Depreciation and Amortization. Depreciation and amortization expense
increased 482.8% from $14,000 for the nine months ended September 30, 1995 to
$84,000 for the nine months ended September 30, 1996. As a percentage of net
revenue, depreciation and amortization expense increased from 0.6% for the nine
months ended September 30, 1995 to 1.6% for the nine months ended September 30,
1996. This increase was caused primarily by the recognition of amortization
expense in 1996 related to a covenant not to compete agreement pursuant to the
Volusia Acquisition, which accounted for $53,000 of the increase, and
depreciation expense incurred at the corporate office which accounted for
$31,000 of the increase.

Year Ended December 31, 1995 Compared to Year Ended December 31, 1994

Net Revenue. Net revenue increased 78.0% from $1.9 million for 1994 to
$3.3 million for 1995. This increase was caused primarily by a 14.2% increase in
net revenue attributable to the four comparable Dental Centers, all of which
were internally developed and accounted for $224,000 of the net revenue
increase, the four internally developed Dental Centers that were opened during
1994, which accounted for $431,000 of the increase, and the three internally
developed Dental Centers opened in 1995, which accounted for $802,000 of the
increase. Capitation payments received from 11 managed care contracts during
1995 accounted for approximately $20,000 of the increase. Patient visits
increased 117.1% from 19,346 in 1994 to 42,005 in 1995. This increase was caused
primarily by an increase of 6,509 patient visits at the four comparable Dental
Centers, an increase of 6,228 patient visits at the four internally developed
Dental Centers opened in 1994 and an increase of 9,922 patient visits at the
three internally developed Dental Centers opened in 1995.

Staff Salaries. Staff salaries increased 93.8% from $445,000 in 1994 to
$863,000 in 1995. This increase was caused primarily by the increase in staff
related to the addition of the four internally developed Dental Centers in 1994
and the three internally developed Dental Centers in 1995. As a percentage of
net revenue, staff salaries increased from 23.8% in 1994 to 26.0% in 1995. This
increase was caused primarily by the opening of internally developed Dental
Centers in 1994 and 1995. Staff salaries at the comparable Dental Centers
remained relatively constant.

Dental Supplies and Lab Fees. Dental supplies and lab fees increased 44.5%
from $385,000 in 1994 to $557,000 in 1995. This increase was primarily caused by
the increase in patient visits and dental services provided at the four
comparable Dental Centers, the four internally developed Dental Centers opened
in 1994 and the three internally developed Dental Centers opened in 1995. As a
percentage of net revenue, dental supplies and lab fees decreased from 20.6% in
1994 to 16.7% in 1995. This decrease was caused primarily by the Company
changing suppliers in October 1995 and negotiating a more favorable supply
agreement. In addition, as the Coast Dental Network expands into new markets,
changing demographics have caused crowns and dentures as a percentage of the
total product mix to decrease.

Advertising. Advertising expense increased 58.6% from $221,000 in 1994 to
$351,000 in 1995. This increase was caused primarily by the increased
advertising for the four internally developed Dental Centers

26
<PAGE> 28

opened in 1994 and the three internally developed Dental Centers opened in 1995.
As a percentage of net revenue, advertising expense decreased from 11.7% in 1994
to 10.6% in 1995. This decrease was caused primarily by increased economies of
scale in advertising achieved through greater market penetration.

Rent. Rent expense increased 35.8% from $218,000 in 1994 to $296,000 in
1995. This increase was caused primarily by the addition of the four internally
developed Dental Centers opened in 1994 and the three internally developed
Dental Centers opened in 1995. Rent expense at the four comparable Dental
Centers remained relatively constant. As a percentage of net revenue, rent
expense decreased from 11.7% in 1994 to 8.9% in 1995. This decrease was caused
primarily by the increase in net revenue at comparable Dental Centers and the
seven internally developed Dental Centers more than offsetting the increase in
rent expense.

Other Expenses. Other expenses increased 76.1% from $163,000 in 1994 to
$287,000 in 1995. This increase was caused primarily by increases in insurance
costs, credit card discounts and expenses related to the three internally
developed Dental Centers opened during 1995, which accounted for $92,000 of the
increase, and depreciation expense, which accounted for $32,000 of the increase.
As a percentage of net revenue, other expenses remained relatively constant,
decreasing from 8.7% in 1994 to 8.6% in 1995.

General and Administrative Expenses. General and administrative expenses
increased 17.5% from $580,000 in 1994 to $682,000 in 1995. This increase was
caused primarily by corporate administrative salaries increasing $131,000 while
other general and administrative expenses decreased $29,000. Additions to
corporate staff were made in 1994 in anticipation of the Company's expansion in
1995. As a percentage of net revenue, general and administrative expenses
decreased from 31.0% in 1994 to 20.5% in 1995. This decrease was caused
primarily by economies of scale realized through the centralization of Dental
Center management.

Depreciation and Amortization. Depreciation and amortization increased
200.0% from $5,000 in 1994 to $15,000 in 1995. This increase was caused
primarily by equipment purchases for the corporate office in 1995.

Year Ended December 31, 1994 Compared to Year Ended December 31, 1993

Net Revenue. Net revenue increased 56.4% from $1.2 million in 1993 to $1.9
million in 1994. This increase was caused primarily by a 60.0% increase in net
revenue attributed to one of the two comparable Dental Centers, which accounted
for $29,000 of the increase, two internally developed Dental Centers opened in
1993, which accounted for $417,000 of the increase, and four internally
developed Dental Centers opened in 1994, which accounted for $279,000 of the
increase. Net revenue for the second comparable Dental Center decreased $51,000
in 1994. This decrease was caused primarily by turnover of dentists during the
year at this particular Dental Center. Patient visits increased 62.8% from
11,881 in 1993 to 19,346 in 1994. This increase was caused primarily by an
increase of 3,271 patient visits at the four internally developed Dental Centers
opened in 1994 and an increase of 722 patient visits at the two comparable
Dental Centers.

Staff Salaries. Staff salaries increased 53.2% from $291,000 in 1993 to
$445,000 in 1994. This increase was caused primarily by an increase in staff
related to the addition of two internally developed Dental Centers in 1993 and
four internally developed Dental Centers in 1994. As a percentage of net
revenue, staff salaries remained relatively constant, decreasing from 24.3% in
1993 to 23.9% in 1994. This decrease was caused primarily by the increase in net
revenue more than offsetting the increase in staff salaries.

Dental Supplies and Lab Fees. Dental supplies and lab fees increased
132.6% from $166,000 in 1993 to $385,000 in 1994. This increase was caused
primarily by the increase in patient visits and dental services provided at the
two comparable Dental Centers, the two internally developed Dental Centers
opened in 1993, and the four internally developed Dental Centers opened in 1994.
As a percentage of net revenue, dental supplies and lab fees increased from
13.9% in 1993 to 20.6% in 1994. This increase was caused primarily by increased
spending on dental supplies in anticipation of increased patient visits at
developing Dental Centers.

Advertising. Advertising expense increased 42.3% from $155,000 in 1993 to
$221,000 in 1994. This increase was caused primarily by increased advertising
for the four internally developed Dental Centers

27
<PAGE> 29

opened in 1994. As a percentage of net revenue, advertising expense decreased
13.0% in 1993 to 11.8% in 1994. This decrease was caused primarily by an
increase in net revenue in one of the comparable Dental Centers and continued
development of the two internally developed Dental Centers opened in 1993 which
more than offset increased advertising spending for the four internally
developed Dental Centers opened in 1994.

Rent. Rent expense increased 54.6% from $141,000 in 1993 to $218,000 in
1994. This increase was caused primarily by the opening of four internally
developed Dental Centers in 1994 and a full year of rent expense associated with
the two internally developed Dental Centers opened in 1993. As a percentage of
net revenue, rent expense remained relatively constant, decreasing from 11.8% in
1993 to 11.7% in 1994.

Other Expenses. Other expenses increased 63.0% from $100,000 in 1993 to
$163,000 in 1994. This increase was caused primarily by an increase in
depreciation expense related to equipment purchases for the two internally
developed Dental Centers opened in 1993, which accounted for $44,000 of the
increase. Increases in miscellaneous Dental Center expenses of $19,000 accounted
for the remainder of the increase. As a percentage of net revenue, other
expenses remained relatively constant, increasing from 8.4% in 1993 to 8.7% in
1994.

General and Administrative Expenses. General and administrative expenses
increased 96.0% from $296,000 in 1993 to $580,000 in 1994. This increase was
caused primarily by an increase in training expenses associated with the
implementation of the Coast Operating Model at the four internally developed
Dental Centers opened in 1994. As a percentage of net revenue, general
administrative expenses increased from 24.8% in 1993 to 31.1% in 1994.

Depreciation and Amortization. Depreciation and amortization expense
decreased 50.0% from $10,000 in 1993 to $5,000 in 1994. This decrease was caused
primarily by depreciation related to the acquisition of equipment for corporate
office purposes. As a percentage of net revenue, depreciation expense decreased
from 0.8% in 1993 to 0.3% in 1994.

SEASONALITY

The Company has traditionally experienced its highest volume of patient
visits during the first and last quarters of the year and its lowest volume of
patient visits in the summer. Individual Dental Centers typically experience
increased patient visits during the period from October through March, when the
population of Florida increases for the winter, and decreased patient visits
during the summer months. Seasonality for the period since January 1, 1995 has
been mitigated by the increase in monthly capitation revenue from managed care
contracts to the Coast Florida P.A. which represented 31% of total revenue to
the Coast Florida P.A. for the nine month period ended September 30, 1996.

LIQUIDITY AND CAPITAL RESOURCES

Since its inception, the Company has financed its operations through a
combination of commercial borrowings and cash generated from operations. Net
cash provided by operations for the years ended December 31, 1993, 1994, 1995
and for the nine months ended September 30, 1996 was $197,000, $135,000,
$231,000, and $1.2 million, respectively. Net cash provided by operations for
1993, 1994 and 1995 consisted primarily of net income and increases in accounts
payable, offset by an increase in 1995 in the management fee receivable. For the
nine months ended September 30, 1996, net cash provided by operations consisted
primarily of net income and increases in accounts payable and accrued expenses
offset by an increase in management fees and other receivables.

Cash used in investing activities for the years ended December 31, 1993,
1994 and 1995 of $175,000, $200,000 and $157,000, respectively, was almost
exclusively related to the purchase of equipment and leasehold improvements
related to the nine internally developed Dental Centers opened during those
periods. For the nine months ended September 30, 1996, cash used in investing
activities of $2.6 million related

28
<PAGE> 30

primarily to the acquisition of tangible and intangible assets of 11 acquired
Dental Centers, one in January 1996, seven in April 1996 and three in September
1996.

Cash used in financing activities for the year ended December 31, 1993 was
limited to $7,000. Cash provided by financing activities for the years ended
December 31, 1994 and 1995 and the nine month period ended September 30, 1996
was $147,000, $46,000 and $1.7 million, respectively. The increase was primarily
due to higher levels of bank borrowings to support the Company's addition of
both internally developed and acquired Dental Centers.

On August 15, 1996, the Company entered into a revolving line of credit
with Barnett Bank of Florida (the "Barnett Credit Agreement"), which provides an
aggregate of $1.5 million for general working capital needs and expansion of the
number of Dental Centers. The revolving line of credit bears interest at the
rate of 1.5% per annum above Barnett Bank of Florida's prime rate and is payable
on demand. Interest only is payable monthly. Amounts borrowed pursuant to the
Barnett Credit Agreement are secured by a first security interest in most of the
Company's assets, including its receivables and equipment, and are subject to
repayment on demand. The Barnett Credit Agreement contains negative and
affirmative covenants and agreements restricting the Company's disposition of
assets, capital expenditures, acquisitions, operations and payment of dividends
as well as requiring the maintenance of certain financial ratios. As of January
1, 1997, the Company had available approximately $720,000 for borrowing under
the Barnett Credit Agreement. The outstanding balance of the Barnett Credit
Agreement is expected to be repaid from the net proceeds received from the
Offering.

On November 7, 1996, the Company received a commitment from Barnett Bank of
Florida to increase the line of credit to $5.0 million subject to various
customary contingencies as well as the successful completion of an initial
public offering of the Company's Common Stock. The terms and conditions of the
expanded line are expected to be similar to those under the existing Barnett
Credit Agreement.

On December 11, 1995, the Company entered into a revolving line of credit
with the Bank of St. Petersburg (the "St. Petersburg Credit Agreement"), which
provides an aggregate of $100,000 for general working capital needs and the
addition of internally developed and acquired Dental Centers. The revolving line
of credit bears interest at 2.0% per annum above the Bank of St. Petersburg's
prime rate and amounts borrowed are secured by a first security interest in the
Company's assets generally not secured by the Barnett Credit Agreement,
including certain receivables and equipment, and are to be repaid in equal
installments of $2,174 per month, plus interest. As of January 1, 1997 the
Company had available approximately $19,000 for borrowing under the St.
Petersburg Credit Agreement. The outstanding balance of approximately $81,000 is
expected to be repaid from net proceeds received from the Offering.

During 1996, the Company added 17 acquired Dental Centers at a cost of
approximately $4.3 million, consisting of approximately $1.1 million in cash and
approximately $3.2 million of promissory notes issued by the Company. In certain
acquisitions the Company has provided security in the assets purchased pursuant
to seller financing. The interest rates on the notes range from 8% to 9% per
annum and the maturity dates for the notes range from the date of the Offering
to October 2003. Approximately $2.9 million of such notes shall be repaid from
the net proceeds received from the Offering.

Upon the completion of the Offering the Company will convert from an S
Corporation to a C Corporation and will become obligated to pay federal and
state income taxes. The Company, has historically distributed funds to its
shareholders sufficient to pay their personal income tax liabilities
attributable to the Company's earnings an S Corporation.

The Company has previously loaned capital to the Coast Florida P.A. in
connection with acquisitions of existing dental practices. The total outstanding
balance of such loans as of January 1, 1997 was $227,000. The loans bear
interest at 8% and have a maturity date of June 30, 1998. The Company may loan
additional funds in the future to the Coast Florida P.A. or a Coast P.A. for
such acquisitions or pursuant to a services and support agreement. See "Risk
Factors -- Dependence on the Coast Florida P.A. and the Coast Dentists" and
"Certain Transactions."

29
<PAGE> 31

The Company expects to add a combined total of at least 25 internally
developed and acquired Dental Centers by the end of 1997. The average cost of an
internally developed Dental Center has been approximately $125,000, which
typically includes approximately $30,000 for the cost of equipment, $70,000 for
leasehold improvements and $25,000 for initial working capital associated with
the internal operations of the Dental Centers. The cost of an acquired Dental
Center is based upon a negotiated percentage of the Dental Center's historical
gross revenue. The Company expects to utilize approximately $12.0 million for
the addition of acquired and internally developed Dental Centers in 1997.
Acquired Dental Centers typically generate sufficient cash flow to fund their
operations. The Company plans to finance the addition of internally developed
and acquired Dental Centers for the foreseeable future through a combination of
bank financing, seller financing, issuances of Common Stock, cash flow from
operations and the net proceeds to be received from the Offering. See "Use of
Proceeds." While the Company is constantly in discussions with existing dental
practices regarding possible acquisitions, the Company does not have any current
understanding or agreement regarding any material acquisition.

Based upon the Company's anticipated capital needs for operations of its
business, general corporate purposes, the addition of at least 25 Dental Centers
and repayment of certain debts, management believes that the combination of the
funds expected to be available under the Company's revolving line of credit,
cash flow from operations and the net proceeds received from the Offering will
be sufficient to meet the Company's funding requirements to conduct its
operations and for further implementation of its growth strategy for the
remainder of 1997. After 1997, remaining capital resources will continue to be
used for Company operations and growth and, to the extent additional capital
resources are needed, the Company expects to utilize supplemental borrowings
where available and, where desirable, the offering of debt or equity.

CERTAIN INFORMATION ON THE COAST FLORIDA P.A.

Pursuant to the Services and Support Agreement with the Coast Florida P.A.,
the Company provides management services and support to facilitate the
development and growth of Dental Centers. Operating expenses at the Dental
Centers, with the exception of compensation paid to the Coast Dentists and
dental hygienists, are expenses of the Company and are recognized as incurred.
Under the current Services and Support Agreement, the Coast Florida P.A. pays a
fee to the Company equal to approximately 76.0% of the Dental Centers' gross
revenue from which the Company pays the operating expenses incurred by the Coast
Florida P.A. excluding certain costs incurred by the Coast Florida P.A. The
costs incurred by the Coast Florida P.A. include primarily dentists and
hygienists salaries, as described in Note 1 of the Company's Notes to Financial
Statements. All arrangements for fees to date have been agreed between the
principal and sole owner of the Coast Florida P.A., Dr. Adam Diasti, (who is
also a major shareholder and the President of the Company) and the Chief
Executive Officer of the Company, Terek Diasti. See "Risk Factors -- Potential
Conflicts of Interest of the Company's President and Chief Operating Officer
Relating to the Coast Florida P.A." The factors considered in setting those fees
included the Company's evaluation of the services it provides, the costs
incurred by the Company in connection with providing the services, and the
Company's negotiated return, balanced against the Coast Florida P.A.'s
requirement for a retained amount which ensured its financial viability,
contemplated an anticipated long-term relationship with the Company and
reflected the future business opportunity related thereto. The following table
sets forth for the periods prior to October 1,

30
<PAGE> 32

1996 the amount of gross Dental Center revenue received by the Coast Florida
P.A., the amounts retained by the Coast Florida P.A., and the management fee
earned by the Company:

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ -----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Dental Center revenue........ $1,531,402 $2,286,265 $4,281,340 $3,060,813 $7,009,516
Amounts retained by the Coast
Florida P.A.:
Coast Florida P.A.
Dentist's salaries and
benefits................ 201,086 246,678 623,028 426,664 1,180,680
Coast Florida P.A.
Hygienist's salaries and
benefits................ 101,072 121,622 288,811 219,730 431,312
Amounts retained by Coast
Florida P.A.(1)(2)...... 34,750 50,000 44,833 44,833 55,708
---------- ---------- ---------- ---------- ----------
Total.............. $ 336,908 $ 418,500 $ 956,672 $ 693,227 $1,667,701
---------- ---------- ---------- ---------- ----------
Fees earned by the Company... $1,194,494 $1,867,765 $3,324,668 $2,367,586 $5,341,815
========== ========== ========== ========== ==========
</TABLE>

- ---------------

(1) The amounts set forth are net of bad debt expense for estimated
uncollectible accounts which amounted to $2,000, $1,000, $58,890, $18,823
and $56,346, for each of the three years ended December 31, 1993, 1994 and
1995 and for the nine months ended September 30, 1995 and 1996,
respectively. The Coast Florida P.A. has incurred in the past and currently
incurs all risks regarding bad debts in connection with its arrangement with
the Company.

(2) In the nine months ended September 30, 1996, the Coast Florida P.A. incurred
interest expense of $13,948, and it is currently liable for $1,069,000 in
principal obligations under its acquisition debts, of which $227,000 was
advanced by the Company. See "RISK FACTORS -- Dependence on the Coast
Florida P.A. and the Coast Dentists" and "Certain Transactions -- Loans to
Coast Florida P.A."

Only the fees earned by the Company for its services to the Coast Florida
P.A. and the actual expenses of the Company are reflected in the financial
statements of the Company. Neither the Coast Florida P.A. nor any of the amounts
retained by the Coast Florida P.A. are reflected in the financial statements of
the Company. For the period 1993 through September 30, 1996, the services and
support fee paid by the Coast Florida P.A. to the Company varied, but averaged
78.5% of Coast Florida P.A. gross revenue for the entire period. The fee was
based on revenues earned by the Coast Florida P.A. reduced by certain costs
incurred by the Coast Florida P.A. and an agreed upon payment to the Coast
Florida P.A. In the event the current fee of 76.0% had been charged by the
Company instead of the previous agreed fee for the years ended 1993, 1994 and
1995, the fees earned by the Company would have been reduced by approximately
$35,000, $128,000, $74,000, respectively, and would have remained approximately
the same for the nine months ended September 30, 1996. Any future changes to the
current Services and Support Agreement and the related 76% fee must be approved
in advance by the independent outside directors of the Company's Audit
Committee.

Since January 1, 1996, the Coast Florida P.A. has acquired the patient
lists and the related assets for eight existing dental practices, located in 16
existing dental offices. As a result of these acquisitions, the Coast Florida
P.A. has accumulated an obligation to pay $1,069,000 in acquisition debt
consisting of principal and interest obligations declining from $393,723 for
1997 to $164,276 for 2001. Through December 31, 1996, the Company had advanced
$227,000 to Coast Florida P.A. relative to the repayment of a portion of such
acquisition debt. The Coast Florida P.A. obtained an advance from the Company in
lieu of seeking other financing (which the Company believes would have been
available to the Coast Florida P.A.). Based upon the budgeted future revenues
and expenses of the Coast Florida P.A., its current financial conditions,
financing opportunities available to the Coast Florida P.A., the existing
personal guarantees related to previous acquisition debt, and the current
expansion strategy, the Company believes that the Coast Florida P.A. will have
the resources to pay its current and future obligations for the foreseeable
future, as they become due and payable, including its obligations to the
Company. The amounts projected to be retained by the Coast Florida

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<PAGE> 33

P.A. under its Services and Support Agreement with the Company will be a factor
in allowing the Coast Florida P.A. to satisfy its current and future debts and
in expanding its practice into future Dental Centers. A material failure of the
Coast Florida P.A. to pay its current and future debts as they become due could
have a material adverse effect on the business of the Company and its ability to
expand. See "Risk Factors -- Dependence on the Coast Florida P.A. and the Coast
Dentists," "-- Obligations of the Coast Florida P.A." and "Certain
Transactions."

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BUSINESS

Coast Dental Services, Inc. provides management services to 29 Dental
Centers located in central Florida. Of the 29 Dental Centers, 12 were internally
developed and 17 were acquired by the Company. As of January 1, 1997, 42 Coast
Dentists were employed by the Coast Florida P.A., serving over 237,500 patients.
Based upon the number of Dental Centers managed and patients served, and
supported by several major dental managed care providers, the Company believes
that it is the largest dental practice management company for general dentistry
practices in Florida. The Company expects to add a combined total of at least 25
internally developed and acquired Dental Centers in 1997. See "Prospectus
Summary -- Industry Information" for a description of all industry data sources.

DENTAL SERVICES INDUSTRY

The United States dental industry is highly fragmented, consisting of more
than 110,000 dental practices with approximately 88% of these practices operated
by dentists working alone or with one other dentist. According to the Health
Care Financing Administration, expenditures for all dental services in the
United States were an estimated $45.2 billion in 1995 and are expected to grow
at a rate of 6.6% per year. Based upon a 1990 survey by the ADA, general
dentistry was estimated to represent approximately 83% of all dental services
performed in the United States. The Company believes several factors are driving
the overall industry growth. First, as the "baby boom" generation ages, the
demand for many higher priced dental maintenance products and procedures (such
as crowns, bridges and dentures) will increase relative to the demand for other
more routine, lower priced dental products and procedures (such as cleanings and
fillings). Second, increasing attention to dental health and, in particular, to
personal appearance has increased the demand for general dentistry services and
cosmetic dental products and procedures (such as bonding and whitening).
Finally, a greater percentage of the population is now covered by private or
government funded dental health insurance thereby facilitating increased dental
office visits and a greater utilization of general dentistry services.

The number of people covered by private dental insurance (i.e., managed
care and indemnity plans) is expected to increase in the near future due, in
large part, to efforts by health insurers to gain a competitive advantage by
offering dental insurance packages to both their present and prospective
members. Payments for dental services by private insurance companies grew from
approximately $3.8 billion in 1980 to approximately $16.8 billion in 1993. Many
of these insurers are managed care companies, whose present focus is on the need
to increase revenue and market share by offering a full range of health
insurance options including dental insurance. In an August 1996 press release,
the National Association of Dental Plans initially estimated that, based upon
its survey of 80 HMO companies, dental managed care enrollment grew 15% in 1995.

In spite of the growth in private dental insurance, a significant portion
of the United States population is not covered by any type of private or
government funded dental insurance. A majority of this uninsured population is
comprised of lower income individuals who cannot afford a basic level of dental
services. As a result, many current government health care reform proposals
include provisions for increased dental coverage. It is estimated that
government funding for dental insurance grew 124% from 1990 to 1994.

While both private and government funded dental insurance programs vary
widely in their coverage and benefits, they are expected to impact the dental
industry in two major ways. First, as more people obtain dental insurance of any
kind, the Company believes there will be increased utilization of general dental
services. As a result, demand for elective cosmetic procedures, typically not
covered by dental insurance programs, is also expected to increase as patients
are educated as to the benefits of these procedures. Second, health insurance
companies, including HMOs and other managed care companies, are contracting with
dental practitioners and dental practice networks to provide dental services on
a capitated basis. Under capitated contracts, the dental practitioner or dental
practice network agrees to accept a predetermined monthly fee per assigned
patient in exchange for providing certain dental services to patients covered by
the contract.

The Company anticipates that, as the number of managed care plans and
government funded programs providing dental insurance grows, pressures relating
to cost containment by dental care providers will increase, as in many other
sectors of the health care industry. Such cost containment pressures will likely
place smaller dental care provider groups and individual practices at a
significant disadvantage. These practices generally

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<PAGE> 35

have higher operating costs because overhead must be spread over a relatively
small revenue base and minimal purchasing power can be exercised with suppliers.
Furthermore, in order to properly negotiate and administer dental managed care
contracts, dental care providers must develop the necessary management
infrastructure and sophisticated information systems which often exceed the
capabilities of most sole practitioners and small dental practice groups.

Traditionally, dentistry has operated as a highly-fragmented, professional
"cottage" industry with most dentists working alone or with one other dentist.
According to the ADA, more than 150,000 dentists provided dental services
through approximately 113,000 dental practices in the United States in 1994. The
traditional solo practitioner or small dental practice group has historically
managed all aspects of the dental practice, including administrative,
purchasing, accounting and marketing functions. Dentists have not historically
competed with each other based upon the pricing of their services and,
therefore, pricing of dental services often varies little among traditional
dental providers within a particular market. Based upon data contained in the
ADA's 1994 survey, the national average annual patient revenue production was
approximately $306,000 for solo general practitioners and approximately $268,000
for nonsolo general practitioners. In addition, pursuant to the same ADA survey,
solo general practitioners averaged 80 patient visits per week (including
hygienist visits) nationwide and nonsolo general practitioners averaged 78
patient visits per week (including hygienist visits) nationwide.

In order to remain competitive, dental care providers are increasingly
consolidating. Much of this consolidation is taking place through the formation
of dental physician practice management companies ("Dental PPMs") which contract
with the dental care providers. Dental PPMs are growing in response to the
demand by managed care companies for larger dental practice groups which can
offer dental care over a wide geographic area. In addition, Dental PPMs
generally have the management infrastructure and sophisticated information
systems necessary to negotiate and manage the risk associated with capitated
managed care contracts and to provide the contract administration expertise
required by managed care companies. Furthermore, Dental PPMs allow dental
practitioners to capture increased market share and incremental revenue through
the addition of managed care contracts. However, the mere consolidation of
practices and creation of a Dental PPM to manage the practices will most likely
not, in itself, be sufficient to enhance the competitive position of the
combined dental groups. Effective management and a cost efficient operating
model are necessary for a Dental PPM to compete successfully in this changing
and growing industry.

BUSINESS STRATEGY

The Company's goal is to develop a leadership position in the management of
general dentistry practices throughout Florida and the southeastern United
States. The Company derives its revenue through fees earned from the Coast
Florida P.A. for providing management services and support at the Dental
Centers. A uniform operating model (the "Coast Operating Model") developed by
the Company is utilized at the Dental Centers to increase productivity and
maintain the low cost delivery of quality general dentistry services. The key
elements of the Coast Operating Model are: (i) affiliating with general dental
providers that focus on the most common, high volume dental products and
procedures which lend themselves to cost-effective delivery; (ii) centralizing
management and administrative responsibilities, thus allowing Coast Dentists to
concentrate on delivering high quality dental care; (iii) facilitating the
training of the Dental Center staff, including Coast Dentists and hygienists, in
the most efficient techniques for managing the delivery of high volume, quality
dental services; and (iv) assisting with the implementation of marketing
programs designed to meet the needs of each Dental Center. The Company plans to
expand the Coast Dental Network to maximize economies of scale in management and
administration, materials procurement and marketing, and to facilitate
contracting with managed care companies. The Company plans to increase
penetration in currently served regions and to expand into new contiguous
markets in the southeastern United States through the addition of internally
developed and acquired Dental Centers.

The Coast Operating Model

The focus of the Company is to manage Dental Centers where Coast Dentists
provide general dentistry services. General dentistry is estimated to represent
approximately 83% of all dental services performed in the

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<PAGE> 36

United States. General dentistry products and procedures provided by Coast
Dentists at the Dental Centers include, but are not limited to, sealants,
crowns, bridges, dentures, examinations, cleaning, polishing, whitening, filling
cavities, simple root canals and extractions, but exclude orthodontics,
periodontics, endodontics and oral surgery which require specialized care. Coast
Dentists focus on the most common, high volume general dentistry products and
procedures which lend themselves to cost-effective delivery, emphasizing crowns,
bridges and dentures. The Company believes that, based upon a 1994 survey of
dental fees conducted by the ADA (the results of which the Company believes have
not changed materially since the date of such survey) and the Company's
understanding of current competitor pricing, Coast Dentists are able to offer
more affordable dental products and procedures, often at prices at least 25%
below the national average for certain comparable dental products and
procedures.

In addition to providing dental care, the traditional dental practitioner
typically performs all the management and administrative functions for the
practice, including billing, purchasing, accounting and the hiring of
administrative personnel. Through the Coast Operating Model, the Coast Dentist
is relieved of most management and administrative responsibilities, allowing the
Coast Dentist to concentrate on delivering high quality general dental care,
thus maximizing both productivity and efficiency. The Company provides the
Dental Center with management and financial information systems which improve
each Dental Center's cost efficiency and maintain greater uniformity in the
delivery of dental care services. The Company believes that its management
controls and quality assessment programs are generally more comprehensive than
those of traditional sole dental practitioners and small dental groups and have
contributed significantly to the delivery of high quality dental care at the
Dental Centers.

After a dentist joins the Coast Florida P.A., they are familiarized with
the Company's management operating systems at the Company's headquarters in
Tampa, Florida. The Company also employs training teams which travel to each new
Dental Center to train the Dental Center's business staff with respect to the
Company's management operating systems. Follow-up visits by the training team
are conducted approximately six months following the opening of each Dental
Center to maintain the business operations of the Dental Centers. The Coast
Florida P.A. conducts initial training for its dental professionals regarding
standardized dental techniques and systems which seek to establish uniform
standards for providing high quality and cost effective dental services.
Thereafter, periodic continuing education and training sessions are provided by
the Coast Florida P.A. for reinforcement of its dental techniques and systems as
well as for new procedures and practices to be utilized throughout the Coast
Dental Network.

Demand is stimulated at each Dental Center through a combination of value
pricing and direct marketing to the consumer. The Company assists in developing
and implementing aggressive and innovative direct marketing plans for each
Dental Center, utilizing local radio and print advertising and marketing
promotions to highlight each Dental Center's convenient location and affordable
prices. During 1995, an average of approximately 8% of each Dental Center's
revenue was spent on advertising and marketing. In contrast, the traditional
dentist's office, which relies primarily on referrals from dentists and
patients, spent approximately 1% of gross billings on advertising and marketing.
As a result of qualifications in the State of Florida, the Coast Florida P.A.
controls all decisions regarding advertising and marketing programs related to
its practice, but relies upon the Company to provide advice and assistance in
the development and implementation of such programs.

The Coast Dental Network

The Company's goal is to develop a leadership position in the management of
general dentistry practices throughout Florida and the southeastern United
States. The Company plans to effect certain economies of scale in management,
materials procurement and direct marketing through the expansion of the Coast
Dental Network. The Company intends to centralize many administrative and
management functions, such as accounting, staffing, training and billing,
thereby more effectively managing its overhead. In addition, expansion of the
Coast Dental Network maximizes the effectiveness of marketing programs to both
customers and managed care companies. Finally, the Company anticipates that it
will be able to increase its negotiating leverage with managed care companies
and purchasing power with suppliers.

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<PAGE> 37

The Company assists the Coast Florida P.A. in negotiating and contracting
with managed care companies which generally have an established presence in
local regions served, or expected to be served, by the Coast Dentists. Managed
care contracts accounted for 31% of the Coast Florida P.A. revenue at the Dental
Centers for the nine month period ended September 30, 1996. The Company believes
the Coast Florida P.A. is well positioned to attract significant additional
business from HMOs and other managed care companies, which generally prefer to
deal with health care providers that can offer extensive regional coverage to
their members. The Company has recently assisted the Coast Florida P.A. in
finalizing managed care contracts with several leading HMOs. Under certain of
these agreements, the Coast Florida P.A. accepts a pre-determined amount per
month per patient in exchange for providing all necessary covered services to
patients insured under the agreements. Under the remaining agreements, the Coast
Florida P.A. agrees to charge the patient a predetermined fee per procedure. The
managed care contracts between the Coast Florida P.A. and managed care companies
are for one year terms which automatically renew and are terminable by either
party on 90 days notice. All managed care contracts between the Coast Florida
P.A. and managed care companies which have reached the end of their term have
been renewed.

Presently, managed care companies are focusing on dental care to gain a
competitive advantage by offering a full range of health care coverage.
Utilizing the Coast Operating Model, the Coast Florida P.A. is well positioned
to continue to take advantage of the growing managed care business even as cost
containment becomes a factor. In addition, an increase in patients provided
through managed care contracts creates an opportunity for the Coast Dentists to
proactively sell elective dental products and procedures that may not be covered
by a particular dental plan.

The Company is expanding into select markets through the implementation of
a well formulated and controlled strategy. When evaluating whether or not to
enter a new region, the Company considers a number of factors. First, the
Company studies the demographics of the local area including, but not limited
to, per capita income, population density and age distribution of residents. The
Company also reviews the competition for general dentistry services in the local
area with the objective of locating Dental Centers where Coast Dentists are able
to offer their dental services at substantially more affordable prices than
their local competitors. The Company also seeks locations containing substantial
numbers of consumers who are covered by dental managed care plans, but who have
access to only a limited number of general dental providers through these plans.

While targeting potential markets for the location of an internally
developed Dental Center, the Company typically assists the Coast Florida P.A. in
contracting with managed care companies serving a particular market. By
contracting with managed care companies prior to entering a new market, a
minimum recurring revenue stream is established during the early stages of the
Dental Center's development. The Company typically seeks to locate in large
shopping centers, where pedestrian traffic is heavy. This provides the Dental
Center with the opportunity to rapidly increase patient revenue beyond the
minimum guaranteed managed care revenue through the implementation of a direct
marketing program. Internally developed Dental Centers typically require 90 days
to prepare for opening. During the initial phase of development, the Dental
Center operates on a limited schedule with reduced professional and
administrative staffing, until sufficient productivity is achieved. Generally,
Coast Dentists who have experience utilizing the Coast Operating Model are
placed by the Coast Florida P.A. in new internally developed Dental Centers,
often providing services at two locations until a full-time Coast Dentist is
required by the Coast Florida P.A.

In evaluating potential acquired Dental Centers, the physical plant and
equipment of the Dental Center is evaluated, as are historical revenue and
expense levels, including the mix of managed care and fee-for-service revenue.
The Company targets Dental Centers which are self supporting, but which can
benefit from the implementation of the Coast Operating Model. The Company
generally seeks to affiliate with dentists who are willing to remain in practice
as Coast Dentists. Following the acquisition of a Dental Center, a
post-acquisition team is actively involved in the integration of the Dental
Center into the Coast Dental Network. This integration includes centralizing
many administrative and management functions and bringing the Dental Center on
line with the Company's management information systems. The Company believes the
full integration of an acquired Dental Center, including the implementation of
the Coast Operating Model, generally takes approximately six months to complete.

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<PAGE> 38

For the twelve months ended September 30, 1996, the average revenue
production for the ten Coast Dentists affiliated with the Company for the entire
period was approximately $488,000. In addition, for the same period, the Coast
Dentists averaged 112 patient visits per week (including hygienist visits).
Based upon data contained in the ADA's survey conducted in 1994 and accounting
for hygienist visits, the Company believes that Coast Dentists have achieved
substantially higher patient revenue production and patient visits than the
national average for general practitioners, although there can be no assurance
that such industry data is representative of current productivity by the average
general dental practitioner. For internally developed Dental Centers, the
Company has attained profitability (determined by subtracting from the services
and support fee earned by the Company at an internally developed Dental Center
the amount of the Company's expenditures incurred at such Dental Center,
excluding corporate overhead) in an average of three to four months from
opening. Acquired Dental Centers which the Company has managed for at least six
months have experienced an average aggregate increase of 14.8% in gross patient
revenue in the six month period following the acquisitions of the dental
practices as compared to the six month period preceding the acquisitions,
attributable to increased patient flow resulting from implementation of
marketing programs, incremental managed care business and increased operating
efficiencies.

RECENT ACQUISITIONS

As of January 1, 1997, the Company was managing 29 Dental Centers located
in central Florida, 12 of which were internally developed and 17 of which were
acquired. The Company opened two internally developed Dental Centers in both
1992 and 1993, four in 1994, three in 1995 and one in 1996. The Company has
added 17 acquired Dental Centers in 1996, including a single dental office in
January 1996, seven dental offices in April 1996 through the Volusia
Acquisition, three separate single dental offices in September 1996, three
dental offices in November 1996 through the Seminole Acquisition, and three
separate single dental offices in December 1996. The total purchase prices for
the Volusia Acquisition and the Seminole Acquisition were $1.8 million and $2.5
million, respectively, and the purchase prices for the other acquisitions
completed in 1996 aggregated approximately $1.0 million. See Notes 4 and 12 to
Notes to Financial Statements of the Company and the Unaudited Pro Forma
Combined Financial Information of the Company.

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COAST DENTAL CENTER LOCATIONS

The current locations of the Dental Centers, all of which are located in
the State of Florida, and the date each was opened or acquired are as follows:

<TABLE>
<CAPTION>
CURRENT DATE OPENED/
LOCATIONS ACQUIRED*
--------- ---------------
<S> <C>
Holiday.................................................... May 1992
Port Richey................................................ September 1992
Spring Hill................................................ April 1993
Clearwater................................................. September 1993
Largo...................................................... May 1994
Oldsmar.................................................... August 1994
Dunedin.................................................... November 1994
Tampa...................................................... December 1994
St. Petersburg............................................. January 1995
Tampa...................................................... March 1995
Titusville................................................. December 1995
Tampa...................................................... January 1996*
Daytona.................................................... April 1996*
Daytona.................................................... April 1996*
Deltona.................................................... April 1996*
Orange City................................................ April 1996*
Ormond Beach............................................... April 1996*
Palm Coast................................................. April 1996*
Port Orange................................................ April 1996*
Tampa...................................................... September 1996*
Wesley Chapel.............................................. September 1996*
Orlando.................................................... September 1996*
Casselberry................................................ November 1996*
Apopka..................................................... November 1996*
Orlando.................................................... November 1996*
Gainesville................................................ December 1996*
Kissimmee.................................................. December 1996*
Orlando.................................................... December 1996*
Lakeland................................................... December 1996
</TABLE>

SERVICES AND OPERATIONS

The Company is primarily responsible for the management and administrative
functions of its Dental Centers, but does not provide dental care. The Company
provides financial, accounting, billing, training, marketing assistance and
collection services for the Coast Florida P.A. and employs the Dental Center's
management and administrative personnel. The Coast Florida P.A. maintains full
control over the dental practices of the Coast Dentists, employs the Coast
Dentists and their hygienists and sets standards of care in order to promote the
provision of quality dental care. The Coast Florida P.A. is also responsible for
compliance with state and local regulations of the practice of dentistry and
with license or certification requirements. Each Coast Dentist is responsible
for acquiring and maintaining professional liability insurance.

Advertising and Marketing. The Company assists in developing and
implementing aggressive and innovative direct marketing plans for each Dental
Center, utilizing local radio and print advertising and marketing promotions.
The Company produces all broadcast advertising internally and tailors such
advertising to the particular local market. The name of the Coast Dentist is
prominently featured in each advertisement. The advertising typically highlights
affordable services and convenient locations. Florida regulations provide
certain restrictions on the Company's ability to provide advertising and
marketing services to the Coast Florida

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<PAGE> 40

P.A. See "Risk Factors -- Government Regulations -- Advertising Restrictions"
and "-- Coast Operating Model."

Managed Care Contracts. The Coast Dental Network is marketed to HMOs,
health insurance companies and other third party payors who have an established
presence in regional markets served, or expected to be served, by the Coast
Dental Network. The Company provides expertise to the Coast Florida P.A. by
assisting in the negotiation of contracts with managed care companies. In some
instances, the managed care contract provides for a monthly pre-determined lump
sum amount or per patient amount, while in other instances, the managed care
contract provides for certain discounts or fixed fees for dental services
provided under the contract. The managed care contracts are typically for one
year terms which automatically renew for additional one year periods unless
terminated by either party. To date all managed care contracts that were subject
to renewal in 1996 have been renewed. The Company believes that managed care
contracts provide Coast Dentists with a steady patient flow and predictable
revenue.

Management Information Systems. The Company utilizes information systems
which track important data related to each Dental Center's operations and
financial performance. The Company monitors all expenditures on advertising in
order to advise the Coast Florida P.A. as to where advertising expenditures need
to be increased or decreased. The Company's systems also track new patient cases
for each of its Dental Centers and develop programs to monitor whether new
patient services at the Dental Centers are at projected levels. Billing and
collection information is sent daily by each of the Dental Centers to the
Company for processing. The Company also provides each of the Dental Centers
with monthly operating data and quarterly financial statements. The Company
provides an analysis of the financial results and recommends changes to improve
the financial performance of the Dental Center. This analysis allows a Dental
Center to make periodic adjustments in marketing and operations.

Recruiting and Training. The Coast Florida P.A. employs, supervises and
trains all Coast Dentists and dental hygienists in each Dental Center. Each
Coast Dentist is a graduate of an accredited dental program, and each Dental
Center is supervised by a Coast Dentist with at least three years of experience.
The Coast Florida P.A. maintains full control over the dental practice of the
Coast Dentists and sets standards of practice in order to promote quality dental
care. All personnel, other than Coast Dentist's and dental hygienist, are
employed, supervised and trained by the Company. The Company, while not engaged
in the practice of dentistry, assists the Dental Center in the day-to-day
operations and management of personnel. The Coast Florida P.A. is responsible
for compliance with state and local regulations of the practice of dentistry and
with license or certification requirements.

Staffing and Scheduling. The Dental Centers are generally open from 8:30
a.m. to 5:00 p.m., Monday through Friday. A Dental Center will increase its
hours and open on Saturday if necessary to accommodate additional patient
visits. The Coast Florida P.A. typically rotates a Coast Dentist to another
Dental Center in order to accommodate unusual volume at that Dental Center.
Currently, staffing by the Coast Florida P.A. and the Company at a typical
Dental Center consists of one dentist, one hygienist, one office manager, one
receptionist and three dental assistants. The staffing and scheduling procedures
established by the Company after direction from and approval by the Coast
Florida P.A. allow the Coast Dentists to spend substantially all of the time
they are in the Dental Center working with patients. The Coast Dentists provide
services to an average of 25 patients per day versus the industry standard of 16
patients per day.

Purchasing and Distribution. Because of the growing number of Dental
Centers, the Company is able to make purchases of dental supplies and inventory,
equipment, and office furniture at reduced per unit costs. The Company
negotiates arrangements with suppliers that provide cost savings to each of the
Dental Centers. Dental equipment supplies are obtained by the Company as
directed by the Coast Florida P.A. Dental and administrative supplies are
purchased by the Company and distributed on a just-in-time basis to each Dental
Center, thereby limiting storage of unused inventory and supplies.

Facilities. All Dental Centers are leased and are generally located either
in shopping centers or professional office buildings. Substantially all of the
Dental Centers include private treatment rooms and large patient waiting areas
rather than one large treatment area. Dental Centers typically range from six to
12 treatment rooms and range in size from 1,200 square feet to 3,900 square
feet. Pursuant to its Services and

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<PAGE> 41

Support Agreement, the Company provides office facilities, dental equipment and
furnishings to the Coast Florida P.A.

SERVICES AND SUPPORT AGREEMENT

The Company has entered into a Services and Support Agreement with the
Coast Florida P.A. pursuant to which the Company is the exclusive business
manager, to the extent allowable by law, of the Dental Centers. As Dental
Centers are acquired or internally developed in Florida by the Company and the
Coast Florida P.A., the Dental Centers are expected to be governed by the
existing Services and Support Agreement, subject to possible future modification
or amendment. The Company has an additional services and support agreement with
another single dental provider on different terms than that of the Services and
Support Agreement and which is immaterial to the business of the Company. All
descriptions and references throughout this document to the Services and Support
Agreement (unless the context requires otherwise) shall be deemed to be that
Services and Support Agreement existing with the Coast Florida P.A.

Under the Services and Support Agreement, the Company is obligated to
provide comprehensive administrative and business services and support
including, among other things, to (i) provide, maintain and repair all offices,
equipment and furnishings, (ii) employ all non-professional personnel necessary
for the operation of the Dental Centers, (iii) provide payroll services, (iv)
implement standard business systems and procedures and provide systems and
procedures training, (v) order all general business inventory and supplies
required by the Dental Centers and handle accounts payable, (vi) establish and
maintain information systems and provide accounting and bookkeeping services,
(vii) monitor compliance with rules and regulations applicable to Dental Center
business, (viii) provide marketing assistance, (ix) provide advisory services
regarding future offices, and (x) provide assistance in billing and collections,
all as to the extent permitted by law.

The Services and Support Agreement provides that the Coast Florida P.A. is
responsible for, among other things, (i) employing and supervising all dentists
and dental hygienists, (ii) complying with all laws, rules and regulations
relating to dentists and dental hygienists, (iii) participating in quality
assurance/utilization review programs, (iv) maintaining proper dental patient
records, and (v) using its best effort to obtain professional liability
insurance with limits of not less than $1.0 million per claim and aggregate
policy limits of not less than $3.0 million.

Under the terms of the Services and Support Agreement, the Coast Florida
P.A. is required to indemnify, hold harmless, and defend the Company from and
against any and all claims from negligent or intentional acts or omissions,
including the performance of dental services, by the Coast Florida P.A. and its
employees. The Company is required to indemnify, hold harmless and defend the
Coast Florida P.A. from and against any and all claims resulting from negligent
or intentional acts or omissions by the Company.

As compensation for its management services under the current Services and
Support Agreement, the Coast Florida P.A. pays the Company a monthly services
and support fee equal to 76% of the gross revenue of the Dental Center. Dental
Center expenses paid by the Company from the services and support fee include
all operating and nonoperating expenses incurred at the Dental Center except for
the salaries and benefits of the Coast Dentists and dental hygienists, federal
and state income taxes, bad debt, and any other expenses designated as an
expense of the Coast Florida P.A. The Coast Florida P.A. is owned and managed by
Adam Diasti, an executive officer and director of the Company. See "Risk
Factors -- Dependence on the Coast Florida P.A. and the Coast Dentists," "Risk
Factors -- Potential Conflicts of Interest of the Company's President and Chief
Operating Officer", "Management" and "Certain Transactions." Future
modifications, amendments or revisions to the Services and Support Agreement
will be approved in advance by the Audit Committee of the Company's Board of
Directors, a majority of which will consist of the independent outside directors
of the Company.

Pursuant to the Services and Support Agreement, an advisory board
("Advisory Board") consisting of one member designated by the Company, currently
Joseph Smith, Chief Financial Officer and a director of the Company, and one
member designated by the Coast Florida P.A., currently Adam Diasti, President
and director of the Company will have the responsibility for, among other
things, (i) reviewing any renovation and expansion plans and capital equipment
expenditures relating to the Coast Florida P.A., (ii) approving the non-dental
ancillary services provided by the Coast Florida P.A., (iii) providing input on
agreements with

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<PAGE> 42

institutional care providers and third party payors, (iv) assisting the Company
in developing long-term strategic planning objectives, (v) providing advice
regarding the priority of major capital expenditures and (vi) resolving disputes
between the Company and the Coast Dentists. Due to legal restrictions in the
State of Florida, the Services and Support Agreement prohibits the Company from
exercising any control, either direct or indirect, over the Coast Dentists'
professional decisions, patient records, and decisions relating to pricing,
advertising, office personnel and hours of practice.

The Services and Support Agreement is for a term of 40 years, which
automatically renews annually, and is terminable by the Company if the Company
determines that any applicable legislation, rule or regulation may have an
adverse effect on the Company's rights, remedies or discretion under the
Services and Support Agreement. The Services and Support Agreement is terminable
by either party if the other party materially defaults in the performance of any
of its obligations under the Services and Support Agreement and such default
continues for a certain period of time after notice, or if the other party files
a petition for bankruptcy or other similar events occur. The Services and
Support Agreement provides that it shall be amended by the parties in the event
of any regulatory matters affecting the validity of the Services and Support
Agreement as is necessary to bring it into compliance. However, the Company may
terminate the Services and Support Agreement if amendment will not preserve the
underlying financial arrangement.

During the term of the Services and Support Agreement, the Company and the
Coast Florida P.A. agree not to disclose certain confidential and proprietary
information regarding the other. The Coast Florida P.A. is required under the
Services and Support Agreement to use its best efforts to enter into and enforce
written employment agreements with each of its professional employees containing
covenants not to compete with the Coast Florida P.A. in a specified geographic
area for a specified period of time after termination of the employment
agreement. The employment agreements generally provide for liquidated damages
and injunctive relief in the event of a breach of the covenant not to compete.
However, the Company's ability to enforce the covenant not to compete is not a
certainty. See "Risk Factors -- Non-competition Covenants." Under the Services
and Support Agreement, the Company is to be designated as a third party
beneficiary in the employment agreements between Coast Florida P.A. and the
Coast Dentist.

To assist in maintaining the continuity of the Services and Support
Agreement, the Company has entered into an Agreement to Transfer Stock and Stock
Pledge (the "Agreement") with Dr. Adam Diasti, sole shareholder of Coast Florida
P.A., pursuant to which Dr. Diasti has agreed to sell all of his shares of Coast
Florida P.A. stock (the "Coast Florida P.A. Shares") to a dentist(s) or
professional association licensed to practice dentistry in the State of Florida,
designated by the Company, in the event (i) Dr. Diasti dies; (ii) Dr. Diasti
loses his Florida license to practice dentistry for any reason; (iii) there is a
default under the Services and Support Agreement by the Coast Florida P.A. or
Dr. Diasti; (iv) Dr. Diasti becomes insolvent, files or has filed against him a
bankruptcy petition which is not discharged within thirty (30) days, has a
receiver appointed for his business, assets or property, has his bank accounts,
property or accounts attached, has execution levied against his business or
property, makes an assignment for benefit of creditors or has any of his Coast
Florida P.A. shares attached or levied upon for payment of his debts; (v) Dr.
Diasti is adjudicated incompetent by any court of law; (vi) Dr. Diasti no longer
meets the qualifications to be a shareholder of a Florida professional
association; or (vii) Dr. Diasti breaches the Agreement.

The purchase price for the Coast Florida P.A. Shares under the Agreement is
an amount which is equal to the fair market value of the Coast Florida P.A.
Shares as determined by a nationally recognized firm of independent certified
public accountants. The term of the Agreement is for as long as the Services and
Support Agreement and any renewals thereof are in effect. Under the Agreement,
Dr. Diasti has pledged to the Company all of his Coast Florida P.A. Shares to
secure his agreement to sell his Coast Florida P.A. Shares to the Company's
designee. Notwithstanding the above, Dr. Diasti shall have the right to sell or
transfer his stock during the terms of the Agreement so long as the transferee
is bound by the terms thereof.

The Company plans to continue to use the current form of its Services and
Support Agreement to the extent possible and marketable, as it enters into new
states or into arrangements with other dental practices. However, the terms of
future agreements may differ according to market conditions and the statutory or
regulatory requirements of the particular state in which the dental practice is
located.

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<PAGE> 43

GOVERNMENTAL AND STATE REGULATIONS

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

There are currently several federal and state initiatives designed to amend
regulations relating to the provision of health care services, the access to
health care, the costs of health care and the manner in which health care
providers are reimbursed for their services. However, it is not possible to
predict whether any such initiatives will be enacted as legislation or, if
enacted, what their form, effective dates or impact on the Company will be. See
"Risk Factors -- Government Regulations."

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

Health Care Regulations Affecting the Company. Business arrangements
between dentists and business corporations are regulated extensively at the
state and federal levels, including regulation in the following areas:

Corporate Practice of Dentistry. The laws of many states prohibit
corporations that are not owned entirely by dentists from employing
dentists (and in some states, dental hygienists and dental assistants),
having control over clinical decision-making, or engaging in other
activities that are deemed to constitute the practice of dentistry. Florida
law specifically prohibits non-professional corporations from employing
dentists and dental hygienists, exercising control over patient records,
and making decisions relating to clinical matters, office personnel, hours
of practice, pricing, credit, refunds, warranties and advertising. The
Company does not employ dentists or dental hygienists and does not exercise
control over any prohibited areas. While Dr. Adam Diasti, the sole
shareholder of the Coast Florida P.A., is also a shareholder, director and
officer of the Company, he acts independently when making decisions in
these areas on behalf of the Coast Florida P.A.

Some states, including Florida, also prohibit non-professional
corporations from owning, maintaining or operating an office for the
practice of dentistry. These laws have generally been construed to permit
arrangements under which the dentists are not employed by or otherwise
controlled as to clinical matters by the party supplying facilities and
non-professional services. Florida law specifically requires that dentists
or their professional corporations maintain complete care, custody and
control of all equipment and materials used in the practice of dentistry.
The Services and Support Agreement between the Company and Coast Florida
P.A. provides that the Company shall not exercise control over any matters
that would violate the requirements of Florida law.

Fee-Splitting and Anti-kickback Laws.

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<PAGE> 44

percentage of the practice's revenues. The Florida fee-splitting law
prohibits paying or receiving any commission, bonus, kickback, or
rebate, or engaging in any split-fee arrangement in any form with a
dentist for patient referrals to dentists or other providers of health
care goods and services. According to a Florida court of appeals
decision interpreting this law, it does not prohibit a management fee
that is based on a percentage of gross income of a professional practice
if the manager does not refer patients to the practice.

The Company operates in a manner that complies with these
requirements. For this reason, the Services and Support Agreement
provides that the Company will not engage in direct marketing to
potential sources of business, but will only assist the Coast Florida
P.A. personnel in these endeavors by providing training, marketing
materials and technical assistance.

Advertising Restrictions. Many states, including Florida, prohibit
dentists from using advertising which includes any name other than their
own, or from advertising in any manner that is likely to mislead a person
to believe that a non-dentist is engaged in the practice of dentistry. The
Services and Support Agreement provides that all advertising shall conform
to these requirements. Florida law also requires all advertising to
identify the Florida dentist who assumes total responsibility for the
advertisement and may not include the name of a person who is not either
actually involved in the practice of dentistry at the advertised location
or an owner of the practice being advertised is not permitted. All of the
advertisements include the name of Dr. Adam Diasti who owns the dental
practice through the Coast Florida P.A.

Limitations on Delegation. Some states, including Florida, regulate
the manner in which dentists delegate certain tasks to non-dentists. In
Florida, if a dentist uses a nonlicensed person to prepare orthodontic or
prosthetic devices such as dentures, certain record keeping requirements
must be met. The Company follows these requirements whenever such
activities are performed by its employees.

These laws have civil and criminal penalties. Shumaker, Loop & Kendrick, LLP,
counsel for the Company, has advised the Company that the Services and Support
Agreement is consistent with the Florida and federal legal requirements
discussed above, so long as the fees paid to the Company do not exceed
reasonable levels for the facilities and services provided, and the Company
believes that the fee arrangement under the Services and Support Agreement is
reasonable. Nonetheless, these laws have been subject to limited judicial and
regulatory interpretation. They are enforced by regulatory agencies that are
vested with broad discretion in interpreting their meaning. The Company's
agreements and activities have not been examined by federal or state authorities
under these laws and regulations. For these reasons, there can be no assurance
that review of the Company's business arrangements or the operation of the
Dental Centers will not result in determinations that adversely affect the
Company's operations or that the long-term Services and Support Agreement or
certain of its provisions will not be held invalid and unenforceable.

In addition, these laws and their interpretation vary from state to state.
The laws and regulations of certain states into which the Company seeks to
expand may require the Company to change the form of relationships entered into
with dentists in a manner that restricts the Company's operations in those
states.

Anti-Fraud Laws.

State Law. State laws prohibit any person from knowingly and
willfully making any false statement or misrepresentation of a material
fact in seeking payment for items or services.

Federal Law. Federal law prohibits any person from knowingly and
willfully making any false statement or misrepresentation of a material
fact in seeking payment for items or services. Federal laws

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<PAGE> 45

impose civil monetary penalties for filing claims that the filing party
"should know" are not appropriate under rules applicable to federally
funded health care programs.

Self-Referral Laws.

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

Federal Law. Federal law, subject to certain exceptions, prohibits
certain Medicare and Medicaid referrals to entities in which a dentist has
an ownership interest or with which the dentist has a compensation
arrangement.

The federal law and most state laws have exceptions for in-office services
provided under the direct supervision of the dentist. The Company believes that
its arrangements with its Coast Dentists comply with these laws. There is no
assurance that changes in these laws or their interpretation will not affect the
Company's current or future activities.

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

INSURANCE

The Company's business entails an inherent risk of claims of liability. The
Coast Dentists are involved in the delivery of health care services to the
public and, therefore, are exposed to the risk of professional liability claims.
Claims of this nature, if successful, could result in substantial damage awards
to the claimants that may exceed the limits of any applicable insurance
coverage. Insurance against losses related to claims of this type can be
expensive and varies widely from state to state. The Company is indemnified
under the Services and Support Agreement for claims against the Company arising
from the performance of medical and dental services provided by the Coast
Florida P.A. The Company maintains liability insurance for itself and negotiates
liability insurance for the Coast Dentists. Successful malpractice claims
asserted against the Coast Florida P.A., however, could have an adverse effect
on the Company's profitability. The Company maintains professional liability and
general liability insurance on a claims-made basis in the amounts of $1.0
million per incident, and $3.0 million in the aggregate per annum, along with a
$5.0 million umbrella policy. While the Company believes it has adequate
liability insurance coverage, there can be no assurance that a pending or future
claim or claims will not be successful or, if successful, will not exceed the
limits of available insurance coverage or that such coverage will continue to be
available at acceptable costs and on favorable terms.

COMPETITION

The Company is aware of several other companies which are actively engaged
in the consolidation of existing dental practices and providing management
services to dental practices, some of which may have substantially greater
financial resources and longer operating histories than the Company. The Company
assumes that additional companies with similar objectives may enter the
Company's markets and compete with the Company. The primary basis of competition
between dental PPMs are the extent of the dental care network, management
expertise and experience, sophistication of management information systems, the
elements of its operating system, the availability of managed care business,
opportunity for career enhancement of potential associated dentists, liquidity,
high visibility, pricing in acquisition and management agreements, degrees of
control required by the merger and the size of operations.

The business of providing dental services is highly competitive in each of
the markets in which the Dental Centers operate. The primary bases of
competition within the dental services industry are price of services, marketing
exposure, convenience of location and traffic flow of location, hours of
operation, reputation, managed care contracts, quality of care, and appearance
and usefulness of facility and equipment. Coast

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<PAGE> 46

Dentists compete with other dentists who maintain single offices or operate a
single satellite office, as well as with dentists who maintain group practices
or operate in multiple offices. Many of those dentists have more established
practices in their markets.

SERVICE MARKS

The Company applied for registration of the service marks "Coast Dental"
and the Company logo with the United States Patent and Trademarks Office in 1996
which application is currently pending.

EMPLOYEES

At January 1, 1997, the Company had 268 full-time and part-time employees,
of which approximately 19 were employed at the Company's headquarters and
approximately 249 were employed at the Dental Centers. None of the Company's
employees are employed under a collective bargaining agreement. The Company
believes that its relationship with its employees is good.

LITIGATION

There are no material pending legal proceedings other than routine
litigation arising in the ordinary course of business. The Company does not
believe that the results of such litigation, even if the outcome were
unfavorable to the Company, would have a material adverse effect on its
financial position.

PROPERTIES

The Company presently leases an average of between 1,200 to 2,000 square
feet of office space for each of the Dental Centers. The typical lease for
office space is for a term of approximately five years and generally provides
for renewal options for additional years. The average rental payments for a
leased Dental Center are approximately $1,600 per month. The Company plans to
continue to lease rather than purchase space for the Dental Centers to preserve
the Company's available capital.

The Company leases 3,800 square feet of office space in Tampa, Florida for
its Corporate headquarters. This lease is for a term through May 2000 and the
Company believes the facility is adequate for its current needs.

The Company generally anticipates leasing and developing new Dental Centers
in its current market as well as in certain other geographic markets rather than
significantly expanding the size of its existing Dental Centers.

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<PAGE> 47

MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The following table sets forth the names and ages of the Company's
directors, executive officers, and key employees, and the positions they each
hold with the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Terek Diasti, DVM............ 37 Chief Executive Officer, Chairman of the Board, and
Director
Adam Diasti, DDS............. 35 President, Chief Operating Officer, Dental Director and
Director
Joseph R. Smith, CPA......... 44 Chief Financial Officer, Secretary, Treasurer and
Director
Tim Diasti................... 28 Vice President of Operations
Elizabeth Szeltner........... 36 Controller
John H. Kang(1).............. 33 Director
Donald R. Millard(1)......... 48 Director
</TABLE>

- ---------------

(1) Appointment will become effective upon the consummation of this Offering.

TEREK DIASTI, DVM, CHIEF EXECUTIVE OFFICER, CHAIRMAN OF THE BOARD, AND
DIRECTOR. Dr. Diasti is a founder of the Company and has served as Chairman of
the Board of the Company since 1992. From 1989 to 1993, Dr. Diasti operated and
managed Lakeside Animal Hospital, Avalon Animal Hospital, Country Oaks Animal
Hospital and Northdale Animal Hospital, all of which are veterinary hospitals in
the Tampa Bay area. While at the veterinary hospitals, Dr. Diasti was engaged in
the development internal managerial and operational programs. Dr. Diasti
received his Doctorate of Veterinary Medicine from Purdue University. Dr. Diasti
is the brother of Dr. Adam Diasti and Tim Diasti.

ADAM DIASTI, DDS, PRESIDENT, CHIEF OPERATING OFFICER, DENTAL DIRECTOR AND
DIRECTOR. Dr. Diasti is a founder of the Company and has served as the
President of the Company since its inception. Dr. Diasti is also the founder,
president, director and sole shareholder of the Coast Florida P.A. From May 1991
to May 1992, he managed and operated the Sarasota Walk In Dental Clinic, a group
practice of three dentists and denture laboratory in Sarasota, Florida. Prior to
May 1991, Dr. Diasti worked as a dentist in a large group practice of 18 offices
known as Quality Dental in Newman Grove, Nebraska. He served as the Dental
Operations Manager of Quality Dental. Dr. Diasti has a Doctorate of Dental
Surgery from Creighton University in 1990 and is a member of the American Dental
Association. Dr. Diasti is the brother of Dr. Terek Diasti and Tim Diasti.

JOSEPH R. SMITH, CHIEF FINANCIAL OFFICER, SECRETARY, TREASURER AND
DIRECTOR. Mr. Smith, a Certified Public Accountant, joined Coast Dental as its
Chief Financial Officer in February 1996. He was elected as a director of the
Company in September 1996. Prior to joining Coast and since 1985, he was a
partner with Deloitte & Touche LLP, in the Central Florida practice where he
most recently served as the partner in charge of middle market services for
Central Florida and the partner in charge of services to the Retail industry for
the Florida region. Mr. Smith graduated with a Bachelor of Science in Accounting
in 1975 from the University of Florida.

TIM DIASTI, VICE PRESIDENT OF OPERATIONS. Mr. Diasti is a founder of the
Company and has served as Vice President of Operations of the Company since its
inception. Mr. Diasti graduated with a Bachelor of Arts from the University of
Nebraska's School of Business in 1992. Mr. Diasti is the brother of Dr. Terek
Diasti and Dr. Adam Diasti.

ELIZABETH SZELTNER, CONTROLLER. Ms. Szeltner joined Coast Dental as its
Controller in July 1994. She served as a controller for USA Rent a Car from 1992
through 1994, a nationwide rental car company with annual revenue exceeding
$52.0 million. From 1990 through 1992, Ms. Szeltner served as
Consultant/Controller for El Paso Rehabilitation Center, a health care company.
She also was employed as a Senior Accountant at KPMG Peat Marwick LLP from 1987
through 1990. Ms. Szeltner has a Bachelor of Science in Accounting from the
University of Texas-El Paso. She earned her CPA certificate in Texas in 1993.

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<PAGE> 48

Mr. John H. Kang and Mr. Donald R. Millard have agreed to serve as a
directors of the Company upon consummation of this Offering.

JOHN H. KANG. Mr. Kang has been President and a director of Medical
Manager Corporation since July 1996. He is the founder of NMS and has served as
its President since its inception in 1994. In 1987, Mr. Kang founded J.
Holdsworth Capital Ltd., a private investment firm, and is currently its
President. He has been a director of Amorphous Technologies International, a
company engaged in the research and development and manufacture of metal alloy,
since May 1995. Mr. Kang also has been a director of Nutcracker Snacks, Inc., a
manufacturer of snack foods, since December 1988. From June 1988 to September
1996, Mr. Kang was the Chairman and a director of Clayton Group, Inc., a
distributor of waterworks materials. Mr. Kang received an A.B. in Economics from
Harvard College in 1985.

DONALD R. MILLARD. Mr. Millard has served as Senior Vice President of
Finance and Chief Financial Officer of Matria Healthcare, Inc., a provider of
comprehensive obstetrical homecare and maternity management services, since
March 1996. Previously, Mr. Millard served as Treasurer from 1990 and Vice
President -- Finance and Chief Financial Officer from 1987 for Healthdyne, Inc.,
which merged with Tokos Medical Corporation in March 1996 to form Matria
Healthcare, Inc. Prior to joining Healthdyne, Inc., Mr. Millard served as
President of Dental One, Inc., a dental healthcare provider, from December 1982
to June 1987. Mr. Millard is a Certified Public Accountant.

Pursuant to the terms of the Company's Certificate of Incorporation and
Bylaws, the Board of Directors has the power to set the number of directors. The
number of directors is presently set at five members and there are currently two
vacancies. The directors are divided into three classes. Each director in a
particular class is elected to serve a three-year term or until his or her
successor is duly elected and qualified. The classes are staggered so that their
terms expire in successive years resulting in the election of only one class of
directors each year. The Class I director is Terek Diasti, the Class II director
is Adam Diasti and the Class III director is Joseph Smith. The initial terms of
the current Class I, Class II and Class III directors will expire at the annual
meeting of the stockholders of the Company in 1997, 1998 and 1999, respectively.
Effective upon consummation of the offering, Mr. John Kang and Mr. Donald R.
Millard will become Class I members of the Company's Board of Directors.
Officers of the Company are appointed by the Board of Directors and hold office
until the first meeting of directors following the annual meeting of
stockholders and until their successors are appointed, subject to earlier
removal by the Board of Directors.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The Company's Restated Certificate of Incorporation (the "Certificate")
provides that a Director shall not be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a Director,
except: (i) for any breach of duty of loyalty; (ii) for acts or omissions not in
good faith or which involve international misconduct or knowing violations of
laws; (iii) for liability under Section 174 of the Delaware GCL (relating to
certain unlawful dividends, stock repurchases or stock redemptions); or (iv) for
any transaction from which the Director derived any improper personal benefit.
Article VIII of the Company's By-laws provides that the Company shall indemnify
each Director and such of the Company's officers, employees and agents as the
Board of Directors shall determine from time to time to the fullest extent
provided by the Delaware GCL.

The Company has entered into indemnification agreements (the
"Indemnification Agreements") with all of its Directors and certain of its
officers. Similar Indemnification Agreements may from time to time be entered
into with additional officers of the Company or certain other employees or
agents of the Company. At present, there is no material pending litigation or
proceeding involving a director, officer, employee or agent of the Company where
indemnification is required or permitted, nor is the Company aware of any
threatened litigation or proceeding that may result in a claim for such
indemnification. The Company is also empowered under its Certificate to purchase
and maintain insurance or furnish similar protection on behalf of any person who
it is required or permitted to indemnify and the Company has acquired such
insurance in connection with such individuals that the Company believes is
warranted.

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<PAGE> 49

DIRECTORS' COMPENSATION

Each Director of the Company who is not an employee of the Company will
receive $1,000 for each meeting of the Board of Directors or any committee
attended plus out-of-pocket expenses incurred in connection with attendance at
such meeting.

COMMITTEES OF THE BOARD OF DIRECTORS

The Board of Directors will establish, effective upon consummation of this
Offering an Audit Committee the members of which will be Messrs. Kang, Smith and
Millard, a Compensation Committee, the members of which will be Messrs. Kang and
Millard, and Dr. Terek Diasti, and an Executive Committee consisting of Dr.
Terek Diasti and Mr. Smith. The functions of the Audit Committee will be to
recommend annually to the Board of Directors the appointment of the independent
public accountants of the Company, discuss and review the scope and the fees of
the prospective annual audit, to review the results thereof with the independent
public accounts, review and approve non-audit services of the independent public
accountants, review compliance with existing major accounting and financial
policies of the Company, review the adequacy of the financial organization of
the Company, review management's procedures and policies relative to the
adequacy of the Company's internal accounting controls, review compliance with
federal and state laws relating to accounting practices and review and approve
(with the concurrence of a majority of the disinterested directors of the
Company) transactions, if any, with affiliated parties.

The functions of the Compensation Committee will be to review and approve
annual salaries and bonuses for all officers, review, approve and recommend to
the Board of Directors the terms and conditions of all employee benefit plans or
changes thereto, administer the Company's stock option plans, and carry out the
responsibilities required by rules of the Securities and Exchange Commission.

The Executive Committee, to the fullest extent allowed by Delaware law and
subject to the powers and authority delegated to the Audit Committee and the
Compensation Committee, will have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Company during intervals between meetings of the Board of Directors.

EXECUTIVE COMPENSATION

The following table sets forth information with respect to all compensation
paid or accrued in 1995 and 1996 for services rendered in all capacities to the
Company and its predecessors by the chief executive officer. For the year ended
December 31, 1995, no officer of the Company received compensation in excess of
$100,000 and for the year ended December 31, 1996, Mr. Joseph Smith, Chief
Financial Officer, was the only officer of the Company to receive compensation
in excess of $100,000.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL LONG TERM
COMPENSATION COMPENSATION
-------------------- ------------
RESTRICTED
NAME AND PRINCIPAL POSITION YEAR SALARY STOCK AWARD
--------------------------- ---- ------------ ------------
<S> <C> <C> <C>
Terek Diasti, Chief Executive Officer............. 1995 $ 26,833
1996 $ 63,442 --
Joseph R. Smith, Chief Financial Officer.......... 1996 $114,423 $27,674(1)
</TABLE>

- ---------------

(1) Represents 105,000 shares of restricted Common Stock granted by the Company
to Mr. Smith, which based upon the assumed initial offering price of $9.00
per share, would have a total aggregate value of $945,000. A total of
57,500 of these shares automatically vest at the time of completion of the
Offering and 28,750 of such shares will vest on February 12, 1998 and on
February 12, 1999, subject to Mr. Smith's continued employment on such
dates. Dividends will not be paid on shares which are subject to such
restrictions.

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<PAGE> 50

The Company anticipates that it will pay compensation in excess of $100,000
to both the Chief Executive Officer and Chief Financial Officer for the year
ended December 31, 1997 pursuant to certain employment agreements. See
"-- Employment Agreements." The Company did not grant any stock options or stock
appreciation rights to executive officers during 1996 nor were any such options
or rights outstanding for executive officers as of the end of that fiscal year.

EMPLOYMENT AGREEMENTS

Dr. Terek Diasti and Dr. Adam Diasti have each entered into an Employment
Agreement with the Company (the "Employment Agreements"), pursuant to which they
have agreed to serve as the Company's Chief Executive Officer and Chief
Operating Officer, respectively. The Employment Agreements are for a term of
five years ending on September 30, 2001 and are renewable for subsequent one
year terms by mutual agreement of the parties. Dr. Terek Diasti and Dr. Adam
Diasti will receive annual base salaries of not less than $110,000 and $90,000,
respectively, during the first year and not less than $135,000 and $115,000,
respectively, for subsequent years, under the Employment Agreements. Dr. Terek
Diasti agreed to devote substantially all of his time and attention to the
business and affairs of the Company, while Dr. Adam Diasti, because of his
obligations to the Coast Florida P.A., has agreed to devote such time and
attention as is reasonably necessary to fulfill his obligations to the Company.
Dr. Terek Diasti and Dr. Adam Diasti will each be eligible for annual incentive
bonuses, up to 100% of their annual base salary, in an amount to be determined
by the Compensation Committee of the Board of Directors in accordance with the
Company achieving certain performance measures set by the Committee. Each of
such Employment Agreements provides that in the event of a termination of
employment by the Company other than (i) for cause, (ii) upon death or
disability or (iii) upon voluntary termination by employee, such employee shall
be entitled to receive from the Company a series of monthly payments equal to
one-twelfth of the employee's annual base salary for each month during the
remaining term of such Employment Agreement, but not less than twenty-four
months, plus a payment for accrued but unpaid wages and expense reimbursements.
Such Employment Agreements provide that in the event such employee's employment
terminates other than for cause within twelve months following a change in
control (as defined in such Employment Agreements) of the Company, the Company
shall pay such employee a series of 36 monthly payments of one-twelfth of the
sum of such employee's base salary plus his previous years' bonus. Each such
Employment Agreement contains a non-competition covenant with the Company for a
period of two years following termination of employment.

The Company and Joseph R. Smith are parties to an Employment Agreement (the
"Employment Agreement"), pursuant to which Mr. Smith has agreed to serve as
Chief Financial Officer of the Company. The term of the Employment Agreement is
for three years ending on February 12, 1999, and is renewable for subsequent one
year terms by mutual agreement of the parties. The Employment Agreement also
provides that Mr. Smith will be employed for at least two years after any public
offering of the Company which occurs during the initial term of the Employment
Agreement. In the event Mr. Smith terminates the Employment Agreement without
cause during the two year period after any public offering, the Employment
Agreement requires Mr. Smith to pay liquidated damages to the Company of
$200,000 for each complete year or portion of a year remaining. The Employment
Agreement provides that Mr. Smith will devote his full time to the business and
affairs of the Company and will receive an annual base salary at a rate equal to
$125,000 during the first six months of employment and $150,000 during the
second six months, $165,000 in the second year and $180,000 in the third year.
The Employment Agreement further provides that upon completion of an initial
public offering by the Company, Mr. Smith's compensation will be adjusted to a
compensation level which is equivalent to compensation levels of chief financial
officers in similarly sized public companies. In addition, Mr. Smith has
received under the Employment Agreement 105,000 shares of restricted Company
Common Stock of which one-half of the shares will cease to be forfeitable on the
initial public offering date and the remaining one-half will cease to be
forfeitable after the second and third year of employment. Mr. Smith is also
eligible for inclusion, at the Company's expense, in any health, medical,
disability, insurance or pension plan made available by the Company to its
employees. The Employment Agreement terminates automatically upon death or
disability of Mr. Smith and is terminable by the Company "for cause" as defined
in the Employment Agreement. The Employment Agreement provides that during the
period ending one year after termination, Mr. Smith will not compete with the
Company in the dental management business.

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<PAGE> 51

Additionally, in January 1997 Mr. Smith received options to purchase 10,000
shares of the Company's Common Stock pursuant to the Company's Incentive Plan as
described below. The options are exercisable at the initial public offering
price and shall vest pro-rata on an equal basis, over a three year period.

THE PLANS

Effective April 1, 1996, the Board of Directors adopted, and the
stockholders of the Company approved, two stock incentive plans: the Coast
Dental Services, Inc. Stock Option Plan (the "Incentive Plan") and the Coast
Dental Services, Inc. Affiliated Professionals Stock Plan (the "Professionals
Plan," and together with the Incentive Plan, the "Plans"). The purpose of the
Plans is to provide officers, key employees, and dental professionals employed
by the Coast Florida P.A. and the Company with additional incentives by
increasing their proprietary interest in the Company or tying a portion of their
compensation to increases in the price of the Company's Common Stock. The
aggregate number of shares of Common Stock subject to the Incentive Plan and the
Professionals Plan is 450,000 shares for each plan.

The Incentive Plan permits the Company to grant incentive stock options
("ISOs"), as defined in Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), non-qualified stock options ("Non-qualified Options"),
stock appreciation rights ("SARs") and Restricted Shares of Common Stock
("Restricted Shares") to officers and employees of the Company (individually, an
"Award" and collectively, "Awards"). The Professionals Plan permits the Company
to grant Awards of Non-qualified Options, SARs and Restricted Shares to dental
professionals employed by the Coast Florida P.A. The various types of Awards are
described in more detail below.

The Incentive Plan is intended to qualify for favorable treatment under
Section 16 of the Exchange Act pursuant to Rule 16b-3 promulgated thereunder
("Rule 16b-3") and Awards under the Incentive Plan are intended to qualify for
treatment as "performance-based compensation" under Section 162(m) of the
Internal Revenue Code ("Section 162(m)"). Following the consummation of the
Offering, the Plans will be administered by the Compensation Committee, which
will be comprised of two or more nonemployee directors who are "disinterested"
within the meaning of Rule 16b-3 and Section 162(m) (the "Committee"). The
Committee will have, subject to the terms of the Plans, the sole authority to
grant Awards under the Plans, to construe and interpret the Plans and to make
all other determinations and take any and all actions necessary or advisable for
the administration of the Plans.

Options. Options for the purchase of shares of the Common Stock may be
granted under both Plans. The exercise price for the ISOs granted under the
Incentive Plan may be no less than the fair market value of the Common Stock on
the date of grant (or 110% in the case of ISOs granted to employees owning more
than 10% of the Common Stock). Only employees of the Company are eligible to
receive ISOs. The exercise price for Non-qualified Options granted under the
Plans will generally be the fair market value of the Common Stock on the date of
grant; however, the Committee will set an exercise price at less than fair
market value if it determines that special circumstances warrant a lower price.
Options will be exercisable during the period specified in each option agreement
and will generally be exercisable in installments pursuant to a vesting schedule
to be designated by the Committee. No Option will remain exercisable later than
ten years after the date of grant (or five years from the date of grant in the
case of ISOs granted to holders of more than 10% of the Common Stock).

SARs. Stock appreciation rights may be granted under both Plans in tandem
with Options. An SAR represents the right to receive from the Company the
difference (the "Spread"), or a percentage thereof not in excess of 100 percent,
between the exercise price of the related Option and the market value of the
Common Stock on the date of exercise of the SAR. SARs may only be exercised at a
time when the related Option is exercisable and the Spread is positive, and the
exercise requires the surrender of the related Option for cancellation. The
amount payable by the Company upon exercise may be paid in cash, Common Stock or
a combination thereof, as determined by the Committee.

Restricted Shares. Restricted Shares may be granted under both Plans. An
award of Restricted Shares involves the immediate transfer by the Company to a
participating employee of ownership of a specific number of shares of Common
Stock in consideration of the performance of services. The employee is entitled

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<PAGE> 52

immediately to voting, dividend and other ownership rights in the shares. The
transfer may be made without additional consideration, or for payment of an
amount that is less than the market value of the shares on the date of grant, as
the Committee may determine. Restricted Shares must be subject to a "substantial
risk of forfeiture" for a period to be determined by the Committee. An example
would be a provision that the employee's Restricted Shares would be forfeited if
he or she ceased to serve the Company as an officer at any time before the end
of a specified period of years. In order to enforce these forfeiture provisions,
the transferability of Restricted Shares will be prohibited or restricted in a
manner and to the extent prescribed by the Committee for the period during which
the forfeiture provisions are to continue. The Committee may also condition the
vesting of the Restricted Shares on the achievement of specified performance
objectives ("Management Objectives").

The Company has awarded a total of 140,000 Restricted Shares to employees
and affiliated professionals under the Incentive Plans, which vest over three to
five years from the date of grants.

The Company anticipates that prior to or upon the consummation of the
Offering it will have outstanding options to purchase a total of approximately
186,000 shares of Common Stock exercisable at the initial public offering price.
The outstanding options are exercisable over vesting schedules ranging from
eighteen months to three years.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Executive compensation in the past has been determined by the Company's
chief executive officer. Shortly after completion of the Offering, the Company
intends to establish a Compensation Committee of the Board of Directors, a
majority of whom will be independent directors.

CERTAIN TRANSACTIONS

The information set forth herein briefly describes transactions over the
past three years between the Company and its directors, officers and 5%
stockholders. These transactions have been approved by the Company's Board of
Directors. Future transactions after the Offering, if any, with affiliated
parties will be approved by a majority of the Company's independent directors of
the Audit Committee and will be on terms no less favorable to the Company than
those that could be obtained from unaffiliated parties.

THE REORGANIZATION

In March 1996, Coast Dental, Inc. ("CDI"), was merged into the Company for
the purpose of reincorporating the Company in the State of Delaware and changing
its name. Terek Diasti and Adam Diasti, directors and executive officers of the
Company, and Tim Diasti, an executive officer of the Company, collectively owned
100% of the outstanding common stock of CDI and each received 1,120,000 shares
or 100% of the then outstanding shares of Common Stock of the Company as a
result of the merger.

AGREEMENT WITH THE COAST FLORIDA P.A.

The Company has an agreement to provide dental management, services and
support to the Coast Florida P.A. Dr. Adam Diasti, a director and the President
and Chief Operating Officer of the Company, is the sole owner of the Coast
Florida P.A. Payments made by the Coast Florida P.A. to the Company for the
management services were $1.2 million, $1.9 million and $3.3 million, in 1993,
1994 and 1995, respectively, and $5.3 million for the nine months ended
September 30, 1996. In October 1996, the Company and the Coast Florida P.A.
entered into a new services and support agreement pursuant to which the Company
will provide dental management services to the Coast Florida P.A. for a
management fee equal to 76% of the gross revenue of the Coast Florida P.A.'s
Dental Centers. The Coast Florida P.A. hires and supervises all Coast Dentists
and hygienists. See "Business -- Services and Support Agreement."

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<PAGE> 53

AGREEMENT WITH ADAM DIASTI

The Company has an agreement with Dr. Adam Diasti, pursuant to which Dr.
Diasti has agreed to sell all of his shares of Coast Florida P.A. stock to a
licensed dentist designated by the Company if certain events occur. Dr. Diasti
is a Director and the President and Chief Operating Officer of the Company. The
purchase price under the agreement, if the certain event should occur, will be
the fair market value of Dr. Diasti's shares of Coast Florida P.A. stock. See
"Business -- Services and Support Agreement."

LOANS TO THE COAST FLORIDA P.A.

The Coast Florida P.A. is indebted to the Company in the aggregate amount
as of January 1, 1997 of approximately $960,000 which represents service and
support fees payable to the Company and a Promissory Note dated December 31,
1996 payable to the Company. The Promissory Note totalling approximately
$227,000 bears interest at 8% per annum and is payable in one balloon payment
due July 1, 1998. The funds were loaned in connection with the acquisition by
the Coast Florida P.A. of the patient lists, patient records and related assets
of certain dental practices located in Volusia, Flagler and Seminole Counties,
Florida, in which the Company acquired the permittable business assets. The
management fee receivable as of January 1, 1997 of approximately $733,000
relates to amounts due to the Company in accordance with the Services and
Support Agreement. The Company may, from time to time, continue to advance funds
under services and support agreement for purposes of funding the payment of
expenses or for the Coast Florida P.A.'s future acquisitions of existing dental
practices.

CANCELLATION OF PERSONAL GUARANTYS

Terek Diasti and Adam Diasti have personally guaranteed certain notes
payable by the Company, under which $4.4 million was outstanding as of January
1, 1997. The Company intends to repay certain of these notes out of the net
proceeds of the Offering, whereupon those individuals are expected to be
released from the respective guarantys related to repaid debt. See Note 7 of the
Financial Statements of the Company and "Use of Proceeds."

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<PAGE> 54

PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth information with respect to the beneficial
ownership of the Company's outstanding Common Stock as of January 1, 1997 and as
adjusted to reflect the sale of the Common Stock offered hereby by (i) each
person or entity known by the Company to be the beneficial owner of more than 5%
of the outstanding shares of Common Stock, (ii) each director of the Company who
owns any shares of Common Stock, (iii) each stockholder that has granted
over-allotment options to the Underwriters (the "Selling Stockholders") and (iv)
all directors and executive officers of the Company as a group. Except as
otherwise indicated, the persons listed below have sole voting and investment
power with respect to all shares of Common Stock owned by them, except to the
extent such power may be shared with a spouse.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY
PERCENT OWNED AFTER OFFERING
BENEFICIALLY IF
SHARES BENEFICIALLY OWNED AFTER NUMBER OF OVER-ALLOTMENT OPTIONS
OWNED PRIOR TO THE OFFERING SHARES ARE EXERCISED IN
OFFERING(2) IF OVER-ALLOTMENT SUBJECT TO FULL(2)
NAME AND ADDRESS OF --------------------- OPTIONS ARE NOT OVER-ALLOTMENT ----------------------
BENEFICIAL OWNER(1) NUMBER PERCENT EXERCISED OPTIONS NUMBER PERCENT
------------------- ---------- ------- ----------------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Diasti Nevada Family Limited
Partnership(3)............ 2,925,000(3) 84.0% 51.0% -- 2,925,000 51.0%
Dr. Terek Diasti............ 3,035,000(4) 87.0 53.0 110,000 2,925,000 51.0
Dr. Adam Diasti............. 3,035,000(4) 87.0 53.0 110,000 2,925,000 51.0
Tim Diasti.................. 3,035,000(4) 87.0 53.0 110,000 2,925,000 51.0
Joseph R. Smith............. 105,000 3.0 2.0 -- 105,000 2.0
All directors and executive
officers as a group (4
persons).................. 3,360,000 96.0% 59.0% 330,000 3,030,000 53.0%
</TABLE>

- ---------------
(1) The address of each of the beneficial owners identified is 6200 Courtney
Campbell Causeway, Suite 690, Tampa FL. 33607. See "Management -- Executive
Officers and Directors," "Management -- Employment Agreements" and "Certain
Transactions" for discussion of any material relationship which certain of
the Selling Stockholders have had with the Company within the past three
years.

(2) Based on 3,500,000 shares of Common Stock outstanding prior to the Offering
and 5,700,000 shares of Common Stock to be outstanding immediately after the
Offering. Pursuant to the rules of the Securities and Exchange Commission
(the "Commission"), certain shares of Common Stock which a person has the
right to acquire within 60 days of the date hereof pursuant to the exercise
of stock options are deemed to be outstanding for the purpose of computing
the percentage ownership of such person but are not deemed outstanding for
the purpose of computing the percentage ownership of any other person.

(3) Shares are owned by the Diasti Nevada Family Limited Partnership (the
"Diasti Family Partnership") in which Dr. Terek Diasti, Dr. Adam Diasti and
Tim Diasti exercise equal investment and voting powers as the general
partners.

(4) Includes 2,925,500 shares owned by the Diasti Family Partnership, over which
Dr. Terek Diasti, Dr. Adam Diasti, and Tim Diasti share voting control.

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<PAGE> 55

DESCRIPTION OF CAPITAL STOCK

GENERAL

The Company is authorized to issue 50,000,000 shares of Common Stock, $.001
par value per share, and 2,000,000 shares of preferred stock, $.001 par value
per share (the "Preferred Stock"). At January 1, 1997, 3,500,000 shares of
Common Stock were issued and outstanding and no shares of Preferred Stock were
outstanding.

COMMON STOCK

Holders of shares of Common Stock are entitled to one vote per share on all
matters to be voted upon by the stockholders. Subject to the prior rights of the
holders of Preferred Stock, holders of Common Stock are entitled to receive
dividends when, as and if declared by the Board of Directors from funds legally
available therefor, and to share ratably in the assets of the Company legally
available for distribution to the stockholders in the event of liquidation or
dissolution. The Common Stock has no preemptive rights and no subscription or
redemption privileges. Stockholders of the Company are not entitled to
cumulative voting rights, which means the holder or holders of a majority of the
shares of Common Stock entitled to vote in any election of directors can elect
all of the Directors standing for election. All the outstanding shares of Common
Stock are, and the shares to be issued in the Transaction when issued will be,
fully paid and not liable for further call or assessment. Upon a liquidation of
the Company, holders of Common Stock will be entitled to a pro rata distribution
of the assets of the Company, after payment of all amounts owed to the Company's
creditors, and subject to any preferential amount payable to holders of
Preferred Stock, if any.

PREFERRED STOCK

The Board of Directors is authorized to issue 2,000,000 shares of Preferred
Stock from time to time in one or more series, and to fix the rights,
preferences, privileges and restrictions, including voting rights, of these
shares without any further vote or action by the stockholders. The rights of the
holders of the Common Stock will be subject to, and may be adversely affected
by, the rights of the holders of any Preferred Stock that may be issued in the
future. The issuance of Preferred Stock, while providing desirable flexibility
in connection with possible acquisitions and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire a
majority of the outstanding voting stock of the Company, thereby delaying,
deferring or preventing a change in control of the Company. Furthermore, such
Preferred Stock may have other rights, including economic rights senior to the
Common Stock, and, as a result, the issuance of such Preferred Stock could have
a material adverse effect on the market value of the Common Stock. The Company
has no present plan to issue shares of Preferred Stock.

DIRECTORS' LIABILITY

As authorized by the Delaware General Corporation Law ("DGCL"), the
Restated Certificate of Incorporation of the Company (the "Certificate") limits,
to the fullest extent permitted by Delaware law, the liability of Directors to
the Company for monetary damages. The effect of this provision in the
Certificate is to eliminate the rights of the Company and its stockholders
(through stockholders' derivative suits on behalf of the Company) to recover
monetary damages against Directors for breaches of their fiduciary duties
(including breaches resulting from negligent behavior), except in certain
circumstances involving wrongful acts, such as the breach of a director's duty
of loyalty or acts or omissions which involve intentional misconduct or a
knowing violation of law. Further, the Bylaws contain provisions to indemnify
the Company's Directors and officers to the fullest extent permitted by the
General Corporation Law of Delaware. These provisions do not limit or eliminate
the rights of the Company or any stockholder to seek non-monetary relief such as
an injunction or rescission in the event of a breach of a Director's fiduciary
duty. These provisions will not alter the liability of Directors under federal
securities laws. The Company believes that these provisions will assist the
Company in attracting and retaining qualified individuals to serve as directors.

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<PAGE> 56

CERTAIN PROVISIONS OF DELAWARE LAW

The Company is subject to the provisions of Section 203 of the DGCL.
Section 203 prevents an "interested stockholder" (defined in Section 203,
generally, as a person owning 15% or more of a corporation's outstanding voting
stock) from engaging in a "business combination" (as defined in Section 203)
with a publicly-held Delaware corporation for three years following the date
such person became an interested stockholder unless (i) before such person
became an interested stockholder, the board of directors of the corporation
approved the transaction in which the interested stockholder became an
interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation outstanding at the time the
transaction commenced (excluding stock held by directors who are also officers
of the corporation and by employee stock plans that do not provide employees
with the right to determine confidentially whether shares held subject to the
plan will be tendered in a tender or exchange offer); or (iii) following the
transaction in which such person became an interested stockholder, the business
combination is approved by the board of directors of the corporation and
authorized at a meeting of stockholders by the affirmative vote of the holders
of 66 2/3% of the outstanding voting stock of the corporation not owned by the
interested stockholder. Generally, a "business combination" includes a merger,
asset or stock sale or other transaction resulting in a financial benefit to the
interested stockholder. This provision may have the effect of delaying,
deferring or preventing a change in control of the Company without further
action by the stockholders.

CERTAIN PROVISIONS OF THE COMPANY'S CERTIFICATE AND BYLAWS

Certain provisions of the Certificate of Incorporation (the "Certificate")
and the Bylaws (the "Bylaws") of the Company could have an anti-takeover effect.
These provisions are intended to enhance the likelihood of continuity and
stability in the composition of the Board of Directors of the Company and in the
policies formulated by the Board of Directors and to discourage certain types of
transactions, described below, which may involve an actual or threatened change
of control of the Company. The provisions are designed to reduce the
vulnerability of the Company to an unsolicited proposal for a takeover of the
Company that does not contemplate the acquisition of all of its outstanding
shares or an unsolicited proposal for the restructuring or sale of all or part
of the Company. The provisions are also intended to discourage certain tactics
that may be used in proxy fights. The Board of Directors believes that, as a
general rule, such takeover proposals would not be in the best interests of the
Company and its stockholders.

CERTIFICATE OF INCORPORATION

Classified Board of Directors. The Certificate provides for the Board of
Directors to be divided into three classes of directors serving staggered
three-year terms. As a result, approximately one-third of the Board of Directors
will be elected each year. The Board of Directors believes that a classified
Board of Directors will help to assure the continuity and stability of the Board
of Directors and the business strategies and policies of the Company as
determined by the Board of Directors, because the likelihood of continuity and
stability in the composition of the Company's Board of Directors and in the
policies formulated by the Board will be enhanced by staggered three-year terms.
The classified board provision could have the effect of discouraging a third
party from making a tender offer or otherwise attempting to obtain control of
the Company, even though such an attempt might be beneficial to the Company and
its stockholders. In addition, the classified board provision could delay
stockholders who do not agree with the policies of the Board of Directors from
removing a majority of the Board for two years, unless they can show cause and
obtain the requisite vote. See "Number of Directors; Removal" below.

Special Meetings of Stockholders. The Certificate prohibits the taking of
stockholder action by written consent without a meeting if there are more than
25 stockholders of record. The Certificate provides that special meetings of
stockholders of the Company may be called only by the Chairman, the President or
by a majority of the members of the Board of Directors. Furthermore, if a
proposal requiring stockholder action is made by or on behalf of an Interested
Stockholder (as defined) or a Director affiliated with an Interested Stockholder
or where an Interested Stockholder otherwise seeks action requiring stockholder
approval, the

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<PAGE> 57

affirmative vote of a majority of the Continuing Directors (as defined) will
also be required to call a special meeting of stockholders. This provision will
make it more difficult for stockholders to take action opposed by the Board of
Directors.

Special Voting Requirements for Certain Transactions. The Certificate
provides that (i) any merger or consolidation of the Company or any Subsidiary
(as defined) with (a) any Interested Stockholder or (b) any other corporation
which is, or after such merger or consolidation would be, an Affiliate (as
defined) or Associate (as defined) of an Interested Stockholder, (ii) any sale,
lease or other disposition to or with or on behalf of any Interested Stockholder
or any Affiliate or Associate of any Interested Stockholder of 5% of the book
value of the total assets of the Company or 5% of stockholders' equity, (iii)
certain liquidations or dissolutions of the Company and any proposal to amend
the Certificate made on behalf of an Interested Stockholder or any Affiliate or
Associate of an Interested Stockholder, or (iv) certain reclassifications and
recapitalizations or other transactions that have the effect of increasing an
Interested Stockholder's proportionate share of the Company's capital stock
(collectively "Business Combinations") require, subject to certain exceptions,
the affirmative vote of the holders of at least 66 2/3% of the outstanding
shares of capital stock entitled to vote on matters generally submitted to
stockholders ("Voting Stock") other than the Voting Stock of which an Interested
Stockholder is the beneficial owner. The term "Interested Stockholder" generally
means any person who is a beneficial owner of or has announced a plan to acquire
10% or more of the outstanding Voting Stock and an Affiliate or Associate which,
at any time within the two-year period prior to the date in question, was the
beneficial owner of 10% or more of the outstanding Voting Stock.

The above requirements generally do not apply to a Business Combination
approved by a disinterested majority of the Continuing Directors if certain
other requirements are met. Such other requirements are designed to provide an
incentive to an Interested Stockholder to treat the stockholders within a class
equally, to discourage discriminatory two-tiered transactions and to encourage
an Interested Stockholder to furnish timely information regarding such Business
Combination.

Amendment of Certain Provisions of the Certificate. The Certificate
generally requires the affirmative vote of the holders of at least 80% of the
outstanding Voting Stock in order to amend its provisions, including any
provisions concerning (i) the classified board, (ii) the amendment of the
Bylaws, (iii) any proposed compromise or arrangement between the Company and its
creditors, (iv) the authority of stockholders to act by written consent, (v) the
liability of Directors, (vi) the calling of special meetings of the
stockholders, and (vii) the supermajority voting requirements described in this
paragraph. These voting requirements will make it more difficult for
stockholders to make changes in the Certificate which would be designed to
facilitate the exercise of control over the Company. In addition, the
requirement for approval by at least an 80% stockholder vote will enable the
holders of a minority of the voting securities of the Company to prevent the
holders of a majority or more of such securities from amending such provisions
of the Certificate.

Number of Directors; Removal. The Certificate provides that the Board of
Directors will consist of between two and 15 members, the exact number to be
fixed from time to time by resolution adopted by a majority of the Directors
then in office. Subject to the rights of the holders of any series of Preferred
Stock then outstanding, the Certificate provides that Directors of the Company
may be removed only for cause and only by the affirmative vote of holders of a
majority of the outstanding shares of Voting Stock. Additionally, if the
proposal to remove a Director is made by or on behalf of an Interested
Stockholder or a Director affiliated with an Interested Stockholder, removal
will also require the affirmative vote of holders of a majority of Disinterested
Shares (as defined). These provisions will preclude a stockholder from removing
incumbent directors without cause and simultaneously gaining control of the
Board of Directors by filling the vacancies created by such removal with its own
nominees.

BYLAWS

Advance Notice Requirements for Stockholder Proposals and Director
Nominations. The Bylaws establish an advance notice procedure for the
nomination, other than by or at the direction of the Board of Directors or a
committee thereof, of candidates for election as Director as well as for other
stockholder proposals to be considered at stockholders' meetings.

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<PAGE> 58

Notice of stockholder proposals and director nominations must be timely
given in writing to the Secretary of the Company prior to the meeting at which
the matters are to be acted upon or the Directors are to be elected. To be
timely, notice must be received at the principal executive offices of the
Company not less than 60 nor more than 90 days prior to the meeting of
stockholders; provided, however, that in the event that less than 70 days'
notice or prior public disclosure of the date of the meeting is given or made to
the stockholders, notice by the stockholder in order to be timely must be so
received not later than the close of business on the tenth day following the day
on which such notice of the date of the meeting was mailed or public disclosure
of the date of the meeting was made, whichever first occurs.

A stockholders' notice to the Secretary with respect to a stockholder
proposal, shall set forth as to each matter the stockholder proposes to bring
before the meeting (i) a brief description of the business desired to be brought
before the meeting, (ii) the reasons for conducting such business at the
meeting, (iii) the name and record address of the stockholder proposing such
business, (iv) the class or series and number of shares of the Company which are
owned beneficially or of record by such stockholder, (v) a description of all
arrangements or understandings between such stockholder and any other person or
persons (including their names) in connection with the proposal of such business
by such stockholder and any material interest of such stockholder in such
business, and (vi) a representation that such stockholder intends to appear in
person or by proxy at the annual meeting to bring such business before the
meeting, A stockholders' notice to the Secretary with respect to a Director
nomination, shall set forth (i) certain information about the nominee, (ii) the
consent of the nominee to serve as a Director if elected, (iii) the name and
record address of the nominating stockholder, (iv) the class or series and
number of shares of the Company which are beneficially owned by such
stockholder, (v) a description of all arrangements or understandings between
such stockholder and each proposed nominee and any other person pursuant to
which the nominations are to be made, (vi) a representation that such
stockholder intends to appear in person or by proxy at the meeting to nominate
the persons named, and (vii) certain other information.

The purpose of requiring advance notice is to afford the Board of Directors
an opportunity to consider the qualifications of the proposed nominees or the
merits of other stockholder proposals and, to the extent deemed necessary or
desirable by the Board of Directors, to inform stockholders about those matters.

Amendment to Bylaw Provisions. The Certificate provides that the Bylaws
are subject to adoption, amendment, repeal or rescission either by (a) a
majority of the authorized number of Directors and, if one or more Interested
Stockholders exists, by a majority of the Directors who are Continuing Directors
or (b) the affirmative vote of the holders of not less than 80% of the
outstanding shares of Voting Stock and, if such adoption, amendment, repeal or
rescission is proposed by or on behalf of an Interested Stockholder or a
Director affiliated with an Interested Stockholder, by a majority of the
Disinterested Shares. These provisions will make it more difficult for
stockholders to make changes in the Bylaws. The 80% vote will allow the holders
of a minority of the voting securities to prevent the holders of a majority or
more of voting securities from amending the Bylaws.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.

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SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of the Offering, the Company will have 5,700,000 shares of
Common Stock outstanding. Of these shares, the 2,200,000 shares offered hereby
and an additional 105,000 shares will be freely tradeable without restriction or
further registration under the Securities Act of 1993, as amended (the
"Securities Act") unless purchased by "affiliates" of the Company as that term
is defined in Rule 144 under the Securities Act. The remaining 3,395,000 shares
outstanding are "Restricted Securities" as that term is defined in Rule 144 and
fall into three categories: (i) 3,255,000 shares held by "affiliates" whom have
already held their shares for more than two years, (ii) 105,000 shares held by
affiliates whom have not held their shares for more than two years and (iii)
35,000 shares held by non-affiliates whom have not held their shares for more
than two years. In addition, 900,000 shares of Common Stock are reserved under
the Plans for exercise of stock options granted by the Company, of which options
to purchase approximately 186,000 shares have been granted (the "Option
Shares").

The Restricted Securities may not be sold unless they are registered under
the Securities Act or are sold pursuant to an exemption from registration, such
as the exemption provided by Rule 144. Rule 144 imposes certain restrictions and
limitations on resale. In general, under Rule 144 as currently in effect, any
affiliate of the Company or any person (or persons whose shares are aggregated
in accordance with the Rule), who has beneficially owned Restricted Securities
for at least two years would be entitled to sell, within any three-month period
a number of such shares that does not exceed the greater of 1% of the then
outstanding shares of Common Stock (approximately 57,000 shares after the
Offering), or the reported average weekly trading volume of the Common Stock on
the Nasdaq National Market during the four calendar weeks preceding the date on
which notice of the sale is filed with the Commission. Sales under Rule 144 are
also subject to certain manner of sale restrictions and notice requirements and
to the availability of current public information concerning the Company. A
person (or persons whose shares are aggregated) who is not an "affiliate" of the
Company at any time during the 90 days preceding a sale, and who has
beneficially owned such shares for at least three years, is currently entitled
to sell such shares under Rule 144(k) without regard to the availability of
current public information, volume limitations, manner of sales provisions or
notice requirements. Beginning 90 days after the date of this Prospectus,
3,255,000 Restricted Shares held by affiliates will be eligible for sale in the
public market pursuant to Rule 144, but are subject to certain "lock-up"
agreements described below. Beginning on April 1, 1998, 35,000 Restricted Shares
held by non-affiliates will be eligible for sale on the public market pursuant
to Rule 144 and beginning on May 13, 1998, 105,000 Restricted Shares held by an
affiliate will be eligible for sale pursuant to Rule 144.

The Company and its officers and directors, including affiliates holding
3,255,000 Restricted Shares, have entered into lock-up agreements providing that
they will not, directly or indirectly, offer, sell, offer to sell, contract to
sell, pledge, grant any option to purchase or otherwise sell or dispose (or
announce any offer, sale, offer of sale, contract of sale, pledge, grant of any
option to purchase or other sale or disposition) of any shares of Common Stock
or any other securities convertible into, or exercisable or exchangeable for,
Common Stock or other capital stock of the Company or any right to purchase or
acquire Common Stock or other capital stock of the Company, for a period of 180
days after the date of this Prospectus, without the prior written consent of
Prudential Securities Incorporated, on behalf of the Underwriters, except for
bona fide gifts or transfers effected by such stockholders other than on any
securities exchange or in the over-the-counter market to donees or transferees
that agree to be bound by similar agreements.

The Option Shares are subject to all the limitations on resale imposed by
Rule 701. In general, shares subject to Rule 701 are subject to the resale
restrictions of Rule 144. However, with respect to resales by non-affiliates, 90
days after the date of this Prospectus, the Option Shares may be resold without
conformance with Rule 144 except for its manner of sale limitation. With respect
to resale of Option Shares by affiliates, 90 days after the date of this
Prospectus, all Rule 144 limitations continue to apply except the two-year
holding period. Additionally, the Company intends to file one or more
registration statements under the Securities Act to register all shares of
Common Stock subject to then outstanding stock options and Common Stock issuable
pursuant to the Plans. The Company expects to file these registration statements
promptly following the closing of the Offering, and such registration statements
are expected to become effective upon filing. Shares

58
<PAGE> 60

covered by these registration statements will thereupon be eligible for sale in
the public markets, subject to lock-up agreements, to the extent applicable. See
"Management."

Because there has been no public market for the shares of Common Stock of
the Company, the Company is unable to predict the effect, if any, that future
sales of shares, or the availability of shares for future sale, will have on the
market price for the Common Stock prevailing from time to time. Sales of
substantial amounts of Common Stock, or the perception that such sale could
occur, could adversely affect market prices for the Common Stock and could
impair the Company's future ability to obtain capital through offerings of
equity securities.

59
<PAGE> 61

UNDERWRITING

The Underwriters named below (the "Underwriters"), for whom Prudential
Securities Incorporated and Raymond James & Associates, Inc. are acting as
representatives (the "Representatives"), have severally agreed, subject to the
terms and conditions contained in the Underwriting Agreement, to purchase from
the Company the number of shares of Common Stock set forth below opposite their
respective names:

<TABLE>
<CAPTION>
NUMBER
UNDERWRITER OF SHARES
----------- ---------
<S> <C>
Prudential Securities Incorporated..........................
Raymond James & Associates, Inc.............................
---------
Total............................................. 2,200,000
=========
</TABLE>

The Company and the Selling Stockholders are obligated to sell, and the
Underwriters are obligated to purchase, all the shares of Common Stock offered
hereby if any are purchased.

The Underwriters, through their Representatives, have advised the Company
and the Selling Stockholders that they propose to offer the Common Stock
initially at the public offering price set forth on the cover page of this
Prospectus; that the Underwriters may allow to selected dealers a concession of
$ per share; and that such dealers may reallow a concession of
$ per share to certain other dealers. After the initial public
offering, the offering price and the concessions may be changed by the
Representatives.

The Selling Stockholders have granted the Underwriters options, exercisable
for 30 days from the date of this Prospectus, to purchase, in the aggregate, up
to 330,000 additional shares of Common Stock at the initial public offering
price, less underwriting discounts and commissions, as set forth on the cover
page of this Prospectus. The Underwriters may exercise such options solely for
the purpose of covering over-allotments incurred in the sale of the shares of
Common Stock offered hereby. To the extent such options are exercised, each
Underwriter will become obligated, subject to certain conditions, to purchase
approximately the same percentage of such additional shares as the number set
forth next to such Underwriter's name in the preceding table bears to 2,200,000.

The Company's officers and directors, who in the aggregate will
beneficially own approximately 3,030,000 shares of Common Stock upon the
completion of the Offering (assuming the Underwriters' over-allotment options
are exercised in full) and the Company and certain other stockholders of the
Company, have agreed not to, directly or indirectly, offer, sell, offer to sell,
contract to sell, pledge, grant any option to purchase or otherwise sell or
dispose (or announce any offer, sale, offer of sale, contract of sale, pledge,
grant of any option to purchase or other sale or disposition) of any shares of
Common Stock or other capital stock or any securities convertible into, or
exercisable or exchangeable for, any share of Common Stock or other capital
stock of the Company or any right to purchase or acquire Common Stock or other
capital stock of the Company, for a period of 180 days after the date of this
Prospectus without the prior written consent of Prudential Securities
Incorporated, on behalf of the Underwriters, other than pursuant to the exercise
of currently outstanding stock options and except for bona fide gifts or
transfers effected by such stockholders other than on any securities exchange or
in the over-the-counter market to donees or transferees that agree to execute
and be bound by such agreements.

The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters or contribute to losses arising out of certain liabilities,
including liabilities under the Securities Act.

The Representatives have informed the Company and the Selling Stockholders
that the Underwriters do not intend to confirm sales to any accounts over which
they exercise discretionary authority.

Prior to the Offering, there has been no public market for the Common Stock
of the Company. Consequently, the initial public offering price for the Common
Stock will be determined through negotiations

60
<PAGE> 62

among the Company and the Representatives. Among the factors to be considered in
making such determination will be prevailing market conditions, the Company's
financial and operating history and condition, its prospects and the prospects
of the industry in general, the management of the Company, and the market prices
of securities for companies in businesses similar to that of the Company.

LEGAL MATTERS

Certain legal matters in connection with the sale of the shares of Common
Stock offered hereby will be passed upon for the Company by Shumaker, Loop &
Kendrick, LLP, Tampa, Florida, and for the Underwriters by King & Spalding,
Atlanta, Georgia. A partner in the law firm of Shumaker, Loop & Kendrick, LLP
owns 105,000 shares of Common Stock and other members of the firm will own
approximately 30,000 additional shares after the offering.

EXPERTS

The Company's financial statements as of December 31, 1994 and 1995 and
September 30, 1996 and for each of the three years in the period ended December
31, 1995 and for the nine months ended September 30, 1996, included in this
Prospectus have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein and are so included in reliance upon the
report of such firm given upon their authority as experts in auditing and
accounting. During May 1996 the Company's Board of Directors approved of a
change in accountants and the Company's former accountants were dismissed. The
independent accounting firm of Deloitte & Touche LLP was engaged by the Company
on June 18, 1996. The former accountant's report on the financial statements for
the years ended December 31, 1995 and 1994 did not contain an adverse opinion,
disclaimer opinion, and was not qualified or modified as to uncertainty, audit
scope, or accounting principles. In addition, there were no disagreements
between the Company and its former accountants on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure during the two most recent fiscal years ended December 31, 1995 and
1994 and any subsequent interim period preceding such dismissal.

The combined financial statements of Richard J. Shawn DMD, P.A. for each of
the three years in the period ended January 31, 1996 and for the two months
ended March 31, 1996, and the combined balance sheet of Seminole Dental Center,
Seminole Dental South, Seminole Dental West and Seminole Dental Services, Inc.
("Seminole Dental Center") as of December 31, 1995 and September 30, 1996, and
the related combined statements of operations and partners' and shareholders'
equity, and of cash flows for the nine months then ended, and for the years
ended December 31, 1994 and 1995, included in this Prospectus have been audited
by Deloitte & Touche LLP, independent auditors, as stated in their reports
appearing herein and are so included in reliance upon the reports of such firm
given upon their authority as experts in auditing and accounting.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1, including amendments thereto, under the Securities Act with respect to the
Common Stock offered hereby. This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement and related exhibits and schedules for further
information with respect to the Company and the Common Stock offered hereby. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and in each such instance reference is made to the copy of
such document filed as an exhibit to the Registration Statement. Each such
statement is qualified in its entirety by such reference. The Registration
Statement and the exhibits and schedules forming a part thereof can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, DC 20549, and should also be
available for inspection and copying at the following regional offices of the
Commission: 7 World Trade Center, Suite 1300, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material can be obtained from the Public
Reference Section of the Commission,

61
<PAGE> 63

450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. The
Registration Statement may also be obtained through the Commission's Internet
address at "http://www.sec.gov".

The Company intends to furnish to its stockholders annual reports,
containing audited financial statements and a report thereon by the Company's
independent public accountants, and quarterly reports for the first three fiscal
quarters of each fiscal year, containing certain unaudited interim financial
information.

62
<PAGE> 64

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<S> <C>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION OF COAST DENTAL
SERVICES, INC.
Basis of Presentation....................................... F-2
Pro Forma Combined Balance Sheet -- September 30, 1996
(Unaudited)............................................... F-3
Pro Forma Combined Statements of Income -- Nine Months Ended
September 30, 1996 (Unaudited)............................ F-4
Pro Forma Combined Statements of Income -- Year Ended
December 31, 1995 (Unaudited)............................. F-4
Notes to Pro Forma Combined Financial Information
(Unaudited)............................................... F-5
FINANCIAL STATEMENTS OF COAST DENTAL SERVICES, INC.
Independent Auditors' Report................................ F-7
Balance Sheets -- December 31, 1994 and 1995 and September
30, 1996.................................................. F-8
Statements of Operations -- Years Ended December 31, 1993,
1994 and 1995 and Nine Months Ended September 30, 1995
(Unaudited) and 1996...................................... F-9
Statements of Stockholders' Equity -- Years Ended December
31, 1993, 1994 and 1995 and Nine Months Ended September
30, 1996.................................................. F-10
Statements of Cash Flows -- Years Ended December 31, 1993,
1994 and 1995 and Nine Months Ended September 30, 1995
(Unaudited) and 1996...................................... F-11
Notes to Financial Statements............................... F-12
FINANCIAL STATEMENTS OF RICHARD J. SHAWN DMD, P.A.
Independent Auditors' Report................................ F-22
Combined Statements of Operations -- Years Ended January 31,
1994, 1995, 1996 and Two Months Ended March 31, 1996...... F-23
Combined Statements of Cash Flows -- Years Ended January 31,
1994, 1995, 1996 and Two Months Ended March 31, 1996...... F-24
Notes to Combined Financial Statements...................... F-25
FINANCIAL STATEMENTS OF SEMINOLE DENTAL CENTER
Independent Auditors' Report................................ F-26
Combined Balance Sheets -- December 31, 1995 and September
30, 1996.................................................. F-27
Combined Statements of Operations and Partners' and
Shareholders' Equity -- For the Years Ended December 31,
1994 and December 31, 1995 and for the Nine Months Ended
September 30, 1996........................................ F-28
Combined Statements of Cash Flows -- For the Years Ended
December 31, 1994 and December 31, 1995 and for the Nine
Months Ended September 30, 1996........................... F-29
Notes to Combined Financial Statements...................... F-30
</TABLE>

F-1
<PAGE> 65

COAST DENTAL SERVICES, INC.

BASIS OF PRESENTATION
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION

The unaudited Pro Forma Combined Statement of Income for the year ended
December 31, 1995 and the nine months ended September 30, 1996 give effect to
the following, as if each had occurred on January 1, 1995: (i) the Recent
Acquisitions, including the Company's entering into a new Services and Support
Agreement with the Coast Florida P.A., and (ii) the sale of 2,200,000 shares of
Common Stock in the Offering at an assumed initial public offering price of
$9.00 per share and the application of the estimated net proceeds therefrom, as
described under "Use of Proceeds." The unaudited Pro Forma Combined Balance
Sheet as of September 30, 1996 gives effect to the following, as if each had
occurred at that date: (i) the acquisition of three dental offices in November
1996, (ii) the acquisition of three dental offices in December 1996, (iii) the S
Corporation Distribution (as described in note 2 to the audited financial
statements); and (iv) the consummation of the Offering and the application of
the estimated net proceeds therefrom, as described under "Use of Proceeds." The
Recent Acquisitions have been accounted for using the purchase method of
accounting, so that the Company's historical statement of operations data
include results of operations of the acquired Dental Centers from their
respective acquisition dates.

The unaudited Pro Forma Combined Financial Information has been prepared by
the Company based on the Company's audited Statements of Operations for the year
ended December 31, 1995 and the nine months ended September 30, 1996, and the
Company's audited Balance Sheets as of September 30, 1996, and the financial
statements of the entities involved in the Recent Acquisitions. The audited
historical financial statements of Richard J. Shawn DMD, P.A., the seller of the
assets in the Volusia Acquisition, and the audited financial statements of
Seminole Dental Center, the seller of assets in the Seminole Acquisition are
included elsewhere in this Prospectus. The Pro Forma Combined Financial
Information should be read in conjunction with the complete historical Financial
Statements of the Company and the notes thereto and the historical financial
statements of Richard J. Shawn DMD, P.A. and Seminole Dental Center and the
notes thereto included elsewhere in this Prospectus. The Pro Forma Combined
Financial Information does not purport to be indicative of the combined results
of operations that actually would have occurred if the transactions described
above had been effected at the dates indicated or to project future results of
operations for any period.

F-2
<PAGE> 66

COAST DENTAL SERVICES, INC.

UNAUDITED PRO FORMA COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
--------------------------------------------------------------------------
PRO FORMA
COMBINED
HISTORICAL RECENT PRO FORMA OFFERING AFTER
COMPANY ACQUISITIONS COMBINED ADJUSTMENTS OFFERING
---------- ------------ --------- ----------- ----------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents...................... $ 572 $ 572 $ (338)(B) $
13,720 (C) 13,606
(348)(C)
Accounts receivable, net....................... 531 531 531
Other current assets........................... 305 305 305
------ ------- ------- --------
Total current assets.................... 1,408 1,408 13,034 14,442
------ ------ ------- ------- --------
Property and equipment, net.................... 1,301 $ 374(A) 1,675 1,675
Intangible assets.............................. 1,363 1,826(A) 3,189 3,189
Offering costs................................. 351 351 (351)(C)
Other assets................................... 216 216 (172)(B) 44
------ ------ ------- ------- --------
Total assets............................ $4,639 $2,200 $ 6,839 $12,511 $ 19,350
====== ====== ======= ======= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses.......... $ 702 $ 702 $ 702
Accrued offering costs......................... 348 348 (348)(C)
Current maturities of long-term debt and
capital lease obligations.................... 540 $ 44(A) 584 $ (584)(C)
------ ------ ------- ------- --------
Total current liabilities............... 1,590 44 1,634 (932) 702
Long-term debt and capital lease obligations..... 1,994 2,156(A) 4,150 (3,647)(C) 503
------ ------ ------- ------- --------
Total liabilities....................... 3,584 2,200 5,784 (4,579) 1,205
------ ------ ------- ------- --------
STOCKHOLDERS' EQUITY:
Common stock................................... 3 3 2 (C) 5
Additional paid-in capital..................... 25 25 517 (B) 18,140
17,598 (C)
Retained earnings.............................. 1,027 1,027 (1,027)(B)
------ ------- ------- --------
Total stockholders' equity.............. 1,055 1,055 17,090 18,145
------ ------ ------- ------- --------
Total................................... $4,639 $2,200 $ 6,839 $12,511 $ 19,350
====== ====== ======= ======= ========
</TABLE>

See accompanying notes to unaudited pro forma combined financial information.

F-3
<PAGE> 67

COAST DENTAL SERVICES, INC.

UNAUDITED PRO FORMA COMBINED STATEMENTS OF INCOME

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30, 1996
-------------------------------------------------------------------------------------------
PRO FORMA
COMBINED
HISTORICAL RECENT ACQUISITION PRO FORMA OFFERING AFTER
COMPANY ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS OFFERING
---------- ------------ ----------- ---------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net revenue........................ $5,342 $4,587 $ 198 (D) $ 8,813 $ 8,813
(1,314)(E)
Dental Center expenses:
Dentist and hygienist salaries... 1,314 (1,314)(E)
Staff salaries................... 1,520 1,163 2,683 2,683
Dental supplies and lab fees..... 742 435 1,177 1,177
Advertising...................... 448 174 622 622
Rent............................. 524 334 858 858
Depreciation and other........... 283 408 691 691
------ ------ ------- ---------- ----------
Total Dental Center expenses:...... 3,517 3,828 (1,314) 6,031 6,031
------ ------ ------- ---------- ----------
Gross profit....................... 1,825 759 198 2,782 2,782
------ ------ ------- ---------- ----------
General and administrative
expenses......................... 634 232 866 866
Depreciation and amortization...... 84 3 103 (F) 190 190
------ ------ ------- ---------- ----------
Operating income................... 1,107 524 95 1,726 1,726
Interest expense -- net.......... 113 4 200 (G) 317 $ (234)(H) 83
------ ------ ------- ---------- ------- ----------
Income before income taxes......... 994 520 (105) 1,409 234 1,643
Pro Forma income tax (expense)
benefit........................ (388) (203) 41 (I) (550) (91)(I) (641)
------ ------ ------- ---------- ------- ----------
Pro Forma net income............... $ 606 $ 317 $ (64) $ 859 $ 143 $ 1,002
====== ====== ======= ========== ======= ==========
Pro Forma earnings per share....... .25 .25(J)
========== ==========
Pro Forma weighted average shares
outstanding...................... 3,500,000 3,970,111
========== ==========
</TABLE>

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------------------------------------
PRO FORMA
COMBINED
HISTORICAL RECENT ACQUISITION PRO FORMA OFFERING AFTER
COMPANY ACQUISITIONS ADJUSTMENTS COMBINED ADJUSTMENTS OFFERING
---------- ------------ ----------- ---------- ----------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
Net revenue........................ $3,325 $8,766 $ 456 (D) $ 9,916 $ 9,916
(2,631)(E)
Dental Center expenses:
Dentist and hygienist salaries... -- 2,631 (2,631)(E)
Staff salaries................... 863 2,139 -- 3,002 3,002
Dental supplies and lab fees..... 557 840 -- 1,397 1,397
Advertising...................... 351 475 826 826
Rent............................. 296 696 992 992
Depreciation and other........... 286 1,034 -- 1,320 1,320
------ ------ ------- ---------- ----------
Total Dental Center expenses:...... 2,353 7,815 (2,631) 7,537 7,537
------ ------ ------- ---------- ----------
Gross profit....................... 972 951 456 2,379 2,379
------ ------ ------- ---------- ----------
General and administrative
expenses......................... 682 581 1,263 1,263
Depreciation and amortization...... 15 18 208 (F) 241 241
------ ------ ------- ---------- ----------
Operating income................... 275 352 248 875 875
Interest expense -- net.......... 50 23 364 (G) 437 $ (322)(H) 115
------ ------ ------- ---------- ------- ----------
Income before income taxes......... 225 329 (116) 438 322 760
Pro Forma income tax (expense)
benefit.......................... (90) (132) 46 (I) (176) (128)(I) (304)
------ ------ ------- ---------- ------- ----------
Pro Forma net income............... $ 135 $ 197 $ (70) $ 262 $ 194 $ 456
====== ====== ======= ========== ======= ==========
Pro Forma earnings per share....... .07 .11(J)
========== ==========
Pro Forma weighted average shares
outstanding...................... 3,500,000 3,970,111
========== ==========
</TABLE>

See accompanying notes to unaudited pro forma combined financial information.

F-4
<PAGE> 68

NOTES TO UNAUDITED PRO FORMA COMBINED INFORMATION

The accompanying pro forma combined information presents the pro forma
financial position of Coast Dental Services, Inc. as of September 30, 1996 and
the pro forma results of its operations for the year ended December 31, 1995 and
the nine months ended September 30, 1996.

From January 1, 1996 through September 30, 1996, the Company acquired
eleven Dental Centers, consisting of a single dental office on January 18, 1996,
seven dental offices in Volusia and Flager Counties, Florida on April 1, 1996
(the "Volusia Acquisition") and three separate acquisitions of single Dental
Centers on September 30, 1996. Since September 30, 1996, the Company has
acquired three Dental Centers in Orlando, Florida in the Seminole Acquisition
and three separate acquisitions of single Dental Centers in Gainesville,
Kissimmee and Orlando. The accompanying pro forma combined balance sheet
includes the acquired assets, assumed liabilities and effects of financing of
the six Dental Centers acquired since September 30, 1996, as if they had been
acquired on September 30, 1996. The accompanying pro forma combined statements
of operations reflect the pro forma results of operations of the Company, as
adjusted, as if the 17 acquired Dental Centers (the "Recent Acquisitions") had
been acquired on January 1, 1995.

PRO FORMA COMBINED BALANCE SHEET

The pro forma adjustments reflected in the pro forma combined balance sheet
are as follows:

(A) Reflects the six Dental Centers acquired after September 30, 1996.
The six Dental Centers were acquired at a total cost of $2,200,000 of which
$374,000 has been allocated to the property and equipment acquired and
$1,826,000 to the intangible assets. The purchase of the six Dental Centers
was financed entirely with a combination of bank and seller financing. See
Note 12 of the Notes to the historical Financial Statements of the Company.

(B) Reflects the planned distribution to existing shareholders of the
Company of 34% of the S Corporation earnings and the forgiveness of the
notes receivable from existing shareholders of $338,000 and $172,000,
respectively. The remaining undistributed S Corporation retained earnings
of $517,000 are reclassified as additional paid-in capital. See Note 2 of
the Notes to the historical Financial Statements of the Company.

(C) Reflects the net proceeds from the sale of 2,200,000 shares of
Common Stock in the Offering at $9 per share, estimated to be approximately
$17.6 million (after deducting underwriting discounts and commissions and
estimated offering expenses) and the repayment of (i) $1.27 million of
notes payable to banks, (ii) notes payable to sellers from all of the
acquisitions completed during 1996 of $2.75 million, (iii) various
equipment financing debts of $220,000 and (iv) accrued offering costs of
$348,000. See "Use of Proceeds."

PRO FORMA COMBINED STATEMENTS OF INCOME

The pro forma adjustments reflected in the pro forma combined statements of
income are as follows:

(D) To reflect the impact of applying the percentage management fee of
76% to the historical gross revenue of each dental practice in accordance
with the services and support agreement entered into between the Company
and the Coast Florida P.A. as of October 1, 1996, as if that services and
support agreement was in place at the beginning of the periods presented.

(E) To reflect the reclassification of historical dentists and
hygienists salaries as a reduction from net revenue of the Company.

(F) To reflect the increased amortization amounts for the noncompete
agreements of $1,145,000 over 9 years and dental service agreements of
$2,024,300 over 25 years.

F-5
<PAGE> 69

(G) To reflect the increased interest expense for both the notes
payable to banks and notes payable issued to sellers to complete all the
1996 acquisitions.

(H) To reflect the savings on interest expense due to the repayment of
debt, discussed in note (C) above.

(I) To reflect the estimated income tax effect of the pro forma
adjustments (D) through (H) utilizing a 39% combined federal and state
rate.

(J) To reflect the pro forma earnings per share assuming an increase
in the weighted average number of outstanding shares to the extent
necessary to repay the existing indebtedness as shown in pro forma
adjustment (C), representing an increase of 470,111 shares.

F-6
<PAGE> 70

INDEPENDENT AUDITORS' REPORT

Coast Dental Services, Inc.:

We have audited the accompanying balance sheets of Coast Dental Services,
Inc. (the Company) as of December 31, 1994 and 1995, and September 30, 1996 and
the related statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1995 and the nine
months ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Coast Dental Services, Inc.
as of December 31, 1994 and 1995 and September 30, 1996 and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995 and the nine months ended September 30, 1996 in conformity
with generally accepted accounting principles.

Deloitte & Touche LLP
Tampa, Florida

November 12, 1996, except for Note 12 as to
which the date is December 31, 1996

F-7
<PAGE> 71

COAST DENTAL SERVICES, INC.

BALANCE SHEETS

<TABLE>
<CAPTION>
DECEMBER 31, PROFORMA
--------------------- SEPTEMBER 30, SEPTEMBER 30,
1994 1995 1996 1996
-------- ---------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents (including
restricted cash of $23,604 at September 30,
1996)...................................... $121,403 $ 241,403 $ 572,208 $ 234,208
Management fee receivable from P.A............ -- 130,113 530,900 530,900
Notes receivable from Manrique and advances
to P.A..................................... -- -- 211,710 211,710
Supplies...................................... 30,000 41,250 67,500 67,500
Prepaid expenses and other assets............. 11,648 2,786 25,408 25,408
-------- ---------- ---------- ----------
Total current assets.................. 163,051 415,552 1,407,726 1,069,726
Property and equipment, net..................... 585,740 602,070 1,301,009 1,301,009
Notes receivable from stockholders.............. 148,056 125,579 172,168 --
Non-compete agreement -- net of amortization of
$52,778....................................... -- -- 953,472 953,472
Dental service agreement -- net of amortization
of $2,863..................................... -- -- 409,919 409,919
Capitalized offering costs...................... -- -- 351,450 351,450
Other assets.................................... 17,343 54,351 43,879 43,879
-------- ---------- ---------- ----------
Total................................. $914,190 $1,197,552 $ 4,639,623 $ 4,129,455
======== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.............................. $358,604 $ 352,166 $ 385,586 $ 385,586
Accrued offering costs........................ -- -- 347,810 347,810
Accrued payroll............................... 33,793 57,568 138,966 138,966
Other accrued expenses........................ 36,605 5,079 177,168 177,168
Notes payable to banks........................ 150,000 -- -- --
Current maturities of long-term debt.......... 45,829 99,161 463,567 463,567
Current portion of capital lease
obligations................................ 34,081 69,578 76,378 76,378
-------- ---------- ---------- ----------
Total current liabilities............. 658,912 583,552 1,589,475 1,589,475
Long-term debt, excluding current maturities.... 120,868 254,812 1,849,345 1,849,345
Capital lease obligations, excluding current
portion....................................... 184,062 184,529 145,230 145,230
-------- ---------- ---------- ----------
Total liabilities..................... 963,842 1,022,893 3,584,050 3,584,050
-------- ---------- ---------- ----------
Stockholders' equity (deficiency):
Preferred stock, $.001 par value; 2,000,000
shares authorized, none issued.............
Common stock, $.001 par value; 50,000,000
shares authorized, 3,360,000, 3,360,000 and
3,500,000, shares issued and outstanding,
respectively............................... 336 336 3,500 3,500
Additional paid-in capital.................... 664 664 25,174 541,905
Retained earnings (deficit)................... (50,652) 173,659 1,026,899 --
-------- ---------- ---------- ----------
Total stockholders' equity
(deficiency)........................ (49,652) 174,659 1,055,573 545,405
-------- ---------- ---------- ----------
Total................................. $914,190 $1,197,552 $ 4,639,623 $ 4,129,455
======== ========== ========== ==========
</TABLE>

See notes to financial statements.

F-8
<PAGE> 72

COAST DENTAL SERVICES, INC.

STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEARS ENDED DECEMBER 31, SEPTEMBER 30,
------------------------------------ ------------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ----------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenue.......................... $1,194,494 $1,867,765 $3,324,668 $ 2,367,586 $5,341,815
Dental Center expenses:
Staff salaries..................... 290,652 445,385 863,142 662,244 1,520,192
Dental supplies and lab fees....... 165,644 385,311 556,574 411,044 741,904
Advertising........................ 155,395 221,071 350,659 285,842 447,586
Rent............................... 140,646 218,017 295,982 243,563 523,583
Depreciation....................... 57,384 106,179 138,213 81,979 122,792
Other.............................. 42,955 56,575 148,506 102,464 160,548
---------- ---------- ---------- ---------- ----------
Total Dental Center expenses......... 852,676 1,432,538 2,353,076 1,787,136 3,516,605
---------- ---------- ---------- ---------- ----------
Gross profit....................... 341,818 435,227 971,592 580,450 1,825,210
General and administrative
expenses........................... 296,062 580,298 681,815 416,846 633,633
Depreciation and amortization........ 10,126 5,043 15,127 14,466 84,301
---------- ---------- ---------- ---------- ----------
Operating income (loss)............ 35,630 (150,114) 274,650 149,138 1,107,276
Interest expense -- net.............. 29,581 31,677 50,339 49,525 112,890
---------- ---------- ---------- ---------- ----------
Income (loss) before income taxes.... 6,049 (181,791) 224,311 99,613 994,386
Pro forma income tax (expense)
benefit............................ (2,420) 72,716 (89,725) (39,845) (387,811)
---------- ---------- ---------- ---------- ----------
Pro forma net income (loss).......... $ 3,629 $ (109,075) $ 134,586 $ 59,768 $ 606,575
========== ========== ========== ========== ==========
Pro forma earnings per share......... $ .04 $ .17
========== ==========
Weighted average number of shares
outstanding........................ 3,500,000 3,500,000
========== ==========
</TABLE>

See notes to financial statements.

F-9
<PAGE> 73

COAST DENTAL SERVICES, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)

<TABLE>
<CAPTION>
TOTAL
COMMON STOCK ADDITIONAL RETAINED STOCKHOLDERS'
------------------ PAID-IN EARNINGS EQUITY
SHARES AMOUNT CAPITAL (DEFICIT) (DEFICIENCY)
--------- ------ ---------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1992............... 3,360,000 $ 336 $ 664 $ 125,090 $ 126,090
Net income................................. -- -- -- 6,049 6,049
--------- ------ ------- ---------- ----------
Balance at December 31, 1993............... 3,360,000 336 664 131,139 132,139
Net loss................................... -- -- -- (181,791) (181,791)
--------- ------ ------- ---------- ----------
Balance at December 31, 1994............... 3,360,000 336 664 (50,652) (49,652)
Net income................................. -- -- -- 224,311 224,311
--------- ------ ------- ---------- ----------
Balance at December 31, 1995............... 3,360,000 336 664 173,659 174,659
Net income................................. -- -- -- 994,386 994,386
Change in par value of stock............... -- 3,150 (3,150) -- --
Issuance of common stock................... 140,000 14 27,660 -- 27,674
Distribution to stockholders............... -- -- -- (141,146) (141,146)
--------- ------ ------- ---------- ----------
Balance at September 30, 1996.............. 3,500,000 $3,500 $ 25,174 $1,026,899 $ 1,055,573
========= ====== ======= ========== ==========
</TABLE>

See notes to financial statements.

F-10
<PAGE> 74

COAST DENTAL SERVICES, INC.

STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER
YEARS ENDED DECEMBER 31, 30,
--------------------------------- ---------------------------
1993 1994 1995 1995 1996
--------- --------- --------- ----------- -----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Cash Flows From Operating Activities:
Net income (loss).......................... $ 6,049 $(181,791) $ 224,311 $ 99,612 $ 994,386
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities:
Depreciation............................. 67,510 111,222 153,341 96,445 151,452
Amortization of noncompete and dental
service agreements..................... -- -- -- -- 55,640
Compensation in the form of common
stock.................................. -- -- -- -- 27,674
Changes in operating assets and
liabilities:
Increase in management fee receivable
from P.A............................ (5,465) (13,142) (130,113) (116,899) (400,787)
Increase in notes receivables from
Manrique and advances to P.A........ -- -- -- -- (211,710)
(Increase) decrease in prepaids and
other assets........................ -- (11,648) 8,862 (10,964) (22,622)
Increase in supplies................... (8,000) (15,000) (11,250) (7,500) (26,250)
Increase (decrease) in accounts payable
and accrued expenses................ 137,316 245,417 (14,189) (15,890) 634,717
--------- --------- --------- --------- -----------
Net cash provided by operating
activities........................ 197,410 135,058 230,962 44,804 1,202,500
--------- --------- --------- --------- -----------
Cash Flows From Investing Activities:
Purchases of property and equipment........ (173,135) (192,155) (119,770) (58,958) (85,454)
Acquired assets, including intangible
assets of $1,363,391..................... -- -- -- -- (2,517,488)
(Increase) decrease in other assets........ (2,088) (7,572) (37,008) (1,858) 10,472
--------- --------- --------- --------- -----------
Net cash used in investing
activities........................ (175,223) (199,727) (156,778) (60,816) (2,592,470)
--------- --------- --------- --------- -----------
Cash Flows From Financing Activities:
Proceeds from long-term debt............... 58,058 131,947 231,500 50,000 2,185,541
Principal payments on long-term debt....... (28,071) (68,648) (44,225) (36,279) (226,601)
Proceeds from notes payable................ 35,000 150,000 --
Payments on notes payable.................. -- (35,000) (150,000) -- --
Proceeds from capital leases............... -- -- 8,065
Principal payments on capital leases....... (8,489) (21,993) (24,036) (18,148) (50,430)
(Increase) decrease in notes receivable
stockholders............................. (63,468) (9,051) 24,512 (25,573) (46,589)
Distributions to shareholders.............. -- -- -- -- (141,146)
--------- --------- --------- --------- -----------
Net cash provided by (used in)
financing activities.............. (6,970) 147,255 45,816 (30,000) 1,720,775
--------- --------- --------- --------- -----------
Net increase (decrease) in cash and
cash equivalents.................. 15,217 82,586 120,000 (46,012) 330,805
Cash and cash equivalents at beginning of
period..................................... 23,600 38,817 121,403 121,403 241,403
--------- --------- --------- --------- -----------
Cash and cash equivalents at end of period... $ 38,817 $ 121,403 $ 241,403 $ 75,391 $ 572,208
========= ========= ========= ========= ===========
Supplemental schedule of cash flow
information:
Cash paid for interest..................... $ 27,130 $ 36,307 $ 70,554 $ 49,526 $ 65,300
========= ========= ========= ========= ===========
</TABLE>

Noncash investing and financing activities:

During 1993, 1994, 1995 and September 30, 1996, the Company recorded
approximately $16,000, $134,000, $60,000, and $18,000, respectively, of
capital leases.

See notes to financial statements.

F-11
<PAGE> 75

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED DECEMBER 31, 1995
AND THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995 (UNAUDITED)

1. DESCRIPTION OF BUSINESS

Sunshine Health Services, Inc. was incorporated in August 1992, as a
Florida corporation and subsequently changed its name to Coast Dental, Inc.
Effective March 31, 1996, Coast Dental, Inc. was merged into Coast Dental
Services, Inc. (the "Company"), a Delaware corporation. The Company's sole
business is to provide practice management services to the Coast Florida, P.A.
(the "P.A."), an affiliated company. The Company has entered into a services and
support agreement with the P.A. whereby the Company will provide certain
management support services to the P.A. in return for a fee. The P.A. employs
the dentists and the professional hygienists and provides all of the dental
services to the patients. As of September 30, 1996, the Company operated 22
dental centers in Florida.

The Company provides administrative and technical support for professional
services rendered by the dental professionals under the service agreement and
receives a management fee from the P.A. The Company does not employ dentists and
hygienists, and, accordingly, "Dental Center Staff Salaries" presented on the
face of the Statement of Operations do not include the salaries of dentists and
hygienists. Prior to October 1, 1996 the fee was based on revenues earned by the
P.A. reduced by certain costs incurred by the P.A. and a negotiated return to
the P.A., however, effective October 1, 1996 the fee is equal to seventy six
percent of revenue of the P.A. The costs incurred by the P.A. include primarily
dentists and hygienists salaries and bad debts.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation. The accompanying financial statements have been
prepared on the accrual basis of accounting. The Company does not own any
interests in or control the activities of the P.A. Accordingly, the financial
statements of the P.A. are not consolidated with those of the Company.

In the opinion of the Company, all adjustments necessary for a fair
presentation of the unaudited interim financial statement as of and for the nine
months ended September 30, 1995 have been included. Such adjustments consist
only of normal recurring items. Interim results are not necessarily indicative
of results for a full year.

Cash Equivalents. The Company considers all highly liquid investments with
an original maturity of three months or less to be cash equivalents.

Management Fee Receivable from P.A. Management fee receivable represents
the receivable from the P.A. for management services provided by the Company
(See Note 3.)

Supplies. Supplies are stated at the lower of FIFO cost or market.

Property and Equipment. Property and equipment are stated at cost.
Equipment held under capital leases is stated at the present value of minimum
lease payments at the inception of the related leases. Depreciation of property
and equipment is calculated using the straight-line method over the estimated
useful lives of the assets ranging from 5 to 7 years. Equipment held under
capital leases and leasehold improvements are amortized on a straight-line basis
over the shorter of the lease term or estimated useful life of the assets.

When assets are retired or otherwise disposed of, the costs and related
accumulated depreciation are removed from the accounts. The difference between
the net book value of the assets and proceeds from disposition is recognized as
gain or loss. Routine maintenance and repairs are charged to expenses as
incurred, while costs of improvements and renewals are capitalized.

Non-Compete Agreement. Costs incurred in connection with the non-compete
agreements are being amortized over their estimated life of three to nine years
on a straight line basis. The estimated life of the non-

F-12
<PAGE> 76

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

compete agreement acquired in connection with the Volusia Acquisition (see Note
4) considers not only the contractual term of the non-compete agreement but also
the Company's estimated length of future employment of Dr. Richard J. Shawn.
While the employment agreement may be cancelled by either party at the end of a
one year term, the expected length of employment of Dr. Shawn is based on his
age and the maturity date of the notes payable issued to him in connection with
the Volusia Acquisition.

Dental Service Agreement. Costs of acquisitions in excess of the estimated
fair value of property and equipment and any noncompete agreements is allocated
to the dental service agreement because the Company has effectively acquired the
right to manage the practice and to earn 76% of patient revenues for that
service. The dental service agreement with the P.A. represents the Company's
exclusive right to operate the dental centers during the term of the agreement.
The assigned value of the dental service agreement is amortized using the
straight-line method over its estimated life of twenty five years.

Capitalized Offering Costs. The Company has capitalized all costs related
to the initial public offering. Upon completion of the offering, such costs will
be netted against the proceeds. In the event that the offering is not
successful, the Company will expense these costs.

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

Dependence on the Coast Florida P.A. The Company receives fees for
services provided to the P.A. under a services and support agreement, but does
not employ dentists or control the practices of the Coast Dentists employed by
the P.A. The Company's revenue is dependent on revenue generated by the Coast
Dentists and, therefore, effective and continued performance of the Coast
Dentists during the term of the services and support agreement is essential to
the Company's long term success. The services and support agreement with the
P.A. is for a term of 40 years and may be terminated by the P.A. only for
"cause," which includes a material default by or bankruptcy of the Company. Any
material loss of revenue by the P.A. would have a material adverse effect on the
Company, including the P.A.'s ability to repay its indebtedness to the Company.

Stock-Based Compensation. In October 1995 the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
Accounting for Stock-Based Compensation ("SFAS No. 123"), which is effective for
fiscal years beginning after December 15, 1995. Under SFAS No. 123, the Company
may elect to recognize stock-based compensation expense based on the fair value
of the awards or continue to account for stock-based compensation under
Accounting Principles Board Opinion No. 25 Accounting for Stock Issued to
Employees and disclose in the financial statements the effects of SFAS No. 123
as if the recognition provisions were adopted. The Company has not adopted the
recognition provisions of SFAS No. 123.

Fair Value of Financial Instruments. The estimated fair value of amounts
reported in the financial statements has been determined by using available
market information and appropriate valuation methodologies. The carrying value
of all current assets and current liabilities approximates the fair value
because of their short-term nature. The fair value of long-term debt
approximates its carrying value.

Pro Forma Income Taxes. Upon completion of the public offering, the
Company will terminate its status as an S Corporation and will be subject to
federal income taxes. As such, the financial statements include a pro forma
adjustment for federal income taxes as if the Company had not been treated as an
S Corporation. The effective rate utilized of 39% approximates the combined
statutory federal and state income tax rate.

F-13
<PAGE> 77

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Pro Forma Net Income Per Common Share. The pro forma net income per common
share is based on the weighted average number of common shares outstanding
during each period adjusted for actual shares issued during the period. The
weighted average number of shares outstanding reflects all shares issued within
one year of the initial public offering as if the shares were issued on January
1, 1995.

Pro Forma Balance Sheet. Upon completion of the public offering, the
Company will make a distribution to the existing shareholders which constitutes
approximately 34% of the S corporation earnings, by reducing cash and retained
earnings. Additionally, the Company will forgive, by way of dividend, the notes
receivable from shareholders. The pro forma balance sheet as of September 30,
1996 reflects these distributions totalling $510,168. The remaining
undistributed S Corporation retained earnings of $516,731 are reclassified as
additional paid-in capital. These distributions and reclassification are
collectively referred to as the "S Corporation Distribution."

3. NET REVENUE

Revenue for all dental centers is recorded at established rates reduced by
amounts retained by the P.A. The Company has a 40 year evergreen dental service
agreement with the P.A. whereby the Company receives fees for services provided
to the P.A. Net revenue represents the aggregate fee charged to the P.A. under
the agreement during the year. The fee was based on revenues earned by the P.A.
reduced by certain costs incurred by the P.A. and a negotiated return to the
P.A. The costs incurred by the P.A. include primarily dentists and hygienists
salaries, see Note 1. All arrangements for fees to date have been agreed between
the principal and sole owner of the P.A., Dr. Adam Diasti, (who is also a major
shareholder and the President of the Company) and the Chief Executive Officer of
the Company, Terek Diasti. The factors considered in setting those fees included
the Company's evaluation of the services it provides, the costs incurred by the
Company in connection with providing the services, and the Company's negotiated
return, balanced against the P.A's requirement for a retained amount which
ensured its financial viability, contemplated an anticipated long-term
relationship with the Company and reflected the future business opportunity
related thereto. The following table sets forth for the periods prior to October
1, 1996 the amount of gross Dental Center revenue received by the P.A., the
amounts retained by the P.A., and the management fee earned by the Company:

- ---------------

(1) The amounts set forth are net of bad debt expense for estimated
uncollectible accounts which amounted to $2,000, $1,000, $58,890, $18,823
and $56,346, for each of the three years ended December 31, 1993, 1994 and
1995 and for the nine months ended September 30, 1995 and 1996,
respectively. The Coast Florida P.A. has incurred in the past and currently
incurs, all risks regarding bad debts in connection with its arrangement
with the Company.

F-14
<PAGE> 78

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

(2) In the nine months ended September 30, 1996, the Coast Florida P.A. incurred
interest expense of $13,948.

Only the fees earned by the Company for its services to the Coast Florida
P.A. and the actual expenses of the Company are reflected in the financial
statements of the Company. Neither the Coast Florida P.A. nor any of the amounts
retained by the Coast Florida P.A. are reflected in the financial statements of
the Company. For the period 1993 through September 30, 1996, the services and
support fee paid by the Coast Florida P.A. to the Company varied, but averaged
78.5% of Coast Florida P.A.'s gross revenue for the entire period. The fee was
based on revenues earned by the Coast Florida P.A. reduced by certain costs
incurred by the Coast Florida P.A. and an agreed upon payment to the Coast
Florida P.A. In the event the current fee of 76.0% had been charged by the
Company instead of the previous agreed fee for the years ended 1993, 1994 and
1995, the fees earned by the Company would have been reduced by approximately
$35,000, $128,000, $74,000, respectively, and would have remained approximately
the same for the nine months ended September 30, 1996. Any future changes to the
current Services and Support Agreement and the related 76% fee must be approved
in advance by the independent outside directors of the Company's Audit
Committee.

4. ACQUISITIONS

The Company and the P.A. periodically have jointly entered into asset
purchase agreements with existing dental practices. In all cases, the P.A.
acquires the patient lists and any other professional assets and the Company
acquires certain tangible assets, principally the dental equipment and assumes
certain liabilities such as the lease agreement for the facility. The fair value
of the patient lists is determined based upon general market information
received from an independent dental practice transaction consultant regarding
traditional dental practice acquisitions. In addition to the purchase price
allocations for tangible assets, there are allocations for identifiable
intangible assets and unidentifiable intangible assets. The identifiable
intangible assets allocation relates to non-compete agreements which are
partially allocated to the Company and partially allocated to the P.A. The total
value of the non-compete agreements is based upon arms-length negotiations
between the sellers and the Company and P.A. as buyers. The value of such
acquired identifiable intangible asset is allocated between the P.A. and the
Company. The non-compete protection acquired by the Company typically relates to
agreements between the selling professional association and its dentist(s)
jointly, and the Company, whereby the selling professional association and its
dentist(s) agree not to engage in competition with the Company's practice
management business or utilize any other practice management group, in the
immediate vicinity of the acquired Dental Center; and also relates to the
Company's third party contractual rights refraining the selling professional
association and its dentist(s) from competing with the P.A. within a specified
area surrounding the acquired Dental Office. The amount allocated to the P.A.,
on the other hand, is limited to the value of the P.A.'s right to prohibit the
selling professional association and its dentist(s) from competing in the dental
business within the specified area surrounding the acquired Dental Office. That
portion of the amount of the purchase price attributable to such non-compete
agreements in acquisitions has historically been allocated on average, 77% to
the Company, and 23% to the P.A. In the future, the Company policy is that the
allocation for the purchase price attributable to the non-compete agreements,
unless unique circumstances dictate otherwise, will be approximately 76% and 24%
to the Company and P.A., respectively. The historical allocation to the Company
is larger because in an early acquisition unique circumstances existed which
justified a greater allocation of such total value to the Company. In the
future, after a determination of the value of the tangible assets and
identifiable intangible assets acquired, the total remaining purchase price
representing unidentifiable intangible assets will be allocated on the basis of
76% to the Company and 24% to the P.A. (value of the Service and Support
Agreement attributable to the Dental Center). Historically, the allocation of
value for unidentifiable intangible assets acquired amounted to approximately
80% and 20% to the Company and the P.A., respectively. Had the allocations set
forth above been allocated pursuant to the Company's current standard policy,
there would not have been a significant effect herein. All acquisitions are

F-15
<PAGE> 79

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

purchases of assets and the operating results of the Company only include the
effects of the operations of the acquired assets from the date of acquisition.

On January 18, 1996, the Company entered into an asset purchase agreement
with Dr. Manrique, P.A. ("Manrique"), whereby the Company acquired all of the
tangible assets of the dental practice entity and entered into a services and
support agreement with Manrique to provide management services. The total
purchase price was $40,000. In connection with the purchase, the Company loaned
$60,000 to Manrique at 9% repayable in sixty equal installments. Also, the P.A.
has the option to acquire Manrique's patient lists for a price ranging from
$222,000 to $322,000 depending on an appraisal as to their value, subject to
adjustment based on future revenue from the acquired practice.

On April 1, 1996, the Company and the P.A. entered into a purchase
agreement with Richard J. Shawn, DMD, P.A. ("Volusia"), whereby the Company
acquired all of the tangible assets and assumed certain liabilities of Volusia
and the P.A. acquired the patient files of Volusia for a total purchase price of
$1,800,000. The Company's portion of the purchase was approximately $1,500,000
($300,000 paid in cash and the balance in seller financed notes) of which
$950,000 has been allocated to the contractually assigned value of the not to
compete agreement and the balance of $550,000 to property and equipment. The
P.A.'s portion of the purchase price, $300,000 (seller financed), relates to the
value of the professional assets principally the patient lists and goodwill. The
Company has entered into a services and support agreement with the P.A. to
provide management services and support to the Volusia practice. Two of the
Company's majority shareholders are guarantors of the $300,000 debt of the P.A.

On September 27, 1996 the Company and the P.A. entered into a purchase
agreement with Juan A. Soler ("Soler") whereby the Company acquired all of the
tangible assets of Soler's dental practice and the P.A. acquired the
professional assets, principally patient lists of the practice for a combined
purchase price of $110,000. The Company's portion of the purchase is
approximately $85,000 of which $35,000 has been allocated to the tangible assets
acquired and $50,000 has been allocated to the dental service agreement.

On September 30, 1996 the Company and the P.A. entered into a purchase
agreement with Dan Steele, P.A. ("Steele") whereby the Company acquired all of
the tangible assets of Steele's dental practice and the P.A. acquired the
professional assets, principally patient lists of Steele for a combined purchase
price of $285,000. The Company's portion of the purchase is approximately
$251,000 of which $68,450 has been allocated to the tangible assets acquired and
$182,550 has been allocated to the dental service agreement and a covenant not
to compete.

On September 30, 1996 the Company and the P.A. entered into a purchase
agreement with Jerry L. Reynolds, P.A. ("Reynolds") whereby the Company acquired
all of the tangible assets of Reynolds' dental practice and the P.A. acquired
the professional assets, principally patient lists of Reynolds for a combined
purchase price of $225,000. The Company's portion of the purchase is $190,000 of
which $30,000 has been allocated to the tangible assets acquired and $160,000
has been allocated to the dental service agreement and a covenant not to
compete.

The unaudited pro forma results of all current, continuing operations,
assuming the five 1996 acquisitions completed on or prior to September 30, 1996
had been consummated on January 1, 1995 are as follows:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Net revenue................................................. $6,025,000 $5,881,000
Earnings (loss) before income taxes......................... 148,000 1,083,000
Net earnings (loss)......................................... 89,000 661,000
Net earnings (loss) per share............................... .03 .19
</TABLE>

F-16
<PAGE> 80

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

On January 18, 1996, the Company entered into an asset purchase agreement
with Dr. Manrique, P.A. ("Manrique"), whereby the Company acquired all of the
tangible assets of the dental practice entity and entered into a services and
support agreement with Manrique to provide management services. The total
purchase price was $40,000. In connection with the purchase, the Company loaned
$60,000 to Manrique at 9% repayable in sixty equal installments. Also, the P.A.
has the option to acquire Manrique's patient lists and records for a price
ranging from $222,000 to $322,000 depending on an appraisal as to their value,
subject to adjustment based on future revenue from the acquired practice.

On April 1, 1996, the Company and the P.A. entered into a purchase
agreement with Richard J. Shawn DMD, P.A., ("Volusia"), whereby the Company
acquired all of the tangible assets and assumed certain liabilities of Volusia
and the P.A. acquired the patient files of Volusia for a total purchase price of
$1,800,000. The Company's portion of the purchase was approximately $1,500,000
($300,000 paid in cash and the balance in seller financed notes) of which
$950,000 has been allocated to the contractually assigned value of the not to
compete agreement and the balance of $550,000 to property and equipment. The
P.A.'s portion of the purchase price, $300,000 (seller financed), relates to the
value of the professional assets, principally the patient files and goodwill.
The Company has entered into a services and support agreement with the P.A. to
provide management services and support to the Volusia practice. Two of the
Company's majority shareholders are guarantors of the $300,000 debt of the P.A.

On September 27, 1996 the Company and the P.A. entered into a purchase
agreement with Juan A. Soler ("Soler") whereby the Company acquired all of the
tangible assets of Soler's dental practice and the P.A. acquired the
professional assets, principally patient files of the practice for a combined
purchase price of $110,000. The Company's portion of the purchase is
approximately $85,000 of which $35,000 has been allocated to the tangible assets
acquired and $50,000 has been allocated to the dental service agreement.

On September 30, 1996, the Company and the P.A. entered into a purchase
agreement with Dan Steele, P.A. ("Steele") whereby the Company acquired all of
the tangible assets of Steele's dental practice and the P.A. acquired the
professional assets, principally patient files, of Steele for a combined
purchase price of $285,000. The Company's portion of the purchase is
approximately $251,000 of which $68,450 has been allocated to the tangible
assets acquired and $182,550 has been allocated to the dental service agreement
and a covenant not to compete.

On September 30, 1996 the Company and the P.A. entered into a purchase
agreement with Jerry L. Reynolds, P.A. ("Reynolds") whereby the Company acquired
all of the tangible assets of Reynolds' dental practice and the P.A. acquired
the professional assets, principally patient files, of Reynolds for a combined
purchase price of $225,000. The Company's portion of the purchase is $190,000 of
which $30,000 has been allocated to the tangible assets acquired and $160,000
has been allocated to the dental service agreement and a covenant not to
compete.

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Net revenue.............................................. $6,025,000 $5,881,000
Earnings (loss) before income taxes...................... 148,000 1,083,000
Net earnings (loss)...................................... 89,000 661,000
Net earnings (loss) per share............................ .02 .17
</TABLE>

F-17
<PAGE> 81

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

5. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
---------------------- SEPTEMBER 30,
1994 1995 1996
--------- --------- -------------
<S> <C> <C> <C>
Furniture fixtures and equipment............... $ 303,407 $ 405,676 $1,232,511
Leasehold improvements......................... 233,658 251,159 251,159
Capitalized leases -- equipment................ 237,327 287,227 305,905
--------- --------- ----------
Total................................ 774,392 944,062 1,789,575
Less accumulated depreciation and
amortization................................. (188,652) (341,992) (488,566)
--------- --------- ----------
Total.......................................... $ 585,740 $ 602,070 $1,301,009
========= ========= ==========
</TABLE>

Accumulated depreciation on capitalized leases of equipment amounted to
approximately $57,000, $113,000 and $158,000 at December 31, 1994, December 31,
1995 and September 30, 1996, respectively.

6. NOTES PAYABLE TO BANKS

Notes payable to banks at December 31, 1994, consisted of two lines of
credit secured by equipment, each payable on demand, in the amount of $100,000
and $50,000. During 1995, these lines of credit were converted to long-term
debt.

7. LONG-TERM DEBT AND CAPITAL LEASES

Long-term debt consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
-------- -------- -------------
<S> <C> <C> <C>
Note payable in increasing monthly installments of
$560 to $672 at an interest rate of 13% payable
monthly through March 1998. Collateralized by
dental equipment................................... $ 21,769 $ 17,639 $ 12,016
Note payable in monthly installments of $314 at an
interest rate of 13% payable monthly through April
1997. Collateralized by dental equipment........... 8,470 5,880 2,965
Note payable in monthly installments of $186 at an
interest rate of 13% payable monthly through April
1997. Collateralized by dental equipment........... 5,132 3,618 2,225
Note payable in monthly installments of $825 at an
interest rate of 9%................................ 6,382 -- --
Note payable in monthly installments of $242 at an
interest rate of 7.75%............................. 10,611 8,473 --
Note payable in monthly installments of $667 plus
interest equal to the bank's prime rate plus
2.5%............................................... 29,333 21,333 --
</TABLE>

F-18
<PAGE> 82

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
-------- -------- -------------
<S> <C> <C> <C>
Note payable in monthly installments of $746 plus
interest at 10% payable monthly through November
1997 at which time the remaining $16,622 becomes
due. Collateralized by bank accounts held with the
lender and by personal guarantees by two of the
majority stockholders of the Company. In addition,
a compensating balance equal to the amount due on
the note must be held with the lender. At June 30,
1996, cash balance held with the lender totaled in
excess of the balance of the loan.................. 35,000 28,841 24,153
Note payable in monthly installments of $1,042 plus
interest equal to the prime rate plus 2% (Prime was
8.25% at June 30, 1996) payable monthly through
December 1998. Collateralized by bank accounts held
with the lender and by personal guarantees of the
majority stockholders of the Company. The Bank has
a right of offset of any accounts maintained in the
Bank. At June 30, 1996, the cash balances with the
lender totaled in excess of the balance of the
loan. ............................................. 50,000 37,496 28,118
Note payable to a bank in monthly installments of
$1,005 through November 1998, at an interest rate
of 9.25% per annum and is collateralized by
computer equipment. The Bank has the right of
offset of any accounts maintained in the Bank. At
June 30, 1996 the Company had cash on hand at the
Bank in excess of the balance of the loan.......... -- 30,693 23,604
Note payable to a bank in monthly installments of
$2,560 with interest at the bank's prime rate plus
2%. (Prime was 8.25% at June 30, 1996) The note is
personally guaranteed by two of the majority
stockholders of the Company. The note is
collateralized by the assets of the Company and the
Bank has a right of offset of any accounts
maintained in the Bank. At June 30, 1996, the
Company had cash on hand at the Bank in excess of
the balance of the loan............................ -- 100,000 84,291
Note payable to a bank in monthly installments of
$10,000 plus interest at the Bank's prime rate plus
2%. (Prime was 8.25% at June 30, 1996). The note is
personally guaranteed by two of the majority
stockholders of the Company. The note is
collateralized by the assets of the Company........ -- 100,000 409,290
Note payable to Richard J. Shawn DMD in monthly
installments of $4,997 at an interest rate of 9%
beginning May 1997 payable monthly through April
1999............................................... -- -- 100,000
Note payable to Richard J. Shawn DMD in monthly
installments of $9,994 at an interest rate of 9%
beginning May 1997 payable monthly through April
1999............................................... -- -- 200,000
</TABLE>

F-19
<PAGE> 83

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
-------- -------- -------------
<S> <C> <C> <C>
Note payable to Richard J. Shawn DMD in monthly
installments of $17,744 at an interest rate of 9%
beginning May 1997 payable monthly through April
2003............................................... -- -- 900,000
Note payable to Dr. Reynolds DMD in monthly
installments of $830.33 at an interest rate of 9%
beginning Oct. 15, 1996 payable monthly through
Sept. 15, 2001..................................... -- -- 40,000
Note payable to Dr. Reynolds DMD in monthly
installments of $1,556.80 at an interest rate of 9%
beginning Oct. 15, 1996 payable monthly through
Sept. 15, 2001..................................... -- -- 75,000
Note payable to Dr. Steele DMD in monthly
installments of $3,970.03 at an interest rate of 9%
beginning Oct. 15, 1996 payable monthly through
Feb. 1, 1998 with a balloon payment of $146,598.84
on March 15, 1998.................................. -- -- 191,250
Note payable to Dr. Soler DMD in monthly installments
of $726.54 at an interest rate of 9% beginning Oct.
15, 1996 payable monthly through September 15,
2001............................................... -- -- 35,000
Revolving line of credit agreement for $1,500,000 at
an interest rate of Prime + 1.5% payable on demand.
This agreement contains covenants requiring
maintenance of certain financial ratios and
restrictions on disposition of assets, capital
expenditures and payment of dividends.............. -- -- 185,000
Total long-term debt................................. 166,697 353,973 2,312,912
Less current maturities.............................. (45,829) (99,161) (463,567)
-------- -------- ----------
Long-term debt, excluding current maturities......... $120,868 $254,812 $1,849,345
======== ======== ==========
</TABLE>

The three notes payable listed above to Dr. Shawn totalling $1,200,000 at
September 30, 1996 originated in connection with the purchase from Dr.
Shawn discussed in note 4. The notes are secured by the Company's interest
in the Dr. Shawn business and the goodwill associated therewith along with
a collateral assignment of leases for the related offices. Each of the
notes is also personally guaranteed by two of the majority shareholders of
Coast.

Capital lease obligations consist of the following:

<TABLE>
<CAPTION>
DECEMBER 31,
------------------- SEPTEMBER 30,
1994 1995 1996
-------- -------- -------------
<S> <C> <C> <C>
Capital lease obligations, at varying rates of
imputed interest from 15% to 21%, collateralized by
lease equipment, with an amortized cost of
approximately $180,000 and $174,000 and $148,000 at
December 31, 1994 and 1995, and at September 30,
1996, respectively................................. $218,143 $254,107 $ 221,608
Less current portion of capital lease obligations.... (34,081) (69,578) (76,378)
-------- -------- ----------
Capital lease obligations, net of current portion.... $184,062 $184,529 $ 145,230
======== ======== ==========
</TABLE>

F-20
<PAGE> 84

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

Scheduled maturities of long-term debt and payments on capital lease
obligations as of September 30, 1996 are as follows:

<TABLE>
<CAPTION>
OBLIGATIONS
LONG-TERM UNDER
DEBT CAPITAL LEASES
---------- --------------
<S> <C> <C>
1997........................................................ $ 463,567 $101,047
1998........................................................ 643,534 86,543
1999........................................................ 438,211 67,732
2000........................................................ 242,803 21,810
2001........................................................ 211,658 --
Thereafter.................................................. 313,139 --
---------- --------
$2,312,912 $277,132
==========
Less amounts representing interest.......................... 55,524
--------
$221,608
========
</TABLE>

8. INCOME TAXES

Since October 1992, the Company has elected to be treated as an S
Corporation for federal income tax purposes, with profits and losses generally
reportable by the stockholders in their individual income tax returns. Upon
completion of the public offering, the Company will terminate its status as an S
Corporation.

The pro forma income tax adjustment represents a provision for federal and
state income taxes at the statutory rate in effect for the periods presented (at
an effective rate of 39%) as if the Company had not been treated as an S
Corporation.

9. RELATED PARTY TRANSACTIONS

The Company periodically advances funds to/from the majority stockholders
and the P.A. The P.A. is wholly-owned by a majority shareholder and director of
the Company. See Notes 1 and 3 for a further description of the relationship
with the P.A. These advances are reflected on the balance sheet as notes
receivable from stockholders for $148,056, $125,579 and $172,168 at December 31,
1994, December 31, 1995 and September 30, 1996, respectively. The notes have a
maturity of five years and are being repaid in varying installments plus
interest at 5% to 8% per annum. Interest income relating to these amounts was
insignificant for all periods presented. Additionally, at September 30, 1996 the
Company advanced funds on a short-term basis to Manrique (see Note 4) and to the
P.A. totalling $106,318 and $105,392 respectively. These advances bear interest
at 8%.

These amounts represent a concentration of credit risk and expose the
Company to risk of loss for these amounts should these related parties be unable
to pay their debts.

F-21
<PAGE> 85

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES

The Company primarily leases space for operation of its clinics under
several noncancelable operating leases expiring over the next seven years.
Rental expense for the years ended December 31, 1993, 1994 and 1995 and the nine
months ended September 30, 1995 and 1996 was $80,313, $117,432, $195,664,
$143,105 and $316,485, respectively.

Future minimum lease payments under these agreements as of September 30,
1996 are:

<TABLE>
<S> <C>
1997....................................................... $ 676,308
1998....................................................... 512,324
1999....................................................... 439,182
2000....................................................... 256,461
2001....................................................... 185,885
Thereafter................................................. 357,817
----------
$2,427,977
==========
</TABLE>

In September, 1996 the Company entered into a lease of approximately three
and one-half years for office space for its corporate offices. The future
minimum lease payments in the above table include the effects of this new lease.

The Company has entered into employment agreements with three of its
officers, all of whom are the majority shareholders of the Company. The terms of
the agreements are from three to five years.

11. STOCKHOLDERS' EQUITY

Effective April 1, 1996, the Board of Directors adopted, and the
stockholders of the Company approved, two stock incentive plans: the Stock
Option Plan (the "Stock Option") and the Affiliated Professionals Stock Plan
(the "Professionals Plan," and together with the Incentive Plan, the "Plans").
The purpose of the Plans is to provide directors, officers, key employees,
advisors and dental professionals employed by the P.A.'s (subject to approval
and reimbursement by the P.A.) with additional incentives by increasing their
proprietary interest in the Company or tying a portion of their compensation to
increases in the price of the Company's common stock. The aggregate number of
shares of common stock subject to the Incentive Plan and the Professionals Plan
is 450,000 shares and 450,000 shares, respectively. During 1996, the Company has
granted approximately 140,000 options under the Professionals Plan and
approximately 46,000 options under the Stock Option Plan with an exercise price
equal to the price of stock in the proposed initial public offering of the
Company's stock. The options vest over three years, none are exercisable as of
October 1, 1996. The fair value of the options granted is not significant. The
effect on compensation expense and net income had compensation costs for the
Company's stock option plans been determined based on the fair value at the
grant date consistent with the provisions of SFAS No. 123, is not material. The
Company estimated the fair value of options utilizing an option pricing model
assuming a market price and exercise price of $9 per share, a risk free interest
rate of 7.5%, a four year expected life, 0% expected volatility, and no
dividends.

In February, 1996 the Company reached a mutual understanding with an
officer that the officer would be entitled to 105,000 shares as compensation and
in January 1996 reached a mutual understanding with certain other employees of
the Company that they would be entitled to an aggregate of 35,000 shares as
compensation for which the Company recognized compensation of $27,674. The fair
market value of the Common Stock granted used to determine compensation expense
recorded was determined based on an independent valuation of the Company's stock
as of February 11, 1996. The above described shares were formally issued in May
and April, respectively.

F-22
<PAGE> 86

COAST DENTAL SERVICES, INC.

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)

12. SUBSEQUENT EVENTS

On October 1, 1996 and December 29, 1996 the Company approved stock splits
resulting in an exchange of 1 share for approximately 3.86 shares of Common
Stock issued and outstanding. Simultaneously, the par value of the common stock
was changed from $.00001 to $.001. All share and per share amounts have been
retroactively adjusted for this split. Additionally, the Company increased the
authorized number of common shares to 50,000,000.

On November 7, 1996 the Company and the P.A. entered into a purchase
agreement with Seminole Dental Center, Seminole Dental South, Seminole Dental
West and Seminole Dental Services, Inc. (collectively the "Seminole Dental
Center") whereby the Company acquired all of the tangible assets of the Seminole
Dental Centers dental practices and the P.A. acquired the professional assets,
principally patient lists and goodwill, of Seminole Dental Center for a combined
purchase price of $2,500,000. The Company's portion of the purchase is
$1,900,000 of which $250,000 has been allocated to the estimated fair value of
the tangible assets acquired and $1,650,000 has been allocated to the dental
service agreement and a covenant not to compete.

On December 11, 1996 the Company received a commitment letter (the
"Commitment") from Barnett Bank of Tampa (the "Bank") to enter into an expanded
revolving line of credit agreement for $5,000,000. Under the terms of this
Commitment, the Bank will extend to Coast the additional line of credit upon the
successful completion of an initial public offering by the Company.

On December 14, 1996, the Company and the P.A. entered into a Purchase
Agreement with Gerber Dental, Inc. ("Gerber") whereby the Company acquired all
of the tangible assets of Gerber's dental practice and the P.A. acquired the
professional assets, principally patient lists, of Gerber for a combined
purchase price of $170,000. The Company's portion of the purchase price is
$135,000, of which $43,500 has been allocated to the tangible assets acquired
and $91,500 has been allocated to the dental service agreement and covenant not
to compete.

On December 31, 1996, the Company and the P.A. entered into a purchase
agreement with Patrick Wayne O'Brien, DMD, P.A. ("O'Brien"), whereby the Company
acquired all of the tangible assets of O'Brien's dental practice and the P.A.
acquired the professional assets, principally patient lists, of O'Brien for a
combined purchase price of $120,000. The Company's portion of the purchase price
is $95,000 of which $50,000 has been allocated to the tangible assets acquired
and $45,000 has been allocated to the dental service agreement

On December 31, 1996, the Company and the P.A. entered into a purchase
agreement with William Glover, DMD, P.A. ("Glover"), whereby the Company
acquired all of the tangible assets of Glover's dental practice and the P.A.
acquired the professional assets, principally patient lists, of Glover for a
combined purchase price of $85,000. The Company's portion of the purchase price
is $70,000 of which $40,000 has been allocated to the tangible assets acquired
and $30,000 has been allocated to the dental service agreement.

As of December 31, 1996, the P.A. has incurred $1,069,000 of acquisition
debt in connection with the acquisitions completed through such date. Through
December 31, 1996, the Company has advanced $227,000 to the P.A. to assist the
P.A. in making its required principle repayments on this acquisition debt. The
Company was not required to make these advances, is not a guarantor or party to
any of the P.A.'s debt, and has not pledged any assets to secure the P.A.'s
debt. Accordingly, these debts of the P.A. are not reflected in the balance
sheet of the Company. Additionally, the balance of the management fee receivable
from the P.A. increased to approximately $733,000 at December 31, 1996. This
increase is directly attributed to the increase in patient revenues earned by
the P.A. for which the Company is due its 76% management fee. These advances and
receivable are unsecured and represent a concentration of credit risk and expose
the Company to risk of loss for these amounts should the P.A. be unable to pay
its debts.

F-23
<PAGE> 87

INDEPENDENT AUDITORS' REPORT

Richard J. Shawn DMD, P.A.

We have audited the accompanying combined statements of operations and cash
flows of Richard J. Shawn DMD, P.A. and East Coast Dental Management, Inc. (the
"Company") for each of the three years in the period ended January 31, 1996 and
for the two months ended March 31, 1996. These combined financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statements presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the results of operations and of cash flows
for the Company for each of the three years in the period ended January 31, 1996
and for the two months ended March 31, 1996 in conformity with generally
accepted accounting principles.

DELOITTE & TOUCHE LLP

Tampa, Florida
January 8, 1997

F-24
<PAGE> 88

RICHARD J. SHAWN DMD, P.A.

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
TWO MONTHS
YEARS ENDED JANUARY 31, ENDED
------------------------------------ MARCH 31,
1994 1995 1996 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue......................................... $3,686,457 $3,264,655 $2,910,268 $457,988
Dentist and hygienists salaries................. 884,444 702,078 670,472 110,675
Dental Center Expenses:
Payroll and benefits.......................... 1,099,040 987,067 860,913 131,467
Dental supplies and lab fees.................. 424,903 351,638 200,656 32,924
Rent.......................................... 337,762 344,760 344,996 42,905
Advertising................................... 127,852 121,523 140,030 1,854
Depreciation.................................. 109,326 98,122 90,254 15,042
Uncollectible accounts expense................ 17,920 11,284 13,970 2,328
Other......................................... 158,731 151,831 157,188 34,846
---------- ---------- ---------- --------
Total dental center expenses.................... 2,275,534 2,066,225 1,808,007 372,041
---------- ---------- ---------- --------
Subtotal........................................ 526,479 496,352 431,789 85,947
---------- ---------- ---------- --------
General and administrative expenses............. 461,508 535,783 426,390 40,121
Depreciation and amortization................... 15,621 11,651 12,230 2,038
---------- ---------- ---------- --------
Total general and administrative expenses....... 477,129 547,434 438,620 42,159
---------- ---------- ---------- --------
Operating income (loss)....................... 49,350 (51,082) (6,831) 43,788
Interest expense................................ (48,452) (26,526) (13,843) (951)
---------- ---------- ---------- --------
Net income (loss)............................... $ 898 $ (77,608) $ (20,674) $ 42,837
========== ========== ========== ========
</TABLE>

See notes to combined financial statements.

F-25
<PAGE> 89

RICHARD J. SHAWN DMD, P.A.

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
TWO MONTHS
YEARS ENDED JANUARY 31, ENDED
-------------------------------- MARCH 31,
1994 1995 1996 1996
--------- --------- -------- ----------
<S> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Net income (loss)................................. $ 898 $ (77,608) $(20,674) $ 42,837
Adjustments to reconcile net income (loss) to
net cash provided by operations increase
(decrease):..................................
Depreciation.................................... 124,947 109,773 102,484 17,080
Increase in allowance for bad debts............. 17,920 11,284 13,970 2,328
Change in accounts receivable................... (237,465) 39,305 (56,254) --
Change in supplies.............................. -- -- -- 30,000
Change in prepaids and other assets............. (3,661) (2,202) 2,816 --
Change in accounts payable...................... 278,289 (9,619) (38,699) 35,784
--------- --------- -------- --------
Net cash provided by operating activities......... 180,928 70,933 3,643 128,029
--------- --------- -------- --------
Cash Flows from Investing Activities:
Property additions.............................. (236,733) (4,326) (44,654) --
Increase in other assets........................ 14,594 273 --
--------- --------- -------- --------
Net cash provided by (used in) investing
activities...................................... (236,733) 10,268 (44,381) --
--------- --------- -------- --------
Cash Flows From Financing Activities:
Repayment of long term debt..................... -- (132,451) (3,466) --
Proceeds from stockholder....................... 114,646 32,168 25,713 --
--------- --------- -------- --------
Net cash provided by (used in) financing
activities...................................... 114,646 (100,283) 22,247 --
--------- --------- -------- --------
Increase (Decrease) in Cash....................... 58,841 (19,082) (18,491) 128,029
Cash and cash equivalents at beginning of
period.......................................... -- 58,841 39,759 21,268
--------- --------- -------- --------
Cash and cash equivalents at end of period........ $ 58,841 $ 39,759 $ 21,268 $149,297
========= ========= ======== ========
</TABLE>

See notes to combined financial statements.

F-26
<PAGE> 90

RICHARD J. SHAWN DMD, P.A.

NOTES TO COMBINED FINANCIAL STATEMENTS
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED JANUARY 31, 1996

1. DESCRIPTION OF BUSINESS

Richard J. Shawn DMD, P.A. and East Coast Dental Management, Inc. (the
"Company") are a professional association of dentists doing business through six
dental centers in Volusia County, Florida. The entities are both wholly-owned by
Richard J. Shawn.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -- The accompanying combined financial statements
have been prepared on the accrual basis of accounting.

Basis of Combination -- The operations of both entities indicated in Note 1
are combined for reporting purposes due to their common ownership and business
activities. Intercompany balances are eliminated upon combination.

Cash equivalents -- The Company considers all highly liquid investments
with an original maturity of three months or less to be cash equivalents.

Property and Equipment -- Depreciation of property and equipment is
calculated using the straight-line method over the estimated useful lives of the
assets ranging from 5 to 7 years. Equipment held under capital leases and
leasehold improvements are amortized on a straight-line basis over the shorter
of the lease term or the estimated useful life of the assets.

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

3. INCOME TAXES

The Company has elected to be treated as an S Corporation for federal
income tax purposes, with profits and losses generally reportable by the sole
stockholder in his individual income tax return.

4. SUBSEQUENT EVENTS

The assets of the Company were purchased on April 1, 1996 by Coast Dental
Services, Inc. and the Coast Florida P.A.

F-27
<PAGE> 91

INDEPENDENT AUDITORS' REPORT

Partners and Shareholders of the Partnership

We have audited the accompanying combined balance sheet of Seminole Dental
Center, Seminole Dental South, Seminole Dental West and Seminole Dental
Services, Inc. (collectively the "Seminole Dental Center" or the "Partnership")
as of December 31, 1995 and September 30, 1996, and the related statements of
operations, and partners' and shareholders' equity, and of cash flows for the
years ended December 31, 1994 and 1995 and for the nine months ended September
30, 1996. The combined financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Partnership as of December 31, 1995 and
September 30, 1996, and the results of its operations and its cash flows for the
years ended December 31, 1994 and 1995 and for the nine months ended September
30, 1996, in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP
Tampa, Florida

January 8, 1997

F-28
<PAGE> 92

SEMINOLE DENTAL CENTER

COMBINED BALANCE SHEET

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
ASSETS
Current Assets
Cash...................................................... $ 56,980 $231,389
Trade receivables, net of allowance for bad debts of
$120,450............................................... 157,025 96,587
Other receivables......................................... 1,893
Supplies.................................................. 13,500 13,500
Other current assets...................................... 4,642 2,973
-------- --------
Total current assets.............................. 232,147 346,342
Property and equipment, net................................. 75,856 78,238
Other assets................................................ 9,802 9,867
-------- --------
Total............................................. $317,805 $434,447
======== ========
LIABILITIES AND EQUITY
Liabilities
Accounts payable.......................................... $ 32,284 $ 28,079
Accrued payroll and related taxes......................... 22,976 82,850
Other accrued expenses.................................... 32,442 11,091
-------- --------
Total current liabilities......................... 87,702 122,020
Combined partners' and shareholders' equity................. 230,103 312,427
-------- --------
Total............................................. $317,805 $434,447
======== ========
</TABLE>

See notes to the combined financial statements.

F-29
<PAGE> 93

SEMINOLE DENTAL CENTER

COMBINED STATEMENTS OF OPERATIONS AND PARTNERS' AND
SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
------------ ------------- -------------
<S> <C> <C> <C>
Revenue.............................................. $3,477,634 $3,425,055 $2,473,038
Dental Center Expenses:
Payroll and benefits............................... 1,696,452 1,814,974 1,340,811
Dental supplies and lab fees....................... 433,553 305,869 208,812
Rent............................................... 165,861 198,291 145,278
Advertising........................................ 204,899 202,589 142,296
Depreciation....................................... 41,955 23,126 4,652
Bad debt expense................................... 34,331 173,924 131,758
Other.............................................. 200,135 255,541 100,204
---------- ---------- ----------
Total dental center expenses......................... 2,777,186 2,974,314 2,073,811
---------- ---------- ----------
Subtotal............................................. 700,448 450,741 399,227
Total general and administrative expenses............ 300,043 119,957 80,965
---------- ---------- ----------
Operating income........................... 400,405 330,784 318,262
Interest expense..................................... 399
---------- ---------- ----------
Net income................................. 400,405 330,385 318,262
---------- ---------- ----------
Partner and shareholder distributions................ (494,162) (324,054) (235,938)
Partner and shareholder contributions................ 14,506 3,348
Combined partners' and shareholders' equity:
Beginning of Period................................ 299,675 220,424 230,103
---------- ---------- ----------
End of Period...................................... $ 220,424 $ 230,103 $ 312,427
========== ========== ==========
</TABLE>

See notes to the combined financial statements.

F-30
<PAGE> 94

SEMINOLE DENTAL CENTER

COMBINED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, SEPTEMBER 30,
1994 1995 1996
------------ -------------- -------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income.......................................... $ 400,405 $ 330,385 $ 318,262
Adjustments to reconcile net income to net cash
provided by operations increase (decrease):
Depreciation................................... 41,955 23,126 4,652
Gain on sale of fixed assets................... (3,254)
Change in allowance for bad debts.............. 34,331 (35,527) 1
Change in accounts receivable.................. (47,865) 36,452 60,437
Change in prepaid and other assets............. 1,347 1,370 (289)
Change in accounts payable..................... (9,031) (21,910) (4,204)
Change in accrued expenses..................... 82,473 (40,949) 38,522
--------- --------- ---------
Net cash provided by operating activities........... 503,615 292,947 414,127
--------- --------- ---------
Cash Flows from Investing Activities
Property additions.................................. (28,543) (2,525) (9,280)
Proceeds of sale of fixed assets.................... 5,500
--------- --------- ---------
Net cash used in investing activities............... (28,543) (2,525) (3,780)
--------- --------- ---------
Cash Flows from Financing Activities
Partner and shareholder distributions............... (494,162) (324,054) (235,938)
Partner and shareholder contributions............... 14,506 3,348
--------- --------- ---------
Net cash used in financing activities............... (479,656) (320,706) (235,938)
--------- --------- ---------
Net (decrease)/increase in cash..................... (4,584) (30,284) 174,409
Cash at beginning of period......................... 91,848 87,264 56,980
--------- --------- ---------
Cash at end of period............................... $ 87,264 $ 56,980 $ 231,389
========= ========= =========
</TABLE>

See notes to the combined financial statements.

F-31
<PAGE> 95

SEMINOLE DENTAL CENTER

NOTES TO THE COMBINED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND FOR THE YEARS ENDED DECEMBER
31, 1995 AND 1994

1. DESCRIPTION OF BUSINESS

Seminole Dental Center, Seminole Dental South, Seminole Dental West and
Seminole Dental Services, Inc. (collectively "Seminole Dental Center" or the
"Partnership") are each a professional association of dentists doing business
through three dental centers in central Florida. Seminole Dental Services, Inc.,
a Florida Corporation, processes Medicaid insurance claims for patients of the
three dental centers. The Partnership entities are owned by M.D. Witcher, DDS,
M.R. Novotny, DDS, and C.M. Garcia, DDS.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation -- The accompanying combined financial statements
have been prepared on the accrual basis of accounting.

Basis of Combination -- The operations of all entities described in Note 1
are combined for reporting purposes due to their common ownership and business
activities. Intercompany balances are eliminated upon the combination.

Supplies -- Supplies are stated at the lower of FIFO cost or market.

Property and Equipment -- Property and equipment are stated at cost.
Depreciation of property and equipment is calculated using the straight-line
method over the estimated useful lives of the assets, which range from 2 to 8
years. Leasehold improvements are amortized on a straight-line basis over the
shorter of the lease term or the estimated useful life of the assets.

Use of Estimates -- The preparation of financial statements in conformity
with general accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those estimated.

3. INCOME TAXES

Seminole Dental Center, Seminole Dental South and Seminole Dental West are
partnerships and their respective profits and losses flow through to the
individual partners. Seminole Dental Services, Inc. has elected to be treated as
an S Corporation for federal income tax purposes, with profits and losses
generally reportable by the stockholders in their individual income tax returns.
Accordingly, no income taxes are reflected in the combined financial statements.

F-32
<PAGE> 96

SEMINOLE DENTAL CENTER

NOTES TO THE COMBINED FINANCIAL STATEMENTS -- (CONTINUED)

4. PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1995 1996
------------ -------------
<S> <C> <C>
Medical equipment........................................... $ 401,453 $ 410,718
Computers and software...................................... 5,398 5,398
Office furniture and equipment.............................. 89,029 77,138
Leasehold improvements...................................... 48,974 47,880
--------- ---------
544,854 541,134
Less accumulated depreciation............................... (468,998) (462,896)
--------- ---------
Total............................................. $ 75,856 $ 78,238
========= =========
</TABLE>

5. COMMITMENTS AND CONTINGENCIES

The Company primarily leases space for operation of its clinics under
several noncancelable operating leases expiring over the next 3 years. Rental
expense for the nine months ended September 30, 1996, years ended December 31,
1995 and 1994 was $145,278, $198,291 and $165,861, respectively.

Future minimum lease payments under these agreements as of September 30,
1996 are:

<TABLE>
<S> <C>
1997........................................................ $ 75,640
1998........................................................ 59,505
1999........................................................ 61,731
2000........................................................ 10,497
2001........................................................ --
Thereafter.................................................. --
--------
Total............................................. $207,373
========
</TABLE>

6. SUBSEQUENT EVENTS

Certain assets of the Partnership were purchased as of October 31, 1996 by
Coast Dental Services, Inc. and the Coast Florida P.A.

F-33
<PAGE> 97

[DESCRIPTION]
OF
[INSIDE BACK COVER PAGE]
[PICTURES OF DENTAL CHAIR, DENTAL TREATMENTS PROVIDED
BY COAST FLORIDA, P.A.
PROFESSIONALS AT MANAGED DENTAL CENTERS AND
SCENE OF SMILING FAMILY]
<PAGE> 98

============================================================

NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDERS, OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY
OFFER TO BUY ANY SECURITY OTHER THAN THE SHARES OF COMMON STOCK OFFERED BY THIS
PROSPECTUS, NOR DOES IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY
OFFER TO BUY THE SHARES OF COMMON STOCK BY ANYONE IN ANY JURISDICTION IN WHICH
SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR IN WHICH THE PERSON MAKING
SUCH OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO, OR TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.

UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED
TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO
DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR
UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

------------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Risk Factors............................... 7
The Company................................ 17
Relationship Between the Company and the
Coast Florida P.A........................ 17
Use of Proceeds............................ 18
Dividend Policy............................ 19
Capitalization............................. 19
Dilution................................... 20
Selected Pro Forma Financial Data.......... 21
Selected Financial Data.................... 22
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 23
Business................................... 33
Management................................. 46
Certain Transactions....................... 51
Principal and Selling Stockholders......... 53
Description of Capital Stock............... 54
Shares Eligible for Future Sale............ 58
Underwriting............................... 60
Legal Matters.............................. 61
Experts.................................... 61
Additional Information..................... 61
Index to Consolidated Financial
Statements............................... F-1
</TABLE>

============================================================
============================================================

2,200,000 Shares

(COAST DENTAL LOGO)

Common Stock

---------------------

PROSPECTUS
---------------------

PRUDENTIAL SECURITIES INCORPORATED

RAYMOND JAMES & ASSOCIATES, INC.
, 1997

============================================================
<PAGE> 99

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The Company estimates that expenses payable by it in connection with the
Offering described in this registration statement (other than underwriting
discounts and commissions) will be as follows:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................... $ 8,364
NASD filing fee........................................................... 3,260
Nasdaq National Market listing fee........................................ 34,500
Printing expenses......................................................... 200,000
Accounting fees and expenses.............................................. 140,000
Legal fees and expenses................................................... 350,000
Fees and expenses (including legal fees) for qualifications under state
securities laws......................................................... 25,000
Registrar and Transfer Agent's fees and expenses.......................... 2,500
Miscellaneous............................................................. 36,376
--------
Total................................................................... $800,000
========
</TABLE>

All amounts except the Securities and Exchange Commission registration fee,
the NASD filing fee and the Nasdaq National Market listing fee are estimated.
The Company intends to pay all expenses of registration with respect to shares
being sold by the Selling Stockholders hereunder, with the exception of
underwriting discounts and commissions.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law ("DGCL") empowers a
corporation, subject to certain limitations, to indemnify its directors and
officers against expenses (including attorneys' fees, judgments, fines and
certain settlements) actually and reasonably incurred by them in connection with
any suit or proceeding to which they are a party so long as they 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 a criminal action or
proceeding, so long as they had no reasonable cause to believe their conduct to
have been unlawful. The Company's By-laws provide that the Company shall
indemnify its directors and such of its officers, employees and agents as it may
from time to time designate, to the fullest extent permitted by Section 145 of
the DGCL, as now existing or as may hereafter be amended.

Section 102 of the DGCL permits a Delaware corporation to include in its
certificate of incorporation a provision eliminating or limiting a director's
liability to a corporation or its stockholders for monetary damages for breaches
of fiduciary duty. The enabling statute provides, however, that liability for
breaches of the duty of loyalty, acts or omissions not in good faith or
involving intentional misconduct or knowing violation of the law, and the
unlawful purchase or redemption of stock or payment of unlawful dividends or the
receipt of improper personal benefits cannot be eliminated or limited in this
manner. The Company's Certificate of Incorporation includes a provision which
eliminates, to the fullest extent permitted by the DGCL, director liability for
monetary damages for breaches of fiduciary duty. In addition, the Board of
Directors of the Company has approved the execution by the Company of
indemnification agreements with the Directors and certain officers of the
Company, the form of which has been filed as an exhibit to this Registration
Statement.

The Company maintains directors' and officers' liability insurance.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

In March 1996, the Company issued an aggregate of 3,360,000 shares of
Common Stock in connection with its corporate reorganization. See "Certain
Transactions." This transaction was exempt from the

II-1
<PAGE> 100

registration requirements of the Securities Act pursuant to Section 4(2) because
it did not involve any public offering.

In January and February 1996, the Company reached mutual understandings to
provide restricted shares of Common Stock and in April and May 1996 issued
35,000 and 105,000 shares, respectively, as compensation to certain employees,
executive officers, and affiliated professionals, pursuant to the Plans. These
transactions were exempt from the registration requirements of the Securities
Act pursuant to Rule 701.

In October, November and December 1996, and in January 1997 the Company
granted options to purchase approximately 186,000 shares of Common Stock under
the Plans to certain employees, executive officers and affiliated professionals.
These transactions are exempt from the registration requirements of the
Securities Act pursuant to Rule 701. The Company plans to file registration
statements under the Securities Act after this Offering to register sales of
shares of Common Stock under the Plans, if any.

The Company has issued non-negotiable promissory notes to sellers as part
of the purchase price in connection with the Company's purchase of the allowable
assets of certain dental practices. On April 24, 1996 the Company issued
non-negotiable promissory notes totalling $1.2 million to Richard J. Shawn,
D.M.D. in connection with the Shawn Acquisition. On September 27, 1996 and
September 30, 1996, the Company issued non-negotiable promissory notes totalling
$341,250 to Juan A. Soler, D.D.S., Jerry L. Reynolds, D.D.S. and Dan Steele,
P.A. in connection with the acquisition of the allowable assets of three dental
practices. On October 31, 1996, the Company issued non-negotiable promissory
notes totalling $1.5 million to Seminole Dental Center, Seminole Dental West,
Seminole Dental South, Michael D. Whitcher, D.D.S. and C. M. Garcia, D.M.D. in
connection with the Seminole Acquisition. The Company does not believe that the
promissory notes issued in these transactions are a "security" as defined by
Section 2(1) of the Securities Act. However, in the event the promissory notes
are deemed to be a security these transactions were exempt from the registration
requirements of the Securities Act pursuant to Section 4(2) because they did not
involve any public offering.

II-2
<PAGE> 101

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE

(a) EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------
<C> <S> <C>
1.1*** -- Form of Underwriting Agreement.
2.1** -- Asset Purchase Agreement dated April 1, by and among Adam
Diasti, D.D.S., P.A., Coast Dental Services, Inc., Richard
J. Shawn D.M.D., P.A., East Coast Dental Management, Inc.
and Richard J. Shawn, D.M.D.................................
2.2** -- Asset Purchase Agreement dated October 31, 1996 by and among
Coast Florida P.A., Coast Dental Services, Inc., Seminole
Dental Services, Inc., Seminole Dental Center, Seminole
Dental West, Seminole Dental South, Michael D. Witcher,
D.D.S., P.A., Milo R. Novotny, D.D.S., P.A., and C.M.
Garcia, D.M.D., P.A.........................................
3.1 -- Restated Certificate of Incorporation of Coast Dental
Services, Inc...............................................
3.2* -- Bylaws of Coast Dental Services, Inc........................
4.1* -- Specimen of Coast Dental Services, Inc. Common Stock
Certificate.................................................
4.2* -- Business Loan Agreement dated August 15, 1996 between Coast
Dental Services, Inc. and Barnett Bank, N.A. (Previously
filed as Exhibit 10.9 to the Company's Registration
Statement on Form S-1 filed on October 7, 1996 (File No.
333-13613) and incorporated herein by reference.
4.3*** -- Loan Commitment Letter dated December 11, 1996 between Coast
Dental Services, Inc. and Barrett Bank, N.A.-Tampa..........
(The Company is not filing any instrument with respect to
long-term debt that does not exceed 10 percent of the total
assets of the Company and the Company agrees to furnish a
copy of such instrument to the Commission upon request.)
5.1*** -- Opinion of Shumaker, Loop & Kendrick, LLP as to the Common
Stock being registered......................................
10.1** -- Employment Agreement between Coast Dental Services, Inc. and
Terek Diasti................................................
10.2** -- Employment Agreement between Coast Dental Services, Inc. and
Adam Diasti, D.D.S..........................................
10.3* -- Employment Agreement between Coast Dental Services, Inc. and
Joseph R. Smith.............................................
10.4* -- Coast Dental Services, Inc. Stock Option Plan...............
10.5* -- Coast Dental Services, Inc. Affiliated Professional Stock
Plan........................................................
10.6* -- Services and Support Agreement dated October 1, 1996 between
Coast Dental Services, Inc. and Coast Florida, P.A..........
10.7* -- Asset Purchase Agreement dated April 1, 1996 by and among
Adam Diasti, D.D.S., P.A., Coast Dental Services, Inc.,
Richard J. Shawn D.M.D., P.A., East Coast Dental Management,
Inc. and Richard J. Shawn, D.M.D., filed as Exhibit 2.1 to
this Registration Statement and incorporated herein by
reference...................................................
10.8* -- Promissory Note from Adam Diasti, DDS, P.A., dated June 30,
1996, payable to Coast Dental Services, Inc.................
10.9* -- Business Loan Agreement dated August 15, 1996 between Coast
Dental Services, Inc. and Barnett Bank, N.A.................
10.10* -- Form of Indemnification Agreement with officers and
directors...................................................
10.11** -- Asset Purchase Agreement dated October 31, 1996 by and among
Coast Florida P.A., Coast Dental Services, Inc., Seminole
Dental Services, Inc., Seminole Dental Center, Seminole
Dental West, Seminole Dental South, Michael D. Witcher,
D.D.S., P.A., Milo R. Novotny, D.D.S. P.A., and C.M. Garcia
D.M.D. P.A., filed as Exhibit 2.2 to this Registration
Statement and incorporated herein by reference..............
10.12** -- Agreement to Transfer Stock and Stock Pledge dated November
1, 1996, by and between Adam Diasti, D.D.S. and Coast Dental
Services, Inc...............................................
10.13*** -- Loan Commitment Letter dated December 11, 1996 between Coast
Dental Services, Inc. and Barrett Bank, N.A.-Tampa filed as
Exhibit 4.3 to the Registration Statement and incorporated
herein by reference.........................................
</TABLE>

II-3
<PAGE> 102

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- -------- ----------------------
<C> <S> <C>
16.1*** -- Letter from KPMG Peat Marwick LLP...........................
23.1*** -- Consent of Shumaker, Loop & Kendrick LLP (included in their
opinion filed as Exhibit 5.1)...............................
23.2 -- Consent of Deloitte & Touche LLP independent certified
public accountants..........................................
27.1** -- Financial Data Schedule for year ended December 31, 1995
(for SEC use only)..........................................
27.2** -- Financial Data Schedule for nine months ended September 30,
1996 (for SEC use only).....................................
</TABLE>

- ---------------

* Previously filed as an exhibit with the same exhibit number identification
in the Company's Registration Statement on Form S-1 filed on October 7, 1996
(File No. 333-13613) and incorporated herein by reference.
** Previously filed as an exhibit with the same exhibit number identification
in the Company's Amendment No. 1 to Form S-1 Registration Statement filed on
November 12, 1996 and incorporated herein by reference.

*** Previously filed as an exhibit with the same exhibit number identification
in the Company's Amendment No. 4 to Form S-1 Registration Statement filed on
January 21, 1997 and incorporated herein by reference.

(b) FINANCIAL STATEMENT SCHEDULES

All other schedules are omitted because the required information is not
present or is not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements or notes thereto or the schedule is not required or inapplicable
under the related instructions.

ITEM 17. UNDERTAKINGS.

(a) The undersigned Registrant hereby undertakes to provide to the
underwriters at the closing specified in the underwriting agreement,
certificates in such denominations and registered in such names as required by
the underwriters to permit prompt delivery to each purchaser.

(b) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(1) For purposes of determining any liability under the Securities
Act, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(2) For purposes of determining any liability under the Securities
Act, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 103

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Tampa, State of Florida
on February 10, 1997.

COAST DENTAL SERVICES, INC.

By: /s/ DR. TEREK DIASTI, DVM
------------------------------------
Dr. Terek Diasti, DVM
Chief Executive Officer

By: /s/ JOSEPH R. SMITH
------------------------------------
Joseph R. Smith,
Chief Financial Officer
(Principal Accounting Officer
and Principal Financial Officer)

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 10, 1997.

<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>

/s/ DR. TEREK DIASTI, DVM Chief Executive Officer and Chairman of the
- ----------------------------------------------------- Board
Dr. Terek Diasti, DVM

* President, Chief Operating Officer and
- ----------------------------------------------------- Director
Dr. Adam Diasti

/s/ JOSEPH R. SMITH Chief Financial Officer, Secretary, Treasurer
- ----------------------------------------------------- and Director
Joseph R. Smith

*By /s/ DR. TEREK DIASTI, DVM as attorneys in fact pursuant to the power of
------------------------------------------------ attorney included in the Registration
Dr. Terek Disasti, DVM Statement as originally filed on October 7,
1996.

/s/ JOSEPH R. SMITH
-------------------------------------------------
Joseph R. Smith
</TABLE>

II-5
<PAGE> 104

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
- ------- -------------------
<C> <C> <S> <C>
1.1*** -- Form of Underwriting Agreement.
2.1** -- Asset Purchase Agreement dated April 1, by and among Adam
Diasti, D.D.S., P.A., Coast Dental Services, Inc., Richard
J. Shawn D.M.D., P.A., East Coast Dental Management, Inc.
and Richard J. Shawn, D.M.D.................................
2.2** -- Asset Purchase Agreement dated October 31, 1996 by and among
Coast Florida P.A., Coast Dental Services, Inc., Seminole
Dental Services, Inc., Seminole Dental Center, Seminole
Dental West, Seminole Dental South, Michael D. Witcher,
D.D.S., P.A., Milo R. Novotny, D.D.S., P.A., and C.M.
Garcia, D.M.D., P.A.........................................
3.1 -- Restated Certificate of Incorporation of Coast Dental
Services, Inc...............................................
3.2* -- Bylaws of Coast Dental Services, Inc........................
4.1* -- Specimen of Coast Dental Services, Inc. Common Stock
Certificate.................................................
4.2* -- Business Loan Agreement dated August 15, 1996 between Coast
Dental Services, Inc. and Barnett Bank, N.A. (Previously
filed as Exhibit 10.9 to the Company's Registration
Statement on Form S-1 filed on October 7, 1996 (File No.
333-13613) and incorporated herein by reference.
4.3*** -- Loan Commitment Letter dated December 11, 1996 between Coast
Dental Services, Inc. and Barrett Bank, N.A.-Tampa..........
(The Company is not filing any instrument with respect to
long-term debt that does not exceed 10 percent of the total
assets of the Company and the Company agrees to furnish a
copy of such instrument to the Commission upon request.)
5.1*** -- Opinion of Shumaker, Loop & Kendrick, LLP as to the Common
Stock being registered......................................
10.1** -- Employment Agreement between Coast Dental Services, Inc. and
Terek Diasti................................................
10.2** -- Employment Agreement between Coast Dental Services, Inc. and
Adam Diasti, D.D.S..........................................
10.3* -- Employment Agreement between Coast Dental Services, Inc. and
Joseph R. Smith.............................................
10.4* -- Coast Dental Services, Inc. Stock Option Plan...............
10.5* -- Coast Dental Services, Inc. Affiliated Professional Stock
Plan........................................................
10.6* -- Services and Support Agreement dated October 1, 1996 between
Coast Dental Services, Inc. and Coast Florida, P.A..........
10.7* -- Asset Purchase Agreement dated April 1, 1996 by and among
Adam Diasti, D.D.S., P.A., Coast Dental Services, Inc.,
Richard J. Shawn D.M.D., P.A., East Coast Dental Management,
Inc. and Richard J. Shawn, D.M.D., filed as Exhibit 2.1 to
this Registration Statement and incorporated herein by
reference...................................................
10.8* -- Promissory Note from Adam Diasti, DDS, P.A., dated June 30,
1996, payable to Coast Dental Services, Inc.................
10.9* -- Business Loan Agreement dated August 15, 1996 between Coast
Dental Services, Inc. and Barnett Bank, N.A.................
10.10* -- Form of Indemnification Agreement with officers and
directors...................................................
</TABLE>

<PAGE> 105

<TABLE>
<C> <C> <S> <C>
10.11** -- Asset Purchase Agreement dated October 31, 1996 by and among Coast Florida P.A., Coast
Dental Services, Inc., Seminole Dental Services, Inc., Seminole Dental Center, Seminole
Dental West, Seminole Dental South, Michael D. Witcher, D.D.S., P.A., Milo R. Novotny,
D.D.S. P.A., and C.M. Garcia D.M.D. P.A., filed as Exhibit 2.2 to this Registration
Statement and incorporated herein by reference.........................................
10.12** -- Agreement to Transfer Stock and Stock Pledge dated November 1, 1996, by and between
Adam Diasti, D.D.S. and Coast Dental Services, Inc.....................................
10.13*** -- Loan Commitment Letter dated December 11, 1996 between Coast Dental Services, Inc. and
Barrett Bank, N.A.-Tampa filed as Exhibit 4.3 to the Registration Statement and
incorporated herein by reference.......................................................
16.1*** -- Letter from KPMG Peat Marwick LLP......................................................
23.1*** -- Consent of Shumaker, Loop & Kendrick, LLP (included in their opinion filed as Exhibit
5.1)...................................................................................
23.2 -- Consent of Deloitte & Touche LLP independent certified public accountants..............
27.1** -- Financial Data Schedule for year ended December 31, 1995 (for SEC use only)............
27.2** -- Financial Data Schedule for nine months ended September 30, 1996 (for SEC use only)....
</TABLE>

- ---------------

* Previously filed as an exhibit with the same exhibit number identification
in the Company's Registration Statement on Form S-1 filed on October 7,
1996 (File No. 333-13613) and incorporated herein by reference.
** Previously filed as an exhibit with the same exhibit number identification
in the Company's Amendment No. 1 to Form S-1 Registration Statement filed
on November 12, 1996 and incorporated herein by reference.

*** Previously filed as an exhibit with the same exhibit number identification
in the Company's Amendment No. 4 to Form S-1 Registration Statement filed
on January 21, 1997 and incorporated herein by reference.

<PAGE> 1

Exhibit 3.1

RESTATED
CERTIFICATE OF INCORPORATION
OF
COAST DENTAL SERVICES, INC.

Coast Dental Services, Inc., a corporation organized and existing
under the General Corporation Law of the State of Delaware (the "Corporation"),
does hereby certify:

I. The name of the Corporation is Coast Dental Services, Inc. and
the Corporation was originally incorporated under the same name, and the
original Certificate of Incorporation, a Restated Certificate of Incorporation
(First), and a Restated Certificate of Incorporation (Second) of the
Corporation were filed with the Secretary of State of the State of Delaware on
September 12, 1995, October 1, 1996, and October 18, 1996, respectively.

II. Pursuant to Section 242 and 245 of the General Corporation
Laws of the State of Delaware ("GCL"), this Restated Certificate of
Incorporation restates and integrates and further amends the provisions of the
October 18, 1996 Restated Certificate of Incorporation of the Corporation, and
has been consented to in writing by the Board of Directors and the stockholders
of the Corporation. This Restated Certificate of Incorporation is amended
primarily to provide for an increase in the number of authorized shares of
common stock and its par value without any affect on the outstanding shares
except for par value.

III. The text of the October 18, 1996 Restated Certificate of
Incorporation as heretofore amended or supplemented is hereby restated and
further amended to read in its entirety as follows:

1. NAME. The name of the Corporation is COAST DENTAL
SERVICES, INC.

2. ADDRESS AND REGISTERED AGENT. The address of the
Corporation's registered office in the State of Delaware is 1209 Orange Street,
in the City of Wilmington, County of New Castle. The name of its registered
agent at such address is The Corporation Trust Company.

3. PURPOSE. The purpose of the Corporation is to engage
in any lawful act or activity for which a corporation may be organized under
the GCL.

4. AUTHORIZED SHARES. The total number of shares of all
classes of Capital Stock which the Corporation shall have the authority to
issue is 52,000,000 shares, consisting of (i) 50,000,000 shares of common
stock, $.001 par value per share (the "Common Stock"), and (ii) 2,000,000
shares of preferred stock, $.001 par value per share (the "Preferred Stock").
The designation, powers, preferences and relative participating, optional or
other special rights and the qualifications, limitations and restrictions
thereof in respect of each class of Capital Stock of the Corporation are as
follows:

A. COMMON STOCK. Each holder of record of
shares of Common Stock shall be entitled to vote at all meetings of
the stockholders and shall have one vote for each share held by him of
record. Subject to the prior

<PAGE> 2

rights of the holders of all classes or series of stock at the time
outstanding having prior rights as to dividends, the holders of shares
of Common Stock shall be entitled to receive, when and as declared by
the Board of Directors of the Corporation (the "Board of Directors"),
out of the assets of the Corporation legally available therefor, such
dividends as may be declared from time to time by the Board of
Directors.

B. PREFERRED STOCK. Subject to the
terms contained in any designation of a series of Preferred Stock, the
Board of Directors is expressly authorized, at any time and from time
to time, to fix, by resolution or resolutions, the following
provisions for shares of any class or classes of Preferred Stock of
the Corporation or any series of any class of Preferred Stock:

(1) the designation of such class or
series, the number of shares to constitute such class or
series which may be increased or decreased (but not below the
number of shares of that class or series then outstanding) by
resolution of the Board of Directors, and the stated value
thereof if different from the par value thereof;

(2) whether the shares of such class or
series shall have voting rights, in addition to any voting
rights provided by law, and, if so, the terms of such voting
rights;

(3) the dividends, if any, payable on
such class or series, whether any such dividends shall be
cumulative, and, if so, from what dates, the conditions and
dates upon which such dividends shall be payable, the
preference or relation which such dividends shall bear to the
dividends payable on any shares of stock of any other class or
any other series of the same class;

(4) whether the shares of such class or
series shall be subject to redemption by the Corporation, and,
if so, the times, prices and other conditions of such
redemption;

(5) the amount or amounts payable upon
shares of such series upon, and the rights of the holders of
such class or series in, the voluntary or involuntary
liquidation, dissolution or winding up, or upon any
distribution of the assets, of the Corporation;

(6) whether the shares of such class or
series shall be subject to the operation of a retirement or
sinking fund and, if so, the extent to and manner in which any
such retirement or sinking fund shall be applied to the
purchase or redemption of the shares of such class or series
for retirement or other corporate purposes and the terms and
provisions relative to the operation thereof;

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<PAGE> 3

(7) whether the shares of such class or
series shall be convertible into, or exchangeable for, shares
of stock of any other class or any other series of the same
class or any other securities and, if so, the price or prices
or the rate or rates of conversion or exchange and the method,
if any, of adjusting the same, and any other terms and
conditions of conversion or exchange;

(8) the limitations and restrictions, if
any, to be effective while any shares of such class or series
are outstanding upon the payment of dividends or the making of
other distributions on, and upon the purchase, redemption or
other acquisition by the Corporation of, the Common Stock or
shares of stock of any other class or any other series of the
same class;

(9) the conditions or restrictions, if
any, upon the creation of indebtedness of the Corporation or
upon the issue of any additional stock, including additional
shares of such class or series or of any other series of the
same class or of any other class;

(10) the ranking (be it pari passu,
junior or senior) of each class or series vis-a-vis any other
class or series of any class of Preferred Stock as to the
payment of dividends, the distribution of assets and all other
matters; and

(11) any other powers, preferences and
relative, participating, optional and other special rights,
and any qualifications, limitations and restrictions thereof,
insofar as they are not inconsistent with the provisions of
this Restated Certificate of Incorporation, to the full extent
permitted in accordance with the laws of the State of
Delaware.

The powers, preferences and relative, participating, optional and
other special rights of each class or series of Preferred Stock, and
the qualifications, limitations or restrictions thereof, if any, may
differ from those of any and all other series at any time
outstanding.'"

5. NAME AND MAILING ADDRESS OF INCORPORATOR. The name
and mailing address of the incorporator is Terek Diasti, 25400 U.S. Highway 19,
Suite 225, Clearwater, Florida 34623.

6. NAMES AND MAILING ADDRESSES OF DIRECTORS. The powers
of the incorporator of the Corporation terminated upon the filing of the
original Certificate of Incorporation with the Secretary of State of the State
of Delaware and the names of the persons who serve as directors of the
Corporation until their successors are elected and qualify are as follows:

Dr. Terek Diasti
25400 U.S. Highway 19
Suite 225
Clearwater, Florida 34623

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<PAGE> 4

Dr. Adam Diasti
25400 U.S. Highway 19
Suite 225
Clearwater, Florida 34623

7. BOARD OF DIRECTORS.

A. NUMBER, CLASS AND TERM. The business and
affairs of the Corporation shall be managed by or under the direction
of a Board of Directors consisting of not less than two nor more than
fifteen directors, the exact number of directors to be determined from
time to time by resolution adopted by the affirmative vote of a
majority of the directors then in office. The Board of Directors
shall be divided into three classes, designated Class I, Class II and
Class III. Each class shall consist, as nearly as may be possible, of
one-third of the total number of directors constituting the entire
Board of Directors. Immediately following the filing of the
Certificate of Incorporation with the Secretary of State of the State
of Delaware, Terek Diasti was designated to serve as Class I director
for a two-year term and Adam Diasti shall be designated to serve as
Class II director for a three-year term. At each annual meeting of
stockholders beginning in 1996, successors to the class of directors
whose term expires at that annual meeting shall be elected for a
three-year term. If the number of directors is changed, any increase
or decrease shall be apportioned among the classes so as to maintain
the number of directors in each class as nearly equal as possible, but
in no case shall a decrease in the number of directors shorten the
term of any incumbent director. A director shall hold office until
the annual meeting for the year in which his term expires and until
his successor shall be elected and shall qualify, subject, however, to
prior death, resignation, retirement, disqualification or removal from
office.

B. VACANCIES. Subject to the rights of holders
of any series of Preferred Stock then outstanding, any vacancy on the
Board of Directors that results from an increase in the number of
directors may be filled by a majority of the Board of Directors then
in office, provided that a quorum is present, and any other vacancy
occurring in the Board of Directors may be filled by a majority of the
directors then in office, even if less than a quorum is present, or by
a sole remaining director. Any director of any class elected to fill
a vacancy resulting from an increase in such class shall hold office
for a term that shall coincide with the remaining term of that class.
Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that
of his predecessor.

C. REMOVAL. Subject to the rights of holders of
any series of Preferred Stock then outstanding, any director or the
entire Board of Directors, may be removed from office at any time, but
only for cause by an affirmative vote of the holders of a majority of
the then outstanding shares of Voting Stock (as defined in Section
11); provided, however, that if a proposal to remove a director for
cause is made by or on behalf of an Interested Stockholder (as defined
in Section 11) or a director affiliated with an Interested
Stockholder, then, such

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<PAGE> 5

removal shall require the affirmative vote of the holders of a
majority of the Disinterested Shares (as hereinafter defined). For
the purposes of this Section 7(C), "Disinterested Shares" means, as to
any Interested Stockholder, shares of Voting Stock held by
stockholders other than such Interested Stockholder.

D. RIGHTS OF PREFERRED STOCK. Notwithstanding
the foregoing, whenever the holders of any one or more classes or
series of Preferred Stock issued by the Corporation shall have the
right, voting separately by class or series, to elect directors at an
annual or special meeting of stockholders, the election, term of
office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Restated Certificate of
Incorporation applicable thereto, and such directors so elected shall
not be divided into classes pursuant to this Section 7 unless
expressly provided by such terms.

E. BALLOT. Election of directors need not be by
ballot unless the By-Laws so provide.

F. POWERS. In addition to the powers and
authorities hereinabove or by statute expressly conferred upon them,
the directors are hereby empowered to exercise all such powers and do
all such acts and things as may be exercised or done by the
Corporation; subject, nevertheless, to the provisions of the statutes
of Delaware, of this Restated Certificate of Incorporation, and to any
By-Laws from time to time made by the stockholders; provided,
however, that no By-Law so made shall invalidate any prior act of the
directors which would have been valid if such By-Law had not been
made.

G. CHANGES. The Board of Directors shall have
the concurrent power with the stockholders to make, alter, amend,
change, add to or repeal (collectively referred to as a "Change") the
By-Laws of the Corporation; provided, however, that any Change of the
By-Laws must be approved either by (i) a majority of the authorized
number of directors and, if one or more Interested Stockholders exist,
by a majority of the directors who are Continuing Directors (as
defined in Section 11), or (ii) the affirmative vote of the holders of
not less than eighty percent (80%) of the then outstanding shares of
Voting Stock and, if the Change is proposed by or on behalf of an
Interested Stockholder or a director affiliated with an Interested
Stockholder, by the affirmative vote of the holders of a majority of
the Disinterested Shares.

8. COMPROMISE. Whenever a compromise or arrangement is
proposed between the Corporation and its creditors or any class of them and/or
between the Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware, may, on the application
(in a summary way) of the Corporation or of any creditor of receivers appointed
for the Corporation under the provisions of Section 291 of the GCL or on the
application of trustees in dissolution or of any receiver or receivers
appointed for the Corporation under the provisions of Section 279 of the GCL
order a meeting of the creditors or class of creditors, and/or of the
stockholders of the Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-

-5-

<PAGE> 6

fourths (3/4) in value of the creditors or class of creditors, and/or of
the stockholders or class of stockholders of the Corporation, as the case may
be, agree to any compromise or arrangement and to any reorganization of the
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the said reorganization shall, if sanctioned by
the court to which the said application has been made, be binding on all the
creditors or class of creditors, and/or on all the stockholders or class of
stockholders, of the Corporation, as the case may be, and also on the
Corporation.

9. WRITTEN ACTION. If the outstanding shares of the
Common Stock are held of record by more than twenty-five (25) shareholders,
then no action required or permitted to be taken at any annual or special
meeting of stockholders of the Corporation may be taken by written consent
without a meeting of such stockholders.

10. LIABILITY FOR MONETARY DAMAGES. No director shall be
personally liable to the Corporation or its stockholders for monetary damages
for any breach of fiduciary duty by such director as a director.
Notwithstanding the foregoing sentence, a director shall be liable to the
extent provided by applicable law (i) for breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the GCL or (iv) for any transaction from
which the director derived an improper personal benefit. No amendment to or
repeal of this Section 10 shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with respect to any
acts or omission of such director occurring prior to such amendment.

11. BUSINESS COMBINATION.

A. SPECIAL VOTE BY STOCKHOLDERS. In addition to
any affirmative vote required by law or this Restated Certificate of
Incorporation or the By-Laws of the Corporation, and except as
otherwise expressly provided in Section 11(B) of this Restated
Certificate of Incorporation, a Business Combination (as hereinafter
defined) with, or proposed by or on behalf of, any Interested
Stockholder (as hereinafter defined) or any Affiliate or Associate (as
hereinafter defined) of any Interested Stockholder or any person who
thereafter would be an Affiliate or Associate of such Interested
Stockholder shall require the affirmative vote of not less than
sixty-six and two thirds percent (66 2/3%) of the votes entitled to be
cast by the holders of all the then outstanding shares of Voting
Stock, voting together as a single class, excluding Voting Stock
beneficially owned by such Interested Stockholder. Such affirmative
vote shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage or separate class vote may be
specified, by law or in any agreement with any national securities
exchange or otherwise.

B. REGULAR VOTE BY STOCKHOLDERS. The provisions
of Section 11(A) of this Restated Certificate of Incorporation shall
not be applicable to any particular Business Combination, and such
Business Combination shall require only such affirmative vote, if any,
as is required by law or by any other provision of this Restated
Certificate of Incorporation or the By-Laws of the Corporation, or any
agreement with any national securities exchange, if all of the

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<PAGE> 7

conditions specified in either of the following Section 11(B)(1) or
(B)(2) are met, or in the case of a Business Combination not involving
the payment of consideration to the holders of the Corporation's
outstanding Capital Stock (as hereinafter defined), if the conditions
specified in the following Section 11(B)(1) are met:

(1) The Business Combination shall have
been approved either specifically or as a transaction which is
within an approved category of transactions, by a majority
(whether such approval is made prior to or subsequent to the
acquisition of, or announcement or public disclosure of the
intention to acquire, beneficial ownership of the Voting Stock
that caused the Interested Stockholder to become an Interested
Stockholder) of the Continuing Directors (as hereinafter
defined).

(2) All of the following conditions
shall have been met:

(a) The aggregate amount of cash
and the Fair Market Value (as hereinafter defined),
as of the date of the consummation of the Business
Combination, of consideration other than cash to be
received per share by holders of Common Stock in such
Business Combination shall be at least equal to the
highest amount determined under the following clauses
(i) and (ii): (i) (if applicable) the highest per
share price (including any brokerage commissions,
transfer taxes and soliciting dealers' fees) paid by
or on behalf of the Interested Stockholder for any
share of Common Stock in connection with the
acquisition by the Interested Stockholder of
beneficial ownership of shares of Common Stock (x)
within the two-year period immediately prior to the
first public announcement of the proposed Business
Combination (the "Announcement Date") or (y) in the
transaction in which it became an Interested
Stockholder, whichever is higher, in either case as
adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with
respect to the Common Stock; and (ii) the Fair Market
Value per share of Common Stock on the Announcement
Date or on the date on which the Interested
Stockholder became an Interested Stockholder (the
"Determination Date"), whichever is higher, as
adjusted for any subsequent stock split, stock
dividend, subdivision or reclassification with
respect to the Common Stock.

(b) The aggregate amount of cash
and the Fair Market Value, as of the date of the
consummation of the Business Combination, of
consideration other than cash to be received per
share by holders of shares of any class or series of
outstanding Capital Stock, other than Common Stock,
shall be at least equal to the highest amount
determined under the following clauses (i), (ii) and
(iii): (i) (if applicable) the highest per share
price (including any brokerage commissions, transfer
taxes and soliciting dealers'

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<PAGE> 8

fees) paid by or on behalf of the Interested
Stockholder for any share of such class or series of
Capital Stock in connection with the acquisition by
the Interested Stockholder of beneficial ownership of
shares of such class or series of Capital Stock (x)
within the two-year period immediately prior to the
Announcement Date, or (y) in the transaction in which
it became an Interested Stockholder, whichever is
higher, in either case as adjusted for any subsequent
stock split, stock dividend, subdivision or
reclassification with respect to such class or series
of Capital Stock; (ii) the Fair Market Value per
share of such class or series of Capital Stock on the
Announcement Date or on the Determination Date,
whichever is higher, as adjusted for any subsequent
stock split, stock dividend, subdivision or
reclassification with respect to such class or series
of Capital Stock; and (iii) (if applicable) the
highest preferential amount per share to which the
holders of shares of such class or series of Capital
Stock would be entitled in the event of any voluntary
or involuntary liquidation, dissolution or winding up
of the affairs of the Corporation regardless of
whether the Business Combination to be consummated
constitutes such an event.

(c) The consideration to be
received by holders of a particular class or series
of outstanding Capital Stock shall be in cash or in
the same form as previously has been paid by or on
behalf of the Interested Stockholder in connection
with its direct or indirect acquisition of beneficial
ownership of shares of such class or series of
Capital Stock. If the consideration so paid for
shares of any class or series of Capital Stock varied
as to form, the form of consideration for such class
or series of Capital Stock shall be either cash or
the form used to acquire beneficial ownership of the
largest number of shares of such class or series of
Capital Stock previously acquired by the Interested
Stockholder.

(d) After the Determination Date
and prior to the consummation of such Business
Combination: (i) except as approved by a majority of
the Continuing Directors, there shall have been no
failure to declare and pay at the regular date
therefor any full quarterly dividends (whether or not
cumulative) payable in accordance with the terms of
any outstanding Capital Stock; (ii) there shall have
been no reduction in the annual rate of dividends
paid on the Common Stock (except as necessary to
reflect any stock split, stock dividend or
subdivision of the Common Stock) except as approved
by a majority of the Continuing Directors; (iii)
there shall have been an increase in the annual rate
of dividends paid on the Common Stock as necessary to
reflect any reclassification (including any reverse
stock split), recapitalization, reorganization or any
similar transaction that has the effect of reducing
the number of outstanding shares of Common Stock,
unless the failure so to increase such annual rate is
approved

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<PAGE> 9

by a majority of the Continuing Directors; and (iv)
such Interested Stockholder shall not have become the
beneficial owner of any additional shares of
Capital Stock except as part of the transaction that
results in such Interested Stockholder becoming an
Interested Stockholder and except in a transaction
that, after giving the effect thereto, would not
result in any increase in the Interested
Stockholder's percentage beneficial ownership of any
class or series of Capital Stock.

(e) After the Determination Date, such
Interested Stockholder shall not have received the
benefit, directly or indirectly (except
proportionately as a stockholder of the Corporation),
of any loans, advances, guarantees, pledges or other
financial assistance or any tax credits or other tax
advantages provided by the Corporation, whether in
anticipation of or in connection with such Business
Combination or otherwise.

(f) A proxy or information statement
describing the proposed Business Combination and
complying with the requirements of the Securities
Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act") (or any
subsequent provisions replacing such Exchange Act,
rules or regulations) shall be mailed to all
stockholders of the Corporation at least 30 days
prior to the consummation of such Business
Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such
Exchange Act or subsequent provisions). The proxy or
information statement shall contain on the first page
thereof, in a prominent place, any statement as to
the advisability (or inadvisability) of the Business
Combination that the Continuing Directors, or any of
them, may choose to make and, if deemed advisable by
a majority of the Continuing Directors, the opinion
of an investment banking firm selected by a majority
of the Continuing Directors as to the fairness (or
unfairness) of the terms of the Business Combination
from a financial point of view to the holders of the
outstanding shares of Capital Stock other than the
Interested Stockholder and its Affiliates or
Associates, such investment banking firm to be paid a
reasonable fee for its services by the Corporation.

(g) Such Interested Stockholder shall
not have made any major change in the Corporation's
business or equity capital structure without the
approval of a majority of the Continuing Directors.

The provisions of this Section 11(B) shall be required to be
met with respect to every class or series of outstanding
Capital Stock, whether or not the Interested Stockholder has
previously acquired beneficial ownership of any shares of a
particular class or series of Capital Stock.

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<PAGE> 10

C. DEFINITIONS. The following definitions shall
apply with respect to this Section 11:

(1) The term "Business Combination" shall mean:
(i) any merger or consolidation of the Corporation or any
Subsidiary (as hereinafter defined) with (x) any Interested
Stockholder or (y) any other corporation (whether or not
itself an Interested Stockholder) which is or after such
merger or consolidation would be an Affiliate or Associate of
an Interested Stockholder; (ii) any sale, lease, exchange,
mortgage, pledge, transfer or other disposition or security
arrangement, investment, loan, advance, guarantee, agreement
to purchase, agreement to pay, extension of credit, joint
venture participation or other arrangement (in one transaction
or a series of transactions) with or for the benefit of any
Interested Stockholder or any Affiliate or Associate of any
Interested Stockholder which, together with all other such
arrangements (including all contemplated future events), has
an aggregate Fair Market Value and/or involves aggregate
commitments of $1,000,000 or more or constitutes more than
five percent (5%) of the book value of the total assets (in
the case of transactions involving assets or commitments other
than Capital Stock) or five percent (5%) of the stockholders'
equity (in the case of transactions in Capital Stock) of the
entity in question (the "Substantial Part"), as reflected in
the most recent fiscal year-end consolidated balance sheet of
such entity existing at the time the stockholders of the
Corporation would be required to approve or authorize the
Business Combination involving the assets, securities and/or
commitments constituting any Substantial Part; (iii) the
adoption of any plan or proposal for the liquidation or
dissolution of the Corporation or for any amendment to the
Corporation's By-Laws or to this Restated Certificate of
Incorporation proposed by or on behalf of an Interested
Stockholder or any Affiliate or Associate of any Interested
Stockholder; (iv) any reclassification of securities
(including any reverse stock split), or recapitalization of
the Corporation, or any merger or consolidation of the
Corporation with any of its Subsidiaries or any other
transaction (whether or not with or otherwise involving an
Interested Stockholder) that has the effect, directly or
indirectly, of increasing the proportionate share of any class
or series of Capital Stock, or any securities convertible into
Capital Stock or into equity securities of any Subsidiary,
that is beneficially owned by any Interested Stockholder or
any Affiliate or Associate of any Interested Stockholder; or
(v) any agreement, contract or other arrangement providing for
any one or more of the actions specified in the foregoing
clauses (i) to (iv).

(2) The term "Capital Stock" shall mean all
Capital Stock of the Corporation authorized to be issued from
time to time under Section 4 of this Restated Certificate of
Incorporation, and the term "Voting Stock" shall mean all
Capital Stock which by its terms may be voted on all matters
submitted to stockholders of the Corporation generally.

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<PAGE> 11

(3) The term "person" shall mean any individual,
firm, corporation or other entity and shall include any group
comprised of any person and any other person with whom such
person or any Affiliate or Associate of such person has any
agreement, arrangement or understanding, directly or
indirectly, for the purpose of acquiring, holding, voting or
disposing of Capital Stock.

(4) The term "Interested Stockholder" shall mean
any person (other than the Corporation or any Subsidiary and
other than any profit-sharing, employee stock ownership or
other employee benefit plan of the Corporation or any
Subsidiary or any trustee of or fiduciary with respect to any
such plan when acting in such capacity or any stockholder of
the Corporation prior to the adoption of this Restated
Certificate of Incorporation) who (a) is or has announced or
publicly disclosed a plan or intention to become the
beneficial owner of Voting Stock representing ten percent
(10%) or more of the votes entitled to be cast by the holders
of all then outstanding shares of Voting Stock; or (b) is an
Affiliate or Associate (other than any stockholder prior to
the adoption of this Restated Certificate of Incorporation) of
the Corporation and at any time within the two-year period
immediately prior to the date in question was the beneficial
owner of Voting Stock representing ten percent (10%) or more
of the votes entitled to be cast by the holders of all then
outstanding shares of Voting Stock.

(5) A person shall be a "beneficial owner" of any
Capital Stock (a) which such person or any of its Affiliates
or Associates beneficially owns, directly or indirectly; (b)
which such person or any of its Affiliates or Associates has,
directly or indirectly, (i) the right to acquire (whether such
right is exercisable immediately or subject only to the
passage of time) pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (ii)
the right to vote pursuant to any agreement, arrangement or
understanding; or (c) which is beneficially owned, directly or
indirectly, by any other person with which such person or any
of its Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Capital Stock. For the purpose
of determining whether a person is an Interested Stockholder
pursuant to Section 11(C)(4) of this Restated Certificate of
Incorporation, the number of shares of Capital Stock deemed to
be outstanding shall include shares deemed beneficially owned
by such person through application of this Section 11(C)(5),
but shall not include any other shares of Capital Stock that
may be issuable pursuant to any agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants
or options, or otherwise.

(6) The terms "Affiliate" and "Associate" shall
have the respective meanings ascribed to such terms in Rule
12b-2 under the Exchange Act as in effect on the date of
filing of this Restated Certificate

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<PAGE> 12

of Incorporation with the Secretary of State of the State
of Delaware (the term "registrant" in said Rule 12b-2 meaning
in this case the Corporation).

(7) The term "Subsidiary" means any company of
which a majority of any class of equity security is
beneficially owned by the Corporation; provided, however, that
for purposes of the definition of Interested Stockholder set
forth in Section 11(C)(4) of this Restated Certificate of
Incorporation, the term "Subsidiary" shall mean only a company
of which a majority of each class of equity security is
beneficially owned by the Corporation.

(8) CONTINUING DIRECTOR. The term "Continuing
Director means any member of the Board of Directors, while
such person is a member of the Board of Directors, who is not
an Affiliate or Associate or representative of the Interested
Stockholder and was a member of the Board of Directors prior
to the time that an Interested Stockholder became an
Interested Stockholder, and any successor of a Continuing
Director while such successor is a member of the Board of
Directors, who is not an Affiliate or Associate or
representative of the Interested Stockholder and is
recommended or elected to succeed the Continuing Director by a
majority of Continuing Directors.

(9) FAIR MARKET VALUE. The term "Fair Market
Value" means (a) in the case of cash, the amount of such cash;
(b) in the case of stock, the highest closing sale price
during the 30-day period immediately preceding the date in
question of a share of such stock on the Composite Tape for
New York Stock Exchange-Listed Stocks, or, if such stock is
not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on the New York
Stock Exchange, on the principal United States securities
exchange registered, or, if such stock is not listed on any
such exchange, the highest closing bid quotation with respect
to a share of such stock during the 30-day period preceding
the date in question on the National Association of Securities
Dealers, Inc. Automated Quotations Systems or any similar
system then in use, or, if no such quotations are available,
the fair market value on the date in question of a share of
such stock as determined by a majority of the Continuing
Directors in good faith; and (c) in the case of property other
than cash or stock, the Fair Market Value of such property on
the date in question as determined in good faith by a majority
of the Continuing Directors.

(10) In the event of any Business Combination in
which the Corporation survives, the phrase "consideration
other than cash to be received" as used in Sections
11(B)(2)(a) and 11(B)(2)(b) of this Restated Certificate of
Incorporation shall include the shares of Common Stock and/or
the shares of any other class or series of Capital Stock
retained by the holders of such shares.

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<PAGE> 13

(D) AUTHORITY. A majority of the Continuing Directors
shall have the power and duty to determine for the purpose of this
Section 11, on the basis of information known to them after reasonable
inquiry, all questions arising under this Section 11, including,
without limitation, (i) whether a person is an Interested Stockholder,
(ii) the number of shares of Capital Stock or other securities
beneficially owned by any person, (iii) whether a person is an
Affiliate or Associate of another, (iv) whether a Proposed Action (as
hereinafter defined) is with, or proposed by, or on behalf of an
Interested Stockholder or an Affiliate or Associate of an interested
Stockholder, (v) whether the assets that are the subject of any
Business Combination have, or the consideration to be received for the
issuance or transfer of securities by the Corporation or any
Subsidiary in any Business Combination has, an aggregated Fair Market
Value of $1,000,000 or more and (vi) whether the assets or securities
that are the subject of any Business Combination constitute a
Substantial Part. Any such determination made in good faith shall be
binding and conclusive on all parties.

(E) FIDUCIARY OBLIGATION. Nothing contained in this
Section 11 shall be construed to relieve any Interested Stockholder
from any fiduciary obligation imposed by law.

(F) NO DUTY TO APPROVE. The fact that any Business
Combination complies with the provisions of Section 11(B) of this
Restated Certificate of Incorporation shall not be construed to impose
any fiduciary duty, obligation or responsibility on the Board of
Directors, or any member thereof, to approve such Business Combination
or recommend its adoption or approval to the stockholders of the
Corporation, nor shall such compliance limit, prohibit or otherwise
restrict in any manner the Board of Directors, or any member thereof,
with respect to evaluations of, or actions and responses taken with
respect to, such Business Combination.

(G) PROPOSED ACTION. For the purposes of this Section
11, a Business Combination or any proposal to amend, repeal or adopt
any provision of this Restated Certificate of Incorporation
inconsistent with this Section 11 (collectively, "Proposed Action") is
presumed to have been proposed by, or on behalf of, an Interested
Stockholder or a person who thereafter would become such if (i) after
the Interested Stockholder became such, the Proposed Action is
proposed following the election of any director of the Corporation
who, with respect to such Interested Stockholder, would not qualify to
serve as a Continuing Director or (ii) such Interested Stockholder,
Affiliate, Associate or person votes for or consents to the adoption
of any such Proposed Action, unless as to such Interested Stockholder,
Affiliate, Associate or person, a majority of the Continuing Directors
makes a good-faith determination that such Proposed Action is not
proposed by or on behalf of such Interested Stockholder, Affiliate,
Associate or person, based on information known to them after
reasonable inquiry.

(H) AMENDMENT. Notwithstanding any other provisions of
this Restated Certificate of Incorporation or the By-Laws of the
Corporation (and notwithstanding the fact that a lesser percentage or
separate class vote may be

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<PAGE> 14

specified by law, this Restated Certificate of Incorporation or the
By-Laws of the Corporation), the affirmative vote of the holders of
not less than sixty-six and two thirds percent (66 2/3%) of the votes
entitled to be cast by the holders of all the then outstanding shares
of Voting Stock, voting together as a single class, excluding Voting
Stock beneficially owned by such Interested Stockholder, shall be
required to amend or repeal, or adopt any provisions inconsistent
with, this Section 11; provided, however, that this Section 11(H)
shall not apply to, and such sixty-six and two thirds percent (66
2/3%) vote shall not be required for, any amendment, repeal or
adoption unanimously recommended by the Board of Directors if all of
such directors are persons who would be eligible to serve as
Continuing Directors within the meaning of Section 11(C)(8) of this
Restated Certificate of Incorporation.

12. SPECIAL MEETING OF STOCKHOLDERS. Special meetings of
the stockholders of the Corporation for any purpose or purposes may be called
at any time by the Chairman of the Board, the President or by a majority of the
members of the Board of Directors; provided, however, that where a proposal
requiring stockholder approval is made by or on behalf of an Interested
Stockholder (as defined in Section 11 of this Restated Certificate of
Incorporation) or director affiliated with an Interested Stockholder, or where
an Interested Stockholder otherwise seeks action requiring stockholder
approval, then the affirmative vote of a majority of the Continuing Directors
(as defined in Section 11 of this Restated Certificate of Incorporation) shall
also be required to call a special meeting of stockholders for the purpose of
considering such proposal or obtaining such approval. Such special meeting may
not be called by any other person or persons or in any other manner.

13. CHANGES. The Corporation reserves the right to
Change (as defined in Section 7 of this Restated Certificate of Incorporation)
any provision contained in this Restated Certificate of Incorporation or in the
By-Laws of the Corporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are granted subject
to this reservation; provided, however, that subject to the powers and rights
provided for herein with respect to Preferred Stock issued by the Corporation,
if any, but notwithstanding anything else contained in this Restated
Certificate of Incorporation to the contrary, the affirmative vote of the
holders of at least eighty percent (80%) of the then outstanding shares of the
Voting Stock, voting together as a single class, shall be required to Change
Sections 7, 8, 9, 10 and 12 of this Certificate of Incorporation.

IN WITNESS WHEREOF, Coast Dental Services, Inc., has caused this
Restated Certificate of Incorporation to be executed by Joseph R. Smith, its
authorized officer, this 29th day of December, 1996.

COAST DENTAL SERVICES, INC.

By: \s\ Joseph R. Smith
---------------------------------
Joseph R. Smith
Chief Financial Officer

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<PAGE> 1

Exhibit 23.2

INDEPENDENT AUDITORS' CONSENT

We consent to the use in this Amendment No. 5 of Registration Statement No.
333-13613 of Coast Dental Services, Inc. on Form S-1 of our report relating to
the financial statements of Coast Dental Services, Inc. dated November 12, 1996
(except for Note 12 as to which the date is December 31, 1996), our report
relating to the combined financial statements of Richard J. Shawn DMD, P.A.
dated January 8, 1997, and our report relating to the combined financial
statements of Seminole Dental Center dated January 8, 1997 appearing in the
Prospectus, which is part of this Registration Statement.

We also consent to the reference to us under the headings "Selected Financial
Data" and "Experts" in such Prospectus.

DELOITTE & TOUCHE LLP

Tampa, Florida

February 10, 1997