Unaudited Pro Forma Condensed Combined Financial Information

The following unaudited pro forma condensed combined financial statements are derived from our historical combined financial statements and give effect to the sale of substantially all the assets of ApothecaryRx. The unaudited pro forma condensed combined balance sheet as of June 30, 2010 and the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2010 and the years ended December 31, 2009 and 2008 were prepared as if the sale had occurred on first day of the periods presented and removes the unaudited historical consolidated statements of operations for ApothecaryRx from the historical audited and unaudited consolidated statements of operations for the Company.

The unaudited pro forma condensed combined financial statements have been prepared for informational purposes only to show the effect of the removal of ApothecaryRx from the Company on a historical basis. These financial statements do not purport to be indicative of the financial position or operations that would have actually occurred had the sale of ApothecaryRx been completed at those dates, nor do they project expected results of operations or financial position for any future period or date.

The unaudited pro forma condensed combined financial statements do not reflect any adjustments for projected non-recurring costs associated with the sale of ApothecaryRx and does not incorporate any incremental cash or other assets or liabilities arising from the sale transaction. The final result of this transaction will be the discontinuation of this segment of the Company’s business.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of June 30, 2010

						Pro Forma
		Graymark				Adjustments				Pro Forma
ASSETS
Cash and cash equivalents		$	1,285,574			$	2,090,832			$	3,376,406
Accounts receivable, net			10,615,365				(7,136,634	)			3,478,731
Inventories			8,674,472				(8,090,372	)			584,100
Other current assets			1,658,607				(602,401				1,056,206
Total current assets			22,234,018				(14,353,948	)			7,880,070
Fixed assets, net			5,775,551				(897,316	)			4,878,235
Intangible assets, net			12,375,659				(6,617,965	)			5,757,694
Goodwill			33,606,032				(13,089,138	)			20,516,894
Other assets			435,563				—				435,563
Total assets		$	74,426,823			$	(34,342,994	)		$	40,083,829
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable		$	5,302,542			$	(4,532,295	)		$	770,247
Accrued liabilities			4,351,082				(2,932,213	)			1,418,869
Intercompany			—				—				—
Short-term debt			20,130				—				20,130
Current portion of long-term debt			1,658,864				(1,259,235	)			399,629
Total current liabilities			11,332,618				(8,723,743	)			2,608,875
Long-term debt net of current portion			45,269,551				(23,135,687	)			22,133,864
Total liabilities			56,602,169				(31,859,430	)			24,742,739
Shareholders’ Equity:
Common stock $0.0001 par value, 500,000,000 shares authorized			2,898				—				2,898
Paid-in capital			29,435,189				(1,000	)			29,434,189
Accumulated deficit			(11,647,227	)			(2,482,564	)			(14,129,791	)
Total Graymark Healthcare shareholders’ equity			17,790,860				(2,483,564	)			15,307,296
Non-controlling Interest			33,794				—				33,794
Total equity			17,824,654				(2,483,564	)			15,307,296
Total liabilities and shareholders’ equity		$	74,426,823			$	(34,342,994	)		$	40,083,829
Common shares issued and outstanding			28,997,997				—				28,997,997

See accompanying notes to unaudited pro forma condensed combined financial statements

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the Six Months Ended June 30, 2010

						Pro Forma
		Graymark				Adjustments				Pro Forma
Revenues		$	55,859,152			$	(43,836,051	)		$	12,023,101
Costs and expenses:
Cost of sales and services			36,926,923				(33,374,773	)			3,552,150
Selling, general and administrative			18,089,286				(8,694,414	)			9,394,872
Depreciation and amortization			1,216,061				(519,537	)			696,524
			56,232,270				(42,588,724	)			13,643,546
Net other (expense)			(1,192,852	)			622,166				(570,686	)
Income from continuing operations, before taxes			(1,565,970	)			(625,161	)			(2,191,131	)
Benefit (provision) for income taxes			(37,589	)			—				(37,589	)
Income from continuing operations, net of taxes			(1,603,559	)			(625,161	)			(2,228,720	)
Discontinued operations, net of taxes			4,576				—				4,576
Net income			(1,598,983	)			(625,161	)			(2,224,144	)
Less: Net income (loss) attributable to noncontrolling interest			(34,727	)			—				(34,727	)
Net income (loss) attributable to Graymark Healthcare		$	(1,564,256	)		$	(625,161	)		$	(2,189,417	)
Net income per share of common stock:
Basic and diluted		$	(0.05	)		$	(0.03	)		$	(0.08	)
Weighted average number of common shares outstanding:
Basic and diluted			28,997,997				—				29,997,997

See accompanying notes to unaudited pro forma condensed combined financial statements

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2009

						Pro Forma
		Graymark				Adjustments				Pro Forma
Revenues		$	107,240,840			$	(89,669,301	)		$	17,571,539
Costs and expenses:
Cost of sales and services			73,867,128				(68,344,196	)			5,522,932
Selling, general and administrative			34,246,548				(17,317,885	)			16,928,663
Depreciation and amortization			2,188,479				(1,114,347	)			1,074,132
			110,302,155				(86,776,428	)			23,525,727
Net other (expense)			(2,287,283	)			1,334,559				(952,724	)
Income from continuing operations, before taxes			(5,348,598	)			(1,558,314	)			(6,906,912	)
Benefit (provision) for income taxes			—				—				—
Income from continuing operations, net of taxes			(5,348,598	)			(1,558,314	)			(6,906,912	)
Discontinued operations, net of taxes			6,896				—				6,896
Net income			(5,341,702	)			(1,558,314	)			(6,900,016	)
Less: Net income (loss) attributable to noncontrolling interest			(153,806	)			—				(153,806	)
Net income (loss) attributable to Graymark Healthcare		$	(5,187,896	)		$	(1,558,314	)		$	(6,746,210	)
Net income per share of common stock:
Basic and diluted		$	(0.18	)		$	(0.06	)		$	(0.24	)
Weighted average number of common shares outstanding:
Basic and diluted			28,414,508				—				28,414,508

See accompanying notes to unaudited pro forma condensed combined financial statements

UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
For the Year Ended December 31, 2008

						Pro Forma
		Graymark				Adjustments				Pro Forma
Revenues		$	96,621,322			$	(81,329,158	)		$	15,292,164
Costs and expenses:
Cost of sales and services			67,803,667				(62,023,749	)			5,779,918
Selling, general and administrative			23,818,864				(16,273,854	)			7,545,010
Depreciation and amortization			1,571,292				(972,665	)			598,627
			93,193,823				(79,270,268	)			13,923,555
Net other (expense)			(2,055,063	)			1,358,882				(696,181	)
Income from continuing operations, before taxes			1,372,436				(700,008	)			672,428
Benefit (provision) for income taxes			(136,000	)			146,000				10,000
Income from continuing operations, net of taxes			1,236,436				(554,008	)			682,428
Discontinued operations, net of taxes			60,932				—				60,932
Net income			1,297,368				(554,008	)			743,360
Less: Net income (loss) attributable to noncontrolling interest			552,970				—				552,970
Net income (loss) attributable to Graymark Healthcare		$	744,398			$	(554,008	)		$	190,390
Net income per share of common stock:
Basic and diluted		$	0.03			$	(0.02	)		$	0.01
Weighted average number of common shares outstanding:
Basic and diluted			25,885,628				—				25,885,628

See accompanying notes to unaudited pro forma condensed combined financial statements

NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS

Note 1: BASIS FOR PRESENTATION

The pro forma condensed combined financial statements present the pro forma effects of the sale by Graymark Healthcare, Inc. (“Graymark”) of substantially all the fixed and intangible assets and inventory of ApothecaryRx, LLC (“Apothecary”) to Walgreen Co. (“Walgreens”) and the resulting discontinuation of the Apothecary segment. The transaction with Walgreens is an asset sale and will be recorded as a disposition of the assets sold. Any remaining assets and liabilities, which include accounts receivable and certain accounts payable and accrued liabilities will be included in discontinued operations.

The accompanying unaudited pro forma condensed combined financial statements are presented assuming the sale and discontinuation of the Apothecary segment occurred on the first day of the periods presented.

The historical information presented for Graymark (i) as of June 30, 2010 and the six months then ended is derived from the unaudited consolidated financial statements contained in our Quarterly Report on Form 10-Q and, (ii) December 31, 2009 and 2008 and the years then ended are derived from the audited consolidated financial statements contained in our Annual Reports on Form 10-K.

The pro forma financial information presented in the unaudited pro form condensed combined financial statements is not necessarily indicative of the financial position and results of operations that would have been achieved had the assets and liabilities of Apothecary been sold as of the first date of the periods presented. The results of operations presented in the unaudited pro forma condensed combined financial statements are not necessarily indicative of the results of future operations of Graymark following the consummation of the sale and subsequent discontinuation of the Apothecary segment.

(2) ADJUSTMENTS — SALE AND DISCONTINUED OPERATIONS OF APOTHECARY

The accompanying unaudited pro forma condensed combined financial statements have been adjusted to give effect to the sale and discontinued operations of the Apothecary segment as follows:

(a)

All asset, liability and equity amounts attributable to the Apothecary segment were adjusted out of the consolidated results of Graymark to reflect the sale and discontinuation of Apothecary.

(b)

Revenue, cost of sales, selling, general and administrative expenses and other revenue and expenses attributable to the Apothecary segment have been reduced from the consolidated results of Graymark to reflect the sale and discontinuation of the Apothecary segment as of the first day of the periods presented.

(c)

Certain expenses recorded as corporate expenses were reduced from the consolidated results of Graymark to reflect an estimate of the amounts related to the Apothecary segment. The total expense adjustment for these items is $259,019, $433,691 and $131,683 for the six months ended June 30, 2010 and the years ended December 31, 2009 and 2008 respectively.

(d)

Intercompany amounts due to Graymark from Apothecary in the amount of $2,049,392 as of June 30, 2010 was offset against cash and cash equivalents to reflect cash provided to Apothecary that would have been retained by Graymark had the sale and discontinuation of Apothecary occurred on the first day of the periods presented.

(3) ACCOUNTS RECEIVABLE, ACCOUNTS PAYABLE AND CERTAIN OTHER LIABILITIES

The accompanying unaudited pro forma condensed combined balance sheets have been adjusted to remove accounts receivable, accounts payable and certain other liabilities for historic presentation purposes. However Graymark is not selling and will retain the accounts receivable, accounts payable and certain other liabilities.

(4) TRANSACTION AND OTHER NON-RECURRING EXPENSES ASSOCIATED WITH THE SALE TRANSACTION

Graymark will incur certain material non-recurring costs and expense associated with the sale and discontinuation of Apothecary including broker and other advisory fees, separation costs, business wind down and inventory disposition costs, income and other tax expense and other costs and expenses of approximately $5.0 million. These costs and expenses are not included in the accompanying unaudited pro forma condensed combined financial statements.