Foundation Healthcare (FDNH) 8-K/A Financial Statements and Exhibits

Exhibit 99.5

UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION

     On August 24, 2009, we at Graymark Healthcare, Inc. (the “Company”), completed the purchase of the outstanding stock of somniTech, Inc. and somniCare, Inc. (collectively “Somni”) and on September 14, 2009, we completed the purchase of the outstanding stock of Avastra Eastern Sleep Centers, Inc. (“Eastern”). Somni and Eastern were purchased from AvastraUSA, Inc. and Avastra Sleep Centres Limited. (collectively “Avastra”). Somni provides diagnostic sleep testing services and treatment for sleep disorders at sleep diagnostic centers in Iowa, Kansas, Minnesota, Missouri, Nebraska and South Dakota. Eastern manages sleep diagnostic in Florida and New York. As purchase consideration for Somni, the Company paid Avastra cash of $5.9 million. As purchase consideration for Eastern, the Company paid Avastra cash of $3.2 million and issued Avastra 752,795 shares of our common stock which had a value of $1.5 million.

     The unaudited pro forma condensed combined balance sheet as of September 30, 2009 was prepared as if the acquisitions had occurred on that date and combines the historical consolidated balance sheet of the Company with the unaudited balance sheets of Somni and Eastern as of September 30, 2009. The unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2009 and the year ended December 31, 2008 were prepared as if the acquisition had occurred on the first day of the period presented and combines the historical consolidated statements of operations of the Company with the unaudited historical consolidated statements of operations of Somni and Eastern.

     The unaudited pro forma condensed combined financial statements have been prepared for informational purposes only, to show the effect of the combination of the Company, Somni and Eastern on a historical basis. These financial statements do not purport to be indicative of the financial position or results of operations that would have actually occurred had the business combination been in effect at those dates, nor do they project the 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 non-recurring items or anticipated synergies resulting from the acquisition. The purchase price allocation is not finalized, because the Company is still in the process of finalizing our estimates of fair value for property, equipment and intangible assets acquired. Accordingly, the Company has prepared the pro forma adjustments based on assumptions that the Company believes are reasonable but that are subject to change as additional information becomes available and the preliminary purchase price allocation is finalized.

UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
As of September 30, 2009

				Historical				Pro Forma		Pro Forma
	Graymark			Somni		Eastern		Adjustments		Combined
								(Notes 2-4)
ASSETS
Cash and cash equivalents	$	3,827,346		$	352,550	$	105,506	$	—	$	4,285,402
Accounts receivable, net		9,439,848			1,014,039		805,120		—		11,259,007
Inventories		8,559,861			73,318		—		—		8,633,179
Other current assets		474,258			16,361		167,087		—		657,706
Total current assets		22,301,313			1,456,268		1,077,713		—		24,835,294
Fixed assets, net		5,059,869			1,035,468		157,109		—		6,252,446
Intangible assets, net		7,701,898			—		—		—		7,701,898
Goodwill		29,694,923			4,930,761		3,657,557		—		38,283,241
Other assets		801,688			132,750		—		—		934,438
Total assets	$	65,559,691		$	7,555,247	$	4,892,379	$	—	$	78,007,317
LIABILITIES AND SHAREHOLDERS’ EQUITY
Liabilities:
Accounts payable	$	3,475,025		$	77,337	$	26,585	$	—	$	3,578,947
Accrued liabilities		4,274,457			199,799		72,271		—		4,546,527
Intercompany		(6,991,001	)		2,218,645		4,772,356		—		—
Short-term debt		127,500			—		—		—		127,500
Current portion of long-term debt		3,020,175			24,713		—		—		3,044,888
Total current liabilities		3,906,156			2,520,494		4,871,212		—		11,297,862
Long-term debt, net of current current portion		41,414,178			4,920,699		—		—		46,334,877
Total liabilities		45,320,334			7,441,193		4,871,212		—		57,632,739
Shareholders’ Equity:
Common stock $0.0001 par value, 500,000,000 shares authorized; 28,756,693 issued and outstanding outstanding		2,876			—		—		—		2,876
Paid-in capital		29,175,377			—		—		—		29,175,377
Accumulated deficit		(8,462,358	)		114,054		21,167		—		(8,327,137	)
Deferred compensation		(507,256	)		—		—		—		(507,256	)
Total Graymark Healthcare shareholders’ equity		20,208,639			114,054		21,167		—		20,343,860
Noncontrolling interest		30,718			—		—		—		30,718
Total equity		20,239,357			114,054		21,167		—		20,374,578
Total liabilities and shareholders’ equity	$	65,559,691		$	7,555,247	$	4,892,379	$	—	$	78,007,317

See accompanying notes to unaudited pro forma condensed combined financial statements

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2009

	Historical
	For the Nine Months Ended
	September 30, 2009									Pro Forma			Pro Forma
	Graymark			Somni			Eastern			Adjustments			Combined
										(Notes 2-4)
Revenues	$	76,971,875		$	7,540,661		$	4,145,694		$	(2,289,174	)	$	86,369,056
Costs and Expenses:
Cost of sales and services		55,178,284			3,119,483			1,713,322			(1,713,322	)		58,297,767
Selling, general and administrative		20,159,392			3,647,213			1,584,217			(560,988	)		24,829,834
Change in accounting estimate		2,648,207			—			—			—			2,648,207
Depreciation and amortization		1,575,872			293,182			127,864			—			1,996,918
		79,561,755			7,059,878			3,425,403			(2,274,310	)		87,772,726
Net other (expense)		(1,643,477	)		(116,743	)		(69,129	)		—			(1,829,349	)
Income (loss) from continuing operations , before taxes		(4,233,357	)		364,040			651,162			(14,864	)		(3,233,019	)
Benefit (provision) for income taxes		208,000			(145,616	)		(260,465	)		406,081			208,000
Income (loss) from continuing operations, net of taxes		(4,025,357	)		218,424			390,697			391,217			(3,025,019	)
Discontinued operations, net of taxes		2,805			—			—			—			2,805
Net income (loss)		(4,022,552	)		218,424			390,697			391,217			(3,022,214	)
Less: Net income (loss) attributable to noncontrolling interest		(241,768	)		—			—			—			(241,768	)
Net income (loss) attributable to Graymark Healthcare	$	(3,780,784	)	$	218,424		$	390,697		$	391,217		$	(2,780,446	)
Net loss per share of common stock, basic and diluted	$	(0.13	)										$	(0.10	)
Weighted average number of common shares outstanding, basic and diluted		28,116,089												28,822,006

See accompanying notes to unaudited pro forma condensed combined financial statements

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2008

	Historical									Pro Forma			Pro Forma
	Graymark			Somni			Eastern			Adjustments			Combined
										(Notes 2-4)
Revenues	$	96,621,322		$	9,551,447		$	5,544,843		$	(2,947,088	)	$	108,770,524
Costs and Expenses:
Cost of sales and services		67,803,667			4,180,074			2,342,821			(2,342,821	)		71,983,741
Selling, general and administrative		23,818,864			4,292,453			1,806,400			(444,505	)		29,473,212
Depreciation and amortization		1,571,292			398,976			162,959			—			2,133,227
		93,193,823			8,871,503			4,312,180			(2,787,326	)		103,590,180
Net other (expense)		(2,055,063	)		(85,104	)		(76,111	)		—			(2,216,278	)
Income from continuing operations , before taxes		1,372,436			594,840			1,156,552			(159,762	)		2,964,066
Benefit (provision) for income taxes		(136,000	)		(237,936	)		(462,621	)		63,905			(772,652	)
Income from continuing operations, net of taxes		1,236,436			356,904			693,931			(95,857	)		2,191,414
Discontinued operations, net of taxes		60,932			—			—			—			60,932
Net income		1,297,368			356,904			693,931			(95,857	)		2,252,346
Less: Net income (loss) attributable to noncontrolling interest		552,970			—			—			—			552,970
Net income (loss) attributable to Graymark Healthcare	$	744,398		$	356,904		$	693,931		$	(95,857	)	$	1,699,376
Net income per share of common stock:
Basic	$	0.03											$	0.06
Diluted	$	0.03											$	0.06
Weighted average number of common shares outstanding:
Basic		25,885,628												26,638,423
Diluted		26,102,841												26,855,636

See accompanying notes to unaudited pro forma condensed combined financial statements

NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS

(1) BASIS FOR PRESENTATION

     The pro forma condensed combined financial statements present the pro forma effects of the acquisition by Graymark Healthcare, Inc. (“Graymark”) of the outstanding equity ownership interests in somniTech, Inc. and somniCare, Inc. (collectively “Somni”) for $5.9 million in cash the outstanding equity ownership interests in Avastra Eastern Sleep Centers, Inc. (“Eastern”) for $3.2 million in cash and 752,792 shares of Graymark common stock (the “Acquisition”). The Acquisition will be accounted for as a purchase of Somni and Eastern by Graymark using the acquisition method of accounting.

     The accompanying unaudited pro forma combining consolidated statements of operations are presented assuming the Acquisition was consummated on the first day of the period presented. The unaudited pro forma combining consolidated balance sheet as of September 30, 2009, is presented assuming the actual date of the Acquisition.

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

     The historical information presented for Somni (i) as of and for the nine months ended September 30, 2009, and (ii) the year ended December 31, 2008, is derived from the unaudited financial statements of somniTech, Inc. and somniCare, Inc.

     The historical information presented for Eastern (i) as of and for the nine months ended September 30, 2009, and (ii) the year ended December 31, 2008, is derived from the unaudited financial statements of Eastern.

     The pro forma financial information presented in the unaudited pro forma combining consolidated financial statements is not necessarily indicative of the financial position and results of operations that would have been achieved had the assets and liabilities been owned by a single corporate entity. The results of operations presented in the unaudited pro forma combining statements of operations are not necessarily indicative of the results of future operations of Graymark following consummation of the Acquisition.

(2) ADJUSTMENTS — THE ACQUISITION:

     The accompanying unaudited pro forma consolidated financial statements have been adjusted to give effect to the Acquisition as follows:

(a)

Income taxes reflect the effect of the historical earnings of Somni and Eastern and the pro forma adjustment for the nine months ended September 30, 2009 to reflect the offset of Somni and Eastern earnings against the losses of Graymark.

(b)

Revenue, cost of services and selling, general and administrative expenses have been reduced to reflect the management services agreement (“MSA”) operating model that was implemented at Eastern after the Acquisition. Under the MSA, Eastern receives management fee income for operating the respective sleep center and providing additional services to the physician group. The cost of the sleep studies performed and the personnel costs of sleep technicians are born by the physician group that performs the sleep studies.

     Since the Acquisition was consummated prior to September 30, 2009, the following post-Acquisition transactions are already reflected in the unaudited pro forma information, including the following:

(a) The recording of the excess fair value over the net assets acquired (goodwill) of Somni and

Eastern of $4,930,761 and $3,657,557, respectively. The fair values of the assets acquired and liabilities assumed were preliminarily determined to be the net book values previously recorded by Somni and Eastern. Due to the timing of the acquisitions, it was not practical for the fair value appraisals of Somni and Eastern to be completed at the time of this report. Management expects that the final appraisals of Somni and Eastern will result in changes, which could be significant, including the establishment of values for identifiable intangible assets which are not part of the preliminary purchase allocation.

(3) NET INCOME PER SHARE

     Pro forma per share calculations for Graymark are based upon the weighted average number of common stock shares assuming the Acquisition occurred on the first day of the period presented.

(4) INCOME TAXES

     The provision for income taxes is based on the federal corporate statutory 35% income tax rate, plus an estimated 5% rate for state income taxes.