UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

                                   (Mark One)

             [ X ]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                For the quarterly period ended September 30, 1999

                                       OR

           [   ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the transition period from       to
                                                 -----    -----
                         Commission file number 0-12050

                       SAFEGUARD HEALTH ENTERPRISES, INC.
             (Exact name of registrant as specified in its charter)


         DELAWARE                                          52-1528581
      (State or other                                   (I.R.S.  Employer
jurisdiction of incorporation)                         Identification No.)


                                95 ENTERPRISE
                          ALISO VIEJO, CALIFORNIA 92656
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (949) 425-4300
              (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.

                                   Yes  X   No
                                       ---     ---

The  number  of  shares  of registrant's common stock, par value $.01 per share,
outstanding at September 30, 1999, was 4,747,498 shares (not including 3,274,788
shares  of  common  stock  held  in  treasury).


<PAGE>
                       SAFEGUARD HEALTH ENTERPRISES, INC.
                                AND SUBSIDIARIES

                                    FORM 10-Q

                    FOR THE QUARTER ENDED SEPTEMBER 30, 1999

                         INFORMATION INCLUDED IN REPORT


                                                                            Page
                                                                            ----

PART  I.     FINANCIAL  INFORMATION                                            1
--------     ---------------------

   Item  1.  Consolidated  Financial  Statements                               1
   --------  -----------------------------------

             Consolidated  Statements  of  Financial  Position                 2
             -------------------------------------------------

             Consolidated  Statements  of  Income                              3
             -------------------------------------

             Consolidated  Statements  of  Cash  Flows                         4
             ------------------------------------------

             Notes  to  Consolidated  Financial  Statements                    9
             ----------------------------------------------

   Item  2.  Management's  Discussion  and  Analysis  of Financial
   -------   -----------------------------------------------------

             Condition andResults  of  Operations                             14
             ------------------------------------

   Item  3.  Quantitative  and Qualitative Disclosures about Market Risk      14
   -------   -----------------------------------------------------------

Part  II.    Other  Information                                               14
----------   ------------------

   Item  1.  Legal  Proceedings                                               14
   -------   ------------------

   Item  3.  Defaults  upon  Senior  Securities                               14
   -------   ----------------------------------

   Item  5.  Other  Information                                               13
   -------   ------------------

   Item  6.  Exhibits  and  Reports  on  Form  8-K                            15
   -------   -------------------------------------

SIGNATURES                                                                    16
----------


                                      -i-
<PAGE>
<TABLE>
<CAPTION>

                              SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                                          CONSOLIDATED BALANCE SHEETS
                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                ASSETS
                                                                                SEPTEMBER 30,    DECEMBER 31,
                                                                                    1999             1998
                                                                               ---------------  --------------
<S>                                                                            <C>              <C>
Current assets:
Cash                                                                           $        1,753   $       2,978
Investments available-for-sale, at estimated fair value                                 2,814             392
Accounts receivable, net of allowances                                                  3,720           3,345
Assets held for sale                                                                       --           3,562
Income taxes receivable                                                                   480             485
Prepaid expenses and other current assets                                                 560           1,017
Deferred income taxes                                                                      --              67
                                                                               ---------------  --------------
Total current assets                                                                    9,327          11,846

Property and equipment, net of accumulated depreciation                                 5,155           6,105
Restricted cash and investments available for sale                                      3,458           6,298
Investments available-for-sale, at estimated fair value                                   669             772
Notes receivable, net of allowances                                                     3,499           3,523
Assets of discontinued operations transferred under contractual arrangements            2,500           8,950
Intangible assets, net of accumulated amortization                                      4,495          31,807
Deferred income taxes                                                                      --           8,415
Other assets                                                                              283             240
                                                                               ---------------  --------------

Total assets                                                                   $       29,386   $      77,956
                                                                               ===============  ==============

                                      LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Accounts payable                                                               $        7,363   $       4,918
Accrued expenses                                                                        3,615           5,129
Short-term debt                                                                           255           9,894
Claims payable and claims incurred but not reported                                     5,283           3,558
Deferred revenue                                                                        1,390           1,022
                                                                               ---------------  --------------
Total current liabilities                                                              17,906          24,521

Long-term debt                                                                         39,545          32,500
Accrued compensation agreement                                                          1,384           1,169

Stockholders' equity:
Preferred stock                                                                            --              --
Common stock                                                                           21,829          21,509
Retained earnings (accumulated deficit)                                               (33,176)         16,734
Accumulated other comprehensive income (loss)                                              21            (354)
Treasury stock, at cost                                                               (18,123)        (18,123)
                                                                               ---------------  --------------
Total stockholders' equity (deficit)                                                  (29,449)         19,766
                                                                               ---------------  --------------

Total liabilities and stockholders' equity (deficit)                           $       29,386   $      77,956
                                                                               ===============  ==============

                        See accompanying Notes to Consolidated Financial Statements.
</TABLE>


                                      -1-
<PAGE>
<TABLE>
<CAPTION>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                 THREE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                           1999         1998
                                                       -------------  --------
<S>                                                    <C>            <C>
                                                                     (see Note 7)
                                                                     (As restated)

Premium revenue                                        $     24,065   $23,504

Health care services expense                                 17,074    16,539
Selling, general and administrative expense                  10,144     7,920
Loss on impairment of assets                                 24,576        --
                                                       -------------  --------

Operating loss                                              (27,729)     (955)

Investment and other income (losses)                           (147)     (948)
Interest expense                                             (2,801)   (1,020)
                                                       -------------  --------

Loss before income taxes and discontinued operations        (30,677)   (2,923)
Income tax expense (benefit)                                 12,224      (988)
                                                       -------------  --------

Loss before discontinued operations                         (42,901)   (1,935)
Discontinued operations:
Loss from operations to be disposed of                       (1,099)     (122)
                                                       -------------  --------

Net loss                                               $    (44,000)  $(2,057)
                                                       =============  ========

Basic and diluted loss per share:
Loss from continuing operations                        $      (9.04)  $ (0.41)
Loss from discontinued operations                             (0.23)    (0.02)
                                                       -------------  --------

Net loss                                               $      (9.27)  $ (0.43)
                                                       =============  ========

Weighted average basic shares outstanding                     4,747     4,747

          See accompanying Notes to Consolidated Financial Statements.
</TABLE>


                                      -2-
<PAGE>
<TABLE>
<CAPTION>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                  NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)

                                                         1999       1998
                                                       ---------  --------
<S>                                                    <C>        <C>
                                                                (As restated)
                                                                 (see Note 7)

Premium revenue                                        $ 71,917   $72,340

Health care services expense                             50,310    49,258
Selling, general and administrative expense              28,587    22,392
Loss on impairment of assets                             24,576        --
                                                       ---------  --------

Operating income (loss)                                 (31,556)      690

Investment and other income (losses)                      1,793      (217)
Interest expense                                         (4,850)   (2,915)
                                                       ---------  --------

Loss before income taxes and discontinued operations    (34,613)   (2,442)
Income tax expense (benefit)                             10,934      (730)
                                                       ---------  --------

Loss before discontinued operations                     (45,547)   (1,712)
Discontinued operations:
Loss from operations to be disposed of                   (4,363)   (2,430)
                                                       ---------  --------

Net loss                                               $(49,910)  $(4,142)
                                                       =========  ========

Basic and diluted loss per share:
Loss from continuing operations                        $  (9.59)  $ (0.36)
Loss from discontinued operations                         (0.92)    (0.51)
                                                       ---------  --------

Net loss                                               $ (10.51)  $ (0.87)
                                                       =========  ========

Weighted average basic shares outstanding                 4,747     4,747

          See accompanying Notes to Consolidated Financial Statements.
</TABLE>


                                      -3-
<PAGE>
<TABLE>
<CAPTION>
                 SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                    NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
                        (IN THOUSANDS, EXCEPT PER SHARE DATA)


                                                                   1999       1998
                                                                 ---------  --------
<S>                                                              <C>        <C>
                                                                          (As restated)
                                                                           (see Note 7)

Cash flows from operating activities:
Net loss                                                         $(49,910)  $(4,142)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Loss from discontinued operations                                   4,363     2,430
Loss on valuation of assets                                        24,576        --
Write-off of deferred loan costs                                    1,953        --
Depreciation and amortization                                       3,220     3,863
Deferred income taxes                                              10,569    (1,270)
Changes in operating assets and liabilities:
Accounts receivable                                                  (348)   (5,225)
Income taxes receivable                                                 5      (343)
Prepaid expenses and other assets                                     414       465
Accounts payable and accrued expenses                               2,044     1,420
Deferred revenue                                                      368      (128)
Claims payable and claims incurred but not reported                 1,725       (70)
                                                                 ---------  --------
Net cash provided by (used in) continuing operations               (1,021)   (3,000)
Net cash provided by (used in) discontinued operations                 --    (2,779)
                                                                 ---------  --------
Net cash provided by (used in) operating activities                (1,021)   (5,779)

Cash flows from investing activities:
Purchase of investments available-for-sale                        (12,854)   (2,295)
Proceeds from sales/maturity of investments available for sale     13,830     5,049
Purchase of investments held-to-maturity                               --    (2,259)
Proceeds from maturity of investments held-to-maturity                 --     7,039
Purchases of property and equipment                                (1,006)   (1,799)
Proceeds from sale of property and equipment                        3,500        --
Payments received on notes receivable                                 497        --
Issuance of notes receivable                                         (500)       --
Additions to intangibles and other assets                            (969)       --
                                                                 ---------  --------
Net cash provided by (used in) investing activities                 2,498     5,735

Cash flows from financing activities:
Payments on notes payable and long-term debt                       (2,594)   (1,394)
Payments on accrued compensation agreement                            (28)      (27)
                                                                 ---------  --------
Net cash provided by (used in) financing activities                (2,622)   (1,421)
                                                                 ---------  --------
Net increase (decrease) in cash                                    (1,145)   (1,465)
Cash balance at beginning of period                                 3,256     3,652
                                                                 ---------  --------
Cash balance at end of period                                    $  2,111   $ 2,187
                                                                 =========  ========

          See accompanying Notes to Consolidated Financial Statements.
</TABLE>


                                      -4-
<PAGE>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE  1.  BASIS  OF  REPORTING
------------------------------

The accompanying unaudited consolidated financial statements of SafeGuard Health
Enterprises, Inc. and subsidiaries (the "Company") for the three months and nine
months  ended September 30, 1999 and 1998, have been prepared in accordance with
generally  accepted  accounting  principles  applicable  to interim periods. The
accompanying  financial  statements reflect all adjustments that, in the opinion
of  management, are necessary for a fair presentation of the Company's financial
position  and  results  of  operations  for  the interim periods.  The financial
statements  have  been  prepared  in  accordance  with  the  regulations  of the
Securities  and  Exchange  Commission, and omit certain footnote disclosures and
other  information  necessary  to  present  the Company's financial position and
results  of  operations  in  accordance  with  generally  accepted  accounting
principles.  These  financial  statements should be read in conjunction with the
Consolidated  Financial  Statements and Notes thereto contained in the Company's
Annual  Report  on Form 10-K/A for the year ended December 31, 1998.  Management
believes  that  the  disclosures  herein  are  adequate to make the accompanying
financial  statements  not  misleading.

NOTE  2.  DISCONTINUED  OPERATIONS
----------------------------------

SALE  OF  DISCONTINUED  OPERATIONS

In  October  1996  the  Company  implemented a strategic plan to sell all of the
general  dental  practices  owned  by  the  Company.  Four of the general dental
practices  were  sold  during 1996, and the remaining practices were sold during
the  first  nine  months  of  1997.  The aggregate consideration received by the
Company  in  the  sale  of all the general dental practices was $14.6 million of
30-year  promissory notes. In April 1998 the Company sold all of its orthodontic
practices  in  a  single  transaction  for  consideration  consisting of a $15.0
million  30-year  promissory  note.

The  operating  results of the discontinued orthodontic practices for the period
prior  to  the  date  of  the sale are included in the accompanying statement of
operations  under  "Discontinued  operations".  Net  revenue of the discontinued
operations, which is reflected under "Discontinued operations," was $1.9 million
during  the  nine  months  ended  September  30,  1998.

ACCOUNTING  TREATMENT  OF  CERTAIN  SALE  TRANSACTIONS

Several  of  the  general  dental practices were sold to a single purchaser (the
"Purchaser")  during  the  three months ended September 30, 1997 in exchange for
$8.0  million  of long-term promissory notes. In April 1998 the Company sold all
of  its  orthodontic practices to the Purchaser in exchange for $15.0 million of
long-term  promissory  notes.  During 1997 and 1998, the entities that purchased
four other general dental practices from the Company conveyed those practices to
the  Purchaser  in  exchange  for the assumption of the related promissory notes
payable to the Company. At the time of the conveyances of these practices to the
Purchaser,  the  related promissory notes had an aggregate outstanding principal
balance  of  $1.9  million.  During 1997 and 1998, the Company loaned a total of
$1.6  million  to  the Purchaser, which was used for working capital purposes by
the  Purchaser.

Due  to  uncertainty about the Purchaser's ability to meet its commitments under
the  promissory  notes, the Company did not treat the sale transactions with the
Purchaser  as sales for accounting purposes. Accordingly, the related promissory
notes  and  the  working  capital  loans  are  not reflected in the accompanying
financial  statements.  Instead,  the  historical  cost of the net assets of the
related  general  dental  and  orthodontic practices, less the interest payments
received  from  the Purchaser, is reflected on the Company's balance sheet under
the  caption  "Assets  of  discontinued operations transferred under contractual
arrangements."  The  Company's  financial statements do not reflect any gains on
these  sale  transactions, and do not reflect any interest income on the related
promissory  notes.  In  addition,  the  carrying  value  of the promissory notes
related to the four practices that were transferred to the Purchaser was reduced
to  the  historical cost of the net assets of the related dental practices. This
reduction  is  included  in  "Loss  from  operations  to  be disposed of" on the
accompanying  statements  of  operations. These assets are also reflected on the
Company's  balance  sheet  under  the caption "Assets of discontinued operations
transferred  under  contractual  arrangements."  The  working capital loans were
treated  as expenses at the time the loans were made, which is included in "Loss
from operations to be disposed of" on the accompanying statements of operations.
This  accounting treatment more appropriately reflects the economic substance of
the  transactions,  as  distinct  from  the  legal  form  of  the  transactions.


                                      -5-
<PAGE>
NOTE  3.  INVESTMENTS
---------------------

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 115,
Accounting  for  Certain  Investments  in  Debt  and  Equity  Securities, and in
accordance  with  management's  intent,  the  Company  has classified its entire
investment  portfolio  as  "available-for-sale".  Investments  classified  as
available-for-sale  are  carried  at fair value and unrealized gains and losses,
net  of  applicable  income  taxes,  are  reported  in  a  separate  caption  of
stockholders'  equity.  At  September  30,  1999, the Company had net unrealized
gains  of $21,000, which is reflected in stockholders' equity under "Accumulated
other  comprehensive  income  (loss)."

NOTE  4.  IMPAIRMENT  OF  ASSETS
--------------------------------

INTANGIBLE  ASSETS

In  March  1995  the  FASB issued SFAS No. 121, Accounting for the Impairment of
Long-Lived  Assets  and  for  Long-Lived  Assets  to  Be  Disposed  Of, which is
effective  for  fiscal  years  beginning  after  December 15, 1995. SFAS No. 121
requires  an  entity  to  review  its  long-lived assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may  not be recoverable. If an impairment of a long-lived asset is indicated, an
entity  is  required  to  measure the amount of impairment by comparing the fair
value  of the asset to its carrying amount, and to recognize the impairment loss
in  its  statement of operations. SFAS No. 121 also requires an entity to reduce
the  carrying  value  of  assets  to  be disposed of to fair value, less selling
costs.

In accordance with SFAS No. 121, and in view of the significant operating losses
incurred  by  the  Company  during the nine months ended September 30, 1999, the
Company  reviewed its intangible assets for possible impairment. Based on recent
operating losses, and the currently expected cash flows generated by each of the
Company's  intangible  assets, the Company concluded that the carrying values of
all  of  its  intangible assets have been impaired. The amount of impairment was
measured  by comparing the discounted expected future cash flows related to each
intangible  asset  to the carrying value of the asset. Based on this comparison,
the  Company  recorded  an  impairment  loss of $24.6 million during the quarter
ended  September  30,  1999.  The  impairment  loss  is due to impairment of the
goodwill  and  non-compete covenant related to the acquisition of First American
Dental  Benefits,  Inc.  in  September  1996  ($14.7  million), the goodwill and
non-compete  covenant related to the acquisition of Advantage Dental HealthPlans
in  May 1997 ($9.3 million), and the insurance license acquisition costs related
to  the acquisitions of two insurance companies in 1997 and 1992 ($0.6 million).

ASSETS  OF  DISCONTINUED  OPERATIONS  TRANSFERRED UNDER CONTRACTUAL ARRANGEMENTS

"Assets  of  discontinued operations transferred under contractual arrangements"
consists  of  the  historical  cost  of the net assets of certain general dental
practices  and  certain  orthodontic  practices that were sold by the Company in
1998  and  1997 (see Note 2). During 1999, the Company reached an oral agreement
with  the purchaser of those practices (the "Purchaser") and another third party
(the  "New  Purchaser"), under which the related promissory notes payable to the
Company  (the "Notes") would be liquidated.  Under this agreement, the Purchaser
would  convey  the dental and orthodontic practices that comprise the collateral
for  the Notes to the New Purchaser, in exchange for proceeds that would be paid
to  the  Company  in  satisfaction  of  the Notes.  Based on this agreement, the
Company recorded a $4.4 million charge to earnings (net of income tax benefit of
$2.1  million)  during  the nine months ended September 30, 1999. This charge to
earnings  reduced  the  carrying  value  of  "Assets  of discontinued operations
transferred  under  contractual arrangements" to the estimated net proceeds that
would  be  realized from this transaction. During March 2000 the Company entered
into a definitive agreement with respect to this transaction, which is currently
pending  regulatory  approval.

REAL  ESTATE

During  the third quarter of 1998, the Company moved its corporate office from a
building  owned  by the Company in Anaheim, California to leased office space in
Aliso  Viejo,  California. As a result, the Company made the decision in 1998 to
sell  the Anaheim building and certain other assets related to it, including the
land  and  various  building improvements. During the first quarter of 1999, the
Company  received  a  written  offer  to purchase these assets from the Company.
Based  on  this  offer, and as required by SFAS No. 121, the Company recorded an
impairment  loss  of  $569,000, and accrued closing expenses of $188,000, in the
fourth  quarter  of  1998. The book value of the building and related assets was
$3.6  million  at  December  31,  1998,  which  is reflected on the accompanying
balance sheet under the caption "Assets held for sale." In May 1999, the Company
sold  the  building  for  $3.5  million,  including  $3.0  million in cash and a
promissory  note  for  $500,000.  The  promissory  note  bears  interest at 10%,
requires  monthly  interest  payments,  and  matures  in  May  2000.


                                      -6-
<PAGE>
NOTE  5.  SHORT-TERM  AND  LONG-TERM  DEBT
------------------------------------------

Short-term  and  long-term  debt  consisted  of  the  following  (in thousands):

                           SEPTEMBER 30,    DECEMBER 31,
                               1999             1998
                          ---------------  --------------
  Bank line of credit     $        7,045   $       8,000
  Senior notes payable            32,500          32,500
  Other notes payable                255           1,894
                          ---------------  --------------
  Total debt                      39,800          42,394
  Less - current portion            (255)         (9,894)
                          ---------------  --------------

  Long-term debt          $       39,545   $      32,500
                          ===============  ==============

In  September  1997  the  Company issued $32.5 million of unsecured senior notes
payable.  The senior notes are payable in annual installments of $6.5 million on
each  September  30,  beginning in 2001, with a final maturity date of September
30,  2005.  The  interest  rate on the notes was fixed at 8.91% at September 30,
1999.

In January 1998 the Company entered into an $8 million revolving credit facility
with a bank, under which $7.0 million was outstanding at September 30, 1999. The
outstanding  balance under the credit facility is payable in full on January 29,
2000.  The  interest rate on the facility as of September 30, 1999, was equal to
the  bank's  prime  rate  plus  3.0%  (11.0% at September 30, 1999). The loan is
secured  by  all  assets  of  the  Company,  including accounts receivable, real
estate,  other  fixed  assets,  intangible  assets, and a negative pledge on the
stock  of  all  the  Company's  subsidiaries.

In  May 1999 the Company executed restructured credit agreements with respect to
both  the  senior  notes  payable  and  the  revolving  credit  facility.  The
restructured  agreements provide for changes in interest rates and modifications
to  the  financial  covenants  and  reporting  requirements, as well as required
principal  repayments.  In  connection  with  the  execution of the restructured
agreements, the Company obtained waivers for all prior and existing defaults and
events  of default under the previous credit agreements through May 28, 1999. In
connection  with  the  restructured  agreements,  the Company issued warrants to
purchase 382,000 shares of common stock for $4.51 per share to the holder of the
senior  notes payable.  The warrants are exercisable at any time from January 1,
2000  to  December  31, 2003. The warrants were cancelled in connection with the
transaction  completed  on  March  1,  2000  (see  Note  8).

In  connection  with  the restructured senior notes payable and revolving credit
facility,  the  Company  is  subject  to various loan covenant requirements. The
Company  was not in compliance with those requirements as of September 30, 1999.
See  Note  8  for  a  description  of  a transaction completed on March 1, 2000,
pursuant  to which the Company expects that the entire outstanding balance under
the  senior  notes  payable  and the revolving credit facility will be converted
into  equity  securities. In connection with this transaction, the holder of the
senior  notes  payable  and  the  bank lender agreed not to demand or accept any
payment  under the credit agreements, and not to take any enforcement actions of
any kind under the agreements until April 30, 2001. Accordingly, the outstanding
balances  under  the  senior notes payable and the revolving credit facility are
classified  as  long-term  as  of  September  30,  1999.

NOTE  6.  INCOME  TAXES
-----------------------

During  the three months ended September 30, 1999, the Company recorded a charge
to  earnings to establish a valuation allowance against its deferred tax assets.
The  amount  of  the  allowance  is  equal  to the total amount of the Company's
deferred tax assets.  The Company's deferred tax assets have been fully reserved
due  to uncertainty about whether they will be realized in the future, primarily
due  to  operating  losses  incurred  by  the  Company  in 1998 and 1999 and the
existence  of  significant  net  operating  loss  carry-forwards.

NOTE  7.  RESTATEMENTS
----------------------

Subsequent  to  the  issuance  of  the  Company's  1998 financial statements the
Company's  management  determined  that  certain prepaid expenses, fixed assets,


                                      -7-
<PAGE>
accrued  liabilities  and  deferred  revenue  balances were not properly stated.
Additionally,  the Company's management determined that the accounting treatment
applied  to  certain  sale  transactions of discontinued orthodontic and general
dental  practices  that  occurred during 1998 and 1997 was not appropriate. As a
result,  the  quarterly  financial statements as of and for the three months and
nine  months  ended  September  30,  1998,  have  been restated from the amounts
previously  reported.

The  effects  of  the  restatement  are  as  follows:

<TABLE>
<CAPTION>
                                                 THREE  MONTHS  ENDED    NINE  MONTHS  ENDED
                                                 SEPTEMBER  30,  1998    SEPTEMBER  30,  1998
                                                ----------------------  ----------------------
                                                   AS                       AS
                                                PREVIOUSLY      AS      PREVIOUSLY      AS
                                                 REPORTED    RESTATED    REPORTED    RESTATED
                                                ----------  ----------  ----------  ----------
<S>                                             <C>         <C>         <C>         <C>
  Premium revenue                               $  24,004   $  23,504   $  72,939   $  72,340
  Health care services expense                     16,539      16,539      49,258      49,258
  Selling, general and administrative               7,567       7,920      20,964      22,392
                                                ----------  ----------  ----------  ----------

  Operating income (loss)                            (102)       (955)      2,717         690

  Investment and other income                         199        (948)      1,703        (217)
  Interest expense                                 (1,020)     (1,020)     (2,915)     (2,915)
                                                ----------  ----------  ----------  ----------

  Income (loss) before income taxes                  (923)     (2,923)      1,505      (2,442)
  Income tax expense (benefit)                       (300)       (988)        757        (730)
                                                ----------  ----------  ----------  ----------

  Income (loss) before
  discontinued operations                            (623)     (1,935)        748      (1,712)
  Income (loss) from discontinued
  operations                                           --        (122)       (620)     (2,430)
  Income (loss) on disposal of
  orthodontic and dental practices                     --          --       1,834          --
                                                ----------  ----------  ----------  ----------
  Net income (loss)                             $    (623)  $  (2,057)  $   1,962   $  (4,142)
                                                ==========  ==========  ==========  ==========

  Basic an diluted earnings (loss) per share:
  Income (loss) from continuing
  operations                                    $   (0.13)  $   (0.41)  $    0.16   $   (0.36)
  Income (loss) from discontinued
  operations                                           --       (0.02)       0.25       (0.51)
                                                ----------  ----------  ----------  ----------

  Net income (loss)                             $   (0.13)  $   (0.43)  $    0.41   $   (0.87)
                                                ==========  ==========  ==========  ==========

  Weighted average basic shares
  outstanding                                       4,747       4,747       4,747       4,747
</TABLE>

NOTE  8.     SUBSEQUENT  EVENTS
--------     ------------------

In  December  1999,  a  shareholder lawsuit against the Company was filed, which
alleges that the Company and certain of its officers violated certain securities
laws  by  issuing a series of alleged false and misleading statements concerning
the  Company's  publicly reported revenues and earnings during a specified class
period.  The  Company has directors and officers liability insurance and intends
to  vigorously  defend  this  litigation.  In  the  opinion  of  the  Company's
management, the ultimate outcome of this matter will not have a material adverse
effect  on  the  Company's  financial  position  or  results  of  operations.

On  March  1, 2000, the Company entered into an agreement with an investor group
(the  "Investors"),  the  holder  of  the senior notes payable (the "Senior Note
Holder"),  and  its  revolving  line  of  credit lender (the "Bank"). Under this
agreement, the Investors loaned $8.0 million to the Company in the form of notes
payable  due April 30, 2001, which bear interest at 10% annually. The Investors,
the  Senior  Note  Holder,  and  the Bank agreed to convert the new $8.0 million
loan,  the  outstanding balance of $32.5 million under the senior notes payable,
and  the  outstanding balance of $7.0 million under the revolving line of credit
to  convertible  preferred  stock,  subject  to  regulatory approval. Under this
agreement,  both  the  Senior  Note  Holder and the Bank agreed not to demand or


                                      -8-
<PAGE>
accept  any payment under the credit agreements, and not to take any enforcement
actions  of  any  kind  under  the  agreements  until  April  30,  2001.

The  convertible  preferred  stock  would  not accrue dividends of any kind, and
would  be  convertible  into  common  stock  at  the  option  of the holder. The
convertible  preferred stock would entitle the holder to one vote for each share
of  common  stock into which the preferred stock is convertible, with respect to
all  matters  voted on by the common stockholders of the Company. As a result of
this  transaction,  after  regulatory  approval  is  obtained,  the  existing
stockholders  of  the  Company  would  own approximately 14% of the common stock
interests  of the Company. Under this agreement, the Company agreed to place new
directors  on  its  board  of directors, who represent the Investors, the Senior
Note  Holder  and  the Bank, and who, collectively, constitute a majority of the
board  of  directors.  The  conversion  of  the  Company's  outstanding  debt to
convertible preferred stock, as described above, is currently pending regulatory
approval.

ITEM  1.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF FINANCIAL CONDITION AND
RESULTS  OF  OPERATIONS

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995

The Private Securities Litigation Reform Act of 1995 (the "1995 Act") provides a
"safe  harbor"  for  forward-looking statements, as long as those statements are
identified  as  forward-looking  and  are  accompanied  by meaningful cautionary
statements  identifying  important  factors  that  could cause actual results to
differ  materially from those discussed in the statement. The Company desires to
take advantage of these safe harbor provisions. The statements contained in this
Management's  Discussion  and  Analysis  of  Financial  Condition and Results of
Operations  concerning  expected  growth,  the  outcome  of business strategies,
future  operating results and financial position, economic and market events and
trends,  future  premium  levels,  future dental health care expense levels, the
Company's  ability  to  control health care, selling, general and administrative
expenses, items discussed under the heading "Year 2000" and all other statements
that  are  not  historical  facts, are forward looking statements. Words such as
expects, projects, anticipates, intends, plans, believes, seeks or estimates, or
variations  of  such words and similar expressions are also intended to identify
forward-looking  statements.  These  forward-looking  statements  are subject to
significant  uncertainties  and  contingencies,  many  of  which  are beyond the
control  of  the  Company.  Actual  results  may  differ  materially  from those
projected  in the forward-looking statements, which statements involve risks and
uncertainties.  The  Company's  ability  to  expand  its business is affected by
competition,  not only in benefit program choices, but also the number of dental
plan  competitors  in  the  markets in which the Company operates. Certain large
employer  groups  and other purchasers of commercial dental health care services
continue  to demand minimal premium rate increases, while limiting the number of
choices  offered  to  employees.  In addition, securing cost effective contracts
with dentists may become more difficult in part due to the increased competition
among  dental  plans  for  dentist  contracts. Other risks include the Company's
potential  inability  to  obtain  waivers  and/or  extensions  from its lenders,
whether or not the Company enters into any extraordinary transaction, changes in
the Company's operating or expansion strategy, or failure to consummate proposed
resale  of  dental  offices and/or promissory notes. The Company's profitability
depends,  in part, on its ability to maintain effective control over health care
costs,  while providing members with quality dental care. Factors such as levels
of  utilization  of  dental  health care services, new technologies, specialists
costs, and numerous other external influences may effect the Company's operating
results.  Any critical unresolved Year 2000 issues at the Company or its vendors
could  have  a  material  adverse effect on the Company's results of operations,
liquidity  or financial condition. The Company's expectations for the future are
based  on  current information and evaluation of external influences. Changes in
any  one  factor  could materially impact the Company's expectations relating to
premium  rates,  benefits  plans  offered,  membership growth, the percentage of
health  care  expenses, and as a result, profitability and therefore, effect the
forward-looking  statements which may be included in these reports. In addition,
past  financial  performance  is  not necessarily a reliable indicator of future
performance.  An  investor  should  not  use  historical  performance  alone  to
anticipate  future  results  or  future  period  trends.


                                      -9-
<PAGE>
Summary  of  Results  of  Operations

The following table shows the Company's results of operations as a percentage of
revenue,  and  is  used  in  the  period-to-period  comparisons discussed below.

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED  NINE MONTHS ENDED
                                                         SEPTEMBER  30,     SEPTEMBER  30,
                                                       ------------------  -----------------
                                                         1999    1998 (1)   1999    1998 (1)
                                                       --------  --------  -------  --------
<S>                                                    <C>       <C>       <C>      <C>
Premium revenue                                          100.0%    100.0%   100.0%    100.0%

Health care services expense                              70.9      70.4     70.0      68.1
Selling, general and administrative expense               42.2      33.7     39.7      31.0
Loss on impairment of assets                             102.1        --     34.2        --
                                                       --------  --------  -------  --------

Operating income (loss)                                 (115.2)     (4.1)   (43.9)      0.9

Investment and other income                               (0.6)     (4.0)     2.5      (0.3)
Interest expense                                         (11.7)     (4.3)    (6.7)     (4.0)
                                                       --------  --------  -------  --------

Loss before income taxes and discontinued operations    (127.5)    (12.4)   (48.1)     (3.4)
Income tax expense (benefit)                              50.8      (4.2)    15.2      (1.0)
                                                       --------  --------  -------  --------

Loss before discontinued operations                     (178.3)     (8.2)   (63.3)     (2.4)
Loss from discontinued operations                         (4.5)     (0.5)    (6.1)     (3.3)
                                                       --------  --------  -------  --------

Net loss                                               (182.8)%    (8.7)%  (69.4)%    (5.7)%
                                                       ========  ========  =======  ========
<FN>

(1)     As  restated.  See  Note  7  to  the  accompanying  financial  statements.
</TABLE>

Subsequent  to  the  issuance  of  the  Company's  1998 financial statements the
Company's  management  determined  that  certain prepaid expenses, fixed assets,
accrued  liabilities  and  deferred  revenue  balances were not properly stated.
Additionally,  the Company's management determined that the accounting treatment
applied  to  certain  sale  transactions of discontinued orthodontic and general
dental  practices  that  occurred during 1998 and 1997 was not appropriate. As a
result,  the  quarterly  financial statements as of and for the three months and
nine  months  ended  September  30,  1998,  have  been restated from the amounts
previously  reported.  The  significant  effects  of  the  restatement have been
presented  in  Note  7  to  the  accompanying financial statements and have been
reflected  herein.

Three  Months  Ended September 30, 1999 Compared to Three Months Ended September
30,  1998

Premium  revenue  increased  by $561,000, or 2.4%, from $23.5 million in 1998 to
$24.1  million  in  1999.  The average membership for which the Company provided
dental coverage decreased by approximately 53,000 members, or 5.7%, from 935,000
members  during  1998 to 883,000 during 1999. The decrease in the average number
of  members  is  primarily  due  to  the  loss of a single large customer, which
accounted  for  over  50,000 members, effective January 1, 1999. Premium revenue
increased  by  2.4%  even  though average membership decreased by 5.7%. This was
primarily  due  to a shift in the product mix toward indemnity plans, which have
higher  premium rates than managed care plans, increases in premium rates, and a
shift  in  the  product mix toward managed care plans with higher benefit levels
and  higher  premium  rates.

Health  care services expense increased by $535,000, or 3.2%, from $16.5 million
in  1998  to $17.1 million in 1999. Health care services expense as a percentage
of  premium  revenue (the "loss ratio") increased from 70.4% in 1998 to 70.9% in
1999.  This  increase  is  primarily due to an increase in the loss ratio in the
Company's  managed  care  business,  which  is  due to an increase in specialist
referral claims and an increase in supplemental payments to capitated providers,
both as a percentage of managed care premium revenue. The increase in specialist
referral  claims  is  primarily  due  to a shift in the managed care product mix
toward  richer  benefit plans that include coverage of more specialist services.
The increase in supplemental payments is due to the fact that the richer benefit
plans  also  cover more services for which general dentists receive supplemental
payments  from  the  Company,  in  addition  to the monthly capitation payments.


                                      -10-
<PAGE>
Selling, general and administrative ("SG&A") expenses increased by $2.2 million,
or 28.1%, from $7.9 million in 1998 to $10.1 million in 1999. SG&A expenses as a
percentage  of  premium  revenue  increased from 33.7% in 1998 to 42.2% in 1999.
This  increase  relates primarily to an accrual for a lease commitment on unused
office  space,  an  increase  in  amortization  related  to internally developed
software, and an increase in occupancy costs related to the company's relocation
of  its  corporate  headquarters  in  September  1998.

Loss  on  impairment  of  intangible assets increased from zero in 1998 to $24.6
million  in  1999. The loss on impairment is primarily due to a reduction in the
carrying  value  of  the  goodwill  and  non-compete  covenants  related  to the
acquisition  of First American Dental Benefits, Inc. in 1996 and the acquisition
of  Advantage  Dental HealthPlans in 1997. The amount of the impairment loss was
determined  in  accordance  with  Accounting Principles Board Opinion No. 17, as
discussed  in  Note  4  to  the  accompanying  financial  statements.

Investment and other income (losses) was a loss of $147,000 in 1999, compared to
a  loss of $948,000 in 1998. The net losses in both periods were due to realized
losses  on  the  sale  of  investments.

Interest expense increased by $1.8 million, or 174.6%, from $1.0 million in 1998
to  $2.8 million in 1999. This increase was primarily due to deferred loan costs
that  were  charged  to  expense  during  the  third quarter of 1999. The entire
balance  of  deferred  loan costs was charged to expense because the Company was
not  in  compliance  with  the covenant requirements related to the senior notes
payable  and  the  revolving  credit  facility  as  of  September  30, 1999, and
therefore,  the  outstanding  balances  were  due  and  payable.

The  loss  before  income  taxes  and discontinued operations increased by $28.1
million,  from  $2.9  million  in 1998 to $30.7 million in 1999. The loss before
income  taxes  and  discontinued  operations  as a percentage of premium revenue
increased  from  12.4%  in  1998 to 127.5% in 1999. The increase in the loss was
primarily  due to the $24.6 million loss on impairment of intangible assets, and
a  $2.2  million  increase  in  SG&A  expenses,  as  discussed  above.

Income  tax expense was $12.2 million in 1999, compared to an income tax benefit
of  $988,000  in  1998.  The  income  tax expense in 1999 primarily represents a
charge to earnings to establish a deferred tax asset valuation allowance that is
equal  to  the  entire  balance  of  the Company's net deferred tax assets. This
valuation  allowance  was  established  due  to  uncertainty  about  whether the
deferred  tax  assets will be realized in the future, primarily due to operating
losses incurred by the Company in 1999 and 1998 and the existence of significant
net  operating  loss  carry-forwards.  See  Note 6 to the accompanying financial
statements.

The  net  loss  from  discontinued operations increased from $122,000 in 1998 to
$1.1  million  in  1999. The loss in 1999 is primarily due to a reduction in the
carrying  value  of  the  net assets related to certain discontinued operations,
which  are  reflected  on  the  accompanying  balance  sheet  under  "Assets  of
discontinued  operations  transferred  under  contractual  arrangements." During
1999,  the Company recorded a charge to earnings to reduce the carrying value of
these  assets  to  the estimated net proceeds from the sale of these assets to a
third  party  pursuant  to  a  transaction  that is currently pending regulatory
approval.  See  Note  4  to  the  accompanying  financial  statements.

Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998

Premium  revenue  decreased  by $423,000, or 0.6%, from $72.3 million in 1998 to
$71.9  million  in  1999.  The average membership for which the Company provided
dental coverage decreased by approximately 65,000 members, or 6.9%, from 943,000
members  during  1998 to 878,000 during 1999. The decrease in the average number
of  members  is  primarily  due  to  the  loss of a single large customer, which
accounted  for  over  50,000 members, effective January 1, 1999. Premium revenue
decreased  by  only  0.6% even though average membership decreased by 6.9%. This
was  primarily  due  to a shift in the product mix toward indemnity plans, which
have  higher  premium rates than managed care plans, increases in premium rates,
and  a  shift  in  the product mix toward managed care plans with higher benefit
levels  and  higher  premium  rates.

Health  care  services  expense  increased  by $1.0 million, or 2.1%, from $49.3
million  in  1998  to  $50.3  million in 1999. Health care services expense as a
percentage of premium revenue (the "loss ratio") increased from 68.1% in 1998 to
70.0%  in  1999. This increase is primarily due to an increase in the loss ratio
in  the  Company's  managed  care  business,  which  is  due  to  an increase in
specialist referral claims and an increase in supplemental payments to capitated
providers, both as a percentage of managed care premium revenue. The increase in
specialist  referral  claims  is  primarily  due  to a shift in the managed care
product mix toward richer benefit plans that include coverage of more specialist
services.  The  increase  in  supplemental  payments is due to the fact that the
richer benefit plans also cover more services for which general dentists receive
supplemental  payments  from  the Company, in addition to the monthly capitation
payments.

Selling, general and administrative ("SG&A") expenses increased by $6.2 million,
or  27.7%, from $22.4 million in 1998 to $28.6 million in 1999. SG&A expenses as
a  percentage  of premium revenue increased from 31.0% in 1998 to 39.7% in 1999.
This  increase  relates primarily to an accrual for a lease commitment on unused
office  space,  an  increase  in  amortization  related  to internally developed
software, and an increase in occupancy costs related to the company's relocation
of  its  corporate  headquarters  in  September  1998.


                                      -11-
<PAGE>
Loss  on  impairment  of  intangible assets increased from zero in 1998 to $24.6
million  in  1999. The loss on impairment is primarily due to a reduction in the
carrying  value  of  the  goodwill  and  non-compete  covenants  related  to the
acquisition  of First American Dental Benefits, Inc. in 1996 and the acquisition
of  Advantage  Dental HealthPlans in 1997. The amount of the impairment loss was
determined  in  accordance  with  Accounting Principles Board Opinion No. 17, as
discussed  in  Note  6  to  the  accompanying  financial  statements.

Investment  and other income was $1.8 million in 1999, compared to a net loss of
$217,000 in 1998. This change was primarily due to realized gains on the sale of
investments  in  1999, compared to realized losses on the sale of investments in
1998.

Interest  expense increased by $2.0 million, or 66.4%, from $2.9 million in 1998
to  $4.9 million in 1999. This increase was primarily due to deferred loan costs
that  were  charged  to  expense  during  the  third quarter of 1999. The entire
balance  of  deferred  loan costs was charged to expense because the Company was
not  in  compliance  with  the covenant requirements related to the senior notes
payable  and  the  revolving  credit  facility  as  of  September  30, 1999, and
therefore,  the  outstanding  balances  were  due  and  payable.

The  loss  before  income  taxes  and discontinued operations increased by $32.2
million,  from  $2.4  million  in 1998 to $34.6 million in 1999. The loss before
income  taxes  and  discontinued  operations  as a percentage of premium revenue
increased  from  3.4%  in  1998  to  48.1% in 1999. The increase in the loss was
primarily  due to the $24.6 million loss on impairment of intangible assets, and
a  $6.2  million  increase  in  SG&A  expenses,  as  discussed  above.

Income  tax expense was $10.9 million in 1999, compared to an income tax benefit
of  $730,000  in  1998.  The  income  tax expense in 1999 primarily represents a
charge to earnings to establish a deferred tax asset valuation allowance that is
equal  to  the  entire  balance  of  the Company's net deferred tax assets. This
valuation  allowance  was  established  due  to  uncertainty  about  whether the
deferred  tax  assets will be realized in the future, primarily due to operating
losses incurred by the Company in 1999 and 1998 and the existence of significant
net  operating  loss  carry-forwards.  See  Note 6 to the accompanying financial
statements.

The net loss from discontinued operations increased from $2.4 million in 1998 to
$4.4  million  in  1999.  The  loss  in  1999 is primarily due to a $6.5 million
reduction  (before  income  tax effect of $2.1 million) in the carrying value of
the  net  assets related to certain discontinued operations, which are reflected
on  the  accompanying  balance  sheet  under  "Assets of discontinued operations
transferred under contractual arrangements." During 1999, the Company recorded a
$6.5  million charge to earnings to reduce the carrying value of these assets to
the  estimated  net  proceeds  from  the  sale  of these assets to a third party
pursuant  to  a  transaction  that is currently pending regulatory approval. See
Note  4  to the accompanying financial statements. The net loss in 1998 consists
of  $2.4 million of operating losses related to the discontinued operations that
were  sold  in  1998.

Liquidity  and  Capital  Resources

Net  cash  used  by operating activities was $1.0 million during the nine months
ended  September  30,  1999,  compared to $5.7 million during the same period in
1998. The decrease in net cash used in operating activities was primarily due to
$2.8  million  of net cash used in discontinued operations in 1998. Although the
net  loss  increased  from  $4.1  million  in  1998  to  $50.2  million in 1999,
substantially  all  of  the  increase  was  due  to  non-cash expenses. Net cash
provided  by investing activities was $2.5 million during 1999, compared to $5.7
million  during 1998. The Company sold certain long-term assets in both 1999 and
1998,  as  shown  on  the accompanying statements of cash flows, to meet it cash
requirements  in  both  periods.  Net cash used in financing activities was $2.6
million  during  1999,  compared  to  $1.4 million during 1998. The cash used in
financing  activities  consisted  primarily  of  debt  payments in both periods.

The  Company's  total short-term and long-term debt decreased from $42.4 million
at December 31, 1998, to $39.8 million at September 30, 1999, due to payments of
$2.6  million during 1999. The payments included $1.6 million paid to the former
owners of acquired businesses in connection with non-competition agreements, and
a  $1.0  million reduction in the balance outstanding under the revolving credit
facility.  Outstanding  debt  at September 30, 1999 consists of $32.5 million of
senior  notes  payable, an outstanding balance of $7.0 million under a revolving
credit  facility, and a $255,000 note payable to the former owner of an acquired
business  in  connection  with  a  non-competition  agreement.


                                      -12-
<PAGE>
In  September  1997  the  Company issued $32.5 million of unsecured senior notes
payable.  The senior notes are payable in annual installments of $6.5 million on
each  September  30,  beginning in 2001, with a final maturity date of September
30,  2005.  The  interest  rate on the notes was fixed at 8.91% at September 30,
1999.

In January 1998 the Company entered into an $8 million revolving credit facility
with a bank, under which $7.0 million was outstanding at September 30, 1999. The
outstanding balance under the credit facility was payable in full on January 29,
2000.  The  interest rate on the facility as of September 30, 1999, was equal to
the  bank's  prime  rate  plus  3.0%  (11.0% at September 30, 1999). The loan is
secured  by  all  assets of the Company, including accounts receivable, property
and  equipment, intangible assets, and a negative pledge on the stock of all the
Company's  subsidiaries.

In  May 1999 the Company executed restructured credit agreements with respect to
both  the  senior  notes  payable  and  the  revolving  credit  facility.  The
restructured  agreements provide for changes in interest rates and modifications
to  the  financial  covenants  and  reporting  requirements, as well as required
principal  repayments.  In  connection  with  the  execution of the restructured
agreements, the Company obtained waivers for all prior and existing defaults and
events  of default under the previous credit agreements through May 28, 1999. In
connection  with  the  restructured  agreements,  the Company issued warrants to
purchase 382,000 shares of common stock for $4.51 per share to the holder of the
senior  notes payable.  The warrants are exercisable at any time from January 1,
2000  to  December  31,  2003.  Those  warrants  were cancelled in March 2000 in
connection  with  the  transaction  described  below.

In  connection  with  the restructured senior notes payable and revolving credit
facility,  the  Company  is  subject  to various loan covenant requirements. The
Company  was not in compliance with those requirements as of September 30, 1999.
The  Company  completed  a  transaction  on  March  1, 2000, as discussed below,
pursuant  to which the Company expects that the entire outstanding balance under
the  senior  notes  payable  and the revolving credit facility will be converted
into  equity  securities. In connection with this transaction, the holder of the
senior  notes  payable  and  the  bank lender agreed not to demand or accept any
payment  under the credit agreements, and not to take any enforcement actions of
any kind under the agreements until April 30, 2001. Accordingly, the outstanding
balances  under  the  senior notes payable and the revolving credit facility are
classified  as  long-term  as  of  September  30,  1999.

On  March  1, 2000, the Company entered into an agreement with an investor group
(the  "Investors"),  the  holder  of  the senior notes payable (the "Senior Note
Holder"),  and  its  revolving  line  of  credit lender (the "Bank"). Under this
agreement, the Investors loaned $8.0 million to the Company in the form of notes
payable  due April 30, 2001, which bear interest at 10% annually. The Investors,
the  Senior Note Holder, and the Bank all agreed to convert the new $8.0 million
loan,  the  outstanding balance of $32.5 million under the senior notes payable,
and  the outstanding balance of $7.0 million under the revolving line of credit,
to  convertible  preferred  stock,  subject  to  regulatory approval. Under this
agreement,  both  the  Senior  Note  Holder and the Bank agreed not to demand or
accept  any payment under the credit agreements, and not to take any enforcement
actions  of  any  kind  under  the  agreements  until  April  30,  2001.

The  convertible  preferred  stock  would  not accrue dividends of any kind, and
would be convertible into an aggregate of 30.0 million shares of common stock of
the  Company, at the option of the holder. The convertible preferred stock would
entitle  the  holder  to  one vote for each share of common stock into which the
preferred  stock  is  convertible,  with  respect to all matters voted on by the
common  stockholders  of  the  Company.  As  a result of this transaction, after
regulatory  approval is obtained, the existing stockholders of the Company would
own approximately 13.7% of the common stock interests of the Company. Under this
agreement,  the Company agreed to place new directors on its board of directors,
who  represent  the  Investors,  the  Senior  Note Holder and the Bank, and who,
collectively,  constitute  a  majority  of  the  board  of  directors.

Year  2000  Compliance

The  Year  2000  issue results from computer programs that use two digits rather
than  four to define the applicable year. Any of the Company's computer programs
that  have  time-sensitive  software,  and  that  use  two  digits to define the
applicable  year,  may  recognize a date using "00" as the year 1900 rather than
the  year 2000. This could result in a system failure or miscalculations causing
a  disruption of operations, including among other things, a temporary inability
to process transactions, send invoices, or engage in normal business activities.

The  Company  relies  heavily upon information technology, including its primary
transaction  processing  systems,  its  telephones,  its building access control
systems,  heating  and ventilation equipment, and other computerized systems, to
conduct  its business. The Company also has numerous business relationships with
employer  groups  and  other  customers,  dental  health  care  providers, other
vendors,  financial  institutions,  and  other  third  parties,  including state
regulators,  who  are  reliant  upon  information  technology  to  conduct their
businesses.  There  can  be  no  assurance  that  none  of  these  entities will


                                      -13-
<PAGE>
experience  business  disruptions  related to the Year 2000 issue that could, in
turn,  cause  business  disruptions  for  the  Company.

The  Company believes it has adequately modified its information systems so that
dates  in  the  year  2000  are  properly  recognized  by all of its significant
applications.  As  of March 31, 2000, the Company has experienced no significant
impact  on  its  business  related  to  the Year 2000 issue, from either its own
information  systems  or  those  of  third  parties with which it does business.

Impact  of  Inflation

The Company's operations are potentially impacted by inflation, which can affect
premium  rates,  health  care  services  expense,  and  selling,  general  and
administrative  expenses.  The  Company  expects  that  its  earnings  will  be
positively  impacted  by  inflation  in premium rates, because premium rates for
dental  benefit plans in general have been increasing due to inflation in recent
years.  The  Company  expects  that  its earnings will be negatively impacted by
inflation  in  health  care  costs,  because  fees charged by dentists and other
dental  providers  have  been  increasing  due to inflation in recent years. The
impact  of  inflation on the Company's health care expenses is mitigated to some
extent  by  the  fact  that  45-50%  of  total  health  care services expense is
comprised  of  capitation  payments  to  providers.  In  addition,  most  of the
Company's  selling,  general and administrative expenses are impacted by general
inflation  in  the  economy.

ITEM  2.          QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT MARKET RISK

The  Company  is  not subject to a material amount of risk related to changes in
interest  rates  or  foreign  currency  exchange  rates.

PART  I.          OTHER  INFORMATION

ITEM  1.          LEGAL  PROCEEDINGS

The  Company  is  subject  to  various  claims and legal actions in the ordinary
course  of  business.  The  Company  believes that all pending claims either are
adequately covered by insurance maintained by its contracted dental providers or
by  the  Company,  or  will  not have a material adverse effect on the Company's
results  of  operations  or  financial position. In December 1999, a shareholder
lawsuit  against  the  Company  was  filed,  which  alleges that the Company and
certain  of its officers violated certain securities laws by issuing a series of
alleged  false  and  misleading  statements  concerning  the  Company's publicly
reported  revenues and earnings during a specified class period. The Company has
directors and officers liability insurance and intends to vigorously defend this
litigation.  In the opinion of the Company's management, the ultimate outcome of
this  matter  will not have a material adverse effect on the Company's financial
position  or  results  of  operations.

ITEM  3.          DEFAULTS  UPON  SENIOR  SECURITIES

Please  see Note 5 to the accompanying consolidated financial statements herein.

ITEM  5.          OTHER  INFORMATION

Please  see  information  set  forth  in  Notes 4 and 5 of Notes to Consolidated
Financial Statements herein, and the section on Risk Factors in Part I., Item 2.


                                      -14-
<PAGE>
ITEM  6.          EXHIBITS  AND  REPORTS  ON  FORM  8-K

(A)     EXHIBITS

          EXHIBIT               DESCRIPTION
          -------               -----------
          10.18          Default  Forbearance Agreement and Irrevocable Power of
                         Attorney,  dated  as  of  February  12,  1999  (1)
          27.1           Financial  Data  Schedule

(1)     Referenced, disclosed and filed as an exhibit to Company's Annual Report
        on  Form  10-K  for  the  year  ended  December  31,  1998.

(B)     REPORTS  ON  FORM  8-K.

A  report on Form 8-K was filed with the Securities and Exchange Commission (the
"SEC") on July 7, 1999, to report that the Company had entered into a definitive
agreement  (the  "Agreement")  with  an  investor  group led by CAI Partners and
Company  and Jack R. Anderson. Under the Agreement, the investor group agreed to
invest  $40  million  into  the  Company  through the purchase of $20 million of
convertible  preferred  stock  and  convertible  subordinated debentures and $20
million  of  10-year  senior  notes.

A report on Form 8-K was filed with the SEC on September 20, 1999. This Form 8-K
reported  that  the  Company's  common  stock  had  been removed from the NASDAQ
National Market on September 1, 1999, due to the Company's inability to meet the
relevant  minimum  tangible  net  worth  requirement.

The  above-described reports on Form 8-K are hereby incorporated by reference in
this  Quarterly  Report  on  Form 10-Q for the quarter ended September 30, 1999.


                                      -15-
<PAGE>


                                   SIGNATURES

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934,  the  Registrant  has duly caused this report to be signed on its
behalf  by  the  undersigned,  thereunto  duly  authorized, in the City of Aliso
Viejo,  State  of  California,  on  the  14th  day  of  April,  2000.

                              SAFEGUARD  HEALTH  ENTERPRISES,  INC.


                              By:  /s/  James  E.  Buncher
                                   -----------------------
                                    James  E.  Buncher
                                    President  and  Chief  Executive  Officer
                                    (Principal  Executive  Officer)


                              By:  /s/  Dennis  L.  Gates
                                   ----------------------
                                    Dennis  L.  Gates
                                    Senior  Vice  President  and Chief Financial
                                    Officer
                                    (Chief  Accounting  Officer)