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 June 30, 2001

                                       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 jurisdiction                 (I.R.S. Employer
       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
                                       ---     ---

As  of  August  1,  2001, the number of shares of registrant's common stock, par
value  $.01 per share, outstanding was 4,740,831 shares (not including 3,284,788
shares  of  common  stock  held  in  treasury),  and  the  number  of  shares of
registrant's  convertible preferred stock, par value $.01 per share, outstanding
was  300,000  shares.


<PAGE>
<TABLE>
<CAPTION>
                                     SAFEGUARD HEALTH ENTERPRISES, INC.
                           INDEX TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001


                                                                                                     PAGE
                                                                                                    ------
PART I.  FINANCIAL INFORMATION
<S>                                                                                                 <C>
     Item 1.  Condensed Consolidated Financial Statements (unaudited). . . . . . . . . . . . . . . .   1

     Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations.   9

     Item 3.  Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . .  13

     Item 4.  Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . .  13

PART II.  OTHER INFORMATION

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

     Item 6.  Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . . . . . . .  14

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  15
</TABLE>


                                        i
<PAGE>
<TABLE>
<CAPTION>
PART  I.     FINANCIAL  INFORMATION
ITEM  1.     CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS


                  SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                         CONDENSED CONSOLIDATED BALANCE SHEETS
                                     (IN THOUSANDS)


                                                             JUNE 30,     DECEMBER 31,
                                                               2001           2000
                                                           ------------  --------------
                             ASSETS                        (unaudited)
<S>                                                        <C>           <C>
Current assets:
  Cash and cash equivalents                                $       922   $       1,381
  Investments available-for-sale, at fair value                 16,310          15,321
  Accounts receivable, net of allowances                         2,077           2,778
  Other current assets                                           1,349           1,788
                                                           ------------  --------------
    Total current assets                                        20,658          21,268

Property and equipment, net of accumulated depreciation          2,308           2,843
Restricted investments available-for-sale, at fair value         2,699           2,700
Notes receivable, net of allowances                                905           1,750
Intangible assets, net of accumulated amortization               4,017           4,154
Other assets                                                       275             380
                                                           ------------  --------------

    Total assets                                           $    30,862   $      33,095
                                                           ============  ==============

                    LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Accounts payable                                         $     4,181   $       3,986
  Accrued interest, converted to equity in 2001 (Note 4)            --           4,990
  Other accrued expenses                                         5,476           6,457
  Short-term debt, converted to equity in 2001 (Note 4)             --          47,545
  Other short-term debt                                            250             250
  Claims payable and claims incurred but not reported            6,279           7,554
  Deferred revenue                                               1,437           1,413
                                                           ------------  --------------
    Total current liabilities                                   17,623          72,195

Long-term debt                                                     136             250
Other long-term liabilities                                        884           1,079

Stockholders' equity (deficit):
  Convertible preferred stock                                   41,250              --
  Common stock                                                  21,832          21,829
  Retained earnings (accumulated deficit)                      (32,770)        (44,254)
  Accumulated other comprehensive income                            40             119
  Treasury stock, at cost                                      (18,133)        (18,123)
                                                           ------------  --------------
    Total stockholders' equity (deficit)                        12,219         (40,429)
                                                           ------------  --------------

    Total liabilities and stockholders' equity (deficit)   $    30,862   $      33,095
                                                           ============  ==============
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                      -1-
<PAGE>
<TABLE>
<CAPTION>
                    SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                         THREE MONTHS ENDED JUNE 30, 2001 AND 2000
                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                        (UNAUDITED)


                                                                          2001      2000
                                                                        --------  --------
<S>                                                                     <C>       <C>
Premium revenue, net                                                    $21,452   $24,173

Health care services expense                                             14,914    17,710
Selling, general and administrative expense                               6,453     7,119
                                                                        --------  --------

Operating income (loss)                                                      85      (656)

Investment and other income                                                 255       378
Interest expense on debt that was converted to equity in 2001 (Note 4)       --    (1,202)
Other interest expense                                                      (30)      (18)
                                                                        --------  --------

Income (loss) before income taxes                                           310    (1,498)
Income tax expense                                                           --        --
                                                                        --------  --------

     Net income (loss)                                                  $   310   $(1,498)
                                                                        ========  ========

Basic net income (loss) per share                                       $  0.01   $ (0.32)
Weighted average basic shares outstanding                                34,740     4,747

Diluted net income (loss) per share                                     $  0.01   $ (0.32)
Weighted average diluted shares outstanding                              35,502     4,747
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                      -2-
<PAGE>
<TABLE>
<CAPTION>
                    SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                          SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                           (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                        (UNAUDITED)


                                                                          2001      2000
                                                                        --------  --------
<S>                                                                     <C>       <C>
Premium revenue, net                                                    $43,095   $48,636

Health care services expense                                             30,101    35,448
Selling, general and administrative expense                              12,987    15,532
                                                                        --------  --------

Operating income (loss)                                                       7    (2,344)

Investment and other income                                                 690       637
Interest expense on debt that was converted to equity in 2001 (Note 4)     (402)   (2,217)
Other interest expense                                                      (62)      (35)
                                                                        --------  --------

Income (loss) before income taxes and extraordinary item                    233    (3,959)
Income tax expense                                                           --        --
                                                                        --------  --------

Income (loss) before extraordinary item                                     233    (3,959)
Extraordinary item:
  Conversion of debt to convertible preferred stock (Note 4)             11,251        --
                                                                        --------  --------

Net income (loss)                                                       $11,484   $(3,959)
                                                                        ========  ========

Basic net income (loss) per share:
  Income (loss) before extraordinary item                               $  0.01   $ (0.83)
  Extraordinary item                                                       0.38        --
                                                                        --------  --------

  Net income (loss)                                                     $  0.39   $ (0.83)
                                                                        ========  ========

Weighted average basic shares outstanding                                29,739     4,747

Diluted net income (loss) per share:
  Income (loss) before extraordinary item                               $  0.01   $ (0.83)
  Extraordinary item                                                       0.37        --
                                                                        --------  --------

  Net income (loss)                                                     $  0.38   $ (0.83)
                                                                        ========  ========

Weighted average diluted shares outstanding                              30,443     4,747
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


                                      -3-
<PAGE>
<TABLE>
<CAPTION>
                  SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        SIX MONTHS ENDED JUNE 30, 2001 AND 2000
                                    (IN THOUSANDS)
                                      (UNAUDITED)


                                                                    2001       2000
                                                                  ---------  ---------
<S>                                                               <C>        <C>
Cash flows from operating activities:
  Net income (loss)                                               $ 11,484   $ (3,959)
  Adjustments to reconcile net income (loss) to net
    cash provided by (used in) operating activities:
    Gain on conversion of debt to convertible preferred stock      (11,251)        --
    Bad debt expense                                                   150         --
    Amortization of deferred loan costs                                 24         85
    Depreciation and amortization                                    1,151      1,431
    Gain on sale of investments                                        (98)        --
    Gain on sale of property and equipment                              --        (67)
  Changes in operating assets and liabilities:
    Accounts receivable                                                551        754
    Other current assets                                               173        388
    Accounts payable                                                   195        560
    Accrued expenses                                                (1,264)       143
    Claims payable and claims incurred but not reported             (1,275)    (1,653)
    Deferred revenue                                                    24        215
                                                                  ---------  ---------
      Net cash used in operating activities                           (136)    (2,103)

Cash flows from investing activities:
  Purchase of investments available-for-sale                       (13,996)   (22,919)
  Proceeds from sale/maturity of investments available-for-sale     13,027     14,100
  Purchases of property and equipment                                 (479)      (124)
  Proceeds from sale of property and equipment                          --        200
  Payments received on notes receivable                              1,120        855
  Additions to other assets                                             --       (297)
                                                                  ---------  ---------
      Net cash used in investing activities                           (328)    (8,185)

Cash flows from financing activities:
  Borrowings on debt                                                    --      8,000
  Increase in accrued interest, converted to equity in 2001            321      1,861
  Payments on debt                                                    (114)      (150)
  Repurchase of common stock                                           (10)        --
  Exercise of stock options                                              3         --
  Payment of other long-term liabilities                              (195)      (133)
                                                                  ---------  ---------
    Net cash provided by financing activities                            5      9,578
                                                                  ---------  ---------
Net decrease in cash and cash equivalents                             (459)      (710)
Cash and cash equivalents at beginning of period                     1,381      1,639
                                                                  ---------  ---------
Cash and cash equivalents at end of period                        $    922   $    929
                                                                  =========  =========
</TABLE>

          See accompanying Notes to Consolidated Financial Statements.


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

NOTE  1.  GENERAL
-----------------

The  accompanying  unaudited  condensed  consolidated  financial  statements  of
SafeGuard  Health  Enterprises, Inc. and subsidiaries (the "Company") as of June
30,  2001, and for the three months and six months ended June 30, 2001 and 2000,
have  been  prepared in accordance with accounting principles generally accepted
in the United States of America, applicable to interim periods. The accompanying
financial  statements  reflect all normal and recurring 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 accordingly, omit certain footnote
disclosures  and  other information necessary to present the Company's financial
position  and  results  of  operations  for  annual  periods  in accordance with
accounting principles generally accepted in the United States of America.  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  for  the  year  ended  December  31,  2000.

The  Company  incurred  significant  net losses in each of the three years ended
December  31,  2000.  During  the period since the beginning of 2000, management
took  certain  actions  to improve the Company's operating results and financial
position.  In  March  2000,  the Company obtained $8.0 million of financing, and
entered  into  a transaction under which substantially all of the Company's debt
was  converted  into equity, as discussed in Note 4, which substantially reduced
the  Company's  interest  expense. During the first quarter of 2000, the Company
consolidated  all  of  its  administrative  activities into its National Service
Center in California, which resulted in a significant reduction in the number of
employees  at  the  Company  and the amount of office space used by the Company.
Also  during  the  first  quarter  of  2000, the Company reduced its health care
services  expense by eliminating non-standard payments to certain dental service
providers.  These  actions,  along  with  reductions  in  various other selling,
general  and  administrative expenses, have had a significant positive impact on
the  Company's  results  of  operations and financial position, beginning in the
second  quarter  of  2000.  Management  intends to further improve the Company's
results  of  operations  by increasing revenue through improved customer service
and  customer  retention  programs,  decreasing  health care services expense by
expanding  its  provider  networks,  and  making  further  reductions in various
selling, general and administrative expenses. The Company believes these actions
and its improved financial position will provide adequate financial resources to
support  its  operations  for  the  foreseeable  future.

Basic  and  diluted net income (loss) per share is based on the weighted average
common  shares  outstanding,  including  the  common  shares  into  which  the
convertible  preferred  stock  is convertible. The number of basic common shares
outstanding  includes  the common share equivalents of the convertible preferred
stock,  because  the  Company  believes  the  convertible  preferred  stock  is
essentially  equivalent to common stock, based on all the rights and preferences
of  both  types  of stock. During the three months and six months ended June 30,
2001  and  2000,  other  potentially  dilutive  securities that were outstanding
consisted  of  stock options and warrants. Due to a net loss in the three months
and  six  months ended June 30, 2000, the outstanding stock options and warrants
would  have  an  anti-dilutive effect on diluted loss per share in both of these
periods.  Accordingly,  stock  options  and  warrants  are  excluded  from  the
calculation  of diluted loss per share for the three months and six months ended
June  30,  2000.  Therefore, the Company's diluted loss per share is the same as
its  basic  loss  per  share  in  these  periods.

Certain amounts in the prior year financial statements have been reclassified to
conform  to  the  current  year  presentation.

NOTE  2.  RECENT  ACCOUNTING  PRONOUNCEMENTS
--------------------------------------------

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments  and  Hedging Activities." SFAS No. 133 was amended by SFAS No. 137,
"Accounting  for Derivative Instruments and Hedging Activities - Deferral of the
Effective  Date of SFAS No. 133," in June 1999, and by SFAS No. 138, "Accounting
for  Certain  Derivative  Instruments  and  Certain Hedging Activities," in June
2000.  SFAS  No. 133, as amended, establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in


                                      -5-
<PAGE>
other  contracts, and for hedging activities. SFAS No. 133, as amended, requires
derivatives  to  be reported on the balance sheet at fair value, and was adopted
by  the  Company  effective on January 1, 2001. The adoption of SFAS No. 133, as
amended,  had  no  significant  effect  on  the  Company's financial statements.

In  September  2000, the FASB issued SFAS No. 140, "Accounting for Transfers and
Servicing  of Financial Assets and Extinguishments of Liabilities." SFAS No. 140
replaces  SFAS  No.  125,  which  has the same title, revises the accounting and
reporting  standards  for  securitizations  and  other  transfers of assets, and
expands  the  disclosure requirements for such transactions. Under SFAS No. 140,
consistent  standards  are  provided  for  distinguishing transfers of financial
assets  that  are  sales  from  transfers  that  are  secured  borrowings.  The
accounting  requirements  of  SFAS  No.  140  are  effective  for  transfers and
servicing  of  financial  assets  and  extinguishments of liabilities that occur
after  March  31,  2001, and must be applied prospectively. The adoption of SFAS
No.  140  had  no  significant  effect  on  the  Company's financial statements.

In  July  2001,  the FASB issued SFAS No. 141, "Business Combinations." SFAS No.
141  requires  the  purchase  method  of  accounting to be used for all business
combinations  initiated  after  June  30,  2001,  and  eliminates  the
pooling-of-interests  method  of  accounting. The Company is currently assessing
the  effect  of  adopting  SFAS  No.  141  on  its  financial  statements.

In  July  2001,  the  FASB  issued  SFAS No. 142, "Goodwill and Other Intangible
Assets."  SFAS  No.  142 requires that goodwill established after June 30, 2001,
not  be amortized, and that amortization of goodwill that existed as of June 30,
2001,  be  ceased effective January 1, 2002. SFAS No. 142 also requires that all
goodwill  be  evaluated  for possible impairment as of the end of each reporting
period,  and  establishes  a new method of testing for possible impairment. SFAS
No.  142 is effective on January 1, 2002. The Company is currently assessing the
effect  of  adopting  SFAS  No.  142  on  its  financial statements. The Company
recorded  $137,000  of amortization expense related to goodwill and identifiable
intangible  assets  during  the  six  months  ended  June  30,  2001.

NOTE  3.  SALE  OF  DISCONTINUED  OPERATIONS
--------------------------------------------

In  1997  and  1998, the Company sold a number of general dental and orthodontic
practices  (the "Practices") to a single purchaser (the "Purchaser") in exchange
for  long-term  promissory  notes.  The  Purchaser subsequently defaulted on its
obligations  to  the  Company under those promissory notes, and in October 2000,
the  Company  completed a transaction with the Purchaser and another third party
(the "New Purchaser"), in which the Practices were sold to the New Purchaser. In
this transaction, the Purchaser transferred its interest in the Practices to the
New Purchaser, the New Purchaser paid $2.4 million to the Company, and placed an
additional $1.5 million in an escrow account for the benefit of the Company, and
the  Company  agreed  to pay certain obligations related to the Practices. These
obligations  consisted primarily of payroll, dental office lease obligations for
which the Company was the primary lessee, patient refunds, and the obligation to
complete  the orthodontic treatments for the Company's managed care patients who
had  previously  paid  their  full  share  of  the cost of the treatments. These
obligations  either had to be paid in order to complete the transaction, or were
obligations  for  which the Company may be contingently liable in any event. The
amount  of  the  escrow  account  that  may  be realized by the Company, and the
ultimate  cost  of  the obligations assumed by the Company, are reflected on the
accompanying  consolidated  balance sheet based on the Company's best estimates,
but  these  amounts  are  subject  to  various  uncertainties.


                                      -6-
<PAGE>
NOTE  4.  NOTES  PAYABLE  AND  OTHER  DEBT
------------------------------------------

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

                                   JUNE 30,    DECEMBER 31,
                                     2001          2000
                                  ----------  --------------

       Investor senior loan       $      --   $       8,000
       Revolving credit facility         --           7,045
       Senior notes payable              --          32,500
       Other                            386             500
                                  ----------  --------------
       Total debt                       386          48,045
       Less - short-term portion       (250)        (47,795)
                                  ----------  --------------

       Long-term debt             $     136   $         250
                                  ==========  ==============

On  March 1, 2000, the Company entered into a Recapitalization Agreement with an
investor  group  (the  "Investors"),  the  revolving credit facility lender (the
"Bank"),  and the holder of the senior notes payable (the "Senior Note Holder").
In  this  transaction,  the  Investors loaned $8.0 million to the Company in the
form  of  an  investor senior loan, due April 30, 2001, with an interest rate of
10%  annually.  The  Investors,  the  Bank, and the Senior Note Holder agreed to
convert  the  $8.0 million investor senior loan, the outstanding balance of $7.0
million  under  the  revolving  credit facility, and the $32.5 million of senior
notes  payable  into  convertible  preferred  stock,  subject  to regulatory and
stockholder  approval.

Effective  as  of  January 31, 2001, the Company completed the conversion of the
investor senior loan ($8.0 million), the outstanding balance under the revolving
credit  facility  ($7.0  million), the senior notes payable ($32.5 million), and
the  accrued  interest  on  the  revolving  credit facility and the senior notes
payable ($5.3 million as of January 31, 2001) into 300,000 shares of convertible
preferred  stock.  The  estimated  value  of the convertible preferred stock was
$137.50 per share as of January 31, 2001, which is based on the closing price of
the  Company's common stock on January 31, 2001, which was $1.375 per share, and
the  fact that each share of convertible preferred stock is convertible into 100
shares  of  common  stock.  Based  on  this  estimated  value,  the  conversion
transaction  resulted  in a gain of $11.3 million, which is net of approximately
$350,000  of  transaction  costs.  There is no income tax effect related to this
transaction,  due  to  the  Company's  net  operating loss carryforwards for tax
purposes.  The  Company's  deferred  tax  asset  related  to  net operating loss
carryforwards  is  fully reserved, due to uncertainty about whether the deferred
tax  assets  will  be  realized  in  the  future,  as  discussed  in  Note  5.

The  convertible  preferred  stock  does  not accrue dividends of any kind. Each
share  of  convertible  preferred stock is convertible into 100 shares of common
stock  at the option of the holder. The convertible preferred stock entitles 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,  except  for  the  election  of  directors. The holders of the
convertible  preferred  stock have the right to elect a total of five members of
the  board  of  directors, and the holders of the common stock have the right to
elect  the  remaining  two  directors. The convertible preferred stock has a $30
million  liquidation  preference  over  the  common  stock.

As  a  result  of  the  conversion  transaction,  the previously existing common
stockholders  of  the  Company  were  diluted to approximately 14% of the common
stock interests of the Company. In March 2000, in connection with the conversion
transaction,  the  Company agreed to place four new directors, who represent the
holders  of  the  investor  senior  loan, the revolving credit facility, and the
senior  notes  payable, on its board of directors. Three of those directors were
placed  on  the  board  in March 2000, and the fourth director was placed on the
board  as  of  January 31, 2001, at which time the Bank sold its interest in the
Company  to  other  existing  stockholders.  These  new  directors  constitute a
majority  of  the  board  of  directors,  which  currently  has a total of seven
members.

In  1999,  in  connection  with a restructuring of the senior notes payable, the
Company issued warrants to purchase 382,000 shares of its common stock for $4.51
per share to the Senior Note Holder. These warrants were cancelled without being
exercised,  in  connection  with the conversion of the senior notes payable into
convertible  preferred  stock  effective  January  31,  2001.


                                      -7-
<PAGE>
NOTE  5.  INCOME  TAXES
-----------------------

The  Company's  net deferred tax assets have been fully reserved since September
30,  1999, due to uncertainty about whether those net assets will be realized in
the future. The uncertainty is primarily due to operating losses incurred by the
Company  during  each  of  the  three  years  ended  December  31, 2000, and the
existence  of  significant  net  operating  loss  carryforwards.  The  Company's
deferred  tax  assets  remain  fully  reserved as of June 30, 2001, for the same
reasons.

As  of  December  31,  2000, the Company had net operating loss carryforwards of
approximately  $35.3  million for federal income tax purposes, and approximately
$18.6  million  for  state income tax purposes. Therefore, the Company's taxable
income during the month ended January 31, 2001, which included the $11.3 million
gain  on  conversion  of the Company's debt into convertible preferred stock, as
discussed  in  Note  4,  was  completely  offset  by loss carryforwards, and the
Company  recognized  no  income tax expense for this period. As discussed below,
the  amount  of  loss  carryforwards  that  can  be utilized by the Company were
substantially  limited effective January 31, 2001, due to a change of control of
the  Company  for  tax  purposes.  However,  the  Company had a net loss for tax
purposes  for  the  period  from February 1, 2001, to June 30, 2001, and its net
deferred  tax  assets  remain  fully  reserved, as noted above. Accordingly, the
Company  recorded  no income tax expense for the six months ended June 30, 2001.

Due  to  the conversion of outstanding debt into convertible preferred stock, as
described in Note 4, there was a "change of control" of the Company for purposes
of  Internal  Revenue Code Section 382, effective January 31, 2001. As a result,
effective  January 31, 2001, the amount of net operating loss carryforwards that
can be used to offset current taxable income on the Company's federal income tax
return  is  limited  to  approximately  $350,000  per  year.

NOTE  6.  TOTAL  COMPREHENSIVE  INCOME
--------------------------------------

Total  comprehensive  income or loss includes the change in stockholders' equity
during  the  period  from  transactions  and other events and circumstances from
non-stockholder  sources.  Total comprehensive income or loss of the Company for
the  six  months  ended  June 30, 2001 and 2000, includes net income or loss and
other  comprehensive  income  or  loss,  which  consists of unrealized gains and
losses  on marketable securities, net of realized gains and losses that occurred
during  the  period. Other comprehensive (loss) income was $(79,000) and $24,000
for  the  six  months  ended  June  30,  2001  and  2000,  respectively.  Total
comprehensive  income (loss) was $11,405,000 and $(3,935,000) for the six months
ended  June  30,  2001  and  2000,  respectively.

NOTE  7.  CONTINGENCIES
-----------------------

LITIGATION

The  Company  is a defendant in various lawsuits arising in the normal course of
business.  In  the  opinion  of  management,  the  ultimate  outcome of existing
litigation  will  not have a material effect on the Company's financial position
or  results  of  operations.

In  December  1999,  a  stockholder lawsuit against the Company was filed, which
alleged 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.  On  September  12, 2000, after the plaintiffs had filed a first amended
complaint,  the  Federal  District  Trial  Court  dismissed  the  lawsuit  with
prejudice,  stating  that the plaintiffs had failed to state a claim against the
Company.  On October 6, 2000, the plaintiffs filed an appeal of the dismissal of
the lawsuit, and that appeal is currently pending. The Company has directors and
officers  liability  insurance  and intends to vigorously contest the appeal. In
the  opinion  of management, the ultimate outcome of this matter will not have a
material  adverse  effect  on  the  Company's  financial  position or results of
operations.


                                      -8-
<PAGE>
CONTINGENT  LEASE  OBLIGATIONS

The  Company  sold all of its general dental practices and orthodontic practices
in  1996,  1997 and 1998. The Company also re-sold certain of these practices in
October  2000,  after  the  original  purchaser  of  a number of these practices
defaulted  on  its  obligations  to  the  Company,  as  discussed  in Note 3. In
connection  with  the sale and re-sale of those practices, all the purchasers of
the  practices agreed to make the remaining lease payments related to the dental
offices  used  by  those  practices.  However,  the Company remains contingently
liable  for  the  lease  payments in the event the purchasers of those practices
fail  to  make  the  payments.  As  of  June  30, 2001, the aggregate contingent
liability  of  the Company related to all of these leases was approximately $5.0
million  over the terms of the various lease agreements, which expire at various
dates through 2007.  Management has not been notified of any defaults that would
materially  affect  the  Company's  financial position. The aggregate contingent
lease  obligation  of  $5.0  million  excludes  $175,000  of  estimated  lease
obligations  that  have  been  accrued  as  of  June 30, 2001, due to a possible
failure by one of the entities to make the lease payments under a lease that was
assigned  to  that  entity  by  the  Company. This estimated lease obligation is
included in the accompanying consolidated balance sheet under the caption "Other
accrued  expenses."

ITEM  2.     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 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 statements. The Company desires to take
advantage  of  these  safe  harbor  provisions.  In addition to the Risk Factors
section  of the Company's Annual Report on Form 10-K for the year ended December
31,  2000, filed with the Securities and Exchange Commission, the following risk
factors  should  be  considered in connection with this Quarterly Report on Form
10-Q  for  the  period  ended  June  30,  2001.

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 revenue, future health
care  expenses,  the  Company's ability to control health care, selling, general
and  administrative  expenses,  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 risks,
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 from a
large  number  of other entities, many of which are much larger and have greater
financial  resources than the Company, that offer dental plans in the markets in
which the Company operates. There is a risk that the Company will not be able to
increase  revenues  in  the  future  as  employer groups and other purchasers of
dental  coverage  continue  to  resist premium rate increases, while demanding a
wide choice of dental care providers and a high level of customer service. There
is  also  a  risk that the number of subscribers covered by Company's dental and
vision benefit plans will decrease due to layoffs and other workforce reductions
by  the  Company's  clients. Securing cost-effective contracts with dentists may
become  more  difficult  due  to  increased  competition  among dental plans for
contracts  with  dental  providers,  and  a  possible  decrease in the number of
dentists  in  practice  in the markets in which the Company operates. There is a
risk  that the Company will not be able to expand its business due to current or
future  overall  economic  conditions.

There are risks associated with changes in the Company's operating and expansion
strategies,  and  the possible inability to realize all of the proceeds from the
re-sale  of  certain dental office assets to a third party. There is a risk that
the  Company  will  be  unable  to continue to maintain or increase its earnings
before  interest,  taxes,  depreciation and amortization ("EBITDA"), as any such
maintenance  or increase is dependent upon a multitude of factors including, but
not  limited to, the ability of the Company to identify additional opportunities
to  increase  sales  and  reduce  costs.


                                      -9-
<PAGE>
There  is  a risk that the purchaser of certain resold dental office assets will
not  comply  with  its  agreement  to make rental payments on the related office
lease  agreements, for which the Company remains contingently liable. There is a
risk  that  the  Company  may  incur  additional expenses in connection with the
delivery  of  the dental office assets resold to the New Purchaser, and that the
Company  may  incur  additional health care expenses to complete the orthodontic
and dental treatment of certain patients of the re-sold dental practices. All of
these  risks and uncertainties could have a negative impact on the estimated net
proceeds  from  the resale of the dental office assets by the Company in October
2000.

There  is  a  risk that other dentists who purchased dental practices previously
owned  by  the  Company will not make the required payments on their assigned or
sublet  lease  agreements,  for  which  the Company remains contingently liable.
There  is  a risk that the dentists who purchased such dental practices from the
Company  and  issued  promissory notes to the Company, will not make payments on
such  promissory  notes.

The  Company's  profitability  depends,  in  part,  on  its  ability to maintain
effective  control  over  its  health  care  costs, while providing members with
quality  dental  care. A variety of factors, such as utilization rates of dental
services,  changes  in  the value of the Company's assets, new technologies, the
cost  of dental services delivered by referral specialists, the amount of claims
incurred  by  patients  insured  by  the  Company,  and  numerous other external
influences  could  affect  the  Company's  operating  results.

All  of  the  risks set forth herein could negatively impact the earnings of the
Company  in  the  future. The Company's expectations for the future are based on
current  information  and  its evaluation of external influences. Changes in any
one factor could materially impact the Company's expectations related to premium
rates,  benefits plans offered, membership enrollment, the amount of health care
expenses  incurred, and profitability, and therefore, affect the forward-looking
statements  which  may  be  included in this report. 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.

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     SIX MONTHS
                                              ENDED JUNE 30,  ENDED JUNE 30,
                                              --------------  --------------
                                               2001    2000    2001    2000
                                              ------  ------  ------  ------
<S>                                           <C>     <C>     <C>     <C>
Premium revenue, net                          100.0%  100.0%  100.0%  100.0%

Health care services expense                   69.5    73.3    69.9    72.9
Selling, general and administrative expense    30.1    29.4    30.1    31.9
                                              ------  ------  ------  ------
Operating income (loss)                         0.4    (2.7)     --    (4.8)

Investment and other income                     1.2     1.6     1.6     1.3
Interest expense on debt that was converted
  to equity in 2001 (1)                          --    (5.0)   (0.9)   (4.5)
Other interest expense                         (0.1)   (0.1)   (0.2)   (0.1)
                                              ------  ------  ------  ------
Income (loss) before income taxes and
  extraordinary item                            1.5    (6.2)    0.5    (8.1)
Income tax expense                               --      --      --      --
                                              ------  ------  ------  ------
Income (loss) before extraordinary item         1.5    (6.2)    0.5    (8.1)
Extraordinary item                               --      --    26.1      --
                                              ------  ------  ------  ------

  Net income (loss)                             1.5%  (6.2)%   26.6%  (8.1)%
                                              ======  ======  ======  ======
<FN>
(1)  Substantially  all  of  the  Company's  debt was converted into convertible
     preferred  stock effective January 31, 2001. See Note 4 to the accompanying
     condensed  consolidated  financial  statements.
</TABLE>


                                      -10-
<PAGE>
THREE  MONTHS  ENDED  JUNE 30, 2001 COMPARED TO THREE MONTHS ENDED JUNE 30, 2000

Premium  revenue decreased by $2.7 million, or 11.3%, from $24.2 million in 2000
to  $21.5 million in 2001. The average membership for which the Company provided
dental  coverage  decreased  by  approximately  206,000  members, or 24.9%, from
828,000  members during 2000 to 622,000 during 2001. The decrease in the average
number  of  members is due to the loss of a number of employer groups during the
eighteen  months  ended  June  30, 2001. Premium revenue decreased by only 11.3%
even  though  average membership decreased by 24.9%. This was primarily due to a
shift  in  the  product  mix  toward preferred provider ("PPO")/indemnity plans,
which  have  significantly higher premium rates than managed care plans, a shift
in  the  managed  care  product mix toward plans with higher benefit levels, and
increases  in  premium  rates.

Health  care  services  expense  decreased by $2.8 million, or 15.8%, from $17.7
million  in  2000  to  $14.9  million in 2001. Health care services expense as a
percentage of premium revenue (the "loss ratio") decreased from 73.3% in 2000 to
69.5% in 2001. This decrease is partially due to a decrease in the loss ratio in
the Company's managed care business, and partially due to a decrease in the loss
ratio in the PPO/indemnity business. The decrease in the managed care loss ratio
is  primarily  due  to an increase in premium rates, including the impact of the
loss  of  several large customers effective January 1, 2001, that had lower than
average premium rates. The decrease in the PPO/indemnity loss ratio is partially
due  to  an  increase  in  premium rates, and partially due to a decrease in the
average  amount  of  incurred  claims  per  member.

Selling, general and administrative ("SG&A") expenses decreased by $0.7 million,
or  9.4%,  from $7.1 million in 2000 to $6.4 million in 2001. SG&A expenses as a
percentage  of  premium  revenue  increased from 29.4% in 2000 to 30.1% in 2001.
The  decrease  in SG&A expenses is due to cost reductions implemented in several
categories,  including  equipment  rent,  telecommunications, sales commissions,
depreciation  expense,  and  others.  The  slight increase in SG&A expenses as a
percentage  of  premium revenue was due to an 11.3% decrease in premium revenue,
as  discussed  above.

Investment  and  other  income decreased by $123,000, or 32.5%, from $378,000 in
2000  to  $255,000  in  2001.  This  decrease  is primarily due to a decrease in
interest  income from notes receivable, due to the liquidation of a majority the
Company's  notes  receivable  during  the  fourth  quarter of 2000 and the first
quarter  of  2001.  The  decrease  in interest income is also partially due to a
decrease  in  interest  rates  on short-term fixed-income investments during the
past  year.

Total interest expense decreased by $1.2 million, or 97.5%, from $1.2 million in
2000  to  $30,000  in  2001. This decrease is primarily due to the conversion of
substantially  all  of  the  Company's  debt  into  convertible  preferred stock
effective  January  31,  2001,  which  eliminated  nearly  all  of the Company's
interest  expense.

The  income  (loss) before income taxes improved by $1.8 million, from a loss of
$1.5  million  in  2000  to income of $310,000 in 2001. The income (loss) before
income  taxes as a percentage of premium revenue improved from a loss of 6.2% in
2000  to  income  of  1.5% in 2001. This improvement was primarily due to a $1.2
million  decrease  in  interest  expense,  and a decrease in the loss ratio from
73.3%  to  69.5%,  as  discussed  above.

SIX  MONTHS  ENDED  JUNE  30,  2001  COMPARED  TO SIX MONTHS ENDED JUNE 30, 2000

Premium  revenue decreased by $5.5 million, or 11.4%, from $48.6 million in 2000
to  $43.1 million in 2001. The average membership for which the Company provided
dental  coverage  decreased  by  approximately  206,000  members, or 24.4%, from
844,000  members during 2000 to 638,000 during 2001. The decrease in the average
number  of  members is due to the loss of a number of employer groups during the
eighteen  months  ended  June  30, 2001. Premium revenue decreased by only 11.4%
even  though  average membership decreased by 24.4%. This was primarily due to a
shift  in  the  product  mix  toward preferred provider ("PPO")/indemnity plans,
which  have  significantly higher premium rates than managed care plans, a shift
in  the  managed  care  product mix toward plans with higher benefit levels, and
increases  in  premium  rates.

Health  care  services  expense  decreased by $5.3 million, or 15.1%, from $35.4
million in 2000 to $30.1 million in 2001. The loss ratio decreased from 72.9% in
2000  to 69.9% in 2001. This decrease is partially due to a decrease in the loss
ratio  in the managed care business, and partially due to a decrease in the loss
ratio in the PPO/indemnity business. The decrease in the managed care loss ratio


                                      -11-
<PAGE>
is  primarily  due  to an increase in premium rates, including the impact of the
loss  of  several large customers effective January 1, 2001, that had lower than
average premium rates. The decrease in the PPO/indemnity loss ratio is partially
due  to  an  increase  in  premium rates, and partially due to a decrease in the
average  amount  of  incurred  claims  per  member.

SG&A expenses decreased by $2.5 million, or 16.4%, from $15.5 million in 2000 to
$13.0  million  in  2001.  SG&A  expenses  as  a  percentage  of premium revenue
decreased from 31.9% in 2000 to 30.1% in 2001.  The decrease in SG&A expenses is
due  to  cost  reductions implemented in several categories, including equipment
rent,  telecommunications, payroll and benefits, sales commissions, depreciation
expense,  and  others.

Investment and other income increased by $53,000, or 8.3%, from $637,000 in 2000
to  $690,000  in  2001.  This increase is primarily due to realized gains on the
sale  of  investments  in  2001,  which  was  partially  offset by a decrease in
interest  income from notes receivable, due to the liquidation of a majority the
Company's  notes  receivable  during  the  fourth  quarter of 2000 and the first
quarter  of  2001.

Total interest expense decreased by $1.8 million, or 79.4%, from $2.3 million in
2000  to  $464,000  in 2001. This decrease is primarily due to the conversion of
substantially  all  of  the  Company's  debt  into  convertible  preferred stock
effective  January  31,  2001,  which  eliminated  nearly  all  of the Company's
interest  expense.

The  income  (loss)  before income taxes and extraordinary item improved by $4.2
million,  from a loss of $4.0 million in 2000 to income of $233,000 in 2001. The
income  (loss)  before  income  taxes  and extraordinary item as a percentage of
premium  revenue improved from a loss of 8.1% in 2000 to income of 0.5% in 2001.
This  improvement  was  primarily  due  to  a  $1.8 million decrease in interest
expense,  a  decrease  in  the loss ratio from 72.9% to 69.9%, and a decrease in
SG&A expenses as a percentage of revenue from 31.9% in 2000 to 30.1% in 2001, as
discussed  above.

There  was  an  extraordinary gain of $11.3 million in 2001, compared to zero in
the  same period in 2000. The extraordinary gain resulted from the conversion of
substantially  all  of  the Company's debt into convertible preferred stock. See
Note  4 to the accompanying consolidated condensed financial statements for more
discussion  of  this  transaction.

LIQUIDITY  AND  CAPITAL  RESOURCES

The  Company  used  $136,000  of net cash in operating activities during the six
months  ended  June 30, 2001, compared to $2.1 million in the same period in the
prior year. During the first six months of 2001, net cash provided by net income
was $1.5 million, after all adjustments to reconcile net income to net cash used
in operating activities, as reflected on the accompanying consolidated statement
of cash flows. This $1.5 million of net cash provided was offset by $1.3 million
of  net  cash used to reduce accrued expenses, and $1.3 million of net cash used
to  reduce  claims  payable  and  claims incurred but not reported ("IBNR"). The
reduction  in  accrued  expenses  was  partially due to payments made in 2001 to
reduce  the obligations assumed in connection with the re-sale of certain dental
practices,  as  discussed  in  Note 3 to the accompanying condensed consolidated
financial  statements.  The  reduction  was  also partially due to a decrease in
accrued  premium  taxes,  which  is  due  to  normal variations in the timing of
quarterly  payments.  The  reduction  in  claims  payable  and  claims  IBNR was
primarily  due  to  a  decrease  in  the processing time for payment of provider
claims during the first six months of 2001. The Company used $2.1 million of net
cash  in  operating  activities  during  the first six months of 2000, which was
primarily  due  to  the  fact  that  $2.5  million  of  net cash was used in the
Company's  net loss, after all adjustments to reconcile the net loss to net cash
used  in  operating  activities.  The  significant  improvement in the Company's
operating  results  is  discussed  above  under  Results  of  Operations.

Net  cash  used  in  investing activities decreased from $8.2 million in 2000 to
$0.3  million  in  2001.  Net  cash  used  by  investing  activities in 2000 was
primarily due to the purchase of investments with the $8.0 million proceeds from
the  borrowing  on  March  1,  2000,  as discussed in Note 4 to the accompanying
condensed  consolidated  financial  statements.  Net  cash  used by purchases of
property  and  equipment  increased from $0.1 million in 2000 to $0.5 million in
2001,  primarily  due to the purchase of computer software and equipment related
to a new accounts receivable system and a new contact management system in 2001.
Net cash provided by financing activities decreased from $9.6 million in 2000 to
$5,000  in  2001.  The  net  cash  provided  by financing activities in 2000 was


                                      -12-
<PAGE>
primarily  due  to  the  $8.0  million  borrowing on March 1, 2000, as discussed
above, and $1.9 million of accrued interest that was converted into equity as of
January  31,  2001,  as  discussed  in  Note  4  to  the  accompanying condensed
consolidated  financial  statements.

The  Company's  net  working  capital improved from negative $50.9 million as of
December  31,  2000, to positive $3.1 million as of June 30, 2001, primarily due
to the conversion of $52.5 million of debt and accrued interest into convertible
preferred  stock,  as  discussed  in  Note  4  to  the  accompanying  condensed
consolidated financial statements. Excluding the obligations that were converted
to  equity,  the Company's net working capital increased from $1.6 million as of
December  31,  2000,  to  $3.1  million as of June 30, 2001. This improvement is
primarily  due  to  $1.4 million of income before depreciation and amortization,
and  before  the  extraordinary  item,  in  the  six months ended June 30, 2001.

The  Company's  total short-term and long-term debt decreased from $48.0 million
at December 31, 2000, to $0.4 million at June 30, 2001, due to the conversion of
substantially  all  of  the  Company's  debt  into  convertible  preferred stock
effective  January  31,  2001.  See  Note  4  to  the  accompanying  condensed
consolidated  financial  statements for more discussion of this transaction. The
Company  believes  it  has  adequate financial resources to continue its current
operations  for  the  foreseeable  future.

RECENT  ACCOUNTING  PRONOUNCEMENTS

See Note 2 to the accompanying condensed consolidated financial statements for a
discussion  of  recent  accounting  pronouncements.

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 in the
short-term  by  the  fact  that  approximately 35% of total health care services
expense  consists of capitation (fixed) payments to providers. In addition, most
of  the  Company's  selling, general and administrative expenses are impacted by
general  inflation  in  the  economy.

ITEM  3.     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.

ITEM  4.     SUBMISSION  OF  MATTERS  TO  A  VOTE  OF  SECURITY  HOLDERS

An Annual Meeting of the Stockholders of the Company (the "Meeting") was held at
the  executive  offices  of  the  Company in Aliso Viejo, California on June 20,
2001,  at  4:00  p.m.  The  following  matter  was  addressed  at  the  Meeting:

ELECTION  OF  DIRECTORS

It  was  proposed  that Jack R. Anderson, Steven J. Baileys, Stephen J. Blewitt,
Ronald  I. Brendzel, James E. Buncher, Leslie B. Daniels, and Dennis L. Gates be
elected  to  serve  as  Directors of the Company until the Company's next annual
meeting  of  stockholders.  Dr.  Baileys  and  Mr.  Brendzel  both  received  an
affirmative  vote  of  4,631,331  shares  of  common  stock present in person or
represented  by  proxy  at  the  Meeting  out  of  a  total  of 4,737,498 shares
outstanding,  or 97.7% of the common shares entitled to vote at the Meeting; Mr.
Anderson,  Mr.  Buncher,  Mr.  Daniels and Mr. Gates all received an affirmative
vote  of  80,000  shares  of  Series  A  preferred  stock  present  in person or
represented by proxy at the Meeting out of a total of 80,000 shares outstanding,
or 100% of the Series A preferred stock entitled to vote at the Meeting; and Mr.
Blewitt  received  an  affirmative  vote  of 220,000 shares of Series B, C and D


                                      -13-
<PAGE>
preferred  stock present in person or represented by proxy at the Meeting out of
a  total  of  220,000  shares  outstanding,  or  100%  of  the Series B, C and D
preferred  stock  entitled  to  vote  at  the  meeting,  and  therefore all such
individuals  were  elected  to  serve until the Company's next annual meeting of
Stockholders.

PART  II.     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 all pending claims either are covered
by liability insurance maintained by the Company or by dentists in the Company's
provider  network,  or  will  not  result  in  a significant adverse outcome. In
December  1999,  a  stockholder  lawsuit  against  the  Company was filed, which
alleged 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.  On  September  12, 2000, after the plaintiffs had filed a first amended
complaint,  the  Federal  District  Trial  Court  dismissed  the  lawsuit  with
prejudice,  stating  that the plaintiffs had failed to state a claim against the
Company.  On October 6, 2000, the plaintiffs filed an appeal of the dismissal of
the lawsuit, and that appeal is currently pending. The Company has directors and
officers  liability  insurance  and intends to vigorously contest the appeal. In
the  opinion  of 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  6.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)  EXHIBITS

        EXHIBIT                            DESCRIPTION
     -------------  ------------------------------------------------------------

          --        None.

(b)  REPORTS  ON  FORM  8-K.

The Company filed a Report on Form 8-K dated as of May 23, 2001, announcing that
the  Company's Annual Meeting of Stockholders on May 23, 2001, was adjourned and
was scheduled to be reconvened on June 20, 2001, at the executive offices of the
Company.


                                      -14-
<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  10th  day  of  August  2001.

                   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)


                                      -15-
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