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, 2002

                                       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, SUITE 100
                       ALISO VIEJO, CALIFORNIA 92656-2605
                    (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  November 1, 2002, the number of shares of registrant's common stock, par
value $0.01 per share, outstanding was 5,666,203 shares (not including 3,216,978
shares  of  common  stock  held  in  treasury),  and  the  number  of  shares of
registrant's convertible preferred stock, par value $0.01 per share, outstanding
was  30,000,000  shares.


<PAGE>
<TABLE>
<CAPTION>
                                    SAFEGUARD HEALTH ENTERPRISES, INC.
                       INDEX TO FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 2002


                                                                                                     PAGE
                                                                                                     ----
<S>                                                                                                  <C>
PART I.  FINANCIAL INFORMATION

     Item 1.  Condensed Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . .     1

     Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations    13

     Item 3.  Quantitative and Qualitative Disclosures About Market Risk. . . . . . . . . . . . . .    21

     Item 4.  Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    21

PART II.  OTHER INFORMATION

     Item 1.  Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    21

     Item 6.  Exhibits and Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . .    22

SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    23

CERTIFICATIONS BY CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . .    24
</TABLE>


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

<TABLE>
<CAPTION>
                      SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                             CONDENSED CONSOLIDATED BALANCE SHEETS
                                        (IN THOUSANDS)
                                          (UNAUDITED)

                                                                SEPTEMBER 30,    DECEMBER 31,
                                                                    2002             2001
                                                               ---------------  --------------
<S>                                                            <C>              <C>
                                   ASSETS
Current assets:
  Cash and cash equivalents                                    $        2,338   $       1,497
  Investments available-for-sale, at fair value                         9,752          13,956
  Accounts receivable, net of allowances                                2,616           2,839
  Other current assets                                                    637             903
                                                               ---------------  --------------
    Total current assets                                               15,343          19,195

Property and equipment, net of accumulated depreciation                 3,664           2,348
Restricted investments available-for-sale, at fair value                3,299           2,831
Notes receivable, net of allowances                                       778             805
Goodwill                                                               10,846           3,920
Other assets                                                              152             226
                                                               ---------------  --------------

    Total assets                                               $       34,082   $      29,325
                                                               ===============  ==============

                    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                             $        1,560   $       3,168
  Accrued expenses                                                      4,059           4,827
  Current portion of long-term debt                                     2,596             265
  Claims payable and claims incurred but not reported                   5,162           5,905
  Deferred premium revenue                                              1,449             823
                                                               ---------------  --------------
    Total current liabilities                                          14,826          14,988

Long-term debt                                                          3,343              --
Other long-term liabilities                                             1,032             971
Commitments and contingencies (Note 9)

Stockholders' equity:
  Convertible preferred stock and additional paid-in capital           41,250          41,250
  Common stock and additional paid-in capital                          22,641          21,552
  Retained earnings (accumulated deficit)                             (31,285)        (31,447)
  Accumulated other comprehensive income                                  101              63
  Treasury stock, at cost                                             (17,826)        (18,052)
                                                               ---------------  --------------
    Total stockholders' equity                                         14,881          13,366
                                                               ---------------  --------------

    Total liabilities and stockholders' equity                 $       34,082   $      29,325
                                                               ===============  ==============
<FN>
            See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>


                                        1
<PAGE>
<TABLE>
<CAPTION>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                 THREE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

                                               2002      2001
                                             --------  --------
<S>                                          <C>       <C>
Premium revenue, net                         $20,682   $20,831

Health care services expense                  14,546    14,456
Selling, general and administrative expense    6,040     6,062
                                             --------  --------

Operating income                                  96       313

Investment and other income                       92       213
Interest expense                                 (84)      (31)
                                             --------  --------

Income before income taxes                       104       495
Income tax expense                                --        --
                                             --------  --------

    Net income                               $   104   $   495
                                             ========  ========

Basic net income per share                   $  0.00   $  0.01
Weighted average basic shares outstanding     35,161    34,753

Diluted net income per share                 $  0.00   $  0.01
Weighted average diluted shares outstanding   35,526    35,542
<FN>
     See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>


                                        2
<PAGE>
<TABLE>
<CAPTION>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                  NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)

                                                                 2002      2001
                                                               --------  --------
<S>                                                            <C>       <C>
Premium revenue, net                                           $61,544   $63,926

Health care services expense                                    43,772    44,557
Selling, general and administrative expense                     17,656    19,049
                                                               --------  --------

Operating income                                                   116       320

Investment and other income                                        311       903
Interest expense on debt that was converted to equity in 2001       --      (402)
Other interest expense                                            (115)      (93)
                                                               --------  --------

Income before income taxes and extraordinary item                  312       728
Income tax expense                                                  --        --
                                                               --------  --------

Income before extraordinary item                                   312       728
Extraordinary item:
  Gain on conversion of debt to convertible preferred stock         --    11,251
                                                               --------  --------

    Net income                                                 $   312   $11,979
                                                               ========  ========

Basic net income per share:
  Income before extraordinary item                             $  0.01   $  0.02
  Extraordinary item                                                --      0.36
                                                               --------  --------
    Net income                                                 $  0.01   $  0.38
                                                               ========  ========

Weighted average basic shares outstanding                       34,817    31,410

Diluted net income per share:
  Income before extraordinary item                             $  0.01   $  0.02
  Extraordinary item                                                --      0.35
                                                               --------  --------
    Net income                                                 $  0.01   $  0.37
                                                               ========  ========

Weighted average diluted shares outstanding                     35,374    32,369
<FN>
      See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>


                                        3
<PAGE>
<TABLE>
<CAPTION>
                         SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                           CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
                                            (IN THOUSANDS)
                                             (UNAUDITED)

                                                                                    2002      2001
                                                                                  --------  ---------
<S>                                                                               <C>       <C>
Cash flows from operating activities:
  Net income                                                                      $   312   $ 11,979
  Adjustments to reconcile net income to net cash
    provided by (used in) operating activities:
    Gain on conversion of debt to convertible preferred stock                          --    (11,251)
    Bad debt expense                                                                  160        225
    Amortization of deferred loan costs                                                --         24
    Depreciation and other amortization                                               908      1,523
    Contribution to retirement plan in the form of common stock, at fair value         68         --
    Gain on liquidation of notes receivable                                            --       (175)
    Gain on sale of subsidiary                                                         (9)        --
    Gain on sale of investments                                                        (2)       (98)
  Changes in operating assets and liabilities, excluding effects of acquisition:
    Accounts receivable                                                               101        111
    Other current assets                                                              457        573
    Accounts payable                                                                   96       (201)
    Accrued expenses                                                                 (740)    (1,691)
    Claims payable and claims incurred but not reported                              (968)    (1,228)
    Deferred premium revenue                                                          270       (467)
    Other assets                                                                       74         --
                                                                                  --------  ---------
      Net cash provided by (used in) operating activities                             727       (676)

Cash flows from investing activities:
  Purchase of investments available-for-sale                                       (3,130)   (14,324)
  Proceeds from sale/maturity of investments available-for-sale                     6,893     15,693
  Cash paid for acquisition of business, net of cash acquired                      (2,702)        --
  Purchases of property and equipment                                                (311)      (542)
  Payments received on notes receivable                                                27      1,320
  Proceeds from sale of subsidiary                                                     72         --
                                                                                  --------  ---------
    Net cash provided by investing activities                                         849      2,147

Cash flows from financing activities:
  Borrowings on long-term debt                                                      2,000         --
  Payments on debt                                                                 (1,099)      (174)
  Increase (decrease) in bank overdrafts                                           (1,746)    (1,203)
  Increase in accrued interest that was converted to equity in 2001                    --        321
  Repurchase of common stock                                                           --        (10)
  Exercise of stock options                                                            49         43
  Increase (decrease) in other long-term liabilities                                   61       (247)
                                                                                  --------  ---------
    Net cash used in financing activities                                            (735)    (1,270)
                                                                                  --------  ---------
Net increase in cash and cash equivalents                                             841        201
Cash and cash equivalents at beginning of period                                    1,497      1,381
                                                                                  --------  ---------
Cash and cash equivalents at end of period                                        $ 2,338   $  1,582
                                                                                  ========  =========
<FN>
                                     (Continued  on  next  page)
</TABLE>


                                        4
<PAGE>
<TABLE>
<CAPTION>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED
                  NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
                                 (IN THOUSANDS)
                                   (UNAUDITED)

                                                                2002     2001
                                                              --------  -------
<S>                                                           <C>       <C>
Supplementary information:
  Cash paid during the period for interest                    $   115   $   306

Supplementary disclosure of non-cash activities:
  Debt converted into convertible preferred stock                  --    41,250
  Purchases of property and equipment through capital leases    1,784        --

  Liabilities assumed in acquisition of business:
    Fair value of assets acquired                             $   864   $    --
    Goodwill related to transaction                             6,926        --
    Less - Secured convertible note issued in transaction      (2,625)       --
    Less - Common stock issued in transaction                  (1,040)       --
    Less - Cash paid in transaction                            (3,158)       --
                                                              --------  -------
      Liabilities assumed in acquisition of business          $   967   $    --
                                                              ========  =======
<FN>
     See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>


                                        5
<PAGE>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2002
                                   (UNAUDITED)

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

The  accompanying  unaudited  condensed  consolidated  financial  statements  of
SafeGuard  Health  Enterprises,  Inc.  and  subsidiaries  (the  "Company") as of
September 30, 2002, and for the three months and nine months ended September 30,
2002  and  2001,  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  consolidated financial statements should be read in conjunction
with  the  Company's  Annual Report on Form 10-K for the year ended December 31,
2001,  which  includes the Company's Consolidated Financial Statements and Notes
thereto  for  that  period.

NOTE  2.  SIGNIFICANT  ACCOUNTING  POLICIES AND RECENT ACCOUNTING PRONOUNCEMENTS
--------------------------------------------------------------------------------

GOODWILL

Goodwill  as  of September 30, 2002 consists of $6.9 million of goodwill related
to  the acquisition of Paramount Dental Plan, Inc. ("Paramount") in August 2002,
which  is  discussed  in  Note  3  to  the  accompanying  condensed consolidated
financial statements, and $3.9 million of goodwill related to the acquisition of
a Texas-based dental health maintenance organization ("HMO") company in 1996. In
the  case  of  each  acquisition, goodwill represents the excess of the purchase
price of the acquired company over the fair value of the net assets acquired. In
the case of the 1996 acquisition, the balance is net of accumulated amortization
and  an  adjustment  in 1999 to reduce the carrying value of the goodwill to its
estimated  realizable  value. The Company estimated that the goodwill related to
the  1996 acquisition had a useful life of 40 years from the date of acquisition
of  the  related  entity, and amortized the goodwill over that period during the
nine months ended September 30, 2001. See Recently Adopted Accounting Principles
below  for  a  discussion  of  the  impact  of Statement of Financial Accounting
Standards  ("SFAS")  No.  142,  "Goodwill  and  Other  Intangible  Assets."

RECOGNITION  OF  PREMIUM  REVENUE

Premium  revenue  is  recognized  in  the period during which dental coverage is
provided to the covered individuals. Payments received from customers in advance
of the related period of coverage are reflected on the accompanying consolidated
balance  sheet  as  deferred  revenue.

CLAIMS  PAYABLE  AND  CLAIMS  INCURRED  BUT  NOT  REPORTED

The  estimated liability for claims payable and claims incurred but not reported
is  based  primarily  on  the  average  historical  lag time between the date of
service  and  the  date the related claim is paid by the Company, and the recent
trend  in  payment  rates  and the average number of incurred claims per covered
individual.  Since  the liability for claims payable and claims incurred but not
reported  is  an  actuarial  estimate,  the amount of claims eventually paid for
services  provided  prior  to  the  balance  sheet  date  could  differ from the
estimated  liability.  Any  such  differences  are  included in the consolidated
statement  of operations for the period in which the differences are identified.

NET  INCOME  PER  SHARE

Net income per share is presented in accordance with SFAS No. 128, "Earnings Per
Share."  Basic  net  income  per  share  is based on the weighted-average common
shares  outstanding,  including  the  common  shares  into which the convertible


                                        6
<PAGE>
preferred  stock  is  convertible, but excluding the effect of other potentially
dilutive  securities. 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. Diluted
net income per share is based on the weighted-average common shares outstanding,
including  the  effect  of all potentially dilutive securities. During the three
months  and  nine  months  ended  September  30,  2002 and 2001, the potentially
dilutive  securities  of  the  Company  that were outstanding consisted of stock
options,  convertible  notes, and warrants. Diluted net income per share for all
periods  presented  includes the effect of all outstanding stock options with an
exercise  price  below  the  average  market price of the Company's common stock
during  each  applicable  period.  The  Company issued two (2) convertible notes
during  the  three months ended September 30, 2002, as discussed in Note 4. Both
of  these convertible notes would have an anti-dilutive effect on net income per
share  for  both  periods  in  2002.  Accordingly,  they  are  excluded from the
calculation of diluted net income per share for these periods. The only warrants
issued  by  the  Company were canceled without being exercised effective January
31,  2001,  as  discussed  in  Note  5.

RECENTLY  ADOPTED  ACCOUNTING  PRINCIPLES

In  July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141,  "Business  Combinations."  SFAS  No.  141 requires the use of the purchase
method of accounting for all business combinations initiated after June 30, 2001
and  eliminates  the  pooling-of-interests method of accounting. The adoption of
SFAS  No.  141  had no significant effect on the Company's financial statements.
See  Note  3  for  a  business  combination  completed  in  August  2002.

In  July  2001,  the  FASB  issued  SFAS No. 142, "Goodwill and Other Intangible
Assets."  SFAS  No.  142 requires that goodwill and other intangible assets with
indefinite  useful  lives  established after June 30, 2001 not be amortized, and
that amortization of goodwill and other intangible assets with indefinite useful
lives  that existed as of June 30, 2001, be ceased effective January 1, 2002. As
a  result, the Company ceased amortizing its goodwill effective January 1, 2002.
The  Company  recorded  $28,000  and  $85,000 of amortization expense related to
goodwill,  and  $40,000  and  $120,000  of  amortization  expense  related  to a
non-competition  agreement,  during  the  three  months  and  nine  months ended
September  30,  2001,  respectively.  The non-competition agreement became fully
amortized  in  September  2001. The Company's adjusted results of operations for
the three months and nine months ended September 30, 2001, which are adjusted to
exclude  goodwill  amortization,  are  as  follows  (in  thousands):

<TABLE>
<CAPTION>
                                               THREE MONTHS ENDED  NINE MONTHS ENDED
                                                 SEPTEMBER  30,      SEPTEMBER  30,
                                               ------------------  ------------------
                                                 2002      2001      2002      2001
                                               --------  --------  --------  --------
<S>                                            <C>       <C>       <C>       <C>
Income before extraordinary item, as reported  $    104  $    495  $    312  $    728
Add back - Goodwill amortization                     --        28        --        85
                                               --------  --------  --------  --------

Income before extraordinary item, as adjusted  $    104  $    523  $    312  $    813
                                               ========  ========  ========  ========

Net income, as reported                        $    104  $    495  $    312  $ 11,979
Add back - Goodwill amortization                     --        28        --        85
                                               --------  --------  --------  --------

Net income, as adjusted                        $    104  $    523  $    312  $ 12,064
                                               ========  ========  ========  ========
</TABLE>

None of the Company's reported net income per share amounts for the three months
or  nine  months  ended September 30, 2001 would change as a result of the above
adjustment for goodwill amortization expense, due to the relatively small amount
of  this  adjustment.

SFAS  No.  142  also  requires  that  all  goodwill  be  evaluated  for possible
impairment  as  of  January  1, 2002, and as of the end of each reporting period
thereafter, and establishes a new method of testing for possible impairment. The
Company  had  no  impairment  of  its  goodwill  as of January 1, 2002, or as of
September  30,  2002,  based  on  the  method of testing for possible impairment
established  by  SFAS  No.  142.  The  adoption  of  SFAS  No.  142 had no other
significant  effect  on  the  Company's  financial  statements.


                                        7
<PAGE>
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal  of  Long-Lived  Assets."  SFAS  No.  144  supersedes  SFAS  No.  121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be  Disposed Of," and Accounting Principles Board Opinion No. 30, "Reporting the
Results  of  Operations  -  Reporting  the Effects of Disposal of a Segment of a
Business,  and  Extraordinary,  Unusual,  and  Infrequently Occurring Events and
Transactions."  SFAS  No. 144 establishes accounting and reporting standards for
the impairment or disposal of long-lived assets and for reporting the results of
discontinued  operations.  The Company adopted SFAS No. 144 effective on January
1, 2002. The adoption of SFAS No. 144 had no significant effect on the Company's
financial  statements.

RECENTLY  ISSUED  ACCOUNTING  PRONOUNCEMENTS

In  August  2001,  the  FASB  issued  SFAS  No. 143, "Accounting for Obligations
Associated  with  the Retirement of Long-Lived Assets." SFAS No. 143 establishes
accounting  and  reporting  standards  for the recognition and measurement of an
asset  retirement  obligation and the associated asset retirement cost. SFAS No.
143  is  effective  for  fiscal years beginning after June 15, 2002. The Company
expects  that  SFAS  No. 143 will not have a significant effect on its financial
statements.

In  April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No.
4,  44,  and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS  No.  145  updates,  clarifies,  and  simplifies  existing  accounting
pronouncements. This statement rescinds SFAS No. 4, which required all gains and
losses from extinguishment of debt to be aggregated and, if material, classified
as  an  extraordinary  item,  net of related income tax effect. As a result, the
criteria in APB No. 30 will now be used to classify those gains and losses. SFAS
No.  64  amended  SFAS  No.  4 and is no longer necessary as SFAS No. 4 has been
rescinded.  SFAS  No.  44 has been rescinded, as it is no longer necessary. SFAS
No. 145 amends SFAS No. 13 to require that certain lease modifications that have
economic effects similar to sale-leaseback transactions must be accounted for in
the  same  manner  as sale-lease transactions. This statement also makes certain
technical  corrections  to  existing pronouncements. While those corrections are
not  substantive  in  nature,  in  some  instances,  they  may change accounting
practice.  The  Company is currently evaluating whether SFAS No. 145 will have a
significant  effect  on  its  financial  statements.

In  July  2002,  the  FASB issued SFAS No. 146, "Accounting for Costs Associated
with  Exit  or  Disposal Activities." SFAS No. 146 requires that a liability for
the  cost  of  an  exit or disposal activity be recognized when the liability is
incurred.  SFAS  No.  146 also requires that the liability be initially measured
and  recorded  at fair value. SFAS No. 146 supersedes Emerging Issues Task Force
("EITF") Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits  and  Other Costs to Exit an Activity (including Certain Costs Incurred
in  a  Restructuring)." Under EITF Issue No. 94-3, a liability for an exit cost,
as  defined  in  the  EITF  Issue,  was  recognized  at  the date of an entity's
commitment  to  an  exit  plan.  SFAS  No. 146 is effective for exit or disposal
activities  that  are  initiated  after  December  31,  2002.

NOTE  3.  ACQUISITION
---------------------

Effective  August  30, 2002, the Company acquired all of the outstanding capital
stock  of  Paramount  Dental  Plan,  Inc.  ("Paramount") for a purchase price of
approximately  $6.7  million,  consisting  of  $3.0  million  in cash, a secured
convertible  note  for  $2,625,000,  and  769,231 shares of the Company's common
stock. Paramount is a dental benefits company located in Florida, and was merged
into the Company's dental HMO effective August 30, 2002. The secured convertible
note  bears  interest  at  7.0%  annually,  and  is  payable in 36 equal monthly
installments  of  principal  and  interest,  beginning  in  October  2002.  The
outstanding  balance  under  the  secured  convertible  note is convertible into
common  stock  of  the Company at a conversion price of $1.625 per share, at any
time  after August 30, 2003. The convertible note is secured by the stock of the
Company's  dental  HMO  subsidiary  in  Florida.

The  business  purpose  of  the acquisition was to increase the Company's market
penetration  in  Florida,  which  is  one  of  the  Company's primary geographic
markets.  The  acquisition  increased the number of members in Florida for which
the  Company  provides  dental  benefits  from  approximately  50,000 members to
approximately  275,000  members.


                                        8
<PAGE>
In  connection  with  this  transaction,  the  Company entered into a three-year
employment  agreement with the seller of Paramount, who is currently employed as
president  of the Company's operations in Florida. The Company also entered into
a three-year office lease agreement with the seller of Paramount, related to the
office space that will be used as the Company's administrative office in Florida
beginning  in  late  2002.

The  cost  of the acquisition was allocated among the assets acquired as follows
(in  thousands):

<TABLE>
<CAPTION>
<S>                                                  <C>
Cost of acquisition:
  Cash portion of purchase price                       $3,000
  Secured convertible note issued to seller             2,625
  Common stock issued to seller                         1,040
  Transaction expenses incurred by the Company            158
                                                       -------
    Total cost                                         $6,823
                                                       =======

Fair value of net assets acquired:
  Cash and cash equivalents                            $  456
  Restricted investment                                    50
  Property and equipment                                  129
  Other assets                                            229
  Goodwill                                              6,926
  Accounts payable and accrued liabilities               (386)
  Claims payable and claims incurred but not reported    (225)
  Deferred premium revenue                               (356)
                                                       -------
    Net assets acquired                                 $6,823
                                                       =======
</TABLE>

The value used for the Company's common stock issued in the acquisition is based
on 769,231 shares of common stock issued, and a market value of $1.35 per share.
The  market  value  of  $1.35  per  share  is  the  average closing price of the
Company's  common  stock  during the period from five (5) business days prior to
execution  of  the  Stock  Purchase  Agreement  to  five (5) business days after
execution  of  the agreement. The Stock Purchase Agreement was executed on April
24,  2002.

The  Company  made  a  preliminary  determination of whether the assets acquired
include  any  separately identifiable intangible assets apart from goodwill. The
Company's  preliminary  conclusion  is that there are no such intangible assets,
and  accordingly,  the  total excess of the purchase price over the net tangible
assets  acquired  has  been  allocated to goodwill in the accompanying condensed
consolidated  financial  statements.


                                        9
<PAGE>
The  operations  of  Paramount  are  included  in  the  accompanying  condensed
consolidated  financial  statements beginning on September 1, 2002. Following is
certain  pro  forma  statement  of  operations  information,  which  reflects
adjustments  to  the  Company's  historical  financial  statements  as  if  the
acquisition  had been completed as of the beginning of each period presented (in
thousands):

<TABLE>
<CAPTION>
                                                       NINE MONTHS ENDED
                                                         SEPTEMBER  30,
                                                        ----------------
                                                         2002     2001
                                                        -------  -------
<S>                                                     <C>      <C>
Premium revenue, net                                    $66,823  $68,359
Operating income                                            354      998
Income before extraordinary item                            194    1,248
Net income                                                  194   12,499

Basic net income per share before extraordinary item       0.01     0.04
Basic net income per share                                 0.01     0.39

Diluted net income per share before extraordinary item     0.01     0.04
Diluted net income per share                               0.01     0.38
</TABLE>

The  above  pro  forma  statement  of  operations information is not intended to
indicate  the  results  that would have occurred if the acquisition had actually
been  completed  on  the  dates  indicated, or the results that may occur in any
future  period.

NOTE  4.  LONG-TERM  DEBT
-------------------------

Long-term  debt  consists  of  the  following  (in  thousands):

<TABLE>
<CAPTION>
                                        SEPTEMBER 30,    DECEMBER 31,
                                            2002             2001
                                       ---------------  --------------
<S>                                    <C>              <C>
Secured convertible promissory note    $        2,559   $          --
Unsecured convertible promissory note           1,900              --
Capital lease obligations                       1,411              --
Other                                              69             265
                                       ---------------  --------------
  Total debt                                    5,939             265
Less - Current portion                         (2,596)           (265)
                                       ---------------  --------------
  Long-term portion of debt            $        3,343   $          --
                                       ===============  ==============
</TABLE>

See  Note  3 for a description of the secured convertible promissory note, which
was  issued  in  the  acquisition  of  Paramount  in  August  2002.

In  August  2002,  the  Company  borrowed $2.0 million from one of its principal
stockholders,  which  was  used  to  increase  the Company's working capital, to
provide  for  the payments due under the two capital leases discussed below, and
to  provide  for  the  payments  due  under  the  settlement  of the stockholder
litigation  discussed  in  Note  9.  The  borrowing  was made under an unsecured
convertible  note  that  bears  interest  at 7.0% annually, and is payable in 36
equal  monthly  installments  of  principal and interest, beginning in September
2002.  The  outstanding  balance  under the convertible note is convertible into
common  stock  of  the Company at a conversion price of $1.625 per share, at any
time  after  one  year  from  the  date  of  the  borrowing.

In  June  2002,  the  Company entered into two capital lease obligations with an
aggregate value of approximately $1.8 million. The two leases are related to the
purchase  of  a  new  computer software application and the purchase of formerly
leased  furniture  for  the Company's primary administrative office. The Company
intends  to use the new software as its primary business application, which will
be  used  for  eligibility file maintenance, billing and collections, payment of
health  care  expenses, utilization review and other related activities. The new
software  application  will  replace  the  Company's two existing systems with a
single  system that can be used for all of the Company's existing product lines.
The  cost  of both of the Company's two existing systems is fully depreciated as
of  September  30,  2002.  The aggregate annual principal payments due under the
two  capital  leases  are $260,000 during the remainder of 2002, $963,000 during
2003 and $188,000 during 2004. Under each of the two capital leases, the Company
has  an  option to purchase the leased assets for $1.00 at the expiration of the
lease.


                                       10
<PAGE>
NOTE  5.  CONVERSION  OF  DEBT  TO  CONVERTIBLE  PREFERRED  STOCK
-----------------------------------------------------------------

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. In addition, the Investors,
the Bank, and the Senior Note Holder agreed to convert the investor senior loan,
the  outstanding  balance  under  the  revolving credit facility, and the 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)  into 30 million shares of convertible preferred stock.
The  estimated  value of the convertible preferred stock was $1.375 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 one share of common
stock.  The number of shares of convertible preferred stock, the estimated value
per  share,  and  the conversion ratio indicated above have all been adjusted to
reflect an exchange of the Company's outstanding shares of convertible preferred
stock  that  was  completed in May 2002. See Note 6 for more information on this
exchange.

Based  on  the  estimated value of the convertible preferred stock as of January
31,  2001, the conversion transaction resulted in an extraordinary gain of $11.3
million,  which is net of approximately $350,000 of transaction costs. There was
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  7.

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 canceled without being
exercised,  in  connection  with the conversion of the senior notes payable into
convertible  preferred  stock  effective  January  31,  2001.

NOTE  6.  EXCHANGE  OF  CONVERTIBLE  PREFERRED  STOCK
-----------------------------------------------------

Prior  to  May  2002,  there  were 300,000 shares of convertible preferred stock
issued  and  outstanding.  Each  share had a par value of $100 and a liquidation
preference  of $100, and was convertible into 100 shares of the Company's common
stock.  In  May  2002, each outstanding share of convertible preferred stock was
exchanged  for  100 new shares of convertible preferred stock. Each new share of
convertible  preferred  stock  has  a  par  value  of  $1.00  and  a liquidation
preference  of  $1.00, and is convertible into one share of the Company's common
stock.  All  other  rights  and  preferences  of the convertible preferred stock
remained  the  same.

NOTE  7.  INCOME  TAXES
-----------------------

The  Company's  accounting  for income taxes is in accordance with SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires the recognition of deferred
tax  liabilities  and  assets for the expected future tax consequences of events
that  are  recognized in the Company's financial statements in different periods
than  those in which the events are recognized in the Company's tax returns. The
measurement  of deferred tax liabilities and assets is based on current tax laws
as  of the balance sheet date. The Company records a valuation allowance related
to  deferred  tax assets in the event that available evidence indicates that the
future  tax  benefits  related to the deferred tax assets may not be realized. A
valuation  allowance  is  required  when  it  is  more  likely than not that the
deferred  tax  assets  will  not  be  realized.

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 cumulative operating losses
incurred  by the Company during the period from January 1, 1998 to September 30,
2002,  and  the  existence  of  significant  net  operating  loss carryforwards.


                                       11
<PAGE>
Due  to  the conversion of outstanding debt into convertible preferred stock, as
described in Note 5, 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  preexisting  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. As of
December  31, 2001, the Company had net operating loss carryforwards for federal
and  state  tax  purposes  of  approximately  $9.0  million  and  $8.1  million,
respectively,  which  are  net of the amounts that will expire unused due to the
change  of  control  limitation.  The  federal  and  state  net  operating  loss
carryforwards  will  begin  to  expire  in  2018  and  2003,  respectively.

The  Company had taxable income for the nine months ended September 30, 2002 and
2001,  but  its  taxable  income  in  both  periods was completely offset by net
operating  loss  carryforwards  from  previous  years.

NOTE  8.  TOTAL  COMPREHENSIVE  INCOME
--------------------------------------

Total  comprehensive  income  includes the change in stockholders' equity during
the  period  from  transactions  and  other  events  and  circumstances  from
nonstockholder  sources.  Total comprehensive income of the Company for the nine
months  ended  September  30,  2002  and  2001,  includes  net  income 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 income (loss) was $47,000 and $27,000 for the three
months  ended  September  30,  2002  and  2001,  respectively,  and  $38,000 and
$(52,000)  for  the nine months ended September 30, 2002 and 2001, respectively.
Total  comprehensive income was $151,000 and $522,000 for the three months ended
September  30, 2002 and 2001, respectively, and $350,000 and $11,927,000 for the
nine  months  ended  September  30,  2002  and  2001,  respectively.

NOTE  9.  COMMITMENTS  AND  CONTINGENCIES
-----------------------------------------

LITIGATION

The  Company  is  subject  to  various  claims  and legal actions arising 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 have a material adverse effect on the
Company's  consolidated  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.  In  September  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 and its officers. In October 2000, the plaintiffs filed an appeal of the
dismissal of the lawsuit, and the dismissal was overturned in February 2002. The
case  was  remanded  back  to  the District Court with instructions to allow the
plaintiff  to  file  a  second  amended  complaint.  Subsequently,  the  Company
conducted  mediation  and reached an agreement with the plaintiffs to settle the
lawsuit  for  a payment of $1.25 million to the plaintiffs, without an admission
of  liability by any party. The agreement between the Company and the plaintiffs
was approved by the District Court in September 2002. The Company's insurer paid
$1.0  million of the cost of the settlement. Accordingly, the Company recorded a
$250,000  expense during the three months ended June 30, 2002, which is included
in  selling,  general  and administrative expenses in the accompanying condensed
consolidated  statement  of  operations.

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 the practices
defaulted on its obligations to the Company. The office lease agreements related
to those practices either have been assigned to the respective purchasers of the
practices,  or  have  expired.


                                       12
<PAGE>
In  the  case  of the assigned leases, the Company is secondarily liable for the
lease  payments  in the event the purchasers of those practices fail to make the
payments.  As  of  September  30, 2002, the total of the minimum annual payments
under  these leases was approximately $1.4 million, and the aggregate contingent
liability  of the Company related to these leases was approximately $3.5 million
over  the  terms  of the lease agreements, which expire at various dates through
2007.  The  aggregate  contingent  liability  related  to  these  leases  was
approximately  $5.2  million  as  of September 30, 2001. Management has not been
notified  of  any  defaults  under these leases that would materially affect the
Company's  consolidated  financial  position.  The  aggregate  contingent  lease
obligation of $3.5 million excludes $120,000 of estimated lease obligations that
have  been  accrued  as  of  September  30, 2002, due to a 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  condensed  consolidated  balance  sheet under the caption "Accrued
expenses."

LIABILITY  INSURANCE

The  Company's  directors'  and  officers'  liability  insurance  policy,  which
contained  $5  million  of  coverage  after  a  $250,000  deductible, expired on
September 30, 2002. Due to a significant increase in the cost of such insurance,
the  Company  has  elected  not  to  purchase  this insurance coverage effective
October  1,  2002.

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, 2001, the Current Reports on Form 8-K dated as of April 24, 2002, and August
30,  2002, and the Current Report on Form 8-K/A dated as of August 30, 2002, all
of  which  have  been  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  September  30,  2002.

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.

RISK  FACTORS

The  Company's  business  and  competitive environment includes numerous factors
that  expose  the Company to risk and uncertainty. Some risks are related to the
dental  benefits  industry in general and other risks are related to the Company
specifically.  Due  to the risks and uncertainties described below, there can be
no  assurance  that  the  Company  will  be  able to maintain its current market
position.  Some  of the risk factors described below have adversely affected the
Company's  operating  results  in  the past, and all of these risk factors could
affect  its  future  operating  results.

PARAMOUNT  INTEGRATION

The  Company  is  in  the  process  of  integrating  the  business operations of
Paramount  into  the  Company's  operations. Due to the complexities inherent in
this  process, there is a risk that the Company may not be able to complete such
integration  activities in a timely and cost effective manner. In such case, the
general  and  administrative  expenses  of  the  Company  may  be  higher  than
anticipated,  which  could  have  a  negative  impact  on  the Company's overall
profitability.


                                       13
<PAGE>
GOVERNMENT  REGULATION

The dental benefits industry is subject to extensive state and local laws, rules
and  regulations.  A  number  of  the  Company's  subsidiaries,  which  generate
substantially  all of the Company's revenue, are subject to various requirements
imposed  by  state laws and regulations related to the operation of a dental HMO
plan  or  a  dental  insurance  company,  including the maintenance of a minimum
amount of net worth by certain subsidiaries. In addition, regulations applicable
to  dental  benefit  plans  could  be  changed  in  the  future. There can be no
assurance  that  the  Company  will  be  able  to meet all applicable regulatory
requirements  in  the  future.

HEALTH  INSURANCE  PORTABILITY  AND  ACCOUNTABILITY  ACT  OF  1996  ("HIPAA")

HIPAA imposes various responsibilities on the Company, and the Company is in the
process of developing policies and procedures to comply with these requirements.
The  total  cost  of compliance with HIPAA is not known at this time. There is a
risk  that  the  Company  will  not be able to successfully implement all of the
HIPAA  requirements. There is also a risk that the cost of compliance with HIPAA
could  have  a  material  adverse  impact  on  the Company's financial position.

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 the practices
defaulted  on its obligations to the Company. All of the office lease agreements
related  to  those  practices  either  have  been  assigned  to  the  respective
purchasers  of  the  practices,  or  have expired. As of September 30, 2002, the
Company is contingently liable for an aggregate of approximately $3.5 million of
office  lease  obligations  related to those practices for which the leases have
been  assigned.  Although all the leases have been assigned to the purchasers of
those  practices,  there can be no assurance that the persons and/or entities to
which  these  office leases were assigned will make the lease payments, and that
the  Company  will  not  become  liable  for  those  payments.

LIABILITIES  RELATED  TO  DENTAL  AND  ORTHODONTIC  PRACTICES

The  Company  has  various  liabilities  in  connection  with  the  dental  and
orthodontic  practices  sold in October 2000, including, but not limited to, the
obligation to pay for orthodontic treatments for certain dental HMO patients who
previously  paid  for  the  treatments  in  full.  The  remaining  amount of the
liabilities  is subject to uncertainties, and there can be no assurance that the
ultimate amount of the remaining liabilities will not exceed the amounts accrued
on  the  Company's  balance  sheet  as  of  September  30,  2002.

PAYMENTS  DUE  ON  PROMISSORY  NOTES

In  connection  with  the  sale  of  certain  dental practices, the dentists who
purchased  those  practices  issued  long-term  promissory notes to the Company,
which  are  secured by the assets purchased. There can be no assurance that each
of  these  dentists  will  make  timely  payments on the promissory notes in the
future.

POSSIBLE  VOLATILITY  OF  STOCK  PRICE

The  market  price  of  the  Company's common stock has fluctuated significantly
during  the  past  few  years. Stock price volatility can be caused by actual or
anticipated  variations in operating results, announcements of new developments,
actions  of  competitors,  developments in relationships with clients, and other
events  or  factors. Even a modest shortfall in the Company's operating results,
compared  to  the  expectations  of  the  investment  community,  can  cause  a
significant  decline  in  the  market  price  of  the Company's common stock. In
addition,  the  trading  volume of the Company's common stock is relatively low,
which  can  cause  fluctuations  in the market price and a lack of liquidity for
holders  of the Company's common stock. The fact that the Company's common stock
is not listed on an exchange can have a negative influence on the trading volume
of  the  stock.  Broad  stock market fluctuations, which may be unrelated to the
Company's  operating  performance,  could  also  have  a  negative effect on the
Company's  stock  price.


                                       14
<PAGE>
COMPETITIVE  MARKET

The Company operates in a highly competitive industry. Its ability to operate on
a  profitable  basis  is affected by significant competition for employer groups
and  for  contracting  dental  providers.  Dental  providers  are  becoming more
sophisticated, their practices are busier, and they are less willing to join the
Company's  networks  under capitation arrangements or discounted fees. There can
be  no  assurance  the Company will be able to compete successfully enough to be
profitable.  Existing  or  new  competitors  could have a negative impact on the
Company's revenues, earnings and growth prospects. The Company expects the level
of  competition  to  remain  high  for  the  foreseeable  future.

ABILITY  TO  MAINTAIN  REVENUE

The  Company's  premium revenue decreased from $63.9 million for the nine months
ended  September  30,  2001  to $61.5 million for the first nine months of 2002,
primarily  due  to  the loss of a number of its customers, and a net decrease in
its  enrollment  within  existing  customers.  The Company intends to expand its
business  in  the future and to increase its annual revenue, but there can be no
assurance  the  Company will be able to maintain its current level of revenue or
increase  it  in the future. The ability of the Company to maintain its existing
business  or  to  expand  its business depends on a number of factors, including
existing  and  emerging competition, its ability to renew its relationships with
existing  customers  on  an  annual  basis,  its ability to maintain competitive
networks of dental providers, its ability to maintain effective control over the
cost of dental services, and its ability to obtain sufficient working capital to
support  an  increase  in  revenue.

UTILIZATION  OF  DENTAL  CARE  SERVICES

Under  the  Company's  preferred provider ("PPO")/indemnity dental plan designs,
the  Company  assumes the underwriting risk related to the frequency and cost of
dental  care  services.  If  the  Company  does  not  accurately  assess  these
underwriting  risks,  the  premium  rates  charged to its customers might not be
sufficient to cover the cost of the dental services delivered. This could have a
material  adverse  effect  on  the  Company's  operating  results.

Under  the  Company's  dental HMO plan designs, the Company assumes underwriting
risk  related  to  the  frequency  and  cost of specialist services, the cost of
supplemental  payments  made  to general dentists, and the frequency and cost of
dental services provided by general dentists with whom the Company does not have
standard  capitation  arrangements.  If  the  Company does not accurately assess
these  underwriting  risks, the premium rates charged to its customers might not
be  sufficient to cover the cost of the dental services delivered to subscribers
and  dependents.  This  could  have  a  material adverse effect on the Company's
operating  results.

EFFECT  OF  ADVERSE  ECONOMIC  CONDITIONS

The  Company's  business  could  be  negatively  affected  by periods of general
economic  slowdown, recession or terrorist activities which, among other things,
may be accompanied by layoffs by the Company's customers, which could reduce the
number  of  subscribers  enrolled  in  the  Company's  benefit  plans, and by an
increase  in  the  pricing  pressure  from  customers  and  competitors.

RELATIONSHIPS  WITH  DENTAL  PROVIDERS

The  Company's  success  is  dependent  on  maintaining  competitive networks of
dentists in each of the Company's geographic markets. Generally, the Company and
the network dentists enter into nonexclusive contracts that may be terminated by
either  party  with  limited  notice.  The  Company's operating results could be
negatively  affected  if it is unable to establish and maintain contracts with a
competitive  number  of  dentists  in  locations  that  are  convenient  for the
subscribers  and  dependents  enrolled  in  the  Company's  benefit  plans.


                                       15
<PAGE>
DEPENDENCE  ON  KEY  PERSONNEL

The  Company  believes its success is dependent to a significant degree upon the
abilities and experience of its senior management team. The loss of the services
of  one  or  more of its senior executives could negatively 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
revenue,  premium  rates,  benefit  plans offered, membership enrollment, health
care  expenses,  general  and  administrative  expenses,  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 for the
Company.

SIGNIFICANT  ACCOUNTING  POLICIES

The  Company's consolidated financial statements are prepared in accordance with
accounting  principles  generally  accepted  in  the  United  States of America.
Application  of  those  accounting  principles includes the use of estimates and
assumptions  that  have  been made by management, and which the Company believes
are  reasonable  based  on  the  information  available.  These  estimates  and
assumptions  affect  the  reported  amounts of assets, liabilities, revenues and
expenses  in  the  accompanying  consolidated  financial statements. The Company
believes  the  most  significant  accounting  policies  used  to  prepare  the
accompanying  condensed  consolidated  financial  statements  are the following:

RECOGNITION  OF  PREMIUM  REVENUE

Premium  revenue  is  recognized  in  the period during which dental coverage is
provided to the covered individuals. Payments received from customers in advance
of the related period of coverage are reflected on the accompanying consolidated
balance  sheet  as  deferred  revenue.

GOODWILL

Goodwill  as  of September 30, 2002 consists of $6.9 million of goodwill related
to  the acquisition of Paramount Dental Plan, Inc. ("Paramount") in August 2002,
which  is  discussed  in  Note  3  to  the  accompanying  condensed consolidated
financial statements, and $3.9 million of goodwill related to the acquisition of
a  Texas-based  dental  HMO  company  in  1996. In the case of each acquisition,
goodwill  represents  the  excess  of the purchase price of the acquired company
over  the  fair  value  of  the net assets acquired, and in the case of the 1996
acquisition, the balance is net of accumulated amortization and an adjustment in
1999  to  reduce  the carrying value of the goodwill to its estimated realizable
value.  The  Company estimated that the goodwill related to the 1996 acquisition
had  a  useful  life  of  40  years  from the date of acquisition of the related
entity, and amortized the goodwill over that period during the nine months ended
September  30,  2001.  In  accordance  with  SFAS  No.  142, "Goodwill and Other
Intangible Assets," the Company ceased amortizing its goodwill effective January
1,  2002.  SFAS  No.  142  requires  that all goodwill be evaluated for possible
impairment  as  of  January  1, 2002, and as of the end of each reporting period
thereafter, and establishes a new method of testing for possible impairment. The
Company  had  no  impairment  of  its  goodwill  as of January 1, 2002, or as of
September  30,  2002,  based  on  the  method of testing for possible impairment
established  by SFAS No. 142. However, there can be no assurance that impairment
will  not  occur  in  the  future.

CLAIMS  PAYABLE  AND  CLAIMS  INCURRED  BUT  NOT  REPORTED

The  estimated liability for claims payable and claims incurred but not reported
is  based  primarily  on  the  average  historical  lag time between the date of
service  and  the  date the related claim is paid by the Company, and the recent
trend  in  payment  rates  and the average number of incurred claims per covered
individual.  Since  the liability for claims payable and claims incurred but not
reported  is  an  actuarial  estimate,  the amount of claims eventually paid for
services  provided  prior  to  the  balance  sheet  date  could  differ from the
estimated  liability.  Any  such  differences  are  included in the consolidated
statement  of operations for the period in which the differences are identified.


                                       16
<PAGE>
INCOME  TAXES

The  Company's  accounting  for income taxes is in accordance with SFAS No. 109,
"Accounting for Income Taxes." SFAS No. 109 requires the recognition of deferred
tax  liabilities  and  assets for the expected future tax consequences of events
that  are  recognized in the Company's financial statements in different periods
than  those in which the events are recognized in the Company's tax returns. The
measurement  of deferred tax liabilities and assets is based on current tax laws
as  of the balance sheet date. The Company records a valuation allowance related
to  deferred  tax assets in the event that available evidence indicates that the
future  tax  benefits  related to the deferred tax assets may not be realized. A
valuation  allowance  is  required  when  it  is  more  likely than not that the
deferred  tax  assets  will  not  be  realized.

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 cumulative operating losses
incurred by the Company during the period from January 1, 1998, to September 30,
2002,  and  the  existence  of  significant  net  operating  loss carryforwards.

RESULTS  OF  OPERATIONS

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


                                                    THREE MONTHS ENDED  NINE MONTHS ENDED
                                                    SEPTEMBER 30, 2002    SEPTEMBER 30,
                                                    ------------------  -----------------
                                                      2002      2001      2002      2001
                                                    --------  --------  --------  --------
<S>                                                 <C>       <C>       <C>       <C>
Premium revenue, net                                  100.0%    100.0%    100.0%    100.0%

Health care services expense                           70.3      69.4      71.1      69.7
Selling, general and administrative expense            29.2      29.1      28.7      29.8
                                                    --------  --------  --------  --------
  Operating income                                      0.5       1.5       0.2       0.5

Investment and other income                             0.4       1.0       0.5       1.4
Interest expense on debt that was converted
  to equity in 2001 (1)                                  --        --        --      (0.6)
Other interest expense                                 (0.4)     (0.1)     (0.2)     (0.2)
                                                    --------  --------  --------  --------
Income before income taxes and extraordinary item       0.5       2.4       0.5       1.1
Income tax expense                                       --        --        --        --
                                                    --------  --------  --------  --------
  Income before extraordinary item                      0.5       2.4       0.5       1.1
Extraordinary item                                       --        --        --      17.6
                                                    --------  --------  --------  --------

  Net income                                            0.5%      2.4%      0.5%     18.7%
                                                    ========  ========  ========  ========
<FN>
(1)  Substantially  all  of  the  Company's  debt was converted into convertible preferred
     stock effective January 31, 2001. See Note 5 to the accompanying condensed consolidated
     financial  statements.
</TABLE>


                                       17
<PAGE>
THREE  MONTHS  ENDED SEPTEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30,  2001

Premium  revenue  decreased by $0.1 million, or 0.7%, from $20.8 million in 2001
to  $20.7 million in 2002. The average membership for which the Company provided
dental  coverage increased by approximately 6,000 members, or 1.0%, from 601,000
members  during  2001  to  607,000  during  2002.  The small decrease in premium
revenue  was  primarily  due to the loss of a number of the Company's customers,
and  a  net  decrease  in  its  enrollment within retained customers, which were
offset by an increase in premium revenue due to the Paramount acquisition, which
is  included  in  the  accompanying  condensed consolidated financial statements
beginning  on  September 1, 2002. Premium revenue decreased slightly even though
average  membership  increased,  which  was  due  to the impact of the Paramount
acquisition.  The  acquired  Paramount  business  has  lower premium revenue per
member  than  the Company's preexisting business. This is due to the dental plan
designs  offered  by  Paramount,  which  include  a significantly lower level of
benefits  than the benefit plans offered by the Company prior to the acquisition
of  Paramount.  Substantially  all  of the Company's premium revenue was derived
from  dental benefit plans in 2002 and 2001. Premium revenue from vision benefit
plans  and  other  products  was  not  material  in  2002  or  2001.

Health  care  services  expense  increased  slightly  from 2001 to 2002, but was
approximately  $14.5  million in both periods. Health care services expense as a
percentage of premium revenue (the "loss ratio") increased from 69.4% in 2001 to
70.3%  in  2002.  The increase in the loss ratio was primarily due to a shift in
the  type  of  plan  designs  toward  preferred  provider ("PPO")/indemnity plan
designs,  which  have  a  higher  loss  ratio  than  HMO  plan  designs.

Selling,  general  and  administrative  ("SG&A")  expense was approximately $6.0
million  in  both  2002  and  2001,  and SG&A expense as a percentage of premium
revenue  increased  slightly,  from  29.1%  in  2001  to  29.2%  in  2002.

Investment and other income decreased by $0.1 million, from $0.2 million in 2001
to  $0.1  million  in  2002.  This  decrease  is  primarily due to a decrease in
interest  rates  on  short-term fixed-income investments during the past year, a
decrease  in  interest income from notes receivable, due to the liquidation of a
portion  of  the Company's notes receivable during the past year, and a decrease
in  the amount of investments held by the Company, compared to the third quarter
of  2001.  The decrease in investments was primarily due to the Company's use of
its  cash  to make significant reductions in accounts payable, accrued expenses,
and claims payable and claims incurred but not reported ("IBNR") during the past
year.  By intentionally accelerating its payment of claims, the Company believes
it  will  enhance  its  image  among  dental  providers.

Income  before income taxes decreased by $0.4 million, from $0.5 million in 2001
to  $0.1  million in 2002. Income before income taxes as a percentage of premium
revenue decreased from 2.4% in 2001 to 0.5% in 2002. This decrease was primarily
due  to  an  increase  in the loss ratio from 69.4% in 2001 to 70.3% in 2002, as
well  as  a  decrease  in investment income and an increase in interest expense.

NINE MONTHS ENDED SEPTEMBER 30, 2002 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2001

Premium  revenue  decreased by $2.4 million, or 3.7%, from $63.9 million in 2001
to  $61.5 million in 2002. The average membership for which the Company provided
dental coverage decreased by approximately 58,000 members, or 9.3%, from 626,000
members  during  2001  to  568,000  during  2002. The decrease in membership was
primarily  due  to  the  loss  of a number of the Company's customers, and a net
decrease  in  its  enrollment  within  retained  customers, which were partially
offset by an increase in premium revenue due to the Paramount acquisition, which
is  included  in  the  accompanying  condensed consolidated financial statements
beginning  on  September  1,  2002.  Premium revenue decreased by only 3.7% even
though average membership decreased by 9.3%. This was primarily due to increases
in  premium  rates  and a shift in the type of plan designs toward PPO/indemnity
plan  designs,  which  have  higher  premium  rates  than  HMO  plan  designs.
Substantially  all  of  the  Company's  premium  revenue was derived from dental
benefit  plans  in  2002 and 2001. Premium revenue from vision benefit plans and
other  products  was  not  material  in  2002  or  2001.

Health  care  services  expense  decreased  by $0.8 million, or 1.8%, from $44.6
million in 2001 to $43.8 million in 2002. The loss ratio increased from 69.7% in
2001  to  71.1%  in  2002.  The  increase in the loss ratio was primarily due to
increases  in  supplemental  payments and discounted fee-for-service payments to
dental  HMO  providers,  and  a  shift  in  the  type  of  plan  designs  toward
PPO/indemnity  plan  designs,  which  have  a  higher  loss  ratio than HMO plan
designs.  The  increases in supplemental and discounted fee-for-service payments
were  partially due to high-cost arrangements with certain providers, which were


                                       18
<PAGE>
started  early  in  2002,  and  which  have  been terminated. These arrangements
resulted  in  an  unusually large amount of supplemental payments and discounted
fee-for-service  payments  in  2002.  The  increase  was also partially due to a
general  increase in supplemental payments, which the Company believes is due to
more  comprehensive  submission of claims information by the dentists in its HMO
network.

SG&A  expenses decreased by $1.4 million, or 7.3%, from $19.0 million in 2001 to
$17.6  million  in  2002.  SG&A  expenses  as  a  percentage  of premium revenue
decreased from 29.8% in 2001 to 28.7% in 2002.  The decrease in SG&A expenses is
primarily  due  to  decreases  in depreciation and amortization, furniture rent,
property  rent,  and  a  $350,000  refund  of  maintenance  fees from one of the
Company's  vendors,  which  were  partially offset by a $250,000 expense in 2002
related  to  the settlement of stockholder litigation, as described in Note 9 to
the  accompanying  condensed  consolidated financial statements. The decrease in
depreciation  and  amortization  expense  is  primarily  due  to the fact that a
significant  component  of  the  Company's  computer  software  became  fully
depreciated  during  the  past  year,  and  the  fact  that  the  Company had no
amortization of goodwill or other intangible assets during 2002, as discussed in
Note  2  to  the accompanying condensed consolidated financial statements. There
was  $205,000 of amortization expense related to goodwill and another intangible
asset  during  the first nine months of 2001. The decrease in furniture rent was
due  to  the  purchase  of  the  office  furniture used in the Company's primary
administrative  office  through a new capital lease during the second quarter of
2002,  as  discussed  in  Note  4  to  the  accompanying  condensed consolidated
financial  statements.  The  related  furniture  was  formerly  leased  under an
operating  lease  with  relatively  expensive terms, compared to the new capital
lease.  The  new  capital  lease caused an increase in depreciation expense, but
this  was  more than offset by other decreases in depreciation and amortization,
as noted above. The decrease in property rent was primarily due to the fact that
the  Company recorded an expense of approximately $300,000 in the second quarter
of  2001  to  accrue all the future rent payments under a lease for office space
previously occupied by the Company. The Company had been subleasing the space to
an  unrelated  entity, and that entity ceased making rent payments in the second
quarter  of  2001,  due  to  its  insolvency. The refund of maintenance fees was
primarily  due  to  the  settlement  of  a  dispute over the amount of equipment
maintenance  fees  paid  by  the  Company  in  several  prior  years.

Investment and other income decreased by $0.6 million, from $0.9 million in 2001
to $0.3 million in 2002. This decrease is primarily due to realized gains on the
sale  of  investments  in  2001,  a  decrease  in  interest  rates on short-term
fixed-income  investments  during  the  past year, a decrease in interest income
from  notes  receivable,  due  to  the liquidation of a portion of the Company's
notes  receivable  during  the  past  year,  and  a  decrease  in  the amount of
investments held by the Company, compared to the prior year. The decrease in the
Company's  investments  was  primarily due to significant reductions in accounts
payable,  accrued expenses, and claims payable and IBNR during the past year. By
intentionally  accelerating  its payment of claims, the Company hopes to enhance
its  image  among  dental  providers.

Total  interest  expense decreased by $0.4 million, from $0.5 million in 2001 to
$0.1  million  in  2002, 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.

Income  before income taxes decreased by $0.4 million, from $0.7 million in 2001
to  $0.3  million in 2002. Income before income taxes as a percentage of premium
revenue decreased from 1.1% in 2001 to 0.5% in 2002. This decrease was primarily
due  to  an increase in the loss ratio, which was partially offset by a decrease
in  SG&A  expense  as  a  percentage  of  premium  revenue.

LIQUIDITY  AND  CAPITAL  RESOURCES

The Company's net working capital decreased from $4.2 million as of December 31,
2001, to $0.5 million as of September 30, 2002, primarily due to the acquisition
of  Paramount  in  August  2002,  as  discussed  in  Note  3 to the accompanying
condensed consolidated financial statements. The Paramount acquisition decreased
working  capital  by a total of $3.5 million, including $2.7 million of net cash
used  in the acquisition and the current portion of the secured convertible note
issued  in  the  transaction,  which  is $0.8 million. The Company borrowed $2.0
million  of working capital in August 2002, but this increase in working capital
was  offset  by the current portion of the two capital lease obligations entered
into  in  June  2002,  as  discussed  in  Note  4  to the accompanying condensed
consolidated  financial  statements.


                                       19
<PAGE>
The  Company's  total  debt  increased from $265,000 as of December 31, 2001, to
$5.9  million  as  of  September  30,  2002,  primarily  due to the $2.6 million
convertible note issued in the Paramount acquisition, the $2.0 million unsecured
convertible  note  issued  in  August 2002, and the two capital leases discussed
above,  which  added $1.8 million of debt during the second quarter of 2002. The
aggregate  principal payments due under all of the Company's debt, including its
capital  leases,  are $563,000 during the remainder of 2002, $2,424,000 in 2003,
$1,755,000  in  2004,  and  $1,197,000  in  2005.

In  August  2002,  the  Company  borrowed $2.0 million from one of its principal
stockholders,  which  was  used  to  increase  the Company's working capital, to
provide  for  the payments due under the two new capital leases discussed above,
and  to  provide  for  the  payments due under the settlement of the stockholder
litigation  discussed  in  Note  9  to  the  accompanying condensed consolidated
financial statements. The borrowing was made under an unsecured convertible note
that  bears  interest  at  7.0%  annually,  and  is  payable in 36 equal monthly
installments  of  principal  and  interest,  beginning  in  September  2002. The
outstanding  balance under the convertible note is convertible into common stock
of  the Company at a conversion price of $1.625 per share, at any time after one
year  from  the  date  of  the  borrowing.

Effective  August  30, 2002, the Company acquired all of the outstanding capital
stock  of  Paramount  Dental  Plan,  Inc.  ("Paramount") for a purchase price of
approximately  $6.7  million,  consisting  of  $3.0  million  in cash, a secured
convertible  note  for  $2,625,000,  and  769,231 shares of the Company's common
stock.  The  secured  convertible  note  bears interest at 7.0% annually, and is
payable in 36 equal monthly installments of principal and interest, beginning in
October  2002.  The  outstanding  balance  under the secured convertible note is
convertible into common stock of the Company at a conversion price of $1.625 per
share, at any time after August 30, 2003. The convertible note is secured by the
stock  of  the  Company's  dental  HMO  subsidiary in Florida. The operations of
Paramount  are  included  in  the  accompanying condensed consolidated financial
statements  beginning  on  September  1,  2002.

The Company believes it has adequate financial resources to continue its current
operations  for  the  foreseeable  future,  and that it will be able to meet its
various  financial  obligations from its existing financial resources and future
cash  flows  from  its  operations.  However, there can be no assurance that the
Company's  future  earnings  will be adequate to make all of the payments on the
Company's  various  obligations  as  they  become  due.

Net  cash  provided  by  operating  activities  was $0.7 million during the nine
months  ended  September  30, 2002, compared to $0.7 million of net cash used by
operating  activities  in the same period last year. The change is primarily due
to  the fact that net cash used to reduce accounts payable, accrued expenses and
claims  payable  and  claims  incurred  but not reported ("IBNR") decreased from
$3.1  million in 2001 to $1.6 million in 2002. The most significant decreases in
both  periods were payments made to reduce the obligations assumed in connection
with  the re-sale of certain dental practices in October 2000, and reductions in
claims  payable and IBNR. The obligations assumed in connection with the re-sale
of  dental practices were reduced by $680,000 during 2001 and by $360,000 during
2002,  due  to  payments  made  during  both  periods.  Claims  payable and IBNR
decreased  by  $1.2  million  in 2001 and $1.0 million in 2002, primarily due to
intentional decreases in the processing time for payment of provider claims, and
in  the  case  of  2001,  partially due to a decrease in the Company's volume of
PPO/indemnity  business  during the period. Due in part to the recent decline in
interest  rates  on  investments, the Company has adopted the practice of paying
all  provider claims as rapidly as possible, in order to enhance its image among
dental  providers.

Net  cash provided by investing activities was $0.8 million in 2002, compared to
$2.1  million  in  2001.  In  2002,  the  Company  had a net liquidation of $3.8
million of investments, the proceeds of which were used primarily to finance the
acquisition  of  Paramount  and  to finance the reduction in bank overdrafts, as
discussed  below.  In 2001, the Company had a net liquidation of $1.4 million of
investments  and  received  $1.3  million from the liquidation of certain of its
notes  receivable,  the  proceeds  of  which  were used primarily to finance the
reduction  in bank overdrafts, as discussed below, and to finance the reductions
in  accounts payable, accrued expenses and claims payable and IBNR, as discussed
above.

Net  cash  used  in  financing activities decreased from $1.3 million in 2001 to
$0.7  million  in  2002.  The net cash used in both periods was primarily due to
reductions in the amount of bank overdrafts, which are due to outstanding checks
not  yet  presented  for  payment.


                                       20
<PAGE>
RECENT  ACCOUNTING  PRONOUNCEMENTS

See Note 2 to the accompanying condensed consolidated financial statements for a
discussion  of  recently  adopted  accounting  principles  and  recently  issued
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 expense. 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 partially mitigated in the short-term
by  the  fact  that  approximately  30%  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 subject to risk related to changes in short-term interest rates,
due to its investments in interest-bearing securities. As of September 30, 2002,
the  Company's  total  cash  and  investments  were approximately $15.4 million.
Therefore, a one percentage-point change in short-term interest rates would have
a  $154,000 impact on the Company's annual investment income. The Company is not
subject  to  a  material  amount  of risk related to changes in foreign currency
exchange  rates.

ITEM  4.     CONTROLS  AND  PROCEDURES

EVALUATION  OF  DISCLOSURE  CONTROLS  AND  PROCEDURES

Within  90  days  prior  to  the  date  of this report, the Company completed an
evaluation,  under  the  supervision and with the participation of the Company's
management,  including  the  Chief  Executive  Officer  and  the Chief Financial
Officer,  of  the  effectiveness  of  the  design and operation of the Company's
disclosure  controls and procedures pursuant to Exchange Act Rule 13a-14.  Based
on  that  evaluation,  the  Chief  Executive Officer and Chief Financial Officer
concluded that the Company's disclosure controls and procedures are effective in
alerting them, on a timely basis, to material information related to the Company
required  to  be  included in the Company's periodic filings with the Securities
and  Exchange  Commission.

CHANGES  IN  INTERNAL  CONTROLS

No  significant  changes to the Company's internal controls were made during the
periods  covered  by  this  report.

PART  II.     OTHER  INFORMATION

ITEM  1.     LEGAL  PROCEEDINGS

The  Company  is  subject  to  various  claims  and legal actions arising 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 have a material adverse effect on the
Company's  consolidated  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.  In  September  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 and its officers. In October 2000, the plaintiffs filed an appeal of the
dismissal of the lawsuit, and the dismissal was overturned in February 2002. The


                                       21
<PAGE>
case  was  remanded  back  to  the District Court with instructions to allow the
plaintiff  to  file  a  second  amended  complaint.  Subsequently,  the  Company
conducted  mediation  and reached an agreement with the plaintiffs to settle the
lawsuit  for  a payment of $1.25 million to the plaintiffs, without an admission
of  liability by any party. The agreement between the Company and the plaintiffs
was approved by the District Court in September 2002. The Company's insurer paid
$1.0  million of the cost of the settlement. Accordingly, the Company recorded a
$250,000  expense during the three months ended June 30, 2002, which is included
in  selling,  general  and  administrative expense in the accompanying condensed
consolidated  statement  of  operations.

ITEM  6.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)     EXHIBITS

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

          10.30          Convertible  Promissory  Note  dated  August  8,  2002.
          10.31          Registration  Rights  Agreement  dated  August 8, 2002.
          10.32          Amended  and  Restated  Stock  Option  Plan.
          10.33          Amendment  to  Restated  Certificate  of Incorporation.

(b)     REPORTS  ON  FORM  8-K.

The Company filed a Current Report on Form 8-K on September 13, 2002, related to
the  completion  of  the  acquisition of Paramount Dental Plan, Inc. The Company
also  filed  a Current Report on Form 8-K/A on November 12, 2002, which includes
historical financial statements of Paramount and pro forma financial information
for  the  Company  related  to  this acquisition. See Note 3 to the accompanying
condensed  consolidated  financial  statements  for  more  information  on  this
transaction.

The  Company  filed  a Current Report on Form 8-K on October 1, 2002, related to
the  Company's  settlement  of  the  stockholder  litigation  filed  against the
Company.  See  Note  9  to  the  accompanying  condensed  consolidated financial
statements  for  more  information  on  the  settlement.


                                       22
<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  13th  day  of  November  2002.

            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)


                                       23
<PAGE>
                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002;
                          QUARTERLY REPORT ON FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002


Each  of  the  undersigned  hereby  certifies  in  his capacity as an officer of
SafeGuard Health Enterprises, Inc. (the "Company"), that the Quarterly Report of
the  Company on Form 10-Q for the period ended September 30, 2002 (the "Report")
fully complies with the requirements of Section 13(a) of the Securities Exchange
Act of 1934 and that the information contained in the Report fairly presents, in
all material respects, the financial condition of the Company at the end of such
period  and  the  results  of  operations  of  the  Company  for  such  period.

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934, this certification has been signed by the undersigned in the City
of  Aliso  Viejo,  State  of  California,  on  the  13th  day  of November 2002.


          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)


                                       24
<PAGE>
                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
           PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                 SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002;
                          QUARTERLY REPORT ON FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002

I,  James  E.  Buncher,  President  and  Chief  Executive Officer, certify that:

1.   I  have  reviewed  this  quarterly  report on Form 10-Q of SafeGuard Health
     Enterprises,  Inc.,  (the  "Report").

2.   Based on my knowledge, this Report does not contain any untrue statement of
     a  material  fact  or  omit  to state a material fact necessary to make the
     statements  made, in light of the circumstances under which such statements
     were  made,  not  misleading  with  respect  to  the period covered by this
     Report;

3.   Based  on  my  knowledge,  the  financial  statements,  and other financial
     information  included  in  this  Report,  fairly  present  in  all material
     respects  the  financial condition, results of operations and cash flows of
     the  registrant  as  of,  and  for,  the  periods presented in this Report;

4.   The  registrant's  other  certifying  officers  and  I, are responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in  Exchange  Act  Rules  13a-14  and  15d-14) for the registrant and have:

          a)   designed  such  disclosure controls and procedures to ensure that
               material  information  relating  to the registrant, including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               Report  is  being  prepared;
          b)   evaluated  the  effectiveness  of  the  registrant's  disclosure
               controls  and procedures as of a date within 90 days prior to the
               filing  date  of  this  Report  (the  "Evaluation  Date");  and
          c)   presented  in this Report our conclusions about the effectiveness
               of the disclosure controls and procedures based on our evaluation
               as  of  the  Evaluation  Date;

5.   The  registrant's  other certifying officers and I have disclosed, based on
     our  most  recent  evaluation,  to  the registrant's auditors and the audit
     committee  of  registrant's  board  of directors (or persons performing the
     equivalent  functions):

          a)   all  significant  deficiencies  in  the  design  or  operation of
               internal  controls  which could adversely affect the registrant's
               ability  to  record, process, summarize and report financial data
               and  have  identified  for the registrant's auditors any material
               weaknesses  in  internal  controls;  and
          b)   any  fraud,  whether or not material, that involves management or
               other  employees  who have a significant role in the registrant's
               internal  controls;  and

6.   The  registrant's  other  certifying  officers and I have indicated in this
     Report  whether  there  were significant changes in internal controls or in
     other  factors that could significantly affect internal controls subsequent
     to the date of our most recent evaluation, including any corrective actions
     with  regard  to  significant  deficiencies  and  material  weaknesses.

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934, this certification has been signed by the undersigned in the City
of  Aliso  Viejo,  State  of  California,  on  the  13th  day  of November 2002.

          SAFEGUARD  HEALTH  ENTERPRISES,  INC.


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


                                       25
<PAGE>
                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
           PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                 SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002;
                          QUARTERLY REPORT ON FORM 10-Q
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002

I,  Dennis  L  Gates, Senior Vice President and Chief Financial Officer, certify
that:

1.   I  have  reviewed  this  quarterly  report on Form 10-Q of SafeGuard Health
     Enterprises,  Inc.,  (the  "Report").

2.   Based on my knowledge, this Report does not contain any untrue statement of
     a  material  fact  or  omit  to state a material fact necessary to make the
     statements  made, in light of the circumstances under which such statements
     were  made,  not  misleading  with  respect  to  the period covered by this
     Report;

3.   Based  on  my  knowledge,  the  financial  statements,  and other financial
     information  included  in  this  Report,  fairly  present  in  all material
     respects  the  financial condition, results of operations and cash flows of
     the  registrant  as  of,  and  for,  the  periods presented in this Report;

4.   The  registrant's  other  certifying  officer  and  I  are  responsible for
     establishing and maintaining disclosure controls and procedures (as defined
     in  Exchange  Act  Rules  13a-14  and  15d-14) for the registrant and have:

          a)   designed  such  disclosure controls and procedures to ensure that
               material  information  relating  to the registrant, including its
               consolidated  subsidiaries,  is made known to us by others within
               those  entities,  particularly  during  the  period in which this
               Report  is  being  prepared;
          b)   evaluated  the  effectiveness  of  the  registrant's  disclosure
               controls  and procedures as of a date within 90 days prior to the
               filing  date  of  this  Report  (the  "Evaluation  Date");  and
          c)   presented  in this Report our conclusions about the effectiveness
               of the disclosure controls and procedures based on our evaluation
               as  of  the  Evaluation  Date;

5.   The  registrant's  other  certifying officer and I have disclosed, based on
     our  most  recent  evaluation,  to  the registrant's auditors and the audit
     committee  of  registrant's  board  of directors (or persons performing the
     equivalent  functions):

          a)   all  significant  deficiencies  in  the  design  or  operation of
               internal  controls  which could adversely affect the registrant's
               ability  to  record, process, summarize and report financial data
               and  have  identified  for the registrant's auditors any material
               weaknesses  in  internal  controls;  and
          b)   any  fraud,  whether or not material, that involves management or
               other  employees  who have a significant role in the registrant's
               internal  controls;  and

6.   The  registrant's  other  certifying  officer  and I have indicated in this
     Report  whether  there  were significant changes in internal controls or in
     other  factors that could significantly affect internal controls subsequent
     to the date of our most recent evaluation, including any corrective actions
     with  regard  to  significant  deficiencies  and  material  weaknesses.

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934, this certification has been signed by the undersigned in the City
of  Aliso  Viejo,  State  of  California,  on  the  13th  day  of November 2002.

          SAFEGUARD  HEALTH  ENTERPRISES,  INC.


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


                                       26
<PAGE>