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 March 31, 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                        (I.R.S. Employer
       jurisdiction of incorporation)              Identification No.)

                            95 ENTERPRISE, SUITE 100
                          ALISO VIEJO, CALIFORNIA 92656
                    (Address of principal executive offices)
                                   (Zip Code)

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


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

                                   Yes  X  No
                                       ---    ---

As  of May 1, 2002, the number of shares of registrant's common stock, par value
$0.01  per  share,  outstanding  was  4,820,832  shares (not including 3,251,452
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  300,000  shares.


<PAGE>
                       SAFEGUARD HEALTH ENTERPRISES, INC.
             INDEX TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2002



                                                                            PAGE
                                                                            ----

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                                            8

  Item 3.  Quantitative  and  Qualitative  Disclosures About Market Risk      15

PART II.  OTHER  INFORMATION

  Item 1.  Legal  Proceedings                                                 15

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

SIGNATURES                                                                    16


<PAGE>
<TABLE>
<CAPTION>

PART  I.     FINANCIAL  INFORMATION

ITEM  1.     CONDENSED  CONSOLIDATED  FINANCIAL  STATEMENTS

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


                                                                MARCH 31,     DECEMBER 31,
                                                                   2002           2001
                                                               ------------  --------------
<S>                                                            <C>           <C>
                                ASSETS                          (unaudited)
Current assets:
  Cash and cash equivalents                                    $     2,246   $       1,497
  Investments available-for-sale, at fair value                     12,512          13,956
  Accounts receivable, net of allowances                             2,369           2,839
  Other current assets                                                 835             903
                                                               ------------  --------------
    Total current assets                                            17,962          19,195

Property and equipment, net of accumulated depreciation              2,246           2,348
Restricted investments available-for-sale, at fair value             2,796           2,831
Notes receivable, net of allowances                                    805             805
Goodwill, net of accumulated amortization                            3,920           3,920
Other assets                                                           206             226
                                                               ------------  --------------

    Total assets                                               $    27,935   $      29,325
                                                               ============  ==============

                 LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable                                             $     2,255   $       3,168
  Accrued expenses                                                   4,602           4,827
  Short-term debt                                                      202             265
  Claims payable and claims incurred but not reported                5,129           5,905
  Deferred revenue                                                   1,010             823
                                                               ------------  --------------
    Total current liabilities                                       13,198          14,988

Long-term liabilities                                                  964             971
Commitments and contingencies (Note 7)

Stockholders' equity:
  Convertible preferred stock and additional paid-in capital        41,250          41,250
  Common stock and additional paid-in capital                       21,559          21,552
  Retained earnings (accumulated deficit)                          (31,078)        (31,447)
  Accumulated other comprehensive income                                27              63
  Treasury stock, at cost                                          (17,985)        (18,052)
                                                               ------------  --------------
    Total stockholders' equity                                      13,773          13,366
                                                               ------------  --------------

    Total liabilities and stockholders' equity                 $    27,935   $      29,325
                                                               ============  ==============
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.


<PAGE>
<TABLE>
<CAPTION>
                SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                    THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                       (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                    (UNAUDITED)


                                                                  2002      2001
                                                                --------  --------
<S>                                                             <C>       <C>
Premium revenue, net                                            $20,688   $21,643

Health care services expense                                     14,550    15,187
Selling, general and administrative expense                       5,839     6,534
                                                                --------  --------

Operating income (loss)                                             299       (78)

Investment and other income                                         116       435
Interest expense on debt that was converted to equity in 2001        --      (402)
Other interest expense                                               (7)      (32)
                                                                --------  --------

Income (loss) before income taxes                                   408       (77)
Income tax expense                                                   --        --
                                                                --------  --------

Income (loss) before extraordinary item                             408       (77)
Extraordinary item:
  Conversion of debt to convertible preferred stock                  --    11,251
                                                                --------  --------

  Net income                                                    $   408   $11,174
                                                                ========  ========

Basic net income per share:
  Income (loss) before extraordinary item                       $  0.01   $    --
  Extraordinary item                                                 --      0.45
                                                                --------  --------

  Net income                                                    $  0.01   $  0.45
                                                                ========  ========

Weighted average basic shares outstanding                        34,812    24,738

Diluted net income per share:
  Income (loss) before extraordinary item                       $  0.01   $    --
  Extraordinary item                                                 --      0.45
                                                                --------  --------

  Net income                                                    $  0.01   $  0.45
                                                                ========  ========

Weighted average diluted shares outstanding                      35,568    24,738
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.


<PAGE>
<TABLE>
<CAPTION>
                SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                     THREE MONTHS ENDED MARCH 31, 2002 AND 2001
                                   (IN THOUSANDS)
                                    (UNAUDITED)


                                                                  2002      2001
                                                                 -------  ---------
<S>                                                              <C>      <C>
Cash flows from operating activities:
  Net income                                                     $  408   $ 11,174
  Adjustments to reconcile net income to net
    cash used in operating activities:
    Gain on conversion of debt to convertible preferred stock        --    (11,251)
    Bad debt expense                                                 64         75
    Amortization of deferred loan costs                              --         24
    Depreciation and amortization                                   293        621
    Contribution to retirement plan in the form of common stock      28         --
    Gain on sale of investments                                      --        (98)
  Changes in operating assets and liabilities:
    Accounts receivable                                             406        734
    Other current assets                                             68         48
    Accounts payable                                                (75)      (141)
    Accrued expenses                                               (225)      (890)
    Claims payable and claims incurred but not reported            (776)      (685)
    Deferred revenue                                                187        103
                                                                 -------  ---------
      Net cash used in operating activities                         378       (286)

Cash flows from investing activities:
  Purchase of investments available-for-sale                       (157)    (7,919)
  Proceeds from sale/maturity of investments available-for-sale   1,600      7,171
  Purchases of property and equipment                              (191)      (145)
  Payments received on notes receivable                              --        845
  Decrease in other assets                                           20         --
                                                                 -------  ---------
      Net cash provided by (used in) investing activities         1,272        (48)

Cash flows from financing activities:
  Decrease in bank overdrafts                                      (838)       (78)
  Increase in accrued interest, converted to equity in 2001          --        321
  Payments on debt                                                  (63)       (56)
  Repurchase of common stock                                         --        (10)
  Exercise of stock options                                           7         --
  Decrease in long-term liabilities                                  (7)       (95)
                                                                 -------  ---------
    Net cash (used in) provided by financing activities            (901)        82
                                                                 -------  ---------
Net increase (decrease) in cash and cash equivalents                749       (252)
Cash and cash equivalents at beginning of period                  1,497      1,381
                                                                 -------  ---------
Cash and cash equivalents at end of period                       $2,246   $  1,129
                                                                 =======  =========
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.


<PAGE>

               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2002
                                   (UNAUDITED)

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

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

NOTE  2.  SIGNIFICANT  ACCOUNTING  POLICIES
-------------------------------------------

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 received by the Company, changes in
the  number  of days between the date claims are received by the Company and the
date the claims are paid, and the recent trend in the average amount 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 Statement of Financial
Accounting  Standards  ("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 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 ended March 31,
2002  and  2001,  the  potentially  dilutive securities of the Company that were
outstanding  consisted entirely of stock options and warrants. The only warrants
issued  by  the  Company were canceled without being exercised effective January
31,  2001,  as  discussed in Note 4. Due to a net loss before extraordinary item
during  the three months ended March 31, 2001, the outstanding stock options and
warrants would have an antidilutive effect on diluted net loss per share in this
period.  Accordingly,  stock  options  and  warrants  are  excluded  from  the
calculation  of  diluted net loss per share for the three months ended March 31,
2001,  and the Company's diluted net loss per share is the same as its basic net
loss  per  share  for  that  period.  The  stock  options and warrants that were
excluded  from  the  calculation  of  diluted  net  loss per share for the first
quarter  of  2001  accounted for an aggregate of approximately 650,000 shares of
common  stock  equivalents.

Recently  Adopted  Accounting  Principles

In  July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141,  "Business  Combinations."  SFAS  No.  141  requires the purchase method of
accounting  to  be  used  for all business combinations initiated after June 30,
2001  and eliminates the pooling-of-interests method of accounting. The adoption
of SFAS No. 141 had no significant effect on the Company's financial statements.


<PAGE>
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  of amortization expense related to goodwill and
$40,000  of  amortization expense related to a non-competition agreement, during
the  three  months  ended  March  31, 2001. The non-competition agreement became
fully  amortized in September 2001. The Company's adjusted results of operations
for  the  three  months  ended  March  31,  2001,  which are adjusted to exclude
goodwill  amortization,  are  as  follows  (in  thousands):

<TABLE>
<CAPTION>
                                                           THREE  MONTHS  ENDED
                                                                 MARCH 31,
                                                           --------------------
                                                              2002       2001
                                                           ----------  --------
<S>                                                        <C>         <C>
  Income (loss) before extraordinary items, as reported    $      408  $   (77)
  Add back - Goodwill amortization                                 --       28
                                                           ----------  --------
    Income (loss) before extraordinary items, as adjusted  $      408  $   (49)
                                                           ==========  ========

  Net income, as reported                                  $      408  $11,174
  Add back - Goodwill amortization                                 --       28
                                                           ----------  --------
    Net income, as adjusted                                $      408  $11,202
                                                           ==========  ========
</TABLE>

None of the Company's reported net income (loss) per share amounts for the three
months ended March 31, 2001 would change as a result of the above adjustment for
goodwill  amortization  expense,  due  to  the  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.
SFAS  No.  142  provides that the initial impairment test as of January 1, 2002,
must  be  completed by June 30, 2002. The Company has not yet determined whether
there  was  any  impairment  of its goodwill as of January 1, 2002, based on the
method  of  testing  for impairment established by SFAS No. 142. The adoption of
SFAS  No.  142  had  no  other  significant  effect  on  the Company's financial
statements.

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.


<PAGE>
NOTE  3.  SALE  OF  DISCONTINUED  OPERATIONS
--------------------------------------------

In  1997  and  1998, the Company sold a number of general dental and orthodontic
practices  (the "Practices") to a single purchaser (the "Purchaser") in exchange
for  long-term  promissory  notes.  The  Purchaser subsequently defaulted on its
obligations  to  the  Company under those promissory notes, and in October 2000,
the  Company  completed a transaction with the Purchaser and another third party
(the "New Purchaser"), in which the Practices were re-sold to the New Purchaser.
In  this transaction, the Purchaser transferred its interest in the Practices to
the New Purchaser, the New Purchaser paid $2.4 million to the Company and placed
an  additional $1.5 million in an escrow account for the benefit of the Company,
and  the  Company  agreed  to  pay certain obligations related to the Practices.
These  obligations  consisted  primarily  of  payroll,  dental  office  lease
obligations  for  which the Company was the primary lessee, patient refunds, and
the  obligation  to complete the orthodontic treatments for the Company's dental
HMO  patients  who  had  previously  paid  their  full  share of the cost of the
treatments.  These  obligations  had  to  be  paid  in  order  to  complete  the
transaction, were obligations of the Company as the members' dental HMO plan, or
were  obligations  for  which the Company could have been contingently liable in
any  event.  The  Company  had  collected  substantially all of the funds in the
escrow  account  as  of  March  31,  2002.  The ultimate cost of the obligations
assumed  by  the Company is reflected on the accompanying condensed consolidated
balance  sheet  based  on  the  Company's  best estimates, but these amounts are
subject  to  various  uncertainties.

NOTE  4.  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. 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 as of January 31, 2001) into 300,000 shares of convertible
preferred  stock.  The  estimated  value  of the convertible preferred stock was
$137.50 per share as of January 31, 2001, which is based on the closing price of
the  Company's common stock on January 31, 2001, which was $1.375 per share, and
the  fact that each share of convertible preferred stock is convertible into 100
shares  of  common  stock.  Based  on  this  estimated  value,  the  conversion
transaction  resulted  in a gain of $11.3 million, which is net of approximately
$350,000  of  transaction  costs.  There is no income tax effect related to this
transaction,  due  to  the  Company's  net  operating loss carryforwards for tax
purposes.  The  Company's  deferred  tax  asset  related  to  net operating loss
carryforwards  is  fully reserved, due to uncertainty about whether the deferred
tax  assets  will  be  realized  in  the  future,  as  discussed  in  Note  5.

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  5.  INCOME  TAXES
-----------------------

The  Company's  net deferred tax assets have been fully reserved since September
30,  1999, due to uncertainty about whether those net assets will be realized in
the  future.  The  uncertainty  is  primarily due to cumulative operating losses
incurred  by  the  Company  during  the period from January 1, 1998 to March 31,
2002,  and  the  existence  of significant net operating loss carryforwards. The
Company's  deferred  tax  assets remain fully reserved as of March 31, 2002, for
the  same  reasons.

Due  to  the conversion of outstanding debt into convertible preferred stock, as
described in Note 4, there was a "change of control" of the Company for purposes
of  Internal  Revenue Code Section 382, effective January 31, 2001. As a result,
effective  January  31,  2001,  the  amount  of  pre-existing 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.


<PAGE>
The  Company  had  taxable income for the three months ended March 31, 2002, but
its  taxable  income  was  completely offset by net operating loss carryforwards
from  previous  years.  The  Company  had  taxable income during the month ended
January  31,  2001,  which included the $11.3 million gain on conversion of debt
into  convertible  preferred  stock,  but its taxable income was also completely
offset  by net operating loss carryforwards from previous years. The Company had
a  net  loss for tax purposes for the period from February 1, 2001, to March 31,
2001.  As  noted  above,  the  Company's net deferred tax assets have been fully
reserved  since  September 30, 1999. Accordingly, the Company recorded no income
tax  expense  or  benefit  for  the  three months ended March 31, 2002 and 2001.

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

Total  comprehensive  income or loss includes the change in stockholders' equity
during  the  period  from  transactions  and other events and circumstances from
nonstockholder sources.  Total comprehensive income of the Company for the three
months ended March 31, 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  $(36,000) and $(79,000) for the three
months  ended  March 31, 2002 and 2001, respectively. Total comprehensive income
was $372,000 and $11,095,000 for the three months ended March 31, 2002 and 2001,
respectively.

NOTE  7.  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.  On  September  12, 2000, after the plaintiffs had filed a first amended
complaint,  the  Federal  District  Trial  Court  dismissed  the  lawsuit  with
prejudice,  stating  that the plaintiffs had failed to state a claim against the
Company  and its officers. On October 6, 2000, the plaintiffs filed an appeal of
the  dismissal  of the lawsuit, and the dismissal was overturned on February 22,
2002.  The  case  was  remanded  back to the District Court with instructions to
allow  the  plaintiff  to  file  a  second  amended  complaint.  The Company has
directors'  and  officers'  liability insurance and intends to vigorously defend
any  second amended complaint that may be filed by the plaintiff. In the opinion
of  management, the ultimate outcome of this litigation will not have a material
adverse  effect  on  the Company's consolidated financial position or results 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,  as  discussed  in Note 3. In
connection with the sale and re-sale of those practices, all of the office lease
agreements  related  to  those  practices  have  been assigned to the respective
purchasers  of  those  practices,  except for two of the leases.  The Company is
currently  in the process of obtaining assignments for the remaining two leases,
although  there  can  be  no  assurance  that it will be successful in doing so.

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 March 31, 2002, the total of the minimum annual payments under
these  leases  was  approximately  $1.5  million,  and  the aggregate contingent
liability  of the Company related to these leases was approximately $4.1 million
over  the  terms  of the lease agreements, which expire at various dates through
2007.  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  $4.1  million excludes $160,000 of
estimated  lease obligations that have been accrued as of March 31, 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."


<PAGE>
The  Company remains primarily liable for the two lease agreements that have not
yet  been assigned, although the purchasers of the related practices have agreed
to make all of the remaining payments under those leases. The total future lease
commitments  related  to  these two leases is approximately $190,000 as of March
31,  2002.

NOTE  8.  SUBSEQUENT  EVENT
---------------------------

In April 2002, the Company entered into a definitive agreement to acquire all of
the outstanding capital stock of Paramount Dental Plan, Inc. ("Paramount") for a
purchase  price  of  approximately  $6.6  million, consisting of $3.0 million in
cash,  a  convertible  note  for $2,625,000, and 767,231 shares of the Company's
common  stock.  Paramount  is  a dental benefits company located in Florida. The
convertible  note  bears  interest  at 7.0% annually, and is payable in 36 equal
monthly  installments  of  principal  and  interest,  beginning  one month after
closing.  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 closing of the transaction. In connection with this
transaction,  the  Company  also  agreed  to  enter into a three-year employment
agreement with the sole stockholder of Paramount, who will serve as president of
the Company's operations in Florida, and to enter into a three-year office lease
agreement  with  the  sole stockholder of Paramount, related to the office space
that  will  be  used  as  the  Company's  administrative  office in Florida. The
transaction  is  currently  pending regulatory approval, and the Company expects
that  it  will  complete  the transaction during 2002. See the Company's Current
Report  on Form 8-K, dated as of April 24, 2002, on file with the Securities and
Exchange  Commission,  for  more  information  on  this  pending  acquisition.

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, and the Current Report on Form 8-K dated as of April 24, 2002, both 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  March  31,  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  or  its  profitability.  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.


<PAGE>
Stockholder  Litigation.  In  December  1999,  a stockholder lawsuit against the
Company  was  filed,  which alleged that the Company and certain of its officers
violated  certain  securities  laws  by  issuing  a  series of alleged false and
misleading  statements  concerning  the Company's publicly reported revenues and
earnings  during  a  specified  class  period.  On September 12, 2000, after the
plaintiffs had filed a first amended complaint, the Federal District Trial Court
dismissed  the lawsuit with prejudice, stating that the plaintiffs had failed to
state  a  claim  against  the  Company and its officers. On October 6, 2000, the
plaintiffs  filed  an  appeal of the dismissal of the lawsuit, and the dismissal
was  overturned on February 22, 2002. The case was remanded back to the District
Court  with  instructions  to  allow  the  plaintiff  to  file  a second amended
complaint.  The  Company  has  directors'  and officers' liability insurance and
intends  to  vigorously defend any second amended complaint that may be filed by
the  plaintiff.  However, there can be no assurance that the ultimate outcome of
this  litigation  will  not have an adverse effect on the Company's consolidated
financial  position  or  results  of  operations.

Government  Regulation.  The  dental  benefits  industry is subject to extensive
state  and  local  laws,  rules and regulations. Each of the Company's operating
subsidiaries  is  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,  as  described above under
"Government  Regulation."  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.

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 complete
orthodontic  treatments  for certain dental HMO patients who previously paid for
the  treatments  in  full.  The  amount  of  these  liabilities  is  subject  to
uncertainties,  and  there can be no assurance that the ultimate amount of these
liabilities  will  not exceed the amounts accrued on the Company's balance sheet
as  of  March  31,  2002.

Contingent  Lease Obligations. As of March 31, 2002, the Company is contingently
liable  for  an  aggregate  of  approximately  $4.1  million  of  office  lease
obligations related to the dental and orthodontic practices sold by the Company.
These  leases have been assigned to the purchasers of those practices, but 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.

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  secured  by  the assets purchased. Although payments on these
promissory notes are current at the present time, there can be no assurance that
each  of  these  dentists will make timely payments on these 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.


<PAGE>
Competitive  Market.  The Company operates in a highly competitive industry. Its
ability to maintain its profitability is affected by significant competition for
employer  groups and for contracting dental providers. There can be no assurance
the  Company  will  be  able  to  compete  successfully  enough  to maintain its
profitability.  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 total revenue decreased from $21.6
million  in  the three months ended March 31, 2001 to $20.7 million in the first
quarter  of  2002,  primarily  due to the loss of a number of its 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 to 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 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  cost  and  rate  at which dental care services are utilized by
subscribers  and  dependents.  If  the  Company does not accurately assess these
underwriting risks, the premium rates charged may 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  also  assumes
underwriting  risk related to the cost and rate at which specialist services are
utilized  by  subscribers  and  dependents, to the cost of supplemental payments
made to general dentists, and to the 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 may 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.

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. The Company has entered into
employment  agreements  with  nine  members of senior management, of which eight
agreements  expire  during  2002.

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, the amount
of  health  care expenses incurred, and profitability and, therefore, affect the
forward-looking  statements  which  may be included in this report. In addition,
past  financial  performance  is  not necessarily a reliable indicator of future
performance.  An  investor  should  not  use  historical  performance  alone  to
anticipate  future  results  or  future  period  trends  for  the  Company.


<PAGE>
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  the  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  consolidated  financial  statements  are  the  following:

NOTES  RECEIVABLE

Notes  receivable  are  stated  at  the estimated collectible amounts, net of an
allowance  for  bad  debts.  The Company continuously monitors its collection of
payments  on the notes receivable and maintains a reserve for estimated bad debt
losses. The amount of the reserve is based primarily on the Company's historical
experience  in  collecting  similar  notes  receivable  that  are  no  longer
outstanding,  and any available information about the financial condition of the
note  issuers,  although the Company has access to very little such information.
The Company believes its reserve for bad debt losses is adequate as of March 31,
2002.  However,  there  can  be  no  assurance that the Company will realize the
carrying  amount  of  its  notes  receivable.

Intangible  Assets

Intangible  assets at March 31, 2002 consist entirely of goodwill related to the
acquisition  of  a  Texas-based  dental  HMO  company  in  1996.  This  goodwill
represents  the  excess  of  the purchase price of the acquired company over the
fair  value of the net assets acquired. The Company estimates that this goodwill
has  a  useful  life  of  40  years  from the date of acquisition of the related
entity,  and  amortized  the  goodwill  over that period during the three months
ended  March  31,  2001.  In  accordance  with SFAS No. 142, "Goodwill and Other
Intangible Assets," the Company ceased amortizing its goodwill effective January
1,  2002. The Company has not yet determined whether there was any impairment of
its  goodwill  as  of  January  1,  2002, based on the new method of testing for
impairment  established  by  SFAS  No.  142.

LIABILITIES  RELATED  TO  SALE  OF  DENTAL  OFFICES

The Company completed the sale of its interest in certain dental and orthodontic
practices  in October 2000, as described in Note 3 to the accompanying condensed
consolidated  financial  statements.  In  connection  with this transaction, the
Company  agreed  to  pay  certain  obligations related to these practices. These
obligations  consisted  primarily  of  payroll, dental office lease obligations,
patient  refunds,  and the obligation to complete the orthodontic treatments for
dental  HMO  patients  who  previously  paid  for  the treatments in full. These
obligations  had  to  be  paid  in  order  to  complete  the  transaction,  were
obligations  of the Company as the members' dental HMO plan, or were obligations
for  which  the  Company could have been contingently liable in any event. As of
March  31,  2002,  the  Company  has  satisfied  a  substantial  portion  of the
obligations  described  above.  However,  the  ultimate  cost of the obligations
assumed  by the Company is subject to various uncertainties, and is reflected on
the  accompanying  condensed  consolidated  balance sheet based on the Company's
best  estimates.

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 received by the Company, changes in
the  number  of days between the date claims are received by the Company and the
date the claims are paid, and the recent trend in the average amount 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, which could have a material adverse effect
on  the Company's financial statements. Any such differences are included in the
consolidated statement of operations for the period in which the differences are
identified.


<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 March 31,
2002,  and  the  existence  of significant net operating loss carryforwards. The
Company's  deferred  tax  assets remain fully reserved as of March 31, 2002, for
the  same  reasons.

RESULTS  OF  OPERATIONS

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

<TABLE>
<CAPTION>
                                                                 THREE MONTHS ENDED
                                                                      MARCH 31,
                                                                   ---------------
                                                                    2002    2001
                                                                   ------  -------
<S>                                                                <C>     <C>
Premium revenue, net                                               100.0%   100.0%

Health care services expense                                        70.3     70.2
Selling, general and administrative expense                         28.2     30.2
                                                                   ------  -------
  Operating income (loss)                                            1.5     (0.4)

Investment and other income                                          0.5      2.0
Interest expense on debt that was converted to equity in 2001 (1)     --     (1.9)
Other interest expense                                                --     (0.1)
                                                                   ------  -------
  Income (loss) before income taxes and extraordinary item           2.0     (0.4)
Income tax expense                                                    --       --
                                                                   ------  -------
  Income (loss) before and extraordinary item                        2.0     (0.4)
Extraordinary item                                                    --     52.0
                                                                   ------  -------

  Net income (loss)                                                  2.0%  (51.6)%
                                                                   ======  =======
<FN>
(1)  Substantially all of the Company's debt was converted into convertible
     preferred stock effective January 31, 2001. See Note 4 to the accompanying
     condensed consolidated financial statements.
</TABLE>


<PAGE>
THREE  MONTHS ENDED MARCH 31, 2002 COMPARED TO THREE MONTHS ENDED MARCH 31, 2001

Premium  revenue  decreased by $0.9 million, or 4.4%, from $21.6 million in 2001
to  $20.7 million in 2002. The average membership for which the Company provided
dental  coverage  decreased  by  approximately  103,000  members, or 15.7%, from
655,000  members during 2001 to 552,000 during 2002. The decrease in the average
number  of  members is primarily due to the loss of a number of customers during
2001  and  at  the  beginning  of  2002.  The Company believes the loss of these
customers  was primarily due to the Company's poor financial condition from late
1999  to  early  2001,  when  the recapitalization of the Company was completed,
large  premium  increases that were necessary for clients with high loss ratios,
and customer service problems during 2000. The Company believes it significantly
improved  its financial condition by completing the recapitalization transaction
in January 2001 (see Liquidity and Capital Resources below), and by implementing
various  cost  reduction  strategies  during  2000  and  2001.  The Company also
implemented  various  operational  improvements  during  2000 and 2001, which it
believes  addressed  and  improved  customer  service.  As a result, the Company
believes  its  financial  condition  and level of customer service should not be
significant  factors  in  its  ability  to  retain  its existing customers or to
generate new customers. However, the Company's image among brokers, consultants,
clients,  and  potential  clients  was  damaged  by  news  of its poor financial
condition  and  its  customer service problems in 1999 and 2000. Even though the
Company  believes  these  issues no longer exist, the Company also believes that
its image in the marketplace is still recovering, and these perceived issues are
still  factors  in  its  ability  to  generate  new  customers.  Premium revenue
decreased  by  only 4.4% even though average membership decreased by 15.7%. 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 $0.6 million, or 4.2%, from $15.2
million  in  2001  to  $14.6  million in 2002. Health care services expense as a
percentage  of  premium revenue (the "loss ratio") increased slightly from 70.2%
in  2001 to 70.3% in 2002. There was a small increase in the loss ratio 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. However,
most  of  this  increase  was  offset  by  a decrease in capitation expense as a
percentage  of  premium  revenue,  which  is primarily due to an increase in the
average  premium  revenue  per  member  from  HMO  plan  designs.

Selling, general and administrative ("SG&A") expenses decreased by $0.7 million,
or  10.6%, from $6.5 million in 2001 to $5.8 million in 2002. SG&A expenses as a
percentage  of  premium  revenue decreased to 28.2% in 2002, from 30.2% in 2001.
The  decrease in SG&A expenses is primarily due to a $358,000 decrease in broker
commissions  and  internal  sales  commissions,  and  a  $328,000  decrease  in
depreciation and amortization expense. The decrease in commission expense is due
to the decrease in premium revenue, as discussed above, as well as a decrease in
new  sales  volume,  compared  to  2001.  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 $68,000 of amortization
expense  related  to  goodwill  and  another  intangible  asset during the first
quarter  of  2001.

Investment and other income decreased by $0.3 million, from $0.4 million in 2001
to $0.1 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 first quarter of 2001. The
decrease  in  the  Company's  investments  was  primarily  due  to  significant
reductions  in accounts payable, accrued expenses, and claims payable and claims
incurred  but not reported ("IBNR"), that occurred between December 31, 2000 and
March  31, 2002. See more information on the reductions that occurred during the
first  quarter  of  2002  below  under  "Liquidity  and  Capital  Resources."

Total  interest  expense  decreased  from $0.4 million in 2001 to nearly zero 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.


<PAGE>
The  income  (loss) before income taxes improved by $0.5 million, from a loss of
$77,000  in  2001  to  income  of $0.4 million in 2002. The income (loss) before
income  taxes as a percentage of premium revenue improved from a loss of 0.4% in
2001 to income of 2.0% in 2002. This improvement was primarily due to a decrease
in  SG&A  expenses  as  a  percentage of premium revenue from 30.2% to 28.2%, as
discussed  above.  The  decrease  in  interest expense was largely offset by the
decrease  in  interest  income.

LIQUIDITY  AND  CAPITAL  RESOURCES

The  Company's net working capital improved from $4.2 million as of December 31,
2001,  to  $4.8 million as of March 31, 2002. This improvement was primarily due
to  net  income of $408,000, plus depreciation expense of $293,000, less capital
expenditures  of  $191,000  during  the  first  quarter  of  2002.

Net  cash  provided  by  operating  activities was $0.4 million during the three
months  ended  March  31,  2002,  compared  to  net cash of $0.3 million used by
operating  activities  in  the same period last year. As noted above, net income
plus  depreciation  expense  was  $701,000 during the first quarter of 2002, but
this  was offset by $776,000 of net cash used to reduce claims payable and IBNR.
The  reduction  in claims payable and IBNR is primarily due to a decrease in the
processing time for payment of provider claims during the first quarter of 2002.
Due  to  the  recent  decrease 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 of $406,000 was
provided  by a decrease in accounts receivable during the first quarter of 2002,
which  was  due  to  normal  variations  in  the  timing  of  cash receipts from
customers.

Net  cash provided by investing activities was $1.3 million in 2002, compared to
net  cash  of  $48,000  used  by  investing  activities  in 2001. The change was
primarily  due  to the net liquidation of $1.4 million of investments during the
first  quarter of 2002, the proceeds of which were used to finance the reduction
in  claims  payable  and  IBNR,  as  discussed  above, and the reduction in bank
overdrafts,  as  discussed  below.

Net cash used by financing activities was $901,000 in 2002, compared to net cash
of  $82,000  provided by financing activities in 2001. The net cash used in 2002
was  primarily due to an $838,000 reduction in bank overdrafts, which are due to
outstanding  checks  not  yet  presented  for  payment.

In April 2002, the Company entered into a definitive agreement to acquire all of
the  outstanding  stock  of  Paramount  Dental  Plan,  Inc.  ("Paramount") for a
purchase  price  of  approximately  $6.6  million, consisting of $3.0 million in
cash,  a  convertible  note  for $2,625,000, and 767,231 shares of the Company's
common stock. This acquisition is currently pending regulatory approval, and the
Company  expects  that it will complete the transaction during 2002. The Company
believes  it  will  be  able  to  finance  the  $3.0 million cash portion of the
purchase price through internal sources or borrowings from external entities. As
a  result  of the acquisition, the Company will incur debt of $2,625,000 related
to  the convertible note to be issued to the seller of Paramount, in addition to
a  possible  borrowing  to  finance  the cash portion of the purchase price. The
convertible  note  bears  interest  at 7.0% annually, and is payable in 36 equal
monthly  installments  of  principal  and  interest,  beginning  one month after
closing.  See  Note  8  to  the  accompanying  condensed  consolidated financial
statements,  and the Company's Current Report on Form 8-K, dated as of April 24,
2002,  on file with the Securities and Exchange Commission, for more information
on  this  pending  acquisition.

The  Company  had  no  significant  debt during the three months ended March 31,
2002.  The  Company believes it has adequate financial resources to complete the
acquisition  described  above  and  continue  its  current  operations  for  the
foreseeable  future.

RECENT  ACCOUNTING  PRONOUNCEMENTS

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


<PAGE>
IMPACT  OF  INFLATION

The Company's operations are potentially impacted by inflation, which can affect
premium  rates,  health  care  services  expense,  and  selling,  general  and
administrative  expenses.  The  Company  expects  that  its  earnings  will  be
positively  impacted  by  inflation  in premium rates, because premium rates for
dental  benefit plans in general have been increasing due to inflation in recent
years.  The  Company  expects  that  its earnings will be negatively impacted by
inflation  in  health  care  costs,  because  fees charged by dentists and other
dental  providers  have  been  increasing  due to inflation in recent years. The
impact  of  inflation  on the Company's health care expenses is mitigated in the
short-term  by  the  fact  that  approximately 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 March 31, 2001, the
Company's  total  investments were approximately $15.3 million. Therefore, a one
percentage-point  change  in  short-term  interest  rates  would have a $153,000
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.

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.  On  September  12, 2000, after the plaintiffs had filed a first amended
complaint,  the  Federal  District  Trial  Court  dismissed  the  lawsuit  with
prejudice,  stating  that the plaintiffs had failed to state a claim against the
Company  and its officers. On October 6, 2000, the plaintiffs filed an appeal of
the  dismissal  of the lawsuit, and the dismissal was overturned on February 22,
2002.  The  case  was  remanded  back to the District Court with instructions to
allow  the  plaintiff  to  file  a  second  amended  complaint.  The Company has
directors'  and  officers'  liability insurance and intends to vigorously defend
any  second amended complaint that may be filed by the plaintiff. In the opinion
of  management,  the  ultimate  outcome  of this matter will not have a material
adverse  effect  on  the Company's consolidated financial position or results of
operations,  although  there  can  be  no  assurance that this will be the case.

ITEM  6.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)     EXHIBITS

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

            --        None.

(b)     REPORTS  ON  FORM  8-K.

        None.


<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  May  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)


<PAGE>