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, 2001

                                       OR

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

                  For the transition period from _____ to _____

                         Commission file number 0-12050

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

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

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

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


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

                                   Yes  X    No
                                       ---     ---

As  of  November 1, 2001, the number of shares of registrant's common stock, par
value  $.01 per share, outstanding was 4,780,830 shares (not including 3,284,788
shares  of  common  stock  held  in  treasury),  and  the  number  of  shares of
registrant's  convertible preferred stock, par value $.01 per share, outstanding
was  300,000  shares.


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



                                                                            PAGE
                                                                            ----

PART  I.  FINANCIAL  INFORMATION

  Item 1.  Condensed Consolidated Financial Statements (unaudited). . . . . .  1

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

  Item 3.  Quantitative and Qualitative Disclosures About Market Risk . . . . 14

PART  II.  OTHER  INFORMATION

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

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

SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


                                        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)


                                                            SEPTEMBER 30,    DECEMBER 31,
                                                                2001             2000
                                                           ---------------  --------------
                              ASSETS                         (unaudited)
<S>                                                        <C>              <C>
Current assets:
  Cash and cash equivalents                                $        1,582   $       1,381
  Investments available-for-sale, at fair value                    13,927          15,321
  Accounts receivable, net of allowances                            2,442           2,778
  Other current assets                                              1,067           1,788
                                                           ---------------  --------------
    Total current assets                                           19,018          21,268

Property and equipment, net of accumulated depreciation             2,068           2,843
Restricted investments available-for-sale, at fair value            2,771           2,700
Notes receivable, net of allowances                                   805           1,750
Intangible assets, net of accumulated amortization                  3,948           4,154
Other assets                                                          232             380
                                                           ---------------  --------------

    Total assets                                           $       28,842   $      33,095
                                                           ===============  ==============

           LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
  Accounts payable                                         $        2,582   $       3,986
  Accrued interest, converted to equity in 2001 (Note 4)               --           4,990
  Other accrued expenses                                            5,049           6,457
  Short-term debt, converted to equity in 2001 (Note 4)                --          47,545
  Other short-term debt                                               257             250
  Claims payable and claims incurred but not reported               6,326           7,554
  Deferred revenue                                                    946           1,413
                                                           ---------------  --------------
    Total current liabilities                                      15,160          72,195

Long-term debt                                                         69             250
Other long-term liabilities                                           832           1,079
Commitments and contingencies (Note 7)

Stockholders' equity (deficit):
  Convertible preferred stock                                      41,250              --
  Common stock                                                     21,872          21,829
  Retained earnings (accumulated deficit)                         (32,275)        (44,254)
  Accumulated other comprehensive income                               67             119
  Treasury stock, at cost                                         (18,133)        (18,123)
                                                           ---------------  --------------
    Total stockholders' equity (deficit)                           12,781         (40,429)
                                                           ---------------  --------------

    Total liabilities and stockholders' equity (deficit)   $       28,842   $      33,095
                                                           ===============  ==============
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.


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


                                                                           2001        2000
                                                                        ----------  ----------
<S>                                                                     <C>         <C>
Premium revenue, net                                                    $  20,831   $  24,639

Health care services expense                                               14,456      17,572
Selling, general and administrative expense                                 6,062       7,436
                                                                        ----------  ----------

Operating income (loss)                                                       313        (369)

Investment and other income                                                   213         478
Interest expense on debt that was converted to equity in 2001 (Note 4)         --      (1,287)
Other interest expense                                                        (31)        (53)
                                                                        ----------  ----------

Income (loss) before income taxes                                             495      (1,231)
Income tax expense                                                             --          --
                                                                        ----------  ----------

Income (loss) before discontinued operations                                  495      (1,231)
Discontinued operations:
  Loss from assets transferred under contractual arrangements (Note 3)         --      (1,750)
                                                                        ----------  ----------

    Net income (loss)                                                   $     495   $  (2,981)
                                                                        ==========  ==========

Basic net income (loss) per share:
  Income (loss) from continuing operations                              $    0.01   $   (0.26)
  Income (loss) from discontinued operations                                   --       (0.37)
                                                                        ----------  ----------

    Net income (loss)                                                   $    0.01   $   (0.63)
                                                                        ==========  ==========

Weighted average basic shares outstanding                                  34,753       4,747

Diluted net income (loss) per share:
  Income (loss) from continuing operations                              $    0.01   $   (0.26)
  Income (loss) from discontinued operations                                   --       (0.37)
                                                                        ----------  ----------

    Net income (loss)                                                   $    0.01   $   (0.63)
                                                                        ==========  ==========

Weighted average diluted shares outstanding                                35,542       4,747
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.


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


                                                                           2001       2000
                                                                        ----------  ----------
<S>                                                                     <C>         <C>
Premium revenue, net                                                    $  63,926   $  73,275

Health care services expense                                               44,557      53,020
Selling, general and administrative expense                                19,049      22,968
                                                                        ----------  ----------

Operating income (loss)                                                       320      (2,713)

Investment and other income                                                   903       1,115
Interest expense on debt that was converted to equity in 2001 (Note 4)       (402)     (3,504)
Other interest expense                                                        (93)        (88)
                                                                        ----------  ----------

Income (loss) before income taxes, discontinued operations
  and extraordinary item                                                      728      (5,190)
Income tax expense                                                             --          --
                                                                        ----------  ----------

Income (loss) before discontinued operations and extraordinary item           728      (5,190)
Discontinued operations:
  Loss from assets transferred under contractual arrangements (Note 3)         --      (1,750)
Extraordinary item:
  Conversion of debt to convertible preferred stock (Note 4)               11,251          --
                                                                        ----------  ----------

    Net income (loss)                                                   $  11,979   $  (6,940)
                                                                        ==========  ==========

Basic net income (loss) per share:
  Income (loss) before discontinued operations and extraordinary item   $    0.02   $   (1.09)
  Loss from discontinued operations                                            --       (0.37)
  Extraordinary item                                                         0.36          --
                                                                        ----------  ----------

    Net income (loss)                                                   $    0.38   $   (1.46)
                                                                        ==========  ==========

Weighted average basic shares outstanding                                  31,410       4,747

Diluted net income (loss) per share:
  Income (loss) before extraordinary item                               $    0.02   $   (1.09)
  Loss from discontinued operations                                            --       (0.37)
  Extraordinary item                                                         0.35          --
                                                                        ----------  ----------

    Net income (loss)                                                   $    0.37   $   (1.46)
                                                                        ==========  ==========

Weighted average diluted shares outstanding                                32,369       4,747
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.


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


                                                                       2001       2000
                                                                    ----------  ----------
<S>                                                                 <C>         <C>
Cash flows from operating activities:
  Net income (loss)                                                 $  11,979   $  (6,940)
  Adjustments to reconcile net income (loss) to net
    cash used in operating activities:
    Loss from discontinued operations                                      --       1,750
    Gain on conversion of debt to convertible preferred stock         (11,251)         --
    Bad debt expense                                                      225         315
    Amortization of deferred loan costs                                    24         198
    Depreciation and amortization                                       1,523       2,100
    Gain on liquidation of notes receivable                              (175)         --
    Gain on sale of investments                                           (98)        (15)
    Gain on sale of property and equipment                                 --         (67)
  Changes in operating assets and liabilities:
    Accounts receivable                                                   111         190
    Other current assets                                                  573         226
    Accounts payable                                                   (1,404)        (15)
    Accrued expenses                                                   (1,691)        277
    Claims payable and claims incurred but not reported                (1,228)        (93)
    Deferred revenue                                                     (467)       (233)
                                                                    ----------  ----------
      Net cash used in operating activities                            (1,879)     (2,307)

  Cash flows from investing activities:
    Purchase of investments available-for-sale                        (14,324)    (24,350)
    Proceeds from sale/maturity of investments available-for-sale      15,693      15,678
    Purchases of property and equipment                                  (542)       (661)
    Proceeds from sale of property and equipment                           --         200
    Payments received on notes receivable                               1,320         855
    Additions to intangible assets                                         --        (395)
                                                                    ----------  ----------
      Net cash provided by (used in) investing activities               2,147      (8,673)

  Cash flows from financing activities:
    Borrowings on debt                                                     --       8,000
    Increase in accrued interest, converted to equity in 2001             321       2,831
    Payments on debt                                                     (174)       (225)
    Repurchase of common stock                                            (10)         --
    Exercise of stock options                                              43          --
    Payment of other long-term liabilities                               (247)       (176)
                                                                    ----------  ----------
      Net cash (used in) provided by financing activities                 (67)     10,430
                                                                    ----------  ----------
Net increase (decrease) in cash and cash equivalents                      201        (550)
Cash and cash equivalents at beginning of period                        1,381       1,639
                                                                    ----------  ----------
Cash and cash equivalents at end of period                          $   1,582   $   1,089
                                                                    ==========  ==========
</TABLE>

     See accompanying Notes to Condensed Consolidated Financial Statements.


                                      -4-
<PAGE>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2001
                                   (UNAUDITED)

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

The  accompanying  unaudited  condensed  consolidated  financial  statements  of
SafeGuard  Health  Enterprises,  Inc.  and  subsidiaries  (the  "Company") as of
September 30, 2001, and for the three months and nine months ended September 30,
2001  and  2000,  have  been  prepared  in accordance with accounting principles
generally  accepted  in  the  United  States  of  America, applicable to interim
periods.  The accompanying financial statements reflect all normal and recurring
adjustments  that,  in  the  opinion  of  management,  are  necessary for a fair
presentation  of  the Company's financial position and results of operations for
the  interim periods.  The financial statements have been prepared in accordance
with the regulations of the Securities and Exchange Commission, and accordingly,
omit certain footnote disclosures and other information necessary to present the
Company's  financial  position  and  results of operations for annual periods in
accordance with accounting principles generally accepted in the United States of
America.  These  financial  statements  should  be  read in conjunction with the
Consolidated  Financial  Statements and Notes thereto contained in the Company's
Annual  Report  on  Form  10-K  for  the  year  ended  December  31,  2000.

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

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

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

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

In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of  Financial  Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments  and  Hedging Activities." SFAS No. 133 was amended by SFAS No. 137,


                                      -5-
<PAGE>
"Accounting  for Derivative Instruments and Hedging Activities - Deferral of the
Effective  Date of SFAS No. 133," in June 1999, and by SFAS No. 138, "Accounting
for  Certain  Derivative  Instruments  and  Certain Hedging Activities," in June
2000.  SFAS  No. 133, as amended, establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other  contracts, and for hedging activities. SFAS No. 133, as amended, requires
derivatives  to  be reported on the balance sheet at fair value, and was adopted
by  the  Company  effective on January 1, 2001. The adoption of SFAS No. 133, as
amended,  had  no  significant  effect  on  the  Company's financial statements.

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

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

In  July  2001,  the  FASB  issued  SFAS No. 142, "Goodwill and Other Intangible
Assets."  SFAS  No.  142 requires that goodwill established after June 30, 2001,
not  be amortized, and that amortization of goodwill that existed as of June 30,
2001,  be  ceased effective January 1, 2002. SFAS No. 142 also requires that all
goodwill  be  evaluated  for possible impairment as of the end of each reporting
period,  and  establishes  a new method of testing for possible impairment. SFAS
No.  142 is effective on January 1, 2002. The Company is currently assessing the
effect  of  adopting  SFAS  No.  142  on  its  financial statements. The Company
recorded  $205,000  of amortization expense related to goodwill and identifiable
intangible  assets  during  the  nine  months  ended  September  30,  2001.

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

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

In  connection with the transaction described above, the Company recorded a $1.8
million  charge to earnings during the three months ended September 30, 2000, to
reduce  the  carrying  value  of  "Assets of discontinued operations transferred
under contractual arrangements" to their estimated realizable value. This charge
is  reflected on the accompanying condensed consolidated statement of operations
under the caption "Loss from assets transferred under contractual arrangements."


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

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

<TABLE>
<CAPTION>
                              SEPTEMBER 30,    DECEMBER 31,
                                  2001             2000
                             ---------------  --------------
<S>                          <C>              <C>
  Investor senior loan       $           --   $       8,000
  Revolving credit facility              --           7,045
  Senior notes payable                   --          32,500
  Other                                 326             500
                             ---------------  --------------
    Total debt                          326          48,045
  Less - short-term portion            (257)        (47,795)
                             ---------------  --------------

    Long-term debt           $           69   $         250
                             ===============  ==============
</TABLE>

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 $8.0 million investor senior
loan,  the  outstanding  balance  of  $7.0  million  under  the revolving credit
facility,  and  the  $32.5  million  of  senior  notes  payable into convertible
preferred  stock,  subject  to  regulatory  and  stockholder  approval.

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

The  convertible  preferred  stock  does  not accrue dividends of any kind. Each
share  of  convertible  preferred stock is convertible into 100 shares of common
stock  at the option of the holder. The convertible preferred stock entitles the
holder to one vote for each share of common stock into which the preferred stock
is  convertible, with respect to all matters voted on by the common stockholders
of  the  Company,  except  for  the  election  of  directors. The holders of the
convertible  preferred  stock have the right to elect a total of five members of
the  board  of  directors, and the holders of the common stock have the right to
elect  the  remaining  two  directors. The convertible preferred stock has a $30
million  liquidation  preference  over  the  Company's  common  stock.

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

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


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

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

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

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

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

Total  comprehensive  income or loss includes the change in stockholders' equity
during  the  period  from  transactions  and other events and circumstances from
non-stockholder  sources.  Total comprehensive income or loss of the Company for
the  nine  months ended September 30, 2001 and 2000, includes net income or loss
and  other  comprehensive income or loss, which consists of unrealized gains and
losses  on marketable securities, net of realized gains and losses that occurred
during  the  period. Other comprehensive (loss) income was ($52,000) and $57,000
for  the  nine  months  ended  September  30, 2001 and 2000, respectively. Total
comprehensive income (loss) was $11,927,000 and $(6,883,000) for the nine months
ended  September  30,  2001  and  2000,  respectively.

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

LITIGATION

The  Company  is a defendant in various lawsuits arising in the normal course of
business.  In  the  opinion  of  management,  the  ultimate  outcome of existing
litigation  will  not  have a material adverse effect on the Company's financial
position  or  results  of  operations.  In  December 1999, a stockholder lawsuit
against the Company was filed, which alleged that the Company and certain of its
officers  violated  certain securities laws by issuing a series of alleged false
and  misleading  statements  concerning the Company's publicly reported revenues
and  earnings  during a specified class period. On September 12, 2000, after the
plaintiffs had filed a first amended complaint, the Federal District Trial Court
dismissed  the lawsuit with prejudice, stating that the plaintiffs had failed to
state  a  claim  against  the  Company and its officers. On October 6, 2000, the
plaintiffs  filed  an appeal of the dismissal of the lawsuit, and that appeal is
currently  pending.  The  Company has directors and officers liability insurance
and  intends to vigorously contest the appeal. In the opinion of management, the
ultimate  outcome  of this matter will not have a material adverse effect on the
Company's  financial  position  or  results  of  operations.

CONTINGENT  LEASE  OBLIGATIONS

The  Company  sold all of its general dental practices and orthodontic practices
in  1996,  1997 and 1998. The Company also re-sold certain of these practices in
October  2000,  after  the  original  purchaser  of  a number of these practices
defaulted  on  its  obligations  to  the  Company,  as  discussed  in Note 3. In
connection  with  the sale and re-sale of those practices, all the purchasers of


                                      -8-
<PAGE>
the  practices agreed to make the remaining lease payments related to the dental
offices  used  by  those  practices.  However,  the Company remains contingently
liable  for  the  lease  payments in the event the purchasers of those practices
fail  to  make  the payments. As of September 30, 2001, the aggregate contingent
liability  of  the Company related to all of these leases was approximately $5.2
million  over the terms of the various lease agreements, which expire at various
dates through 2007.  Management has not been notified of any defaults that would
materially  affect  the  Company's  financial position. The aggregate contingent
lease  obligation  of  $5.2  million  excludes  $150,000  of  estimated  lease
obligations  that  have been accrued as of September 30, 2001, due to a possible
failure by one of the entities to make the lease payments under a lease that was
assigned  to  that  entity  by  the  Company. This estimated lease obligation is
included  in  the  accompanying  condensed  consolidated balance sheet under the
caption  "Other  accrued  expenses."

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

In  November  2001,  the  Company  completed the sale of its managed care dental
business located in Missouri and Kansas, which generated premium revenue of $1.3
million  during  the  nine months ended September 30, 2001. The Company does not
expect  to  report  a  gain  or  loss  on  the  sale.

ITEM  2.   MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OF  FINANCIAL  CONDITION AND
           RESULTS  OF  OPERATIONS

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

The  Private  Securities  Litigation Reform Act of 1995 provides a "safe harbor"
for  forward-looking  statements,  as long as those statements are identified as
forward-looking  and  are  accompanied  by  meaningful  cautionary  statements
identifying  important  factors  that  could  cause  actual  results  to  differ
materially  from  those discussed in the statements. The Company desires to take
advantage  of  these  safe  harbor  provisions.  In addition to the Risk Factors
section  of the Company's Annual Report on Form 10-K for the year ended December
31,  2000, filed with the Securities and Exchange Commission, the following risk
factors  should  be  considered in connection with this Quarterly Report on Form
10-Q  for  the  period  ended  September  30,  2001.

The  statements  contained  in  this  Management's  Discussion  and  Analysis of
Financial  Condition  and  Results of Operations concerning expected growth, the
outcome of business strategies, future operating results and financial position,
economic  and  market  events  and trends, future premium revenue, future health
care  expenses,  the  Company's ability to control health care, selling, general
and  administrative  expenses,  and all other statements that are not historical
facts,  are  forward-looking  statements.  Words  such  as  expects,  projects,
anticipates, intends, plans, believes, seeks or estimates, or variations of such
words  and  similar  expressions,  are also intended to identify forward-looking
statements.  These  forward-looking statements are subject to significant risks,
uncertainties  and  contingencies,  many  of which are beyond the control of the
Company.  Actual  results  may  differ  materially  from  those projected in the
forward-looking  statements,  which  statements involve risks and uncertainties.

The  Company's  ability to expand its business is affected by competition from a
large  number  of other entities, many of which are much larger and have greater
financial  resources  than  the  Company, that offer dental benefit plans in the
markets in which the Company operates. There is a risk that the Company will not
be  able  to  increase  revenues  in the future through sales to new clients. In
addition,  employer  groups  and other purchasers of dental coverage continue to
resist  premium  rate  increases,  while  demanding a wide choice of dental care
providers,  and  a  high  level  of  customer  service. There is a risk that the
Company  will  not  be able to retain its existing clients at premium rates that
are  acceptable  to  the  client  and  satisfactory  to  the  Company.

There  is also a risk that the number of subscribers covered by Company's dental
and  vision  benefit  plans  will  decrease  due  to layoffs and other workforce
reductions  by  the  Company's  clients.  Securing cost-effective contracts with
dentists  may  become  more  difficult due to increased competition among dental
plans for contracts with dental providers, and a possible decrease in the number
of dentists in practice in the markets in which the Company operates. There is a
risk  that the Company will not be able to expand its business due to current or
future  overall  economic  conditions,  recession,  or  terrorist  activities.

There are risks associated with changes in the Company's operating and expansion
strategies.  There  is  a  risk  that  the Company will be unable to continue to


                                      -9-
<PAGE>
maintain  or  increase  its  earnings  before  interest, taxes, depreciation and
amortization  ("EBITDA"), or its net income, as any such maintenance or increase
is  dependent  upon  a  multitude  of factors including, but not limited to, the
ability  of  the  Company to identify additional opportunities to increase sales
and  reduce  costs.

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

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

There  is  a  risk  that  the cost of compliance with HIPPA will have a material
impact  on  the  selling,  general  and  administrative expenses incurred by the
Company,  and  accordingly,  on  its  net  income.

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

All  of  the  risks set forth herein could negatively impact the earnings of the
Company  in  the  future. The Company's expectations for the future are based on
current  information  and  its evaluation of external influences. Changes in any
one  factor  could  materially  impact  the  Company's  expectations  related to
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.


                                      -10-
<PAGE>
RESULTS  OF  OPERATIONS

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

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED    NINE MONTHS ENDED
                                                      SEPTEMBER 30,         SEPTEMBER 30,
                                                  --------------------  --------------------
                                                     2001       2000       2001       2000
                                                  ---------  ---------  ---------  ---------
<S>                                               <C>        <C>        <C>        <C>
Premium revenue, net                                 100.0%     100.0%     100.0%     100.0%

Health care services expense                          69.4       71.3       69.7       72.4
Selling, general and administrative expense           29.1       30.2       29.8       31.3
                                                  ---------  ---------  ---------  ---------
Operating income (loss)                                1.5       (1.5)       0.5       (3.7)

Investment and other income                            1.0        1.9        1.4        1.5
Interest expense on debt that was converted
  to equity in 2001 (1)                                 --       (5.2)      (0.6)      (4.8)
Other interest expense                                (0.1)      (0.2)      (0.2)      (0.1)
                                                  ---------  ---------  ---------  ---------
Income (loss) before income taxes, discontinued
  operations and extraordinary item                    2.4       (5.0)       1.1       (7.1)
Income tax expense                                      --         --         --         --
                                                  ---------  ---------  ---------  ---------
Income (loss) before discontinued operations
  and extraordinary item                               2.4       (5.0)       1.1       (7.1)
Loss from discontinued operations                       --       (7.1)        --       (2.4)
Extraordinary item                                      --         --       17.6         --
                                                  ---------  ---------  ---------  ---------

  Net income (loss)                                    2.4%    (12.1)%      18.7%     (9.5)%
                                                  =========  =========  =========  =========
<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>

THREE  MONTHS  ENDED SEPTEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30,  2000

Premium  revenue decreased by $3.8 million, or 15.5%, from $24.6 million in 2000
to  $20.8 million in 2001. The average membership for which the Company provided
dental  coverage  decreased  by  approximately  196,000  members, or 24.6%, from
797,000  members during 2000 to 601,000 during 2001. The decrease in the average
number  of  members is due to the loss of a number of employer groups during the
twelve  months ended September 30, 2001. Premium revenue decreased by only 15.5%
even  though  average membership decreased by 24.6%. This was primarily due to a
shift  in  the  product  mix  toward preferred provider ("PPO")/indemnity plans,
which  have  significantly higher premium rates than managed care plans, a shift
in  the  managed  care  product mix toward plans with higher benefit levels, and
increases  in  premium  rates.

Health  care  services  expense  decreased by $3.1 million, or 17.7%, from $17.6
million  in  2000  to  $14.5  million in 2001. Health care services expense as a
percentage  of  premium  revenue  (the "loss ratio") decreased to 69.4% in 2001,
from  71.3%  in  2000.  This decrease is partially due to a decrease in the loss
ratio in the Company's managed care business, and partially due to a decrease in
the  loss  ratio in the PPO/indemnity business. The decrease in the managed care
loss  ratio  is  primarily  due  to  an increase in premium rates, including the
impact  of  the  loss of several large customers effective January 1, 2001, that
had  lower  than  average  premium rates. The decrease in the PPO/indemnity loss
ratio  is  partially due to an increase in premium rates, and partially due to a
decrease  in  the  average  amount  of  incurred  claims  per  member.

Selling, general and administrative ("SG&A") expenses decreased by $1.3 million,
or  18.5%, from $7.4 million in 2000 to $6.1 million in 2001. SG&A expenses as a
percentage  of  premium  revenue decreased to 29.1% in 2001, from 30.2% in 2000.
The  decrease  in SG&A expenses is due to cost reductions implemented in several
categories,  including  depreciation expense, equipment rent, sales commissions,
telecommunications,  and  others.


                                      -11-
<PAGE>
Investment  and  other  income decreased by $265,000, or 55.4%, from $478,000 in
2000  to  $213,000  in  2001.  This  decrease  is primarily due to a decrease in
interest  rates on short-term fixed-income investments during the past year, and
a decrease in interest income from notes receivable, due to the liquidation of a
majority  the  Company's  notes  receivable  during  the  past  year.

Total interest expense decreased by $1.3 million, or 97.7%, from $1.3 million in
2000  to  $31,000  in  2001. This decrease is primarily due to the conversion of
substantially  all  of  the  Company's  debt  into  convertible  preferred stock
effective  January  31,  2001,  which  eliminated  nearly  all  of the Company's
interest  expense.

The  income  (loss) before income taxes improved by $1.7 million, from a loss of
$1.2  million  in  2000  to income of $495,000 in 2001. The income (loss) before
income  taxes as a percentage of premium revenue improved from a loss of 5.0% in
2000  to  income  of  2.4% in 2001. This improvement was primarily due to a $1.3
million  decrease  in  interest  expense,  and  a decrease in SG&A expenses as a
percentage  of  premium  revenue  from  30.2%  to  29.1%,  as  discussed  above.

There  was a $1.8 million loss from discontinued operations in 2000, compared to
zero  in 2001. The loss in 2000 was the result of reducing the carrying value of
"Assets  of  discontinued operations transferred under contractual arrangements"
to their estimated realizable value, in connection with the sale of those assets
in October 2000. See Note 3 to the accompanying condensed consolidated financial
statements  for  more  information  on  this  transaction.

NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
2000

Premium  revenue decreased by $9.3 million, or 12.8%, from $73.3 million in 2000
to  $63.9 million in 2001. The average membership for which the Company provided
dental  coverage  decreased  by  approximately  202,000  members, or 24.4%, from
828,000  members during 2000 to 626,000 during 2001. The decrease in the average
number  of  members is due to the loss of a number of employer groups during the
twelve  months ended September 30, 2001. Premium revenue decreased by only 12.8%
even  though  average membership decreased by 24.4%. This was primarily due to a
shift  in  the  product mix toward PPO/indemnity plans, which have significantly
higher  premium  rates  than  managed  care  plans,  a shift in the managed care
product  mix  toward  plans with higher benefit levels, and increases in premium
rates.

Health  care  services  expense  decreased by $8.4 million, or 16.0%, from $53.0
million  in  2000 to $44.6 million in 2001. The loss ratio decreased to 69.7% in
2001,  from  72.4%  in 2000. This decrease is partially due to a decrease in the
loss  ratio in the managed care business, and partially due to a decrease in the
loss  ratio in the PPO/indemnity business. The decrease in the managed care loss
ratio  is primarily due to an increase in premium rates, including the impact of
the  loss  of  several large customers effective January 1, 2001, that had lower
than  average  premium  rates.  The  decrease in the PPO/indemnity loss ratio is
partially  due  to an increase in premium rates, and partially due to a decrease
in  the  average  amount  of  incurred  claims  per  member.

SG&A expenses decreased by $4.0 million, or 17.1%, from $23.0 million in 2000 to
$19.0  million  in  2001.  SG&A  expenses  as  a  percentage  of premium revenue
decreased  to  29.8% in 2001, from 31.3% in 2000.  The decrease in SG&A expenses
as  a  percentage  of  premium  revenue is due to cost reductions implemented in
several  categories,  including  depreciation  expense,  equipment  rent,
telecommunications,  sales  commissions,  and  others.

Investment  and  other income decreased by $212,000, or 19.0%, from $1.1 million
in  2000  to  $903,000  in 2001. This decrease is primarily due to a decrease in
interest  income from notes receivable, due to the liquidation of a majority the
Company's  notes  receivable  during  the  past  year.  The liquidation of notes
receivable  was partially offset by realized gains on the sale of investments in
2001.

Total interest expense decreased by $3.1 million, or 86.2%, from $3.6 million in
2000  to  $495,000  in 2001. This decrease is primarily due to the conversion of
substantially  all  of  the  Company's  debt  into  convertible  preferred stock
effective  January  31,  2001,  which  eliminated  nearly  all  of the Company's
interest  expense.

The  income  (loss)  before income taxes and extraordinary item improved by $5.9
million,  from a loss of $5.2 million in 2000 to income of $728,000 in 2001. The
income  (loss)  before  income  taxes  and extraordinary item as a percentage of
premium revenue improved to income of 1.1% in 2001, from a loss of 7.1% in 2000.


                                      -12-
<PAGE>
This  improvement  was  primarily  due  to  a  $3.1 million decrease in interest
expense,  a  decrease  in  SG&A  expenses as a percentage of revenue to 29.8% in
2001,  from  31.3%  in  2000, and a decrease in the loss ratio to 69.7% in 2001,
from  72.4%  in  2000,  as  discussed  above.

There  was a $1.8 million loss from discontinued operations in 2000, compared to
zero  in 2001. The loss in 2000 was the result of reducing the carrying value of
"Assets  of  discontinued operations transferred under contractual arrangements"
to their estimated realizable value, in connection with the sale of those assets
in October 2000. See Note 3 to the accompanying condensed consolidated financial
statements  for  more  information  on  this  transaction.

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

LIQUIDITY  AND  CAPITAL  RESOURCES

The  Company  used  $1.9  million of net cash in operating activities during the
nine  months  ended  September  30,  2001,  compared to $2.3 million in the same
period  in  the  prior  year.  During  the  first  nine months of 2001, net cash
provided  by  net  income,  as adjusted for non-cash items, was $2.2 million, as
reflected  on  the  accompanying condensed consolidated statement of cash flows.
This  $2.2  million  of net cash provided was offset by $1.7 million of net cash
used  to  reduce accrued expenses, $1.4 million used to reduce accounts payable,
and  $1.2  million  used  to  reduce  claims payable and claims incurred but not
reported  ("IBNR").

The  reduction in accrued expenses was partially due to payments made in 2001 to
reduce  the obligations assumed in connection with the re-sale of certain dental
practices,  as  discussed  in  Note 3 to the accompanying condensed consolidated
financial  statements.  The  reduction  was  also partially due to a decrease in
accrued  premium  taxes,  which  is  due  to  normal variations in the timing of
quarterly  payments.  The  reduction  in  claims  payable  and  claims  IBNR was
primarily  due  to  a  decrease  in  the processing time for payment of provider
claims  during  the  first nine months of 2001. The Company used $2.3 million of
net cash in operating activities during the first nine months of 2000, which was
primarily  due  to  the  fact  that  $2.7  million  of  net cash was used in the
Company's  net loss, after all adjustments to reconcile the net loss to net cash
used  in  operating  activities.  The  significant  improvement in the Company's
operating  results  is  discussed  above  under  Results  of  Operations.

Net  cash provided by investing activities was $2.1 million in 2001, compared to
net cash of $8.7 million used by investing activities in 2000.  Net cash used by
investing  activities  in  2000 was primarily due to the purchase of investments
with the $8.0 million proceeds from the borrowing on March 1, 2000, as discussed
in  Note  4 to the accompanying condensed consolidated financial statements. Net
cash  provided  by  investing  activities  in  2001  consisted  primarily of the
liquidation  of  notes  receivable, and the net sale of investments to finance a
portion  of  the  reductions  in  current  liabilities  noted  above.

Net  cash used by financing activities was $67,000 in 2001, compared to net cash
of $10.4 million provided by financing activities in 2000. The net cash provided
by  financing activities in 2000 was primarily due to the $8.0 million borrowing
on  March 1, 2000, as discussed above, and $2.8 million of accrued interest that
was  converted into equity as of January 31, 2001, as discussed in Note 4 to the
accompanying  condensed  consolidated  financial  statements.

The  Company's  net  working  capital improved from negative $50.9 million as of
December  31, 2000, to positive $3.9 million as of September 30, 2001, primarily
due  to  the  conversion  of  $52.5  million  of  debt and accrued interest into
convertible  preferred  stock,  as  discussed  in  Note  4  to  the accompanying
condensed consolidated financial statements. Excluding the obligations that were
converted to equity, the Company's net working capital increased to $3.9 million
as  of  September  30,  2001,  from  $1.6  million as of December 31, 2000. This
improvement  is  primarily due to $2.3 million of income before depreciation and
amortization,  and  before  the  extraordinary  item,  in  the nine months ended
September  30,  2001.

The  Company's  total short-term and long-term debt decreased to $0.3 million at
September  30,  2001,  from  $48.0  million  at  December  31,  2000, due to the


                                      -13-
<PAGE>
conversion of substantially all of the Company's debt into convertible preferred
stock  effective  January  31,  2001.  See  Note 4 to the accompanying condensed
consolidated  financial statements for more information on this transaction. The
Company  believes  it  has  adequate financial resources to continue its current
operations  for  the  foreseeable  future.

RECENT  ACCOUNTING  PRONOUNCEMENTS

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

IMPACT  OF  INFLATION

The Company's operations are potentially impacted by inflation, which can affect
premium  rates,  health  care  services  expense,  and  selling,  general  and
administrative  expenses.  The  Company  expects  that  its  earnings  will  be
positively  impacted  by  inflation  in premium rates, because premium rates for
dental  benefit plans in general have been increasing due to inflation in recent
years.  The  Company  expects  that  its earnings will be negatively impacted by
inflation  in  health  care  costs,  because  fees charged by dentists and other
dental  providers  have  been  increasing  due to inflation in recent years. The
impact  of  inflation  on the Company's health care expenses is mitigated in the
short-term  by  the  fact  that  approximately 35% of total health care services
expense  consists of capitation (fixed) payments to providers. In addition, most
of  the  Company's  selling, general and administrative expenses are impacted by
general  inflation  in  the  economy.

ITEM  3.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

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

PART  II.     OTHER  INFORMATION

ITEM  1.     LEGAL  PROCEEDINGS

The  Company  is  subject  to  various  claims and legal actions in the ordinary
course  of  business. The Company believes all pending claims either are covered
by liability insurance maintained by the Company or by dentists in the Company's
provider  network,  or  will  not  result  in  a significant adverse outcome. In
December  1999,  a  stockholder  lawsuit  against  the  Company was filed, which
alleged that the Company and certain of its officers violated certain securities
laws  by  issuing a series of alleged false and misleading statements concerning
the  Company's  publicly reported revenues and earnings during a specified class
period.  On  September  12, 2000, after the plaintiffs had filed a first amended
complaint,  the  Federal  District  Trial  Court  dismissed  the  lawsuit  with
prejudice,  stating  that the plaintiffs had failed to state a claim against the
Company  and its officers. On October 6, 2000, the plaintiffs filed an appeal of
the  dismissal of the lawsuit, and that appeal is currently pending. The Company
has directors and officers liability insurance and intends to vigorously contest
the  appeal.  In  the opinion of management, the ultimate outcome of this matter
will  not  have a material adverse effect on the Company's financial position or
results  of  operations.

ITEM 6.  EXHIBITS  AND  REPORTS  ON  FORM  8-K

(A)  EXHIBITS

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

            --                   None.

(B)  REPORTS  ON  FORM  8-K.

None.


                                      -14-
<PAGE>
                                   SIGNATURES

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934,  the  Registrant  has duly caused this report to be signed on its
behalf  by  the  undersigned,  thereunto  duly  authorized, in the City of Aliso
Viejo,  State  of  California,  on  the  10th  day  of  November  2001.

               SAFEGUARD  HEALTH  ENTERPRISES,  INC.


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


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


                                      -15-
<PAGE>