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, 2003

                                       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 Identification No.)
    jurisdiction of incorporation)

                            95 ENTERPRISE, SUITE 100
                       ALISO VIEJO, CALIFORNIA 92656-2605
                    (Address of principal executive offices)
                                   (Zip Code)

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



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

                                   Yes X    No
                                      ---     ---

As  of May 1, 2003, the number of shares of registrant's common stock, par value
$0.01  per  share,  outstanding  was  5,697,962  shares (not including 3,216,978
shares  of  common  stock  held  in  treasury),  and  the  number  of  shares of
registrant's convertible preferred stock, par value $0.01 per share, outstanding
was  30,000,000  shares.


<PAGE>
                       SAFEGUARD HEALTH ENTERPRISES, INC.
             INDEX TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2003


                                                                            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 . . . . . . . . . . . . . . . . . . . . .    13

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

  Item 4.  Controls and Procedures . . . . . . . . . . . . . . . . . . . .    22

PART II.  OTHER INFORMATION

  Item 1.  Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . .    22

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

SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .    24

CERTIFICATIONS BY CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER. . .    25


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

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

                                                                            MARCH 31,    DECEMBER 31,
                                                                              2003           2002
                                                                           -----------  --------------
<S>                                                                        <C>          <C>
                                                 ASSETS
Current assets:
  Cash and cash equivalents                                                $    4,061   $       3,036
  Investments available-for-sale, at fair value                                10,066           9,668
  Accounts receivable, net of allowances                                        2,228           2,554
  Other current assets                                                            675             853
                                                                           -----------  --------------
    Total current assets                                                       17,030          16,111

Property and equipment, net of accumulated depreciation and amortization        3,360           3,532
Restricted investments available-for-sale, at fair value                        3,328           3,254
Notes receivable, net of allowances                                               447             457
Goodwill                                                                        9,289           8,590
Intangible assets, net of accumulated amortization                              1,896           2,013
Other assets                                                                      147             157
                                                                           -----------  --------------

    Total assets                                                           $   35,497   $      34,114
                                                                           ===========  ==============

                                    LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable                                                         $    1,675   $       1,661
  Accrued expenses                                                              4,602           3,526
  Current portion of long-term debt and capital lease obligations               2,259           2,430
  Claims payable and claims incurred but not reported                           4,856           4,690
  Deferred premium revenue                                                      2,126           1,786
                                                                           -----------  --------------
    Total current liabilities                                                  15,518          14,093

Long-term debt and capital lease obligations                                    2,545           2,997
Other long-term liabilities                                                       971           1,013
Commitments and contingencies (Note 8)

Stockholders' equity:
  Convertible preferred stock and additional paid-in capital                   41,250          41,250
  Common stock and additional paid-in capital                                  22,680          22,662
  Retained earnings (accumulated deficit)                                     (29,726)        (30,170)
  Accumulated other comprehensive income                                           85              95
  Treasury stock, at cost                                                     (17,826)        (17,826)
                                                                           -----------  --------------
    Total stockholders' equity                                                 16,463          16,011
                                                                           -----------  --------------

    Total liabilities and stockholders' equity                             $   35,497   $      34,114
                                                                           ===========  ==============
<FN>
            See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>


                                        1
<PAGE>
<TABLE>
<CAPTION>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                   THREE MONTHS ENDED MARCH 31, 2003 AND 2002
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                   (UNAUDITED)


                                                                2003      2002
                                                              --------  --------
<S>                                                           <C>       <C>
Premium revenue, net                                          $21,912   $20,688

Health care services expense                                   15,093    14,550
Selling, general and administrative expense                     6,354     5,839
                                                              --------  --------

Operating income                                                  465       299

Investment and other income                                        79       116
Interest expense                                                 (100)       (7)
                                                              --------  --------

Income before income taxes                                        444       408
Income tax expense                                                 --        --
                                                              --------  --------

    Net income                                                $   444   $   408
                                                              ========  ========

Basic net income per share                                    $  0.01   $  0.01
Weighted-average basic shares outstanding                      35,693    34,812

Diluted net income per share                                  $  0.01   $  0.01
Weighted-average diluted shares outstanding                    35,989    35,568
<FN>
     See accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>


                                        2
<PAGE>
<TABLE>
<CAPTION>
                        SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
                          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                            THREE MONTHS ENDED MARCH 31, 2003 AND 2002
                                          (IN THOUSANDS)
                                            (UNAUDITED)

                                                                                   2003     2002
                                                                                  -------  -------
<S>                                                                               <C>      <C>
Cash flows from operating activities:
  Net income                                                                      $  444   $  408
  Adjustments to reconcile net income to net cash
    provided by operating activities:
    Bad debt expense                                                                  39       64
    Depreciation and amortization                                                    420      293
    Contribution to retirement plan in the form of common stock, at fair value        24       28
  Changes in operating assets and liabilities, excluding effects of acquisition:
    Accounts receivable                                                              396      406
    Other current assets                                                             264       68
    Other assets                                                                      10       20
    Accounts payable                                                                (124)     (75)
    Accrued expenses                                                                (244)    (225)
    Claims payable and claims incurred but not reported                              134     (776)
    Deferred premium revenue                                                          82      187
                                                                                  -------  -------
      Net cash provided by operating activities                                    1,445      398

Cash flows from investing activities:
  Purchase of investments available-for-sale                                        (777)    (157)
  Proceeds from sale/maturity of investments available-for-sale                      760    1,600
  Purchases of property and equipment                                               (131)    (191)
  Cash acquired in acquisition of business                                           287       --
  Payments received on notes receivable                                               10       --
                                                                                  -------  -------
      Net cash provided by investing activities                                      149    1,252

Cash flows from financing activities:
  Increase (decrease) in bank overdrafts                                              96     (838)
  Payments on debt                                                                  (623)     (63)
  Exercise of stock options                                                           --        7
  Decrease in other long-term liabilities                                            (42)      (7)
                                                                                  -------  -------
    Net cash used in financing activities                                           (569)    (901)
                                                                                  -------  -------
Net increase in cash and cash equivalents                                          1,025      749
Cash and cash equivalents at beginning of period                                   3,036    1,497
                                                                                  -------  -------
Cash and cash equivalents at end of period                                        $4,061   $2,246
                                                                                  =======  =======

                                    (Continued on next page)
</TABLE>


                                        3
<PAGE>
<TABLE>
<CAPTION>
                SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS -- CONTINUED
                      THREE MONTHS ENDED MARCH 31, 2003 AND 2002
                                    (IN THOUSANDS)
                                      (UNAUDITED)

                                                                         2003    2002
                                                                       --------  -----
<S>                                                                    <C>       <C>
Supplementary information:
  Cash paid during the period for interest                             $   102   $   7

Supplementary disclosure of non-cash activities:
  Liabilities assumed in acquisition of business:
    Fair value of identifiable assets acquired                         $   947   $  --
    Goodwill related to transaction                                        699      --
    Less - Liability for purchase price, which was paid in April 2003   (1,100)     --
    Less - Liability for contingent consideration                         (176)     --
    Less - Accrual for acquisition expenses                                (28)     --
                                                                       --------  -----
      Liabilities assumed in acquisition of business                   $   342   $  --
                                                                       ========  =====

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


                                        4
<PAGE>
               SAFEGUARD HEALTH ENTERPRISES, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 MARCH 31, 2003
                                   (UNAUDITED)

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

The  accompanying  unaudited  condensed  consolidated  financial  statements  of
SafeGuard  Health Enterprises, Inc. and subsidiaries (the "Company") as of March
31,  2003,  and  for  the  three months ended March 31, 2003 and 2002, 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
condensed  consolidated  financial statements should be read in conjunction with
the  Company's  Annual Report on Form 10-K for the year ended December 31, 2002,
which includes the Company's Consolidated Financial Statements and Notes thereto
for  that  period.

NOTE  2.  SIGNIFICANT  ACCOUNTING  POLICIES  ANDRECENTLY  ADOPTED  ACCOUNTING
-----------------------------------------------------------------------------
PRINCIPLES
----------

GOODWILL

The  Company's  accounting  for  goodwill  is  in  accordance  with Statement of
Financial  Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets,"  which  the Company adopted as of January 1, 2002. Goodwill as of March
31,  2003  consists  of  $4.7  million of goodwill related to the acquisition of
Paramount  Dental  Plan,  Inc.  ("Paramount")  in  August  2002, $3.9 million of
goodwill  related  to the acquisition of a Texas-based dental health maintenance
organization  ("HMO")  company  in 1996, and $0.7 million of goodwill related to
the  acquisition  of  Ameritas  Managed  Dental Plan, Inc. ("Ameritas") in March
2003.  See  Note  3  for  more  information  on  the  Paramount  and  Ameritas
acquisitions. In the case of each acquisition, goodwill represents the excess of
the purchase price of the acquired company over the fair value of the net assets
acquired.  In  the  case  of  the  1996  acquisition,  the  balance is net of an
adjustment in 1999 to reduce the carrying value of the goodwill to its estimated
realizable value. The Company has not yet completed its determination of whether
the  assets  acquired  in  the  Ameritas  acquisition  in March 2003 include any
separately  identifiable intangible assets apart from goodwill. Accordingly, the
entire  excess  of  the purchase price over the net tangible assets acquired has
been  classified  as  goodwill,  pending  completion  of  this  determination.

SFAS  No.  142 requires that goodwill be evaluated for possible impairment on an
annual  basis  and  any time an event occurs that may have affected the value of
the  goodwill.  The  Company  has  established October 1 as the date on which it
conducts  its  annual  evaluation  of  goodwill  for  possible  impairment.  In
accordance  with  SFAS  No.  142,  the  Company tested its goodwill for possible
impairment  by  estimating  the  fair  value of each of its reporting units that
include  goodwill,  and  comparing  the fair value of each reporting unit to the
book  value  of  the  net  assets of each reporting unit. The fair value of each
reporting unit was determined primarily by estimating the discounted future cash
flows  of  the  reporting  unit,  and  by  estimating  the  amount for which the
reporting  unit  could  be  sold to a third party, based on a market multiple of
earnings.  The  Company had no impairment of its goodwill as of October 1, 2002,
based  on  the method of testing for possible impairment established by SFAS No.
142.  The  estimates  to  which  the  results of the Company's test are the most
sensitive  are  the amount of shared administrative expenses that are charged to
each  reporting  unit,  and  the  market  multiple  of  earnings that is used to
estimate  the  fair  value  of  each  reporting  unit.  The Company believes the
estimates  used  in  its  test are reasonable and appropriate, but a significant
change  in  either  of  these  estimates  could  result  in the indication of an
impairment  of  goodwill.  The  Company  is  not  aware  of any events that have
occurred  since  October  1,  2002,  that  represent an indication of a possible
impairment.


                                        5
<PAGE>
Changes  in  the carrying amount of goodwill during the three months ended March
31,  2003  were  as  follows  (in  thousands):

<TABLE>
<CAPTION>
<S>                                                   <C>
     Balance at December 31, 2002                     $8,590
     Goodwill acquired (see Note 3)                      699
                                                      ------

       Balance at March 31, 2003                      $9,289
                                                      ======
</TABLE>

INTANGIBLE  ASSETS

Intangible  assets  as  of  March 31, 2003 consist of customer relationships and
other intangible assets with an aggregate net book value of $1.9 million, all of
which  were  acquired  in connection with the acquisition of Paramount in August
2002,  as  discussed  in  Note  3.  The  amount  of  the purchase price that was
allocated  to  each of the intangible assets was equal to the Company's estimate
of  the  fair value of each asset. Each intangible asset is being amortized over
its  estimated  useful  life  on  a  straight-line  basis.

CLAIMS  PAYABLE  AND  CLAIMS  INCURRED  BUT  NOT  REPORTED

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

RECOGNITION  OF  PREMIUM  REVENUE

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

STOCK-BASED  COMPENSATION

SFAS  No.  123,  "Accounting for Stock-Based Compensation," provides a choice of
two different methods of accounting for stock options granted to employees. SFAS
No.  123  encourages,  but  does not require, entities to recognize compensation
expense  equal  to  the fair value of employee stock options granted. Under this
method  of accounting, the fair value of a stock option is measured at the grant
date,  and  compensation  expense is recognized over the period during which the
stock option becomes exercisable. Alternatively, an entity may choose to use the
accounting  method  described in Accounting Principles Board Opinion ("APB") No.
25,  "Accounting  for  Stock  Issued  to  Employees."  Under  APB  No.  25,  no
compensation  expense  is  generally recognized as long as the exercise price of
each  stock option is at least equal to the market price of the underlying stock
at  the  time  of  the  grant. If an entity chooses to use the accounting method
described  in  APB  No.  25,  SFAS No. 123 requires that the pro forma effect of
using  the  fair  value method of accounting on its net income be disclosed in a
note  to  the  financial  statements.

The Company has chosen to use the accounting method described in APB No. 25. All
stock  options granted by the Company have an exercise price equal to the market
value  of the Company's common stock on the date of grant and accordingly, there
is  no  employee  compensation expense related to stock options reflected in the
accompanying  condensed  consolidated  statements  of operations.  Stock options
granted  generally  become  exercisable  in  equal  annual  installments  over a
three-year  period  after  the  date  of  grant.


                                        6
<PAGE>
The following table shows the pro forma effect of using the fair value method of
accounting for stock options, as described by SFAS No. 123, on the Company's net
income  and  net  income  per  share  (in  thousands, except per share amounts):

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED
                                                                         MARCH 31,
                                                                   ----------  ----------
                                                                      2003        2002
                                                                   ----------  ----------
<S>                                                                <C>         <C>
     Net income, as reported                                       $     444   $     408
     Less - Employee compensation expense based on the fair value
       method of accounting for stock options, net of
       applicable tax effect                                            (161)       (214)
                                                                   ----------  ----------

     Pro forma net income                                          $     283   $     194
                                                                   ==========  ==========

     Basic net income per share, as reported                       $    0.01   $    0.01
     Pro forma basic net income per share                               0.01        0.01

     Diluted net income per share, as reported                     $    0.01   $    0.01
     Pro forma diluted net income per share                             0.01        0.01
</TABLE>

SFAS  No.  123  requires  a publicly traded entity to estimate the fair value of
stock-based  compensation  by  using  an  option-pricing  model  that takes into
account  certain  facts  and assumptions. The facts and assumptions that must be
taken  into account are the exercise price, the expected life of the option, the
current  stock  price,  the expected volatility of the stock price, the expected
dividends  on  the  stock,  and  the risk-free interest rate. The option-pricing
models  commonly  used  were  developed  to  estimate  the  fair value of freely
tradable,  fully  transferable  options  without  vesting  restrictions,  which
significantly  differ from the stock options granted by the Company. The Company
estimates  the  fair  value  of  stock  options  by  using  the  Black-Scholes
option-pricing  model.

NET  INCOME  PER  SHARE

Net income per share is presented in accordance with SFAS No. 128, "Earnings Per
Share."  Basic  net  income  per  share  is based on the weighted-average common
shares  outstanding,  including  the  common  shares  into which the convertible
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,  2003  and  2002, the potentially dilutive
securities outstanding consisted of stock options and convertible notes. Diluted
net  income  per share includes the effect of all outstanding stock options with
an  exercise  price below the average market price of the Company's common stock
during  each  applicable  period.  The  Company issued two (2) convertible notes
during  the  three months ended September 30, 2002, as discussed in Note 4. Each
of  these convertible notes would have an anti-dilutive effect on net income per
share  for  the  three-months ended March 31, 2003. Accordingly, the convertible
notes  are  excluded from the calculation of diluted net income per share. As of
March  31,  2003, these two convertible notes were convertible into an aggregate
of  2,381,000  shares  of  common  stock.


                                        7
<PAGE>
The  differences  between  weighted-average  basic  shares  outstanding  and
weighted-average  diluted  shares  outstanding  are  as  follows (in thousands):

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED
                                                        MARCH  31,
                                                    --------------------
                                                      2003       2002
                                                    ---------  ---------
<S>                                                 <C>        <C>
     Weighted-average basic shares outstanding         35,693     34,812
     Effect of dilutive stock options                     296        756
                                                    ---------  ---------

       Weighted-average diluted shares outstanding     35,989     35,568
                                                    =========  =========
</TABLE>

RECENTLY  ADOPTED  ACCOUNTING  PRINCIPLES

In  April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statement Nos.
4,  44,  and 64, Amendment of FASB Statement No. 13, and Technical Corrections."
SFAS  No.  145  updates,  clarifies,  and  simplifies  existing  accounting
pronouncements. This statement rescinds SFAS No. 4, which required all gains and
losses from extinguishment of debt to be aggregated and, if material, classified
as an extraordinary item, net of any related income tax effect. As a result, the
criteria  in APB No. 30 is now used to classify those gains and losses. SFAS No.
44  has  been  rescinded, as it is no longer necessary. SFAS No. 64 amended SFAS
No. 4 and is no longer necessary, as SFAS No. 4 has been rescinded. SFAS No. 145
amends  SFAS  No.  13  to  require  that  certain  lease modifications that have
economic effects similar to sale-leaseback transactions must be accounted for in
the  same  manner  as  sale-leaseback transactions, and to require that the fair
value of a lease guarantee be recorded as a liability on the guarantor's balance
sheet  for  all  guarantees issued after May 15, 2002. This statement also makes
certain  technical  corrections  to  existing  pronouncements.  While  those
corrections  are  not  substantive in nature, in some instances, they may change
accounting  practice.  SFAS  No.  145  is  generally  effective  for  financial
statements  issued  after  May  15,  2002.  The  adoption of SFAS No. 145 had no
significant  effect  on  the  Company's  consolidated  financial  statements.

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

In  November  2002,  the  FASB  issued  FASB  Interpretation  No.  ("FIN")  45,
"Guarantor's  Accounting  and  Disclosure Requirements for Guarantees, Including
Indirect  Guarantees  of Indebtedness of Others." FIN 45 is an interpretation of
FASB  Statement Nos. 5, 57, and 107, and a rescission of FIN No. 34, "Disclosure
of  Indirect  Guarantees  of  Indebtedness  of  Others."  FIN 45 requires that a
guarantor  recognize  a  liability  for  the  fair  value  of  certain  types of
guarantees,  at the time the guarantee is initially made.  It also elaborates on
the  financial  statement  disclosures  to  be  made  by  a  guarantor about its
obligations  under  certain  types  of  guarantees.  The initial recognition and
measurement  provisions  of  this interpretation are applicable on a prospective
basis  to  guarantees issued or modified after December 31, 2002. The disclosure
requirements  are  effective  for  financial statements for periods ending after
December  15,  2002.  The  adoption  of  FIN 45 had no significant effect on the
Company's  consolidated  financial  statements.

In  December  2002,  the  FASB  Issued SFAS No. 148, "Accounting for Stock-Based
Compensation  -  Transition  and  Disclosure," which is an amendment of SFAS No.
123.  SFAS  No.  148  provides alternative methods of transition for a voluntary
change  to  the  fair  value based method of accounting for stock-based employee
compensation.  It also requires prominent disclosures in both annual and interim
financial  statements  about  the  method of accounting for stock-based employee
compensation  and  the  effect of the method used on reported results.  SFAS No.


                                        8
<PAGE>
148  is  effective for fiscal years ending after December 15, 2002. The adoption
of  SFAS  No.  148  had  no  significant  effect  on  the Company's consolidated
financial  statements.

In  January  2003,  the  FASB issued FIN 46, "Consolidation of Variable Interest
Entities,"  an  interpretation  of  Accounting Research Bulletin No. 51.  FIN 46
requires  that  variable  interest  entities  be  consolidated  by the investing
company if the investing company is obligated to absorb a majority of the losses
incurred  by  the variable interest entity, or is entitled to receive a majority
of  the profits earned by the entity, or both.  FIN 46 also requires disclosures
about  significant  variable  interests in entities that don't meet the criteria
for  consolidation.  The  consolidation requirements of FIN 46 are effective for
all periods with respect to variable interest entities created after January 31,
2003.  The consolidation requirements with respect to variable interest entities
created prior to February 1, 2003 are effective for periods beginning after June
15,  2003.  The  disclosure  requirements  are  effective  for  all  financial
statements  issued after January 31, 2003.  The Company had no variable interest
entities  as  of  March  31, 2003, and the adoption of FIN 46 had no significant
effect  on  its  consolidated  financial  statements.

NOTE  3.  ACQUISITIONS
----------------------

Effective  August  30, 2002, the Company acquired all of the outstanding capital
stock  of  Paramount  Dental  Plan,  Inc. ("Paramount") for an aggregate cost of
approximately  $6.8  million,  including  acquisition  expenses. Paramount was a
dental  benefits  company  located  in Florida and was merged into the Company's
Florida dental HMO subsidiary effective August 30, 2002. The business purpose of
the  acquisition  was  to  increase the Company's market penetration in Florida,
which  is  one  of  the  Company's  primary  geographic markets. The acquisition
increased the number of members in Florida for which the Company provides dental
benefits  from  approximately  50,000  members to approximately 275,000 members.

The operations of Paramount are included in the Company's consolidated financial
statements  beginning  on  September  1,  2002.  Following  is certain pro forma
statement of operations information, which reflects adjustments to the Company's
historical financial statements for the three months ended March 31, 2002, as if
the  acquisition  had  been  completed  as  of  the beginning of that period (in
thousands):

<TABLE>
<CAPTION>
<S>                                                      <C>
     Premium revenue, net                                $22,611
     Operating income                                        397
     Net income                                              364

     Basic net income per share                          $  0.01
     Diluted net income per share                           0.01
</TABLE>

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

Effective  March  31,  2003, the Company acquired all of the outstanding capital
stock of Ameritas Managed Dental Plan, Inc. ("Ameritas") for a purchase price of
$1.1  million  in cash, plus contingent quarterly payments during the five years
following  the  acquisition  date. Each contingent quarterly payment is equal to
10%  of the actual premium revenue during the quarter from customers of Ameritas
that  existed as of March 31, 2003. The Company recorded a $176,000 liability as
of  March  31,  2003, for the estimated contingent quarterly payments related to
the remaining portion of annual customer contracts that are in force as of April
1,  2003.  The  Company  intends to accrue additional portions of the contingent
purchase  price  in  the future, if and when the payment of such amounts becomes
probable,  based  on  the  renewal  of existing customer contracts. Ameritas had
premium  revenue  of  $3.7  million during the year ended December 31, 2002, and
accordingly,  the  maximum aggregate amount of the contingent quarterly payments
over  the  five-year  period would be approximately $1.8 million, if the Company
retained  all  of  the  existing  customers of Ameritas for five years after the
acquisition  date  at  the  premium  rates  in  effect  during  2002.

Ameritas  is  a  dental  benefits  company  located  in California. The business
purpose  of  the acquisition was to increase the Company's market penetration in
California,  which  is  one  of  the  Company's  primary geographic markets. The
acquisition  increased the number of members in California for which the Company
provides  dental  benefits  from  approximately 300,000 members to approximately
330,000  members.


                                        9
<PAGE>
The  aggregate  purchase  price  recorded  by  the Company as of March 31, 2003,
including  the amount paid at closing and the estimated liability for contingent
quarterly  payments,  is approximately $1.3 million. The cost of the acquisition
was  allocated  among  the  assets  acquired  as  follows  (in  thousands):

<TABLE>
<CAPTION>
<S>                                                          <C>
     Fair value of net assets acquired:
       Cash and cash equivalents                             $  287
       Investments                                              465
       Goodwill                                                 699
       Other assets                                             195
       Accounts payable and accrued liabilities                 (84)
       Deferred premium revenue                                (258)
                                                             -------
         Total cost of acquisition                           $1,304
                                                             =======
</TABLE>

The  Company  has  not  yet  completed  its  determination of whether the assets
acquired  include separately identifiable intangible assets apart from goodwill.
Accordingly,  the  excess  of  the  purchase  price over the net tangible assets
acquired  has  been  classified  as  goodwill,  pending  completion  of  this
determination.  The  operations  of  Ameritas  will be included in the Company's
consolidated  financial  statements  beginning  on  April  1,  2003.

NOTE  4.  LONG-TERM  DEBT  AND  CAPITAL  LEASE  OBLIGATIONS
-----------------------------------------------------------

Long-term  debt  and  capital  lease  obligations consisted of the following (in
thousands):

<TABLE>
<CAPTION>
                                                      MARCH 31,    DECEMBER 31,
                                                        2003           2002
                                                     -----------  --------------
<S>                                                  <C>          <C>
     Secured convertible promissory note             $    2,226   $       2,427
     Unsecured convertible promissory note                1,643           1,798
     Capital lease obligations                              935           1,202
                                                     -----------  --------------
       Total debt and capital lease obligations           4,804           5,427
     Less - Current portion                              (2,259)         (2,430)
                                                     -----------  --------------
       Long-term debt and capital lease obligations  $    2,545   $       2,997
                                                     ===========  ==============
</TABLE>

Effective  in  August  2002, the Company issued a secured convertible promissory
note  for  $2,625,000  in connection with the acquisition of Paramount, which is
discussed  in  Note 3.  The note bears interest at 7.0% annually, and is payable
in 36 equal monthly installments of principal and interest, beginning in October
2002.  The outstanding balance under the secured convertible note is convertible
into  common  stock of the Company at a conversion price of $1.625 per share, at
any  time after August 30, 2003. The convertible note is secured by the stock of
the  Company's  dental  HMO  subsidiary  in  Florida.

In  August  2002,  the  Company  borrowed $2.0 million from one of its principal
stockholders  under  an  unsecured  convertible  promissory note. The note bears
interest  at  7.0%  annually, and is payable in 36 equal monthly installments of
principal  and  interest,  beginning  in September 2002. The outstanding balance
under  the  unsecured  convertible  note is convertible into common stock of the
Company  at  a  conversion price of $1.625 per share, at any time after one year
from  the  date  of  the  borrowing.

The  outstanding  capital  lease  obligations  consist  primarily  of two leases
entered  into  by  the Company in June 2002. Those two leases are related to the
purchase  of  an  updated  version  of  the  Company's primary computer software
application  and  the  purchase  of  formerly leased furniture for the Company's
primary  administrative  office.  The Company intends to use the new software as
its  primary  business  application,  which  will  be  used for eligibility file
maintenance,  billing  and  collections,  payment  of  health  care  expenses,
utilization  review  and  other related activities. The new software application
will replace the Company's two existing systems with a single system that can be
used  for  all  of the Company's existing product lines. The cost of both of the
Company's two existing systems is fully depreciated as of March 31, 2003.  Under
each  of  these  two  capital  leases, the Company has an option to purchase the
leased  assets  for  $1.00  at  the  expiration  of  the  lease.


                                       10
<PAGE>
NOTE  5.  EXCHANGE  OF  CONVERTIBLE  PREFERRED  STOCK
-----------------------------------------------------

Prior  to  May  2002,  there  were 300,000 shares of convertible preferred stock
issued  and  outstanding.  Each  share had a par value of $100 and a liquidation
preference  of $100, and was convertible into 100 shares of the Company's common
stock.  In  May  2002, each outstanding share of convertible preferred stock was
exchanged  for  100 new shares of convertible preferred stock. Each new share of
convertible  preferred  stock  has  a  par  value  of  $1.00  and  a liquidation
preference  of  $1.00, and is convertible into one share of the Company's common
stock.  All  other  rights  and  preferences  of the convertible preferred stock
remained  the  same.  All  references  to the convertible preferred stock in the
accompanying  condensed consolidated financial statements reflect the effects of
this  exchange  on  a  retroactive  basis.

NOTE  6.  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  assets  and  liabilities 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 assets and liabilities 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 large losses incurred by the
Company  during 1998, 1999 and 2000, relative to the amounts of income earned by
the  Company  during  2001,  2002  and the first quarter of 2003, as well as the
existence  of  significant  net  operating  loss  carryforwards.

Due  to  the  conversion of outstanding debt into convertible preferred stock in
January  2001,  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, 2002, the Company had net operating loss carryforwards for federal
and  California  state  tax  purposes  of  approximately  $9.8  million and $5.2
million,  respectively, which are net of the amounts that will expire unused due
to  the  change  of  control  limitation.  The  federal and California state net
operating  loss  carryforwards  will  begin  to  expire  in  2018  and  2004,
respectively.

The  Company  had  taxable  income for federal income tax purposes for the three
months ended March 31, 2003 and 2002, but its taxable income in both periods was
completely  offset  by net operating loss carryforwards from previous years. The
State of California has suspended the use of net operating loss carryforwards to
offset  current  taxable  income in 2003 for all corporations. The Company had a
net  loss  for California state tax purposes during the three months ended March
31,  2003.

NOTE  7.  TOTAL  COMPREHENSIVE  INCOME
--------------------------------------

Total  comprehensive  income  includes the change in stockholders' equity during
the  period  from  transactions  and  other  events  and  circumstances  from
non-stockholder  sources.  Total  comprehensive  income  of  the Company for the
three  months  ended  March  31,  2003  and  2002, 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 $(10,000) and $(36,000) for the
three  months  ended  March 31, 2003 and 2002, respectively. Total comprehensive
income  was  $434,000 and $372,000 for the three months ended March 31, 2003 and
2002,  respectively.


                                       11
<PAGE>
NOTE  8.  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.

CONTINGENT  LEASE  OBLIGATIONS

The  Company  sold all of its general dental practices and orthodontic practices
in  1996,  1997 and 1998. The Company also re-sold certain of these practices in
October  2000,  after  the  original  purchaser  of  a  number  of the practices
defaulted on its obligations to the Company. The office lease agreements related
to  all  of  the  practices sold by the Company either have been assigned to the
respective  purchasers  of  the  practices,  or  have  expired.

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, 2003, the total of the minimum annual payments under
these  leases  was  approximately  $1.3  million,  and  the aggregate contingent
liability  of the Company related to these leases was approximately $2.9 million
over  the remaining terms of the lease agreements, which expire at various dates
through 2007. In the event that the parties to which these lease agreements have
been  assigned  defaulted  on  the leases, the aggregate contingent liability of
approximately  $2.9  million could be mitigated by the Company by subleasing the
related  office  space  to  other parties, although there can be no assurance it
would  be able to do so. The Company 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 $2.9 million excludes
$85,000  of  estimated  lease obligations that have been accrued as of March 31,
2003, 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."

GUARANTEES  AND  INDEMNITIES

As  discussed above, the Company has contingent lease obligations under which it
is  secondarily  liable  for  the lease payments under dental office leases that
have  been  assigned  to third parties. In the event those third parties fail to
make  the  lease  payments,  the  Company  could  be obligated to make the lease
payments  itself. The Company has also purchased a letter of credit for $250,000
in  connection with a certain customer agreement. In the event the Company fails
to meet its financial obligations to the customer, the customer would be able to
use the letter of credit to satisfy the Company's obligations, in which case the
Company  would  be  obligated  to  repay the issuer of the letter of credit. The
Company  also  indemnifies  its  directors  and  officers  to the maximum extent
permitted  by  Delaware  law.  In addition, the Company makes indemnities to its
customers  in connection with the sale of dental and vision benefit plans in the
ordinary  course  of  business.  The maximum amount of potential future payments
under  all of the preceding guarantees and indemnities cannot be determined. The
Company  has recorded no liabilities related to these guarantees and indemnities
in the accompanying consolidated balance sheets, except as described above under
"Contingent  Lease  Obligations."  The  Company  issued no guarantees during the
three  months  ended  March  31,  2003.

LIABILITY  INSURANCE

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

GOVERNMENT  REGULATION

As  of  March  31,  2003,  one  of  the  Company's  subsidiaries,  which  had an
insignificant amount of revenue during the three months ended March 31, 2003 and
2002,  was  not  in  compliance  with  the  applicable  regulatory  net  worth


                                       12
<PAGE>
requirement.  The Company has not invested the required funds in this subsidiary
because the Company is in the process of closing that subsidiary's business, and
the  Company  has received a waiver of compliance from the applicable regulatory
agency.  During  the  three months ended March 31, 2003 and 2002, another of the
Company's  subsidiaries was not in compliance with a regulatory requirement that
limits the amount of the subsidiary's administrative expenses as a percentage of
premium  revenue.  The  Company  has  discussed  this  noncompliance  with  the
applicable  regulatory  agency, and that agency has taken no action with respect
to this noncompliance. The Company believes these two instances of noncompliance
with regulatory requirements will have no significant effect on its consolidated
financial  statements.

NOTE  9.  SUBSEQUENT  EVENTS
----------------------------

On  April  7,  2003, the Company entered into a definitive agreement to purchase
all  of  the  outstanding capital stock of Health Net Dental, Inc. ("HN Dental")
and  certain  group  dental  insurance  business underwritten by Health Net Life
Insurance  Company  ("HN  Life"),  which  is an affiliate of HN Dental, for $9.0
million  in  cash,  subject  to  regulatory  approval. HN Dental is a California
dental  HMO,  which  had premium revenue of approximately $46 million during the
year  ended  December 31, 2002. In addition, the group dental insurance business
being acquired generated premium revenue of approximately $14 million during the
year  ended  December 31, 2002.  The transaction is currently pending regulatory
approval.

On  April  7,  2003, the Company also entered into a binding letter of intent to
purchase  all  of  the outstanding capital stock of Health Net Vision, Inc. ("HN
Vision"), which is an affiliate of HN Dental, and certain group vision insurance
business  underwritten  by  HN  Life,  for  $3.0  million  in  cash,  subject to
regulatory  approval. A substantial portion of the business of HN Vision will be
transferred  to  a  third party prior to the Company's acquisition of HN Vision,
and  the  remainder  of  the  business  of  HN Vision will be transferred to the
Company.  HN  Vision is a California vision HMO, and the portion of its business
that is being acquired by the Company generated premium revenue of approximately
$5  million  during  the  year  ended  December 31, 2002. In addition, the group
vision  insurance  business  being  acquired  generated  premium  revenue  of
approximately  $1  million  during  the  year  ended  December  31,  2002.  The
transaction  is  currently  pending  negotiation  of  definitive  agreements and
regulatory  approval.

The  Company  plans  to finance the two transactions described above through the
issuance  of up to approximately $18 million of unsecured convertible promissory
notes  to  certain  of  its  principal  stockholders.  The  proceeds  from  the
convertible notes will be used to finance the two pending transactions described
above,  to  increase  the  net  worth  of  the Company's insurance subsidiary to
support  the  group  dental and vision insurance business to be acquired, and to
provide  working capital that may be required in connection with the integration
of  the  acquired  businesses  into  the  Company's  existing  operations.

The  Company  has  reached  an  oral  agreement  with the principal stockholders
referred  to  above,  regarding  the expected terms of the convertible notes. In
accordance with this agreement, the convertible notes will bear interest at 6.0%
annually, and will be convertible into the Company's common stock at the rate of
$1.75  per  share,  at  the  option  of  the  holder. There will be no principal
payments  due  under  the  convertible  notes  during  the first six years after
issuance,  principal  payments  will  be  due  during  the succeeding four years
pursuant  to a ten-year amortization schedule, and the remaining balance will be
payable in full ten years after the date of issuance. The convertible notes will
be  payable  in  full  upon  a change in control of the Company, at the holder's
option.  Provided  that  the  Company redeems all of the outstanding convertible
notes  at  the  same  time, it will have the option of redeeming the convertible
notes for 229% of the face value of the notes during the first seven years after
the  date  of  issuance, for 257% of the face value during the eighth year after
issuance,  for  286% of the face value during the ninth year after issuance, and
for 323% of the face value during the tenth year after issuance. The issuance of
the  convertible notes is currently pending negotiation of definitive agreements
and  the  completion  of  the  acquisitions  described  above.

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


                                       13
<PAGE>
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. The following risk factors, as well
as  the  risk factors identified in the Company's Annual Report on Form 10-K for
the  year ended December 31, 2002, and the Company's Current Reports on Form 8-K
filed  on February 14, 2003, April 3, 2003, April 25, 2003, and May 5, 2003, all
of  which have been filed with the Securities and Exchange Commission, should be
read  in conjunction with this Management's Discussion and Analysis of Financial
Condition  and  Results  of  Operations  ("MD&A").

The statements contained in this MD&A 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.

All  of  the  risks  set forth below 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.

RISK  FACTORS

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

INTEGRATION  OF  ACQUIRED  COMPANIES

The  Company  completed  the  acquisition  of  Paramount  Dental  Plan,  Inc.
("Paramount")  effective  on  August  30,  2002, and the acquisition of Ameritas
Managed  Dental Plan, Inc. ("Ameritas") effective on March 31, 2003. The Company
is  in  the process of integrating the business operations of both Paramount and
Ameritas  into  the  Company's  pre-existing operations. Due to the complexities
inherent  in  this  process, there is a risk that the Company may not be able to
complete  such  integration activities in a timely and effective manner. In such
case, the Company may not be able to retain all of the customers of the acquired
companies,  resulting  in  a  loss  of  revenue,  and  the Company's general and
administrative  expenses  could  be  higher  than  expected,  which could have a
negative  impact  on  the  Company's  overall  profitability.

GOVERNMENT  REGULATION

The dental benefits industry is subject to extensive state and local laws, rules
and  regulations. Several of the Company's operating subsidiaries are subject to
various  requirements  imposed  by  state  laws  and  regulations related to the
operation  of  a  dental  HMO  plan or a dental insurance company, including the
maintenance  of  a  minimum amount of net worth, and these requirements 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.


                                       14
<PAGE>
HEALTH  INSURANCE  PORTABILITY  AND  ACCOUNTABILITY  ACT  OF  1996  ("HIPAA")

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

CONTINGENT  LEASE  OBLIGATIONS

The  Company  sold all of its general dental practices and orthodontic practices
in  1996,  1997 and 1998. The Company also re-sold certain of these practices in
October  2000,  after  the  original  purchaser  of  a  number  of the practices
defaulted  on its obligations to the Company. All of the office lease agreements
related  to  those  practices  either  have  been  assigned  to  the  respective
purchasers  of the practices, or have expired. As of March 31, 2003, the Company
is  contingently liable for an aggregate of approximately $2.9 million of office
lease  obligations  related  to  those  practices for which the leases have been
assigned.  Although  the  leases  have  been assigned to the purchasers of those
practices,  there  can be no assurance that the persons and/or entities to which
these  office  leases  were  assigned will make the lease payments, and that the
Company  will  not  become  liable  for  those  payments.

PAYMENTS  DUE  ON  PROMISSORY  NOTES

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

POSSIBLE  VOLATILITY  OF  STOCK  PRICE

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

COMPETITIVE  MARKET

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

ABILITY  TO  MAINTAIN  REVENUE

The  combined  premium revenue of the Company and Paramount decreased from $22.6
million  on  a  pro forma basis during the three months ended March 31, 2002, to
$21.9 million during the comparable period in 2003, primarily due to the loss of
a  number  of  customers,  and  a net decrease in the enrollment within existing
customers.  The  Company  intends  to  expand  its business in the future and to
increase  its  annual revenue, but there can be no assurance the Company will be
able  to maintain its current level of revenue or increase it in the future. The


                                       15
<PAGE>
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 maintain its relationships with existing customers
and  brokers,  its ability to maintain competitive networks of dental providers,
its  ability to maintain effective control over the cost of dental services, and
its  ability  to  obtain  sufficient  working  capital to support an increase in
revenue.

UTILIZATION  OF  DENTAL  CARE  SERVICES

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

EFFECT  OF  ADVERSE  ECONOMIC  CONDITIONS

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

RELATIONSHIPS  WITH  DENTAL  PROVIDERS

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

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.

CRITICAL  ACCOUNTING  POLICIES

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

ACCOUNTS  RECEIVABLE

Accounts  receivable  represent uncollected premiums related to coverage periods
prior  to  the  balance  sheet date, and are stated at the estimated collectible
amounts,  net  of  an allowance for bad debts. The Company continuously monitors
the  timing  and  amount of its premium collections, and maintains a reserve for
estimated  bad  debt losses. The amount of the reserve is based primarily on the
Company's historical experience and any customer-specific collection issues that
are identified. The Company believes its reserve for bad debt losses is adequate
as of       March 31, 2003. However, there can be no assurance that the bad debt
losses ultimately incurred will not exceed the reserve for bad debts established
by  the  Company.


                                       16
<PAGE>
NOTES  RECEIVABLE

Notes  receivable  are  stated  at  their estimated realizable values, 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,
2003.  However,  there  can  be  no  assurance that the Company will realize the
carrying  amount  of  its  notes  receivable.

GOODWILL

The  Company's  accounting  for  goodwill  is  in  accordance  with Statement of
Financial  Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible
Assets,"  which  the Company adopted as of January 1, 2002. Goodwill as of March
31,  2003  consists  of  $4.7  million of goodwill related to the acquisition of
Paramount  Dental  Plan,  Inc.  ("Paramount")  in  August  2002, $3.9 million of
goodwill  related  to the acquisition of a Texas-based dental health maintenance
organization  ("HMO")  company  in 1996, and $0.7 million of goodwill related to
the  acquisition  of  Ameritas  Managed  Dental Plan, Inc. ("Ameritas") in March
2003. See Note 3 to the accompanying condensed consolidated financial statements
for  more information on the Paramount and Ameritas acquisitions. In the case of
each  acquisition,  goodwill  represents the excess of the purchase price of the
acquired  company over the fair value of the net assets acquired. In the case of
the  1996 acquisition, the balance is net of an adjustment in 1999 to reduce the
carrying  value  of  the goodwill to its estimated realizable value. The Company
has  not  yet  completed its determination of whether the assets acquired in the
Ameritas  acquisition  in  March  2003  include  any  separately  identifiable
intangible  assets  apart  from  goodwill. Accordingly, the entire excess of the
purchase  price  over  the  net  tangible assets acquired has been classified as
goodwill,  pending  completion  of  this  determination.

SFAS  No.  142 requires that goodwill be evaluated for possible impairment on an
annual  basis  and  any time an event occurs that may have affected the value of
the  goodwill.  The  Company  has  established October 1 as the date on which it
conducts  its  annual  evaluation  of  goodwill  for  possible  impairment.  In
accordance  with  SFAS  No.  142,  the  Company tested its goodwill for possible
impairment  by  estimating  the  fair  value of each of its reporting units that
include  goodwill,  and  comparing  the fair value of each reporting unit to the
book  value  of  the  net  assets of each reporting unit. The fair value of each
reporting unit was determined primarily by estimating the discounted future cash
flows  of  the  reporting  unit,  and  by  estimating  the  amount for which the
reporting  unit  could  be  sold to a third party, based on a market multiple of
earnings.  The  Company had no impairment of its goodwill as of October 1, 2002,
based  on  the method of testing for possible impairment established by SFAS No.
142.  The  estimates  to  which  the  results of the Company's test are the most
sensitive  are the amounts of shared administrative expenses that are charged to
each  reporting  unit,  and  the  market  multiple  of  earnings that is used to
estimate  the  fair  value  of  each  reporting  unit.  The Company believes the
estimates  used  in  its  test are reasonable and appropriate, but a significant
change  in  either  of  these  estimates  could  result  in the indication of an
impairment  of  goodwill.  The  Company  is  not  aware  of any events that have
occurred  since  October  1,  2002,  that  represent an indication of a possible
impairment. However, there can be no assurance that impairment will not occur in
the  future.

INTANGIBLE  ASSETS

Intangible  assets  as  of  March 31, 2003 consist of customer relationships and
other intangible assets with an aggregate net book value of $1.9 million, all of
which  were  acquired  in connection with the acquisition of Paramount in August
2002,  as  discussed  in  Note  3  to  the  accompanying  condensed consolidated
financial  statements.  The  amount  of the purchase price that was allocated to
each  of  the  intangible assets was equal to the Company's estimate of the fair
value of each asset. Each intangible asset is being amortized over its estimated
useful  life  on  a  straight-line  basis.

CLAIMS  PAYABLE  AND  CLAIMS  INCURRED  BUT  NOT  REPORTED

The  estimated liability for claims payable and claims incurred but not reported
("IBNR")  is based primarily on the average historical lag time between the date
of service and the date the related claim is paid by the Company, and the recent


                                       17
<PAGE>
trend  in  payment  rates  and the average number of incurred claims per covered
individual.  Since  the liability for claims payable and claims incurred but not
reported  is  an  actuarial  estimate,  the amount of claims eventually paid for
services  provided  prior  to  the  balance  sheet  date  could  differ from the
estimated  liability.  Any  such  differences  are  included in the consolidated
statement  of operations for the period in which the differences are identified.

RECOGNITION  OF  PREMIUM  REVENUE

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

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  assets  and  liabilities 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 assets and liabilities 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  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,
2003,  and  the  existence  of  significant  net  operating  loss carryforwards.

RESULTS  OF  OPERATIONS

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

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED
                                                          MARCH 31,
                                                   ----------------------
                                                      2003        2002
                                                   ----------  ----------
<S>                                                <C>         <C>
Premium revenue, net                                   100.0%      100.0%

Health care services expense                            68.9        70.3
Selling, general and administrative expense             29.0        28.2
                                                   ----------  ----------
  Operating income                                       2.1         1.5

Investment and other income                              0.4         0.5
Interest expense                                        (0.5)         --
                                                   ----------  ----------
  Income before income taxes                             2.0         2.0
Income tax expense                                        --          --
                                                   ----------  ----------

  Net income                                             2.0%        2.0%
                                                   ==========  ==========
</TABLE>

THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THREE MONTHS ENDED MARCH 31, 2002

Premium  revenue  increased by $1.2 million, or 5.9%, from $20.7 million in 2002
to  $21.9 million in 2003. The average membership for which the Company provided
dental  coverage  increased  by  approximately  185,000  members, or 33.5%, from
552,000  members  during  2002 to 737,000 members during 2003. The operations of
Paramount  are  included  in  the  Company's  financial  statements beginning on
September 1, 2002. Average membership increased in 2003 by approximately 220,000
members due to the Paramount acquisition, but this increase was partially offset


                                       18
<PAGE>
by  the  loss  of a number of the Company's customers, and a net decrease in its
enrollment  within  retained customers. The Company believes the net decrease in
its  enrollment within retained customers is primarily due to reduced employment
levels  within  its customers due to general economic conditions, and to reduced
enrollment in the Company's dental benefit plans due to significant increases in
the  cost  of  medical  coverage,  which  may  cause  employers and employees to
allocate  less  spending  for  the purchase of dental coverage, which is usually
viewed  as  being  more  discretionary  than  medical  coverage. Premium revenue
increased  by only 5.9% even though average membership increased 33.5%. This was
primarily  due  to  the  Paramount  acquisition,  as  the business acquired from
Paramount  consists  largely  of  products that have significantly lower premium
rates  than the Company's pre-existing business. This is because the dental plan
designs  offered  by  Paramount  include a significantly lower level of benefits
than  the  benefit  plans  offered  by  the  Company prior to the acquisition of
Paramount.  Substantially  all of the Company's premium revenue was derived from
dental benefit plans in 2003 and 2002. Premium revenue from vision benefit plans
and  other  products  was  not  material  in  2003  or  2002.

Health  care  services  expense  increased  by $0.5 million, or 3.7%, from $14.6
million  in  2002  to  $15.1  million in 2003. Health care services expense as a
percentage of premium revenue (the "loss ratio") decreased from 70.3% in 2002 to
68.9% in 2003, primarily due to the Paramount acquisition. The business acquired
from  Paramount  has  a  significantly  lower  loss  ratio  than  the  Company's
pre-existing  business,  which  is  primarily  due  to  the type of benefit plan
designs  sold  by  Paramount.  The  loss  ratios  in  the Company's pre-existing
business  were  substantially  the  same  in  2003  and  2002.

Selling,  general and administrative ("SG&A") expense increased by $0.5 million,
or  8.8%,  from  $5.8 million in 2002 to $6.3 million in 2003. SG&A expense as a
percentage  of  premium  revenue  increased from 28.2% in 2002 to 29.0% in 2003.
The  increase  in SG&A expense is primarily due to increases in selling expenses
and  amortization  expense.  The  increase  in  selling expenses includes modest
increases  in salaries, internal commissions, sales consultant costs, and broker
commissions,  which  are  primarily related to the Company's efforts to increase
its new sales activity. The increase in amortization expense is primarily due to
$117,000  of  amortization  expense related to the intangible assets acquired in
connection  with  the  Paramount  acquisition  in  August  2002.

Investment  and other income decreased from $116,000 in 2002 to $79,000 in 2003,
which  was  primarily due to a decrease in the amount of investments held by the
Company,  compared to the first quarter of 2002, a decrease in interest rates on
short-term  fixed-income  investments,  and  a  decrease in interest income from
notes  receivable.

Income  before  income  taxes  was $0.4 million, and 2.0% of premium revenue, in
both  2003  and 2002. The decrease in the loss ratio from 70.3% in 2002 to 68.9%
in  2003  was  offset  by an increase in SG&A expense as a percentage of premium
revenue  from  28.2%  in  2002  to  29.0%  in  2003,  as  discussed  above.

LIQUIDITY  AND  CAPITAL  RESOURCES

The Company's net working capital decreased from $2.0 million as of December 31,
2002,  to $1.5 million as of March 31, 2003, primarily due to the acquisition of
Ameritas  in  March  2003,  as discussed in Note 3 to the accompanying condensed
consolidated  financial  statements.  The Ameritas acquisition decreased working
capital  by a net amount of $0.7 million, which represents the goodwill acquired
in the transaction. The Company made $0.6 million of payments on debt during the
quarter  ended  March  31,  2003, but this was offset by the total of net income
plus  depreciation  and amortization, which was $0.8 million during the quarter.

The Company's total debt decreased from $5.4 million as of December 31, 2002, to
$4.8  million  as  of  March 31, 2003, primarily due to payments made during the
first  quarter  of  2003,  as  noted above. The aggregate principal payments due
under  all of the Company's debt, including its capital leases, are $1.8 million
during  the  remainder  of 2003, $1.8 million in 2004, and $1.2 million in 2005.

In  August  2002,  the  Company  borrowed $2.0 million from one of its principal
stockholders,  which  was  used  to  increase  the Company's working capital, to
provide  for  the  payments  due under the two capital lease obligations entered
into  in  June  2002,  as  discussed  in  Note  4  to the accompanying condensed
consolidated financial statements, and to provide for the payments due under the
settlement  of  the  stockholder  litigation.  The  borrowing  was made under an
unsecured  convertible note that bears interest at 7.0% annually, and is payable
in  36  equal  monthly  installments  of  principal  and  interest, beginning in
September  2002.  The  outstanding  balance  under  the  convertible  note  is


                                       19
<PAGE>
convertible into common stock of the Company at a conversion price of $1.625 per
share,  at  any  time  after  one  year  from  the  date  of  the  borrowing.

Effective  August  30, 2002, the Company acquired all of the outstanding capital
stock of Paramount for a total cost of approximately $6.8 million, consisting of
$3.0  million in cash, a secured convertible note for $2,625,000, 769,231 shares
of the Company's common stock, and $164,000 of transaction expenses. The secured
convertible  note  bears  interest  at 7.0% annually, and is payable in 36 equal
monthly  installments  of principal and interest, beginning in October 2002. The
outstanding  balance  under  the  secured  convertible  note is convertible into
common  stock  of  the Company at a conversion price of $1.625 per share, at any
time  after August 30, 2003. The convertible note is secured by the stock of the
Company's  dental  HMO  subsidiary  in  Florida. The operations of Paramount are
included  in  the  Company's  consolidated  financial  statements  beginning  on
September  1,  2002.

Effective  March  31,  2003, the Company acquired all of the outstanding capital
stock  of Ameritas for a purchase price of $1.1 million in cash, plus contingent
quarterly  payments  during  the five years following the acquisition date. Each
contingent  quarterly  payment  is  equal  to  10% of the actual premium revenue
during the quarter from customers of Ameritas that existed as of March 31, 2003.
Ameritas  had premium revenue of $3.7 million during the year ended December 31,
2002,  and accordingly, the maximum aggregate amount of the contingent quarterly
payments would be approximately $1.8 million, if the Company retained all of the
existing  customers of Ameritas for five years after the acquisition date at the
premium  rates  in  effect during 2002. See Note 3 to the accompanying condensed
consolidated  financial statements for more information on this acquisition. The
operations  of Ameritas will be included in the Company's consolidated financial
statements  beginning  on  April  1,  2003.

On  April  7,  2003, the Company entered into a definitive agreement to purchase
all  of  the  outstanding capital stock of Health Net Dental, Inc. ("HN Dental")
and  certain  group  dental  insurance  business underwritten by Health Net Life
Insurance  Company  ("HN  Life"),  which  is an affiliate of HN Dental, for $9.0
million  in  cash,  subject  to  regulatory  approval. HN Dental is a California
dental  HMO,  which  had premium revenue of approximately $46 million during the
year  ended  December 31, 2002. In addition, the group dental insurance business
being acquired generated premium revenue of approximately $14 million during the
year  ended  December 31, 2002.  The transaction is currently pending regulatory
approval.

On  April  7,  2003, the Company also entered into a binding letter of intent to
purchase  all  of  the outstanding capital stock of Health Net Vision, Inc. ("HN
Vision"), which is an affiliate of HN Dental, and certain group vision insurance
business  underwritten  by  HN  Life,  for  $3.0  million  in  cash,  subject to
regulatory  approval. A substantial portion of the business of HN Vision will be
transferred  to  a  third party prior to the Company's acquisition of HN Vision,
and  the  remainder  of  the  business  of  HN Vision will be transferred to the
Company.  HN  Vision is a California vision HMO, and the portion of its business
that is being acquired by the Company generated premium revenue of approximately
$5  million  during  the  year  ended  December 31, 2002. In addition, the group
vision  insurance  business  being  acquired  generated  premium  revenue  of
approximately  $1  million  during  the  year  ended  December  31,  2002.  The
transaction  is  currently  pending  negotiation  of  definitive  agreements and
regulatory  approval.

The  Company  plans  to finance the two transactions described above through the
issuance  of up to approximately $18 million of unsecured convertible promissory
notes  to  certain  of  its  principal  stockholders.  The  proceeds  from  the
convertible notes will be used to finance the two pending transactions described
above,  to  increase  the  net  worth  of  the Company's insurance subsidiary to
support  the  group  dental and vision insurance business to be acquired, and to
provide  working capital that may be required in connection with the integration
of  the  acquired  businesses  into  the  Company's  existing  operations.

The  Company  has  reached  an  oral  agreement  with the principal stockholders
referred  to  above,  regarding  the expected terms of the convertible notes. In
accordance with this agreement, the convertible notes will bear interest at 6.0%
annually, and will be convertible into the Company's common stock at the rate of
$1.75  per  share,  at  the  option  of  the  holder. There will be no principal
payments  due  under  the  convertible  notes  during  the first six years after
issuance,  principal  payments  will  be  due  during  the succeeding four years
pursuant  to a ten-year amortization schedule, and the remaining balance will be
payable in full ten years after the date of issuance. The convertible notes will
be  payable  in  full  upon  a change in control of the Company, at the holder's
option.  Provided  that  the  Company redeems all of the outstanding convertible
notes  at  the  same  time, it will have the option of redeeming the convertible


                                       20
<PAGE>
notes for 229% of the face value of the notes during the first seven years after
the  date  of  issuance, for 257% of the face value during the eighth year after
issuance,  for  286% of the face value during the ninth year after issuance, and
for 323% of the face value during the tenth year after issuance. The issuance of
the  convertible notes is currently pending negotiation of definitive agreements
and  the  completion  of  the  acquisitions  described  above.

The Company believes it has adequate financial resources to continue its current
operations for the foreseeable future. The Company also believes it will be able
to  meet  all of its financial obligations from its existing financial resources
and future cash flows from its operations, except for the obligation to complete
the  pending  acquisitions  of  HN  Dental,  HN  Vision,  and the related dental
insurance and vision insurance businesses. As discussed above, the Company plans
to  finance  these  acquisitions  through  the  issuance of convertible notes to
certain of its principal stockholders. Although the Company believes it can meet
its  other  financial  obligations  from its internal resources, there can be no
assurance that the Company's future earnings will be adequate to make all of the
payments  on  the  Company's  various  obligations  as  they  become  due.

Net cash provided by operating activities increased from $0.4 million during the
three  months  ended March 31, 2002, to $1.4 million during the first quarter of
2003.  The  increase is primarily due to $0.1 million of net cash provided by an
increase  in  claims incurred but not reported ("IBNR") during 2003, compared to
$0.8  million of net cash used by a decrease in claims payable and IBNR in 2002.
The  decrease  in  claims  payable  and  IBNR  in  2002  was primarily due to an
intentional  decrease in the processing time for payment of provider claims. Due
in  part to the recent decline in interest rates on investments, the Company has
adopted  the  practice  of paying all provider claims as rapidly as possible, in
order  to enhance its image among dental providers. The reduced processing times
for  payment  of  provider claims have been substantially maintained through the
first  quarter  of  2003.

Net cash provided by investing activities decreased from $1.3 million in 2002 to
$0.1  million  in  2003.  The  decrease  is  primarily  due to a decrease in the
proceeds  from  liquidation  of  investments  from  $1.6 million in 2002 to $0.8
million  in  2003. The liquidation of investments in 2002 was related to the net
cash  used  to  reduce  claims  payable  and  IBNR  by  $0.8 million in 2002, as
discussed  above.

Net  cash  used  in  financing activities decreased from $0.9 million in 2002 to
$0.6  million  in  2003. The Company made $0.6 million of debt payments in 2003,
compared to $0.8 million of net cash used in 2002 to decrease the amount of bank
overdrafts,  which  are due to outstanding checks not yet presented for payment.

RECENT  ACCOUNTING  PRONOUNCEMENTS

See Note 2 to the accompanying condensed consolidated financial statements for a
discussion  of  recently  adopted  accounting  principles  and  recently  issued
accounting  pronouncements.

IMPACT  OF  INFLATION

The Company's operations are potentially impacted by inflation, which can affect
premium  rates,  health  care  services  expense,  and  selling,  general  and
administrative expense. The Company expects that its earnings will be positively
impacted by inflation in premium rates, because premium rates for dental benefit
plans  in  general  have  been  increasing due to inflation in recent years. The
Company  expects  that  its earnings will be negatively impacted by inflation in
health  care  costs, because fees charged by dentists and other dental providers
have  been  increasing due to inflation in recent years. The impact of inflation
on  the  Company's health care expenses is partially mitigated in the short-term
by  the  fact  that  approximately  30%  of  total  health care services expense
consists  of  capitation (fixed) payments to providers. In addition, most of the
Company's  selling,  general and administrative expenses are impacted by general
inflation  in  the  economy.

ITEM  3.     QUANTITATIVE  AND  QUALITATIVE  DISCLOSURES  ABOUT  MARKET  RISK

The  Company is subject to risk related to changes in short-term interest rates,
due to its investments in interest-bearing securities. As of March 31, 2003, the
Company's  total  cash  and  investments  were  approximately  $13.4  million.
Therefore, a one percentage-point change in short-term interest rates would have
a  $134,000 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.


                                       21
<PAGE>
ITEM  4.     CONTROLS  AND  PROCEDURES

EVALUATION  OF  DISCLOSURE  CONTROLS  AND  PROCEDURES

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

CHANGES  IN  INTERNAL  CONTROLS

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

PART  II.    OTHER  INFORMATION

ITEM  1.     LEGAL  PROCEEDINGS

The  Company  is  subject  to  various  claims  and legal actions arising in the
ordinary  course of business. The Company believes all pending claims either are
covered  by  liability insurance maintained by the Company or by dentists in the
Company's  provider  network,  or will not have a material adverse effect on the
Company's  consolidated  financial  position  or  results  of  operations.

In  December  1999,  a  stockholder lawsuit against the Company was filed, which
alleged  that  the  Company  and certain of its officers then in office violated
certain  securities  laws  by  issuing  alleged  false and misleading statements
concerning  the  Company's  publicly  reported  revenues  and  earnings during a
specified  class  period.  During  2002  the  Company  settled the lawsuit for a
payment  of $1.25 million to the plaintiffs, without any admission of liability.
The  agreement  between  the  Company  and  the  plaintiffs  was approved by the
District  Court  in  September  2002,  and  the  matter  has been dismissed with
prejudice.  The  Company's  insurer  paid  $1.0  million  of  the  cost  of  the
settlement.  Accordingly,  the  Company  recorded  a $250,000 expense during the
three  months  ended  June  30, 2002, which was included in selling, general and
administrative  expenses.

ITEM  6.     EXHIBITS  AND  REPORTS  ON  FORM  8-K

(a)     EXHIBITS

None.

(b)     REPORTS  ON  FORM  8-K.

The  Company  filed a Current Report on Form 8-K on April 3, 2003, to report the
completion  of  the  acquisition of Ameritas Managed Dental Plan, Inc. effective
March  31, 2003. See Note 3 to the accompanying condensed consolidated financial
statements  for  more  information  on  this  transaction.

The  Company filed a Current Report on Form 8-K on April 25, 2003, to report the
execution  of a definitive agreement to purchase all of the outstanding stock of
Health  Net  Dental,  Inc.  ("HN  Dental")  and  certain  group dental insurance
business underwritten by Health Net Life Insurance Company ("HN Life"), which is
an  affiliate  of  HN  Dental,  for  $9.0 million in cash, subject to regulatory
approval,  and to report the execution of a binding letter of intent to purchase
all  of  the outstanding capital stock of Health Net Vision, Inc. ("HN Vision"),
which  is an affiliate of HN Dental, and certain group vision insurance business
underwritten  by  HN  Life,  for  $3.0  million  in  cash, subject to regulatory
approval.  These  transactions are currently pending regulatory approval, and in
the  case  of  the  HN  Vision  transaction,  pending  negotiation of definitive
agreements.  See  Note  9  to  the accompanying condensed consolidated financial
statements  for  more  information  on  these  transactions.


                                       22
<PAGE>
The  Company  filed  a  Current Report on Form 8-K on May 5, 2003, to report the
issuance  of  a  news release containing information on the Company's results of
operations  for  the  quarter  ended  March  31,  2003.


                                       23
<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  2003.

                SAFEGUARD  HEALTH  ENTERPRISES,  INC.


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


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


                                       24
<PAGE>
                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                 SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002;
                          QUARTERLY REPORT ON FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2003


Each  of  the  undersigned  hereby  certifies  in  his capacity as an officer of
SafeGuard Health Enterprises, Inc. (the "Company"), that the Quarterly Report of
the  Company  on  Form  10-Q  for the period ended March 31, 2003 (the "Report")
fully complies with the requirements of Section 13(a) of the Securities Exchange
Act of 1934 and that the information contained in the Report fairly presents, in
all material respects, the financial condition of the Company at the end of such
period  and  the  results  of  operations  of  the  Company  for  such  period.

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934, this certification has been signed by the undersigned in the City
of  Aliso  Viejo,  State  of  California,  on  the  13th  day  of  May  2003.


             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)


                                       25
<PAGE>
                    CERTIFICATION OF CHIEF EXECUTIVE OFFICER
           PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                 SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002;
                          QUARTERLY REPORT ON FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2003

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

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

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

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

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

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

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

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

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

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934, this certification has been signed by the undersigned in the City
of  Aliso  Viejo,  State  of  California,  on  the  13th  day  of  May  2003.

                     SAFEGUARD  HEALTH  ENTERPRISES,  INC.


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


                                       26
<PAGE>
                    CERTIFICATION OF CHIEF FINANCIAL OFFICER
           PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
                 SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002;
                          QUARTERLY REPORT ON FORM 10-Q
                      FOR THE QUARTER ENDED MARCH 31, 2003

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

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

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

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

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

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

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

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

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

Pursuant  to  the requirements of Section 13 or 15(d) of the Securities Exchange
Act  of  1934, this certification has been signed by the undersigned in the City
of  Aliso  Viejo,  State  of  California,  on  the  13th  day  of  May  2003.

                     SAFEGUARD  HEALTH  ENTERPRISES,  INC.


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


                                       27
<PAGE>