SECURITIES AND EXCHANGE COMMISSION
                        Washington, DC  20549
                        _____________________

                              FORM 10-K

                  FOR ANNUAL AND TRANSITION REPORTS
               PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                   SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

     For the fiscal year ended December 31, 1997

                                 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:  0-26090

                        COMPDENT CORPORATION
       (Exact name of registrant as specified in its charter)

           DELAWARE                                     04-3185995
(State or other jurisdiction of                     (I.R.S. Employer
 incorporation or organization)                    Identification No.)

100 Mansell Court East, Suite 400, Roswell, Georgia        30076
     (Address of principal executive offices)           (zip code)

 Registrant's telephone number, including area code:  (770) 998-8936
                    __________________________

Securities registered pursuant to Section 12(b) of the Act: None.

Securities registered pursuant to Section 12(g) of the Act:

     Common Stock, par value $.01 per share
          (Title of Class)

     Preferred Stock Purchase Rights
          (Title of Class)

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 [BOX WITH X]              No [BOX]

Indicate by Check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.

As of March 10, 1998, there were 10,112,629 shares of the registrant's
Common Stock outstanding. The aggregate market value of the voting
stock held by nonaffiliates of the registrant on March 10, 1998 was
$119,437,566.

                 DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's definitive Proxy Statement dated March 30,
1998 for the Annual Meeting of Stockholders to be held on April 30,
1998 are incorporated by reference in Part III of the Report on Form
10-K.

<PAGE>

                              PART I

STATEMENTS MADE OR INCORPORATED INTO THIS ANNUAL REPORT INCLUDE A
NUMBER OF FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE
SECURITIES EXCHANGE ACT OF 1934. FORWARD-LOOKING STATEMENTS INCLUDE,
WITHOUT LIMITATION, STATEMENTS CONTAINING THE WORDS "ANTICIPATES,"
"BELIEVES," EXPECTS," "INTENDS," "FUTURE" AND WORDS OF SIMILAR IMPORT
WHICH EXPRESS MANAGEMENT'S BELIEF, EXPECTATIONS OR INTENT REGARDING
THE COMPANY'S FUTURE PERFORMANCE.  THE COMPANY'S ACTUAL RESULTS COULD
DIFFER MATERIALLY FROM THOSE SET FORTH IN THE FORWARD-LOOKING
STATEMENTS.  FACTORS THAT MAY CAUSE SUCH DIFFERENCES ARE DESCRIBED IN
THE SECTION ENTITLED "CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS"
FOUND ON PAGE 21 OF THIS ANNUAL REPORT.


Item 1.   BUSINESS.

          The information contained in this report is provided as of
December 31, 1997, unless otherwise indicated.

Overview

          The Company is a full-service dental benefits provider,
offering network-based dental care, reduced fee-for-service and
third-party administration and providing dental coverage for
approximately 2.2 million plan members at December 31, 1997. The
Company currently has operations in more than 23 states and markets
its products through a network of more than 8,000 independent agents
and a direct marketing sales force that assists the independent
agents.  The Company markets its products to employers and other
business entities ("Groups"), to Group employees or other members and
their families as a unit ("Subscribers") and to individuals.  The
Company has contracted with more than 9,000 dental facilities ("Panel
dentists") to provide dental services to covered individuals
("Members"). CompDent's  benefit plans also include
CompSave[COPYRIGHT] (a reduced fee-for-service product),
CompNet[COPYRIGHT] a PPO and network rental product), and
administrative services for self-insured dental plans. In the first
quarter of 1997, CompDent established Dental Health Management, Inc.
("DHMI"), a wholly-owned subsidiary providing management and
administrative services to dental practices. DHMI manages or operates
38 dental practices in 7 states.

Markets and Operations; Acquisitions

     The Company commenced operations in Florida in 1978 and until
1987 conducted business only in Florida. The Company established
operations in Georgia and Ohio in 1987 and 1990, respectively.  The
Company established operations on a de novo basis in Alabama (1992),
North Carolina (1993), Mississippi (1993), Tennessee (1994) and South
Carolina (1995). In 1994 and 1995, the Company entered markets in
eight new states, including Texas, Kentucky, Indiana and Missouri
through acquisitions. In January 1996, the Company acquired Texas
Dental Plans, Inc. and certain of its affiliated entities
(collectively, "TDP") for $23 million in cash. TDP is a San
Antonio-based provider of low cost dental referral plans with
operations in fourteen states, including principally Texas, Louisiana,
Oklahoma and Pennsylvania (the "TDP Acquisition"). As a result of the
TDP Acquisition, the Company expanded its presence in seven states,
entered markets in seven new states and expedited the Company's
development of  the CompSave[COPYRIGHT] product line. In addition,
in May 1996, the Company acquired all of the outstanding capital stock
of Dental Care Plus Management, Corp. and its wholly owned subsidiary
(collectively, "Dental Care Plus"), a Chicago-based third-party
administrator and managed dental care plan, for an aggregate purchase
price of approximately $38 million (the "Dental Care Plus
Acquisition"). The Dental Care Plus Acquisition significantly expanded
the Company's presence in Illinois.  In March 1997, the Company
acquired American Dental Providers, Inc. and Diamond Dental & Vision,
Inc. (the "AMDP & DDV Acquisitions") for $1.7 million in cash and
stock. As a result of the AMDP & DDV Acquisition, the Company entered
the Arkansas market. In July 1997, the Company entered the dental
practice management business with the acquisition of 21 dental
facilities in Illinois and one clinic in Florida for approximately
$16.9 million in cash. In addition, in September 1997, the Company
acquired one dental facility in Tennessee for $1.6 million in cash.
In November 1997, the Company acquired the Stratman Management Group
and its six dental facilities in Indiana for $2.0 million in cash.
<PAGE>
 Products and Services

     Managed Dental Plans. The Company offers a variety of managed
dental care plans under the principal trade names American Dental
Plan, American Prepaid Dental Plan, DentiCare and CompDent( Dental
Plan. The Company's managed dental care plans operate similarly in
each state in which business is conducted.

     Under the Company's managed dental care plans a premium is paid
to the Company by the Subscriber through payroll deduction or directly
(in the case of individual Subscribers), or by the Subscriber's
employer, from the date the Subscriber enrolls in the plan. The
Subscriber selects a dentist from the Company's panel to provide
dental services. Each Panel Dentist provides dental services to the
Subscribers who selected that dentist in return for a portion of the
premium paid by the Subscriber ("Capitation payments"). Thus, the
Panel Dentist receives steady monthly capitation payments from the
Company according to the number of Subscribers who have selected the
dentist, regardless of the frequency or value of dental services
performed. Under a managed dental care plan, capitation payments are
fixed. Therefore, incentive to control costs and the risk of
over-utilization of dental services is shifted to the dentists.

     Members covered under the Company's managed dental care plans
obtain certain basic dental procedures (such as exams, x-rays,
cleanings, and certain fillings) at no additional charge beyond
premium payments (other than, in some cases, a small per visit
copayment). The plans establish copayments for more complicated
services provided by the Panel Dentist, such as root canals and
crowns, which vary according to the complexity of the service and the
level of benefits purchased by subscribers. The Company's managed
dental care plans also cover services provided by specialists
participating in the dental panel rather than by the Panel Dentist
selected by the Subscriber, including oral surgery, endodontics,
periodontics, orthodontics and pediatric dentistry. Members typically
receive a reduction from the specialist's usual and customary fees for
the services performed. The Company does not assume traditional
insurance risk under its managed dental care plan arrangements, except
with respect to certain specialty benefit plans described in more
detail below under "Specialty Benefit Plan".

     The Company's managed dental care plans are tailored to meet the
needs of different customers, and range from products having
relatively higher levels of benefits and premiums to products having
relatively lower levels. A majority of the Company's revenues from
managed dental care plans for the year ended December 31, 1997, were
paid by Subscribers either directly or through employee payroll
deductions, with the remainder paid by employers on behalf of their
employees. The contracts between the Company and its Subscribers
require the payment of a monthly premium that is generally fixed for
one year.

     Dual Choice Plans. The Company's products also include dual
choice plans ("Dual Choice Plans"), which allow Subscribers to choose
between a managed dental care plan offered by the Company and an
indemnity dental insurance plan underwritten by a licensed insurance
company but marketed and administered by the Company under an
agreement with the underwriting insurer. The  Company believes that
the ability to offer Dual Choice Plans enables it to offer prospective
customers flexibility, particularly when there are potential
Subscribers outside the area served by the Company's dental panel.
Certain states require that managed dental care plans be offered only
as part of a Dual Choice Plan and other states may do so in the
future. Dual Choice Plans are particularly effective as part of the
Company's growth strategy in areas in which the Company's dental panel
is less well developed and Subscribers may value the ability to choose
non-panel dentists.

     The indemnity insurance portion of the Company's Dual Choice
Plans is marketed and administered by the Company under contractual
arrangements primarily with independent insurance companies. Under the
dental indemnity insurance portion of the Dual Choice Plans,
Subscribers are required to pay small deductibles and copayments which
are generally higher than those which are required under the Company's
managed dental care plans. Subscribers who select the indemnity plan
are not limited to the Company's Panel dentists and may receive dental
services from the dentist of their choice. Under the contract with the
third-party insurers, the Company retains as a marketing and servicing
fee a specified percentage (typically 10-25%) of Premiums paid by
Subscribers under indemnity dental insurance plans underwritten by the
insurer and remits the remainder of such premiums to the insurer.
<PAGE>

     Reduced Fee-For-Service Plans. In January 1996, the Company
acquired TDP, a Texas-based reduced fee-for-service dental company.
The Company's reduced fee-for-service products are offered principally
under the trade names CompSave[COPYRIGHT], Texas Dental Plans and National
Dental Plan. Members receive dental care from a list of participating
dentists who offer discounts from their usual and customary fees.
There are no claim forms or deductibles and no pre-authorization
approval is required. No capitation payments are made to the dentists.
The plan covers certain basic dental procedures as well as
orthodontics and cosmetic dentistry.

     Network Rental. The Company has contracted to provide discount
dental benefits to members of several HMOs. Under this plan Members of
the HMO receive certain limited dental services from Panel dentists at
reduced rates as an additional benefit under the health care plan
provided by the HMO. The Company receives a fixed monthly fee per
Member to administer this plan and does not make capitation payments
to the Panel dentists, who receive payments at rates established under
the plan directly from the Members who receive services. The TDP
Acquisition expanded the number of network rental members. The Company
may in the future seek to provide similar plans to other
organizations.

     ASO Services. In connection with the Dental Care Plus
Acquisition, the Company began providing services as an Administrative
Services Organization ("ASO") in certain markets to self-insured
groups. The Company provides comprehensive services to employers and
other groups offering self-insured dental plans, including billing and
collections, claims processing and payment, Member eligibility
processing and customer service. The Company receives a monthly fee in
exchange for such services equal to a specified amount per each member
of the plan.

     Specialty Benefit Plan. The Company also offers a managed dental
care plan (the "Specialty Benefit Plan") whereby Members who require
covered dental services from participating specialists rather than
their selected Panel dentists may receive them for specific copayments
rather than at a discount from the specialists' usual and customary
fees (as under the Company's more standard plans). The Company
typically collects a higher premium from the Subscriber for this
benefit and reimburses the specialist, resulting in the Company
assuming some risk of utilization of covered specialty dental
services. The Company uses actuaries to determine the cost of expected
benefits under the plan based on the anticipated level of utilization
of specialty services by Members.

     Dental Practice Management. The Company has established a
subsidiary, DHMI, through which the Company manages and operates a
network of dental practices. The Company earned fees paid by dental
facilities for providing management and administrative services and
support to such dental facilities.  The Company owns the operating
assets of the dental practices but does not employ or contract with
dentists or control the provision of dental care or equipment related
thereto.

     Existing dental practices create the foundation for DHMI
networks.  DHMI acquires the assets of and signs a Management Services
Agreement ("MSA") with this practice.  Through the MSA, DHMI provides
the resources and expertise necessary to operate and improve the
business and management elements of a dental practice.  These services
include billing and collections, accounting, marketing, materials
management, human resources, facility management and payor relations.
The practice, in turn, is obligated through the MSA to oversee the
provision of all patient care.  Thus all clinical personnel are
employees of the practice.

     DHMI derives all of its revenue from MSAs with its affiliated
dental practices.  Under certain of the MSAs, DHMI receives a
management fee equal to DHMI's costs plus the lower of (i) the
practice's net pre-tax income or (ii) 30% of the practice's net
revenue.  DHMI's costs include all direct and indirect costs, overhead
and expenses relating to the provision of management services to the
practice under the MSA, such that substantially all of the costs
associated with the provision of dental services by the practice are
borne by DHMI, other than the compensation and benefits of the
clinical personnel who are employed by the practice.  In some cases,
DHMI receives a stated fee for the services provided rather than a
percentage of the practice's revenues.

     Once an acquired practice has been integrated into DHMI's
management systems, DHMI and the practice seek to develop a network of
offices throughout the market.  DHMI and the practice will be able to
develop a geographically comprehensive network of offices that offer
patients and payors a full continuum of dental services.
<PAGE>

Panel Dentists

     The design and operating features of the Company's dental
benefits are intended to assist it in attracting and retaining quality
Panel dentists.  These plan features include copayments, capitation
rates, timely remittance of capitation payments, maintenance of
accurate Member eligibility information, reduction of paperwork and
other administrative functions, and the Company's ability to deliver a
reliable supply of new patients.  As of December 31, 1997, more than
9,000 primary-care and specialty-care dentists were participants on
the Company's panel.

     In its efforts to establish a large panel of quality dentists in
convenient locations, the Company engages in an active marketing and
recruitment program emphasizing personal visits to potential Panel
dentists followed by a quality management program involving screening
of applications for panel membership, reference checks with state
licensing authorities, validation of malpractice coverage, initial
certification and periodic recertification.  Once a dentist has been
admitted to the Company's panel, the Company seeks to recredential the
dentist on an annual basis by updating verification of professional
credentials, licenses, malpractice insurance coverage and legal
compliance, conducting an on-site visit and evaluation, and reviewing
any complaints and/or questions received from Members. The Company
administers its quality management program through a full-time staff
of three dentists who serve as Regional Dental Directors under the
supervision of its National Dental Director, who is also a dentist.

     Panel dentists are independent from the Company and provide
services to Members pursuant to contractual arrangements with the
Company.  The Company's relationships with its Panel dentists are
terminable by either party, upon advance written notice (typically
thirty or sixty days).  The contracts do not require Panel dentists to
provide services exclusively to Members of the Company's plans.  The
Company may, following any required regulatory approval, change the
terms, capitation rates, benefits and conditions of the various plans
serviced by its Panel dentists upon advance written notice.  The
Company's contracts with Panel dentists require the Dentists to
maintain their own malpractice insurance.  The Company also carries
insurance protecting it against liability relating to acts or
omissions of Panel dentists.

Marketing

     The Company markets its dental benefits through a large network
of independent agents and a direct sales force consisting of Company
employees.  This dual distribution system is designed to reach large
groups as well as smaller groups and individual subscribers in an
efficient and cost effective manner.  The Company seeks to avoid
competition between its direct sales force and its independent agents
for the same or similar accounts and seeks to conduct its direct sales
efforts in a manner that avoids undermining the loyalty of independent
agents or their incentive to market the Company's plans on a regular
basis.  The Company's direct sales force (often working with
independent agents) generally focuses on soliciting larger accounts,
including employers with over 250 employees. Independent agents
typically target mid-size and smaller employers and individuals.  The
Company pays the independent agents commissions based on revenue
generated while its direct sales force receives a combination of
salary and a bonus program based on new Subscribers enrolled.  The
independent agents typically do not market the Company's dental
benefits on an exclusive basis.

     The Company also has several departments and employees who
facilitate Group and Member retention. These departments and employees
assist Members on such matters as schedules of benefits, available
Panel dentists, transfers from one Panel Dentist to another, emergency
dental services, billing issues and other administrative and customer
service matters.

Management Information Systems

     The management information systems used by the Company are
designed to facilitate subscriber, provider and agent service.  The
Company depends on these systems for comprehensive customer service,
premium collection and reconciliation, administration of capitation
and commission payments, Member eligibility processing, corporate
accounting, and management reporting.  The Company's management
information systems are sufficiently flexible to allow it to offer
multiple dental benefits tailored to the needs of its customers and
have the capability to interface directly with the systems of its
customers, which can facilitate expeditious processing of changes in
membership information.  In case of emergency, the Company has
established a disaster avoidance and recovery plan and has
<PAGE>
entered into agreements for the transfer of its system and backed-up
data to a compatible computer in Atlanta.  The Company utilizes a
separate management information system in connection with ASO services
provided in Illinois.

     DHMI has licensed for use at its dental offices a management
information system for dental practice management.  Substantially all
of the dental offices are currently utilizing this information system.
DHMI uses the information system to track data related to each dental
office's operations.  The information system can provide each of the
dental offices with data such as patient and practitioner scheduling
information, insurance coverage information, clinical record-keeping
and revenue and collection data (including credit history).  Within
each market, DHMI uses the information system to manage billing and
collections, including electronic insurance claims processing.

Competition

     The Company operates in a highly competitive environment.  Its
competitors principally include large insurance companies, which offer
managed dental care and indemnity dental products in most of the
Company's markets, and independent companies including for-profit and
not-for-profit HMOs, DHMOs, self-funded plans, PPOs and reduced
fee-for-service dental plans offering dental benefits similar to those
offered by the Company.

     The principal competitive factors in the dental benefits industry
are the cost of services (based on the level and type of benefits,
premiums and copayments), the reputation of the plan for providing
quality dental care and the size of the plan's provider network
(including the number of available Panel dentists and the convenience
of their locations).  Price competition may be especially relevant in
seeking the accounts of governmental employers which award contracts
on a periodic basis through competitive bidding.  The dental benefits
industry in general has been subjected to periods of intense price
competition in the past, and similar intense competition in the
managed dental care industry may occur in the future.  The Company has
experienced increased competition from indemnity insurance companies
through direct entry into the managed dental care market.  It is
likely that these efforts will intensify in the future.  Frequently,
such plans are offered in tandem with indemnity dental insurance
coverage and/or PPO alternatives.  In addition, an increasing number
of medically-oriented HMOs and PPOs include dental care benefits as
part of their benefit programs.

     The Company's dental benefits business does not require
substantial amounts of capital and, other than government regulation,
systems operating costs and the cost of obtaining and monitoring a
dental panel, there are no significant barriers to new competitors
entering the market.  There can be no assurance that the Company will
be able to compete successfully with existing competitors or new
market entrants.  Any such additional competition could adversely
affect the Company's results of operations.

     Indemnity dental insurance coverage offered by insurance carriers
may have a competitive advantage over other dental benefit plans
because many such carriers are better known, are significantly larger
and have substantially greater financial and other resources than the
Company. Indemnity dental insurance coverage also has the benefit of
allowing a beneficiary to select almost any licensed dentist, while
participants in the benefits offered by the Company typically must
select a dentist from the plan's panel.

     The dental services industry is highly fragmented, consisting
primarily of solo and smaller group practices. The dental practice
management segment of this industry, currently in its formative stage,
is highly competitive and is expected to become more competitive.  In
this regard, the Company expects that the provision of multi-specialty
dental services at convenient locations will become increasingly more
common.  The Company is aware of several dental practice management
companies that are currently operating in its existing markets.
Companies with dental practice management businesses similar to that
of DHMI, which currently operate in other parts of the country, may
begin targeting DHMI's existing markets for expansion.  Such
competitors may be better capitalized or otherwise enjoy competitive
advantages which may make it difficult for the Company to compete
against them or to acquire additional dental offices on terms
acceptable to the Company.  As the Company seeks to expand its
operations into new markets, it is likely to face competition from
dental practice management companies which already have established a
strong business presence in such locations.

     The business of providing general dental, orthodontic and other
specialty dental services is highly competitive in the markets in
which DHMI operates.  DHMI believes it competes with other providers
of dental and
<PAGE>
specialty services on the basis of factors such as brand
name recognition, convenience, cost and the quality and range of
services provided.  Competition may include practitioners who have
more established practices and reputations. DHMI's affiliated dental
practices also compete in the retention and recruitment of general
dentists, specialists and clinical staff.  If the availability of
dentists begins to decline in DHMI's markets, it may become more
difficult to attract qualified dentists to staff the dental offices
sufficiently or to expand them.  The dental offices may not be able to
compete effectively against other existing practices or against new
single or multi-specialty dental practices that enter its markets, or
to compete against such other practices in the recruitment of
qualified dentists.

Government Regulation

     The Company's business is and will continue to be subject to
substantial governmental regulation, principally under the insurance
laws of the states in which the Company conducts business and may in
the future conduct business.  Although specific requirements vary from
state to state, these laws generally require that the Company's
subsidiary operating in that state be licensed by the relevant state
insurance department to offer its dental care products and otherwise
conduct its operations, prescribe minimum levels of net worth and
reserves, limit the ability of the Company's subsidiaries to pay
dividends to the extent required regulatory capital would be impaired,
establish the manner in which premiums are determined or structured,
require filing for approval of products, certain product literature,
premium levels and contract forms with subscribers, dentists and
others (which may entail substantial delay in implementing changes or
introducing new products), in some cases establish minimum benefit
levels for the Company's dental products, provide for periodic
examinations, including quality assurance review, establish standards
for the Company's management and other personnel, specify measures for
resolving grievances and generally prohibit the acquisition of more
than specified levels (as low as 5% in current states of operation) of
the Company's outstanding voting power without prior approval.  These
regulatory provisions generally grant plenary power to the relevant
agencies in interpreting and administering the applicable laws and
regulations.  Various state regulatory agencies and legislatures have
in the past considered, are presently considering, and may in the
future propose regulatory and legislative changes, such as the
establishment of prescribed minimum capitation payments to Panel
dentists, minimum loss ratios or mandated schedules of benefits and
the adoption of legislation requiring the Company to admit "any
willing provider" to its dental panels, that could adversely affect
the Company's business and profitability.  In addition, health care
and insurance reform initiatives have been proposed and may be
proposed in the future at the state and federal levels which may
adversely affect the Company's business and profitability.  The
Company is unable to determine the likelihood or effect of any such
regulatory or legislative changes.

     State regulatory requirements may also limit the Company's
ability to operate in certain existing markets or adversely affect its
ability to enter new markets on a de novo basis or through
acquisitions.  In some states the Company can only conduct business
through a contractual arrangement with a licensed indemnity carrier or
a full service HMO, which is generally a less advantageous and more
cumbersome arrangement than offering managed dental care plans
directly.  The Company conducts business in such states through such
arrangements with Shenandoah Life Insurance Company ("Shenandoah") and
Centennial Life Insurance Company.  The Company cannot generally enter
new states on a de novo basis without obtaining required licenses and
approvals, a process which can take as long as two years or more in
certain states. The acquisition of managed dental care companies
generally requires the prior approval of the state regulatory
authorities in the states in which these companies do business, which
can take up to six months or more, and relevant state laws concerning
regulatory capital and surplus in many cases prohibit these entities
from guaranteeing parent company debt, thus possibly limiting the
Company's ability to obtain acquisition financing.  While the
regulated nature of the Company's industry may interfere with
management's plans for further geographic expansion, this regulatory
environment also governs, to a greater or lesser extent, the conduct
and expansion prospects of existing and new competitors.

     Failure to maintain regulatory compliance and constructive
relationships with relevant regulatory authorities could adversely
affect the Company's ability to conduct its business, for example, by
limiting the Company's ability to obtain required approvals for new
products or premium increases.  In an extreme case, failure to comply
with relevant laws and regulations may result in revocation of one or
more of the Company's licenses.  The Company's policy is to pay close
attention to regulatory compliance matters.

     In connection with the marketing and administration by the
Company of the indemnity insurance benefits that are offered as a part
of its Dual Choice Plans, the Company may be subject to license and
regulation as a "third-
<PAGE>
party administrator" in certain states.  Such regulation typically is
less extensive than regulation applicable to the managed dental care
plans offered directly by the Company.  In addition, if the Company is
licensed to offer managed dental care plans in such states, it may be
exempt from regulation as a third-party administrator.

     DHMI is also subject to a variety of governmental and regulatory
requirements relating to the conduct of its business.  DHMI seeks to
structure its business practices and arrangements with dental
practices to comply with relevant federal and state law and believes
that such arrangements and practices comply in all material respects
with all applicable statutes and regulations.  The health care
industry and dental practices are highly regulated, and there can be
no assurance that the regulatory environment in which DHMI operates
will not change significantly and adversely in the future.

     The laws of many states prohibit corporations that are not owned
entirely by dentists from employing dentists (and in some states,
dental hygienists and dental assistants), having control over clinical
decision-making or engaging in other activities that are deemed to
constitute the practice of dentistry.  DHMI does not employ dentists
or dental hygienists and does not exercise control over any prohibited
areas.  Also, the laws and regulations of certain states into which
DHMI seeks to expand may require DHMI to change the form of
relationships entered into with dentists in a manner that restricts
DHMI's operations in those states.

     The operations of DHMI are also subject to compliance with
regulations promulgated by the Occupational Safety and Health
Administration ("OSHA"), relating to such matters as heat
sterilization of dental instruments and the usage of barrier
techniques; such as, masks, goggles and gloves.  DHMI incurs expenses
on an ongoing basis relating to OSHA monitoring and compliance.

     DHMI believes that health care regulations will continue to
change, and as a result, regularly monitors developments in health
care law.  DHMI expects to modify its agreements and operations from
time to time, if necessary, as the business and regulatory environment
change.

Employees

     The Company had approximately 600 employees at December 31, 1997.
None of the Company's employees are covered by a collective bargaining
agreement.  The Company believes its relations with its employees are
good.

UniLife

     The Company's wholly-owned subsidiary, UniLife Insurance Company,
an Arizona-domiciled company ("UniLife"), is licensed to transact
business in Arizona, Colorado, Louisiana, Mississippi, Missouri, New
Mexico, Oklahoma, Texas and Utah.  UniLife is a traditional indemnity
insurance carrier and therefore assumes underwriting risk.  Effective
January 1, 1996, UniLife and Shenandoah entered into an assumption
reinsurance agreement transferring all of UniLife's existing business
that was not already reinsured to Shenandoah.

Item 2.  PROPERTIES.

     All offices and facilities of the Company are leased.  The
Company's leased properties are in generally good condition and are
adequate for their intended use.

Item 3.  LEGAL.

     The Company's wholly-owned subsidiary, American Prepaid and its
Florida subsidiary, American Dental Plan, Inc. ("ADP"), are currently
defendants to a civil complaint filed by three participating dentists
(one of which has since withdrawn) who have entered into Participating
Dentist Agreements with various subsidiaries of the Company
("Subsidiaries").  The complaint alleges a breach of contract and
seeks damages based on the failure of ADP to make capitation payments
to its participating dentists for the period of time between when a
subscriber enrolls and the time at which the subscriber selects a
participating dentist.  The plaintiffs sought to bring the suit as a
class action.  On December 4, 1997, a class was certified consisting
of all participating dentists in the states of
<PAGE>
Florida, Mississippi, South Carolina, and Tennessee who, since
September 1, 1989, have had Participating Dentist Agreements with
American Dental Plan, Inc.

     While the Company believes its interpretation and administration
of the Participating Dentist Agreements are correct, the Company
recently entered into a proposed settlement, which awaits final
approval by the Court.  The general terms of the settlement provide
for a total payment of $1.3 million to be divided among (1) the class
members who are no longer with ADP, (2) the class representatives, and
(3) the attorneys for the plaintiff class. Additional costs associated
with this settlement will be approximately $0.3 million.

     The settlement also requires that ADP amend its Participating
Dental Agreement to provide that it will pay capitation to the dentist
when there has been a delay between the time a subscriber initially
enrolls in the dental plan and the date they select a dentist, for all
subscribers who enroll after January 1, 1999.  In addition, ADP has
agreed to provide additional notices to subscribers who have not
selected a dentist.

     The proposed settlement is subject to the notification of the
class members, a fairness hearing, and approval by the court.

     Management does not believe that there are currently any asserted
or unasserted claims that will have a material adverse effect on the
financial position of the Company.

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

     There were no matters submitted during the fourth quarter of the
fiscal year covered by this report to a vote of security holders
through solicitation of proxies or otherwise.

PART II

Item 5.   MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS.

Market Information

     The Common Stock of the Company has been traded on the Nasdaq
National Market ("Nasdaq") since the Company's initial public offering
on May 24, 1995 and currently trades under the symbol "CPDN".  The
following table sets forth the high and low closing sales prices for
the Company's Common Stock as reported by Nasdaq for the periods
indicated:

                                           Market Prices (1)

Fiscal Quarters                         High ($)          Low ($)
        1997
First                                   39 1/4            27 1/2
Second                                  27 3/8            14 1/4
Third                                   26 1/8            19 3/8
Fourth                                  27 5/8            18 5/8

         1996
First                                   45 1/8            34 1/4
Second                                  51                35 1/8
Third                                   51 11/16          33
Fourth                                  40 3/8            27 1/2
_______________

     (1) The prices listed reflect inter-dealer prices without retail
mark-up, markdown or commission and may not necessarily represent
actual transactions.
<PAGE>

Holders

     The number of record holders of the Company's Common Stock as of
March 10, 1998 was approximately forty-three (43).  The Company
believes that the number of beneficial owners of the Company's Common
Stock at that date was substantially greater.

Dividends

     The Company did not pay cash dividends on its Common Stock during
the years ended December 31, 1997 and December 31, 1996.  The Company
does not currently intend to pay cash dividends on its Common Stock in
the foreseeable future.  Under the Company's senior credit facility,
the distribution of dividends would require the lender's consent.
Applicable laws generally limit the ability of the Company's
subsidiaries to pay dividends to the extent that required regulatory
capital would be impaired, which in turn further limits the Company's
ability to pay dividends.
<PAGE>

Item 6.  SELECTED FINANCIAL DATA.

     The selected consolidated statement of income data and balance
sheet data set forth below for, and at the end of, the years ended
December 31, 1995, 1996 and 1997, are derived from, and are qualified
by reference to the financial statements of the Company audited by
Coopers & Lybrand L.L.P., independent auditors, included elsewhere in
this annual report.  The selected consolidated statement of income
data and balance sheet data for, and at the end of, the periods ended
December 31, 1993 and prior, are derived from audited financial
statements of the Company not included herein.  The selected
consolidated financial information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Company's consolidated
financial statements and related notes.

<TABLE>
                                        Predecessor Company(1)                        The Company
                                                    Six Months    Six Months
                                                         Ended      Ended
                                                       June 30,    Dec. 31,              YearEnded Dec. 31,
                                                          1993       1993       1994      1995        1996      1997
<S>                                                    <C>         <C>       <C>        <C>        <C>        <C>
(in thousands, except per share data)

Consolidated Statement of Income Data:
Revenues                                               $22,004     $24,033   $55,192   $106,661    $141,069   $158,726
Dental providers' fees and claim costs                  11,932      13,055    30,262     62,218      73,431     81,690
Commissions                                              3,028       3,143     6,800     10,763      12,184     13,272
Gross profit                                             7,044       7,835    18,130     33,680      55,454      1,047
General and administrative                               6,418       4,537    10,827     20,827      31,412     44,318
Depreciation and amortization                              205         884     2,195      2,717       5,153     64,688
Operating income (loss)                                    42l       2,414     5,108     10,136      18,889    (46,289)
Interest expense                                            --       1,208     2,464      1,970       1,935      3,239
Other (income) expense, net                              1,139          --       (77)      (803)       (804)      (723)
Income (loss) before provisions for
   income taxes and extraordinary item                    (718)      1,206     2,721      8,969      17,758    (48,805)
Income tax provision                                        55         553     1,316      3,765       7,866      4,900
Income (loss) before extraordinary item                   (773)        653     1,405      5,204       9,892    (53,705)
Extraordinary loss, net of applicable
  benefit of $305                                           --          --        --        498          --         --
Net income (loss)                                         (773)        653     1,405      4,706       9,892    (53,705)
Income (loss) per common share - basic:
Income (loss) before extraordinary item                                         0.31        0.69       0.98      (5.32)
Extraordinary loss                                                                         (0.07)
Income (loss) income per common share                                           0.31        0.62       0.98      (5.32)
Income (loss) per common share - diluted:
Income (loss) before extraordinary loss                                         0.30        0.68       0.97      (5.32)
Extraordinary loss                                                                --       (0.07)        --         --
Net income (loss) per common share (1)                                          0.30        0.61       0.97      (5.32)
Weighted average common shares outstanding (1)                                 4,149       7,241     10,049     10,098
Weighted average common shares outstanding
  with dilutive securities                                                     4,252       7,352     10,177     10,098
</TABLE>
<PAGE>

<TABLE>                                          The Company
                                                  December 31,
                                         1993       1994(2)     1995(2)(3)     1996(4)(5)    1997(6)(7)
<S>                                    <C>          <C>          <C>           <C>            <C>
Consolidated Balance Sheet Data:

Total current assets                   $ 8,776      $14,488      $ 46,254      $ 34,083       $37,283
Total assets                            37,202       63,342       129,396       184,167       150,871
Total current liabilities                8,640       16,597        21,041        24,273        26,067
Total liabilities                       34,252       53,983        27,219        71,984        90,595
Redeemable preferred                     1,050        5,159            --            --            --
Stockholders' equity                     1,900        4,200       102,177       112,183        60,276
</TABLE>
(1)  Presents consolidated financial data of the Company's
     predecessor, American Prepaid, for the periods prior to the
     Company's Acquisition of all of the outstanding stock thereof
     effective in June 1993. Because of such transaction, certain
     aspects of the consolidated results of operations for periods
     prior to the period July 1, 1993 are not comparable with those
     for subsequent periods. Consequently, net income per share data
     are presented only for the years December 31, 1994 and
     thereafter. For purposes of the Consolidated Statements of Income
     Data, references to common shares include common share
     equivalents. Net income per common share for the years ended
     December 31, 1994 and 1995, has been computed after deducting
     $109,000 and $218,000, respectively, from net income attributable
     to preferred stock dividend accumulation.
(2)  The DentiCare and UniLife acquisitions were completed on December
     28, 1994, and DentiCare and UniLife are therefor included in the
     consolidated balance sheet of the Company at December 31, 1994
     and thereafter, and the consolidated statement of income of the
     Company for the years ended December 31, 1995 and thereafter.
(3)  The CompDent acquisition was completed on July 5, 1995, and
     CompDent is therefor included in the consolidated balance sheet
     of the Company at December 31, 1995 and thereafter, and the
     consolidated statement of income of the Company for the years
     ended December 31, 1995 and thereafter.
(4)  The Texas Dental acquisition was completed on January 8, 1996 and
     Texas Dental is therefor included in the consolidated balance
     sheet of the Company at December 31, 1996, and the consolidated
     statement of income of the Company for the year ended December
     31, 1996.
(5)  The Dental Care Plus acquisition was completed on May 8, 1996,
     and Dental Care Plus is therefore included in the consolidated
     balance sheet of the Company at December 31, 1996, and the
     consolidated statement of income of the Company for the year
     ended December 31, 1996.
(6)  The American Dental Providers and Diamond Dental & Vision
     acquisition was completed on March 21, 1997 and is therefore
     included in the consolidated balance sheet of the Company at
     December 31, 1997, and the consolidated statement of income of
     the Company for the year ended December 31, 1997.
(7)  The Workman Management Group, Old Cutler Dental Associates,
     Robert T. Winfree, D.D.S. and the Stratman Management Group
     acquisitions were completed on July 2, 1997, July 2, 1997,
     September 26, 1997 and November 7, 1997 respectively and these
     five are included in the consolidated balance sheet of the
     Company at December 31, 1997, and the consolidated statement of
     income of the Company for the year ended December 31, 1997.

Item 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS.

OVERVIEW

Type of Services

     The Company is a full-service dental benefits provider.
Approximately 75% of revenues are generated from managed dental care
plan subscriber premiums.  In addition, DHMI generates approximately
10% of the Company's revenues from providing management services and
support to dental practices.  The balance of revenues are generated by
reduced fee-for-service plans and third-party administrator services.

     Under managed dental care plans, Subscribers pay a premium to
receive dental services from a dentist which the subscriber selects
from a panel of dentists.  The Panel dentists are paid by the Company
a monthly capitation fee which is fixed under the participating dental
agreement regardless of the extent of services provided. Historically,
the cost structure within managed dental care plans results in
capitations of approximately 60% of revenues, commission expense of
approximately 10% of revenues, and general and administrative expenses
of
<PAGE>
approximately 20% of revenues, leaving an operating margin of
approximately 10% of revenues.  Dual Choice plans allow members to
choose between a managed dental care plan offered by the Company or a
traditional dental indemnity insurance plan underwritten by an
unaffiliated insurance company, but marketed and administered by the
Company under agreements with the underwriting insurers.  A small
portion of the Company's revenues is generated from commissions earned
from the insurance companies underwriting such dental indemnity
insurance.

     In reduced fee-for-service plans, the subscriber pays a fee for
access to a panel of dentists.  The dentists on the panel have agreed
to provide services at reduced rates.  The subscriber pays the dentist
at the reduced rate for services provided at the time of service
delivery.  Therefore, this type of plan involves no payment by the
Company to the dentists.  Historically, the cost structure within
reduced fee-for-service plans consists of no capitation expense,
commission expense of approximately 25% of revenues, and general and
administrative expenses of approximately 40% of revenues, leaving an
operating margin of approximately 35% of revenues.

     Revenues from third-party administrator arrangements are earned
by managing the claims processing and paying function for groups.  The
groups fund the claims and pay a service fee to the Company.
Historically, the cost structure within third-party administrator
arrangements consists of no capitation expense, commission expense of
approximately 5% of revenues, and general and administrative expenses
of approximately 70% of revenues, leaving an operating margin of
approximately 25% of revenues.

     DHMI earns its revenues from the provision of management services
to the dental practices.  These services include billing and
collections, accounting, marketing, materials management, human
resources, facility management and payor relations.  In most markets,
DHMI is paid a percent of practice revenues; however, because of
regulatory limitations, DHMI receives a flat fee in several markets.

     The Company operates two distinguishable segments, dental
benefits services and dental practice management.  The Company will
report, for the year ending December 31, 1998, its financial
information in accordance with SFAS No. 131, Disclosures about
Segments of an Enterprise and Related Information.

History and Growth

     The Company's predecessor, American Prepaid Professional
Services, Inc. (American Prepaid), began operations in Florida in
1978.  Since 1987 the Company has begun de novo operations in seven
additional states.  In December 1994, the Company entered the Texas
market through the acquisitions of DentiCare, Inc. (DentiCare), a
Houston-based managed dental care company, and UniLife Insurance
Company, an indemnity insurer (UniLife).  In July 1995, the Company
entered or expanded its presence in additional markets, including
Kentucky, Indiana, Missouri, Kansas and West Virginia, through the
acquisition of CompDent Corporation (CompDent), a Louisville,
Kentucky-based managed dental care company.  In January 1996, the
Company acquired Texas Dental Plans, Inc. and affiliated entities
(Texas Dental), a reduced fee-for-service dental company based in San
Antonio, Texas, which increased the Company's presence in Texas,
broadened the Company's product line, and expanded the Company's
operations to an additional seven states.  Dental Care Plus
Management, Corp. and its wholly owned subsidiary, CompDent of
Illinois (formerly known as I.H.C.S., Inc.), a Chicago, Illinois-based
third-party administrator and managed dental care provider,
respectively, were acquired in May 1996 and greatly expanded the
Company's presence in Illinois.

     In addition to growth by acquisitions, the Company has achieved
internal revenue growth from increases in the number of subscribers, a
shift toward products with higher benefit levels and higher premiums
and, to a much more limited extent, premium rate increases.  The
Company has historically introduced an across-the-board rate/benefit
increase of approximately 6% to 8% every three years with a gradual
implementation of the new rates/benefits throughout the subscriber
base resulting in price increases of approximately 3% per year on
average.

Business Combinations

     On June 29, 1993, the Company acquired all of the issued and
outstanding capital stock of American Prepaid for approximately $29.5
million in cash.  The 1993 acquisition was funded through the
incurrence of $20.0 million of senior indebtedness (the "1993 Loan")
and the issuance of $6.85 million of Subordinated Notes, $1.0 million
of Redeemable Preferred Stock and $1.7 million of common stock.  The
Company repaid the entire
<PAGE>
outstanding balance of the 1993 Loan and retired all outstanding
Subordinated Notes and Redeemable Preferred Stock (including accrued
unpaid interest and accumulated dividends) on June 1, 1995, with a
portion of the net proceeds from its initial public offering.  The
1993 acquisition has been accounted for using the purchase method of
accounting.  The Company recorded $3.0 million related to a
non-competition agreement and $23.5 million of goodwill, which are
being amortized on a straight-line basis over 5 and 40 years,
respectively.

     On December 28, 1994, the Company acquired DentiCare and UniLife
for $17.0 million plus approximately $600,000 in transaction costs.
These acquisitions were funded through the incurrence of $12.0 million
of senior indebtedness (the "1994 Loan") and the issuance of $4.0
million of Redeemable Preferred Stock and $1.0 million of common
stock.  On June 1, 1995, the Company repaid the entire outstanding
balance of the 1994 loan and retired all outstanding Subordinated
Notes and Redeemable Preferred Stock (including accrued unpaid
interest and accumulated dividends) with a portion of the net proceeds
from its initial public offering.  The DentiCare and UniLife
acquisitions have been accounted for using the purchase method of
accounting.  The acquired assets and liabilities were recorded at
their estimated fair market values at the date of acquisition, which
in the case of UniLife resulted in a write-down of certain assets.  In
connection with the DentiCare acquisition, the Company recorded $15.6
million of goodwill, which is being amortized on a straight-line basis
over 40 years. The Company's strategy regarding UniLife has been to
wind down over time UniLife's dental indemnity insurance business.  As
of October 1, 1995, the Company reinsured UniLife's dental indemnity
insurance business and its group term policies with another insurance
company.  In April 1996, the Company completed the conversion of all
of UniLife's real estate and other assets into cash and cash
equivalents.

     On July 5, 1995, the Company acquired CompDent for $32.5 million
plus approximately $1.1 million in transaction costs.  The CompDent
acquisition was funded through the incurrence of $25.0 million of
senior indebtedness under the Company's revolving credit facility and
proceeds from the Company's initial public offering. The Company then
repaid the outstanding indebtedness under its revolving credit
facility with a portion of the net proceeds received from its second
stock offering.  The CompDent acquisition has been accounted for using
the purchase method of accounting. The acquired assets and liabilities
were recorded at their estimated fair market values at the date of
acquisition.  In connection with the CompDent acquisition, the Company
recorded $34.3 million of goodwill which is being amortized on a
straight-line basis over 40 years.

     On January 8, 1996, the Company acquired Texas Dental, a
Texas-based reduced fee-for-service dental company for an aggregate
cash purchase price of approximately $23.0 million including
approximately $540,000 in transaction costs.  The Texas Dental
acquisition was funded with net proceeds remaining from the Company's
second stock offering. The Texas Dental acquisition was accounted for
using the purchase method of accounting, with the acquired assets and
liabilities recorded at their estimated fair market values at the date
of acquisition. Goodwill of $26.0 million was recorded in the
acquisition and is being amortized over 40 years on a straight-line
basis.  The reduced fee-for-service products offered by Texas Dental
broaden the Company's existing product line.

     Effective May 8, 1996, the Company acquired Dental Care Plus.
The aggregate purchase price for Dental Care Plus was $38.0 million
(including approximately $843,000 in transaction costs), of which the
Company paid approximately $27.0 million in cash and assumed
approximately $11.0 million in accrued liabilities.  Dental Care Plus
is based in Chicago, Illinois, and provides managed dental care
services through a network of dental care providers.  Dental Care Plus
also acts as a third-party administrator and provides management
services to Health Care Systems, Inc., a non-profit dental company.
The Company financed the purchase of Dental Care Plus as well as
satisfaction of the assumed liabilities by drawing down the Company's
revolving credit facility.  The acquisition of Dental Care Plus was
accounted for using the purchase method of accounting, resulting in
the Company recording $41.2 million in goodwill which is being
amortized over 40 years on a straight-line basis.

     Effective March 21, 1997, the Company completed the acquisition
of American Dental Providers, Inc. ("AMDP"), and Diamond Dental &
Vision, Inc. ("DDV").  The aggregate purchase price of $1.7 million
consisted of $0.5 million in cash and $1.2 million of Company common
stock issued at fair market value.  AMDP provides managed dental care
services through a network of dental care providers, and DDV provides
a vision plan and referral fee-for-service dental plan to the Arkansas
market.  The Company funded the cash portion of the purchase with cash
available from operations.  The acquisition of AMDP and DDV was
accounted for using the purchase method of accounting with the results
of operations of the businesses acquired included from the effective
date of the acquisition.  The acquisition resulted in excess of cost
over fair value of net assets acquired of $2.9 million which is
<PAGE>
being amortized over 40 years.  During the second quarter of 1997, the
Company revised its allocation of the purchase price of AMDP and DDV
which resulted in a decrease to the excess of purchase price over net
assets acquired of $0.5 million to $2.4 million.

     Effective July 2, 1997, the Company completed the acquisition of
21 dental facilities from The Workman Management Group, LTD
("Workman"). The dental facilities are located in central and southern
Illinois.  The purchase price consisted of $15.5 million in cash, and
with funding mainly from the revolving line of credit. Concurrent with
the acquisition, the Company entered into a forty-year agreement to
manage the dental practices which are operating in the dental
facilities.  The acquisition of Workman was accounted for using the
purchase method of accounting with the results of operations of the
business acquired included from the effective date of the acquisition.
The acquisition resulted in excess of cost over fair value of net
assets acquired of $15.2 million which is being amortized over 40
years.  During the fourth quarter of 1997, the Company revised its
allocation of the purchase price of Workman which resulted in an
increase to the excess of purchase price over net assets acquired of
$1.8 million to $17.0 million.

     During the third and fourth quarter of 1997, the Company
completed the acquisition of several dental facilities from three
additional dental groups.  Effective July 2, 1997, the Company
completed the acquisition of one dental facility located in southern
Florida from the Old Cutler Dental Associates, P.A. ("Old Cutler").
Effective September 26, 1997, the Company completed the acquisition of
one dental facility located in central Tennessee from Robert T.
Winfree, D.D.S., P.C. ("Winfree"). Effective November 7, 1997, the
Company completed the acquisition of Stratman Management Group
("Stratman") and its six dental facilities located in Indiana.  The
purchase price of these facilities consisted of $5.0 million in cash
less discharge of liabilities related to the purchased assets.
Funding for the acquisitions was obtained from cash available from
operations and from the Company's revolving line of credit.
Concurrent with the acquisitions, the Company entered into
forty-year agreements to manage the dental practices which are
operating in the dental facilities.  Each acquisition was accounted
for using the purchase method of accounting with the results of
operations of the businesses acquired included from the effective date
of the acquisition.  The acquisitions resulted in excess of cost over
fair value of net assets acquired of $5.5 million which is being
amortized over 40 years.

     During the fourth quarter, management concluded that the
Company's accounting policy with respect to the recoverability of
goodwill should be changed to discounted projections of future cash
flows using an economic rate of return that would be customary for
evaluating the present value of future cash flows in connection with
current dental benefit company transactions.  As a result of this
accounting change, the goodwill attributable to the acquisition of
CompDent Corporation was reduced from $32.1 million to $13.9 million.
Additionally, the goodwill attributable to the acquisition of Dental
Care Plus Management, Corp. was reduced from $39.1 million to $8.8
million, DentiCare, Inc. was reduced from $14.4 million to $6.0
million and American Dental Providers, Inc. and Diamond Dental &
Vision, Inc. was reduced from $2.1 million to $0, or a total reduction
of $59.0 million.  The goodwill associated with these acquisitions
will be amortized over the remaining forty-year life.

RESULTS OF OPERATIONS

Year ended  December 31, 1997, compared to the year ended December 31,
1996
     Revenues increased by $17.6 million, or 12.5%, to $158.7 million
in 1997 from $141.1 million in 1996.  Of the increase, $7.9 million,
was primarily attributable to revenues contributed by DHMI which
commenced operations in 1997. The addition of AMDP and DDV and Dental
Care Plus revenues following the acquisitions of these companies
accounted for $0.9 million and $2.1 million, respectively, of this
increase. Internal growth accounted for $6.7 million of the growth in
subscriber premiums.

     Other revenue increased by $2.9 million, or 54.7%, to $8.2
million in 1997 from $5.3 million in 1996. The increase was primarily
attributable to $2.0 million of Dental Care Plus third-party
administrator fees and management fees in 1997 following the May 1996
Dental Care Plus acquisition.

     Dental care providers' fees and claim costs increased $8.3
million, or 11.3%, to $81.7 million in 1997 from $73.4 million in
1996.  Dental care providers' fees represent capitation payments paid
to panel dentists under the Company's managed dental care plans.
Under managed dental care plans, capitation payments to panel dentists
are fixed under the participating dental agreement regardless of the
extent of services provided.  Dental claim costs
<PAGE>
represent amounts payable to dental care providers under certain
non-capitated plans.  The increase in dental care providers' fees and
claim costs was due in part to a $2.0 million one-time charge
associated with terminating an indemnity relationship. Dental care
providers' fees and claims costs increased to 57.0% from 54.1% of
subscriber premiums in 1997 and 1996, respectively.  The increase was
partially the result of the one-time charge mentioned above.

     Commission expense increased $1.1 million, or 9.0%, to $13.3
million in 1997 from $12.2 million in 1996. The $1.0 million increase
in commission expense was the result of internal growth in subscriber
premiums.  As a percentage of subscriber premiums, commissions
increased to 9.3% in 1997 from 9.0% in 1996.

     Premium taxes remained the same in 1997 as a percentage of
subscriber premiums at 0.7%

     General and administrative expenses increased $13.9 million, or
45.7%, to $44.3 million in 1997 from $30.4 million in 1996.  As a
percentage of total revenues, this expense increased to 27.9 % in 1997
from 21.5% in 1996.  Of this increase, $5.0 million, or 35.5%, was
related to the operating costs of DHMI's dental facilities. This
increase as a percentage of revenues is due to higher general and
administrative costs ($2.1 million or 14.8%) added following the
January startup of DHMI. The remaining increase related to the $7.4
million in unusual and one-time charges which were recorded in the
fourth quarter of 1997. The unusual and one-time charges included a
reserve for a surplus note ($2 million), reserve for incurred practice
management startup costs ($1.4 million), litigation settlement costs
($1.6 million) and other costs ($2.4 million).  The increases were
partially offset by a $0.6 million decrease from further assimilation
of acquired business which resulted in reductions of general and
administrative costs.

     Depreciation and amortization expense increased $59.5 million, or
115.5%, to $64.7 million in 1997 from $5.2 million in 1996.  This
includes $59.0 million in write-offs for goodwill impairment. The
goodwill impairment resulted from the Company's determination that the
recoverability of goodwill should be determined through discounted
projections of future flows instead of undiscounted cash flows,
utilizing an economic rate of return that would be customary for
evaluating the present value of future cash flows of current dental
benefit company transactions. Depreciation expense increased $600,000
due to additional office furniture, equipment, and leasehold
improvements and capital expenditures at DHMI.  Depreciation expense
in 1998 is expected to be slightly higher due to the addition of
leasehold improvements, and computer and phone equipment.

     Interest income increased from $585,000 in 1996 to $725,000 in
1997.  This increase is primarily attributed to the rise in interest
rates and a concerted effort to invest cash in higher yielding
instruments.

     Interest expense increased to $3.2 million in 1997 from $1.9
million in 1996.  The Company had $56.6 million of debt outstanding at
December 31, 1997.  At each quarter end, the Company draws from its
credit facility to pay down inter-company balances.  The increase is
primarily related to the increase in interest rates and in the amounts
outstanding under the Company's credit facility.  Any future
acquisitions may cause the Company to incur additional indebtedness
under its revolving credit facility or otherwise.

     In 1997, the Company's effective income tax rate increased to
48.3% (excluding the $59.0 million in write-offs for goodwill
impairment) compared with 44.3% in 1996.  The increase is primarily
attributable to additional nondeductible goodwill amortization
recorded in 1997 following the recent acquisitions and the relatively
lower base of net income.

     As a result of the above mentioned factors, the net loss for 1997
was $53.7 million or $5.32 per share compared to net income of $9.9
million or $0.97 per share for 1996.


Year ended  December 31, 1996, compared to the year ended December 31,
1995
     Revenues increased by $34.4 million, or 32.3%, to $141.1 million
in 1996 from $106.7 million in 1995. This increase was primarily
attributable to a $30.9 million, or 29.5% increase in subscriber
premiums to $135.8 million in 1996 from $104.9 million in 1995.  The
addition of Texas Dental and Dental Care Plus subscriber premiums
following the acquisitions of these companies accounted for $8.8
million and $10.0 million, respectively, of this increase.  The
acquisition of CompDent in July of 1995 impacted 1995 for part of the
year and impacted 1996
<PAGE>
for the full year, resulting in higher subscriber premiums in 1996 of
approximately $16.6 million.  Internal growth accounted for $9.7
million of the growth in subscriber premiums.  These increases in
subscriber premiums were partially offset by a decrease of $14.2
million in UniLife premiums. Effective October 1, 1995, UniLife
reinsured all of its indemnity insurance with another insurance
company.  This completed the Company's strategy upon acquiring UniLife
to wind down UniLife's dental indemnity insurance business.

     Other revenue increased by $3.5 million, or 198.5%, to $5.3
million in 1996 from $1.8 million 1995. The increase was primarily
attributable to $3.2 million of Dental Care Plus third-party
administrator fees and management fees in 1996 following the May 1996
Dental Care Plus acquisition.

     Dental care providers' fees and claims costs increased $11.2
million, or 18.0%, to $73.4 million in 1996 from $62.2 million in
1995.  Dental care providers' fees represent capitation payments paid
to panel dentists under the Company's managed dental care plans.
Under managed dental care plans, capitation payments to panel dentists
are fixed under the participating dental agreement regardless of the
extent of services provided.  Dental claim costs represent amounts
payable to dental care providers under certain non-capitated plans.
Dental care providers' fees and claims costs decreased to 54.1% from
59.3% of subscriber premiums in 1996 and 1995, respectively.  This
decrease as a percentage of subscriber premiums is due to the
acquisition of Texas Dental which, as a reduced fee-for-service dental
company, has subscriber premiums with no corresponding capitation
expense. Providers' fees and claim costs as a percentage of subscriber
premiums were also lowered by the elimination of UniLife claims costs.
As discussed above, effective October 1, 1995, UniLife entered into a
reinsurance agreement and thus incurred no claims cost after this
date.  The addition of Dental Care Plus providers' fees and claims at
61.2% of subscriber premiums following the May 1996 acquisition
partially offset these decreases.

     Commission expense increased $1.4 million, or 13.2%, to $12.2
million in 1996 from $10.8 million in 1995.  The addition of Texas
Dental and Dental Care Plus commissions in 1996 resulted in a $1.4
million increase while the elimination of UniLife commissions resulted
in a $1.9 million decrease.  The acquisition of CompDent in July of
1995 impacted 1995 for part of the year and impacted 1996 for the full
year, resulting in higher commission expense in 1996 of approximately
$0.9 million.  The remaining $1.0 million increase in commission
expense was the result of internal growth in subscriber premiums.  As
a percentage of subscriber premiums, commissions decreased to 9.0% in
1996 from 10.3% in 1995.  This decease related primarily to the
addition of Dental Care Plus commissions at 1.0% of subscriber
premiums and the elimination of UniLife commissions at 13.4% of
subscriber premiums, partially offset by the addition of Texas Dental
commissions at 15.4% of subscriber premiums. Without the effects of
Dental Care Plus, UniLife, and Texas Dental on subscriber premiums and
commissions, commissions as a percentage of subscriber premiums
decreased slightly from 9.8% in 1995 to 9.2% in 1996.  The slight
decrease as a percentage of subscriber premiums was primarily
attributable to an increase in the number of large employer groups for
which the Company's direct sales force typically plays an active role
in sales and servicing, resulting in a lower commission rate or no
commissions being paid to independent agents with respect to these
accounts.  The expenses associated with the increased number of sales
representatives employed by the Company were reflected in general and
administrative expenses, rather than commissions.

     Premium taxes decreased as a percentage of subscriber premiums to
0.7% in 1996 compared with 1.3% in 1995.  This decrease was a result
of the addition of Texas Dental and Dental Care Plus subscriber
premiums in 1996 and the elimination of UniLife subscriber premiums in
the third quarter of 1995.  Texas Dental is a reduced fee-for-service
dental company and, accordingly, its revenues are not subject to
premium tax in the state of Texas.  Dental Care Plus revenues are not
subject to a premium tax in the state of Illinois.  UniLife premiums
in 1995 were subject to the Texas premium tax rate of approximately
2.5%.

     General and administrative expenses increased $11.0 million, or
56.4%, to $30.4 million in 1996 from $19.4 million in 1995.  As a
percentage of total revenues, this expense increased to 21.5% in 1996
from 18.2% in 1995.  This increase as a percentage of revenues is due
to a higher general and administrative level added following the
January 1996 acquisition of Texas Dental and the May 1996 acquisition
of Dental Care Plus.  The increased use of in-house sales and new
marketing staff, as opposed to independent agents paid commissions
also contributed to the increase.  The Company's strategy regarding
acquisitions includes, in part, the reduction of general and
administrative expenses through the elimination of redundant overhead
functions and the extension of the Company's management systems and
policies.  While comparing 1996 with 1995, general and administrative
expenses as a percentage of revenue show a year-to-year increase;
quarterly results show that since the second quarter of 1996,
<PAGE>
when the acquisition of Dental Care Plus took place, general and
administrative expenses as a percentage of revenues have decreased
from 22.5% in the second quarter of 1996 to 20.7% in the fourth
quarter of 1996. The Company believes further assimilation of acquired
business will continue to result in reductions of general and
administrative costs, subject to the temporary increases caused by any
future acquisitions.

     Depreciation and amortization expense increased $2.4 million, or
89.7%, to $5.1 million in 1996 from $2.7 million in 1995.
Amortization of intangible assets (goodwill and non-compete
agreements) increased $l.8 million to $3.8 million in 1996. Of this
increase, $1.3 million is the result of additional goodwill
amortization recorded following the Texas Dental and Dental Care Plus
acquisitions.  The remaining $0.5 million of the increase is primarily
due to the amortization of CompDent goodwill being recorded for only
that portion of 1995 following the acquisitions compared to the full
12 months in 1996.  Depreciation expense increased $636,000 due to
additional office furniture, equipment, and leasehold improvements
obtained in conjunction with the acquisitions in January 1996 and May
1996, and for new office space occupied by the Company in September
1996.  Depreciation expense in 1997 is expected to be slightly higher
due to the addition of leasehold improvements, and computer and phone
equipment.

     Interest income decreased from $735,000 in 1995 to $585,000 in
1996.  Interest income consists of interest earned on available cash
balances as well as interest earned on cash balances which are
restricted by state regulatory agencies.  Interest income declined due
to the Company having less cash to invest in 1996, due to the
completion of the Texas Dental and Dental Care Plan acquisitions.

     Interest expense decreased slightly to $1.9 million in 1996 from
$2.0 million in 1995.  The Company had $26.6 million of debt
outstanding from January 1995, of which $1.0 million was retired with
proceeds from operating cash flows and the remainder with proceeds
from the Company's initial public offering in June 1995.  The Company
incurred $25.0 million of new indebtedness in July 1995 under its
revolving credit facility to partially finance the CompDent
acquisition and repaid this indebtedness in August 1995 with proceeds
from the second stock offering.  In May 1996, $38.0 million was
borrowed under the revolving credit facility to finance the
acquisition of Dental Care Plus.  At each quarter end, the Company
draws from its credit facility to pay down inter-company balances.
Any future acquisitions may cause the Company to incur additional
indebtedness under its revolving credit facility or otherwise.

     Other expense and income items total $219,000 in 1996, consisting
mainly of the gain on sale of unneeded properties obtained in past
acquisitions.

     In 1996, the Company's effective income tax rate increased to
44.3% compared with 42.0% in 1995.  The increase is primarily
attributable to additional nondeductible goodwill amortization
recorded in 1996 following the recent acquisitions.

LIQUIDITY AND CAPITAL RESOURCES

     The Company's primary sources of cash in 1997 have been operating
activities and borrowings under its revolving line of credit.  The
primary uses of cash for the period were the acquisitions of  various
dental practices, AMDP and capital expenditures at DentLease.  During
1997, the Company invested excess funds in reverse repurchase
agreements for U.S. government securities.  The carrying value of the
agreements approximates fair value because of the short maturity of
the investments and the Company believes that it is not exposed to any
significant risks on its investments in reverse repurchase agreements.

     Cash flows from operating activities were $4.3 million and $9.5
million for 1997 and 1996, respectively. Cash flows from operations
consist primarily of subscriber premiums and investment income net of
capitation payments to panel dentists, claims paid, brokers' and
agents' commissions, general and administrative expenses, and income
tax payments. The Company receives some premium payments in advance of
anticipated capitation payments and claims and invests cash balances
in excess of current needs in interest-bearing accounts.

     Cash used in investing activities was $24.9 million in 1997 and
$64.5 million in 1996.  The decrease, in 1997, in cash used relates
primarily to a reduction in acquisitions. While cash of $20.8 million
was used in 1997 to acquire AMDP and various dental practices, the
Company used cash of $62.5 million to purchase Texas Dental and
<PAGE>
Dental Care Plus in 1996.  The $1.6 million increase in capital
expenditures for 1997 compared with 1996 is due primarily to purchases
of equipment and leasehold improvements, and enhancements and upgrades
to computer and communications equipment.  The Company expects to make
additional capital expenditures of approximately $2.0 million in 1998,
mainly for further enhancements to its computer and telephone
equipment.

     Cash flows from financing activities in 1997 were $15.6 million,
primarily representing borrowings under the Company's revolving line
of credit to finance the acquisitions of various dental care practices
and to repay inter-company borrowings to its regulated subsidiary
companies at quarter-ends.

     On June 30, 1995, the Company obtained a reducing revolving $35
million line of credit (the "Credit Facility") from banks.  On July 5,
1995, to partially finance the acquisition of CompDent, the Company
borrowed $25 million under the Credit Facility.  On May 3, 1996, the
Credit Facility was amended to increase the available line of credit
to $65 million.  On May 7, 1996, the Company borrowed $38 million
under the Credit Facility to finance the acquisition of Dental Care
Plus.  The Credit Facility pursuant to a second amendment, entered
into on March 16, 1998 requires a 50% reduction in available
borrowings on December 31, 1999, and expiration of the Credit Facility
on December 31, 2000.  Outstanding indebtedness under the Credit
Facility bears interest, at the Company's option, at a rate equal to
the prime rate plus up to 1/4% or LIBOR plus up to 1 3/4%, with the
margin over the prime rate and LIBOR decreasing as the ratio of
consolidated debt to EBITDA decreases.  Currently borrowings under the
Credit Facility bear interest at the LIBOR-based rate.  The Credit
Facility prohibits payment of dividends and other distributions and
restricts or prohibits the Company from making certain acquisitions,
incurring indebtedness, incurring liens, disposing of assets or making
investments; and requires it to maintain certain financial ratios on
an ongoing basis.  The Credit Facility is collateralized by pledges of
the stock of the Company's direct and indirect subsidiaries.  At
December 31, 1997, the Company was in technical violation of three of
the financial ratios as a result of the goodwill impairment and
one-time charges recorded in the fourth quarter. The Company has
received a waiver with respect to such covenants from its lenders. The
Company had $56.6 million of borrowings outstanding as of December 31,
1997, under the Credit Facility.

     The Company believes that cash flow generated by operations will
be sufficient to fund its normal working capital needs and capital
expenditures for at least the next 24 months.  Historically, the
Company's operations have not been capital intensive; however, the
Company's recent initiative in the establishment of dental offices
through its subsidiary operation Dental Health Management, Inc. will
present capital needs, the extent of which is indeterminate.
Additional financing, under the Credit Facility or otherwise, will be
required in connection with an acquisition or acquisitions which the
Company may consummate in the future.

     Under applicable insurance laws of most states in which the
Company conducts business, the Company's subsidiary operating in the
particular state is required to maintain a minimum level of net worth
and reserves.  In general, minimum capital requirements are more
stringent for insurance companies, such as UniLife.  The Company may
be required from time to time to invest funds in one or more of its
subsidiaries to meet regulatory capital requirements.  Applicable laws
generally limit the ability of the Company's subsidiaries to pay
dividends to the extent that required regulatory capital would be
impaired, and dividend payments are further restricted under the
Credit Facility.

     During the fourth quarter of 1997, the Company completed an
extensive review of its operation and determined there were changes
that occurred that necessitated a number of unusual and one-time
charges.  The charges include $2.0 million for the termination of an
exclusive indemnity relationship, $2.0 million for reserve for a
surplus note, $1.6 million for litigation settlement costs, $1.4
million for a reserve for incurred practice management costs and $2.4
million in other costs.  There was also $59.0 million in a write off
for a goodwill impairment.  Historically, the goodwill was reviewed on
an undiscounted cash flow basis.  It was determined that potential
goodwill impairment should be analyzed on a discounted cash flow basis
utilizing an economic rate of return that would be customary for
evaluating the present value of future cash flows of current dental
benefit company transactions.  The Company believes that this method
of valuation better reflects the performance of each acquisition.  The
Company does not believe these unusual and one-time charges will
adversely affect its normal cash flow in 1998.
<PAGE>


LITIGATION

     The Company's wholly-owned subsidiary, American Prepaid and its
Florida subsidiary, American Dental Plan, Inc. ("ADP"), are currently
defendants to a civil complaint filed by three participating dentists
(one of which has since withdrawn) who have entered into Participating
Dentist Agreements with various subsidiaries of the Company
("Subsidiaries").  The complaint alleges a breach of contract and
seeks damages based on the failure of ADP to make capitation payments
to its participating dentists for the period of time between when a
subscriber enrolls and the time at which the subscriber selects a
participating dentist.  The plaintiffs sought to bring the suit as a
class action.  On December 4, 1997, a class was certified consisting
of all participating dentists in the states of Florida, Mississippi,
South Carolina, and Tennessee who, since September 1, 1989, have had
Participating Dentist Agreements with American Dental Plan, Inc.

     While the Company believes its interpretation and administration
of the Participating Dentist Agreements are correct, the Company
recently entered into a proposed settlement, which awaits final
approval by the Court.  The general terms of the settlement provide
for a total payment of $1.3 million to be divided among (1) the class
members who are no longer with ADP, (2) the class representatives, and
(3) the attorneys for the plaintiff class. Additional costs associated
with this settlement will be approximately $0.3 million.

     The settlement also requires that ADP amend its Participating
Dental Agreement to provide that it will pay capitation to the dentist
when there has been a delay between the time a subscriber initially
enrolls in the dental plan and the date they select a dentist, for all
subscribers who enroll after January 1, 1999.  In addition, ADP has
agreed to provide additional notices to subscribers who have not
selected a dentist.

     The proposed settlement is subject to the notification of the
class members, a fairness hearing and approval by the court.

     Management does not believe there are currently any asserted or
unasserted claims that will have a material adverse effect on the
financial position of the Company.

INFLATION

     The Company does not believe that its financial performance has
been or will be materially affected by inflation.

CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS

     The Company's actual results could differ materially from its
historical results or from any forward-looking statements made or
incorporated into this Annual Report.  Factors that may cause such
differences include:  the Company's ability to successfully complete
new acquisitions and integrate acquired companies; the Company's
ability to successfully expand its business to include the management
of dental practices; the Company's ability to attract and retain
qualified personnel and management; changes in state insurance laws
and related government regulations; increased competition and growth
in the dental benefits coverage market, and other unanticipated
changes in economic conditions.

     By the end of 1998, the Company expects that its various
administrative systems will have the capability to process
transactions dated beyond 1999.  The costs to complete its efforts to
modify or replace such systems are not expected to be material.

RECENTLY ISSUED ACCOUNTING STANDARDS

     See Note 19 in the Company's consolidated financial statements
included herein.

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Not Applicable.
<PAGE>
Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     The consolidated financial statements of the Company for the
fiscal year ended December 31, 1997 set forth on pages F-1 through
F-36 herein.

Item 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE.

     None.

                              PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     The information appearing under the captions "Information
Regarding Directors" and "Executive Officers" in the registrant's
definitive proxy statement relating to the Annual Meeting of
Stockholders to be held on April 30, 1998 is incorporated herein by
reference.

Item 11.  EXECUTIVE COMPENSATION.

     The information appearing under the caption "Executive
Compensation" in the registrant's definitive Proxy statement relating
to the Annual Meeting of Stockholders to be held on April 30, 1998 is
incorporated herein by reference.

Item 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT.

     The information appearing under the caption "Principal and
Management Stockholders" in the registrant's definitive Proxy
statement relating to the Annual Meeting of Stockholders to be held on
April 30, 1998 is incorporated herein by reference.

Item 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     None.

                               PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
          8-K.

(a)(1)    Financial Statements

          The response to this Portion of Item 14 is submitted as a
separate section of this Annual Report beginning on page S-1.

(a)(2)    Schedules

          The response to this portion of Item 14 is submitted as a
separate section of this Annual Report beginning on page S-5.


(a)(3)    Exhibits
          Exhibits 10.8 through 10.27 constitute all of the management
contracts and compensation plans and arrangements of the Company
required to be filed as exhibits to this Annual Report.

1.        The following is a complete list of Exhibits filed or
          incorporated by reference as part of this Annual Report.

<PAGE>
Exhibit No.              Description
3.1          Amended and Restated Certificate of Incorporation (8)
3.2          Amended and Restated By-laws (1)
4.1          Specimen certificate for shares of the Company's Common
             Stock (2)
4.2          Shareholder Rights Agreement, dated as of August 16,
             1996, between the Company and State Street Bank and
             Trust Company, as Rights Agent. (7)
4.3          Certificate of Designations, Preferences, and Rights of
             a Series of Preferred Stock of CompDent Corporation
             (11)
10.1         First Amendment to the Credit Agreement among the
             Company, American Prepaid, the lenders named therein
             and First Union National Bank of North Carolina, as
             Agent, dated May 3, 1996 (10)
10.2         Parent Guaranty of the Company in favor of First Union
             National Bank of North Carolina, dated July 5, 1995 (4)
10.3         Parent Pledge Agreement between the Company and First
             Union National Bank of North Carolina, dated July 5,
             1995 (4)
10.4         Borrower Pledge Agreement between American Prepaid and
             First Union National Bank of North Carolina, dated July
             5, 1995 (4)
10.6         Amended and Restated Investment and Stockholders'
             Agreement dated as of April 26, 1995 among the Company,
             American Prepaid, the Brains, the TA Investors, the
             Chestnut Investors and the Management Investors (2)
10.8         Employment Agreement dated May 24, 1995 between American
             Prepaid and David R. Klock (1)
10.9         Employment Agreement dated May 24, 1995 between American
             Prepaid and Phyllis A. Klock (1)
10.10        Employment Agreement dated May 24, 1995 between
             American Prepaid and Sharon S. Graham (1)
10.10A       Employment Agreement dated April 1, 1997 between the
             Company and Philip Hertik (12)
10.13        Key Executive Insurance Policies for David R. Klock and
             Phyllis A. Klock (3)
10.14        Key Executive Insurance Policy for Sharon S. Graham (1)
10.15        Non-Qualified Stock Option Agreement dated November 1,
             1993 between Philip Hertik and the Company (3)
10.16        Non-Qualified Stock Option Agreement dated as of
             November 1, 1993 between Joseph E. Stephenson and the
             Company (3)
10.17        Non-Qualified Stock Option Agreement dated as of
             September 25, 1995 between Joseph Ciffolillo and the
             Company (9)
10.18        The Company's 1994 Stock Option and Grant Plan (3)
10.19        Stock Redemption Agreement dated July 29, 1994 between
             the Company and David R. Klock for 2,500 shares at $5.33
             per share (3)
10.20        Amended and Restated CompDent Corporation 401(k)
             Standardized Profit Sharing Plan effective January 1,
             1997 (11)
10.21        Form of Indemnity Agreement between the Company and
             each of its directors (2)
10.22        Employment Agreement dated February 1, 1996 by and
             between the Company and Bruce A. Mitchell (6)
10.23        The Company's Employee Stock Purchase Plan (9)
10.24*       The Company's Non-Employee Directors Stock Option Plan,
             as amended
10.25        Form of Non-Qualified Stock Option Agreement under the
             Company's Non-Employee Directors' Stock Option Plan (11)
10.26        The Company's 1997 Stock Option Plan (12)
10.27        Forms of Non-Qualified Stock Option Agreement under the
             Company's 1994 Stock Option and Grant Plan and 1997 Stock
             Option Plan (12)
10.27A       Forms of Non-Qualified Stock Option Agreement issued in
             connection with that certain Asset Purchase Agreement
             dated June 13, 1997 by and among the Company, Dental
             Health Management, Inc., DentLease, Inc., Workman
             Management Group, Ltd., Associated Dental Professionals,
             Ltd., Premier Management Group, Ltd., Supreme Dental
             Management, Ltd., Elite Management Group, Ltd., Paramount
             Dental Management, Ltd. and the Stockholders thereof (13)
10.28        Agreement by and between Shenandoah Life Insurance
             Company and American Prepaid, effective December 27, 1993
             (3)
10.29        Agreement by and between Shenandoah Life Insurance
             Company and ADP-NC, effective January 20, 1994 (3)
<PAGE>
10.30        Agreement by and between Shenandoah Life Insurance
             Company and ADP-GA, effective January 20, 1994 (3)
10.31        Agreement by and between Shenandoah Life Insurance
             Company and ADP, effective January 20, 1994 (3)
10.32        Agreement by and between Shenandoah Life Insurance
             Company and American Dental Plan of Alabama, Inc.,
             effective January 20, 1994 (3)
10.33        Agreement by and between Shenandoah Life Insurance
             Company and American Prepaid Dental Plan of Ohio, Inc.,
             effective January 20, 1994 (3)
10.34        Prepaid Product Marketing/Administration Agreement by
             and between The Centennial Life Insurance Company and
             CompDent Corporation, effective January 1, 1995 (1)
10.35        Indemnity Products Marketing/Administrative Agreement
             by and between the Centennial Life Insurance Company and
             CompDent Corporation, effective January 1, 1995 (1)
10.36        Lease Agreement dated December 22, 1995, by and between
             Mansell Overlook 100, LLC, and CompDent Corporation for
             property located at 100 Mansell Court East, Roswell, GA
             30076
13.1         Annual Report to Stockholders for the fiscal year ended
             December 31, 1997 (11)
18.1*        Letter of Coopers & Lybrand L.L.P.
21.1         Subsidiaries of the Company (11)
23.1*        Consent of Coopers & Lybrand L.L.P.
27.1         Financial Data Schedule
___________

(1)  Filed as an exhibit to the Registrant's Registration Statement on
     Form S-1 filed with the Securities and Exchange Commission on
     August 4, 1995 (File No. 33-95444) and incorporated herein by
     reference thereto.

(2)  Filed as an exhibit to Pre-effective Amendment No. 1 to the
     Registrant's Registration Statement on Form S-1 filed with the
     Securities and Exchange Commission on April 27, 1995 (File No.
     33-90316) and incorporated herein by reference thereto.

(3)  Filed as an exhibit to the Registrant's Registration Statement on
     Form S-1 filed with the Securities and Exchange Commission on
     March 14, 1995 (File No. 33-90316) and incorporated herein by
     reference thereto.

(4)  Filed as an exhibit to the Registrant's Current Report on Form
     8-K filed with the Securities and Exchange Commission on July 5,
     1995 and incorporated herein by reference thereto.

(5)  Filed as an exhibit to the Registrant's Current Report on Form
     8-K filed with the Securities and Exchange Commission on January
     8, 1996 and incorporated herein by reference thereto.

(6)  Filed as an exhibit to the Registrant's Quarterly Report on Form
     10-Q for the period ended March 31, 1996 filed with the
     Securities and Exchange Commission on May 15, 1996 and
     incorporated herein by reference thereto.

(7)  Filed as an exhibit to the Registrant's Annual Report on Form
     10-K for the period ended December 31, 1995 filed with the
     Securities and Exchange Commission on March 28, 1996 and
     incorporated herein by reference thereto.

(8)  Filed as an exhibit to the Registrant's Current Report on Form
     8-K filed with the Securities and Exchange Commission on August
     20, 1996 and incorporated herein by reference thereto.

(9)  Filed as an exhibit to the Registrant's Registration Statement on
     Form S-8 filed with the Securities and Exchange Commission on
     September 18, 1996 (File No. 333-12227) and incorporated herein
     by reference thereto.
<PAGE>
(10) Filed as an exhibit to the Registrant's Quarterly Report on Form
     10-Q for the period ended June 30, 1996 filed with the Securities
     and Exchange Commission on August 14, 1996 and incorporated
     herein by reference thereto.

(11) Filed as an exhibit to the Registrant's Annual Report on Form
     10-K for the Period ended December 31, 1997 filed with the
     Securities and Exchange Commission on March 31, 1997 and
     incorporated herein by reference thereto.

(12) Filed as an exhibit to the Registrant's Quarterly Report on Form
     10-Q for the period ended June 30, 1997 filed with the Securities
     and Exchange Commission on July 14, 1997 and incorporated herein
     by reference thereto.

(13) Filed as an exhibit to the Registrant's Quarterly Report on Form
     10-Q for the period ended September 30, 1997 filed with the
     Securities and Exchange Commission on November 13, 1997 and
     incorporated herein by reference thereto.

(b)  Reports on Form 8-K.

     The Registrant did not file any reports on Form 8-K during the
     last quarter of the period covered by this Annual Report.

(c)  Exhibits.

     The response to this portion of Item 14 is contained in Item
     14(a)(3) of this report.

(D)  Financial Statement Schedules.

     The response to this portion of Item 14 is submitted as a
     separate section of this Annual Report begins on page S-1.
<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.

                                       COMPDENT CORPORATION


                                       By:/s/ David R. Klock
                                          David R. Klock
                                          Chairman of the Board and
                                          Chief Executive Officer

Dated: March 27, 1998

Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on the dates indicated.

     Signature                   Title                      Date

/s/ David R. Klock        Chairman of the Board         March 27, 1998
    David R. Klock        and Chief Executive
                          Officer (Principal
                          Executive  Officer)
                          and Director

/s/ Keith J. Yoder        Chief Financial Officer       March 27, 1998
    Keith J. Yoder        And Treasurer (Principal
                          Financial and Accounting
                          Officer)

/s/ Phyllis A. Klock      President and Chief           March 27, 1998
    Phyllis A. Klock      Operating Officer
                          and Director

/s/ Joseph Ciffolillo     Director                      March 27, 1998
    Joseph Ciffolillo


/s/ Philip Hertik         Director                      March 27, 1998
    Philip Hertik


/s/ William G. Jens, Jr.  Director                      March 27, 1998
    William G. Jens, Jr.


/s/ David F. Scott, Jr.   Director                      March 27, 1998
    David F. Scott, Jr.

/s/ Joseph E. Stephenson  Director                      March 27, 1998
    Joseph E. Stephenson
<PAGE>

<PAGE>
CompDent Corporation and Subsidiaries
Table of Contents

                                                        Pages

Report of Independent Accountants                        F-2

Financial Statements:
   Consolidated Balance Sheets
     December 31, 1997 and 1996                       F-3 - F-4

   Consolidated Statements of Operations
     for the years ended December 31, 1997, 1996
     and 1995                                            F- 5

   Consolidated Statements of Stockholders' Equity
     for the years ended December 31, 1997, 1996
     and 1995                                            F-6

   Consolidated Statements of Cash Flows
     for the years ended December 31, 1997, 1996
     and 1995                                          F-7 - F-8

   Notes to Consolidated Financial Statements         F-9 - F-36
<PAGE>
Report of Independent Accountants

To the Board of Directors and Stockholders of
CompDent Corporation and Subsidiaries

We have audited the accompanying consolidated balance sheets of
CompDent Corporation and subsidiaries (collectively, the "Company") as
of December 31, 1997 and 1996, and the related consolidated statements
of operations, stockholders' equity, and cash flows for each of the
three years in the period ended December 31, 1997. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of CompDent Corporation and subsidiaries as of
December 31, 1997 and 1996, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1997 in conformity with generally accepted
accounting principles.

As discussed in Note 7 to the consolidated financial statements, in
1997, the Company changed its method of assessing the recoverability
of Excess of Purchase Price over Net Assets Acquired.


                                         COOPERS & LYBRAND L.L.P.

Atlanta, Georgia
February 9, 1998, except as to the information presented
in Note 8, for which the date is March 16, 1998

<PAGE>
<TABLE>
CompDent Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, 1997 and 1996
(Dollars in Thousands, Except Share and Per Share Data)

                                                                                      1997                  1996

                                 ASSETS
<S>                                                                                 <C>                   <C>
Current assets:
   Cash and cash equivalents, including reverse repurchase agreements
     of $18,875 (see Note 2)                                                        $ 21,963              $ 26,959
   Premiums receivable from subscribers                                                5,554                 3,121
   Patient accounts receivable, net of allowance for doubtful accounts
     of $1,188 in 1997                                                                 1,668
   Income taxes receivable                                                               175                   247
   Deferred income taxes                                                               5,081                 3,106
   Other current assets                                                                2,842                   650
                                                                                    --------              --------
          Total current assets                                                        37,283                34,083

Restricted funds                                                                       2,321                 2,070
Property and equipment, net of accumulated depreciation                                6,292                 2,977
Excess of purchase price over net assets acquired                                     96,296               135,040
Noncompetition agreements                                                                325                   945
Reinsurance receivable                                                                 5,417                 5,388
Investment in DHDC (see Note 2)                                                        1,500
Deferred income taxes                                                                                        2,026
Other assets                                                                           1,437                 1,638
                                                                                    --------              --------
                                                                                    $150,871              $184,167
                                                                                    ========              ========
</TABLE>
<TABLE>
CompDent Corporation and Subsidiaries
Consolidated Balance Sheets, Continued
December 31, 1997 and 1996
(Dollars in Thousands, Except Share and Per Share Data)

                                                                                      1997                   1996
                     LIABILITIES AND STOCKHOLDERS' EQUITY
<S>                                                                                 <C>                   <C>
Current liabilities:
   Unearned revenue                                                                 $  9,538              $  9,582
   Accounts payable and accrued expenses                                              14,855                10,956
   Accrued interest payable                                                              109                   390
   Dental claims reserves                                                              1,502                 1,421
   Other current liabilities                                                              63                 1,924
                                                                                    --------              --------
     Total current liabilities                                                        26,067                24,273
                                                                                    --------              --------
   Aggregate reserves for life policies and contracts                                  5,331                 5,338
   Notes payable                                                                      56,595                41,663
   Deferred tax liability                                                              1,887
   Deferred compensation expense                                                         298                   338
   Other liabilities                                                                     417                   372
                                                                                    --------              --------
     Total liabilities                                                                90,595                71,984
                                                                                    --------              --------

Commitments and contingencies

Stockholders' equity:
   Preferred stock, $.01 par value, 2,000,000 shares
     authorized at December 31, 1997 and 1996, none
     issued at December 31, 1997 and 1996
   Common stock, $.01 par value, 50,000,000 shares
     authorized at December 31, 1997 and 1996, 10,112,629
     and 10,066,004 shares issued and outstanding at
     December 31, 1997 and 1996, respectively                                            101                   101
   Additional paid-in capital                                                         97,618                95,820
   Retained (deficit) earnings                                                       (37,443)               16,262
                                                                                    --------              --------

          Total stockholders' equity                                                  60,276               112,183
                                                                                    --------              --------
                                                                                    $150,871              $184,167
                                                                                    ========              ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
CompDent Corporation and Subsidiaries
Consolidated Statements of Operations
for the years ended December 31, 1997, 1996 and 1995
(Dollars in Thousands, Except Share and Per Share Data)

                                                                 1997                 1996             1995

<S>                                                          <C>                 <C>               <C>
Revenues:
   Subscriber premiums                                       $   143,396         $   135,807       $   104,898
   Affiliated practice revenue                                     7,113
   Other revenue                                                   8,217               5,262             1,763
                                                             -----------         -----------       -----------
     Total revenue                                               158,726             141,069           106,661
                                                             -----------         -----------       -----------
Expenses:
   Dental care providers' fees and claim costs                    81,690              73,431            62,218
   Commissions                                                    13,272              12,184            10,763
   Premium taxes                                                   1,047               1,018             1,392
   General and administrative                                     44,318              30,394            19,435
   Depreciation and amortization                                   5,735               5,153             2,717
   Goodwill impairment (see Note 7)                               58,953
                                                             -----------         -----------       -----------
     Total expenses                                              205,015             122,180            96,525
                                                             -----------         -----------       -----------
     Operating (loss) income                                     (46,289)             18,889            10,136
                                                             -----------         -----------       -----------
Other expense (income):
   Interest income                                                  (725)               (585)             (735)
   Interest expense                                                3,239               1,935             1,970
   Other, net                                                          2                (219)              (68)
                                                             -----------         -----------       -----------
     Total other expense                                           2,516               1,131             1,167
                                                             -----------         -----------       -----------
     (Loss) income before provision for income taxes
        and extraordinary item                                   (48,805)             17,758             8,969
Income tax provision                                               4,900               7,866             3,765
                                                             -----------         -----------       -----------
     (Loss) income before extraordinary item                     (53,705)              9,892             5,204
Extraordinary loss on early extinguishment of debt,
   net of applicable tax benefit of $305 (see Note 9)                                                     (498)
                                                             -----------         -----------       -----------
     Net (loss) income                                       $   (53,705)        $     9,892       $     4,706
                                                             ===========         ===========       ===========
     (Loss) income per common share - basic:
        (Loss) income before extraordinary item              $     (5.32)        $      0.98       $      0.69
        Extraordinary loss                                                                               (0.07)
                                                             -----------         -----------       -----------
     Net (loss) income per common share                      $     (5.32)        $      0.98       $      0.62
                                                             ===========         ===========       ===========

     (Loss) income per common share - diluted:
        (Loss) income before extraordinary item              $     (5.32)        $      0.97       $      0.68
        Extraordinary loss                                                                               (0.07)
                                                             -----------         -----------       -----------
     Net (loss) income per common share                            (5.32)        $      0.97       $      0.61
                                                             ===========         ===========       ===========
     Weighted average common shares outstanding               10,098,323          10,048,513         7,240,600
                                                             ===========         ===========       ===========
     Weighted average common shares outstanding
        with dilutive securities                              10,098,323          10,176,756         7,351,655
                                                             ===========         ===========       ===========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
<TABLE>
CompDent Corporation and Subsidiaries
Consolidated Statements of Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995
(Dollars and Shares in Thousands)

                                                Class A                              Additional  Retained
                                              Common Stock        Common Stock        Paid-In    Earnings
                                            Shares      Value    Shares     Value     Capital    (Deficit)     Total

<S>                                         <C>         <C>      <C>         <C>      <C>         <C>         <C>
Balance, December 31, 1994                   1,843      $ 18      2,305      $23      $ 2,277     $ 1,882     $ 4,200
Issuance of Common Stock in initial
   public offering, net of issuance costs                         3,933       40       51,402                  51,442
Conversion of Class A Common Stock
   to Common Stock in connection with
   public offering                          (1,843)      (18)     1,843       18
Issuance of Common Stock in second
   offering, net of issuance costs                                1,935       19       42,028                  42,047
Net income                                                                                          4,706       4,706
Accumulated preferred stock dividend                                                                 (218)       (218)
                                            ------      ----     ------      ---      -------     -------     -------
Balance, December 31, 1995                       0         0     10,016      100       95,707       6,370     102,177
Issuance of Common Stock pursuant
   to option agreements                                              48        1           65                      66
Issuance of Common Stock pursuant
   to employee stock purchase plan                                    2                    48                      48
Net income                                                                                          9,892       9,892
                                            ------      ----     ------      ---      -------     -------     -------
Balance, December 31,1996                        0         0     10,066      101       95,820      16,262     112,183
Issuance of Common Stock pursuant
   to purchase agreement (see Note 4)                                40                 1,141                   1,141
Issuance of Common Stock pursuant
   to option agreements                                               4                    21                      21
Issuance of Common Stock pursuant
   to employee stock purchase plan                                    3                    53                      53
Tax benefit from issuance of Common
   Stock (nonqualified options)                                                           583                     583
Net loss                                                                                          (53,705)    (53,705)
                                            ------      ----     ------      ---      -------     -------     -------
Balance, December 31, 1997                       0      $  0     10,113     $101      $97,618    $(37,443)    $60,276
                                            ======      ====     ======     ====      =======    ========     =======
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CompDent Corporation and Subsidiaries
Consolidated Statements of Cash Flows
for the years ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)
<TABLE>
                                                                         1997                1996              1995
<S>                                                                    <C>                  <C>              <C>
Cash flows from operating activities:
   Net (loss) income                                                   $(53,705)            $ 9,892          $ 4,706
   Adjustments to reconcile net (loss) income to net cash
      provided by operating activities:
         Depreciation and amortization                                    5,735               5,248            2,855
         Goodwill impairment                                             58,953
         (Gain) loss on sale of assets held for sale                                           (174)              23
         Gain on sale of property and equipment                             (12)                (53)
         Loss on sale or property and equipment                              65
         Bad debt expense                                                   183
         Extraordinary loss on early extinguishment of debt                                                      803
         Deferred income tax expense (benefit)                            2,136               1,526             (255)
         Changes in assets and liabilities:
            Premiums receivable from subscribers                         (2,433)              1,813             (203)
            Patient receivables                                          (1,029)
            Income taxes receivable                                          71                (231)             213
            Other assets                                                 (3,487)                (73)          (1,181)
            Unearned revenue                                                (59)             (1,445)           1,213
            Accounts payable and accrued expenses                          (300)             (3,200)            (424)
            Income taxes payable                                                               (903)             854
            Other liabilities                                            (1,781)             (2,895)            (146)
                                                                       --------             -------          -------
               Net cash provided by operating activities                  4,337               9,505            8,458
                                                                       --------             -------          -------
Cash flows from investing activities:
   Additions to property and equipment                                   (3,985)             (2,394)          (1,076)
   Proceeds from sale of assets held for sale                                                   694            1,323
   Increase in restricted cash                                             (175)               (607)            (106)
   Proceeds from sale of property and equipment                              37                 253
   Cash surrender value of life insurance                                   (28)                 15              (28)
   Purchases of businesses, net of cash acquired                        (20,770)            (62,462)         (31,188)
                                                                       --------             -------          -------
               Net cash used in investing activities                    (24,921)            (64,501)         (31,075)
                                                                       --------             -------          -------
Cash flows from financing activities:
   Repayment of notes payable                                                                                (26,600)
   Borrowings under credit agreement                                     59,456              57,697           25,000
   Repayments under credit agreement                                    (44,525)            (16,034)         (25,000)
   Loan fees paid                                                                              (112)            (240)
   Repayment of subordinated notes                                                                            (7,947)
   Retirement of preferred stock                                                                              (5,377)
   Proceeds from initial public offering, net of issuance costs                                               51,442
   Proceeds from second public offering, net of issuance costs                                                42,047
   Proceeds from exercise of stock options                                   21                  66
   Proceeds from employee stock purchase plan                                53                  48
   Tax benefit realized from exercise of nonqualified stock options         583
   Other                                                                                        (98)
                                                                       --------             -------          -------
               Net cash provided by financing activities                 15,588              41,567           53,325
                                                                       --------             -------          -------
               (Decrease) increase in cash and cash equivalents          (4,996)            (13,429)          30,708
Cash and cash equivalents, beginning of period                           26,959              40,388            9,680
                                                                       --------             -------          -------
Cash and cash equivalents, end of period                               $ 21,963             $26,959          $40,388
                                                                       ========             =======          =======
</TABLE>
<PAGE>

CompDent Corporation and Subsidiaries
Consolidated Statements of Cash Flows, Continued
for the years ended December 31, 1997, 1996 and 1995
(Dollars in Thousands)

<TABLE>
                                                                         1997                1996              1995
<S>                                                                    <C>                  <C>              <C>
Supplemental disclosures of cash flow information:
   Cash paid during the period for:
     Interest                                                          $  3,349             $ 1,450          $ 1,961
                                                                       ========             =======          =======
     Income taxes                                                      $  1,839             $ 7,474          $ 2,619
                                                                       ========             =======          =======
Non-cash investing and financing activities:
   Stock issued in exchange for business acquired (see Note 4)         $  1,141
                                                                       ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
CompDent Corporation and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in Thousands, Except Share and Per Share Data)

1.   Organization and Basis of Presentation

     CompDent Corporation and subsidiaries (collectively, the
     "Company") operate a system of dental benefit plans in more than
     23 states. The Company's primary source of revenue is managed
     dental care plans offered either separately or together with a
     traditional indemnity insurance plan, underwritten by a third
     party, under a "dual-choice" plan. The Company markets its plans
     primarily through independent agents to private and governmental
     employers. Dental services are provided through a network of
     selected independent dentists who are responsible for each
     member's individual dental care. The Company also manages dental
     practices which provide general dentistry services. The Company
     currently conducts business principally in Florida, Georgia,
     Kentucky, Texas, Illinois, Indiana, and Ohio. For the years ended
     December 31, 1997, 1996, and 1995, Florida operations accounted
     for approximately 34%, 35%, and 42%, respectively, of the
     Company's revenues.

     During 1997, the Company, through its subsidiary Dental Health
     Management, Inc. (DHMI), acquired and began managing dental
     practices which provide general dentistry services. Collectively,
     29 dental offices located in Illinois, Florida, Tennessee, and
     Indiana were acquired during the year and are now being managed
     by DHMI.

2.   Significant Accounting Policies

     Basis of Consolidation - The consolidated financial statements
     include the accounts of the Company and its wholly owned
     subsidiary, American Prepaid Professional Services, Inc.
     ("American Prepaid"), and through American Prepaid, the following
     wholly owned subsidiaries: American Dental Plan, Inc. (a Florida
     corporation), American Dental Plan of Georgia, Inc., American
     Prepaid Dental Plan of Ohio, Inc., American Dental Plan of
     Alabama, Inc., American Dental Plan, Inc. (a North Carolina
     corporation), American Dental Plan of North Carolina, Inc.,
     DentiCare, Inc. ("DentiCare"), UniLife Insurance Company
     ("UniLife"), CompDent Corporation and its wholly owned
     subsidiaries, Texas Dental Plans, Inc., National Dental Plans,
     Inc., Dental Plans International, Inc., Dental Provider
     Resources, Inc., Dental Care Plus Management Corp. and its wholly
     owned subsidiary, CompDent of Illinois, Inc. (formerly I.H.C.S.,
     Inc.), Diamond Dental of Arkansas, Inc., American Dental
     Providers of Arkansas, Inc., DentLease, Inc., and DHMI. All
     significant intercompany balances and transactions have been
     eliminated in consolidation.

     Subscriber Premiums - Managed care subscriber premiums revenue is
     recognized as earned over the related contract period. The
     unexpired portion of such revenue collected is reported as
     unearned revenue in the consolidated balance sheets. Indemnity
     dental and life premiums are recognized as earned on a pro rata
     basis over the risk coverage periods. Reserves are provided for
     the portion of premiums written for dental and life insurance
     which relate to the unexpired coverage period.
<PAGE>
     Affiliated Practice Revenue - Affiliated or dental practice
     revenue is recognized as services are provided and includes
     fee-for-service revenue as well as revenue from contracts with
     capitated managed dental care plans for general dentistry
     services. Revenue is reported at estimated realizable amounts
     from third-party payors and patients for services rendered, net
     of contractual and other adjustments. Also included in affiliated
     practice revenue are contracted management fees for
     administrative services provided to Dental Health Development
     Corporation (DHDC) by DHMI.

     Other Revenue - Other revenue consists of the following:

                                         1997      1996      1995
     Indemnity income                   $1,839    $1,558    $  747
     HCS management fee (see Note 12)    3,103     1,749
     Administrative services and other   3,275     1,955     1,016

                                        ------    ------    ------
          Total                         $8,217    $5,262    $1,763
                                        ======    ======    ======

     Dental Care Providers' Fees and Claim Costs - The Company
     contracts with various independent dentists to provide services
     to covered enrollees. Most dentists participating in the managed
     dental care plan are compensated by the Company on a capitation
     basis. Indemnity dental and life, and specialty dental benefits
     are charged to expense in the period that the claims are
     incurred.

     Advertising Costs - Costs of advertising are expensed when
     incurred.

     Cash and Cash Equivalents - The Company considers all highly
     liquid investments purchased with an original maturity of three
     months or less to be cash equivalents.

     Concentrations of Credit Risk - The Company collects the majority
     of its revenue before services are provided. However, in
     instances where this does not occur, the Company extends credit
     without requiring collateral. Management believes exposure to
     losses on receivables is minimal due to the nature of this
     business and the fact that the financial condition of the
     Company's groups is monitored closely. Also, the dental offices
     grant credit without collateral to their patients, most of whom
     are local residents and are insured under third-party payor
     agreements. The Company does not believe these receivables
     represent any significant concentrated credit risk.

     During 1997, the Company invested excess funds in reverse
     repurchase agreements for U.S. government securities. At December
     31, 1997, the Company had purchased $18,875 of U.S. government
     securities under agreements to resell them on a specified date.
     Generally, the maturity date of the Company's reverse repurchase
     agreements is within five business days of the purchase. Due to
     the short-term nature of the agreements, the Company does not
     take possession of the securities, which are instead held at the
     Company's principal bank from which
<PAGE>
     it purchases the securities. In the event of a bank failure,
     there could be a delay in selling the securities; however, the
     Company evaluates the stability of the financial institution with
     which it enters into agreements. The carrying value of the
     agreements approximates fair market value because of the short
     maturity of the investments, and the Company believes that it is
     not exposed to any significant risk of loss on its investments in
     reverse repurchase agreements and has never recognized a loss on
     such transactions. Exclusive of the reverse repurchase
     agreements, the Company's cash and restricted funds in financial
     institutions exceeded the federally insured deposit limits by
     $3,992 and $27,336 at December 31, 1997 and 1996, respectively.

     Patient Accounts Receivable - Current operations are charged with
     a provision for uncollectible accounts based upon circumstances
     which affect the collectibility of receivables. Accounts deemed
     uncollectible are charged against the allowance. Accounts
     receivable are also reported net of contractual adjustments which
     represent the difference between established billing rates and
     estimated reimbursement from patients and other third-party
     payors.

     Property and Equipment - Property and equipment is carried at
     cost less accumulated depreciation which is computed using the
     straight-line method over the estimated useful lives of two to
     five years of the related assets. Maintenance and repairs are
     charged to expense as incurred. Upon sale, retirement, or other
     disposition of these assets, the cost and the related accumulated
     depreciation are removed from the respective accounts and any
     gain or loss on the disposition is included in income.

     Intangible Assets - Deferred financing costs are amortized as an
     increase to interest expense on a straight-line basis, which
     approximates the effective interest method, over the terms of the
     related debt agreements (see Note 8). Accumulated amortization at
     December 31, 1997 and 1996, was $241 and $130, respectively.

     Noncompetition agreements are amortized on a straight-line basis
     over the terms of the related agreements. Accumulated
     amortization at December 31, 1997 and 1996, was $2,765 and
     $2,135, respectively.

     The excess of purchase price over net assets acquired (goodwill)
     is being amortized on a straight-line basis over 40 years. The
     Company periodically assesses the recoverability and the
     amortization period of the goodwill by determining whether the
     amount can be recovered through a projection of future discounted
     cash flows of the business acquired. Prior to 1997, cash flows
     were undiscounted. At December 31, 1997, the Company adopted a
     change in accounting for assessing the recoverability of excess
     cost by discounting projected future cash flows of the Company's
     acquired entities (see Note 7).

     In connection with the allocation of purchase price to intangible
     assets generated from the dental practice group acquisitions (see
     Note 4), the Company analyzed the nature of each dental group
     practice with which a Management Agreement was entered into,
     including the number of dentists in each dental practice group,
     number of dental offices and ability to recruit additional
<PAGE>
     dentists, the dental group practice's relative market position,
     the length of time each dental group practice has been in
     existence, and the term and enforceability of the Management
     Agreement. The Management Agreements are for a term of 40 years
     and cannot be terminated by the relevant P.C. without consent of
     the Company or without cause, consisting primarily of bankruptcy,
     material default, or failure to perform under the terms of the
     Agreement by the Company.

     The Company believes that there is no material value allocable to
     the employment and noncompete agreements entered into between the
     P.C.s and the individual dentists, since the primary economic
     beneficiaries of these agreements are the P.C.s, which are
     entities that the Company does not legally control. The Company
     believes that the dental group practices operated by the P.C.s
     with which it has Management Agreements are long-lived entities
     with an indeterminable life and that the dentists, customer
     demographics and various contracts will be continuously replaced.
     The amounts allocated to the Management Agreements are being
     amortized on a straight-line method over 40 years.

     Investment in DHDC - During 1997, the Company invested $1,500 in
     exchange for a 19% ownership interest in DHDC. DHDC is a dental
     management company specializing in developing and managing
     start-up dental practices. The Company has an option to purchase
     the remaining equity at specified dates; however, there is no
     obligation to buy it.

     The Company does not have the ability to exert significant
     influence over the operations of DHDC and, therefore, carries its
     investment in it at cost.

     Income Taxes - Under Statement of Financial Accounting Standards
     (SFAS) No. 109, deferred income taxes are provided based on the
     estimated future tax effects of differences between financial
     statement carrying amounts and the tax bases of existing assets
     and liabilities.

     The Company and its subsidiaries file a consolidated U.S. federal
     income tax return. Subsidiaries are allocated a tax provision as
     if each subsidiary filed separate income tax returns.

     Dental Claims Reserves - The Company's financial position
     includes liabilities associated with indemnity and specialty
     insurance coverage. Dental claims reserves include provisions for
     reported claims and claims incurred but not reported based upon
     analyses of historical claim development patterns. Estimates and
     assumptions with respect to the Company's dental claims reserves
     are required in accordance with generally accepted accounting
     principles. Actual results could differ from these estimates.
     Changes in these estimates are reflected in the results of
     operations in the period in which such changes occur.

     Aggregate Reserve for Policies and Contracts - The Company's
     financial position includes liabilities associated with indemnity
     insurance coverage. Liabilities for future life policy benefits
     are computed by the net level premium method based upon estimated
     future investment yield, mortality and withdrawal assumptions,
     commensurate with the Company's experience. Assumed mortality is
     based on various industry published tables, modified as
     appropriate for the Company's actual experience.
<PAGE>
     Fair Value of Financial Instruments - The carrying amount of the
     Company's cash and cash equivalents and restricted funds
     approximate fair value because of the short maturity of these
     instruments. The fair value of the Company's notes payable
     approximates its carrying amount because the interest rate
     associated with the debt is variable. The investment in DHDC is
     carried at cost as the Company does not maintain control or
     significant ownership. The Company's cost approximates the
     estimated fair value as of December 31, 1997.

     Long-Lived Assets - In accordance with SFAS No. 121, the Company
     periodically reviews long-lived assets and certain identifiable
     intangibles for impairment noting events or changes that indicate
     the carrying amount may not be recoverable.

     Stock-Based Compensation - The Company applies the accounting
     provisions of Accounting Principles Board (APB) Opinion No. 25 to
     its stock-based employee compensation arrangements and the
     disclosure provisions of SFAS No. 123.

     Use of Estimates - The preparation of financial statements in
     conformity with generally accepted accounting principles requires
     management to make estimates and assumptions that affect the
     reported amounts of assets and liabilities and disclosure of
     contingent assets and liabilities at the date of the financial
     statements and the reported amounts of revenue and expenses
     during the reporting period. Actual results could differ from
     those estimates.

     Earnings Per Share - In 1997, the Company adopted the provisions
     of SFAS No. 128, Earnings per Share, which establishes standards
     for computing and presenting earnings per share ("EPS") and
     applies to entities with publicly held common stock or potential
     common stock. Earnings per share are computed by deducting
     preferred stock dividends ($218 for the year ended December 31,
     1995) from income before extraordinary items and cumulative
     accounting changes. Basic EPS excludes dilution and is computed
     by dividing income available to common stockholders by the
     weighted-average number of common shares outstanding for the
     period. Diluted EPS reflects the potential dilution that could
     occur if securities or other contracts to issue common stock were
     exercised or converted into common stock or resulted in the
     issuance of common stock that shared in the earnings of the
     entity. The number of common stock equivalents is determined
     using the treasury stock method. Options have a dilutive effect
     under the treasury stock method only when the average market
     price of the common stock during the period exceeds the exercise
     price of the options.

     Reclassifications - Certain amounts for 1996 have been
     reclassified to conform with the 1997 presentation.

3.   Regulatory Requirements and Restricted Funds

     The Company has set aside certificates of deposit bearing
     interest at variable rates as required by various state statutes.
     Additionally, the subsidiaries of American Prepaid are required
     to maintain certain levels of regulatory capital for statutory
     reporting. At December 31, 1997 and 1996, the various
     subsidiaries were required to cumulatively maintain approximately
     $3,927
<PAGE>
     and $3,663, respectively, in capital and surplus. Accordingly,
     the subsidiaries may be limited in their ability to pay dividends
     to American Prepaid, and it in turn to the Company.

4.   Business Combinations

     Effective January 8, 1996, the Company completed the acquisition
     of Texas Dental Plans, Inc., a Texas-based referral
     fee-for-service dental company, and affiliated entities ("Texas
     Dental"), for an aggregate cash purchase price of approximately
     $23,000. The acquisition was funded with net proceeds remaining
     from the Company's second stock offering. The Texas Dental
     acquisition was accounted for using the purchase method of
     accounting, with the results of operations of the business
     acquired included from the effective date of the acquisition. The
     acquisition resulted in excess of purchase price over net assets
     acquired of $26,000 which is being amortized over 40 years.

     The following is a summary of assets acquired, liabilities
     assumed, and consideration paid in connection with the
     acquisition:

     Fair value of assets acquired, including goodwill        $27,239
     Cash paid for assets acquired, net of cash acquired      (23,132)
     Acquisition costs paid                                      (540)
                                                              -------
     Liabilities assumed                                      $ 3,567
                                                              =======

     Effective May 8, 1996, the Company acquired all of the
     outstanding capital stock and options of Dental Care Plus
     Management, Corp. ("Dental Care"). The aggregate purchase price
     for Dental Care and its wholly owned subsidiary, CompDent of
     Illinois, Inc. was $38,000, of which the Company paid
     approximately $27,000 in cash and assumed approximately $11,000
     in accrued liabilities. Dental Care and its subsidiary, CompDent
     of Illinois, are based in Chicago, Illinois, and provide managed
     dental care services through a network of dental care providers.
     Dental Care also acts as a third party administrator and provides
     management services to Health Care Systems, Inc. (HCS), a
     non-profit dental company. The Company financed the purchase of
     Dental Care as well as satisfaction of the assumed liabilities by
     drawing down the Company's revolving line of credit. The
     acquisition of Dental Care was accounted for using the purchase
     method of accounting with the results of operations of the
     businesses acquired included from the effective date of the
     acquisition. The acquisition resulted in excess of purchase price
     over net assets acquired of $39,700 which is being amortized over
     40 years. During the third quarter of 1996, the Company finalized
     its allocation of the purchase price of Dental Care which
     resulted in an increase to excess of purchase price over net
     assets acquired of $1,500 to $41,200.
<PAGE>
     The following is a summary of assets acquired, liabilities
     assumed, and consideration paid in connection with the
     acquisition:

     Fair value of assets acquired, including goodwill        $46,770
     Cash paid for assets acquired, net of cash acquired      (26,836)
     Acquisition costs paid                                      (843)
                                                              -------
     Liabilities assumed                                      $19,091
                                                              =======

     Effective March 21, 1997, the Company completed the acquisition
     of American Dental Providers, Inc. ("AMDP"), and Diamond Dental &
     Vision, Inc. ("DDV"). The aggregate purchase price of $1,700
     consisted of $500 in cash and $1,200 of Company common stock
     issued at fair market value. AMDP provides managed dental care
     services through a network of dental care providers, and DDV
     provides a vision plan and referral fee-for-service dental plan
     to the Arkansas market. The Company funded the cash portion of
     the purchase with cash available from operations. The acquisition
     of AMDP and DDV was accounted for using the purchase method of
     accounting with the results of operations of the businesses
     acquired included from the effective date of the acquisition. The
     acquisition resulted in excess of cost over fair value of net
     assets acquired of $2,900 which will be amortized over 40 years.
     During the second quarter of 1997, the Company revised its
     allocation of the purchase price of AMDP and DDV which resulted
     in a decrease to the excess of purchase price over net assets
     acquired of $500 to $2,400.

     The following is a summary of assets acquired, liabilities
     assumed and consideration paid in connection with the
     acquisition:

     Fair value of assets acquired, including goodwill         $2,652
     Cash paid and fair value of stock issued for assets
        acquired, net of cash acquired                         (1,614)
     Acquisition costs paid                                      (416)
                                                               ------
     Liabilities assumed                                       $  622
                                                               ======

     During the fourth quarter of 1997, the Company assessed the
     recoverability of goodwill, concluding that certain goodwill
     generated from the acquisitions of Dental Care, AMDP, and DDV was
     impaired (see Note 7).

     Effective July 2, 1997, the Company completed the acquisition of
     twenty-one dental facilities from The Workman Management Group,
     LTD ("Workman"). The dental facilities are located in central and
     southern Illinois. The purchase price consisted of $15,500 in
     cash, and funding for the acquisition was obtained from cash
     available from operations and from the Company's revolving line
     of credit. Concurrent with the acquisition, the Company entered
     into a 40-year agreement to manage the dental practices which are
     operating in the dental facilities. The acquisition of Workman
     was accounted for using the purchase method of accounting with
     the
<PAGE>
     results of operations of the business acquired included from the
     effective date of the acquisition. The acquisition resulted in
     excess of cost over fair value of net assets acquired of $15,200
     which will be amortized over 40 years. During the fourth quarter
     of 1997, the Company revised its allocation of the purchase price
     of Workman which resulted in an increase to the excess of
     purchase price over net assets acquired of $1,780 to $16,980.

     The following is a summary of assets acquired, liabilities
     assumed, and consideration paid in connection with the
     acquisition:

     Fair value of assets acquired, including goodwill        $18,040
     Cash paid for assets acquired, net of cash acquired      (15,340)
     Acquisition costs paid                                      (990)
                                                              -------
     Liabilities assumed                                      $ 1,710
                                                              =======

     During the third and fourth quarters of 1997, the Company
     completed the acquisition of several dental facilities from three
     additional dental groups. Effective July 2, 1997, the Company
     completed the acquisition of one dental facility located in
     southern Florida from the Old Cutler Dental Associates, P.A.
     ("Old Cutler"). Effective September 26, 1997, the Company
     completed the acquisition of one dental facility located in
     central Tennessee from Robert T. Winfree, D.D.S., P.C.
     ("Winfree"). Effective November 7, 1997, the Company completed
     the acquisition of Stratman Management Group ("Stratman") and its
     six dental facilities located in Indiana. The purchase price of
     these facilities consisted of $4,957 in cash less discharge of
     liabilities related to the purchased assets. Funding for the
     acquisitions was obtained from cash available from operations and
     from the Company's revolving line of credit. Concurrent with the
     acquisitions, the Company entered into 40-year agreements to
     manage the dental practices which are operating in the dental
     facilities. Each acquisition was accounted for using the purchase
     method of accounting with the results of operations of the
     businesses acquired included from the effective date of the
     acquisition. The acquisitions resulted in excess of cost over
     fair value of net assets acquired of $5,490 which will be
     amortized over 40 years. During the fourth quarter of 1997, the
     Company revised its allocation of the purchase prices for Old
     Cutler, Winfree, and Stratman which resulted in an increase to
     the excess of purchase price over net assets acquired of $38 to
     $5,528.

     The following is a summary of assets acquired, liabilities
     assumed and consideration paid in connection with the
     acquisitions:

     Fair value of assets acquired, including goodwill         $6,055
     Cash paid for assets acquired, net of cash acquired       (4,957)
     Acquisition costs paid                                      (227)
                                                               ------
     Liabilities assumed                                       $  871
                                                               ======
<PAGE>
     Unaudited pro forma results of operations of the Company for the
     years ended December 31, 1997 and 1996 are included below. Such
     pro forma presentation has been prepared assuming that the Dental
     Care, AMDP, DDV, Workman, Old Cutler, Winfree, and Stratman
     acquisitions had occurred as of January 1, 1997 and January 1,
     1996.

                                                1997         1996

     Revenues                                 $163,900     $170,313
                                              ========     ========
     Net (loss) income                        $(54,460)    $  6,177
                                              ========     ========
        Net (loss) income per common share    $  (5.38)    $    .60
                                              ========     ========

     The unaudited pro forma results include the historical accounts
     of the Company, and historical accounts of the acquired
     businesses and pro forma adjustments including the amortization
     of the excess purchase price over the fair value of the net
     assets acquired, the increase in depreciation expense related to
     acquired property and equipment, the increase in interest expense
     related to the incurral of debt to fund the acquisitions, the
     reduction of revenues for an intercompany management fee charged
     by Dental Care to its subsidiary, CompDent of Illinois, the
     elimination of consulting costs incurred by Dental Care under
     various contractual arrangements with related entities of Dental
     Care which were terminated upon the Company's purchase of Dental
     Care, and the applicable income tax effects of these adjustments.
     The pro forma results of operations are not necessarily
     indicative of actual results which may have occurred had the
     operations of the acquired companies been combined in prior
     periods.

5.   Property and Equipment

     Property and equipment is comprised of the following as of
     December 31, 1997 and 1996:

                                                    1997       1996

     Office furniture and equipment                $2,003     $1,836
     Data processing equipment and software         4,431      3,085
     Leasehold improvements                         2,245      1,278
     Dental equipment                               1,125
                                                   ------     ------
                                                    9,804      6,199
     Less: accumulated amortization and
        depreciation                               (3,512)    (3,222)
                                                   ------     ------
     Property and equipment, net                   $6,292     $2,977
                                                   ======     ======

     Depreciation expense was $1,275, $1,350, and $719, for the years
     ended December 31, 1997, 1996, and 1995, respectively.
     Accumulated depreciation on assets held for leasing at December
     31, 1997 approximated $321.
<PAGE>
6.   Income Taxes

     Income tax expense includes income taxes currently payable and
     those deferred because of temporary differences between the
     financial statement and tax bases of assets and liabilities.

     Income tax expense consists of the following:

                                           1997       1996      1995
     Current payable:
          Federal                        $ 5,494    $ 5,286   $ 3,427
          State                              900      1,054       593
                                         -------    -------   -------
                                           6,394      6,340     4,020
                                         -------    -------   -------
     Deferred:
          Federal                         (1,284)     1,386      (217)
          State                             (210)       140       (38)
                                         -------    -------   -------
                                          (1,494)     1,526      (255)
                                         -------    -------   -------
                                         $ 4,900    $ 7,866   $ 3,765
                                         =======    =======   =======

     The differences between actual income tax (benefit) expense and
     income tax (benefit) expense computed using the federal statutory
     income tax rate were as follows:
<TABLE>
                                                       1997        1996       1995
     <S>                                            <C>           <C>        <C>
     Computed "expected" tax (benefit) expense      $(17,082)     $6,215     $3,049
     Nondeductible goodwill amortization              21,870       1,106        477
     Tax-exempt interest                                 (57)        (73)       (89)
     State income taxes, net of federal benefit          419         825        357
     (Decrease) increase in valuation allowance         (188)       (131)        88
     Other, net                                          (62)        (76)      (117)
                                                    --------      ------     ------
     Income tax expense                             $  4,900      $7,866     $3,765
                                                    ========      ======     ======
</TABLE>
<PAGE>
     Components of deferred tax assets and liabilities as of
      December 31, 1997 and 1996 are as follows:

<TABLE>
                                                                   1997       1996
     <S>                                                          <C>        <C>
     Deferred tax assets:
          Unearned revenue                                        $  447     $  215
          Investment in affiliate                                     33         36
          Property and equipment, net                                469        288
          Accrued liabilities                                      4,739      3,503
          Net operating loss carryforwards                         1,625      5,065
          Capital loss carryforward                                  158        204
                                                                  ------     ------
     Total deferred tax asset                                      7,471      9,311
     Valuation allowance                                          (1,301)      (974)
                                                                  ------     ------
     Net deferred tax asset                                        6,170      8,337
                                                                  ------     ------

     Deferred tax liabilities:
          Reserves                                                 2,752      3,205
          Deductible goodwill                                        224
                                                                  ------     ------
     Total deferred tax liability                                  2,976      3,205
                                                                  ------     ------
     Total net deferred tax asset                                 $3,194     $5,132
                                                                  ======     ======
</TABLE>
     From December 31, 1996 to December 31, 1997, the valuation
     allowance increased by $327 as a result of valuation allowances
     recorded in purchase accounting of $515 offset by a reduction of
     $188 due to the utilization of certain net operating and capital
     loss carryforwards associated with UniLife.

     SFAS No. 109 specifies that deferred tax assets are to be reduced
     by a valuation allowance if it is more likely than not that some
     portion or all of the deferred tax assets will not be realized.
     The Company has established valuation allowances primarily for
     net operating loss carryforwards and capital loss carryforwards
     related to certain acquired companies due to uncertainty
     surrounding their utilization prior to expiration. For similar
     reasons the Company has established a valuation allowance for
     certain state operating loss carryforwards generated at the
     holding company level.

     To the extent that certain of the preacquisition loss
     carryforwards are utilized in the future and the associated
     valuation allowance reduced, the tax benefit thereof will be
     allocated to reduce excess of purchase price over net assets
     acquired. At December 31, 1997, the portion of the valuation
     allowance, if utilized, that would reduce excess of purchase
     price over net assets acquired is approximately $515.
<PAGE>

     At December 31, 1997, certain subsidiaries have federal and state
     net operating loss carryforwards expiring as follows:

     Year of Expiration                          Federal       State
     1998                                                     $    76
     2000                                                          72
     2001                                                          21
     2002                                        $  801
     2003                                           706
     2007                                                         564
     2008                                                         903
     2009                                            66           236
     2010                                                       1,271
     2011                                           324        11,519
     2012                                           479         1,773
                                                 ------       -------
                                                 $2,376       $16,435
                                                 =======      =======

     Currently, the 1996 consolidated tax return is under examination
     by the Internal Revenue Service. The Company does not anticipate
     any material adjustments as a result of the examination.

7.   Accounting for Purchase Price Over Net Assets Acquired (Goodwill)

     The Company's accounting policy is to amortize goodwill on a
     straight-line basis over a 40-year period. Historically, the
     Company periodically assessed the recoverability of its goodwill
     through undiscounted cash flows, excluding interest expense and
     amortization, over the remaining life of such goodwill.

     During the fourth quarter of 1997, management evaluated goodwill
     impairment pursuant to their existing policy. The evaluation
     indicated no impairment which is contrary to events occurring in
     the fourth quarter, primarily a reevaluation of growth rates and
     an inability to expand dental panel of certain acquired companies
     to anticipated levels. The industry and, specifically the
     Company, has not exhibited the growth rates or sustained stock
     price levels consistent with historical purchase assumptions
     resulting in impaired goodwill.

     Consistently applying the historical policy would not result in
     the recognition of impairment; therefore, management concluded
     that the Company's accounting policy with respect to the
     recoverability of goodwill should be changed to discount
     projections of future cash flows using an economic rate of return
     that would be customary for evaluating the present value of
     future cash flows in connection with current dental benefit
     company transactions. As a result of this accounting change, the
     goodwill attributable to the acquisition of CompDent Corporation
     was reduced from $32,080 to $13,869. Additionally, the goodwill
     attributable to the acquisition of Dental Care Plus Management,
     Corp. was reduced from $39,052 to $8,818, DentiCare, Inc.
<PAGE>
     from $14,433 to $6,010 and American Dental Providers, Inc. and
     Diamond Dental & Vision, Inc. from $2,085 to $0, or a total
     reduction of $58,953.

     The Company tested the recoverability of the remaining goodwill
     of $67,599 relating to the American Prepaid Professional
     Services, Texas Dental Plans, Inc. acquisitions and various
     dental facilities acquired by Dental Health Management, Inc., and
     based on the above methodology utilized, management concluded
     that such goodwill appeared to be fully recoverable.

     Because such a change in accounting was determined to be
     inseparable from a change in an estimate, such reduction was
     reflected as a charge to operating earnings, as opposed to being
     reflected as the cumulative effect of a change in an accounting
     principle.

8.   Long-Term Debt

     Long-term debt consists of the following at December 31, 1997 and
     1996:

                                                  1997      1996

     Notes payable pursuant to a $65,000
     reducing revolving line of credit
     agreement with banks (interest
     accrues at prime plus up to 1/4% or
     LIBOR plus up to 1-3/4%, with the margin
     over prime and LIBOR decreasing as the
     ratio of consolidated debt to EBITDA
     (as defined) decreases; American
     Prepaid's borrowing rate at
     December 31, 1997 was 7.1%)                $ 56,595   $41,663
                                                ========   =======

     American Prepaid has a reducing revolving $65,000 line of credit
     (the "Credit Facility") from a combination of lenders, as amended
     by the First Amendment which increased the line of credit from
     $35,000. American Prepaid pays a commitment fee of 0.375% per
     annum on any unused portion of the Credit Facility.

     The Credit Facility prohibits payment of dividends and other
     distributions and restricts or prohibits American Prepaid from
     making certain acquisitions, incurring indebtedness, incurring
     liens, disposing of assets or making investments without the
     lender's approval, and requires it to maintain certain financial
     ratios on an ongoing basis. The Credit Facility is collateralized
     by pledges of the stock of the Company's and American Prepaid's
     direct and indirect subsidiaries.

     At December 31, 1997, the Company was in technical violation of
     three of the financial ratios primarily as a result of the
     goodwill impairment (see Note 7) and one-time and unusual charges
     recorded in the fourth quarter. These charges included $2,000 to
     terminate an exclusive indemnity relationship, $2,000 to reserve
     for a surplus note, $1,400 to reserve for incurred practice
     management startup costs, $1,600 for litigation settlement costs,
     and $2,400 of other costs. The Company has received a waiver with
     respect to such covenants from its lenders.
<PAGE>

     As of March 16, 1998, the Credit Facility has been amended by the
     Second Amendment which reduces the minimum net worth requirement
     for future periods and modifies the scheduled reductions in the
     aggregate commitment. Prior to the Second Amendment, the Credit
     Facility required a 33% reduction in available borrowings for
     each year ending December 31, 2000, 1999, and 1998. The Credit
     Facility, as amended, reduces the available borrowings to $32,500
     at December 31, 1999 with the remaining balance due on December
     31, 2000.

     Aggregate maturities as set forth in the Second Amendment are as
     follows:

     Year Ending December 31:
     1999                                                $24,095
     2000                                                 32,500
                                                         -------
                                                         $56,595
                                                         =======

9.   Stock Offerings

     In anticipation of an initial public offering (IPO), the
     Company's Board of Directors, effective March 31, 1995, increased
     the number of shares authorized to 7,380,000 and effected a
     1.8-for-1 stock split, effective in the form of a dividend. All
     references to the number of Company shares authorized, issued and
     outstanding have been adjusted to reflect the stock split on a
     retroactive basis.

     On May 24, 1995, the Company's IPO of 3,420,000 shares of common
     stock at an offering price of $14.50 per share was declared
     effective by the Securities and Exchange Commission. On June 1,
     1995, the Company completed the IPO, issued the common stock and
     received net proceeds (after deducting issuance costs) of
     $44,527. On June 1, 1995, the Company sold an additional 513,000
     shares of common stock at the initial offering price of $14.50
     per share pursuant to the exercise of the overallotment option
     granted to the underwriters in the IPO. Net proceeds of $6,915
     (after deducting issuance costs) were received by the Company.

     In accordance with the terms of the Class A common stock, upon
     consummation of the IPO, each outstanding share of Class A common
     stock converted to an outstanding share of common stock. In
     addition, all options to purchase Class A common stock converted
     to options to purchase common stock. All references to Class A
     common stock, where appropriate, have been changed to reflect the
     conversion to common stock.

     In accordance with the terms of the then existing 10% cumulative
     redeemable preferred stock and the 10% subordinated notes, the
     Company used approximately $5,400 and $7,900 of the net proceeds
     of the IPO to redeem the preferred stock and accumulated
     dividends thereon and the subordinated notes and accrued interest
     thereon, respectively. During the year ended December 31, 1995
     the Company accumulated $218 in dividends through a charge to
     retained earnings and a credit to the carrying value of the
     preferred shares. In addition, the Company
<PAGE>
     used approximately $26,600 of the net proceeds of the IPO to
     repay both of the then existing term loans payable to the bank.

     The repayment of the term loans in the second quarter resulted in
     a pretax extraordinary loss (due to the write-off of unamortized
     loan fees) on early extinguishment of debt of $498, net of a tax
     benefit of $305.

     On April 18, 1995, the Company's stockholders approved an
     amendment to the Company's Certificate of Incorporation to
     increase the number of authorized shares of common stock to
     18,000,000 and to authorize the issuance of 2,000,000 shares of
     preferred stock, par value $0.01 per share, with such rights and
     preferences as the Board of Directors may establish from time to
     time. The stockholders then approved the elimination of the 10%
     cumulative preferred stock and the Class A common stock. Upon
     completion of the IPO and after the redemption of the preferred
     stock and the conversion of the Class A common stock to common
     stock, the Company filed certificates with the State of Delaware
     prohibiting the issuance of either form of stock.

     On August 22, 1995, a second stock offering of 3,400,000 shares
     of the Company's common stock at an offering price of $23.25 per
     share was declared effective by the Securities and Exchange
     Commission. Of the 3,400,000 shares offered, 1,500,000 were sold
     by the Company and 1,900,000 shares were sold by selling
     stockholders. The Company also sold 435,000 of the 510,000
     underwriter over-allotment shares. On August 25, 1995, the
     Company completed the second stock offering, issued 1,935,000
     shares of common stock and received net proceeds (after deducting
     issuance costs) of $42,047. $25,000 in proceeds from the second
     stock offering were used to repay outstanding indebtedness under
     the Company's revolving credit facility.

     On April 29, 1996, the Company's stockholders approved an
     amendment to the Company's Certificate of Incorporation to
     increase the number of authorized shares of common stock from
     18,000,000 to 50,000,000.

10.  Stock Options

     Under the 1994 Stock Option and Grant Plan (the "1994 Plan"), the
     Company may issue to officers, employees, consultants, and other
     key persons options to purchase up to 360,000 shares of the
     Company's common stock. The Option Committee may specify periods
     which options may be exercised following retirement or
     termination of employment.

     During 1997, the Company established the 1997 Stock Option Plan
     (the "1997 Plan") whereby the Company may issue to officers,
     employees, directors, consultants, advisors, and other key
     persons options to purchase up to 500,000 shares of the Company's
     common stock. Unless specified by the Option Committee, options
     are automatically terminated upon termination of employment. The
     1997 Plan is subject to shareholder approval. A proxy vote is
     scheduled for the annual shareholder's meeting in April 30, 1998.
<PAGE>
     The 1994 and 1997 Plans allow for incentive and nonqualified
     stock options. Options granted are at an exercise price which is
     determined by the Option Committee of the Board of Directors. The
     exercise price of the incentive stock options shall not be less
     than fair market value of the stock on the date of grant. Options
     are exercisable in installments as designated by the Option
     Committee. Options granted under the plans shall expire no later
     than ten years after date of grant.

     During 1996, the Company established the Non-Employee Director's
     Stock Option Plan (the "Director's Plan") whereby the Company may
     issue to directors nonqualified options to purchase up to 100,000
     shares of the Company's common stock. Options granted are at an
     exercise price which is determined by the Option Committee of the
     Board of Directors. The exercise price of the incentive stock
     options shall not be less than fair market value of the stock on
     the date of grant. Options vest ratably over a four-year period.
     Options granted under the plan shall expire no later than ten
     years after date of grant.

     During 1997, the Company granted 268,000 nonqualified stock
     options outside of the 1994, 1997, and Director's Plans. In
     addition, there were 50,000 stock options outstanding that were
     issued in 1996 and are not part of any plan. In connection with
     the Workman acquisition (see Note 4), 70,000 options were granted
     and expire at the end of five years. The Company also granted
     198,000 stock options to new employees. Options vest in
     installments as designated by the Option Committee and expire no
     later than ten years after date of the grant.

     Prior to the adoption of the Director's Plan, the Company had
     granted options to certain of its directors to purchase 72,000
     shares of common stock at $.49 per share. These options vest 25%
     per year and, unless exercised, expire at the end of six years. A
     total of 36,000, 18,000, and 36,000 of these options were
     exercisable at December 31, 1997, 1996, and 1995, respectively.
     During 1997, no options were exercised.

     On April 30, 1997, the 1996 Stock Option Plan (the "1996 Plan")
     was defeated by a proxy vote of the shareholders, thus rescinding
     the 320,000 stock options that had been granted during 1996. The
     following tables have been restated to reflect this transaction.
<PAGE>
     Pertinent information regarding the Plans are as follows:
<TABLE>
                                                                                  Weighted
                                                     Number           Range of     Average
                                                       of             Exercise    Exercise     Vesting
                                                     Options           Prices       Price     Provisions

<S>                                                <C>             <C>              <C>        <C>
Options outstanding, December 31, 1994               127,800        $.49 - 5.89     $ 2.31     25%/year
Options granted                                      112,400       14.50 - 29.00     24.82     25%/year
Options canceled                                     (28,800)       5.89 - 14.50     10.20
                                                   ---------
Options outstanding, December 31, 1995               211,400         .49 - 29.00     13.21     25%/year
Options granted                                      187,000        29.25 - 42.75    34.29     25%/year
Options granted                                      140,000           29.25         29.75     immediate
Options canceled                                     (36,700)        2.96 - 29.75    23.97
Options exercised                                    (47,700)         .49 - 5.89      1.37
                                                   ---------
Options outstanding, December 31, 1996               454,000          .49 - 42.75    27.62
Options granted                                      457,000        16.34 - 30.25    22.13     25%/year
Options granted                                      200,000        16.12 - 30.25    18.36     immediate
Options canceled                                     (24,500)       29.00 - 39.50    32.55
Options exercised                                     (3,500)            .49          0.49
                                                   ---------
Options outstanding, December 31, 1997             1,083,000         $.49 - 42.75   $23.56
                                                   =========
</TABLE>
     The following table summarizes information about stock options
     outstanding at December 31, 1997:

<TABLE>
                                  Options Outstanding                  Options Exercisable
                                       Weighted
                        Number          Average       Weighted                      Weighted
                         Out-          Remaining       Average        Number        Average
  Range of             standing       Contractual      Exercise     Exercisable     Exercise
  Exercise             12/31/97       Life (Years)      Price        12/31/97         Price
<S>                   <C>                 <C>           <C>           <C>             <C>
 $.49 - 5.89             55,000           6.27          $ 1.88         48,250         $ 1.45
$14.50 - 20.50          492,000           9.55           18.86        199,000          17.59
$23.22 - 30.25          408,000           8.91           28.01        182,750          29.69
$36.25 - 42.75          128,000           8.28           36.71         32,000          36.71
                      ---------           ----          ------        -------         ------
   Total              1,083,000           9.04          $23.56        462,000         $22.01
                      =========           ====          ======        =======         ======
</TABLE>
     The options above were issued at exercise prices which
     approximate fair market value at the date of grant. At December
     31, 1997, 215,800 shares are available for grant under the
     various plans.

     At December 31, 1997 and 1996, the Company has stock options
     outstanding under three stock-based compensation plans and other
     agreements which are described above. The
<PAGE>
     Company also has an Employee Stock Purchase Plan which allows
     employees to purchase common stock at certain times during the
     year. The Company applies APB Opinion No. 25 and related
     Interpretations in accounting for its stock plans. Accordingly,
     no compensation cost has been recognized for its fixed stock
     options or stock purchase plan with the exception of the Workman
     options. Had compensation cost for the Company's stock-based
     compensation plans been determined based on the fair value at the
     grant dates for awards under those plans consistent with the
     method prescribed in SFAS No. 123, the Company's net income and
     earnings per share would have been reduced to the pro forma
     amounts indicated below:
<TABLE>
                                                        1997              1996           1995
     <S>                                             <C>                 <C>            <C>
     Net (loss) income - as reported                 $(53,705)           $9,892         $4,706
     Net (loss) income - pro forma                   $(55,162)           $8,611         $4,654

     Earnings per share (basic) - as reported        $  (5.32)           $ 0.98         $ 0.62
     Earnings per share (basic) - pro forma          $  (5.46)           $ 0.86         $ 0.61

     Earnings per share (diluted) - as reported      $  (5.32)           $ 0.97         $ 0.61
     Earnings per share (diluted) - pro forma        $  (5.46)           $ 0.86         $ 0.61
</TABLE>
     The pro forma amounts reflected above are not representative of
     the effects on reported net income in future years because, in
     general, the options granted typically do not vest for several
     years and additional awards are made each year.

     The fair value of each option grant is estimated on the grant
     date using the Black-Scholes option-pricing model with the
     following weighted-average assumptions:

                                        1997      1996      1995
     Dividend yield                        0%        0%        0%
     Expected life (years)               3.4       4.2       5.0
     Expected volatility                56.2%    41.45%    41.45%
     Risk-free interest rate            6.04%     5.80%     6.05%

     The Company has a stock redemption agreement with its Chairman
     under which the Company may, contingent upon a certain former
     member of management exercising options, redeem up to 4,500
     shares of common stock issued to the Chairman at a redemption
     price of $2.96. The agreement is in effect until all shares are
     redeemed or the certain former member of management's options are
     no longer exercisable.

11.  Employee Benefit Plan

     The Company maintains a 401(k) profit sharing plan for all
     full-time employees who have completed six months of service. The
     plan allows employees to defer from 1% to 20% of their
<PAGE>
     earnings on a pretax basis through contributions to the plan.
     Employer matching contributions are based upon a fixed percentage
     of voluntary employee contributions. Employer profit sharing
     contributions are based upon a fixed percentage of qualifying
     plan participants' annual compensation. Both employer matching
     and profit sharing contribution levels are discretionary and are
     determined by the Company and approved by the Board of Directors
     on an annual basis. Employees are always 100% vested in their
     contributions and become fully vested in employer contributions
     after five years of service. On December 1, 1997, a 401(k) plan
     was created for employees of DHMI. The Company also maintains the
     401(k) plans of the companies that it acquires until such time as
     they are merged into the Company's existing plan.  At December
     31, 1997, the Company had terminated the plans relating to the
     Texas Dental acquisition and rolled participants into the
     Company's plan, and merged the plan relating to the Dental Care
     acquisition. At December 31, 1997, former employees of AMDP and
     DDV were eligible to participate in the Company's plan. The
     Company contributed a total of $91, $203 and $82 to all of the
     plans during 1997, 1996, and 1995, respectively.

12.  Related Party Transactions

     In 1997, DHMI and DHDC entered into a contractual management
     agreement by which DHDC pays a monthly fee to DHMI for accounting
     and information system services as well as general and
     administrative expenses. Management fees recognized for the year
     ended December 31, 1997 were $1,854. At December 31, 1997,
     approximately $605 was due from DHDC.

     During 1997, DentLease acquired and held various operating lease
     agreements for office space and equipment relating to DHMI and
     DHDC acquisitions and operations (see Note 13). Collective future
     rentals on existing leases with DHDC as of December 31, 1997 are
     as follows:

     Year Ending December 31:
     1998                                                $  258
     1999                                                   258
     2000                                                   258
     2001                                                   258
     2002                                                   258
     Thereafter                                             179
                                                         ------
                                                         $1,469
                                                         ======

     As part of the Dental Care purchase, the Company assumed an
     agreement whereby Dental Care provides marketing, processing, and
     other administrative services to HCS, a non-profit dental
     company. The management fee may be waived if HCS will have a net
     loss after recognition of the fee and cannot exceed 30% of net
     premiums, as defined in the agreement. The management fee for the
     years ended December 31, 1997 and 1996 were $3,103 and $1,749,
     respectively. At December 31, 1997, approximately $146 was due
     from HCS. At December 31, 1996, approximately $1,100 was due to
     HCS.
<PAGE>
     The Company has an agreement with a former stockholder of
     American Prepaid who is also a current stockholder of the Company
     that provides for such stockholder to receive certain future
     payments for a ten-year period upon retirement. The stockholder
     retired in 1993 and commenced receiving payments upon retirement.
     Amounts accrued for such future payments were $288 and $329 as of
     December 31, 1997 and 1996, respectively. Deferred compensation
     expense recognized pursuant to this agreement was $41, $38, and
     $35 for the years ended December 31, 1997, 1996, and 1995,
     respectively.

     The Company has an agreement with a former stockholder of
     American Prepaid who is also a current stockholder of the Company
     that provides for such stockholder to receive future payment of
     medical costs. The Company has recorded an actuarially determined
     liability of approximately $245 at December 31, 1997 and 1996.
     The discount rate and medical cost trend rate used to compute
     this benefit was 7% and 10%, respectively. A 1% increase in the
     medical cost trend rate would increase the liability by
     approximately $18. Expense recognized pursuant to this agreement
     was $7, $6, and $13 for the years ended December 31, 1997, 1996,
     and 1995, respectively.

     The Company has consulting agreements in place with a former
     director and the former president of American Prepaid. The
     consulting agreement with the former president expired in 1996,
     while the agreement with the former director expires in 1998 and
     requires annual payments of $55. Payments made pursuant to these
     agreements were $55, $165, and $165, respectively, for each of
     the years in the three year period ended December 31, 1997.

13.  Operating Lease Commitments

     The Company leases office facilities and certain office equipment
     under various operating leases expiring through 2006. Collective
     future minimum lease payments under these agreements as of
     December 31, 1997 are as follows:

     Year Ending December 31:
     1998                                                 $ 3,478
     1999                                                   3,304
     2000                                                   2,984
     2001                                                   2,950
     2002                                                   2,783
     Thereafter                                             2,372
                                                          -------
                                                          $17,871
                                                          =======

     Rental expense under such leases for the years ended December 31,
     1997, 1996, and 1995 was $2,359, $1,770, and $741, respectively.
<PAGE>
14.  Arrangement with Indemnity Insurers

     Effective January 1, 1996, the Company entered into a two-year
     agreement with an unrelated indemnity insurer, wherein the
     Company may offer dual-choice (managed or indemnity) dental
     coverage. For subscribers in groups offering dual-choice dental
     coverage, subscribers select the type of coverage desired, and
     indemnity coverage is underwritten by the indemnity insurer. The
     Company invoices and collects all dual choice premiums. The
     Company retains 100% of all premiums related to the managed
     product and 10% of indemnity premiums collected under the
     dual-choice plan to cover commissions and processing costs. The
     remaining 90% of indemnity premiums are remitted to the indemnity
     carrier. The agreement also provides for additional payments to
     the indemnity insurer dependent on loss ratios of the underlying
     business. The Company records retention of indemnity premiums as
     other income. Any additional payments subject to the risk sharing
     provisions of the agreement are recorded as additions to dental
     care providers' fees and claim costs.

     The Company has an arrangement with another unrelated indemnity
     insurer, expiring December 31, 1997, wherein the Company may
     offer indemnity dental coverage. The indemnity coverage is
     underwritten by the indemnity insurer. The Company invoices and
     collects all indemnity premiums, retaining 25% of all gross
     premiums collected to cover commissions and processing costs. The
     Company records these indemnity premiums as other income. The
     Company is not liable under indemnity insurance underwritten by
     the insurer.

     In certain states, this indemnity insurer also underwrites
     prepaid and indemnity dental plans. Under this arrangement, the
     indemnity carrier receives 2% of prepaid premiums (plus
     applicable premium taxes).

15.  Reinsurance

     In 1992, UniLife ceased writing life insurance, other than a
     small amount of group life, and ceded substantially all of its
     existing ordinary life insurance to another insurer. The face
     amount of these ceded ordinary life policies is $14,974 and
     $15,611 at December 31, 1997 and 1996, respectively. UniLife has
     recorded aggregate reserves of $5,331 and $5,338 and
     corresponding receivables from reinsurer for the same amount at
     December 31, 1997 and 1996, respectively.

     Additionally, for its group life policies, UniLife had ceded
     amounts in excess of $10 on any one term life policy. The face
     amount of these policies at December 31, 1996 was $91,520, of
     which $54,837 is subject to reinsurance. As of October 1, 1995,
     pursuant to the reinsurance arrangement mentioned below, all of
     the $91,520 is reinsured by a combination of reinsurers.

     Effective October 1, 1995, UniLife reinsured all of its dental
     indemnity and life insurance with one of the Company's unrelated
     indemnity insurers (see Note 14). For the period October 1, 1995
     to December 31, 1995, UniLife administered the policies and
     received a fee, based upon net premiums, from the indemnity
     insurer.
<PAGE>
     Effective January 1, 1996, UniLife and the indemnity insurer
     entered into an assumption reinsurance agreement, transferring
     all risk from UniLife to the indemnity insurer and notifying the
     policyholders of the transaction. For three years, the indemnity
     insurer will pay UniLife a ceding commission of 2% of dental
     indemnity premiums recognized on the policies transferred from
     UniLife.

     Non-assumption reinsurance contracts do not relieve the Company
     from its obligations to policyholders. Failure of reinsurers to
     honor their obligations could result in losses to the Company;
     therefore, allowances are established if amounts are determined
     to be uncollectible. Management monitors the financial condition
     of its reinsurers on a routine basis. Any exposure from
     deterioration of reinsurers' financial condition would be
     recognized currently.

     The following table summarizes the effects of reinsurance on
     premiums, benefits and surrenders for the years ended December
     31, 1997, 1996, and 1995:

                                    1997       1996       1995


     Direct premiums earned         $ 159      $ 218     $19,083
     Premiums assumed                                      1,592
     Premiums ceded                  (159)      (218)     (4,616)
                                    -----      -----     -------
          Net premiums earned       $   0      $   0      16,059
                                    =====      =====     =======
     Direct benefits                $  75      $ 165     $14,393
     Benefits assumed                                      1,163
     Benefits ceded                   (75)      (165)     (3,425)
                                    -----      -----     -------
          Net benefits              $   0      $   0     $12,131
                                    =====      =====     =======
     Direct surrenders              $ 190
     Surrenders ceded                (190)
                                    -----
          Net surrenders            $   0
                                    =====
<PAGE>
     Activity in the dental claims reserves for the years ended
     December 31 is summarized as follows:

                                                    1997       1996

     Balance, January 1                            $1,421     $1,308

     Reinsurance receivables                                   1,129
                                                   ------     ------
     Net balance, January 1                         1,421      2,437
                                                   ------     ------
     Dental claims reserves assumed in
          connection  with purchase of
          CompDent of Illinois                                   220
     Prior claims reserves ceded during
          current year                                        (1,978)
     Incurred related to:
          Current year                              8,902      7,388
          Prior years                                (475)      (262)
                                                   ------     ------
               Total incurred                       8,427      7,126
                                                   ------     ------
     Paid related to:
          Current year                              7,400      5,967
          Prior years                                 946        417
                                                   ------     ------
               Total paid                           8,346      6,384
                                                   ------     ------
     Balance, December 31                          $1,502     $1,421
                                                   ======     ======

16.  Contingencies

     The Company was a defendant to a civil compliant filed by three
     participating dentists (one of which later withdrew) who had
     entered into Participating Dentist Agreements with various
     subsidiaries of the Company ("Subsidiaries"). The complaint
     alleged a breach of contract and sought damages based on the
     failure of each subsidiary to make capitation payments to the
     participating dentists for the period of time between when the
     affected subscribers enroll and the time at which the subscribers
     select a dentist. The plaintiffs in July of 1996 were originally
     denied class certification by the trial court. However, the
     plaintiffs successfully appealed this ruling and the class was
     certified.

     The Company believes its interpretation and administration of the
     Participating Dentist Agreements were correct. However, due to
     the costs involved in protracted litigation, the Company agreed
     to a proposed settlement on December 2, 1997. The settlement
     costs including attorney's fees, payments to the class and its
     representatives, and various other payments will be approximately
     $1,600. This charge is included in general and administrative
     expenses in the statement of operations.

     The settlement also requires that the Subsidiaries amend the
     Participating Dental Agreements to provide that it will pay
     capitation to the dentist when there has been a delay between the
     time a subscriber initially enrolls in the dental plan and the
     date they select a dentist for all subscribers
<PAGE>
     who enroll after January 1, 1999. In addition, the Subsidiaries
     have agreed to provide additional notices to subscribers who have
     not selected a dentist.

     The proposed settlement is subject to the notification of the
     class members, a fairness hearing, and approval by the court.

     Various legal proceedings have arisen or may arise in the normal
     course of business. Management does not believe that there are
     currently any asserted or unasserted claims that will have a
     material adverse effect on the financial position, results of
     operations, or cash flows of the Company.

17.  Employee Stock Purchase Plan

     During 1996, the Company adopted an Employee Stock Purchase Plan
     to provide substantially all employees who have completed six
     months of service an opportunity to purchase shares of its common
     stock through payroll deductions. Annually, on December 31,
     participant account balances are used to purchase whole shares of
     stock at the lesser of 85% of the fair market value of shares on
     January 1 (offering date) (August 1, 1996 for initial offering
     period) or December 31 (exercise date). The aggregate number of
     shares purchased annually by an employee are subject to
     limitations imposed by the Internal Revenue Code. A total of
     100,000 shares are available for purchase under the plan. There
     were 3,090 and 1,611 shares issued under the plan at December 31,
     1997 and 1996, respectively, at an exercise price of $17.24 and
     $29.96, respectively.

18.  Earnings Per Share

     The calculation of basic and diluted EPS is as follows:

<TABLE>
                              For The Year Ended 1997         For The Year Ended 1996      For The Year Ended 1995
                          Income       Shares       Per-    Income     Shares     Per-    Income     Shares     Per-
                           (Num-      (Denom-      Share    (Num-     (Denom-    Share    (Num-      (Denom-   Share
                          erator)     inator)      Amount   erator)    inator)   Amount   inator)    inator)   Amount

<S>                      <C>         <C>          <C>       <C>      <C>          <C>     <C>      <C>         <C>
(Loss) income before
  extraordinary item     $(53,705)                          $9,892                        $5,204
Extraordinary loss                                                                          (498)
                         --------                           ------                        ------
     Net (loss)
       income             (53,705)                           9,892                         4,706
Less preferred
   dividends                                                                                (218)
                         --------                           ------                        ------

Basic EPS
(Loss) income
   available to
   common stockholders    (53,705)   10,098,323   $(5.32)    9,892   10,048,513   $0.98    4,488   7,240,600   $0.62

Effect of dilutive
   securities
     Stock options                                                      128,243   (0.01)             111,055   (0.01)
                         --------    ----------   ------    ------   ----------   -----   ------   ---------   -----

Diluted EPS
   (Loss) income
      available to
      common stock-
      holders plus
      assumed
      conversions        $(53,705)   10,098,323   $(5.32)   $9,892   10,176,756   $0.97   $4,488   7,351,655   $0.61
                         ========    ==========   ======    ======   ==========   =====   ======   =========   =====
</TABLE>
<PAGE>
     In accordance with SFAS No. 128, the 1995 and 1996 EPS have been
     restated to conform with basic and diluted EPS as defined by the
     pronouncement. Diluted EPS is equivalent to "net income per
     common share" as previously reported since dilutive common stock
     equivalents are included in the denominator in both calculations.

     Options to purchase 479,000 shares of common stock ranging from
     $24.88 to $42.75 per share were outstanding during 1997 but are
     not included in the computation of 1997 diluted EPS because the
     options' exercise price was greater than the average market price
     of the common shares. The options, which expire through November
     2007, were still outstanding at December 31, 1997. Additionally,
     common stock equivalents of 112,937 were excluded as the effect
     is anti-dilutive due to the net loss in 1997.

     Options to purchase 32,000 shares of common stock ranging from
     $39.50 to $42.75 per share were outstanding during 1996 but are
     not included in the computation of 1996 diluted EPS because the
     options' exercise price was greater than the average market price
     of the common shares.

     All options to purchase common stock were included in the 1995
     diluted EPS.

19. Recently Issued Accounting Standards

     The Board has issued SFAS No. 130, Reporting Comprehensive
     Income, that establishes standards for reporting and display of
     comprehensive income and its components (revenues, expenses,
     gains, and losses) in the financial statements. Comprehensive
     income is defined as the change in equity of a business enterprise
     during a period from transactions and other events and
     circumstances from nonowner sources. It includes all changes in
     equity during a period except those resulting from investments by
     owners and distributions to owners. This Statement does not
     require a specific format for the presentation of comprehensive
     income but requires an amount representing total comprehensive
     income for the period. This Statement is effective for fiscal
     years beginning after December 15, 1997 with reclassification of
     earlier periods required.  Other than the additional presentation
     requirements of this Statement, the Company does not anticipate a
     material impact on the financial position, results of operations,
     earnings per share, or cash flows.

     The Board has issued SFAS No. 131, Disclosures about Segments of
     an Enterprise and Related Information, which establishes
     standards for the way that public business enterprises report
     information about operating segments in annual financial
     statements and requires selected information about operating
     segments in interim financial reports.

     This Statement requires that a public business enterprise report
     financial and descriptive information about its reportable
     operating segments. Operating segments are components of an
     enterprise about which separate financial information is
     available that is evaluated regularly by the chief operating
     decision maker in deciding how to allocate resources and in
     assessing performance. Generally, financial information is
     required to be reported on the basis that it is
<PAGE>
     used internally for evaluating segment performance and deciding
     how to allocate resources to segments.

     The financial information required includes a measure of segment
     profit or loss, certain specific revenue and expense items,
     segment assets and a reconciliation of each category to the
     general financial statements. The descriptive information
     required includes the way that the operating segments were
     determined, the products and services provided by the operating
     segments, differences between the measurements used in reporting
     segment information and those used in the general purpose
     financial statements, and changes in the measurement of segment
     amounts from period to period.

     This Statement is effective for financial statements for periods
     beginning after December 15, 1997 with restatement of earlier
     periods required in the initial year of application. This
     Statement need not be applied to interim financial statements in
     the initial year of its application, but comparative information
     for interim periods in the initial year of application is to be
     reported in financial statements for interim periods in the
     second year of application. The Company is currently determining
     if these disclosure requirements will be applicable and,
     therefore, required in future periods.

     The Emerging Issues Task Force (EITF) has issued EITF Issue No.
     97-2 ("Issue 97-2"), Application of FASB Statement No. 94,
     Consolidation of All Majority-Owned Subsidiaries, and APB Opinion
     No. 16, Business Combinations, to Physician Practice Management
     Entities and Certain Other Entities with Contractual Management
     Arrangements, that establishes standards for determining whether
     a physician practice management group ("PPM") has a controlling
     financial interest in a physician practice based on a contractual
     management agreement. For purposes of Issue 97-2, the practices
     of medicine, dentistry, and veterinary science are collectively
     referred to as "physician practices."

     Under Issue 97-2, when such a controlling financial interest
     exists, consolidation of the physician practice is required. A
     controlling financial interest is defined based on the term of
     the contractual arrangement, control over decision making, and
     the extent of the PPM's financial interest in the physician
     practice and is deemed to exist if the following six criteria are
     met: 1) the contractual arrangement has a term that is either (i)
     the entire remaining legal life of the physician practice entity
     or (ii) a period of 10 years or more; 2) the contractual
     arrangement is not terminable by the physician practice except in
     the case of gross negligence, fraud, or other illegal acts by the
     PPM, or bankruptcy of the PPM; 3) PPM has exclusive authority
     over all decision making related to ongoing, major, or central
     operations of the physician practice, except for the dispensing
     of medical services; 4) PPM has exclusive authority over all
     decision making related to total practice compensation of the
     licensed medical professionals as well as the ability to
     establish and implement guidelines for the selection, hiring, and
     firing of them; 5) PPM's financial interest in the physician
     practice is unilaterally salable or transferable by the PPM; 6)
     PPM's financial interest in the physician practice provides the
     PPM with the right to receive income as on-going fees and as
     proceeds from the sale of its interest in the physician
<PAGE>
     practice, in an amount that fluctuates based on the performance
     of the operations of the physician practice and the change in the
     fair value thereof. If the six criteria are met, then the
     transaction between the PPM and physician practice in which the
     PPM executes a management agreement with the physician practice
     is considered to be a business combination to be accounted for
     under APB 16. Finally, Issue 97-2 establishes the presumption
     that an employee of a physician practice that is consolidated by
     the PPM should be considered an employee of the PPM and its
     subsidiaries for purposes of determining the method of accounting
     for stock-based compensation.

     For all arrangements that exist on November 20, 1997, this Issue
     is effective for financial statements for fiscal years ending
     after December 15, 1998. The effect of initially applying the
     consensus may be reported as the effect of a change in accounting
     principle or may be retroactively reported by restating the
     financial statements of prior periods.

     The Company is currently evaluating the four dental acquisitions
     made during 1997 (see Note 4) to determine compliance with the
     provisions of Issue 97-2.

20.  Selected Quarterly Data (Unaudited)

     The following table, which has not been audited by independent
     accountants, sets forth summary unaudited quarterly financial
     information of the Company for each quarter in 1997 and 1996.

     In the opinion of management, such information has been prepared
     on the same basis as the audited consolidated financial
     statements appearing elsewhere in this annual report and reflects
     all adjustments necessary for a fair presentation of such
     unaudited consolidated quarterly results. The quarterly results
     should be read in conjunction with the audited consolidated
     financial statements of the Company. Results of operations for
     any particular quarter are not necessarily indicative of results
     of operations for a full year.
<PAGE>
<TABLE>
                                                 1996                                            1997
                            Q1             Q2           Q3         Q4          Q1           Q2          Q3         Q4
                                                                    (in thousands)
<S>                       <C>           <C>          <C>         <C>         <C>         <C>         <C>         <C>
Revenues:
  Subscriber premiums     $30,831       $33,384      $35,443     $36,149     $35,636     $35,852     $35,982     $35,926
  Affiliated practice
    revenue                                                                                            3,343       3,774
  Other revenue               554         1,377        1,704       1,627       2,199       2,348       1,809       1,857
                          -------       -------      -------     -------     -------     -------     -------     -------
      Total revenue        31,385        34,761      137,147      37,776      37,835      38,200      41,134      41,557
                          -------       -------      -------     -------     -------     -------     -------     -------

Expenses:
   Dental care providers'
     fees and claim
     costs                 16,481        17,967       19,196      19,787      19,544      19,906      19,849      22,391
   Commissions              3,013         3,091        2,949       3,131       3,172       3,192       3,552       3,356
   Premium taxes              259           264          264         231         265         256         263         263
   General and
     administrative         6,771         7,831        7,964       7,828       7,860       7,967      10,231      18,260
   Depreciation and
     amortization           1,047         1,287        1,389       1,430       1,321       1,355       1,553       1,506
   Goodwill impairment                                                                                            58,953
                          -------       -------      -------     -------     -------     -------     -------     -------
      Total expenses       27,571        30,440       31,762      32,407      32,162      32,676      35,448     104,729
                          -------       -------      -------     -------     -------     -------     -------     -------
   Operating income
     (loss)                 3,814         4,321        5,385       5,369       5,673       5,524       5,686
(63,172)
   Interest (income)
     expense, net            (107)          289          580         588         547         484         704         779
   Other (income)
     expense, net             (10)         (299)          96          (6)        (45)        (16)         (5)         68
                          -------       -------      -------     -------     -------     -------     -------     -------
   Income (loss)
     before provisions
     for income taxes       3,931         4,331        4,709       4,787       5,171       5,056       4,987
(64,019)
   Income tax provision
     (benefit)              1,694         1,924        2,103       2,145       2,332       2,172       2,055
(1,659)
                          -------       -------      -------     -------     -------     -------     -------     -------
   Net income (loss)      $ 2,237       $ 2,407      $ 2,606     $ 2,642     $ 2,839     $ 2,884     $ 2,932
$(62,360)
                          =======       =======      =======     =======     =======     =======     =======
========
</TABLE>
     The Company experiences no significant seasonality revenues with
     respect to its revenue. However, because the enrollment of new
     groups and changes in membership are typically concentrated in
     the first quarter of each year, the Company generally experiences
     an increase in general and administrative expense in the
     preceding fourth quarter resulting from higher staffing levels
     and printing and communication costs.
<PAGE>
Report of Independent Accountants

In connection with our audit of the consolidated financial statements
of CompDent Corporation and subsidiaries as of December 31, 1997 and
1996, and for the years then ended, which financial statements are
included in the annual report, we have also audited the financial
statement schedules as of December 31, 1997 and 1996 and for the years
then ended listed in Item 14 herein.

In our opinion, these financial statement schedules, when considered
in relation to the basic financial statements taken as a whole
presents fairly, in all material respects, the information required to
be included therein.


                                            COOPERS & LYBRAND L.L.P.

Atlanta, Georgia
February 9, 1998, except as to the information presented
in Note 8, for which the date is March 16, 1998.
<PAGE>
CompDent Corporation (Parent Company)
Schedule I - Condensed Financial Information of Registrant
Balance Sheets
December 31, 1997 and 1996
(Dollars in Thousands)

                                                  1997       1996
                ASSETS
Current assets:
     Receivable from subsidiary*               $   252     $    114
                                               -------     --------
          Total current assets                     252          114
Investment in subsidiaries*                     60,024      112,069
                                               -------     --------
                                               $60,276     $112,183
                                               -------     --------


           STOCKHOLDERS' EQUITY
Stockholders' equity:
     Preferred stock, .01 par value,
       2,000,000 shares authorized at
       December 31, 1997 and 1996,
       none issued at December 31, 1997
       and 1996

     Common stock, $.01 par value 50,000,000
       shares authorized at December 31, 1997
       and 1996; 10,112,629 and 10,066,004
       shares issued and outstanding at
       December 31, 1997 and 1996,
       respectively                            $   101     $    101
     Additional paid-in capital                 97,618       95,820
     Retained (deficit) earnings               (37,443)      16,262
                                               -------     --------
                                               $60,276     $112,183
                                               =======     ========

*Eliminated in consolidation.
<PAGE>
CompDent Corporation (Parent Company)
Schedule I - Condensed Financial Information of Registrant
Statements of Operations
for the years ended December 31, 1997, 1996, and 1995
(Dollars in Thousands)

                                         1997        1996      1995

Equity in net (loss) income
  of subsidiaries*                     $(53,705)    $9,892    $4,706
                                       --------     ------    ------
     Net (loss) income                 $(53,705)    $9,892    $4,706
                                       ========     ======    ======

* Eliminated in consolidation.
<PAGE>
<TABLE>
CompDent Corporation (Parent Company)
Schedule I - Condensed Financial Information of Registrant
Statements of Cash Flows
for the years ended December 31, 1997, 1996, and 1995
(Dollars in Thousands)

                                                                                 1997            1996             1995
<S>                                                                            <C>              <C>            <C>
Cash flows from operating activities:
     Net (loss) income                                                        $(53,705)         $  9,892       $  4,706
     Adjustments to reconcile net (loss) income to net
       cash (used in) provided by operating activities:
          Equity in net loss (income) of subsidiaries*                          53,705            (9,892)        (4,706)
          Changes in assets and liabilities:
               Receivable from subsidiary                                         (138)           88,025        (88,122)
                                                                              --------          --------       --------
                    Net cash (used in) provided by operating activities           (138)           88,025        (88,122)
                                                                              --------          --------       --------
Cash flows from investing activities:
     Capital contributions to subsidiaries*                                       (519)          (88,139)
                                                                              --------          --------       --------
                    Net cash used in investing activities                         (519)          (88,139)
                                                                              --------          --------       --------
Cash flows from financing activities:
     Retirement of preferred stock                                                                               (5,377)
     Proceeds from initial public offering, net of issuance costs                                                51,442
     Proceeds from second public offering, net of issuance costs                                                 42,047
     Proceeds from exercise of stock options                                         21               66
     Proceeds from employee stock purchase plan                                      53               48
     Tax benefit from exercise of nonqualified options                              583
                                                                               --------         --------       --------
                    Net cash provided by financing activities                       657              114         88,112
                                                                               --------         --------       --------
                    Decrease in cash and cash equivalents                             0                0            (10)
Cash and cash equivalents, beginning of year                                          0                0             10
                                                                               --------         --------       --------
Cash and cash equivalents, end of year                                         $      0         $      0       $      0
                                                                               ========         ========       ========
Cash paid during the period for:
     Income taxes                                                              $  1,839         $  7,474       $  2,619
                                                                               ========         ========       ========
Noncash investing and financing activities:
     Stock issued in business combination                                      $  1,141
                                                                               ========
</TABLE>
* Elimination in consolidation.
<PAGE>
CompDent Corporation (Parent Company)
Schedule I - Condensed Financial Information of Registrant
Note to Condensed Financial Statements

The Company publishes consolidated financial statements that are its
primary financial statements. Therefore, these parent company
condensed financial statements are not intended to be the primary
financial statements of the Company and should be read in conjunction
with the consolidated financial statements and notes thereto of
CompDent Corporation.
<PAGE>
<TABLE>
CompDent Corporation
Schedule II - Consolidated Financial Information of Registrant
Valuation and Qualifying Accounts
December 31, 1997, 1996, and 1995
(Dollars in Thousands)

                                                         Additions -  Deductions-
                                        Balance           Charged To   Write-Offs/     Balance At
                                       Beginning           Costs And     Claims          End Of
         Account                       Of Period*           Expense       Paid           Period

<S>                                     <C>                 <C>         <C>              <C>
1997:
Allowance for doubtful accounts         $1,005              $   183                      $1,188
Dental claims reserves                  $1,421              $ 8,427     $ 8,346          $1,502

1996:
Dental claims reserves                  $2,437              $ 5,368     $ 6,384          $1,421

1995:
Life and dental claims reserves         $2,346              $13,748     $13,620          $2,474
</TABLE>
*Allowance for doubtful accounts initially recorded in relation with
the Workman, Old Cutler, and Stratman dental practice acquisitions.
<PAGE>

                                                          EXHIBIT 18.1

CompDent Corporation
100 Mansell Court East, Suite 400
Roswell, Georgia 30076

We are providing this letter to you for inclusion as an exhibit to
your Form 10-K filing pursuant to Item 601 of Regulation S-K.

We have read management's justification for the change in accounting
for assessing the recoverability of excess of purchase price over net
assets acquired from an undiscounted cash flow method (excluding
excess cost amortization and interest expense) over the remaining
useful life to a fair value method using cash flows discounted at an
economic rate of return commensurate with the risk involved contained
in the Company's Form 10-K for the year ended December 31, 1997.
Based on our reading of the data and discussions with Company
officials about the business judgment and business planning factors
relating to the change, we believe management's justification to be
reasonable. Accordingly, in reliance on management's determination as
regards elements of business judgment and business planning, we concur
that the newly adopted accounting principle described above is
preferable in the Company's circumstances to the method previously
applied.

                                             COOPERS & LYBRAND L.L.P.

Atlanta, Georgia
February 9, 1998
<PAGE>