UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
(Mark One)

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

         For the quarterly period ended           September 30, 2002
                                                --------------------------------

                                                         OR

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

         For the transition period from                      to
                                            ----------------    ---------------


                         Commission file number 0-23367


                     BIRNER DENTAL MANAGEMENT SERVICES, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                    COLORADO                                      84-1307044
-----------------------------------------------             --------------------
 (State or other jurisdiction of incorporation                  (IRS Employer
                or organization)                             Identification No.)


               3801 EAST FLORIDA AVENUE, SUITE 508
                        DENVER, COLORADO                      80210
--------------------------------------------------------------------------------
            (Address of principal executive offices)        (Zip Code)

                                 (303) 691-0680
--------------------------------------------------------------------------------
              (Registrant's telephone number, including area code)

                                       N/A
--------------------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes      X     No
     --------      ---------

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Class                               Shares Outstanding as of November 6, 2002
-------------------------------    ---------------------------------------------
Common Stock, without par value                     1,438,717



<PAGE>





            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
                               INDEX TO FORM 10-Q


PART I - FINANCIAL INFORMATION

<TABLE>
<CAPTION>
Item 1.  Financial Statements                                                                                 Page

                                                                                                               ----
<S>                                                                                                            <C>
         Condensed Consolidated Balance Sheets as of December 31, 2001
           and September 30, 2002 (unaudited)                                                                  3

         Unaudited Condensed Consolidated Statements of Operations for the Quarters
           and Nine Months Ended September 30, 2001 and 2002                                                   4

         Unaudited Condensed Statement of Shareholders' Equity                                                 5

         Unaudited Condensed Consolidated Statements of Cash Flows for the Nine Months
           Ended September 30, 2001 and 2002                                                                   6

         Unaudited Notes to Condensed Consolidated Financial Statements                                        8

Item 2.  Management's Discussion and Analysis of Financial Condition
           And Results of Operations                                                                          12

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                           21

Item 4.  Controls and Procedures                                                                              21


PART II - OTHER INFORMATION


Item 1.  Legal Proceedings                                                                                    22

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

Signatures                                                                                                    23

Certification of Chief Executive Officer                                                                      24

Certification of Chief Financial Officer                                                                      25

Certification of 10-Q Report                                                                                  26

</TABLE>




                                       2
<PAGE>





                         PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
                     CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                      December 31,        September 30,
                                     ASSETS                                               2001                2002
                                                                                  ---------------      ---------------
                                                                                          **              (Unaudited)

CURRENT ASSETS:

<S>                                                                               <C>                  <C>
    Cash and cash equivalents                                                     $     949,236        $     962,569
    Accounts receivable, net of allowance for doubtful accounts
       of $201,795 and $215,340, respectively                                         3,086,648            2,940,498
    Notes receivable - related parties                                                        -              284,479
    Deferred tax asset                                                                  112,214              112,214
    Prepaid expenses and other assets                                                   724,429              353,576

              Total current assets                                                    4,872,527            4,653,336
                                                                                  -------------        -------------
PROPERTY AND EQUIPMENT, net                                                           5,369,198            4,279,228

OTHER NONCURRENT ASSETS:
    Intangible assets, net                                                           13,915,362           15,288,569
    Deferred charges and other assets                                                   216,285              179,231
    Notes receivable - related parties                                                  284,479                    -
    Deferred tax asset, net                                                             104,074              104,074
                                                                                  -------------        -------------
              Total assets                                                        $  24,761,925        $  24,504,438
                                                                                  =============        =============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable and accrued expenses                                         $   3,190,723        $   3,567,695
    Income taxes payable                                                                 48,479              233,321
    Current maturities of long-term debt                                              1,332,158            2,807,907
                                                                                  -------------        -------------
              Total current liabilities                                               4,571,360            6,608,923

LONG-TERM LIABILITIES:
    Long-term debt, net of current maturities                                         3,296,304            1,006,940
    Other long-term obligations                                                         173,089              171,964
                                                                                  -------------        -------------
              Total liabilities                                                       8,040,753            7,787,827

COMMITMENTS AND CONTINGENCIES

SHAREHOLDERS' EQUITY:
    Preferred Stock, no par value, 10,000,000 shares
       authorized; none outstanding                                                           -                    -
    Common Stock, no par value, 20,000,000 shares
       authorized; 1,506,705 and 1,454,727 shares issued and
       outstanding, respectively                                                     16,855,661           16,107,555
    Retained earnings (accumulated deficit)                                            (134,489)             609,056
                                                                                  -------------        -------------
              Total shareholders' equity                                             16,721,172           16,716,611

                                                                                  -------------        -------------
              Total liabilities and shareholders' equity                          $  24,761,925        $  24,504,438
                                                                                  =============        =============
</TABLE>

      ** Derived from the Company's audited consolidated balance sheet at
                               December 31, 2001

              The accompanying notes are an integral part of these
                     condensed consolidated balance sheets.



                                       3
<PAGE>





            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>



                                                                Quarters Ended                 Nine Months Ended
                                                                September 30,                   September 30,
                                                           -------------------------         ---------------------
                                                           2001            2002             2001               2002
                                                        -----------    -----------       ------------      -----------
<S>                                                     <C>            <C>               <C>               <C>
NET REVENUE                                             $7,049,075     $ 7,558,588       $22,282,410       $22,959,798
DIRECT EXPENSES:
    Clinical salaries and benefits                       2,807,972       2,895,670         9,157,089         8,833,681
    Dental supplies                                        423,742         455,705         1,337,710         1,354,664
    Laboratory fees                                        612,912         580,334         1,885,495         1,801,312
    Occupancy    852,095                                   859,540       2,494,956         2,554,425
    Advertising and marketing                               82,785          95,826           263,925           256,481
    Depreciation and amortization                          596,678         600,974         1,822,440         1,794,200
    General and administrative                             748,890         790,908         2,317,692         2,365,842
                                                        ----------     -----------       -----------       -----------
                                                         6,125,074       6,278,957        19,279,307        18,960,605
                                                        ----------     -----------       -----------       -----------
    Contribution from dental offices                       924,001       1,279,631         3,003,103         3,999,193

CORPORATE EXPENSES:
    General and administrative                             620,926         689,802         2,314,320         2,277,607
    Depreciation and amortization                           78,681          84,436           243,933           247,615
                                                        ----------     -----------       -----------       -----------

Operating income 224,394                                   505,393         444,850         1,473,971
Interest expense, net                                       98,669          79,673           376,030           274,704

Income before income taxes                                 125,725         425,720            68,820         1,199,267
Income tax expense                                               -         161,774                 -           455,722


Net income                                              $  125,725     $   263,946       $    68,820       $   743,545
                                                        ===========    ===========       ============      ===========


Net income per share of Common Stock:
    Basic                                               $      .08     $       .18       $       .05       $       .50
                                                        ===========    ===========       ============      ===========

    Diluted                                             $      .08     $       .16       $       .05      $        .46
                                                        ===========    ===========       ============      ===========


Weighted average number of shares of Common
Stock and dilutive securities:
    Basic                                                1,506,705       1,471,646         1,506,705         1,493,840
                                                        ===========    ===========       ============      ===========

    Diluted                                              1,533,999       1,617,310         1,514,802         1,629,786
                                                        ===========    ===========       ============      ===========






              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.
</TABLE>



                                       4
<PAGE>




            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                   (UNAUDITED)



<TABLE>
<CAPTION>
                                                                                       Retained
                                                                                        Earnings               Total
                                                                Common Stock          (Accumulated         Shareholders'
                                                          Shares          Amount        Deficit)              Equity
                                                      ---------      ------------       -----------        ------------
<S>                                                         <C>            <C>                 <C>               <C>
BALANCES, December 31, 2001                           1,506,705      $ 16,855,661        $ (134,489)       $ 16,721,172

   Common Stock options exercised                        40,544            93,013                 -              93,013
   Purchase and retirement of Common Stock              (92,522)         (901,173)                -            (901,173)
   Exercise of Common Stock  options
       recorded as compensation expense                       -            60,054                                60,054
   Net income                                                 -                 -           743,545             743,545
                                                      ---------      -----------         ----------         -----------
BALANCES, September 30, 2002                          1,454,727      $ 16,107,555        $  609,056         $16,716,611
                                                      =========      ============        ==========         ===========
</TABLE>
































              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.



                                       5
<PAGE>




            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                               Nine Months Ended
                                                                                                 September 30,
                                                                                            2001             2002
CASH FLOWS FROM OPERATING ACTIVITIES:                                                 ------------        ------------
<S>                                                                                   <C>                 <C>
    Net income                                                                        $     68,820        $    743,545
    Adjustments to reconcile net income to net
       cash provided by operating activities:
          Depreciation and amortization                                                  2,066,373           2,041,815
          Loss (gain) on disposition of property                                             3,660             (10,838)
          Provision for doubtful accounts                                                    9,671              13,545
          Amortization of debt issuance costs                                               17,449              54,091
    Changes in assets and liabilities, net of effects from acquisitions:
          Accounts receivable                                                              427,240             132,605
          Prepaid expenses, income tax receivable and other assets                          14,085             369,773
          Accounts payable and accrued expenses                                            374,426             376,972
          Income taxes payable                                                                   -             184,842
          Other long-term obligations                                                       35,044              (1,125)
                                                                                      ------------        ------------
              Net cash provided by operating activities                                  3,016,768           3,905,225


CASH FLOWS FROM INVESTING ACTIVITIES:
    Notes receivable - related parties                                                     (58,349)                  -
    Capital expenditures                                                                  (430,889)           (396,064)
    Acquisition of dental offices                                                         (435,006)           (959,150)
                                                                                      ------------        ------------
              Net cash used in investing activities                                       (924,244)         (1,355,214)


CASH FLOWS FROM FINANCING ACTIVITIES:
    Net repayments - line of credit                                                     (1,688,000)           (168,000)
    Repayment of bank term-loan                                                                  -          (1,375,000)
    Repayment of long-term debt                                                           (158,435)           (229,615)
    Payment of financing costs                                                                   -             (15,957)
    Proceeds from exercise of Common Stock options                                               -              93,013
    Purchase and retirement of Common Stock                                                      -            (841,119)
                                                                                      ------------        ------------
              Net cash used in financing activities                                     (1,846,435)         (2,536,678)


NET INCREASE IN CASH AND CASH EQUIVALENTS                                                  246,089              13,333
CASH AND CASH EQUIVALENTS, beginning of period                                             691,417             949,236
                                                                                      ------------        ------------

CASH AND CASH EQUIVALENTS, end of period                                              $    937,506        $    962,569
                                                                                      ============        ============

</TABLE>







              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.



                                       6
<PAGE>





            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                                                Nine Months Ended
                                                                                                  September 30,
                                                                                           2001                2002
                                                                                      ---------------     ------------
SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION:

<S>                                                                                   <C>                 <C>
       Cash paid during the period for interest                                       $       399,800     $    275,047
                                                                                      ===============     ============

       Cash paid during the period for income taxes                                   $           -       $    270,880
                                                                                      ===============     ============


SUPPLEMENTAL DISCLOSURE OF NONCASH
    INVESTING AND FINANCING ACTIVITIES:

       Notes payable incurred from:
          Acquisition of dental offices                                               $      434,000      $    959,000
                                                                                      ==============      ============


</TABLE>




























              The accompanying notes are an integral part of these
                  condensed consolidated financial statements.



                                       7
<PAGE>

            BIRNER DENTAL MANAGEMENT SERVICES, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
                               SEPTEMBER 30, 2002

(1)    UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
       ------------------------------------------------------

The  financial  statements  included  herein have been prepared by Birner Dental
Management Services,  Inc. (the "Company") pursuant to the rules and regulations
of the  Securities and Exchange  Commission.  Certain  information  and footnote
disclosures  normally  included in financial  statements  prepared in accordance
with  accounting  principles  generally  accepted in the United States have been
condensed  or omitted  pursuant  to such  rules and  regulations,  although  the
Company  believes that the disclosures  included herein are adequate to make the
information presented not misleading.  A description of the Company's accounting
policies and other financial information is included in the audited consolidated
financial statements as filed with the Securities and Exchange Commission in the
Company's Form 10-K for the year ended December 31, 2001.

In the opinion of management,  the accompanying unaudited condensed consolidated
financial  statements  contain all  adjustments  necessary to present fairly the
financial  position of the Company as of  September  30, 2002 and the results of
operations and cash flows for the periods presented. All such adjustments are of
a normal  recurring  nature.  The results of operations for the quarter and nine
months ended  September 30, 2002 are not  necessarily  indicative of the results
that may be  achieved  for a full  fiscal  year and  cannot be used to  indicate
financial performance for the entire year.



(2)    EARNINGS PER SHARE

The Company  calculates  earnings  per share in  accordance  with  Statement  of
Financial Accounting Standards ("SFAS") No. 128 "Earnings Per Share".
<TABLE>
<CAPTION>

                                                                   Quarters Ended September 30,
                                                           2001                                2002
                                                          -----                                ----
                                                                     Per Share                              Per Share
                                            Income         Shares    Amount       Income         Shares      Amount
                                           ---------     ---------   -----        -----------   ---------   -----
Basic EPS:
<S>                                        <C>           <C>         <C>          <C>           <C>         <C>
   Net income available to
     shares of Common Stock                $ 125,725     1,506,705   $ .08        $  263,946    1,471,646   $ .18

   Effect of dilutive shares of
    Common Stock from stock
    options and warrants                           -        27,294       -               -        145,664    (.02)

                                           ---------     ---------    -----       ----------    ----------  -----
Diluted EPS:
   Net income available to
      shares of Common Stock               $ 125,725     1,533,999   $ .08        $  263,946    1,617,310   $ .16
                                           =========     =========   =====        ==========    =========   =====
</TABLE>


The difference in weighted average shares outstanding between basic earnings per
share and diluted earnings per share for the quarters ended September 30, 2001
and 2002 relates to the effect of 27,294 and 145,664, respectively, of dilutive
shares of Common Stock from stock options and warrants which are included in
total shares for the diluted calculation.



                                       8
<PAGE>
<TABLE>
<CAPTION>

                                                                Quarters Ended September 30,
                                                           2001                                2002
                                                          -----                                ----
                                                                     Per Share                              Per Share
                                            Income         Shares    Amount       Income         Shares      Amount
                                            ---------    ---------   -----        -----------   ---------   -----
Basic EPS:
<S>                                         <C>          <C>         <C>          <C>           <C>         <C>
   Net income available to
     shares of Common Stock                 $ 68,820     1,506,705   $ .05        $  743,545    1,493,840  $ .50

   Effect of dilutive shares of
    Common Stock from stock
    options and warrants                           -         8,097       -               -        135,946   (.04)

                                            --------     ---------   -----        ----------    ----------  ----

Diluted EPS:
   Net income available to
      shares of Common Stock                $ 68,820     1,514,802   $ .05        $  743,545    1,629,786   $ .46
                                            ========     =========   =====        ==========    ==========  =====
</TABLE>


The difference in weighted average shares outstanding between basic earnings per
share and diluted  earnings  per share for the nine months ended  September  30,
2001 and 2002  relates  to the  effect of 8,097 and  135,946,  respectively,  of
dilutive  shares of Common  Stock  from stock  options  and  warrants  which are
included in total shares for the diluted calculation.

(3)      LINE OF CREDIT
         --------------

Under the  Company's  Credit  Facility (as amended on  September  9, 2002),  the
Company  may  borrow on a  revolving  basis up to the  lesser  of an  applicable
Borrowing  Base  (calculated in accordance  with the most recent  Borrowing Base
Certificate  delivered  to the Lender) or $2.0  million  and on a  non-revolving
basis, an aggregate  principal  amount not in excess of $4.0 million for working
capital,  for restructuring of the Original Loan and for other general corporate
purposes. Balances bear interest at the lender's prime rate. The Company is also
obligated to pay an annual  facility fee of .50% on the average unused amount of
the revolving line of credit during the previous full calendar month. Borrowings
on the  revolving  loan are  limited  to an  availability  formula  based on the
Company's eligible accounts receivable.  As amended, both the revolving loan and
the  non-revolving  note mature on April 30, 2003.  At September  30, 2002,  the
Company had no borrowings  outstanding and $2.0 million  available for borrowing
under the revolving loan and $2.5 million  outstanding  under the  non-revolving
loan.  The  Credit  Facility  is  secured  by a lien on the  Company's  accounts
receivable  and its Management  Agreements.  The Credit  Facility  prohibits the
payment of  dividends  and other  distributions  to  shareholders,  restricts or
prohibits the Company from incurring indebtedness, incurring liens, disposing of
assets,  making investments or making acquisitions,  and requires the Company to
maintain certain financial ratios on an ongoing basis. At September 30, 2002 the
Company was in full compliance with all of its covenants under this agreement.



                                       9
<PAGE>


(4)  RECENT ACCOUNTING PROUNCEMENTS

In July 2001 the Financial  Accounting Standards Board ("FASB") issued SFAS 141,
"Business  Combinations," and SFAS 142, "Goodwill and Other Intangible  Assets,"
which replace Accounting  Principles Board ("APB") 16, "Business  Combinations,"
and APB 17,  "Intangible  Assets,"  respectively.  SFAS  141  requires  that the
purchase  method of accounting be used for all business  combinations  initiated
after  June 30,  2001,  and that the use of the  pooling-of-interests  method be
prohibited.  SFAS 142 changes the accounting  for goodwill from an  amortization
method  to  an  impairment-only-method.   Amortization  of  goodwill,  including
goodwill  recorded in past  business  combinations,  will cease upon adoption of
SFAS 142,  which the  Company was  required  to adopt on January 1, 2002.  After
December 31, 2001, goodwill can only be written down upon impairment  discovered
during  annual  tests for fair  value,  or  discovered  during  tests taken when
certain triggering events occur.  Prior to the adoption of SFAS 142,  impairment
of intangibles was recognized  according to the undiscounted  cash flow test per
SFAS 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed  Of." The  adoption of SFAS 141 and SFAS 142 on January 1,
2002 did not have a  material  impact on the  Company's  financial  position  or
results of operations.

In June  2001,  the FASB  approved  for  issuance  SFAS  143,  Asset  Retirement
Obligations.   SFAS  143  establishes  accounting  requirements  for  retirement
obligations associated with tangible long-lived assets, including (1) the timing
of the liability  recognition,  (2) initial  measurement of the  liability,  (3)
allocation of asset  retirement cost to expense,  (4) subsequent  measurement of
the liability and (5) financial statement disclosures. SFAS 143 requires that an
asset  retirement  cost should be capitalized as part of the cost of the related
long-lived  asset and  subsequently  allocated to expense using a systematic and
rational method. The statement is effective for the financial  statements issued
for fiscal years  beginning  after June 15,  2002.  The Company does not believe
that the adoption of this statement will have a material effect on its financial
position, results of operations, or cash flows.

In August 2001,  the FASB issued SFAS 144,  "Accounting  for the  Impairment  or
Disposal  of  Long-Lived  Assets"  which  addresses  financial   accounting  and
reporting  for the  impairment  or disposal of  long-lived  assets.  SFAS 144 is
effective for fiscal years  beginning after December 15, 2001. The provisions of
this statement are generally to be applied  prospectively.  The adoption of SFAS
144 on January 1, 2002 did not have a material impact on the Company's financial
position, results of operations or cash flows.

In April 2002, the FASB approved for issuance Statements of Financial Accounting
Standards No. 145, "Rescission of FASB Statements No. 4, 44 and 64, Amendment of
SFAS 13, and Technical  Corrections"  ("SFAS 145").  SFAS 145 rescinds  previous
accounting guidance,  which required all gains and losses from extinguishment of
debt be classified as an extraordinary  item. Under SFAS 145  classification  of
debt  extinguishment  depends on the facts and circumstances of the transaction.
SFAS 145 is effective for fiscal years beginning after May 15, 2002 and adoption
is not expected to have a material effect on the Company's financial position or
results of its operations.

In July 2002, the FASB issued Statements of Financial  Accounting  Standards No.
146,  "Accounting for Costs Associated with Exit or Disposal  Activities"  (SFAS
146).  SFAS 146 requires  companies to recognize  costs  associated with exit or
disposal  activities  when  they  are  incurred  rather  than  at the  date of a
commitment  to an exit or disposal  plan.  Examples of costs covered by SFAS 146
include lease  termination  costs and certain employee  severance costs that are
associated with a restructuring, discontinued operation, plant closing, or other
exit or disposal  activity.  SFAS 146 is to be applied  prospectively to exit or
disposal activities  initiated after December 31, 2002. The adoption of SFAS 146
is not expected to have a material effect on the Company's financial position or
results of its operations



                                       10
<PAGE>



 (5)     INCOME TAXES
         -------------

The Company accounts for income taxes through recognition of deferred tax assets
and liabilities for the expected future income tax consequences of events, which
have been  included  in the  financial  statements  or tax  returns.  Under this
method,  deferred  tax  assets  and  liabilities  are  determined  based  on the
difference  between  the  financial  statement  and  tax  basis  of  assets  and
liabilities  using  enacted  tax  rates in  effect  for the  year in  which  the
differences  are  expected to reverse.  At December  31,  2001,  the Company has
available tax net operating loss carryforwards of approximately $780,000,  which
expire beginning in 2012.

The Company is aware of the risk that the  recorded  deferred tax assets may not
be realizable. However, management believes that it will obtain the full benefit
of the  deferred  tax  assets on the basis of its  evaluation  of the  Company's
anticipated   profitability   over  the  period  of  years  that  the  temporary
differences  are expected to become tax  deductions.  The Company  believes that
sufficient  book and taxable  income will be generated to realize the benefit of
these tax assets.

(6)    ACQUISITIONS
       ------------

On January  31,  2002 the  Company  acquired  two-thirds  of the  remaining  50%
interest in Mississippi Dental Group for a total purchase price of $798,654. The
consideration consisted of $398,654 in cash and $400,000 in notes payable with a
term of 60 months and an interest rate of 8.0%. The Company recorded an increase
to intangible  assets for the total  purchase  price of the 33% interest in this
Office.

On April 1, 2002 the Company  acquired  the  remaining  50% interest in Glendale
Dental  Group  for a total  purchase  price  of  $1,119,496.  The  consideration
consisted  of $560,496 in cash and  $559,000 in notes  payable with a term of 60
months and an  interest  rate of 8.0%.  The  Company  recorded  an  increase  to
intangible  assets for the total purchase price of the remaining 50% interest in
this Office.

(7)      SUBSEQUENT EVENTS
         -----------------

On October 1, 2002 the company  acquired the remaining  interest in  Mississippi
Dental Group for a total purchase price of $399,327. The consideration consisted
of $199,327 in cash and  $200,000 in notes  payable with a term of 60 months and
an interest rate of 8.0%. The Company recorded an increase to intangible  assets
for the total purchase price of the remaining 17% interest in this office.



                                       11
<PAGE>



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

Forward-Looking Statements

The statements  contained in this Form 10-Q ("Quarterly  Report") of the Company
which are not  historical in nature are  forward-looking  statements  within the
meaning  of  the  Private  Securities  Litigation  Reform  Act  of  1995.  These
forward-looking  statements  include  statements in this Item 2.,  "Management's
Discussion and Analysis of Financial  Condition and Results of Operations,"  and
in Part II, Item 1., "Legal  Proceedings",  regarding intent,  belief or current
expectations  of the Company or its officers with respect to the  development or
acquisition  of  additional  dental  practices  ("Offices")  and the  successful
integration  of  such  Offices  into  the  Company's  network,   recruitment  of
additional dentists,  funding of the Company's expansion,  capital expenditures,
payment or nonpayment of dividends, cash outlays for income taxes and outcome of
pending legal proceedings.

Such  forward-looking  statements  involve certain risks and uncertainties  that
could cause actual results to differ materially from anticipated results.  These
risks and  uncertainties  include  regulatory  constraints,  changes  in laws or
regulations  concerning the practice of dentistry or dental practice  management
companies,  the  availability  of suitable  new markets and  suitable  locations
within such markets,  changes in the Company's  operating or expansion strategy,
the general  economy of the United States and the specific  markets in which the
Company's  Offices  are located or are  proposed  to be  located,  trends in the
health  care,  dental  care and  managed  care  industries,  as well as the risk
factors set forth in the  "Management's  Discussion  and  Analysis of  Financial
Condition  and Results of  Operations - Risk  Factors"  section of the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 2001 (as filed
with the Securities  Exchange  Commission on March 28, 2002), the  "Management's
Discussion and Analysis of Financial  Condition and Results of Operations  -Year
2002" of this Quarterly Report, and other factors as may be identified from time
to time in the Company's filings with the Securities and Exchange  Commission or
in the Company's press releases.

General

The following discussion relates to factors,  which have affected the results of
operations  and  financial  condition  of the Company for the  quarters and nine
months ended  September 30, 2001 and 2002.  This  information  should be read in
conjunction with the Company's Condensed  Consolidated  Financial Statements and
related Notes thereto included elsewhere in this Quarterly Report.


Overview


The  Company  was formed in May 1995 and as of  September  30,  2002  managed 54
Offices in Colorado,  New Mexico and Arizona staffed by 77 general  dentists and
14  specialists.  The  Company  has  acquired  42  Offices  (five of which  were
consolidated  into existing Offices) and opened 18 de novo Offices (one of which
was consolidated into an existing Office).  Of the 42 acquired  practices,  only
three  (the  first  three  practices,  which were  acquired  from the  Company's
President,  Mark Birner, DDS) were acquired from affiliates of the Company.  The
Company  derives  all of its revenue  (as  defined  below)  from its  Management
Agreements with professional  corporations  ("P.C.s") which conduct the practice
at each Office.  In addition,  the Company assumes a number of  responsibilities
when it  acquires a new  practice or  develops a de novo  Office,  which are set
forth in a Management  Agreement,  as described  below.  The Company  expects to
expand in existing markets  primarily by enhancing the operating  performance of
its  existing  Offices  and by  developing  de novo  Offices.  The  Company  has
historically  expanded in existing  markets by  acquiring  solo and group dental
practices and may do so in the future if an  economically  feasible  opportunity
presents  itself.  Generally,  the Company seeks to acquire dental practices for
which the Company believes  application of its Dental Practice  Management Model
will improve operating performance.



                                       12
<PAGE>



The Company was formed with the intention of becoming the leading dental
practice management company in Colorado. The Company's growth and success in the
Colorado market led to its expansion into the New Mexico and Arizona markets as
well as to its evaluation of additional markets. During 2000, the Company's
growth strategy shifted from an acquisition and development approach to an
approach which is focused on greater utilization of exsisting physical capacity
through recruiting more dentists and support staff. The following table sets
forth the change in the number of Offices affiliated with and managed by the
Company from 1998 through September 30, 2002, including the number of de novo
Offices and acquired Offices in each such period.
<TABLE>
<CAPTION>

                                             1998            1999            2000           2001         2002 (1)
                                             ----            ----            ----           ----         ----
<S>                                           <C>             <C>             <C>            <C>            <C>
Offices at beginning of the period            34              49              54             56             54
De novo Offices                                5               5               2              0              0
Acquired Offices                              10               1               0              0              0
Consolidation of Offices                       0              (1)              0             (2)             0
                                             ----            ----            ----           ----          ----
Offices at end of the period                  49              54              56             54             54
                                             ====            ====            ====           ====          ====

</TABLE>

(1)      From January 1, 2002 through September 30, 2002.


The combined purchase amounts for the 31 practices acquired through 1998 and the
one practice acquired in 1999 were $15.9 million and $760,000 respectively.  The
average initial  investment by the Company in each of its 17 de novo Offices has
been  approximately  $210,000,  which includes the cost of equipment,  leasehold
improvements  and working  capital  associated  with the Offices.  These de novo
Offices,  which  were  opened  between  January  1996 and  October  2000,  began
generating positive  contribution from dental offices, on average,  within eight
months of opening.

At September 30, 2002, the Company's total assets of approximately $24.5 million
included  approximately $15.3 million of identifiable  intangible assets related
to  Management  Agreements.  At that date,  the Company had total  shareholders'
equity of approximately  $16.7 million.  The Company reviews the recorded amount
of  intangible  assets and other  fixed  assets for  impairment  for each Office
whenever events or changes in circumstances  indicate the carrying amount of the
assets may not be recoverable. If this review indicates that the carrying amount
of the assets may not be  recoverable  as determined  based on the  undiscounted
cash flows of each Office, whether acquired or developed,  the carrying value of
the asset is reduced to fair  value.  Among the factors  that the  Company  will
continually  evaluate are  unfavorable  changes in each Office,  relative market
share and local market  competitive  environment,  current period and forecasted
operating results, cash flow levels of Offices and the impact on the net revenue
earned by the  Company,  and the  legal and  regulatory  factors  governing  the
practice of dentistry.

Components of Revenue and Expenses


Total dental group practice  revenue  ("Revenue")  represents the revenue of the
Offices  reported at estimated  realizable  amounts,  received from  third-party
payors and patients  for dental  services  rendered at the Offices.  Net revenue
represents Revenue less amounts retained by the Offices. The amounts retained by
the Offices  represent  amounts paid as salary,  benefits and other  payments to
employed dentists and hygienists.  The Company's net revenue is dependent on the
Revenue of the  Offices.  Management  service  fee  revenue  represents  the net
revenue  earned  by the  Company  for the  Offices  for which  the  Company  has
management agreements, but does not have control. Direct expenses consist of the
expenses  incurred by the  Company in  connection  with  managing  the  Offices,
including   salaries  and  benefits  (for  personnel  other  than  dentists  and
hygienists),   dental  supplies,   dental  laboratory  fees,   occupancy  costs,
advertising  and  marketing,  depreciation  and  amortization  and  general  and
administrative   (including  office  supplies,   equipment  leases,   management
information  systems and other expenses related to dental practice  operations).
The Company also incurs personnel and administrative expenses in connection with
maintaining  a corporate  function  that  provides  management,  administrative,
marketing, development and professional services to the Offices.



                                       13
<PAGE>



Under each of the Management  Agreements,  the Company  manages the business and
marketing  aspects  of  the  Offices,  including  (i)  providing  capital,  (ii)
designing  and  implementing  marketing  programs,  (iii)  negotiating  for  the
purchase of supplies, (iv) staffing, (v) recruiting, (vi) training of non-dental
personnel,  (vii)  billing and  collecting  patient fees,  (viii)  arranging for
certain legal and accounting  services,  and (ix)  negotiating with managed care
organizations.  The P.C. is responsible  for, among other things (i) supervision
of all dentists and dental  hygienists,  (ii) complying with all laws, rules and
regulations  relating to dentists and dental  hygienists,  and (iii) maintaining
proper patient records. The Company has made, and intends to make in the future,
loans to P.C.s in Colorado,  New Mexico and Arizona to fund their acquisition of
dental  assets  from  third  parties  in order to  comply  with the laws of such
states.

Under the typical  Management  Agreement used by the Company,  the P.C. pays the
Company a management  fee equal to the Adjusted Gross Center Revenue of the P.C.
less  compensation  paid to the dentists and dental  hygienists  employed at the
Office of the P.C.  Adjusted  Gross Center  Revenue is comprised of all fees and
charges  booked  each  month by or on behalf  of the P.C.  as a result of dental
services  provided  to  patients  at  the  Office,   less  any  adjustments  for
uncollectible accounts, professional courtesies and other activities that do not
generate a collectible  fee. The Company's costs include all direct and indirect
costs,  overhead and expenses relating to the Company's  provision of management
services at each Office under the Management Agreement,  including (i) salaries,
benefits and other direct costs of employees who work at the Office, (ii) direct
costs of all Company  employees  or  consultants  who provide  services to or in
connection with the Office, (iii) utilities,  janitorial,  laboratory, supplies,
advertising  and other  expenses  incurred by the  Company in  carrying  out its
obligations under the Management Agreement, (iv) depreciation expense associated
with the P.C.'s assets and the assets of the Company used at the Office, and the
amortization  of  intangible  asset value  relating to the Office,  (v) interest
expense  on  indebtedness  incurred  by  the  Company  to  finance  any  of  its
obligations  under  the  Management  Agreement,  (vi)  general  and  malpractice
insurance  expenses,  lease  expenses and dentist  recruitment  expenses,  (vii)
personal  property and other taxes assessed  against the Company's or the P.C.'s
assets used in connection with the operation of the Office, (viii) out-of-pocket
expenses of the Company's personnel related to mergers or acquisitions involving
the P.C., (ix) corporate  overhead  charges or any other expenses of the Company
including  the P.C.'s  pro rata  share of the  expenses  of the  accounting  and
computer services provided by the Company,  and (x) a collection  reserve in the
amount of 5.0% of Adjusted Gross Center Revenue. As a result,  substantially all
costs  associated with the provision of dental services at the Offices are borne
by the  Company,  other than the  compensation  and benefits of the dentists and
hygienists  who work at the Offices of the P.C.'s..  This enables the Company to
manage the profitability of the Offices. Each Management Agreement is for a term
of 40 years.  Further,  each Management Agreement generally may be terminated by
the P.C. only for cause,  which includes a material  default by or bankruptcy of
the Company.  Upon expiration or termination of a Management Agreement by either
party, the P.C. must satisfy all obligations it has to the Company.

The Company's Revenue is derived  principally from  fee-for-service  revenue and
revenue  from  capitated  managed  dental  care plans.  Fee-for-service  revenue
consists  of P.C.  revenue  received  from  indemnity  dental  plans,  preferred
provider  plans and direct  payments by patients not covered by any  third-party
payment  arrangement.  Managed  dental care  revenue  consists  of P.C.  revenue
received from capitated managed dental care plans, including capitation payments
and patient  co-payments.  Capitated  managed  dental care contracts are between
dental benefits  organizations and the P.C.s.  Under the Management  Agreements,
the Company  negotiates and administers  these contracts on behalf of the P.C.s.
Under a  capitated  managed  dental care  contract,  the dental  group  practice
provides dental services to the members of the dental benefits  organization and
receives a fixed monthly  capitation  payment for each plan member covered for a
specific schedule of services  regardless of the quantity or cost of services to
the  participating  dental  group  practice  obligated  to  provide  them.  This
arrangement shifts the risk of utilization of these services to the dental group
practice   providing   the  dental   services.   Because  the  Company   assumes
responsibility under the Management  Agreements for all aspects of the operation
of the dental  practices  (other than the practice of dentistry)  and thus bears
all costs of the P.C.s  associated  with the provision of dental services at the
Offices (other than  compensation and benefits of dentists and hygienists),  the
risk of  over-utilization  of dental  services  at the Offices  under  capitated
managed  dental care plans is effectively  shifted to the Company.  In addition,
dental group  practices  participating  in a capitated  managed dental care plan
often receive supplemental payments for more complicated or elective procedures.
In contrast,  under traditional indemnity insurance arrangements,  the insurance
company pays whatever reasonable charges are billed by the dental group practice
for the dental services provided.



                                       14
<PAGE>



The Company seeks to increase its  fee-for-service  business by  increasing  the
patient volume of existing Offices through  effective  marketing and advertising
programs.  The Company seeks to supplement  this  fee-for-service  business with
Revenue from contracts with  capitated  managed dental care plans.  Although the
Company's  fee-for-service  business  generally  is  more  profitable  than  its
capitated  managed dental care business,  capitated managed dental care business
serves to increase facility utilization and dentist  productivity.  The relative
percentage of the Company's  revenue derived from  fee-for-service  business and
capitated  managed dental care contracts  varies from market to market depending
on the availability of capitated managed dental care contracts in any particular
market and the Company's ability to negotiate  favorable  contractual  terms. In
addition, the profitability of managed dental care Revenue varies from market to
market  depending  on the  level  of  capitation  payments  and  co-payments  in
proportion to the level of benefits required to be provided.


Results of Operations

As a result of the  shift in focus  from  expansion  of the  Company's  business
through  acquisitions  and the  development  of de novo  Offices to the  greater
utilization of existing  physical capacity through the recruitment of additional
dentists and staff, the period-to-period  comparisons set forth below may not be
representative of future operating results.

For the three months ended  September 30, 2002,  Revenue  increased  $706,000 to
$10.7 million  compared to $9.9 million for the three months ended September 30,
2001. For the nine months ended September 30, 2002,  Revenue increased  $786,000
to $32.4 million  compared to $31.6 million for the nine months ended  September
30, 2001.

The following  table sets forth the  percentages  of net revenue  represented by
certain items reflected in the Company's  Condensed  Consolidated  Statements of
Operations.  The  information  contained in the table  represents the historical
results  of the  Company.  The  information  that  follows  should  be  read  in
conjunction with the Company's Condensed  Consolidated  Financial Statements and
related Notes thereto contained elsewhere in this Quarterly Report.
<TABLE>
<CAPTION>

                                                       Quarters Ended                 Nine Months Ended
                                                       September 30,                    September 30,
                                                       --------------                   -------------
                                                    2001            2002            2001              2002
                                                    ----            ----            ----              ----


<S>                                                 <C>            <C>             <C>                <C>
Net revenue                                         100.0 %        100.0 %         100.0 %            100.0 %
Direct expenses:
   Clinical salaries and benefits                    39.8 %         38.3 %          41.1 %             38.5 %
   Dental supplies                                    6.0 %          6.0 %           6.0 %              5.9 %
   Laboratory fees                                    8.7 %          7.7 %           8.4 %              7.9 %
   Occupancy                                         12.1 %         11.4 %          11.2 %             11.1 %
   Advertising and marketing                          1.2 %          1.3 %           1.2 %              1.1 %
   Depreciation and amortization                      8.5 %          7.9 %           8.2 %              7.8 %
   General and administrative                        10.6 %         10.5 %          10.4 %             10.3 %
                                                    -------        -------         -------            -------
                                                     86.9 %         83.1 %          86.5 %             82.6 %
                                                    -------        -------         -------            -------

Contribution from dental offices                     13.1 %         16.9 %          13.5 %             17.4 %

Corporate Expenses:
   General and administrative                         8.8 %          9.1 %          10.4 %              9.9 %
   Depreciation and amortization                      1.1 %          1.1 %           1.1 %              1.1 %
                                                    -------        --------        -------            -------
Operating income                                      3.2 %          6.7 %           2.0 %              6.4 %
Interest expense, net                                 1.4%           1.1 %           1.7 %              1.2 %
                                                    -------        -------         -------            -------
Income before income taxes                            1.8%           5.6 %           0.3 %              5.2 %
Income tax expense                                     - %           2.1 %             - %              2.0 %
                                                    -------        -------         -------            -------
Net income                                            1.8%           3.5 %           0.3 %              3.2 %
                                                    =======        =======         =======            =======


</TABLE>

                                       15
<PAGE>


Three Months Ended  September 30, 2002 Compared to Three Months Ended  September
30, 2001:

Net revenue. For the three months ended September 30, 2002 net revenue increased
to $7.6 million  compared to $7.0  million for the three months ended  September
30, 2001, an increase of $510,000 or 7.2%.

Clinical  salaries and benefits.  For the three months ended  September 30, 2002
clinical  salaries  and  benefits  increased  to $2.9  million  compared to $2.8
million for the three months ended September 30, 2001, an increase of $88,000 or
3.1%.  This  increase  was  primarily  due to the hiring of  additional  support
personnel corresponding to the increased number of dentists at the Offices. As a
percentage of net revenue, clinical salaries and benefits decreased to 38.3% for
the three months ended September 30, 2002 compared to 39.8% for the three months
ended September 30, 2001.

Dental  supplies.  For the three months ended September 30, 2002 dental supplies
increased to $456,000  compared to $424,000 for the three months ended September
30, 2001,  an increase of $32,000 or 7.5%.  This  increase was  primarily due to
higher  production  during  this  period  due to the  increase  in the number of
dentists  working.  As a percentage  of net revenue,  dental  supplies  remained
constant at 6.0% for the three months ended  September  30, 2002 compared to the
three months ended September 30, 2001.

Laboratory  fees. For the three months ended  September 30, 2002 laboratory fees
decreased to $580,000  compared to $613,000 for the three months ended September
30, 2001, a decrease of $32,000 or 5.3%.  This decrease was primarily due to the
Company's efforts to consolidate the use of dental laboratories so that improved
pricing could be obtained based upon the Company's  laboratory case volume. As a
percentage  of net  revenue,  laboratory  fees  decreased  to 7.7% for the three
months ended September 30, 2002 compared to 8.7% for the three months  September
30, 2001.

Occupancy.  For the three  months ended  September  30, 2002  occupancy  expense
increased to $860,000  compared to $852,000 for the three months ended September
30, 2001,  an increase of $7,000 or 0.9%.  This  increase was  primarily  due to
increased rental payments resulting from the renewal of Office leases at current
market rates for Offices whose leases expired  subsequent to the 2001 period. As
a percentage of net revenue,  occupancy expense decreased to 11.4% for the three
months  ended  September  30, 2002  compared to 12.1% for the three months ended
September 30, 2001.

Advertising  and  marketing.  For the three  months  ended  September  30,  2002
advertising and marketing increased to $96,000 compared to $83,000 for the three
months ended September 30, 2001, an increase of $13,000 or 15.8%.  This increase
was primarily due to additional yellow page advertising in local directories. As
a percentage of net revenue, advertising and marketing increased to 1.3% for the
three  months  ended  September  30, 2002  compared to 1.2% for the three months
ended September 30, 2001.

Depreciation  and  amortization.  For the three months ended  September 30, 2002
depreciation and  amortization,  which consists of depreciation and amortization
expense incurred at the Offices,  increased to $601,000 compared to $597,000 for
the three months ended  September 30, 2001, an increase of $4,000 or 0.7%.  This
increase is related to the  increase  in the  Company's  amortizable  asset base
relating to the purchase of a portion of the remaining  interest in  Mississippi
Dental Group and all of the remaining  interest in Glendale  Dental Group during
the first and second  quarters of 2002,  respectively.  As a  percentage  of net
revenue,  depreciation and  amortization  decreased to 7.9% for the three months
ended  September 30, 2002 compared to 8.5% for the three months ended  September
30, 2001.

General  and  administrative.  For the three  months  ended  September  30, 2002
general and administrative,  which is attributable to the Offices,  increased to
$791,000  compared to $749,000 for the three months ended September 30, 2001, an
increase  of  $42,000 or 5.6%.  This  increase  is  primarily  due to  increased
recruiting  expenses relating to the hiring of new dentists.  As a percentage of
net  revenue,  general and  administrative  expenses  decreased to 10.5% for the
three months  ended  September  30, 2002  compared to 10.6% for the three months
ended September 30, 2001.




                                       16
<PAGE>



Contribution from dental offices. As a result of the above, contribution from
dental offices increased to $1.3 million for the three months ended September
30, 2002 compared to $924,000 for the three months ended September 30, 2001, an
increase of $356,000 or 38.5%. As a percentage of net revenue, contribution from
dental offices increased to 16.9% for the three months ended September 30, 2002
compared to 13.1% for the three months ended September 30, 2001.

Corporate  expenses - general and  administrative.  For the three  months  ended
September 30, 2002 corporate expenses - general and administrative  increased to
$690,000  compared to $621,000 for the three months ended September 30, 2001, an
increase  of  $69,000 or 11.1%.  This  increase  is  primarily  attributable  to
incentive  bonuses paid based on the increased  profitability of the Company and
performance  of the  Company's  Common  Stock.  As a percentage  of net revenue,
corporate expense - general and  administrative  increased to 9.1% for the three
months ended  September  30, 2002 compared to 8.8% during the three months ended
September 30, 2001.

Corporate  expenses - depreciation and amortization.  For the three months ended
September 30, 2002 corporate expenses - depreciation and amortization  increased
to $84,000 as compared to $79,000 for the three months ended September 30, 2001,
an  increase  of $6,000 or 7.3%.  This  increase  is  primarily  due to a higher
depreciable asset base due to the purchase of enhanced computer  software.  As a
percentage of net revenue,  corporate  expenses - depreciation  and amortization
remained constant at 1.1% for the three months ended September 30, 2002 compared
to the three months ended September 30, 2001.

Operating  income.  As a result of the above,  the Company  generated  operating
income of $505,000  for the three months ended  September  30, 2002  compared to
operating  income of $224,000 for the three months ended  September 30, 2001, an
increase of $281,000 or 125.2%. As a percentage of net revenue, operating income
increased to 6.7% for the three months ended September 30, 2002 compared to 3.2%
for the three months ended September 30, 2001.

Interest  expense,  net. For the three months ended  September 30, 2002 interest
expense  decreased  to $80,000  compared to $99,000 for the three  months  ended
September  30, 2001, a decrease of $19,000 or 19.3%.  This  decrease in interest
expense is  attributable  to a lower  average  outstanding  debt  balance  and a
lowering of the interest rate on the Company's credit facility.  As a percentage
of net revenue,  interest  expense  decreased to 1.1% for the three months ended
September  30, 2002  compared to 1.4% for the three months ended  September  30,
2001.

Net income.  As a result of the above, the Company's net income was $264,000 for
the three months ended September 30, 2002 compared to net income of $126,000 for
the three months ended  September  30, 2001,  an increase of $138,000 or 109.9%.
Net  income  for the  quarter  ended  September  30,  2002 was net of income tax
expense of $162,000  while the net income for the quarter  ended  September  30,
2001 did not include a provision for income taxes.

Nine Months Ended September 30, 2002 Compared to Nine Months Ended September 30,
2001:

Net revenue.  For the nine months ended September 30, 2002 net revenue increased
to $23.0 million  compared to $22.3 million for the nine months ended  September
30, 2001, an increase of $677,000 or 3.0%.

Clinical  salaries and  benefits.  For the nine months ended  September 30, 2002
clinical  salaries  and  benefits  decreased  to $8.8  million  compared to $9.2
million for the nine months ended  September 30, 2001, a decrease of $323,000 or
3.5%.  This  decrease was  primarily  due to  attrition of support  staff at the
Offices  which  were not  replaced,  partially  offset by the  recent  hiring of
additional  support personnel  corresponding to the increased number of dentists
at the Offices.  As a percentage of net revenue,  clinical salaries and benefits
decreased  to 38.5% for the nine months  ended  September  30, 2002  compared to
41.1% for the nine months ended September 30, 2001.

Dental supplies. For the nine months ended September 30, 2002 dental supplies
increased to $1.4 million compared to $1.3 million for the nine months ended
September 30, 2001, an increase of $17,000 or 1.3%. As a percentage of net
revenue, dental supplies decreased to 5.9% for the nine months ended September
30, 2002 compared to 6.0% for the nine months ended September 30, 2001.

                                       17
<PAGE>

Laboratory  fees. For the nine months ended  September 30, 2002  laboratory fees
decreased  to $1.8  million  compared to $1.9  million for the nine months ended
September  30, 2001, a decrease of $84,000 or 4.5%.  This decrease was primarily
due to the Company's  efforts to consolidate  the use of dental  laboratories so
that improved pricing could be obtained based upon the Company's laboratory case
volume.  As a percentage of net revenue,  laboratory  fees decreased to 7.9% for
the nine months ended  September  30, 2002  compared to 8.4% for the nine months
September 30, 2001.

Occupancy.  For the nine  months  ended  September  30, 2002  occupancy  expense
increased  to $2.6  million  compared to $2.5  million for the nine months ended
September 30, 2001, an increase of $59,000 or 2.4%.  This increase was primarily
due to increased rental payments  resulting from the renewal of Office leases at
current  market rates for Offices  whose leases  expired  subsequent to the 2001
period. As a percentage of net revenue, occupancy expense decreased to 11.1% for
the nine months ended  September  30, 2002 compared to 11.2% for the nine months
ended September 30, 2001.

Advertising  and  marketing.  For the  nine  months  ended  September  30,  2002
advertising  and  marketing  decreased to $256,000  compared to $264,000 for the
nine  months  ended  September  30,  2001,  a decrease  of $7,000 or 2.8%.  As a
percentage of net revenue,  advertising and marketing  decreased to 1.1% for the
nine months ended  September 30, 2002 compared to 1.2% for the nine months ended
September 30, 2001.

Depreciation  and  amortization.  For the nine months ended  September  30, 2002
depreciation and  amortization,  which consists of depreciation and amortization
expense incurred at the Offices,  remained  constant at $1.8 million compared to
the nine months  ended  September  30,  2001.  As a  percentage  of net revenue,
depreciation  and  amortization  decreased  to 7.8%  for the nine  months  ended
September  30, 2002  compared to 8.2% for the nine months  ended  September  30,
2001.

General and administrative. For the nine months ended September 30, 2002 general
and  administrative,  which is  attributable  to the Offices,  increased to $2.4
million  compared to $2.3 million for the nine months ended  September 30, 2001,
an increase of $48,000 or 2.1%.  As a  percentage  of net  revenue,  general and
administrative  expenses  decreased to 10.3% for the nine months ended September
30, 2002 compared to 10.4% during the nine months ended September 30, 2001.

Contribution  from dental offices.  As a result of the above,  contribution from
dental offices increased to $4.0 million for the nine months ended September 30,
2002  compared to $3.0 million for the nine months ended  September 30, 2001, an
increase of $996,000 or 33.2%. As a percentage of net revenue, contribution from
dental offices  increased to 17.4% for the nine months ended  September 30, 2002
compared to 13.5% for the nine months ended September 30, 2001.

Corporate  expenses - general  and  administrative.  For the nine  months  ended
September  30, 2002  corporate  expenses - general and  administrative  remained
constant at $2.3 million  compared to the nine months ended  September 30, 2001.
As a percentage of net revenue,  corporate expense - general and  administrative
decreased to 9.9% for the nine months ended September 30, 2002 compared to 10.4%
during the nine months ended September 30, 2001.

Corporate expenses - depreciation and amortization. For the nine months ended
September 30, 2002 corporate expenses - depreciation and amortization increased
to $248,000 compared to $244,000 for the nine months ended September 30, 2001,
an increase of $4,000 or 1.5%. As a percentage of net revenue, corporate
expenses - depreciation and amortization remained constant at 1.1% for the nine
months ended September 30, 2002 compared to the nine months ended September 30,
2001.

Operating  income.  As a result of the above,  the Company  generated  operating
income of $1.5 million for the nine months ended  September 30, 2002 compared to
operating  income of $445,000 for the nine months ended  September  30, 2001, an
increase of $1.0 million or 231.3%.  As a percentage  of net revenue,  operating
income  increased to 6.4% for the nine months ended  September 30, 2002 compared
to 2.0% for the nine months ended September 30, 2001.

                                       18
<PAGE>

Interest  expense,  net. For the nine months ended  September  30, 2002 interest
expense  decreased  to $275,000  compared to $376,000  for the nine months ended
September  30, 2001, a decrease of $101,000 or 26.9%.  This decrease in interest
expense is  attributable to a lower average  outstanding  debt balance and lower
interest  rates  during the current  period.  As a  percentage  of net  revenue,
interest expense  decreased to 1.2% for the nine months ended September 30, 2002
compared to 1.7% for the nine months ended September 30, 2001.

Net  income.  As a result of the  above,  the  Company  generated  net income of
$744,000 for the nine months ended  September 30, 2002 compared to net income of
$69,000 for the nine months ended  September  30, 2001.  Net income for the nine
months ended  September 30, 2002 was net of income tax expense of $456,000 while
net  income for the nine  months  ended  September  30,  2001 did not  include a
provision for income taxes.

Liquidity and Capital Resources

Since its  inception,  the Company has financed its growth through a combination
of private sales of convertible  subordinated  debentures and Common Stock, cash
provided by operating activities, a bank line of credit (the "Credit Facility"),
seller notes and its initial public offering of Common Stock.

Net cash provided by operating  activities  was  approximately  $3.0 million and
$3.9  million  for  the  nine  months  ended   September   30,  2001  and  2002,
respectively. During the 2002 period, excluding net income and after adding back
non-cash items,  the Company's cash provided by operating  activities  consisted
primarily  of  an  increase  in  accounts   payable  and  accrued   expenses  of
approximately $377,000, a decrease in prepaid expense, income tax receivable and
other assets of approximately  $370,000,  an increase in income taxes payable of
approximately  $185,000 and a decrease in accounts  receivable of  approximately
$133,000.  Net cash  provided by  operating  activities  during the 2001 period,
excluding net income and after adding back non-cash items,  consisted  primarily
of a decrease in accounts  receivable of approximately  $427,000 and an increase
in accounts payable and accrued expenses of approximately $374,000.

Net cash  used in  investing  activities  was  approximately  $924,000  and $1.4
million for the nine months  ended  September  30, 2001 and 2002,  respectively.
During the nine month period ended  September 30, 2002,  approximately  $959,000
was utilized for the  acquisition of a portion of the remaining  interest in one
dental  office,  all of the  remaining  interest  in another  dental  office and
approximately  $396,000 was invested in the purchase of additional  property and
equipment.  For the nine months ended September 30, 2001, approximately $435,000
was invested in the purchase of the remaining 50% interest in an existing Office
and additional property and equipment purchases totaling approximately $431,000.

Net cash used in financing  activities was  approximately  $1.8 million and $2.5
million for the nine months  ended  September  30, 2001 and 2002,  respectively.
During the nine months  ended  September  30,  2002,  net cash used in financing
activities  was comprised of $1.4 million used to reduce the amount  outstanding
on the  Company's  term-loan  with its bank,  $168,000 used to reduce the amount
outstanding on the Company's bank line of credit,  $841,000 for the purchase and
retirement  of Common  Stock and  approximately  $230,000  for the  repayment of
long-term  debt.  During the nine months ended September 30, 2001, net cash used
in financing  activities was comprised of $1.7 million used to reduce the amount
outstanding  on the Company's bank line of credit and $158,000 for the repayment
of long-term debt.

Under the  Company's  Credit  Facility (as amended on  September  9, 2002),  the
Company  may  borrow on a  revolving  basis up to the  lesser  of an  applicable
Borrowing  Base  (calculated in accordance  with the most recent  Borrowing Base
Certificate  delivered  to the Lender) or $2.0  million  and on a  non-revolving
basis, an aggregate  principal  amount not in excess of $4.0 million for working
capital,  for restructuring of the Original Loan and for other general corporate
purposes. Balances bear interest at the lender's prime rate. The Company is also
obligated to pay an annual  facility fee of .50% on the average unused amount of
the revolving line of credit during the previous full calendar month. Borrowings
on the  revolving  loan are  limited  to an  availability  formula  based on the
Company's eligible accounts receivable.  As amended, both the revolving loan and
the  non-revolving  note mature on April 30, 2003.  At September  30, 2002,  the
Company had no borrowings  outstanding and $2.0 million  available for borrowing
under the revolving loan and $2.5 million  outstanding  under the  non-revolving
loan.  The  Credit  Facility  is  secured  by a lien on the  Company's  accounts
receivable  and its Management  Agreements.  The Credit  Facility  prohibits the
payment of  dividends  and other  distributions  to  shareholders,  restricts or
prohibits the Company from incurring indebtedness, incurring liens, disposing of
assets,  making investments or making acquisitions,  and requires the Company to
maintain certain financial ratios on an ongoing basis. At September 30, 2002 the
Company was in full compliance with all of its covenants under this agreement.

                                       19
<PAGE>

At September 30, 2002, the Company had outstanding indebtedness of approximately
$1.3 million  represented  by notes issued in connection  with various  practice
acquisitions,  all of which  bear  interest  at  8.0%.  The  Company's  material
commitments for capital expenditures total approximately  $250,000.  The Company
anticipates that these capital  expenditures will be provided from cash on hand,
cash generated by operations, or borrowings under the Company's Credit Facility.
The  Company's  retained  earnings as of  September  30, 2002 was  approximately
$609,000  and  the  Company  had a  working  capital  deficit  on  that  date of
approximately  $2.0 million  which was the result of the  classification  of the
entire amount  outstanding under the Credit Facility as a short-term  liability.
The Company  believes the Credit  Facility  will be extended  beyond its current
maturity date. When excluding the effect of this  classification,  the Company's
working  capital  deficit  would be  $456,000.  The  Company's  earnings  before
interest,  taxes, depreciation and amortization ("EBITDA") increased 40% to $3.5
million for the nine months ended  September  30, 2002  compared to $2.5 million
for the same nine-month period in 2001. During the first nine months of 2002 the
Company  reduced total bank debt  outstanding by $1.5 million to $2.5 million as
of September 30, 2002.

The Company  believes that cash generated from  operations and borrowings  under
its Credit Facility,  will be sufficient to fund its anticipated working capital
needs,  capital  expenditures  and future  acquisitions for at least the next 12
months.  In the event the  Company is not able to  successfully  negotiate a new
Credit  Facility  at the end of its  term,  the  Company's  current  sources  of
liquidity  may not be  adequate.  In  addition,  in order to meet its  long-term
liquidity  needs the Company may issue  additional  equity and debt  securities,
subject  to market and other  conditions.  There can be no  assurance  that such
additional  financing will be available on terms acceptable to the Company.  The
failure to raise the funds  necessary  to finance its future  cash  requirements
could  adversely  affect the Company's  ability to pursue its strategy and could
negatively affect its operations in future periods.

On May 8,  2002  the  Company's  Board of  Directors  unanimously  approved  the
purchase of shares of the  Company's  Common Stock on the open market up to $1.0
million.  On October  24,  2002 the  Company's  Board of  Directors  unanimously
approved an  incremental  increase of $500,000 in the amount that can be used to
purchase  shares  of the  Company's  Common  Stock  on the open  market  to $1.5
million.  Through September 30, 2002 the Company,  in 56 separate  transactions,
purchased  92,522 shares of Common Stock at prices  ranging from $7.35 to $11.20
per  share,  for  total  consideration  of  approximately   $901,000,  of  which
approximately  $60,000 was recorded as  compensation  expense in accordance with
Financial Accounting Standards Board Interpretation Number 44.



                                       20
<PAGE>



ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk represents the risk of loss that may impact the financial  position,
results of  operations  or cash flows of the Company  due to adverse  changes in
financial  and  commodity  market  prices and rates.  The  Company is exposed to
market risk in the area of changes in United States interest rates. Historically
and as of June 30,  2002,  the Company has not used  derivative  instruments  or
engaged in hedging activities.

Interest Rate Risk.  The interest  payable on the Company's  line-of-credit  and
term-loan is variable  based upon the prime rate,  and,  therefore,  affected by
changes in market  interest  rates.  At September 30, 2002,  approximately  $2.5
million was outstanding with an interest rate of 4.75% (Prime).  The Company may
repay the balance in full at any time without penalty.  As a result, the Company
does not believe that reasonably  possible  near-term  changes in interest rates
will result in a material effect on future  earnings,  fair values or cash flows
of the Company.  Based on calculations performed by the Company, a 1.0% increase
in the Company's  interest rate would result in additional  interest  expense of
approximately $26,300 for the nine months ended September 30, 2002.


ITEM 4.  CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures.

The Company,  under the supervision and with the  participation of the Company's
management,  including its Chief Executive Officer and Chief Financial  Officer,
carried out an  evaluation of the  effectiveness  of the design and operation of
the  Company's  disclosure  controls and  procedures as of November 1, 2002 (the
"Evaluation Date"). Based upon this evaluation,  the Chief Executive Officer and
Chief Financial  Officer  concluded as of the Evaluation Date that the Company's
disclosure  controls and  procedures  were  effective for purposes of recording,
processing, summarizing and timely reporting material information required to be
disclosed in reports that the Company files under the Exchange Act.

Changes in internal controls.

There were no significant  changes in our internal controls and no other factors
that could  significantly  affect these  controls  subsequent to the  Evaluation
Date. The Company did not need to implement any  corrective  actions with regard
to any significant deficiency or material weakness in its internal controls.






                                       21
<PAGE>




                           PART II. OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS

From  time to time the  Company  is  subject  to  litigation  incidental  to its
business. The Company is not presently a party to any material litigation.  Such
claims,  if  successful,  could  result  in  damage  awards  exceeding,  perhaps
substantially, applicable insurance coverage.



ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K


(a)      Exhibits


Exhibit Number        Description of Document


10.40    Second  Amendment  to  Amended  and  Restated  Credit  Agreement  dated
         September 9, 2002 between the Registrant and Key Bank of Colorado.


(b)   Reports on Form 8-K         None




                                       22
<PAGE>




                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.




                                    BIRNER DENTAL MANAGEMENT SERVICES, INC.
                                    a Colorado corporation


Date:  November 6, 2002             By:    /s/ Frederic W.J. Birner
                                    --------------------------------------------
                                    Name: Frederic W.J. Birner
                                    Title:Chairman of the Board, Chief Executive
                                          Officer and Director
                                         (Principal Executive Officer)


Date:  November 6, 2002             By:     /s/ Dennis N. Genty
                                    --------------------------------------------
                                    Name:  Dennis N. Genty
                                    Title: Chief Financial Officer, Secretary,
                                           Treasurer and Director
                                          (Principal Financial and
                                           Accounting Officer)





                                       23
<PAGE>




                                  CERTIFICATION


     I, Frederic W.J. Birner, Chief Executive Officer certify that:

     1.   I have reviewed this  quarterly  report on Form 10-Q of Birner
          Dental Management Services, Inc.;

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

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

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

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

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

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

     6.    The Registrant's other certifying officer and I have indicated in
           this quarterly report whether or not there were significant changes
           in internal controls or in other factors that could significantly
           affect internal controls subsequent to the date of my most recent
           evaluation, including any corrective actions with regard to
           significant deficiencies and material weaknesses.


         November 6, 2002  By: /s/   Frederic W.J. Birner
                               ----------------------------------------
                               Name:   Frederic W.J. Birner
                               Title   Chairman of the Board,
                                       Chief Executive Officer and Director
                                      (Principal Executive Officer)




                                       24
<PAGE>



                                  CERTIFICATION

     I, Dennis N. Genty, Chief Financial Officer certify that:

     1.   I have reviewed this quarterly report on Form 10-Q of
          Birner Dental Management Services, Inc.;

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

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

     4.   The Registrant's other certifying officer and I are responsible for
          establishing and maintaining disclosure controls and procedures (as
          defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant
          and have:
                  a)       designed such  disclosure  controls and procedures to
                           ensure  that  material  information  relating  to the
                           Registrant  is made known to us by others  within the
                           Company, particularly during the period in which this
                           quarterly report is being prepared;
                  b)       evaluated  the   effectiveness  of  the  Registrant's
                           disclosure  controls  and  procedures  as  of a  date
                           within  90  days  prior  to the  filing  date of this
                           quarterly report (the "Evaluation Date"); and
                  c)       presented in this  quarterly  report our  conclusions
                           about the  effectiveness  of the disclosure  controls
                           and  procedures  based  on our  evaluation  as of the
                           Evaluation Date;

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

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

     6.    The Registrant's other certifying officer and I have indicated in
           this quarterly report whether or not there were significant changes
           in internal controls or in other factors that could significantly
           affect internal controls subsequent to the date of my most recent
           evaluation, including any corrective actions with regard to
           significant deficiencies and material weaknesses.


         November 6, 2002  By: /s/   Dennis N. Genty
                               -------------------------------
                               Name:    Dennis N. Genty
                               Title:   Chief Financial Officer,
                                        Secretary, Treasurer and Director
                                        (Principal Financial Officer)







                                       25
<PAGE>



                          CERTIFICATION OF 10-Q REPORT
                                       OF
                     BIRNER DENTAL MANAGEMENT SERVICES, INC.
                    FOR THE QUARTER ENDED SEPTEMBER 30, 2002


1.       The undersigned are the Chief Executive Officer and the Chief Financial
         Officer of Birner Dental Management  Services,  Inc. This Certification
         is made pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. This
         Certification  accompanies the 10-Q Report of Birner Dental  Management
         Services, Inc. for the quarter ended September 30, 2002.

2.       We certify that such 10-Q Report fully  complies with the  requirements
         of Section  13(a) or 15(d) of the  Securities  Exchange Act of 1934 and
         that the information  contained in such 10-Q Report fairly presents, in
         all  material  respects,   the  financial   condition  and  results  of
         operations of Birner Dental Management Services, Inc.

                  This Certification is executed as of November 6, 2002.



                       By:    /s/ Frederic W.J. Birner
                          -----------------------------------------
                       Name:    Frederic W.J. Birner
                       Title:   Chairman of the Board, Chief
                                Executive Officer and Director
                               (Principal Executive Officer)



                       By:     /s/ Dennis N. Genty
                          ----------------------------------------
                       Name:    Dennis N. Genty
                       Title:   Chief Financial Officer, Secretary,
                                Treasurer and Director
                               (Principal Financial and Accounting Officer)




















                                       26