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         June 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 August 2, 2002
-------------------------------   --------------------------------------------
Common Stock, without par value                    1,480,060


<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 June 30, 2002 (unaudited)                                                                       3

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

         Unaudited Condensed Statement of Shareholders' Equity                                                 5

         Unaudited Condensed Consolidated Statements of Cash Flows for the Six Months
           Ended June 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                                                                          11

Item 3.  Quantitative and Qualitative Disclosures About Market Risk                                           19


PART II -OTHER INFORMATION


Item 1.  Legal Proceedings                                                                                    20

Item 4.  Submission of Matters to a Vote of Security Holders                                                  20

Item 6.  Exhibits and Reports on Form 8-K                                                                     21

Signatures                                                                                                    22

Certification of 10-Q Report                                                                                  23

</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,          June 30,
                                     ASSETS                                               2001                2002
                                                                                           **              (Unaudited)
                                                                                      -----------           ---------
CURRENT ASSETS:
<S>                                                                                    <C>                <C>
    Cash and cash equivalents                                                      $    949,236         $  1,090,829
    Accounts receivable, net of allowance for doubtful accounts
       of $201,795 and $211,328, respectively                                         3,086,648            2,854,815
    Deferred tax asset                                                                  112,214              112,214
    Prepaid expenses and other assets                                                   724,429              523,654

              Total current assets                                                    4,872,527            4,581,512
                                                                                   -------------        ------------
PROPERTY AND EQUIPMENT, net                                                           5,369,198            4,632,016

OTHER NONCURRENT ASSETS:
    Intangible assets, net                                                           13,915,362           15,476,200
    Deferred charges and other assets                                                   216,285              185,157
    Notes receivable - related parties                                                  284,479              284,479
    Deferred tax asset, net                                                             104,074              104,074
                                                                                   -------------        ------------

              Total assets                                                          $24,761,925          $25,263,438
                                                                                   ============         ============

                      LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable and accrued expenses                                          $  3,190,723         $  3,426,959
    Income taxes payable                                                                 48,479              171,546
    Current maturities of long-term debt                                              1,332,158            3,283,652
                                                                                   -------------        ------------
              Total current liabilities                                               4,571,360            6,882,157

LONG-TERM LIABILITIES:
    Long-term debt, net of current maturities                                         3,296,304            1,086,054
    Other long-term obligations                                                         173,089              174,629
                                                                                   -------------        ------------
              Total liabilities                                                       8,040,753            8,142,840

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 1,497,235 shares issued and
       outstanding, respectively                                                     16,855,661           16,775,488
    Retained earnings (accumulated deficit)                                            (134,489)             345,110
                                                                                   -------------        ------------
              Total shareholders' equity                                             16,721,172           17,120,598


              Total liabilities and shareholders' equity                            $24,761,925          $25,263,438
                                                                                   ============         ============
</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                   Six Months Ended
                                                                  June 30,                         June 30,
                                                        -------------------------             ---------------------
                                                        2001                 2002             2001             2002
                                                        ----                 ----             ----             ----
<S>                                                    <C>             <C>               <C>               <C>
NET REVENUE                                            $ 7,518,664     $ 7,633,596       $15,233,335       $15,401,210
DIRECT EXPENSES:
    Clinical salaries and benefits                       3,055,754       2,965,813         6,349,117         5,938,011
    Dental supplies                                        441,578         454,698           913,968           898,959
    Laboratory fees                                        649,184         626,007         1,272,583         1,220,978
    Occupancy                                              828,835         860,615         1,642,861         1,694,885
    Advertising and marketing                               98,636          81,589           181,140           160,655
    Depreciation and amortization                          612,821         598,836         1,225,762         1,193,226
    General and administrative                             791,216         801,247         1,568,802         1,574,934
                                                       -----------     -----------       -----------       -----------
                                                         6,478,024       6,388,805        13,154,233        12,681,648
                                                         ---------       ---------         ---------         ---------
    Contribution from dental offices                     1,040,640       1,244,791         2,079,102         2,719,562

CORPORATE EXPENSES:
       General and administrative                          720,125         681,873         1,693,394         1,587,805
       Depreciation and amortization                        82,766          83,960           165,252           163,179
                                                       -----------     -----------       -----------       -----------

    Operating income                                       237,749         478,958           220,456           968,578
    Interest expense, net                                 (119,411)        (88,550)         (277,361)         (195,031)

    Income (loss) before income taxes                      118,338         390,408           (56,905)          773,547
    Income tax expense                                           -        (148,355)                -          (293,948)


    Net income (loss)                                  $   118,338      $  242,053      $    (56,905)      $   479,599
                                                       ============     ===========      ===========       ===========


Net income (loss) per share of Common Stock:
    Basic                                              $       .08      $      .16      $       (.04)      $       .32
                                                       ===========      ===========      ===========       ===========

    Diluted                                            $       .08      $      .15      $       (.04)      $       .29
                                                       ===========      ===========      ===========       ===========


Weighted average number of shares of C
Common Stock and dilutive securities:
    Basic                                                1,506,705       1,503,553         1,506,705         1,505,121
                                                         =========       =========         =========         =========

    Diluted                                              1,506,799       1,650,896         1,506,705         1,634,356
                                                         =========       =========         =========         =========



</TABLE>



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


                                       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                         9,584            22,668                 -              22,668
   Purchase and Retirement of Common Stock              (19,054)         (150,841)                -            (150,841)
   Exercise of Common Stock  Options
       Recorded as Compensation Expense                       -            48,000                                48,000
   Net Income                                                 -                 -           479,599             479,599
                                                      ---------      ------------        ----------         -----------
BALANCES, June 30, 2002                               1,497,235      $ 16,775,488        $  345,110         $17,120,598
                                                      =========      ============        ==========         ===========

</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>

                                                                                               Six Months Ended
                                                                                                    June 30,
                                                                                            2001                 2002
                                                                                            ----                 ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                   <C>                   <C>
    Net income (loss)                                                                 $    (56,905)         $  479,599
    Adjustments to reconcile net income (loss) to net
       cash provided by operating activities:
          Depreciation and amortization                                                  1,391,014           1,356,405
          Loss (Gain) on disposition of property                                             3,660              (5,495)
          Provision for doubtful accounts                                                    9,489               9,533
          Amortization of debt issuance costs                                               15,574              43,165
    Changes in assets and liabilities, net of effects from acquisitions:
          Accounts receivable                                                              211,334             222,300
          Prepaid expense, income tax receivable and other assets                         (277,837)            199,694
          Accounts payable and accrued expenses                                            409,100             236,236
          Income taxes payable                                                                   -             123,067
          Other long-term obligations                                                       15,736               1,540
                                                                                       -----------         -----------
              Net cash provided by operating activities                                  1,721,165           2,666,044


CASH FLOWS FROM INVESTING ACTIVITIES:
    Notes receivable - related parties                                                      12,873                   -
    Capital expenditures                                                                  (327,855)           (256,415)
    Acquisition of dental offices                                                         (430,843)           (959,150)
                                                                                       ------------        -----------
              Net cash used in investing activities                                       (745,825)         (1,215,565)


CASH FLOWS FROM FINANCING ACTIVITIES:
    Net repayments - line of credit                                                       (582,000)           (168,000)
    Repayment of bank term-loan                                                                  -            (900,000)
    Repayment of long-term debt                                                            (97,319)           (149,756)
    Payment of financing costs                                                                   -             (10,957)
    Proceeds from exercise of Common Stock options                                               -              22,668
    Purchase and retirement of Common Stock                                                      -            (102,841)
                                                                                       -----------         ------------
              Net cash used in financing activities                                       (679,319)         (1,308,886)


NET INCREASE IN CASH AND CASH EQUIVALENTS                                                  296,021             141,593
CASH AND CASH EQUIVALENTS, beginning of period                                             691,417             949,236
                                                                                       -----------         -----------

CASH AND CASH EQUIVALENTS, end of period                                               $   987,438         $ 1,090,829
                                                                                       ===========         ===========





</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>

                                                                                                 Six Months Ended
                                                                                                     June 30,
                                                                                            2001                2002
                                                                                     ---------------      -------------
SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION:

<S>                                                                                  <C>                   <C>
       Cash paid during the period for interest                                      $       298,929       $    195,322
                                                                                     ===============       ============

       Cash paid during the period for income taxes                                  $           -         $    170,880
                                                                                     ===============       ============


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)
                                  JUNE 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 June  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 six
months ended June 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 June 30,
                                                            2001                                     2002
                                            --------------------------------------------------------------------------
                                                                      Per Share                              Per Share
                                            Income         Shares       Amount       Income       Shares       Amount
                                            ------         ------     ---------      ------       ------       ------
Basic EPS:
   Net income available to
<S>                                        <C>           <C>            <C>         <C>           <C>             <C>
     shares of Common Stock                $ 118,338     1,506,705      $ .08       $  242,053    1,503,553     $ .16

   Effect of dilutive shares of
   Common Stock from stock
   options and warrants                            -            94          -                -      147,343      (.01)
                                           ---------     ---------      -----       ----------    ---------     -----
Diluted EPS:
   Net income available to
    shares of Common Stock                 $ 118,338     1,506,799      $ .08       $  242,053    1,650,896     $ .15
                                           =========     =========      =====       ==========    =========     =====

</TABLE>

The difference in weighted average shares outstanding between basic earnings per
share and diluted  earnings per share for the  quarters  ended June 30, 2001 and
2002 relates to the effect of 94 and 147,343,  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>



                                                                          Six Months Ended June 30,
                                                                2001                                     2002
                                                ------------------------------------ --------------------------------------
                                                                          Per Share                              Per Share
                                                (Loss)         Shares       Amount       Income       Shares       Amount
   <S>                                        <C>               <C>          <C>         <C>           <C>              <C>
Basic EPS:
   Net income (loss) available to
     shares of Common Stock                $ (56,905)        1,506,705    $ (.04)     $  479,599    1,505,121        $ .32

   Effect of dilutive shares of
   Stock from stock
   and warrants                                    -                 -         -               -      129,235         (.03)
                                           ----------        ---------   -------      ----------    ---------        ------
Diluted EPS:
   Net income (loss) available to
      shares of Common Stock               $ (56,905)        1,506,705    $ (.04)     $  479,599    1,634,356        $ .29
                                           ==========        =========   =======      ==========    =========        =====
</TABLE>


All options and warrants to purchase  shares of Common Stock were  excluded from
the computation of diluted  earnings per share for the six months ended June 30,
2001 since they were anti-dilutive as a result of the Company's net loss for the
period.  The number of options and warrants excluded from the earnings per share
calculation because they are anti-dilutive, using the treasury stock method were
1,743 for the six months ended June 30, 2001. The difference in weighted average
shares  outstanding  between basic  earnings per share and diluted  earnings per
share for the six months  ended June 30,  2002  relates to the effect of 129,235
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 April 1, 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  base rate (prime plus a rate margin of
2.0%).  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 June 30,  2002,  the Company had no  borrowings  outstanding  and $2.0
million  available for borrowing  under the  revolving  loan and $2.975  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 June 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 Statement
of Financial  Accounting  Standards ("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.

 (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.


                                       10
<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 six
months  ended  June 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  currently  manages  54  Offices  in
Colorado,  New  Mexico  and  Arizona  staffed  by 76  general  dentists  and  13
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.



                                       11
<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 June 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 June 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 June 30, 2002,  the  Company's  total assets of  approximately  $25.3 million
included  approximately $15.5 million of identifiable  intangible assets related
to  Management  Agreements.  At that date,  the Company had total  shareholders'
equity of approximately  $17.1 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.



                                       12
<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.


                                       13
<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 June 30, 2002, Revenue increased $51,000 to $10.7
million as compared to the three months ended June 30, 2001. For the six months
ended June 30, 2002, Revenue increased $80,000 to $21.7 million compared to
$21.6 million for the six months ended June 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 June 30,         Six Months Ended June 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                    40.6 %         38.8 %          41.7 %             38.6 %
   Dental supplies                                    5.9 %          6.0 %           6.0 %              5.8 %
   Laboratory fees                                    8.6 %          8.2 %           8.3 %              7.9 %
   Occupancy                                         11.0 %         11.3 %          10.8 %             11.0 %
   Advertising and marketing                          1.3 %          1.1 %           1.2 %              1.0 %
   Depreciation and amortization                      8.2 %          7.8 %           8.1 %              7.8 %
   General and administrative                        10.5 %         10.5 %          10.3 %             10.2 %
                                                    -------       --------        --------            -------
                                                     86.1 %         83.7 %          86.4 %             82.3 %
                                                    -------       --------        --------            -------
Contribution from dental offices                     13.9 %         16.3 %          13.6 %             17.7 %

Corporate Expenses:
   General and administrative                         9.6 %          8.9 %          11.1 %             10.3 %
   Depreciation and amortization                      1.1 %          1.1 %           1.1 %              1.1 %
                                                    -------       --------        --------            -------
Operating income                                      3.2 %          6.3 %           1.4 %              6.3 %
Interest expense, net                                (1.6)%         (1.2)%          (1.8)%             (1.3)%
                                                    -------       --------        --------            -------
Income (loss) before income taxes                     1.6 %          5.1 %          (0.4)%              5.0 %
Income tax expense                                      - %          1.9 %             - %              1.9 %
                                                    -------       --------        --------            -------
Net income (loss)                                     1.6 %          3.2 %          (0.4)%              3.1 %
                                                    =======        =======         =======            =======
..
</TABLE>





                                       14
<PAGE>



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

Net revenue. For the three months ended June 30, 2002 net revenue increased to
$7.6 million compared to $7.5 million for the three months ended June 30, 2001,
an increase of $115,000 or 1.5%.

Clinical  salaries  and  benefits.  For the three  months  ended  June 30,  2002
clinical  salaries  and  benefits  decreased  to $3.0  million  compared to $3.1
million for the three months ended June 30, 2001, a decrease of $90,000 or 2.9%.
This  decrease was  primarily  due to attrition of support  staff at the Offices
which were not replaced.  As a percentage of net revenue,  clinical salaries and
benefits decreased to 38.8% for the three months ended June 30, 2002 compared to
40.6% for the three months ended June 30, 2001.

Dental  supplies.  For the three  months  ended June 30,  2002  dental  supplies
increased  to $455,000  compared to $442,000 for the three months ended June 30,
2001, an increase of $13,000 or 3.0%.  This increase was primarily due to higher
production during this period.  As a percentage of net revenue,  dental supplies
increased to 6.0% for the three months ended June 30, 2002  compared to 5.9% for
the three months ended June 30, 2001.

Laboratory  fees.  For the three  months  ended June 30,  2002  laboratory  fees
decreased  to $626,000  compared to $649,000 for the three months ended June 30,
2001,  a decrease of $23,000 or 3.6%.  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 8.2% for the three
months ended June 30, 2002 compared to 8.6% for the three months June 30, 2001.

Occupancy.  For the three months ended June 30, 2002 occupancy expense increased
to $861,000  compared to $829,000 for the three  months ended June 30, 2001,  an
increase of $32,000 or 3.8%. 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  increased to 11.3% for the three months ended
June 30, 2002 compared to 11.0% for the three months ended June 30, 2001.

Advertising and marketing.  For the three months ended June 30, 2002 advertising
and  marketing  decreased  to $82,000  compared to $99,000 for the three  months
ended June 30,  2001,  a decrease of $17,000 or 17.3%.  As a  percentage  of net
revenue,  advertising and marketing decreased to 1.1% for the three months ended
June 30, 2002 compared to 1.3% for the three months ended June 30, 2001.

Depreciation  and  amortization.  For the  three  months  ended  June  30,  2002
depreciation and  amortization,  which consists of depreciation and amortization
expense incurred at the Offices,  decreased to $599,000 compared to $613,000 for
the three  months  ended  June 30,  2001,  a decrease  of $14,000 or 2.3%.  This
decrease is related to the decrease in the Company's depreciable and amortizable
asset base.  As a  percentage  of net  revenue,  depreciation  and  amortization
decreased to 7.8% for the three months ended June 30, 2002  compared to 8.2% for
the three months ended June 30, 2001.

General and administrative. For the three months ended June 30, 2002 general and
administrative,  which is  attributable  to the  Offices,  increased to $801,000
compared to $791,000 for the three  months  ended June 30, 2001,  an increase of
$10,000 or 1.3%.  As a  percentage  of net revenue,  general and  administrative
expenses  remained  constant at 10.5% for the three  months  ended June 30, 2002
compared to the three months ended June 30, 2001.

Contribution  from dental offices.  As a result of the above,  contribution from
dental  offices  increased  to $1.2  million for the three months ended June 30,
2002  compared to $1.0  million for the three  months  ended June 30,  2001,  an
increase of $204,000 or 19.6%. As a percentage of net revenue, contribution from
dental  offices  increased  to 16.3% for the three  months  ended June 30,  2002
compared to 13.9% for the three months ended June 30, 2001.

Corporate expenses - general and administrative. For the three months ended June
30, 2002 corporate expenses - general and  administrative  decreased to $682,000
compared to $720,000  for the three  months  ended June 30,  2001, a decrease of
$38,000 or 5.3%. This decrease is attributable to a management initiative in the
second  quarter  of 2001 to lower  corporate  expenses  through a  reduction  in
personnel  and other cost  cutting  measures.  As a  percentage  of net revenue,
corporate expense - general and  administrative  decreased to 8.9% for the three
months  ended June 30, 2002  compared to 9.6% during the three months ended June
30, 2001.


                                       15
<PAGE>


Corporate  expenses - depreciation and amortization.  For the three months ended
June 30, 2002 corporate  expenses - depreciation and  amortization  increased to
$84,000 as compared to $83,000 for the three months  ended June 30,  2001.  As a
percentage of net revenue,  corporate  expenses - depreciation  and amortization
remained  constant at 1.1% for the three months ended June 30, 2002  compared to
the three months ended June 30, 2001.

Operating  income.  As a result of the above,  the Company  generated  operating
income  of  $479,000  for the three  months  ended  June 30,  2002  compared  to
operating  income of  $238,000  for the three  months  ended June 30,  2001,  an
increase of $241,000 or 101.5%. As a percentage of net revenue, operating income
increased to 6.3% for the three months ended June 30, 2002  compared to 3.2% for
the three months ended June 30, 2001.

Interest expense, net. For the three months ended June 30, 2002 interest expense
decreased  to $89,000  compared to $119,000  for the three months ended June 30,
2001,  a decrease of $31,000 or 25.8%.  This  decrease  in  interest  expense is
attributable to a lower average outstanding debt balance. As a percentage of net
revenue,  interest expense decreased to 1.2% for the three months ended June 30,
2002 compared to 1.6% for the three months ended June 30, 2001.

Net income.  As a result of the above, the Company's net income was $242,000 for
the three months ended June 30, 2002  compared to net income of $118,000 for the
three months ended June 30, 2001, an increase of $124,000 or 104.5%.  Net income
for the  quarter  ended June 30,  2002 was net of income tax expense of $148,000
while the net  income for the  quarter  ended  June 30,  2001 did not  include a
provision for income taxes.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001:

Net revenue. For the six months ended June 30, 2002 net revenue increased to
$15.4 million compared to $15.2 million for the six months ended June 30, 2001,
an increase of $168,000 or 1.1%.

Clinical salaries and benefits.  For the six months ended June 30, 2002 clinical
salaries and benefits decreased to $5.9 million compared to $6.3 million for the
six months ended June 30, 2001,  a decrease of $411,000 or 6.5%.  This  decrease
was  primarily  due to attrition of support  staff at the Offices which were not
replaced.  As a  percentage  of net  revenue,  clinical  salaries  and  benefits
decreased to 38.6% for the six months ended June 30, 2002  compared to 41.7% for
the six months ended June 30, 2001.

Dental  supplies.  For the six  months  ended  June  30,  2002  dental  supplies
decreased  to $899,000  compared to $914,000  for the six months  ended June 30,
2001, a decrease of $15,000 or 1.6%. This decrease was primarily due to fewer de
novo office  starts which  require  additional  expenses to establish a start-up
inventory. As a percentage of net revenue, dental supplies decreased to 5.8% for
the six months  ended June 30, 2002  compared  to 6.0% for the six months  ended
June 30, 2001.

Laboratory  fees.  For the six  months  ended  June  30,  2002  laboratory  fees
decreased to $1.2 million compared to $1.3 million for the six months ended June
30, 2001, a decrease of $52,000 or 4.1%.  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 six months
ended June 30, 2002 compared to 8.3% for the six months June 30, 2001.

Occupancy. For the six months ended June 30, 2002 occupancy expense increased to
$1.7 million compared to $1.6 million for the six months ended June 30, 2001, an
increase of $52,000 or 3.2%. 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 increased to 11.0% for the six months ended June
30, 2002 compared to 10.8% for the six months ended June 30, 2001.

Advertising  and marketing.  For the six months ended June 30, 2002  advertising
and  marketing  decreased  to $161,000  compared to $181,000  for the six months
ended June 30,  2001,  a decrease of $20,000 or 11.3%.  As a  percentage  of net
revenue,  advertising  and marketing  decreased to 1.0% for the six months ended
June 30, 2002 compared to 1.2% for the six months ended June 30, 2001.




                                       16
<PAGE>



Depreciation  and  amortization.   For  the  six  months  ended  June  30,  2002
depreciation and  amortization,  which consists of depreciation and amortization
expense incurred at the Offices,  remained  constant at $1.2 million compared to
the six months ended June 30, 2001. As a percentage of net revenue, depreciation
and  amortization  decreased  to 7.8% for the six  months  ended  June 30,  2002
compared to 8.1% for the six months ended June 30, 2001.

General and  administrative.  For the six months ended June 30, 2002 general and
administrative,  which is attributable to the Offices, remained constant at $1.6
million  compared to the six months ended June 30, 2001.  As a percentage of net
revenue,  general and  administrative  expenses  decreased  to 10.2% for the six
months  ended June 30, 2002  compared to 10.3%  during the six months ended June
30, 2001.

Contribution  from dental offices.  As a result of the above,  contribution from
dental offices  increased to $2.7 million for the six months ended June 30, 2002
compared to $2.1 million for the six months ended June 30, 2001,  an increase of
$640,000 or 30.8%.  As a  percentage  of net revenue,  contribution  from dental
offices  increased to 17.7% for the six months  ended June 30, 2002  compared to
13.6% for the six months ended June 30, 2001.

Corporate expenses - general and  administrative.  For the six months ended June
30, 2002  corporate  expenses - general  and  administrative  decreased  to $1.6
million  compared to $1.7  million  for the six months  ended June 30,  2001,  a
decrease of $106,000 or 6.2%.  This  decrease is  attributable  to a  management
initiative in the second quarter of 2001 to lower corporate  expenses  through a
reduction in personnel and other cost cutting  measures.  As a percentage of net
revenue,  corporate expense - general and administrative  decreased to 10.3% for
the six months ended June 30, 2002 compared to 11.1% during the six months ended
June 30, 2001.

Corporate  expenses - depreciation  and  amortization.  For the six months ended
June 30, 2002 corporate  expenses - depreciation and  amortization  decreased to
$163,000 compared to $165,000 for the six months ended June 30, 2001, a decrease
of  $2,000  or 1.2%.  As a  percentage  of net  revenue,  corporate  expenses  -
depreciation and amortization remained constant at 1.1% for the six months ended
June 30, 2002 compared to the six months ended June 30, 2001.

Operating  income.  As a result of the above,  the Company  generated  operating
income of $969,000 for the six months ended June 30, 2002  compared to operating
income of  $220,000  for the six months  ended June 30,  2001,  an  increase  of
$748,000 or 339.4%.  As a percentage of net revenue,  operating income increased
to 6.3% for the six months  ended  June 30,  2002  compared  to 1.4% for the six
months ended June 30, 2001.

Interest  expense,  net. For the six months ended June 30, 2002 interest expense
decreased  to $195,000  compared to $277,000  for the six months  ended June 30,
2001,  a decrease of $82,000 or 29.7%.  This  decrease  in  interest  expense is
attributable to a lower average outstanding debt balance. As a percentage of net
revenue,  interest  expense  decreased to 1.3% for the six months ended June 30,
2002 compared to 1.8% for the six months ended June 30, 2001.

Net income (loss). As a result of the above, the Company's  generated net income
of $480,000  for the six months  ended June 30,  2002  compared to a net loss of
$(57,000) for the six months ended June 30, 2001.  Net income for the six months
ended June 30, 2002 was net of income tax expense of $294,000 while the net loss
for the six months  ended June 30, 2001 did not  include a provision  ofr 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  $1.7 million and
$2.7  million  for the six months  ended June 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
$236,000,  a decrease in  accounts  receivable  of  approximately  $222,000,  an
increase in income taxes  payable of  approximately  $123,000 and an decrease in
prepaid  expense,  income  tax  receivable  and other  assets  of  approximately
$200,000.  Net cash  provided by  operating  activities  during the 2001 period,
excluding the net loss and after adding back non-cash items, consisted primarily
of an  increase  in accounts  payable  and  accrued  expenses  of  approximately
$409,000  and a decrease  in  accounts  receivable  of  approximately  $211,000,
partially offset by an increase in prepaid  expenses,  income tax receivable and
other assets of approximately $278,000.

                                       17
<PAGE>

Net cash  used in  investing  activities  was  approximately  $746,000  and $1.2
million for the six months  ended June 30, 2001 and 2002,  respectively.  During
the six month period ended June 30,  2002,  approximately  $959,000 was utilized
for acquisition of dental offices and approximately $256,000 was invested in the
purchase of additional property and equipment. For the six months ended June 30,
2001,  approximately $431,000 was utilized for acquisition of dental offices and
approximately  $328,000 was invested in the purchase of additional  property and
equipment.

Net cash  used in  financing  activities  was  approximately  $679,000  and $1.3
million for the six months  ended June 30, 2001 and 2002,  respectively.  During
the six months ended June 30, 2002,  net cash used in financing  activities  was
comprised of approximately $900,000 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,  $103,000 for the purchase and
retirement  of Common  Stock and  approximately  $150,000  for the  repayment of
long-term  debt.  During the six months  ended June 30,  2001,  net cash used in
financing activities was comprised of approximately  $582,000 used to reduce the
amount  outstanding  on the  Company's  bank  line of credit  and  approximately
$97,000 for the repayment of long-term debt.

Under the Company's  Credit Facility (as amended on April 1, 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  base rate (prime plus a rate margin of
2.0%).  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 June 30,  2002,  the Company had no  borrowings  outstanding  and $2.0
million  available for borrowing  under the  revolving  loan and $2.975  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 June 30,  2002 the  Company  was in full  compliance  with all of its
covenants under this agreement.

At June 30, 2002,  the Company had  outstanding  indebtedness  of  approximately
$1,395,000  represented  by notes issued in  connection  with  various  practice
acquisitions, all of which bear interest at rates varying from 8.0% to 9.0%. 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 June 30,
2002 was approximately $345,000 and the Company had a working capital deficit on
that  date  of   approximately   $2.3  million  which  was  the  result  of  the
classification  of  the  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 $326,000.  The
Company's  earnings  before  interest,   taxes,  depreciation  and  amortization
("EBITDA")  increased 44% to $2.3 million for the six months ended June 30, 2002
compared to $1.6 million for the same six-month period in 2001. During the first
six  months of 2002 the  Company  reduced  total bank debt  outstanding  by $1.1
million to $2.98 million as of June 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.  During the
second  quarter of 2002,  the Company,  in 14 separate  transactions,  purchased
approximately  19,100  shares of Common  Stock at prices  ranging  from $7.35 to
$9.50 per share, for total  consideration of  approximately  $151,000,  of which
$48,000 was  recorded  as  compensation  expense in  accordance  with  Financial
Accounting Standards Board Interpretation Number 44.



                                       18
<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 June 30, 2002, approximately $2.975 million
was  outstanding  with an interest rate of 6.75% (Prime plus 2.0%).  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 $18,800 for the six months ended June 30, 2002.




                                       19
<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 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)      The annual meeting of shareholders was held on June 6, 2002.

(b)      The  following  directors  were  elected  at the  meeting  to  serve  a
         three-year term as Class II directors:

                          For               Withheld Authority    Abstain
                          ---               ------------------    -------
     Dennis N. Genty      1,385,867               14,301             0
     Steven M. Bathgate   1,385.867               14,301             0

Continuing Directors

The following directors are continuing to serve their three-year term as Class
III directors which will expire at the Company's annual meeting in 2003:

     Frederic W J. Birner
     Mark A. Birner, D.D.S.

The following directors are continuing to serve their three-year terms as Class
I directors which will expire at the Company's annual meeting in 2004:

     James M. Ciccarelli
     Paul E. Valuck, D.D.S.

(c)      other  matters voted upon at the meeting and results of those votes are
         as follows:

         Authorization to increase the number of shares available under the 1995
employee stock option plan to 329,250 shares:

          For               Against                    Abstain         Not Voted
          ---               -------                    -------         ---------
        826,988              74,937                     6,135           492,108


         Shareholder proposal to take immediate action to cause the sale, merger
or other disposition of the Company:

           For              Against                    Abstain         Not Voted
           ---              -------                    -------         ---------
         62,696             828,706                    16,658           492,108

     The matters mentioned above are described in detail in the Company's
     definitive proxy statement dated May 10, 2002 for the Annual Meeting of
     Shareholders held on June 6, 2002.


                                       20
<PAGE>


ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K


(a)      Exhibits
          None

(b)      Reports on Form 8-K
          None




                                       21
<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:  August 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:  August 6, 2002     By:     /s/ Dennis N. Genty
                             ---------------------------------------
                          Name:  Dennis N. Genty
                          Title: Chief Financial Officer, Secretary,
                                 Treasurer and Director
                                 (Principal Financial and Accounting Officer)





                                       22
<PAGE>



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


1.       The undersigned are the Chief Executive Officer and the Chief Financial
         Officer of Birner Dental Management Services, Inc. This Cerification 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 June 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 August 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)


                                       23