UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                    FORM 10-Q
(Mark One)

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

         For the quarterly period ended         March 31, 2001
                                                --------------------------------

                                       OR

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

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


                         Commission file number 0-23367


                     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 May 9, 2001
  -----------------------------------         ------------------------
       Common Stock, without par value              1,506,705


<PAGE>




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


PART I - FINANCIAL INFORMATION


Item 1.   Financial Statements                                            Page
                                                                          ----

         Condensed Consolidated Balance Sheets as of December 31, 2000
         And March 2001 (unaudited)                                      3

         Unaudited  Condensed  Consolidated  Statements  of  Operations
         for the Quarters Ended March 31, 2000 and 2001                  4

         Unaudited Condensed Statement of Shareholders' Equity           5

         Unaudited Condensed Consolidated Statements of Cash Flows
         for the Three Months Ended March 31, 2000 and 2001              6

         Unaudited Notes to Condensed Consolidated Financial Statements  8

Item 2.   Management's Discussion and Analysis of Financial Condition
                  And Results of Operations                              10

Item 3.   Quantitative and Qualitative Disclosures About Market Risk     17


PART II - OTHER INFORMATION


Item 1.   Legal Proceedings                                              18

Item 6.   Exhibits and Reports on Form 8-K                               18

Signatures                                                               19



                                       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,         March, 31,
                                     ASSETS                                               2000                2001
                                                                                                          (Unaudited)

CURRENT ASSETS:
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>                  <C>
    Cash and cash equivalents                                                     $     691,417        $     909,673
    Accounts receivable, net of allowance for doubtful accounts
       of $201,047 and $190,925 at December 31, 2000 and
       March 31, 2001, respectively                                                   3,871,818            4,162,777
    Current portion of notes receivable - related parties                               214,112              201,239
    Deferred income taxes                                                               104,429              104,429
    Income tax receivable                                                                87,000               87,000
    Prepaid expenses and other assets                                                   339,938              685,185
                                                                                   ------------          -----------
              Total current assets                                                    5,308,714            6,150,303

PROPERTY AND EQUIPMENT, net                                                           6,967,914            6,686,553

OTHER NONCURRENT ASSETS:
    Intangible assets, net                                                           13,693,092           13,538,565
    Deferred charges and other assets                                                   179,156              169,574
    Deferred tax asset, net                                                             184,192              184,192
                                                                                   ------------         ------------
              Total assets                                                          $26,333,068          $26,729,187
                                                                                    ===========          ===========

                       LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
    Accounts payable and accrued expenses                                          $  2,897,043         $  3,762,743
    Current maturities of long-term debt                                                154,666              138,938
                                                                                   ------------         ------------
              Total current liabilities                                               3,051,709            3,901,681

LONG-TERM LIABILITIES:
    Long-term debt, net of current maturities                                         6,681,623            6,394,956
    Other long-term obligations                                                         128,820              136,877
                                                                                   ------------         ------------
              Total liabilities                                                       9,862,152           10,433,514
                                                                                   ------------         ------------

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 shares issued and
       outstanding                                                                   16,855,661           16,855,661
    Accumulated deficit                                                                (384,745)            (559,988)
                                                                                   ------------         ------------
Total shareholders' equity                                                           16,470,916           16,295,673
                                                                                   ------------         ------------

              Total liabilities and shareholders' equity                            $26,333,068          $26,729,187
                                                                                    ===========          ===========



</TABLE>

              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

                                                                                                        March 31,
                                                                                                2000                2001

------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                      <C>             <C>
NET REVENUE                                                                              $ 7,802,571       $ 7,714,671
DIRECT EXPENSES:
    Clinical salaries and benefits                                                         3,099,470         3,293,363
    Dental supplies                                                                          498,359           472,390
    Laboratory fees                                                                          743,595           623,399
    Occupancy                                                                                791,791           814,026
    Advertising and marketing                                                                 88,948            82,504
    Depreciation and amortization                                                            577,791           612,941
    General and administrative                                                               769,904           777,586
                                                                                           ----------       ----------
                                                                                           6,569,858         6,676,209
                                                                                           ----------       ----------
Contribution from dental offices                                                           1,232,713         1,038,462
Corporate expenses:
    General and administrative                                                               892,988           973,269
    Depreciation and amortization                                                             81,832            82,486
                                                                                           ----------       ----------
Operating income (loss)                                                                      257,893           (17,293)
Interest expense, net                                                                       (158,763)         (157,950)
                                                                                           ----------       ----------
Income (loss) before income taxes                                                             99,130          (175,243)
Income tax expense                                                                           (36,975)               -
                                                                                           ----------       ----------
Net income (loss)                                                                       $     62,155       $  (175,243)
                                                                                           ==========       ==========




Net income (loss) per share of Common Stock:
     Basic                                                                              $         .04      $      (.12)
                                                                                           ==========       ==========
     Diluted                                                                            $         .04      $      (.12)
                                                                                           ==========       ==========

Weighted average number of shares of Common Stock and dilutive securities:
     Basic                                                                                  1,532,954        1,506,705
                                                                                         ============       ==========
     Diluted                                                                                1,534,544        1,506,705
                                                                                         ============       ==========


</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>


                                                   -------------------------------
                                                                                                            Total
                                                            Common Stock             Accumulated        Shareholders'
                                                       Shares          Amount          Deficit              Equity
<S>                                                   <C>            <C>                <C>                <C>
BALANCES, December 31, 2000                           1,506,705      $ 16,855,661       $ (384,745)        $ 16,470,916

   Net Loss                                                   -                 -         (175,243)            (175,243)

BALANCES, March 31, 2001                              1,506,705      $ 16,855,661       $ (559,988)         $16,295,673
                                                      =========      ============   ===============         ===========



</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>
                                                                                                   Quarters Ended
                                                                                                     March 31,
                                                                                            2000                 2001

------------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                                   <C>                  <C>
    Net income (loss)                                                                 $     62,155         $  (175,243)
    Adjustments to reconcile net income (loss) to net
       cash provided by operating activities:
          Depreciation and amortization                                                    659,623             695,427
          Loss on sale of property                                                               -               1,254
          Provision for doubtful accounts                                                    1,554              10,122
          Provision for deferred income taxes                                               36,975                   -
    Changes in assets and liabilities, net of effects from acquisitions:
          Accounts receivable                                                             (245,150)           (301,081)
          Prepaid expense, income tax receivable and other assets                         (215,620)           (335,665)
          Accounts payable and accrued expenses                                            274,767             865,700
          Other long-term obligations                                                       10,049               8,057
                                                                                       -----------         -----------
    Net cash provided by operating activities                                              584,353             768,571
                                                                                       -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
    Notes receivable - related parties                                                    (172,793)             12,873
    Capital expenditures                                                                  (210,306)           (260,793)
    Acquisition of dental offices                                                          (54,728)                  -
                                                                                       -----------         -----------
    Net cash used in investing activities                                                 (437,827)           (247,920)
                                                                                       -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
    Net borrowings (repayments) - line of credit                                           300,000            (260,000)
    Repayment of long-term debt                                                            (48,658)            (42,395)
                                                                                       -----------         -----------
    Net cash provided by (used in) financing activities                                    251,342            (302,395)
                                                                                       -----------         -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                                                  397,868             218,256
CASH AND CASH EQUIVALENTS, beginning of period                                             806,954             691,417
                                                                                       -----------         -----------
CASH AND CASH EQUIVALENTS, end of period                                             $   1,204,822         $   909,673
                                                                                     ==============        ===========


</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>
                                                                                                Quarters Ended
                                                                                                  March 31,
                                                                                        2000                2001

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

SUPPLEMENTAL DISCLOSURE OF CASH
    FLOW INFORMATION:

<S>                                                                                  <C>                   <C>
       Cash paid during the period for interest                                      $       144,207       $    160,145
                                                                                     ===============       ============

       Cash paid during the period for income taxes                                  $           -         $          -
                                                                                     ==============        =============

SUPPLEMENTAL DISCLOSURE OF NONCASH
    INVESTING AND FINANCING ACTIVITIES:

       Liabilities assumed or incurred through acquisitions:
          Notes payable                                                              $        54,000        $         -
                                                                                     ===============        ============




</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)
                                 MARCH 31, 2001

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

The  financial  statements  included  herein  have been  prepared by 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,
2000.

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 March 31,  2001 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 ended March
31, 2001 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>
                                                                      Quarter Ended March 31,
                                                                      ----------------------
                                                           2000                                     2001
                                                           ----                                     -----
                                                                     Per Share                                Per Share
                                            Income        Shares       Amount       (Loss)       Shares        Amount

Basic EPS:
   Net income (loss) available to
<S>                                         <C>          <C>         <C>          <C>            <C>        <C>
     shares of Common Stock                 $ 62,155     1,532,954   $ .04        $  (175,243)   1,506,705  $ (.12)

   Effect of dilutive shares of
   Common Stock from stock options
   and warrants                                    -         1,590       -                -            -         -

Diluted EPS:
                                           ---------    ----------   -----        -----------   ----------  -------
   Net income (loss) available to
      shares of Common Stock                $ 62,155     1,534,544   $ .04        $  (175,243)   1,506,705  $ (.12)
                                            =========    =========   =====        ===========    =========  =======
</TABLE>

The difference in weighted average shares outstanding between basic earnings per
share and diluted  earnings per share for 2000 relates to the effect of 1,590 of
dilutive  shares of Common  Stock  from stock  options  and  warrants  which are
included in total shares for the diluted  calculation.  All options and warrants
to purchase shares of Common Stock were excluded from the computation of diluted
earnings  per  share  for the  quarter  ended  March 31,  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 212 for the quarter
ended March 31, 2001.





                                       8
<PAGE>



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

Under the Company's  Credit  Facility (as amended on September  29,  2000),  the
Company may borrow up to $10.0 million for working  capital needs,  acquisitions
and capital  expenditures  including  capital  expenditures for de novo Offices.
Advances  bear  interest  at the  lender's  base rate  (prime plus a rate margin
ranging  from .25% to 1.50%  based on the ratio of  consolidated  senior debt to
consolidated  Earnings  Before  Income  Taxes,   Depreciation  and  Amortization
("EBITDA") or at an adjusted London Interbank Offered Rate ("LIBOR") (LIBOR plus
a rate margin  ranging  from 1.50% to 2.75%  based on the ratio of  consolidated
senior debt to consolidated  EBITDA),  at the Company's  option.  The Company is
also obligated to pay an annual facility fee ranging from .25% to .50% (based on
the ratio of  consolidated  senior debt to  consolidated  EBITDA) on the average
unused amount of the line of credit  during the previous full calendar  quarter.
Borrowings  are  limited  to an  availability  formula  based  on the  Company's
adjusted  EBITDA.  As amended,  the loan matures on April 30, 2002. At March 31,
2001, the Company had  approximately  $8.1 million  available and  approximately
$6.2  million  outstanding  under the Credit  Facility.  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 March 31,  2001 the Company  was in  compliance  with all
covenants required by the Credit Facility.

(4)    SHAREHOLDERS' EQUITY
       -------------------

The Company received notice from NASDAQ that the Company did not comply with the
requirements  for continued  listing on the NASDAQ  National  Market System.  In
order to satisfy NASDAQ's  listing  requirements for the NASDAQ SmallCap Market,
effective February 26, 2001, the Company's Shareholders approved a reverse stock
split of between  one-for-three  and  one-for-five  and the  Company's  Board of
Directors  set the ratio at one-for  four.  The  SmallCap  Market's  maintenance
standards,  among other things,  require the Company to have 1) at least 500,000
shares of Common Stock held by  non-affiliates;  2) an aggregate  market  public
float of at least $1,000,000; 3) at least 300 shareholders who own 100 shares of
common  Stock or more;  and 4) a minimum  bid price of at least $1.00 per share.
All shares,  share prices and earnings per share  calculations for prior periods
have been restated to reflect this reverse stock split.

(5)    RECENT ACCOUNTING PROUNCEMENTS
       ------------------------------

In  September  1998,  the FASB issued SFAS No. 133  "Accounting  for  Derivative
Instruments and Hedging  Activities" that  establishes  accounting and reporting
standards for derivative  instruments,  including certain derivative instruments
embedded in other  contracts  and for hedging  activities.  It requires  that an
entity  recognize all derivatives as either assets or liabilities on the balance
sheet and measure those  instruments at fair value.  In September 1999, the FASB
issued SFAS 137 "Accounting for Derivative  Instruments and Hedging Activities -
Deferral of the Effective  Date of FASB Statement No. 133 - An Amendment of FASB
Statement No 133".  SFAS 137 delays the effective  date of SFAS 133 to financial
quarters and financial  years  beginning after June 15, 2000. In June 2000, SFAS
No. 138  "Accounting  for Certain  Derivative  Instruments  and Certain  Hedging
Activities  - an  Amendment  of FASB  Statement  No. 133" was  issued.  SFAS 138
addresses a limited number of issues causing  difficulties in the implementation
of SFAS 133 and is  required  to be  adopted  concurrent  with SFAS 133.  As the
Company  holds  no  derivative  instruments  and  does  not  engage  in  hedging
activities  the  adoption  of SFAS 133 and SFAS 138 will  have no  impact to the
Company.

In December  1999 the SEC staff  released  Staff  Accounting  Bulletin  No. 101,
"Revenue  Recognition  in  Financial  Statements"  (SAB 101").  SAB 101 provides
interpretive guidance on the recognition, presentation and disclosure of revenue
in the financial statements. SAB 101 must be applied to the financial statements
no later than the fourth quarter of 2000. The adoption of SAB 101 did not have a
material effect on the Company's financial results.



                                       9
<PAGE>



In March 2000 the FASB issued FASB Interpretation No. 44 "Accounting for Certain
Transactions   Involving   Stock   Compensation"   ("FIN  44").  FIN  44  is  an
interpretation  of APB No. 25 and  clarifies the  application  of APB No. 25 for
certain  issues.  This  interpretation  is effective  July 1, 2000,  but certain
conclusions  cover specific events that occur after either December 15, 1998, or
January 12, 2000. To the extent that FIN 44 covers  events after these  periods,
but before the  effective  date of July 1, 2000,  the effects of  applying  this
interpretation  are recognized on a prospective  basis from July 1, 2000. FIN 44
did not have a material effect on the Company's financial results.

(6)      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,  2000,  the Company has
available tax net operating loss  carryforwards of  approximately  $1.3 million,
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.  For the quarter  ended  March 31,  2001,  the Company did not
record an income tax benefit due to the operational  fluctuations  that occur in
its  business on a monthly  basis and because it believes  that the deferred tax
assets currently recorded are materially correct.

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

On April 30, 2001 the Company consolidated two of its Denver, Colorado practices
into one office.

On April 30, 2001 the Company  acquired  the  remaining  50% interest in Perfect
Teeth/Alice  P.C.  for a total  purchase  price of $869,006.  The  consideration
consisted  of $435,006 in cash and  $434,000 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.


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 Birner Dental
Management Services, Inc. (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, 2000 (as filed
with the Securities  Exchange  Commission on March 29, 2001), the  "Management's
Discussion and Analysis of Financial  Condition and Results of Operations  -Year
2001" 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.

                                       10
<PAGE>

General

The following discussion relates to factors,  which have affected the results of
operations  and  financial  condition  of the Company for the three months ended
March 31, 2000 and 2001. 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 March 31, 2001 managed 56 Offices
in  Colorado,  New Mexico and  Arizona  staffed  by 79 general  dentists  and 12
specialists.   The  Company  has  acquired  42  Offices   (four  of  which  were
consolidated  into existing  Offices) and opened 18 de novo  Offices.  Of the 42
acquired  Offices,  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  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  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 increase in the number of Offices  affiliated  with and managed by the
Company  from 1997  through  March 31,  2001,  including  the  number of de novo
Offices and acquired Offices in each such period.
<TABLE>
<CAPTION>

<S>                                          <C>             <C>             <C>            <C>          <C>
                                             1997            1998            1999           2000         2001 (1)
                                             ----            ----            ----           ----         ----
Offices at beginning of the period           18               34              49             54            56
De novo Offices                               1                5               5              2             0
Acquired Offices                             15               10               1              0             0
Consolidation of Offices                      0                0              (1)             0             0
                                            ----             ----            ----           ----         ----
Offices at end of the period                 34               49              54             56            56

</TABLE>

(1)      From January 1, 2001 through March 31, 2001.


The combined purchase amounts for the 31 practices acquired through 1997, the 10
practices  acquired  in 1998,  and the  practice  acquired  in 1999  were  $10.1
million, $6.0 million, and $760,000 respectively. The average initial investment
by the  Company  in  each  of its 18 de  novo  Offices  has  been  approximately
$206,000,  which  includes the cost of  equipment,  leasehold  improvements  and
working  capital  associated  with the Offices.  The five de novo offices opened
prior to January 1997 and the 11 de novo Offices opened between January 1997 and
December 1999 began generating  positive  contribution  from dental offices,  on
average,  within six months of  opening.  Of the two de novo  Offices  opened in
2000, one began generating positive contribution from dental offices within four
months of opening.  The Company's remaining de novo Office,  which has been open
for six months, has not generated  positive  contribution from dental offices as
of the date of this Quarterly Report.

At March 31, 2001,  the Company's  total assets of  approximately  $26.7 million
included  approximately $13.5 million of identifiable  intangible assets related
to  Management  Agreements.  At that date,  the Company had total  shareholders'
equity of approximately  $16.3 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.



                                       11
<PAGE>


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.  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.

Under 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) hiring 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.  Because  the
Company  consolidates the financial  statements of the P.C.'s with its financial
statements, these loans are eliminated in consolidation.

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.  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
Office.  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.



                                       12
<PAGE>




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.

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 March 31, 2001,  Revenue  increased to $11.0  million
from $10.9  million for the three months  ended March 31,  2000,  an increase of
$67,000 or 0.6%. Revenue at the 54 Offices in existence during both full periods
decreased  to $10.8  million in 2001 from $10.9  million in 2000,  a decrease of
$87,000 or 0.8%.  This decrease was offset by an increase in Revenue of $154,000
attributable to the two Offices which were opened in March and October of 2000.



                                       13
<PAGE>



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.

                                                Quarters Ended March 31,
                                                  2000             2001
                                                  ----             ----


Net revenue                                      100.0 %           100.0 %
Direct expenses:
     Clinical salaries and benefits               39.7 %            42.7 %
     Dental supplies                               6.4 %             6.1 %
     Laboratory fees                               9.5 %             8.1 %
     Occupancy                                    10.2 %            10.5 %
     Advertising and marketing                     1.1 %             1.1 %
     Depreciation and amortization                 7.4 %             7.9 %
     General and administrative                    9.9 %            10.1 %
                                                 -----             -----
                                                  84.2 %            86.5 %
                                                  ----              ----
Contribution from dental offices                  15.8 %            13.5 %

Corporate expenses:
     General and administrative                   11.4 %            12.6 %
     Depreciation and amortization                 1.1 %             1.1 %
                                                 -----             -----
Operating income (loss)                            3.3 %            (0.2) %
Interest expense, net                             (2.0)%            (2.1)%
                                                 -----             -----
Income (loss) before income taxes                  1.3 %            (2.3) %
Income tax expense                                (0.5)%            (0.0)%
                                                 -----             -----
Net income (loss)                                  0.8 %            (2.3) %
                                                 =====            ======




Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000:

Net revenue.  For the three months ended March 31, 2001 net revenue decreased to
$7.7 million compared to $7.8 million for the three months ended March 31, 2000,
a decrease  of  approximately  $88,000,  or 1.1%.  Net revenue at the 54 Offices
managed by the Company which were in existence  for both first  quarter  periods
decreased to $7.6 million for the first quarter of 2001 compared to $7.8 million
for the first quarter of 2000, a decrease of  approximately  $177,000,  or 2.3%.
This  decrease was  primarily  due to 1) the higher  amounts  retained by dental
offices for compensation  paid by the professional  corporations to dentists and
hygienists  resulting  from the shift in the Company's  revenue mix from managed
care to fee-for-service and the corresponding higher labor costs associated with
this  fee-for-service  business,  and 2) the higher cost of doing  business in a
tight labor  market.  This amount  increased  due to the shift in revenues  from
managed  dental  care  plans to  fee-for-service  business.  This  decrease  was
partially  offset by an increase in net revenue of $89,000  attributable  to the
two Offices  that were opened  during the period  from  January 1, 2000  through
March 31, 2001.

Clinical  salaries  and  benefits.  For the three  months  ended  March 31, 2001
clinical  salaries  and  benefits  increased  to $3.3  million  compared to $3.1
million for the three months  ended March 31,  2000,  an increase of $194,000 or
6.3%.  This increase was  primarily due to the increased  number of Offices open
during the 2000 period and the corresponding addition of non-dental personnel as
well as the Company's annual compensation increase, which took effect on July 1,
2000. As a percentage of net revenue,  clinical salaries and benefits  increased
to 42.7% for the three  months  ended March 31,  2001  compared to 39.7% for the
three months ended March 31, 2000.

Dental  supplies.  For the three  months  ended March 31,  2001 dental  supplies
decreased to $472,000  compared to $498,000 for the three months ended March 31,
2000,  a decrease of $26,000 or 5.2%.  As a percentage  of net  revenue,  dental
supplies decreased to 6.1% for the three months ended March 31, 2001 compared to
6.4% for the three months ended March 31, 2000.

                                       14
<PAGE>


Laboratory  fees.  For the three  months  ended March 31, 2001  laboratory  fees
decreased to $623,000  compared to $744,000 for the three months ended March 31,
2000, a decrease of $120,000 or 16.2%.  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 8.1% for the three
months  ended March 31, 2001  compared  to 9.5% for the three  months  March 31,
2000.

Occupancy. For the three months ended March 31, 2001 occupancy expense increased
to $814,000  compared to $792,000 for the three months ended March 31, 2000,  an
increase of $22,000 or 2.8%.  This  increase was  primarily  due to  incremental
occupancy  expenditures  related to the increased  number of Offices open during
the 2001 period in addition to  increased  rental  payments  resulting  from the
renewal of Office  leases at  current  market  rates for  Offices  whose  leases
expired subsequent to the 2000 period. As a percentage of net revenue, occupancy
expense increased to 10.6% for the three months ended March 31, 2001 compared to
10.2% for the three months ended March 31, 2000.

Advertising and marketing. For the three months ended March 31, 2001 advertising
and  marketing  decreased  to $83,000  compared to $89,000 for the three  months
ended March 31,  2000,  a decrease  of $6,000 or 7.2%.  As a  percentage  of net
revenue,  advertising  and  marketing  remained  constant  at 1.1% for the three
months ended March 31, 2001 compared to the three months ended March 31, 2000.

Depreciation  and  amortization.  For the three  months  ended  March  31,  2001
depreciation and  amortization,  which consists of depreciation and amortization
expense incurred at the Offices,  increased to $613,000 compared to $578,000 for
the three  months  ended March 31,  2000,  an increase of $35,000 or 6.1%.  This
increase is related to the increase in the Company's depreciable and amortizable
asset base. The increase in the asset base is directly  related to the Company's
growth in terms of number of Offices,  upgrades to existing Offices and addition
of equipment to older Offices. As a percentage of net revenue,  depreciation and
amortization  increased  to 7.9% for the  three  months  ended  March  31,  2001
compared to 7.4% for the three  months  ended March 31,  2000.  The  increase in
depreciation  and  amortization as a percentage of net revenue is related to the
higher  depreciable asset base associated with the Company's de novo Offices and
the addition of equipment to older Offices.

General and  administrative.  For the three  months ended March 31, 2001 general
and administrative,  which is attributable to the Offices, increased to $778,000
compared to $770,000 for the three  months ended March 31, 2000,  an increase of
approximately  $8,000 or 1.0%.  As a  percentage  of net  revenue,  general  and
administrative  expenses increased to 10.1% for the three months ended March 31,
2001 compared to 9.9% during the three months ended March 31, 2000.

Contribution  from dental offices.  As a result of the above,  contribution from
dental  offices  decreased  to $1.0 million for the three months ended March 31,
2001  compared to $1.2  million for the three  months  ended March 31,  2000,  a
decrease of $194,000 or 15.8%. As a percentage of net revenue, contribution from
dental  offices  decreased  to 13.5% for the three  months  ended March 31, 2001
compared to 15.8% for the three months ended March 31, 2001

Corporate  expenses - general and  administrative.  For the three  months  ended
March 31, 2001  corporate  expenses - general and  administrative  increased  to
$973,000  compared to $893,000 for the three  months  ended March 31,  2000,  an
increase of $80,000 or 9.0%.  This increase is attributable to higher legal fees
and computer  operations  and  maintenance  expenses  offset,  in part, by lower
employee salaries and contract labor. As a percentage of net revenue,  corporate
expense - general and  administrative  increased  to 12.6% for the three  months
ended March 31, 2001  compared to 11.4%  during the three months ended March 31,
2000.

Corporate  expenses - depreciation and amortization.  For the three months ended
March 31, 2001  corporate  expenses -  depreciation  and  amortization  remained
constant at $82,000 as compared to the three months  ended March 31, 2000.  As a
percentage of net revenue,  corporate  expenses - depreciation  and amortization
remained  constant at 1.1% for the three months ended March 31, 2001 compared to
the three months ended March 31, 2000.

Operating  income  (loss).  As a result of the above,  the  Company  incurred an
operating  loss of $(17,000)  for the three months ended March 31, 2001 compared
to  operating  income of $258,000  for the three  months ended March 31, 2000, a
decrease of $275,000.


                                       15
<PAGE>


Interest  expense,  net.  For the three  months  ended March 31,  2001  interest
expense  decreased  to $158,000  compared to $159,000 for the three months ended
March 31, 2000, a decrease of $1,000 or 0.5%. This decrease in interest  expense
is  attributable  to a lower  average  interest  rate as well as a lower average
outstanding  debt  balance.  As a percentage  of net revenue,  interest  expense
increased to 2.1% for the three months ended March 31, 2001 compared to 2.0% for
the three months ended March 31, 2000.

Net income (loss).  As a result of the above, the Company's  incurred a net loss
of  $(175,000)  for the three months ended March 31, 2001 compared to net income
of $62,000 for the three months ended March 31, 2000.

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  $584,000  and
$769,000  for the three  months  ended  March 31,  2000 and 2001,  respectively.
During the 2001 period,  excluding  the net loss 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
$866,000 partially offset by an increase in accounts receivable of approximately
$301,000 and an increase in prepaid  expense,  income tax  receivable  and other
assets of  approximately  $336,000.  Net cash  provided by operating  activities
during the 2000  period,  excluding  net income and after  adding back  non-cash
items,  consisted  primarily  of an  increase  in  accounts  payable and accrued
expenses of approximately  $275,000 offset by an increase in accounts receivable
of  approximately  $245,000  and an  increase  in  prepaid  expense,  income tax
receivable and other assets of approximately $216,000.

Net cash used in investing  activities was  approximately  $438,000 and $248,000
for the three months ended March 31, 2000 and 2001, respectively.  For the three
months ended March 31, 2001, approximately $261,000 was invested in the purchase
of additional property and equipment which was partially offset by approximately
$13,000  relating to the  repayment of notes  receivable  from related  parties.
During the three month period ended March 31,  2000,  approximately  $55,000 was
utilized for acquisitions,  approximately  $210,000 was invested in the purchase
of additional  property and equipment and approximately  $173,000 was related to
the issuance of notes receivable from related parties.

Net cash provided by financing  activities  was  approximately  $251,000 for the
three months ended March 31, 2000 and net cash used in financing  activities was
approximately  $302,000 for the three  months  ended March 31, 2001.  During the
three  months ended March 31, 2001,  net cash used in financing  activities  was
comprised of approximately $260,000 used to reduce the amount outstanding on the
Company's  bank line of credit and  approximately  $42,000 for the  repayment of
long-term debt.  During the three months ended March 31, 2000, net cash provided
by  financing  activities  was  comprised  of  approximately   $300,000  of  net
borrowings under the Company's line of credit offset,  in part, by approximately
$49,000 for the repayment of long-term debt.

Under the Company's  Credit  Facility (as amended on September  29,  2000),  the
Company may borrow up to $10.0 million for working  capital needs,  acquisitions
and capital  expenditures  including  capital  expenditures for de novo Offices.
Advances  will bear interest at the lender's base rate (prime plus a rate margin
ranging  from .25% to 1.50%  based on the ratio of  consolidated  senior debt to
consolidated  EBITDA) or at an  adjusted  LIBOR rate  (LIBOR  plus a rate margin
ranging  from 1.5% to 2.75%  based on the ratio of  consolidated  senior debt to
consolidated  EBITDA), at the Company's option. The Company is also obligated to
pay an annual  facility  fee  ranging  from .25% to .50%  (based on the ratio of
consolidated senior debt to consolidated EBITDA) on the average unused amount of
the line of credit  during the previous full calendar  quarter.  Borrowings  are
limited to an availability  formula based on the Company's  adjusted EBITDA.  As
amended,  the loan matures on April 30, 2002. At March 31, 2001, the Company had
approximately  $1.9 million  available  and $6.2 million  outstanding  under the
Credit  Facility.  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 March 31, 2001 the
Company was in full compliance with all of its covenants under this agreement.

                                       16
<PAGE>

At March 31, 2001, the Company had  outstanding  indebtedness  of  approximately
$311,894  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 $1.1
million which includes the  acquisition of controlling  interest in two existing
Offices  scheduled to occur during the second and fourth  quarters of 2001.  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   accumulated  deficit  as  of  March  31,  2001  was
approximately  $560,000  and the  Company  had  working  capital on that date of
approximately $2.2 million.

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 September 5, 2000, the Company's Board of Directors  unanimously approved the
purchase of shares of the Company's Common Stock on the open market, total value
not to exceed $150,000.  During 2000, the Company, in 18 separate  transactions,
purchased approximately 26,300 shares of Common Stock for total consideration of
approximately $113,000 at prices ranging from $3.80 to $6.68 per share. At March
31, 2001  approximately  $37,000 remains available under this Board of Directors
approved program.


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 March 31, 2001,  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  is
variable  based upon the prime  rate or LIBOR (at the  Company's  option),  and,
therefore, affected by changes in market interest rates. At March 31, 2001, $6.2
million was  outstanding  under the LIBOR option with an interest rate of 7.375%
(LIBOR plus 2.25%) and $22,000  was  outstanding  with an interest  rate of 9.0%
(prime plus 1.0%). 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 0.5% increase in the Company's  interest rate would
result in  additional  interest  expense of  approximately  $8,400 for the three
months ended March 31, 2001.




                                       17
<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
        None
(b)   Reports on Form 8-K
        None



                                       18
<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:  May 14, 2001                 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:  May 14, 2001                 By:     /s/ Dennis N. Genty
                                       -----------------------------------------
                                    Name:   Dennis N. Genty
                                    Title:  Chief Financial Officer,
                                            Secretary, Treasurer and Director
                                           (Principal Financial and
                                            Accounting Officer)