U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                     - - - - - - - - - - - - - - - - - -

                                   FORM 10-QSB
(MARK ONE)

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

            FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999


   [ ]      TRANSITION REPORT UNDER SECTION 13 OR 15 (d)
            OF THE EXCHANGE ACT

     FOR THE TRANSITION PERIOD FROM _______________ TO __________________

                         COMMISSION FILE NUMBER: 0-23055
            - - - - - - - - - - - - - - - - - - - - - - - - - - - -

                            OMEGA ORTHODONTICS, INC.
                   (EXACT NAME OF SMALL BUSINESS ISSUER AS
                            SPECIFIED IN ITS CHARTER)

         DELAWARE                                         95-4596853
(STATE OR OTHER JURISDICTION                           (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)

                              3621 SILVER SPUR LANE
                             ACTON, CALIFORNIA 93510
                   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

         ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: 805-269-2841

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

Check  whether the Issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [   ]

As of May 11, 1998, there were 5,052,584 shares of Common Stock  outstanding and
2,070,000 Redeemable Common Stock Purchase Warrants outstanding.
<PAGE>
                            OMEGA ORTHODONTICS, INC.
                            FORM 10-QSB REPORT INDEX


Part I - Financial Information

      Item 1 - Financial Statements

            Condensed Consolidated Balance Sheets March 31, 1999 and
            December 31, 1998 (Unaudited)

            Condensed Consolidated Statements of Operations for the Three
            Months Ended March 31, 1999 and March 31, 1998 (Unaudited)

            Condensed Consolidated Statements of Cash Flows for the Three
            Months Ended March 31, 1999 and March 31, 1998 (Unaudited)

            Notes to Condensed Consolidated Financial Statements

      Item 2 - Management's Discussion and Analysis of Financial Condition
      and Results of Operations

Part II - Other Information

      Item 1 - Legal Proceedings

      Item 2 - Changes in Securities and Use of Proceeds

      Item 3 - Defaults upon Senior Securities

      Item 4 - Submission of Matters to a Vote of Security Holders

      Item 5 - Other Information

      Item 6 - Exhibits and Reports on Form 8-K

Signatures

                         PART I - FINANCIAL INFORMATION

ITEM 1.     FINANCIAL STATEMENTS
<PAGE>
                            OMEGA ORTHODONTICS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (Unaudited)


                                                        March 31,   December 31,
                                                          1999         1998     
                                                          ----         ----     

ASSETS
Current assets:
   Cash and cash equivalents                         $    797,933  $    982,157
   Receivable from affiliated practices                 2,515,975     2,485,991
   Notes receivable from affiliated practice               73,180        74,824
   Notes and interest receivable from related parties     131,358       129,259
   Prepaid expenses and other current assets               42,541       109,464
                                                           ------       -------
      Total current assets                              3,560,987     3,781,695

Property and equipment, at cost, net                      984,390       908,484
Intangible assets, net                                  9,766,140     9,721,133
Other assets                                               36,673        42,985

      Total assets                                   $ 14,348,190  $ 14,454,297
                                                     ============   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Current portion of long-term debt                 $    367,513  $    366,585
   Demand line of credit                                  149,772       149,772
   Accounts payable                                       190,903       158,537
   Accrued expenses                                       259,249       229,602
   Patient prepayments                                  2,052,652     1,813,433
                                                        ---------     ---------
      Total current liabilities                         3,020,089     2,717,929

Long-term debt, less current  portion                     969,877     1,055,206
                                                          -------     ---------

      Total liabilities                                 3,989,966     3,773,135
                                                        ---------     ---------

Stockholders' equity:
Common stock, $.01 par value 9,500,000 shares
   authorized - 5,052,584 shares issued and
   outstanding                                             50,526        50,526
Additional paid-in capital                             15,031,372    15,031,372
Accumulated deficit                                   ( 4,723,674)  ( 4,400,736)
                                                       ----------    ----------
      Total stockholders' equity                       10,358,224    10,681,162
                                                       ----------    ----------

   Total liabilities and stockholders' equity        $ 14,348,190  $ 14,454,297
                                                     ============  ============


The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.
<PAGE>
                            OMEGA ORTHODONTICS, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)


                                                        Three Months Ended
                                                             March 31    
                                                        ------------------

                                                        1999          1998

Revenues:
   Service fees                                    $  1,935,257    $ 1,619,441
   Consulting fees                                        6,777         17,866
                                                          -----         ------
      Total revenues                                  1,942,034      1,637,307
                                                      ---------      ---------

Costs and expenses:
   Employee costs                                     1,049,156        779,758
   General and administrative                           738,408        532,406
   Other direct costs                                   324,570        249,031
   Depreciation and amortization                        131,895         97,167
                                                        -------         ------
      Total costs and expenses                        2,244,029      1,658,362
                                                      ---------      ---------

Loss from operations                              (     301,995)   (    21,055)

Interest expense                                  (      36,196)   (    19,967)
Interest income                                          15,253         49,998
                                                         ------         ------

      Net (loss) income                           ($    322,938)   $     8,976


Basic and diluted net (loss) income per share     ($       0.06)   $      0.00
                                                   ============    ===========

Basic weighted average number of common
   shares outstanding                                 5,052,584      4,755,287
                                                      =========      =========

Diluted weighted average number of common
   shares outstanding                                 5,052,584      4,762,038
                                                      =========      =========


The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.
<PAGE>
                            OMEGA ORTHODONTICS, INC.
               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

                                                      Three Months Ended
                                                  March 31, 1999       1998
                                                  -------------------------

Net cash used in operating activities             $    17,031      ($   458,800)
                                                  -----------       ----------- 

Cash flows from investing activities:
      Purchases of property and equipment        (    122,711)     (     75,095)
      Decreases in other assets                         6,312            32,457
      Acquisition of management services 
            agreements and related assets                  -       (  1,778,353)
      Increase in notes receivable               (        455)               -
                                                  -----------       ----------- 

Net cash used in investing activities            (    116,854)     (  1,820,991)
                                                  -----------       ----------- 

Cash flows from financing activities:
    Repayment of borrowings                      (     84,401)     (     35,763)
                                                  -----------       ----------- 

Net decrease in cash and cash equivalents        (    184,224)     (  2,315,554)
Cash and cash equivalents, beginning of period        982,157         5,421,721
                                                  -----------       ----------- 
Cash and cash equivalents, end of period          $   797,933       $ 3,106,167
                                                  ===========       ===========

Supplemental disclosure of cash flow information:
      Cash paid during the period for interest    $    36,196       $    23,142
                                                  ===========       ===========

Supplemental disclosure of cash flows related to
 affiliations:
    Fair value of assets acquired, excluding cash                   $ 3,534,488
    Issuance of common stock                                       (    923,220)
    Issuance of notes payable                                      (    553,100)
    Cash paid                                                      (  1,778,353)
                                                                    -----------

Liabilities assumed                                                 $   279,815
                                                                    ===========

Supplemental disclosure of non cash items from
 investing activities:
   Issuance of debt in connection with affiliations                     553,100
                                                                    ===========

   Transfer of note receivable in connection with
     affiliation                                                    $    50,000
                                                                    ===========

The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.
<PAGE>
1. BASIS OF PRESENTATION

   The condensed  consolidated  balance  sheet at March 31, 1999,  the condensed
   consolidated  statements of  operations  for the three months ended March 31,
   1999 and March 31, 1998 and the  condensed  consolidated  statements  of cash
   flows for the three  months  ended March 31, 1999 and March 31, 1998 of Omega
   Orthodontics,  Inc.  and its  subsidiaries  ("Omega"  or "the  Company")  are
   unaudited,  but,  in the  opinion  of  management,  include  all  adjustments
   (consisting   of  normal   recurring   adjustments)   necessary  for  a  fair
   presentation  of results for the interim  periods.  The results of operations
   for the three months ended March 31, 1999 are not  necessarily  indicative of
   results to be expected for the entire year. For further information, refer to
   the consolidated  financial  statements and footnotes thereto included in the
   Company's Annual Report on Form 10-KSB for the year ended December 31, 1998.

   Income (Loss) Per Share

   Basic loss per share was  determined  by  dividing  net loss by the  weighted
   average common shares  outstanding  during the period.  A  reconciliation  of
   basic and diluted shares is as follows:

                                               3 months ended March 31
                                               1999                1998
                                               ----                ----

   Weighted average shares outstanding       5,052,584           4,755,287
   Dilutive stock options  pursuant to
   the treasury stock method                    --                   6,751
                                             ---------           ---------
   Diluted shares outstanding                5,052,084           4,762,038

   Diluted shares  outstanding does not include options and warrants to purchase
   2,423,333  shares and  2,303,333  shares for the three months ended March 31,
   1999 and 1998 respectively, as their effect would be antidilutive.
<PAGE>
   Intangible Assets

   The value assigned to the Management Services Agreements with the acquisition
   of the assets and liabilities of the management services  organizations (MSO)
   and concurrent  Management Services Agreements with the Affiliated  Practices
   has been accounted for by the Company in accordance  with the Emerging Issues
   Task Force ("EITF") Issue 97-2. Substantially all of the intangible assets on
   the Company's condensed  consolidated  balance sheet as of March 31, 1999 are
   related  to the  affiliations  with the  Affiliated  Practices.  The  Company
   evaluates each affiliation and establishes an appropriate amortization period
   based on the underlying facts and circumstances.  Currently, the Company uses
   an  amortization  period  ranging  from 25 to 40 years,  consistent  with the
   extended  terms  of  the  Management   Services   Agreements.   For  all  new
   affiliations  subsequent to the IPO, the Company uses a 25-year  amortization
   period.  Subsequent to each affiliation,  the Company  reevaluates such facts
   and  circumstances to determine if the related  intangible assets continue to
   be realizable and if the amortization period continues to be appropriate.

   Amortization  expense was  approximately  $85,100 for the three  months ended
   March 31, 1999. Affiliations with additional Affiliated Practices will result
   in  the   recognition  of  additional   intangible   assets  and  will  cause
   amortization  expense  to  increase  further.  Although  the net  unamortized
   balance of intangible assets on the Company's condensed  consolidated balance
   sheet as of March 31,  1999 was not  considered  to be  impaired,  any future
   determination  that a significant  impairment  has occurred would require the
   write-off of the impaired  portion of unamortized  intangible  assets,  which
   would have a material  adverse  effect on the Company's  business,  financial
   condition and results of operations.

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

   THE FOLLOWING CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS REGARDING THE PLANS
   AND  OBJECTIVES  OF  MANAGEMENT  FOR FUTURE  OPERATIONS  INCLUDING  PLANS AND
   OBJECTIVES  RELATING TO THE  DEVELOPMENT  OF THE  AFFILIATED  PRACTICES.  THE
   FORWARD-LOOKING  STATEMENTS INCLUDED HEREIN ARE BASED ON CURRENT EXPECTATIONS
   THAT  INVOLVE  NUMEROUS  RISKS AND  UNCERTAINTIES.  THE  COMPANY'S  PLANS AND
   OBJECTIVES  ARE BASED ON A  SUCCESSFUL  EXECUTION OF THE  COMPANY'S  BUSINESS
   STRATEGY AND  ASSUMPTIONS  THAT THE AFFILIATED  PRACTICES WILL BE PROFITABLE,
   THAT THE ORTHODONTIC  INDUSTRY WILL NOT CHANGE  MATERIALLY OR ADVERSELY,  AND
   THAT THERE WILL BE NO UNANTICIPATED  MATERIAL ADVERSE CHANGE IN THE COMPANY'S
   OPERATIONS  OR  BUSINESS.  ASSUMPTIONS  RELATING  TO  THE  FOREGOING  INVOLVE
   JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS,  FUTURE ECONOMIC,  COMPETITIVE
   AND  MARKET  CONDITIONS  AND  FUTURE  BUSINESS  DECISIONS,  ALL OF WHICH  ARE
   DIFFICULT OR  IMPOSSIBLE TO PREDICT  ACCURATELY  AND MANY OF WHICH ARE BEYOND
   THE  CONTROL  OF  THE  COMPANY.   ALTHOUGH  THE  COMPANY  BELIEVES  THAT  ITS
   ASSUMPTIONS UNDERLYING THE FORWARD-LOOKING  STATEMENTS ARE REASONABLE, ANY OF
   THE  ASSUMPTIONS  COULD  PROVE  INACCURATE  AND,  THEREFORE,  THERE CAN BE NO
   ASSURANCE THAT THE FORWARD-LOOKING  STATEMENTS INCLUDED IN THE FOLLOWING WILL
   PROVE TO BE ACCURATE. IN LIGHT OF THE SIGNIFICANT  UNCERTAINTIES  INHERENT IN
   THE  FORWARD-LOOKING  STATEMENTS  INCLUDED  HEREIN,  THE  INCLUSION  OF  SUCH
   INFORMATION  SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE COMPANY OR ANY
   OTHER PERSON THAT THE  OBJECTIVES  AND PLANS OF THE COMPANY WILL BE ACHIEVED.
   THE FOLLOWING SHOULD BE READ IN CONJUNCTION WITH THE FINANCIAL STATEMENTS AND
   NOTES APPEARING ELSEWHERE IN THIS REPORT AND THE COMPANY'S PRIOR FILINGS WITH
   THE SECURITIES AND EXCHANGE COMMISSION.

   The  Company  provides   management  and  marketing   services  primarily  to
   Orthodontic and other specialty dental practices in the United States.  Since
   inception in August 1996,  the Company has provided  these  services on a fee
   for services basis. Following its initial public offering on October 1, 1997,
   the  Company  has   typically   offered  its  services   under  an  affiliate
   relationship  with  each  practice.  Under  this  arrangement,   the  Company
   purchases the equity interest in a management services  organization  ("MSO")
   that holds  certain  assets of and is  associated  with an  affiliate  of the
   Company  ("Affiliated  Practices" or "Orthodontic  Affiliate(s)")  and enters
   into  a  long-term  management  services  agreement   ("Management   Services
   Agreement") with the Orthodontic Affiliate.

   As of March 31, 1999,  the Company had 15 operating  Orthodontic  Affiliates,
   consisting of 18 doctors in 10 states. Of the 15 Orthodontic Affiliates,  one
   is based on an interim  management  agreement  with the practice  under terms
   similar to the Company's standard Affiliation Agreements.

Recent Developments

   On March 15,  1999,  the  Company  executed a certain  Agreement  and Plan of
   Merger  among   Pentegra   Dental   Group,   Inc.,  a  Delaware   corporation
   ("Pentegra"),  Omega Acquisition Corporation, a Delaware corporation, certain
   substantial  stockholders  of  the  Company  and  the  Company  (the  "Merger
   Agreement"). Pursuant to the terms of the Merger Agreement, each share of the
   common stock of the Company  ("Company Common Stock") shall be converted into
   the  right to  receive  such  number  of shares  of  issued,  fully  paid and
   nonassessable  common stock of Pentegra which is equal to 1.8 million divided
   by the  number of issued and  outstanding  shares of  Company  Common  Stock.
   Management  believes that the Merger will significantly  enhance  shareholder
   value by enabling the combined  assets of Pentegra and the Company to produce
   a higher  return on capital than the Company  could  achieve on a stand alone
   basis.  The Company believes that the Merger will enable the combined company
   to be an effective  competitor  in an industry that is becoming more and more
   competitive.

   The  Merger is subject  to  shareholder  approval  of both  Pentegra  and the
   Company  as well as other  customary  conditions.  The  companies  expect  to
   provide  details of the Merger to their  shareholders  prior to seeking their
   approval at a special meeting of the shareholders called for such purpose.

General

   The  Company was  incorporated  in Delaware  in August  1996.  Following  its
   initial  public  offering  ("IPO") on October 6, 1997,  the Company  began to
   offer its services  primarily  under an "affiliate"  relationship  whereby it
   purchases,  pursuant to an affiliation agreement  ("Affiliation  Agreement"),
   the equity  interests of the management  services  organization  ("MSO") that
   holds certain assets of and is associated with an orthodontic or other dental
   specialty  practice  ("Affiliated  Practice")  and  enters  into a long  term
   management  services  agreement  ("Management  Services  Agreement") with the
   Affiliated  Practice  of  the  participating  orthodontist  or  other  dental
   specialist ("Affiliated  Practitioner").  Pursuant to the Management Services
   Agreement, the Company receives a monthly management fee for providing all of
   the Affiliated Practice's practice needs, including facilities, support staff
   and  supplies,  as well as a  program  of  systems,  methods  and  procedures
   designed  to  enhance  the  growth,   efficiency  and  profitability  of  the
   Affiliated Practice.

   Pursuant to the Affiliation Agreement,  the Affiliated Practitioner typically
   converts his existing  professional  corporation  into a general  corporation
   that will function as the MSO and creates a new professional corporation (the
   Affiliated Practice) through which the Affiliated  Practitioner will continue
   to provide  orthodontic  or other  dental  specialty  care.  The MSO  retains
   certain  assets and  liabilities  which  typically  include the lease for the
   Affiliated  Practice's  office  space,  clinical  supplies and  equipment and
   office  furniture,  supplies and equipment.  The Affiliated  Practice retains
   certain other assets and  liabilities  (if any) which  typically  include all
   cash and cash equivalents,  property,  automobiles,  patient records, related
   patient  information  and notes payable  unrelated to assets  purchased.  The
   Company  generally  acquires  all of the equity  interest of the MSO from the
   Affiliated  Practitioner,  the purchase price for which is determined through
   an assessment of immediate and anticipated  future return on investment.  The
   MSO typically is acquired for a  combination  of cash,  five year  promissory
   notes and unregistered  Common Stock or stock options.  As of March 31, 1999,
   the  Company  had  completed  17  affiliations,  three of which  merged  with
   existing  Affiliated  Practices,  with  an  average  MSO  purchase  price  of
   approximately $567,000, of which the cash portion was approximately $292,000.

   The Management  Services Agreement provides that the Affiliated Practice will
   utilize the leased  facility  and the  Company's  services for a period of 20
   years, with two ten year extensions. While each Management Services Agreement
   is negotiated  based on specific  circumstances,  the management fees charged
   typically range between 65% to 75% of the Affiliated Practice's gross income,
   which is  expected  to be  sufficient  to pay all of the MSO's  expenses  and
   provide a return on the Company's  investment.  If the Affiliated  Practice's
   expenses  payable  by the MSO  are  less  than an  agreed  target  amount  of
   expenses,  the difference  between the target amount and the actual  expenses
   will typically be shared equally by the MSO and the Affiliated Practice. Upon
   the  retirement,  disability  or death of the  Affiliated  Practitioner,  the
   Company will identify a replacement  Affiliated  Practitioner to purchase the
   Affiliated Practice and assume the Management Services Agreement.
<PAGE>
Results of Operations

   For the three months ended March 31, 1999  compared to the three months ended
   March 31, 1998.

   Revenues

   Net revenues increased approximately $305,000 to approximately $1,942,000 for
   the three  months ended March,  1999,  compared to revenues of  approximately
   $1,637,000  for  the  three  months  ended  March,   1998.  This  growth  was
   attributable to a full quarter of operations for the 12 practices  affiliated
   with  during the three  months  ended  March 31,  1998 and the  addition of 4
   affiliations,  one of which merged with an existing Affiliated  Practice,  in
   1998 subsequent to March 31, 1998.

   Costs and Expenses

   Costs and  expenses  increased  approximately  $586,000  for the three months
   ended March 31, 1999. The increase in costs and expenses for the three months
   ended March 31, 1999 was  attributable to a full quarter of operation for the
   12 practices affiliated with during the three months ended March 31, 1998 and
   the  addition  of 4  affiliations,  one of which  merged  with an  Affiliated
   Practice, in 1998 subsequent to March 31, 1998.

   The Company's costs and expenses include:

      Employee Costs.  Includes all salaries,  payroll taxes and fringe benefits
      of the dental assistants,  office staff and corporate office personnel and
      increased approximately $269,000 to approximately $1,049,000 for the three
      months  ended March 31,  1999 from  approximately  $780,000  for the three
      months ended March 31, 1998.

      Other Direct Costs. Includes dental and office supplies, laboratory costs,
      facilities and equipment for the Affiliated Practices and corporate office
      and  increased  approximately  $76,000 to  approximately  $325,000 for the
      three  months  ended March 31, 1999 from  approximately  $249,000  for the
      three months ended March 31, 1998.

      General Administrative.  Includes all other operating expenses,  including
      advertising,   repairs  and  maintenance,   computer  support,  telephone,
      utilities,  taxes and licenses for the Affiliated  Practices and corporate
      office,  as well as the cost of consultants,  professional fees and travel
      related to providing  support to the  Affiliated  Practices  and corporate
      office and increased  approximately $206,000 to approximately $738,000 for
      the three months ended March 31, 1999 from approximately  $532,000 for the
      three months ended March 31, 1998.
<PAGE>
      Depreciation  and  Amortization.  Includes  depreciation  of equipment and
      leasehold  improvements  of the Affiliated  Practices and  amortization of
      intangible assets related to the Omega Management  Services Agreements and
      increased  approximately  $35,000 to approximately  $132,000 for the three
      months  ended  March 31,  1999 from  approximately  $97,000  for the three
      months ended March 31, 1998.

   Interest Expense

   Interest  expense of  approximately  $36,000 for the three months ended March
   31, 1999 and $20,000 for the three months ended March 31, 1998,  reflects the
   cost of borrowings under notes payable to Affiliated Practices issued as part
   of the purchase price for affiliating with those practices.

   Interest Income

   Interest  income was  approximately  $15,000 for the three months ended March
   31, 1999 and $50,000 for the three months ended March 31, 1998,  and reflects
   interest  earned on the  Company's  net proceeds  from the IPO and notes from
   related  parties.  The Company's  cash position  decreased from 1999 to 1998,
   thereby decreasing interest income.

   Net Loss

   As a  result  of  the  foregoing  factors,  Omega  generated  a net  loss  of
   approximately  $323,000 or $0.06 per share,  for the three months ended March
   31,1999 compared to a net income of approximately $9,000, or $0.00 per share,
   for the three  months  ended March 31,  1998.  The  Company  has  experienced
   operating  losses,  negative cash flows, a deficit in working  capital and an
   accumulated  deficit since its inception.  The Company's  accumulated deficit
   from  inception  (August 30, 1996) to October 1, 1997 (the Company's IPO) was
   approximately  $3.9 million.  The Company  reported a  significant  loss from
   operations  for the year ended December 31, 1998 and has reported a loss from
   operations for the three months ended March 31, 1999 of $301,995. The Company
   makes  routine cash advances  from time to time to its  Affiliated  Practices
   under its Management Services Agreements to fund any deficits in monthly cash
   flows of the Affiliated Practices.  Such advances will generally be repaid by
   the Affiliated  Practices to the Company  without  interest as adequate funds
   are  generated  by the  Affiliated  Practices.  The  balance of  advances  to
   Affiliated Practices as of March 31, 1999 was $205,518.

   Due to the prospective  merger outlined in the Recent  Developments  section,
   the Company does not anticipate  concluding any further affiliations prior to
   consummating the transaction contemplated in the Merger Agreement.

Year 2000

   Like many other companies,  the Year 2000 computer issue creates risk for the
   Company.  If both information  technology systems and embedded  technology do
   not correctly  recognize date  information  when the year changes to 2000, it
   could have an adverse  impact on the  Company's  operations.  The  Company is
   currently  confirming  that  its  software  and  programming  logic  properly
   interprets  dates on and  subsequent  to January 1, 2000 and will  review any
   embedded  technology  in its software  and hardware to determine  whether the
   technology  is compliant.  The Company  believes that all of its software and
   hardware  is  currently  compliant.  Also,  the Company  does not  anticipate
   difficulty in resolving issues relating to software or embedded technology in
   any programs or equipment provided by third-party  vendors. In addition,  the
   Company believes that certain software  employed by the Affiliated  Practices
   is not Year  2000  compliant.  The  Company  is  currently  working  with the
   Affiliated Practices to repair any non-compliant software. It is unknown what
   costs the Company will incur to correct any non-compliant software.

   Based on the Company's  work to date and assuming that the software  updating
   projects can be implemented as planned,  the Company believes that it will be
   Year 2000  compliant on a timely basis and that future costs  relating to the
   Year 2000 issue will not have a material  impact on the  Company's  financial
   position, results of operations or cash flows.

   Once the Year 2000 remediation process is substantially  complete the Company
   intends to formulate a comprehensive  contingency  plan to address  remaining
   material risks, if any. Forward-looking  statements in this report, including
   without limitation,  statements relating to the Company's plans,  strategies,
   objectives,  expectations,  intentions  and adequacy of  resources,  are made
   pursuant to the safe harbor provisions of the Private  Securities  Litigation
   Reform Act of 1995.

   The   forward-looking   statements  included  herein  are  based  on  current
   expectations  that involve  numerous risks and  uncertainties.  The Company's
   plans and  objectives  are based on a successful  execution of the  Company's
   business combination strategy and assumptions that the Orthodontic Affiliates
   will be profitable,  that the orthodontic industry will not change materially
   or adversely, and that there will be no unanticipated material adverse change
   in  the  Company's  operations  or  business.  Assumptions  relating  to  the
   foregoing  competitive  and market  conditions are difficult or impossible to
   predict   accurately   and   many   underlie   the   reasonableness   of  the
   forward-looking  statements.  Any of the assumptions  could prove  inaccurate
   and, therefore, there can be no assurance that the forward-looking statements
   included in this Annual  report  will prove to be  accurate.  In light of the
   significant uncertainties inherent in the forward-looking statements included
   herein,  the  inclusion  of such  information  should  not be  regarded  as a
   representation  by the Company or any other  person that the  objectives  and
   plans of the Company will be achieved.

   The following  discussion  identifies  certain  important  factors that could
   affect the Company's  actual  results and actions and could cause results and
   actions to differ materially from any forward-looking statement made by or on
   behalf of the Company  related to such  results and actions.  Other  factors,
   which are not identified herein, could also have such an effect.

Continued History of Losses; No Assurance of Profitability

   Although the Company  successfully  completed its IPO in October 1997 and has
   consummated  affiliations with 15 Affiliated  Practices,  the Company has not
   yet  achieved a  profitable  level of  operations.  As a result,  the Company
   remains  subject  to  many  of  the  business  risks  associated  with  a new
   enterprise,  including  constraints on its financial and personnel resources,
   lack  of  established  business  relationships  and  uncertainties  regarding
   affiliations  and future  profits.  At December 31, 1998,  the Company had an
   accumulated deficit of $4,400,736.  The Company incurred an operating loss in
   the three  months ended March 31, 1999,  of  approximately  $302,000 and will
   incur operating losses for the foreseeable future.  There can be no assurance
   that the Company will ever be profitable.

Doubt About Ability to Continue as a Going Concern

   The report of the Company's  independent public  accountants  relating to the
   Company's  financial  statements of and for the year ended  December 31, 1998
   indicates  that there is  substantial  doubt about the  Company's  ability to
   continue as a going concern.

Risks Associated with Expansion

   The  Company  has  consummated  Affiliation  Agreements  with 15  Orthodontic
   Affiliates.  The success of the Company's  business strategy will depend on a
   number  of  factors,   including  (i)  the   Company's   ability  to  attract
   orthodontists  to affiliate with the Company,  the  availability  of suitable
   markets and the  Company's  ability to obtain  good  locations  within  those
   markets;  (ii)  the  Company's  ability  to  locate  existing  practices  for
   affiliation,   affiliate   with  such   practices  on  favorable   terms  and
   successfully  integrate the affiliated operations into the Company's existing
   operations;  (iii) the  availability  of  additional  adequate  financing  to
   affiliate with orthodontic practices, and (iv) regulatory constraints.  There
   can be no assurance that the Company's  business strategy will be successful,
   that additional  modifications to the Company's strategy will not be required
   or that the  Company  will be able to  manage  effectively  and  enhance  the
   profitability of its Orthodontic Affiliates.

Need for Additional Financing and Other Strategic Opportunities

   The Company's success will require substantial capital resources, in addition
   to those  currently  available to the Company.  The Company  expects that its
   capital needs over the next several years will  substantially  exceed capital
   generated from  operations.  To finance its future capital needs, the Company
   has  entered  into the Merger  Agreement  (see,  Recent  Developments).  With
   respect to additional financing, if the Merger is not consummated,  there can
   be no assurance that the Company will be able to raise  additional funds when
   needed on  satisfactory  terms to the Company or at all. If additional  funds
   are  raised  through  the  issuance  of equity  securities,  dilution  to the
   Company's  stockholders  may result.  If adequate  financing is not available
   when needed or on terms  acceptable to the Company,  the  Company's  business
   strategy may be materially adversely affected.

Dependence on Orthodontic Affiliates

   The Company  receives fees for  management  services  provided to Orthodontic
   Affiliates  under  Management   Services   Agreements  but  does  not  employ
   orthodontists  or  control  practices  of  its  Orthodontic  Affiliates.  The
   Company's  revenue  is  dependent  on  revenue  generated  by  the  Company's
   Orthodontic  Affiliates and,  therefore,  the  performance  and  professional
   reputation  of Affiliated  Orthodontists  (those  orthodontists  who practice
   through the Orthodontic  Affiliates) and Orthodontic Affiliates are essential
   to the  Company's  success.  The  Management  Services  Agreements  with  the
   Orthodontic  Affiliates  are for terms of 20 years and are  renewable  at the
   election of the Company for two  additional 10 year periods.  The  Management
   Services Agreements may only be terminated by either party for "cause," which
   includes a material default by or bankruptcy of the other party. Any material
   loss  of  revenue  by any of the  individual  Orthodontic  Affiliates  or the
   Orthodontic Affiliates in the aggregate, would have a material adverse effect
   on the Company.

Risk of Providing Orthodontic Services; Adequacy of Insurance

   The Orthodontic Affiliates provide orthodontic services to the public and are
   exposed to the risk of professional  liability and other claims.  The Company
   does not control the practice of orthodontics  by its Orthodontic  Affiliates
   or the compliance with regulatory and other requirements  directly applicable
   to the orthodontists and their practices.  The Company might  nevertheless be
   held liable for negligence on their part.

   The Management  Services  Agreements  require the  Orthodontic  Affiliates to
   maintain,  at  their  own  expense,   professional  liability  insurance  for
   themselves  and  each  orthodontist   employed  by  or  otherwise   providing
   orthodontic  services for the Orthodontic  Affiliate in the minimum amount of
   $500,000 per occurrence and  $1,000,000 in the aggregate.  In addition,  each
   Orthodontic   Affiliate  has   undertaken  to  comply  with  all   applicable
   regulations  and  requirements,  and the  Company  is  indemnified  under the
   Management  Services  Agreements  for claims  against the Company  arising in
   connection  with  actions by the  Orthodontic  Affiliates.  The  Company  has
   general  liability  insurance  for itself and requires that it be named as an
   additional insured party on the professional  liability insurance policies of
   the Orthodontic Affiliates pursuant to the Management Services Agreement. The
   Company does not maintain professional liability insurance for itself.

   There can be no assurance that the Company,  its employees,  the  Orthodontic
   Affiliates or the licensed  orthodontists  employed by or associated with the
   Orthodontic  Affiliates  will not be subject to claims in amounts that exceed
   the coverage  limits or that such  coverage  will be  available  when needed.
   Further,  there can be no  assurance  that  professional  liability  or other
   insurance will continue to be available to the Orthodontic  Affiliates in the
   future at adequate levels or at acceptable costs.

   A successful claim against the Company or an Orthodontic  Affiliate in excess
   of the applicable  insurance  coverage  could have a material  adverse effect
   upon the Company.  Claims  against the Company,  regardless  of the merits or
   eventual outcomes, may also have a material adverse effect on the Company.

Government Regulations

   As noted above,  federal and state laws extensively regulate the relationship
   among  providers of health care services,  physicians  and other  clinicians.
   These laws  include  federal  fraud and abuse  provisions  that  prohibit the
   solicitation,  receipt,  payment  or  offering  of  any  direct  or  indirect
   remuneration of for the referral of patients for which  reimbursement is made
   under  any  federal  or  state   funded   health  care  program  or  for  the
   recommending,  leasing, arranging,  ordering or providing or services covered
   by such programs.  States have similar laws that apply to patients covered by
   private and  government  programs.  Federal  fraud and abuse laws also impose
   restrictions on physicians'  referrals for designated health services covered
   under a federal or state funded  health care  program to entities  with which
   they have financial  relationships.  Various states have adopted similar laws
   that cover patients in private programs as well as government programs. There
   can be no assurance that the federal and state  governments will not consider
   additional  prohibitions on physician ownership,  directly or indirectly,  of
   facilities to which they refer patients,  which  prohibitions could adversely
   affect the Company.  Violations of these laws may result in substantial civil
   or criminal  penalties for  individuals  or entities,  including  large civil
   money penalties and exclusion from  participation  in federal or state health
   care programs.

   Moreover,   the  laws  of  many  states  prohibit   physicians  from  sharing
   professional  fees, or  "splitting  fees," with anyone other than a member of
   the same profession.  These laws and their interpretations vary from state to
   state and are enforced by the courts and by regulatory authorities with broad
   discretion.  Expansion of operations of the Company to certain  jurisdictions
   may require structural and organizational modifications of the Company's form
   of  relationship  with  Orthodontic  Affiliates,  which could have an adverse
   effect on the  Company.  Although  the Company  believes  its  operations  as
   currently conducted are in material compliance with existing applicable laws,
   there can be no assurance  that a review of the Company's  business by courts
   or  regulatory  authorities  will not  result in a  determination  that could
   adversely  affect the  operations  of the  Company  or that the  health  care
   regulatory  environment  will not  change  so as to  restrict  the  Company's
   existing operations, the prospective Merger or its expansion.

State Laws Regarding Prohibition of Corporate Practice of Orthodontics

   The Orthodontic  Affiliates are formed as professional  corporations owned by
   one or more  orthodontists  licensed to practice  dentistry under  applicable
   state law in states  that  prohibit  the  corporate  practice  of  dentistry.
   Corporations  such as the Company are not permitted  under certain state laws
   to  practice  dentistry  or exercise  control  over the dental  judgments  or
   decisions of  practitioners.  Corporate  practice of dentistry laws and their
   interpretations  vary from state to state and are  enforced by the courts and
   by  regulatory  authorities  with broad  discretion.  Currently,  the Company
   performs only non-orthodontic  administrative services and does not represent
   to the  public  that it offers  orthodontic  services.  Nor does the  Company
   exercise  influence  or control  over the  practice  of  orthodontics  by the
   practitioners  with whom it  contracts.  Expansion of the  operations  of the
   Company or any successor to the Company to certain  jurisdictions may require
   structural  and   organizations   modifications  to  the  Company's  form  of
   relationship  with Orthodontic  Affiliates in order to comply with the dental
   practice laws,  which could have an adverse  effect on the Company.  Although
   the Company  believes its  operations as currently  conducted are in material
   compliance with existing  applicable laws, there can be no assurance that the
   Company's  structure  will not be challenged as  constituting  the unlicensed
   practice of dentistry or that the enforceability of the agreements underlying
   this  structure  will  not  be  limited.   If  such  a  challenge  were  made
   successfully in any state, the Company could be subject to civil and criminal
   penalties  under such state's laws and could be required to  restructure  its
   contractual  arrangements  in that state.  Such  results or the  inability to
   restructure its contractual arrangements could have a material adverse effect
   on the Company.

Competition

   The business of providing  orthodontic services is highly competitive in each
   market in which the  Company  operates  or  intends to  operate.  Each of the
   orthodontic  Affiliates faces competition from other orthodontists or general
   dentists in the communities  served,  many of whom may have more  established
   practices  in the market or greater  financial  an other  resources  than the
   Orthodontic Affiliates.  At this time, the Company believes there are several
   other companies actively involved in consolidating and management orthodontic
   practices   throughout  the  United  States.  These  companies  have  greater
   financial marketing and other resources than the Company. In addition,  there
   are companies pursuing similar strategies with respect to dental specialties,
   including orthodontics,  and additional companies with similar objectives may
   enter  the  Company's  market  and  financial  and other  resources  than the
   Company.  There can be  assurance  that the  Company  will be able to compete
   effectively.

Absence of Dividends

   The Company has never declared or paid dividends on its Common Stock and does
   not anticipate  paying any dividends in the foreseeable  future.  The Company
   expects  that future  earnings,  if any,  will be retained for the growth and
   development of the Company's business, and, accordingly, the Company does not
   anticipate  that any  dividends  will be declared or paid on the Common Stock
   for the foreseeable future.

No  Assurance  of  NASDAQ  Small  Cap  Market  Listing;  Risk  of  Low-Price  
Securities; Risk of Application of Penny Stock Rules

   The Board of Governors of the National  Association  of  Securities  Dealers,
   Inc. has established  certain standards for the initial listing and continued
   listing of a security  on the NASDAQ  Small Cap  Market.  The  standards  for
   initial listing require, among other things, that an issuer have net tangible
   assets of $4,000,000; that the minimum bid price for the listed securities be
   $4.00 per share;  that the  minimum  market  value of the  public  float (the
   shares held by  non-insiders)  be at least  $5,000,000;  and that there be at
   least  two  market  makers  for  the  issuer's  securities.  The  maintenance
   standards require among other things, that an issuer have net tangible assets
   of at least $2,000,000;  that the minimum bid price for the listed securities
   be $1.00 per share; that the minimum market value of the "public float" be at
   least  $1,000,000;  and that  there be at least  two  market  makers  for the
   issuer's  securities.  A deficiency  in either the market value of the public
   float or the bid price  maintenance  standard  will be deemed to exist if the
   issuer fails the individual  stated  requirement for ten consecutive  trading
   days.

   The Company was  notified  by NASDAQ  that its common  stock was  delisted on
   April 21,  1999 for failure to  maintain  the minimum bid price.  Because the
   Company's  securities  were delisted for the NASDAQ Small Cap Market,  it may
   adversely  affect the prices of such securities and the ability of holders to
   sell them,  and the  Company  will be  required  to comply  with the  initial
   listing  requirements  to be  delisted on the NASDAQ  Small Cap  Market.  The
   Company's common stock now trades on OTC Bulletin Board.

   If the Company is unable to overturn NASDAQ's delisting determination because
   of the Company's inability to satisfy maintenance requirements, the Company's
   securities  could become subject to certain penny stock rules  promulgated by
   the Securities and Exchange  Commission ("the  Commission").  The penny stock
   rules require a  broker-dealer,  prior to a transaction  in a penny stock not
   otherwise  exempt from the rules,  to deliver a standardized  risk disclosure
   document  prepared by the Commission  that provides  information  about penny
   stocks  and the  nature  and level of risks in the penny  stock  market.  The
   broker-dealer  also must  provide  the  customer  with  current bid and offer
   quotations for the penny stock, the compensation of the broker-dealer and its
   salesperson in the  transaction and monthly  account  statements  showing the
   market value of each penny stock held in the customer's account. In addition,
   the penny stock rules  require that prior to a  transaction  in a penny stock
   not otherwise exempt from such rules, the  broker-dealer  must make a special
   written  determination that the penny stock is a suitable  investment for the
   purchaser and receive the purchaser's  written  agreement to the transaction.
   These  disclosure  requirements  may have the effect of further  reducing the
   level of trading  activity in the  secondary  market for a stock that becomes
   subject to the penny stock. As a result of the common stock becoming  subject
   to the penny stock  rules,  stockholders  may find it more  difficult to sell
   their shares.
<PAGE>
                           PART II - OTHER INFORMATION


ITEM 1.  Legal Proceedings

   None

ITEM 2.  Changes in Securities and Use of Proceeds

   (a)   Not applicable

   (b)   Not applicable

   (c)   Not applicable

   (d)   The Company's  Registration  Statement on Form SB-2 (Registration No.
         333-27179),  as amended,  with  respect to the  offering of shares of
         the Common Stock and Redeemable  Common Stock Purchase Warrant in the
         Company's initial public offering ("the IPO") was declared  effective
         on March 30,  1997.  The net  proceeds  to the  Company  from the IPO
         were $9.5  million.  The Company  used such net  proceeds as follows:
         (i) $1.1  million for the  repayment  of debt;  (ii) $2.1  million to
         consummate  the  affiliations  with  the  seven  initial   Affiliated
         Practices ("the Initial  Affiliated  Practices");  (iii) $3.2 million
         to consummate affiliations with additional Affiliated Practices;  and
         (iv)  $2.0  million  for  working   capital,   equipment,   leasehold
         improvements and other corporate purposes.

ITEM 3.  Defaults Upon Senior Securities

   Not applicable

ITEM 4.  Submission of Matters to a Vote of Security Holders

   Not applicable

ITEM 5.  Other Information

   Not applicable.

ITEM 6.  Exhibits and Reports on Form 8-K.

   Not applicable.
<PAGE>
                                   SIGNATURES


In accordance with the  requirements of the Exchange Act, the Registrant  caused
this  report to be  signed on its  behalf  by the  undersigned,  thereunto  duly
authorized.


                                          OMEGA ORTHODONTICS, INC.
                                                 (Registrant)


Date:   May 14, 1999                 By:  /s/Robert J. Schulhoff
                                          ------------------------------------
                                          Robert J. Schulhof
                                          Chief Executive Officer


Date:   May 14, 1999                 By:  /s/Edward M. Mulherin
                                          ------------------------------------
                                          Edward M. Mulherin
                                          Chief Financial Officer
<PAGE>
                                  EXHIBIT INDEX


Exhibit Number                            Description

   27                                     Financial  Data Schedule  (furnished
                                          to  the   Securities   and  Exchange
                                          Commission   for   Electronic   Data
                                          Gathering   Analysis  and  Retrieval
                                          {EDGAR} purposes only)