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 SEPTEMBER 30, 1998


     [ ]       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 October 31, 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 September 30, 1998 (Unaudited)
            and December 31, 1997

            Condensed Consolidated Statements of Operations for the Three Months
            and Nine Months Ended September 30, 1998 and September 30, 1997
            (Unaudited)

            Condensed Consolidated Statement of Stockholders' Equity
            September 30, 1998 (Unaudited)

            Condensed Consolidated Statements of Cash Flows for the Nine Months
            Ended September 30, 1998 and September 30, 1997 (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

<PAGE>

                     PART I - FINANCIAL INFORMATION

ITEM 1.        FINANCIAL STATEMENTS
     
                                              OMEGA ORTHODONTICS, INC.
                                          CONDENSED CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                September 30,   December 31,
                                                                   1998             1997
                                                                 (Unaudited)     (Audited)   
ASSETS
<S>                                                              <C>           <C>
Current assets:
       
     Cash and cash equivalents ...............................   $ 1,262,268   $ 5,421,721
     Receivable from affiliated practices, net ...............     2,901,129       926,271
     Notes and interest receivable from affiliated practice ..        25,833        50,000
     Notes and interest receivable from related parties ......       127,159       120,859
     Prepaid expenses ........................................        49,820        55,791
                                                                 -----------     ---------
         Total current assets ................................     4,366,209     6,574,642

Property and equipment, net ..................................       907,473       503,339
Due from affiliated practices ................................       205,518        53,194
Intangible assets, net .......................................     9,812,446     5,099,043
Other assets .................................................       102,195        80,303
                                                                 -----------     ---------

                  Total Assets ...............................   $15,393,841   $12,310,521
                                                                 ===========     =========

LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
     Accounts payable ........................................   $   230,482   $   155,671
     Accrued expenses ........................................       227,989       354,513
     Patient prepayments .....................................     2,101,668       775,699
     Current portion of long-term debt .......................       343,000        76,130
     Due to affiliated practices .............................       415,881       147,955
     Due to related parties ..................................          --         305,000
                                                                 -----------     ---------
         Total current liabilities ...........................     3,319,020     1,814,968
Long-term debt, less current  portion ........................     1,170,828       468,551
                                                                 -----------     ---------
                  Total Liabilities ..........................     4,489,848     2,283,519
                                                                 -----------     ---------

Commitments and contingencies

Stockholders' equity:
Common stock, $.01 par value 9,500,000 shares authorized --
   5,052,584 and 4,338,823 shares issued and outstanding
   at September 30, 1998 and December 31, 1997, respectively          50,526        43,388
Additional paid-in capital ...................................    15,031,372    13,858,851
Accumulated deficit ..........................................   ( 4,177,905)  ( 3,875,237)
                                                                 -----------   ---------
         Total stockholders' equity ..........................    10,903,993    10,027,002
                                                                 -----------     ---------

                  Total Liabilities and Stockholders' Equity .   $15,393,841   $12,310,521
                                                                 ===========     =========
</TABLE>


See notes to condensed consolidated financial statements.



<PAGE>


                                          OMEGA ORTHODONTICS, INC.
                               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                               (UNAUDITED)
<TABLE>
<CAPTION>


                                           Three Months Ended             Nine Months Ended
                                             September 30,                  September 30,        

                                          1998             1997          1998            1997
<S>                                    <C>            <C>            <C>            <C>  
Revenues:
     Service fees ..................   $ 1,997,345    $      --      $ 5,357,823    $      --
     Consulting fees ...............         1,528         10,713         23,323         55,284
                                       -----------      ---------     ----------    -----------
         Total revenues ............     1,998,873         10,713      5,381,146         55,284
                                       -----------     ----------    -----------    -----------

Costs and expenses:
     Employee costs ................       966,788         52,275      2,625,835        159,853
     Other direct costs ............       311,212         11,242        858,600         55,098
     General and administrative ....       728,871        153,802      1,923,492        431,354
     Depreciation and amortization .       128,160            914        312,081          2,742
     Non-recurring consulting
        expense ....................          --             --             --        2,867,400
                                       -----------     -----------   ----------     -----------
         Total costs and expenses ..     2,135,031        218,233      5,720,008      3,516,447
                                       -----------     -----------   -----------    -----------

Loss from operations ............... (      136,158)   (   207,520)  (    338,862)  (  3,461,163)

Interest expense ................... (      25,119)   (    59,579)  (     71,336)  (    140,724)
Interest income ....................        23,156            233        107,530          2,556
                                        -----------   -----------   -----------     -----------

         Net loss ..................   ($  138,121)   ($  266,866)   ($  302,668)   ($3,599,331)
                                       ===========    ===========    ===========    ===========

Basic and diluted net loss per share   ($     0.03)   ($     0.16)   ($     0.06)   ($     2.14)
                                       ===========    ===========     ===========   ===========

Basic and diluted
  shares outstanding ...............     4,965,253      1,685,000      4,843,747      1,685,000
                                       ===========    ===========    ===========    ===========

</TABLE>

See notes to condensed consolidated financial statements.


<PAGE>



                                  OMEGA ORTHODONTICS, INC.
                CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                     (UNAUDITED)

<TABLE>
<CAPTION>


                                          Common Stock         Additional                      Total
                                    Number of      $.01 Par      Paid-in     Accumulated    Stockholders'
                                     Shares          Value       Capital       Deficit        Equity



<S>                                  <C>         <C>           <C>           <C>            <C>        
Balance, December 31,
       1997                          4,338,823   $    43,388   $13,858,851   ($3,875,237)   $10,027,002
Issuance of common stock
     to new affiliated practices       707,511         7,076     1,164,146          --        1,171,222
Issuance of common stock
     to consultant .............         6,250            62         8,375          --            8,437
Net loss .......................          --            --            --     (   302,668)    (  302,668)
                                   -----------    -----------   -----------   -----------    -----------

Balance, September 30,
              1998                   5,052,584   $    50,526   $15,031,372   ($4,177,905)   $10,903,993
                                   ===========   ===========   ===========   ===========    ===========


</TABLE>

See notes to condensed consolidated financial statements.


<PAGE>



                                             OMEGA ORTHODONTICS, INC.
                                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                             Nine Months Ended
                                                                                September 30,                         
                                                                             1998         1997
                                                                             ----         ----

<S>                                                                    <C>            <C>        
Net Cash used/provided by operating activities .....................   ($  926,985)   $   459,852
Cash flows from investing activities:
         Purchases of property and equipment .......................   (   312,315)   (     1,712)
         Increase in notes receivable from affiliated practice .....   (    25,833)           --
         Increase in other assets ..................................   (    21,892)           --
         Acquisition of management services agreements
                  and related assets ...............................   ( 2,749,355)           --   
                                                                       -----------    -----------
Net cash used by investing activities ..............................   ( 3,109,395)  (      1,712)
                                                                       -----------    -----------

Cash flows from financing activities:
    Repayment of borrowings ........................................  (    131,510)
    Deferred offering costs ........................................          --     (  1,249,567)
    Debt financing costs ...........................................          --     (     20,900)
    Proceeds from issuance of notes payable ........................          --          510,000
    Issuance of common stock to consultant .........................         8,437            --   
                                                                       -----------    -----------
Net cash used by financing activities ..............................  (    123,073)  (    760,467)
                                                                       -----------    -----------

Net decrease in cash and cash equivalents ..........................  (  4,159,453)  (    302,327)
Cash and cash equivalents, beginning of period .....................     5,421,721        321,057
                                                                       -----------    -----------
Cash and cash equivalents, end of period ...........................   $ 1,262,268    $    18,730
                                                                       ===========    ===========

Supplemental disclosure of cash flow information:
         Cash paid during the period for interest ..................   $    72,899    $    74,260
                                                                       ===========    ===========

Supplemental disclosure of cash flows related to affiliations:
      Fair value of assets acquired, excluding cash ................   $ 5,296,903
      Issuance of common stock ..................................... (   1,171,222)
      Issuance of notes payable .................................... (     986,435)
      Cash paid .................................................... (   2,749,355)
                                                                       -----------

Liabilities assumed ................................................   $   389,891
                                                                       ===========

Supplemental disclosure of non cash items from investing activities:
    Issuance of debt in connection with affiliations ...............   $   986,435
                                                                       ===========
    Transfer of note receivable in connection with
      affiliation ..................................................   $    50,000
                                                                       ===========
    Transfer of note payable in connection with
      affiliation ..................................................   $    33,588
                                                                       ===========
</TABLE>
See notes to condensed consolidated financial statements.


<PAGE>
                               OMEGA ORTHODONTICS, INC.
                   NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


1.  BASIS OF PRESENTATION

    The  condensed  consolidated  balance  sheet  at  September  30,  1998,  the
    condensed  consolidated  statements of  operations  for the three months and
    nine  months  ended  September  30,  1998  and  September  30,  1997 and the
    condensed  consolidated  statements  of cash flows for the nine months ended
    September 30, 1998 and September 30, 1997 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 and nine  months  ended
    September 30, 1998 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, 1997.

    REVENUE RECOGNITION

    The Company's  services are provided under  management  services  agreements
    (Management  Services  Agreements)  and interim  management  agreements with
    affiliated  practices  (Affiliated  Practices).  Net  revenue  earned by the
    Company under the management agreements is equal to approximately 25% of new
    patient contract balances in the first month of new patient contracts plus a
    portion of existing contract balances recorded by the Affiliated  Practices,
    less amounts  retained by the  Affiliated  Practices.  The Company  provides
    practice management and marketing services,  facilities and non-professional
    personnel and receives 65% to 75% of the Affiliated Practices' gross patient
    fee  collections as a management  fee. The Affiliated  Practices  retain all
    revenue not paid to the Company as the management fee. The amounts  retained
    by the Affiliated  Practices are dependent on their  financial  performance,
    based in significant part on their cash receipts and disbursements. If total
    expenses of an Affiliated  Practice are below  prescribed  percentages,  the
    Affiliated  Practice is entitled to retain 50% of the difference.  Under the
    terms  of  the  Management  Services Agreement,  the   Affiliated  Practices
    assign their receivables to the Company in payment of their management fees.
    The Company is  responsible  for  collection. The Company  also  assumes its
    portion of patient prepayments,  which are deposits from patients for dental
    care to be performed in future periods.

    INCOME (LOSS) PER SHARE

    Basic loss per share was  determined  by dividing  net loss by the  weighted
    average common shares outstanding during the period.  Diluted loss per share
    is the  same as  basic  loss  per  share  as the  effects  of the  Company's
    potential  common stock (options to purchase  528,333 shares of common stock
    and 2,070,000  warrants as of September 30, 1998) are  antidilutive.  During
    the period  preceding the  Company's  initial  public  offering  (IPO),  the
    Company  issued  185,000  shares of common  stock that have been  treated as
    "nominal issuances" in accordance with SAB 98. 



<PAGE>
                               OMEGA ORTHODONTICS, INC.
                  NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


    INTANGIBLE ASSETS

    The  value  assigned  to  the  Management   Services   Agreements  with  the
    acquisition  of  the  assets  and  liabilities  of the  management  services
    organizations (MSOs) 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  September  30,  1998 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 used 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   of  the   intangible   assets  on  the  Company's   condensed
    consolidated  balance sheet as of September  30, 1998 produced  amortization
    expense of  approximately  $204,000 for the nine months ended  September 30,
    1998.  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  September  30,  1998  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.


    NEW ACCOUNTING STANDARD

    In June 1998,  the FASB  issued  SFAS No.  133,  Accounting  for  Derivative
    Instruments  and Hedging  Activities.  SFAS No. 133 is effective  for fiscal
    years  beginning  after June 15,  1999.  The  Company  does not  believe the
    adoption of this  accounting  standard will have any impact on the Company's
    financial position or results of operations.

 .   NEW AFFILIATED PRACTICES

    During the nine months  ended  September  30,  1998,  the Company  completed
    affiliations with nine new Affiliated  Practices, three of which merged with
    existing Affiliated Practices.

    Total consideration related to the new Affiliated Practices is summarized as
    follows:

              Value of common stock                           $     1,171,221
              Cash paid                                             2,749,356
              Notes payable                                           986,435
                                                              ---------------

                  Total                                       $     4,907,012
                                                             ===============

<PAGE>



The cost of the above new  Affiliated  Practices has been allocated on the basis
of the  estimated  fair value of the assets  acquired and  liabilities  assumed,
resulting in management  contract  intangibles  of  approximately  $4.9 million.
These allocations may be adjusted to the extent that management becomes aware of
additional  information  within one reporting year of the affiliation date which
results in a material  change in the amount of any contingency or changes in the
estimated fair value of assets acquired and liabilities assumed.

The  allocation  of the  purchase  price  of the new  Affiliated  Practices,
including acquisition costs of approximately $192,000, is as follows:

         Property and equipment                                $      196,094
         Management service contract intangibles                    4,921,210
         Patient receivables and patient prepayments                  179,599
         Assumed liabilities                                  (       389,891)
                                                               --------------

                Contract intagible assets                     $     4,907,012
                                                              ===============

During the nine months ended  September 30, 1998,  the Company entered into
an  interim  management  agreement with two of the new affiliated practices,
pursuant to which the Company provides management services under essentially
the same terms as its  Management  Services  Agreements.  One of the interim
agreements was subsequently converted into a Management Services Agreement.


COMMITMENTS AND CONTINGENCIES

OPERATING LEASES 

The Company leases an office for its corporate headquarters which expires August
30, 2001. Future minimun lease payments as of September 30, 1998 are as follows:


               1999                $18,600
               2000                $18,600                       
               2001                $17,050                   
                                   -------   

                                   $54,250                
                                   =======                

Rent  expense for  the operating  lease  was  $1,550 for the  nine  months ended
September 30, 1998.


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  EXPANSION
    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,  PARTICULARLY IN VIEW OF THE
    COMPANY'S  EARLY STAGE OF  OPERATIONS,  THE  INCLUSION  OF SUCH  INFORMATION
    SHOULD NOT BE REGARDED AS A REPRESENTATION BY THE


<PAGE>



    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.

    GENERAL 

    Omega 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 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 selling 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,  real 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 future return on investment.  The MSO
    typically  is  acquired  for a  combination  of cash,  five  year  notes and
    unregistered  Common Stock or stock  options.  As of September 30, 1998, the
    Company had completed 17 affiliations  with an average MSO purchase price of
    approximately   $577,000,  of  which  the  cash  portion  was  approximately
    $279,000.

    The Management Services Agreement provides that the Affiliated Practice will
    utilize the  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.  At  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.

    Concurrent with the IPO, the Company  executed  Affiliation  Agreements with
    seven  initial  Affiliated  Practices.  In  addition,  between  October  and
    December 31, 1997 the Company entered into  Affiliation  Agreements with two
    additional Affiliated  Practices.  During the first nine months of 1998, the
    Company entered into Affiliation  Agreements with nine additional  practices
    (three


<PAGE>



    of which  merged  with  existing  Affiliated  Practices).  Pursuant to those
    collective  agreements,  the Company  acquired  the equity  interests in the
    MSOs.  Each of the  Affiliated  Practices  is  typically  operated  with one
    practitioner,  who  is  typically  supported  by a  staff  of  three  dental
    assistants and three office personnel. As of September 30, 1998, the Company
    had  15  operating  practices  with  18  doctors in 21 offices in 10 states;
    which  includes  an  interim   management  agreement with one practice under
    terms similar to its Affiliation Agreements.

    In  consideration  for  acquiring the nine MSOs during the nine months ended
    September  30, 1998,  the Company paid the aggregate of  approximately  $2.7
    million in cash,  issued an  aggregate  of  approximately  $986,000 in notes
    bearing interest at 8.5%, assumed approximately  $349,000 of liabilities and
    issued an aggregate of 707,511 shares of Common Stock.

    In light of current market conditions and the prevailing view of MSOs by the
    dental  industry,  the Company  expects that its future internal growth will
    come from continuing to implement its Omega Exceptional  Practice Model with
    Affiliated Practices and the reduction of internal expenses.  The ability of
    the Company to achieve external  expansion will depend upon the availability
    of adequate financing to fund affiliations with orthodontic and other dental
    specialty  practices or through the development of strategic  alliances with
    other  corporations.  The  Company  is  currently  exploring  a  variety  of
    alternatives  with the goal of maintaining  the Company's focus on providing
    quality practice  management and promoting practice growth.  There can be no
    assurance that the Company's  expansion  strategy will be successful or that
    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 Affiliated Practices.

    RESULTS OF OPERATIONS

    For the three months and nine months ended  September  30, 1998  compared to
    the three months and nine months ended September 30, 1997.

    REVENUES 

    Total revenues for the three months and nine months ended September 30, 1998
    were  approximately  $2.0  million  and  $5.4  million,   respectively,  and
    consisted  of  approximately  $2.0  million and $5.4 million of service fees
    revenue from fifteen  Affiliated  Practices, and  approximately  $1,500 and
    $23,000 of other consulting fee revenue on a fee for service basis from non-
    Affiliated  Practices,  respectively.  For the three and nine  months  ended
    September  30,  1997,  the Company  did not  have  any  service fees revenue
    because  it  had  not yet affiliated  with any Affiliated Practices.  During
    the  three and  nine months ended  September  30, 1997,  the Company  earned
    approximately  $11,000 and $55,000,  respectively,  for  consulting services
    provided on a fee for service basis.

    COST AND EXPENSES

    The Company  incurred  operating  costs and expenses of  approximately  $2.1
    million and $5.7 million for the three and nine months ended  September  30,
    1998,  respectively.  The Company's costs and expenses consist  primarily of
    salaries  and  benefits,   orthodontic  supplies,   rent,   advertising  and
    marketing, general and administrative and depreciation and amortization. The
    Company incurred operating costs and expenses of approximately  $218,000 and
    $3.5  million  for the three  and nine  months  ended  September  30,  1997,
    respectively,  which  represented  corporate  office  expense,  the  cost of
    providing certain management  consulting  services and the value ascribed to
    certain stock compensation earned by consultants.

    



<PAGE>

    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.

         Other Direct Costs.   Includes  dental  and office supplies, laboratory
         costs,  facilities  and  equipment  for  the  Affiliated  Practices and
         corporate office.

         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.

         Depreciation and Amortization.  Includes  depreciation of equipment and
         leasehold  improvements of the Affiliated Practices and amortization of
         intangible assets related to the Management Services Agreement.

    INTEREST EXPENSE

    Interest expense of approximately $25,000 and $71,000 for the three and nine
    months  ended  September  30,  1998,  respectively,  reflected  the  cost of
    borrowings under notes payable to Affiliated Practices issued as part of the
    purchase price for affiliating  with those  practices.  Interest  expense of
    approximately  $60,000  and  $141,000  for the three and nine  months  ended
    September  30, 1997,  respectively,  reflects  the cost of  borrowing  under
    bridge  financing  outstanding  at that  time  used to  finance  the cost of
    operations and IPO costs.  The bridge financing notes were paid in full with
    a portion of the proceeds of the IPO.

    INTEREST INCOME 

    Interest income of approximately $23,000 and $108,000 for the three and nine
    months ended September 30, 1998, respectively,  reflected interest earned on
    the  Company's  net proceeds  from the IPO and notes from  related  parties.
    Interest  income of  approximately  $200 and  $3,000  for the three and nine
    months ended September 30, 1997, respectively,  reflected interest earned on
    the net proceeds of the bridge financing notes.

    NET LOSS

    As a result of the foregoing  factors,  the Company  generated a net loss of
    approximately $138,000 and $303,000, or $0.03 and $0.06 per share, for three
    and nine months ended September 30, 1998, respectively, versus a net loss of
    approximately  $267,000 and $3.6 million,  or $0.16 and $2.14 per share, for
    the three and nine months ended September 30, 1997, respectively.


    LIQUIDITY AND CAPITAL RESOURCES

    FINANCING ACTIVITY

    The Company has financed its capital  requirements  to date with  borrowings
    from bridge and interim notes and the issuance of equity securities.

    The Company  has  experienced  operating  losses, negative cash flows (aside
    from  cash flows derived from the reinvestment of net proceeds from its IPO)
   

<PAGE>
    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,  1997 due  primarily  to the value ascribed  to certain  stock
    compensation  earned  by consultants in April 1997 and has  reported  a loss
    from  operations for the nine  months  ended September 30, 1998 of $338,862.

    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 September 30, 1998 was $205,518.

    The Company's  expansion  strategy requires  substantial  capital resources.
    Capital  is  needed  not only for the  affiliation  with  future  Affiliated
    Practices,  but also for the effective integration,  operation and expansion
    of the existing and future Affiliated Practices. In addition, the Affiliated
    Practices may from time to time require capital for renovation and expansion
    and for the addition of equipment and technology.

    Since  consummation  of the  Company's  IPO,  the  Company  has  funded  its
    affiliations  through use of a combination of cash,  notes and shares of its
    Common Stock.  Recently,  the ability of the Company to use shares of Common
    Stock for  affiliations  has been adversely  affected by the decrease in the
    market value of the Common Stock.  The decrease,  as well as the  relatively
    low market  value of the Common  Stock in dollar  terms,  has  affected  the
    willingness  of owners of potential  affiliated  practices to accept  Common
    Stock as full or partial payment of  consideration  for their  affiliations.
    Even if future affiliations could be funded with the Company's Common Stock,
    its use due to the current market value of the Company's Common Stock, would
    result in substantial  dilution to existing  stockolders.   As a result, the
    Company  has not  consummated  an  affiliation  since  August,  1998 and the
    Company does not expect to be able to consummate future  affiliations unless
    there is a  substantial  improvement  in the market  value of the  Company's
    Common Stock and/or other financing or other strategic  alternatives  become
    available. During the three months and nine months ended September 30, 1998,
    the Company spent approximately $921,000 and $2.7 million in cash and issued
    245,352 and 707,511 shares of Common Stock, respectively, in connection with
    affiliations with Affiliated Practices.

    Aside from cash flows  derived from the  investment of net proceeds from its
    IPO, the Company has not realized  positive cash flow from operations  since
    its inception. Accordingly, the Company has had to use net proceeds from its
    IPO for its working capital  requirements  for its operations.  At September
    30,  1998 the  Company  had  $1.3  million  of  working  capital  consisting
    primarily of cash and cash equivalents,  all of which represented  remaining
    net proceeds from its IPO.

    In order for the  Company to grow,  it is likely  that the  Company  will be
    required to seek  additional  financing  for working  capital and  liquidity
    purposes.  Further,  any additional  financing obtained by the Company could
    have a  dilutive  effect  on then  existing  stockholders.  In the event the
    Company  fully  utilizes the  remaining  net  proceeds  from its IPO to fund
    additional  affiliations  and/or working  capital  requirements,  and in the
    event the  Company is not able to  thereafter  continue  to meet its working
    capital  requirements or liquidity needs with bank borrowings (which to date
    have been  unavailable to the Company),  the Company will need to find other
    public or private debt or equity sources.  The availability of these capital
    sources will depend on prevailing market conditions,  interest rates and the
    financial condition of the Company. There can be no


<PAGE>
    assurance,  however,  that the  Company  will be able to  obtain  additional
    financing  for future  affiliations  or its working  capital  and  liquidity
    needs.
    
    The Company  anticipates  an  improvement  in its  operations and expects to
    realize positive operating cash flow beginning in the last quarter of fiscal
    1998 or in the first  quarter  of fiscal  1999.  Moreover,  the  Company  is
    continuing  with its efforts to improve  the  operating  performance  of its
    Affiliated Practices.  Concurrently, the Company is also pursuing additional
    financing and considering other strategic alternatives including discussions
    with potential partners regarding strategic alliances and capital investment
    in the Company.


<PAGE>
YEAR 2000 DISCLOSURE

      The Year 2000  ("Year  2000")  computer  issue is the  result of  computer
programs using a two-digit format, as opposed to a four-digit format to indicate
the year.  Such computer  programs will be unable to recognize date  information
correctly when the year changes to 2000. The Year 2000 issue poses risks for the
Company's information technology systems, including those used by the Company in
providing  its practice  management  and  marketing  services to its  Affiliated
Practices.

      The  Company's  information  technology  systems  are based upon  software
licenses  and  software   maintenance   agreements  with  third  party  software
companies. Based upon the Company's internal assessments and communications with
its software  vendors,  all of the software utilized by the Company is Year 2000
compliant software. The Company has used internal personnel to test its software
systems for Year 2000 compliance and such tests yielded  positive  results.  The
Company will continue to monitor its Year 2000 readiness.

      Each of the  Affiliated  Practices have their own  information  technology
systems  (including  systems for billing and  collecting  patient fees) based on
third party software  licenses and maintenance  agreements with various vendors.
The Company is currently  evaluating an integrated  system to replace all of the
information   technology  systems  of  its  Affiliated   Practices  which,  when
implemented in accordance with the Company's  specifications,  is expected to be
Year 2000 compliant.  The Company is currently  obtaining  information  from its
Affiliated   Practices  as  to  the  readiness  of  their  existing  information
technology  systems to be or to become Year 2000  compliant  by the end of 1998.
Since the Company has already updated its own information  technology systems to
be Year 2000  compliant  and is in the  process of  implementing  an  integrated
system  for all of its  Affiliated  Practices  which  will be new and Year  2000
compliant,  the Company does not expect that it will incur any incremental costs
of a material amount to become Year 2000 compliant on a timely basis.

<PAGE>
      Also,  the Company does not  anticipate  difficulty  to resolve any issues
related to imbedded technology in the equipment provided to the Company by other
manufacturers.  The Company has made inquiry of each of its Affiliated Practices
as to issues  related to imbedded  technology in the  equipment  provided to the
Affiliated Practices by third party manufacturers. Once the Company receives and
analyzes the responses from its Affiliated  Practices as to imbedded technology,
the Company intends to work on a contingency  plan to address material risks, if
any, with respect to such imbedded  technology in the equipment  utilized by its
Affiliated Practices.

      Based on the  foregoing,  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  consolidated  financial
position, results of operations or cash flows.

<PAGE>

                             RISK FACTORS

THE  FOLLOWING   RISK  FACTORS  SHOULD  BE  CONSIDERED  CAREFULLY  IN EVALUATING
THE COMPANY AND ITS BUSINESS, INCLUDING FORWARD-LOOKING STATEMENTS REGARDING THE
COMPANY'S  PLANS  AND  OBJECTIVES  FOR  FUTURE   OPERATIONS  AND  THE  COMPANY'S
DEVELOPMENT OF ITS AfFILIATED PRACTICES.

      RISKS  ASSOCIATED WITH EXPANSION.  The success of the Company's  expansion
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  affiliations  with  such practices  on  favorable  terms  and  successfully
integrate the  affiliated  operations  into the Company's  existing  operations;
(iii) the  availability  of adequate  financing  to affiliate  with  orthodontic
practices;   and  (iv)   regulatory   constraints.   A  shortage  of   available
orthodontists with the skills and experience  required by the Company would have
a material  adverse  effect on the Company's  expansion  plans.  There can be no
assurance  that  the  Company's  expansion  strategy  will be  successful,  that
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
Affiliated Practices.

      POSSIBLE NEED FOR ADDITIONAL  FINANCING.  The Company's expansion strategy
will require substantial capital resources. The Company expects that its capital
needs over the next 12 months years will substantially exceed  capital generated
from  operations  and the net proceeds of its IPO. To finance its future capital
needs, the Company plans to issue, from time to time,  additional debt or equity
securities,  including  notes and Common  Stock in  connection  with its planned
affiliations.  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,  and if additional  funds are raised
through the  incurrence  of debt,  the Company  likely would  become  subject to
financial covenants and restrictions on its operations and finances. If adequate
financing is not  available  when needed or on terms  acceptable to the Company,
the Company's expansion strategy may be materially adversely affected.

      RISKS ASSOCIATED WITH DECREASE IN THE MARKET VALUE OF THE COMPANY'S COMMON
STOCK.  Since  consummation  of the  Company's  IPO,  the Company has funded its
affiliations  through  use of a  combination  of cash,  notes and  shares of its
Common Stock. Recently, the ability of the Company to use shares of Common Stock
for affiliations has been adversely affected by the decrease in the market value
of the Common Stock. The decrease, as well as the relatively low market value of
the Common Stock in dollar  terms,  has affected  the  willingness  of owners of
potential Affiliated Practices to accept Common Stock as full or partial payment
of consideration for their  affiliations.  Even if future  affiliations could be
funded with the Company's  Common Stock, its use due to the current market value
of the Company's  Common Stock would result in substantial  dilution to existing
stockholders.  Accordingly, the Company does not expect to be able to consummate
future affiliations unless there is substantial  improvement in the market value
of the  Company's  Common  Stock  and/or  other  financing  or  other  strategic
alternatives become available.

<PAGE>
      DEPENDENCE  ON  ORTHODONTIC  AFFILIATES.  The  Company  receives  fees for
management  services provided to Affiliated  Practices under Management Services
Agreements,  but does not employ  orthodontists  or control the practices of its
Affiliated Practices. The Company's revenue is dependent on revenue generated by
the  Company's  Affiliated   Practices  and,  therefore,   the  performance  and
professional  reputation of affiliated  orthodontists  (those  orthodontists who
practice  through the  Affiliated  Practices)  are  essential  to the  Company's
success.  Any material loss of revenue by the Affiliated  Practices would have a
material adverse effect on the Company.

      FLUCTUATIONS IN OPERATING RESULTS. The Company's results of operations may
fluctuate  significantly  from  quarter to quarter or year to year.  Results may
fluctuate  due  to  a  number  of  factors,   including  the  timing  of  future
affiliations,  seasonal  fluctuations in the demand for orthodontic services and
future  economic,  competitive  and market  conditions.  Accordingly,  quarterly
comparisons of the Company's revenues and operating results should not be relied
upon as an  indication of future  performance,  and the results of any quarterly
period may not be indicative of results to be expected for a full year.

      RISK  OF  PROVIDING  ORTHODONTIC  SERVICES;  ADEQUACY  OF  INSURANCE.  The
Affiliated  Practices 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  Affiliated  Practices  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.

      Although  the  Management  Services  Agreements  requires  the  Affiliated
Practices to maintain,  at their 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,  the Company  does not  maintain
professional  liability insurance for itself. In addition,  although the Company
has obtained  general  liability  insurance  for itself and requires  that it be
named as an additional  insured party on the  professional  liability  insurance
policies  of its  Affiliated  Practices,  there  can be no  assurance  that  the
Company's exposure in any particular case will be covered by such policies.

      There can be no assurance that the Company, its employees,  the Affiliated
Practices  or the  licensed  orthodontists  employed by or  associated  with the
Affiliated  Practices  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  Affiliated  Practices in the future at adequate
levels or at an  acceptable  cost. A successful  claim against the Company or an
Affiliated  Practice in excess of the relevant  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.

<PAGE>
      GOVERNMENT  REGULATION.  Federal and state laws  extensively  regulate the
relationships  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 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 of 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 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 the operations of the Company to certain jurisdictions
may require structural and organizational modifications of the Company's form of
relationship  with Affiliated  Practices,  which could have an adverse effect on
the Company.  Although the Company believes its operations as currently expected
to be conducted are in material  compliance with existing applicable laws, there
can be no  assurance  that  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
or its expansion.

      STATE LAWS REGARDING  PROHIBITION OF CORPORATE  PRACTICE OF  ORTHODONTICS.
The Affiliated Practices 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.  The Company performs only non-orthodontic  administrative services,
does not  represent to the public that it offers  orthodontic  services and does
not  exercise  influence or control  over the  practice of  orthodontics  by the
practitioners with whom it contracts. Expansion of the operations of the Company
to certain jurisdictions may require structural and organizational modifications
of the Company's  form of  relationship  with  Affiliated  Practices 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  expected to
be conducted is in material  compliance with existing applicable laws, there can
be no  assurance  that  the  Company's  structure  will  not  be  challenged  as


<PAGE>
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 upon the Company.

        DEPENDENCE  ON KEY  PERSONNEL.  The success of the Company is  dependent
upon  the  continued services of the Company's senior  management,  particularly
upon  its  Chief Executive  Officer and President,  Mr. Robert J. Schulhof,  and
its  Director of  Affiliate  Programs,  Dr. Dean C. Bellavia.  Both Mr. Schulhof
and Dr. Bellavia  have  entered into three year  employment  agreements with the
Company,  but there can  be  no assurance  that either of them will  continue in
the employ of the Company  for  the full term of his employment  agreement.  The
Company has  obtained  a  "key-man"  life  insurance  policy  on the life of Mr.
Schulhof  providing  benefits to  the  Company  of $1 million  upon the death of
Mr.  Schulhof.  The loss of the services of Mr.  Schulhof  or Dr.  Bellavia,  or
the  inability to attract  other  qualified   employees,  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 intends to operate.  Each of the
Affiliated  Practices  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  and other  resources  than the
Affiliated Practices. At this time, the Company believes there are several other
companies actively involved in consolidating and managing 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 markets
and  compete  with  the  Company.  Many of the  Company's  competitors  may have
substantially greater financial and other resources than the Company.  There can
no be assurance that the Company will be able to compete effectively.

      CHANGES IN  REGULATION  OF THE  DELIVERY  OF AND  PAYMENT  FOR HEALTH CARE
SERVICES.  Although  Congress  failed to pass  comprehensive  health care reform
legislation   in  1996,  the  Company   anticipates   that  Congress  and  state
legislatures will continue to review and assess alternative health care delivery
and  payment  systems  and  may in the  future  propose  and  adopt  legislation
effecting  fundamental  changes in the health care delivery system.  The Company
cannot  predict  the  ultimate  timing,  scope  or  effect  of  any  legislation
concerning  health care reform.  Any proposed federal  legislation,  if adopted,
could result in significant changes in the availability,  delivery,  pricing and
payment for health care services and products. Various states agencies also have
undertaken  or are  considering  significant  health  care  reform  initiatives.


<PAGE>

Although  it  is  not  possible  to  predict  whether  any  health  care  reform
legislation  will be adopted or, if adopted,  the exact manner and the extent to
which the  Company  will be  affected,  it is likely  that the  Company  will be
affected in some  fashion,  and there can be no  assurance  that any health care
reform legislature, if and when adopted, will not have a material adverse effect
on the Company.

       DEPENDENCE  ON  THIRD  PARTY  REIMBURSEMENT.            A  portion of the
revenue of the Affiliated  Practices on which the Company's  revenue will depend
comes from  commercial  dental  insurance and preferred  provider  plans.  These
providers  and programs are regulated at the state or federal  level.  There are
increasing and significant  public sector pressures to contain health care costs
and to restrict reimbursement rates for dental services. Changes in the level of
support by federal and state governments of health care services, the methods by
which such  services may be  delivered,  and the prices of such services may all
have a material  impact on revenue of the  Affiliated  Practices,  which in turn
could have a material adverse effect on the Company.

      NO  ASSURANCE  OF NASDAQ  SMALL CAP  MARKET  LISTING;  RISK OF  LOW-PRICED
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.  Although the Company met the  standards for initial
listing upon its IPO,  there can be no assurance  that the Company will continue
to satisfy the  requirements  for maintaining a Nasdaq Small Cap Market listing.
If the  Company's  securities  were to be  excluded  from the  Nasdaq  Small Cap
Market,  it would adversely affect the prices of such securities and the ability
of holders to sell them,  and the  Company  would be required to comply with the
initial listing requirements to be relisted on the Nasdaq Small Cap Market.


<PAGE>
      If the Company is unable to satisfy maintenance requirements and the price
per share were to drop below $5.00,  then unless the Company  satisfied  certain
net asset tests, the Company's  securities would 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  reducing  the level of
trading activity in the secondary market for a stock that becomes subject to the
penny  stock.  If the Common  Stock  becomes  subject to the penny stock  rules,
holders of the Company's  Common Stock 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  Warrants  in  the  Company's  initial  public
                  offering  (the "IPO") was declared  effective on September 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)  $1.8  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



<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:   November 13, 1998                          By: /s/Robert J. Schulhof
                                                   Robert J. Schulhof
                                                   Chief Executive Officer


Date:   November 13, 1998                          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)