SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                  FORM 10-KSB
(Mark One)

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

     For the fiscal year ended December 31, 1998

                                       OR

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

           For the transition period from __________ to ____________.

                        Commission File Number: 0-23055

                            Omega Orthodontics, Inc.
                 (Name of Small Business Issuer in Its Charter)

           Delaware                                      95-4596853
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
Incorporation or Organization)

3621 Silver Spur Lane, Acton, California                 93510
(Address of Principal Executive Offices)               (Zip Code)

                                 (805) 269-2841
                (Issuer's Telephone Number, Including Area Code)

     Securities registered under Section 12(b) of the Exchange Act:  None

     Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.01 par value
                   Redeemable Common Stock Purchase Warrants

      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

      Check if there is no disclosure  of delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to the Form 10-KSB. [ ]

      The  issuer's   revenues  for  the  year  ended  December  31,  1998  were
$7,387,585.

      The aggregate market value of the voting stock held by  non-affiliates  as
of February 27, 1999 was $2,486,584.  The amount was computed by reference to
the average bid and asked  prices of the Common Stock on that date on The Nasdaq
Stock Market.

      As  of  February  27,  1999,   5,052,584   shares  of  Common  Stock  were
outstanding,  and  2,070,000  Redeemable  Common Stock  Purchase  Warrants  were
outstanding.
<PAGE>
                                     PART I

                           Forward Looking Statements

      Except for the historical  information contained herein, the discussion in
this Report and any document  incorporated  herein by reference contains certain
forward-looking  statements  that  involve  risks  and  uncertainties,  such  as
statements of the Company's  plans,  strategies,  objectives,  expectations  and
intentions.  The cautionary  statements made in the Management's  Discussion and
Analysis - "Safe Harbor Statement under the Private Securities Litigation Reform
Act of  1995"  should  be  read  as  being  applicable  to  all  forward-looking
statements  wherever  they appear.  The  Company's  actual  results could differ
materially  from those  discussed or  incorporated  therein.  Factors that could
cause or contribute to such differences  include those discussed in Management's
Discussion  and  Analysis  as well as those  discussed  elsewhere  herein or the
documents incorporated herein by reference.

Item 1.     Description of Business

Introduction

      Omega  Orthodontics,  Inc. ("the Company" or "Omega") provides  management
and marketing  services  primarily to  Orthodontic  and other  specialty  dental
practices in the United  States.  Since its inception in August 1996,  Omega has
provided  these  services on a fee for services  basis and following its initial
public offering on October 1, 1997, the Company typically continues to offer its
services under an affiliate relationship with each practice, whereby the Company
purchases the equity  interests 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  December  31,  1998,  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 its 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,  Omega
Acquisition  Corporation,  a Delaware  corporation,  the  Company  and Robert J.
Schulhof.  Pursuant to the terms of the Agreement,  each share of Company Common
Stock  will 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 bring  together  two
organizations  that share  common  values  and have  compatible  strategies.  In
addition  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, as well as other customary
conditions.  The Companies  expect to provide  details of the proposed merger to
their  shareholders  prior to seeking their approval at a special meeting of the
shareholders called for such purpose.

Business Operations

      Pursuant to its  Management  Service  Agreements,  the Company  receives a
monthly management fee for providing  facilities,  support staff and supplies to
its  Affiliated  Practices  and  institutes  a program of  systems,  methods and
procedures  the Company refers to as the Omega  Exceptional  Practice Model (the
"Model").  The  Model  is  designed  to  increase  the  Orthodontic  Affiliate's
profitability by focusing on and improving customer service while simultaneously
reducing costs and increasing operating efficiency.

      Since its  inception,  Omega  has  sought to  affiliate  with  established
orthodontic  and other specialty  dental  practices that Omega believes have the
potential for significant growth utilizing the Model. Omega considers  financial
and  operational   factors  that  include  the  practice's  gross  income,  cost
structure,  existing treatment contracts,  fees,  schedules,  referral rates and
sources,   health   maintenance   organization   relationships,   case   starts,
appointments  per  day  and  average  treatment  times.   Omega  also  evaluates
demographic  factors that include the  practice's  location  with respect to the
average income levels and concentration of families with children in the area.

      The Company's strategy is to (i) enter into affiliation  relationships and
Management Service Agreements with established  orthodontic  practices that meet
the Company's  criteria and (ii) achieve  operating  efficiencies  and increased
profitability  for each such practice through  implementation  of the Model. The
Model is designed to permit the practice to meet or exceed patient  expectations
by (a) offering  flexible payment plans, (b) scheduling  convenient  appointment
times,  (c) ensuring that treatment is delivered on time, (d) updating  patients
and their referring  dentists  regularly on treatment  programs and (e) training
staff to anticipate and address patient needs.

      To date, the Company has focused its marketing efforts on the practices of
the  approximately  4,500  orthodontists  over  the  age of 47 who  the  Company
believes are planning their  transition to retirement.  The Company  believes it
can generally  place a higher value on a mature  practice  than other  potential
affiliates or buyers, many of whom are recent orthodontic graduates. The Company
believes that this higher valuation,  combined with consideration in the form of
a combination of cash,  notes and the Company's Common Stock and the opportunity
to  delegate  managerial  and  marketing   responsibilities  to  an  experienced
management  team,  generally  makes  affiliation  with the Company an attractive
alternative  for  orthodontists  planning their  transition to  retirement.  The
Company also targets younger orthodontists who may want to merge their practices
with the practice of an orthodontist in transition or take over such a practice.

The Orthodontic Industry

      General.  Omega believes that the annual market for orthodontic  treatment
and  services is  approximately  $3.6  billion.  Based on U.S.  census data that
indicate that the number of children  between the ages of 5 and 19 will increase
by  approximately  10.4 million by the year 2000,  the Company  expects that the
growth in this population  group will result in increased demand for orthodontic
services.  The  orthodontic  marketplace  is highly  fragmented  and consists of
approximately 9,000 practicing orthodontists, a significant majority of whom are
sole  practitioners.  Omega believes that many of the  orthodontists in practice
today have excess  patient  capacity  and lack the  training  and  resources  in
management  and marketing  techniques to fill that capacity  effectively.  It is
Omega's  belief  that less than 5% of the  orthodontic  practices  in the United
States are presently  managed by independent,  professional  management  service
organizations and that an opportunity  exists for the Company to market and sell
its services to the orthodontic practices that are not currently managed by such
organizations.

      The  projected  growth of the  orthodontics  market  derives  from several
demographic and economic factors.  Omega believes that the number of patients of
prime  orthodontic  treatment  age (12 years old) will likely  remain at a level
that is 15%  higher in the 10 years  ending  in 2002  than in the prior  10-year
period. Also, although orthodontic  treatment has been historically viewed as an
expensive  elective,  advances in practice methods and technologies have made it
relatively more affordable.  As a result,  orthodontic treatment is being sought
by a broadening segment of American society.

      Orthodontic  Practice Dynamics.  Although there exists a large and growing
demand for orthodontic  services in the United States, the Company believes that
the  orthodontic  industry  is  presently  ill-prepared  to  meet  that  demand.
Orthodontists,  the vast  majority  of whom are sole  practitioners,  are  often
highly skilled clinicians but generally are not trained in marketing  themselves
as professional  service  providers.  Most rely on referrals from other dentists
and from  current or past  patients.  Accordingly,  the  Company  believes  that
achieving sustainable growth through referrals requires both clinical excellence
and a patient focus that emphasizes value, flexibility and efficiency.

      In  order  to   increase   profitability,   the  Company   believes   that
orthodontists  must improve their  management and marketing  techniques.  Unlike
many other  medical  and dental  specialties,  orthodontics  involves  treatment
delivered  over a period  of two to three  years  for a fixed  fee.  Much of the
treatment can be provided  efficiently by the  orthodontist  delegating  certain
clinical and communications  tasks to trained  assistants.  The Company believes
that  creative  management  and  effective  delegation  will  reduce per patient
treatment  costs.  In  addition,  the  Company  believes  that the well  managed
orthodontic  practice will also be able to handle a larger  patient  base,  and,
with a patient  centered  emphasis on the quality and efficiency of the services
it offers, will expand that base through professional and patient referrals.  As
a result, the Company believes that an orthodontic practice with a qualified and
capable  orthodontist  operating  under a well-designed  efficient  schedule and
utilizing  professional   management  and  marketing  practices  is  capable  of
enhancing its profitability.

      Market for Orthodontic  Practices.  The value of orthodontic  practices in
the United States has fallen for the past several years. The number of potential
sellers, generally orthodontists approaching retirement age, is relatively large
compared  to the  potential  purchasers.  This  downward  pressure on prices for
orthodontic  practices results primarily from the fact that approximately 4,500,
or 50%, of the practicing orthodontists in the United States are over the age of
47. The  Company  believes  that many are  looking to make a  transition  out of
active practice while realizing as much value as possible from the goodwill they
have built up over their years in practice.

      State laws governing the practice of dentistry and its specialties and the
shrinking  number of orthodontic  graduates  intending to practice in the United
States have combined to limit the number of potential  purchasers of orthodontic
practices.  State dental  practice  statutes and  professional  codes  generally
provide  that only  orthodontists  may own,  operate or  control an  orthodontic
practice.   These  restrictions  have  functioned  to  depress  the  market  for
orthodontic  practices  and  have  inhibited  the  development  of  professional
management in the industry.

      Another major factor in limiting the value of orthodontic practices is the
historic  oversupply of orthodontists in the United States which has reduced the
number of recent  orthodontic  graduates.  In addition,  many of the more recent
graduates are foreign  students who plan to return to their own  countries.  The
orthodontic  graduates who seek to buy a practice  generally  have student loans
and limited financial  resources.  As a result,  Omega believes that the average
purchase  price for an  orthodontic  practice has fallen from roughly one year's
gross revenues to  approximately  70% of that number.  In addition,  the selling
orthodontists  often  must  finance  the  purchase  by  accepting  a note  for a
significant part of the purchase price and, in order to ensure that the practice
performs  well  enough to  service  the debt,  often must stay  involved  in the
management and marketing of the practice.

Business Strategy

      Over  the  past  year,  the  Company's  strategy  has been to seek out and
affiliate with established orthodontic practices that it believes have potential
for  significant  growth  utilizing  the  Model.  Upon  the  consummation  of an
Affiliation,  the Company implements the Model in an effort to achieve operating
efficiencies and increase profitability for the practice.

      At the present time, the Company believes that due to its size and capital
resources limitations, the ability of the Company to continue external expansion
will depend upon the  availability  of additional  financing to fund  additional
affiliations,  which  may be  obtained  through  the  development  of  strategic
alliances  with other  companies.  Over the past year, the Company has evaluated
and held  discussions  regarding such potential  strategic  alliances with other
companies.  In doing so, the  Company  has been  following a policy that it will
publicly  announce  proposed  transactions  only upon the signing of  definitive
agreements.  However,  no assurance can be given that discussions  regarding any
particular affiliation will lead to the signing of definitive agreements.

      The Company's  future success will largely depend upon the  development of
strategic alliances mentioned above or its ability to increase the internal rate
of return  from its current  practices,  as well as to lower  current  operating
costs.  The Company  believes  that the  addition of nine new  practices  in the
twelve months ended  December 31, 1998,  three of which were  consummated in the
third quarter of 1998, will contribute significantly to future revenues.

      In  affiliating  with  the  new  practices  and in  searching  for  future
affiliates, the Company will continue to conduct a comprehensive analysis of the
prospective affiliate, including a thorough financial and operational review and
evaluation of staff, facilities,  equipment and systems.  Initially, an estimate
of the current value of the practice is calculated based on the practice's gross
income,  net profit and new treatment  contracts written during the prior twelve
months. The Company evaluates the practice's  capacity for improvement under the
Model by  analyzing  (i) the  number of new  patient  exams,  treatment  starts,
patients in active  treatment  and patients  seen per day, (ii) the fees charged
for  different  treatments,  (iii)  the  costs  incurred  by  the  practice  for
employees,  facilities,  supplies  and  laboratory  work and (iv) the  number of
treatment  chairs and dental and clinical  assistants  and the square footage of
office space employed by the practice.  Also,  current staff are  interviewed to
determine their  suitability for and commitment to the practice,  and facilities
and equipment are reviewed to ensure that they will support a larger and growing
practice without significant  additional cost. Finally, the Company analyzes the
prospective  affiliate's  current  systems for starting new patients,  reviewing
treatment  programs,  scheduling,   communicating  with  patients  and  referral
sources,  marketing  and  controlling  expenses,  and the cost of  upgrading  or
replacing the systems.

      The Company  seeks  practices  that have the  capacity  to increase  their
profitability  initially through improved  performance on existing patient bases
rather  than  through  immediately  increasing  new patient  exams.  The Company
generally   requires   that   practices   demonstrate   the  potential  to  grow
approximately  40%  with a  relatively  small  increase  in new  patient  exams.
Practices that have developed strong  professional  referral  relationships  and
have  attractive  locations and facilities are preferred over those that rely on
mass marketing techniques and health maintenance  organization  relationships to
grow.

      The Company also  evaluates  demographic factors  affecting  the practice.
Practices  located where there are significant  concentrations  of families with
young  children  are  attractive,  particularly  when the  families  have higher
incomes than the national  average and these  populations are stable or growing.
To date, the Company has focused its efforts on locating  practices in the South
or far West of the United States. At year end 1998,  Affiliates were situated in
the following locales:  Goodyear and Bullhead City,  Arizona;  Huntington Beach,
Acton, Hawthorne, Garden Grove, Woodland Hills, and Encino, California; Colorado
Springs,  Colorado;  Champaign,  Illinois; Elko and Reno, Nevada; Austin, Texas;
Conyers,  Georgia; Bend, Oregon; Glen Allen, Virginia; and Watertown,  Brookings
and Sisseton, South Dakota.

      If the practice  satisfies the Company's  criteria for an affiliation,  an
offer is made for the  practice to become an  Affiliated  Practice.  The Company
outlines  proposed  financial terms of the affiliation,  including the Company's
valuation  of the  practice  and the  amount of cash,  notes  and  shares of the
Company's  Common  Stock that the Company  proposes to pay to acquire the equity
interests in the MSO associated with the practice. Once the basic business terms
of the  affiliation are agreed to, the parties proceed to execute an Affiliation
Agreement and the related practice Management  Services  Agreement.  The Company
has paid, on average for each of its current Affiliated Practices,  an aggregate
purchase price per MSO of approximately  $567,000, of which the cash portion was
approximately  $292,000 and, in certain  cases,  issued notes  bearing  interest
ranging between 8.0% and 8.5% and ranging between $30,000 and $374,000.

      Implementing  the Omega  Exception  Practice  Model.  The Model is patient
centered and designed to promote  customer  service and increase the Orthodontic
Affiliate's  productivity  while permitting the  orthodontist  practicing at the
Orthodontic  Affiliate (the  "Affiliated  Orthodontist")  to continue to deliver
quality  orthodontic  treatment.  The  Model  focuses  the  orthodontic  team on
understanding  patient  expectations  and provides the orthodontic team with the
training,   systems  and  other  tools   necessary   to  meet  or  exceed  those
expectations. The Model is generally implemented in the Affiliated Practice over
a period of 12 months and involves  the active  participation  of the  Company's
professional staff, the Affiliated Orthodontist and his or her staff, as well as
a  practice   facilitator   assigned  by  the  Company  to  oversee  the  entire
installation of the Model, monitor its progress and provide follow-up support.

      Customer service  permeates all aspects of the Model. The Company provides
a scheduling  system that offers  patients a wide choice of  appointment  times,
including night and weekend  appointments.  The scheduling system also carefully
plans the Affiliated Orthodontist's time so that the patient is seen on schedule
and the treatment is performed within the allotted  appointment  time. The Model
offers flexible payment plans that meet the varying financial  situations of the
patients and provides  for the review of  insurance  benefits and credit  issues
with the  patient in advance so that  patients  coming to a first exam will have
sufficient information at the end of that exam to commit to the proposed plan of
treatment.

      The Company  believes  that good  communication  between  patients and the
orthodontic team is essential to building successful relationship and developing
customer satisfaction. The Company trains the Affiliated Orthodontist and his or
her staff in  interpersonal  skills and  communication  techniques and carefully
plans and scripts patient  interactions so that the orthodontic  team is attuned
to patient needs and can handle their questions accurately and efficiently.  The
staff  is  instructed  to  make  courtesy   calls  to  patients  after  long  or
particularly  difficult appointments to inquire about patient comfort and answer
questions.  In addition,  the Model uses computerized analysis and video imaging
to provide the patient with a clear  understanding  of the  proposed  treatment,
including all planned tooth and jaw movements, and its intended results.

      In order to enhance  the total  dental care the  patient  receives  and to
improve the Orthodontic  Affiliate's  professional  referral sources,  the Model
also encourages  frequent  communication  between the  orthodontic  team and the
referring dentist.  Automated diagnostic letters that include a treatment status
report  and video  images  of the  patient  are  periodically  delivered  to the
referring  dentist.  Brief  seminars  on current  orthodontic  developments  are
planned from time to time at the Orthodontic Affiliate's office in order to keep
referring  dentists and their staffs informed and to promote  opportunities  for
professional  and staff  interaction.  By encouraging  the close  integration of
orthodontic and general dental  services,  the Model promotes  improved  overall
dental care for the patient and fosters  strong  relationships  with the general
dentists for future referrals.

      The  Company  believes  that a more  productive  practice  also serves the
interest  of the  orthodontic  patients.  In order to increase  the  Orthodontic
Affiliate's  productivity,  the Model requires the orthodontic team to establish
operational goals, such as increasing the number of treatment starts, percentage
of patients seen on time and the revenue generated per minute of chair time. The
orthodontic  team also sets  financial and quality  goals for the  practice.  In
order to assist the orthodontic  team in  accomplishing  these goals,  the Model
contains  written  policies and procedures for the orthodontic team to adopt and
follow.  In addition,  the Model will generally require either an upgrade to the
Orthodontic   Affiliates   present  systems  or  the   installation  of  a  new,
computerized  operational and financial reporting system so that progress can be
measured regularly.

      The Company believes that  implementation of the Model generally should be
accomplished  over a 12 month  period.  The  program is  overseen  by one of the
Company's  experienced practice  facilitators who coordinates the efforts of the
orthodontic  team  and  the  Company.   The  practice   facilitator  visits  the
Orthodontic  Affiliate monthly during this period to train the orthodontic team,
install systems and programs and audit and debug their  performance.  By the end
of the first 12 months, the Orthodontic  Affiliate generally will have completed
the following tasks: (i) established a new staff organizational  structure; (ii)
installed a communication and marketing system;  (iii) installed a sophisticated
scheduling  system to increase  treatment  productivity;  (iv) instituted a new,
flexible fee and payment program;  (v) installed a new or upgraded financial and
operational reporting system; (vi) conducted staff relationship training;  (vii)
conducted  initial and final  patient  surveys;  and (viii)  installed a patient
communication and treatment completion review program.

Agreements with Affiliated Orthodontists

      The Company  affiliates  with  orthodontic  practices  through a series of
contractual arrangements.  Initially, the Company and an Affiliated Orthodontist
enter into an  Affiliation  Agreement  through  which the Company  acquires  the
equity  interests  in the MSO  associated  with  the  Affiliated  Orthodontist's
practice. (The Company may cause a wholly-owned subsidiary to acquire the equity
interests in the MSO to reduce adverse tax  consequences  in certain cases.) The
Affiliated Orthodontist,  who generally practices through and holds the practice
assets  in a  professional  corporation,  converts  that  entity  into a general
corporation (the MSO) and creates a new professional  corporation  through which
the  Affiliated   Orthodontist   continues  to  provide  orthodontic  care  (the
Orthodontic  Affiliate).  The Company  acquires the equity interests in the MSO,
and the Affiliated Orthodontist causes the Orthodontic Affiliate to enter into a
long-term Management Services Agreement with the Company.

      Through the Management Services  Agreement,  the Company provides practice
management and marketing services,  facilities and non-professional personnel to
the Orthodontic  Affiliate for a monthly fee. In order to provide for an orderly
transition in the event that the Management  Services Agreement is terminated or
expires or the  Affiliated  Orthodontist  ceases  practice with the  Orthodontic
Affiliate,  the  parties  enter  into a  Stock  Put/Call  Option  and  Successor
Designation Agreement (the "Put/Call Agreement"). This agreement creates for the
Affiliated  Orthodontist  certain  rights  and  obligations  to  repurchase  the
practice  assets held by the Company in the event that the  Management  Services
Agreement is  terminated  and grants the Company  certain  rights to designate a
successor  orthodontist to purchase the stock of the Orthodontic  Affiliate when
the  Affiliated   Orthodontist  ceases  practice  through   retirement,   death,
disability or in other enumerated cases.

      Affiliation Agreement.  The Affiliation Agreement is the mechanism through
which the Company  acquires the equity  interests in the MSO of the  Orthodontic
Affiliate,  typically in exchange for a combination  of cash, a promissory  note
and shares of Common Stock of the Company.  The  completion  of the  transaction
under the  Affiliation  Agreement is subject to certain  conditions,  including,
without  limitation,  that  there  has been no  material  adverse  change to the
Orthodontic  Affiliate between the time the Affiliation  Agreement is signed and
the  transaction  is closed and that the  Orthodontic  Affiliate and the Company
have entered into the Management Services Agreement and the Put/Call Agreement.

      Management  Services  Agreement.   Pursuant  to  the  Management  Services
Agreement,  the Company  provides the Orthodontic  Affiliate with  comprehensive
management,  financial and marketing services and facilities,  equipment (in the
control of the  Orthodontic  Affiliate,  where  required by statute) and support
personnel  required  by  the  Orthodontic  Affiliate  to  operate  its  clinical
orthodontic  practice.  The Company maintains existing orthodontic  equipment at
the offices of the  Orthodontic  Affiliate at the Company's  expense and,  after
consultation  with the Affiliated  Orthodontist and agreement upon the equipment
needs of the  Orthodontic  Affiliate,  purchases  new  equipment  for use by the
Orthodontic Affiliate.  The Company is appointed the sole and exclusive business
manager of the  Orthodontic  Affiliate.  In  addition to  providing  facilities,
equipment  (in the  control of the  Orthodontic  Affiliate,  where  required  by
statute) and support services,  the Company undertakes all purchasing,  payment,
billing,  collection  and payroll  functions for the  Orthodontic  Affiliate and
facilitates the implementation of the Model.

      The  Orthodontic  Affiliate  is solely  responsible  for and has  complete
control and supervision over the professional  aspects of its practice,  as well
as the provision of all professional  services,  including,  without limitation,
the selection of the course of treatment for a patient,  procedures or materials
to be used as part of such  treatment and the manner in which such  treatment is
carried  out.  The  Orthodontic  Affiliate  has sole  authority  to  direct  the
business,  professional  and  ethical  aspects  of its  practice.  It makes  all
professional  hiring  decisions,  renders  patient  care,  and keeps all patient
dental records. The Orthodontic  Affiliate is also responsible for entering into
an  employment  agreement,   including  non-competition  provisions,  with  each
orthodontist  engaged by it, including the Affiliated  Orthodontist,  and paying
all  salaries  for  dental  professionals,   professional  licensure  and  board
certification fees and professional liability insurance premiums.

      The Management  Services Agreement typically has an initial term of twenty
(20) years and is renewable for two successive ten (10) year periods. During the
initial term and any renewal  term,  the  Management  Services  Agreement may be
terminated by the Company or the  Orthodontic  Affiliate only for "cause," which
includes the bankruptcy of or a material default by the other party. In exchange
for the performance of its duties and obligations under the Management  Services
Agreement,  the Company receives a monthly management fee. The fee, which varies
somewhat from practice to practice,  is generally 65% to 75% of the  Orthodontic
Affiliate's gross collections for the period.  From the monthly fee, the Company
pays all of its expenses in  providing  services to the  Orthodontic  Affiliate,
including,  without  limitation,  the  salaries  and  benefits of the  Company's
employees,  the costs of any consultants,  corporate overhead, lease obligations
and taxes. In the event that the gross  collections of an Orthodontic  Affiliate
in a given  month are not  sufficient  to pay the  entire  amount  of  salaries,
benefits and other direct costs  payable by the  Orthodontic  Affiliate  and the
Company's  monthly fee for such month,  the Company  anticipates  making routine
advances to the  Orthodontic  Affiliate to fund any  shortfalls  for such month.
Such  advances  will  generally  be repaid by the  Orthodontic  Affiliate to the
Company  without  interest as adequate  funds are  generated by the  Orthodontic
Affiliate in subsequent months.

      Put/Call Agreement.  The Put/Call Agreement governs the dissolution of the
affiliation between the Orthodontic Affiliate and the Company, whether caused by
a termination or expiration of the Management  Services Agreement or as a result
of the cessation of practice by the  Affiliated  Orthodontist.  In the case of a
termination or expiration of the Management Services Agreement,  the Orthodontic
Affiliate  may be required to  repurchase  the assets of the MSO utilized in the
practice of the Affiliated  Orthodontist as set forth on the MSO's balance sheet
as of the end of the month  immediately  preceding the date of such  termination
(when the  termination  is  initiated  by the  Company) or may have the right to
repurchase  such assets (when the  termination  is initiated by the  Orthodontic
Affiliate). Such assets typically will include leasehold improvements, fixtures,
furniture,  furnishings,  equipment, inventory, supplies and intangibles. In the
event that the Company initiates the termination,  the Orthodontic  Affiliate is
typically  required  to pay book  value  for the  assets  as shown on the  MSO's
balance  sheet,  and,  in the  event the  Orthodontic  Affiliate  initiates  the
termination, the Company is typically required to pay an amount equal to the sum
of (a) the amount of cash paid to the  Affiliated  Orthodontist  by the  Company
under  the  Affiliation  Agreement,  (b) the  original  principal  amount of the
Promissory  Note (if any) issued by the Company to the  Affiliated  Orthodontist
under the Affiliation  Agreement,  and (c) the value of that number of shares of
Common  Stock  issued  to the  Affiliated  Orthodontist  under  the  Affiliation
Agreement,  such value to be determined by multiplying  such number of shares by
the average last sales (or closing) price for the Company's  Common Stock on the
Nasdaq  Small Cap Market for each of the 60 trading days  immediately  preceding
the date the notice of the Orthodontic  Affiliate's  determination to repurchase
such assets is delivered to the Company. When the Affiliated Orthodontist ceases
practicing  with the Orthodontic  Affiliate,  whether as a result of retirement,
death,  disability  or other  reason,  the Company  typically  has the option to
designate a successor  orthodontist to purchase the  Orthodontic  Affiliate from
the Affiliated  Orthodontist in order to ensure that the  Orthodontic  Affiliate
continues  to  operate  and to  perform  its  obligations  under the  Management
Services Agreement. The Company may choose not to exercise this option where the
Affiliated  Orthodontist  proposes to sell the Orthodontic  Affiliate to another
orthodontist   previously   approved  by  the  Company  to  be  the   Affiliated
Orthodontist's successor in the ownership of the Orthodontic Affiliate.

Competition

      The business of providing  orthodontic  services is highly  competitive in
each of the  markets  in  which  the  Company  operates.  Each of the  Company's
Orthodontic  Affiliates faces competition from orthodontists who maintain single
offices or operate a single satellite office, as well as from orthodontists that
maintain  group  practices  or  operate in  multiple  offices.  The  Orthodontic
Affiliates also compete with dentists who provide certain orthodontic  services.
The provision of  orthodontic  services by such dentists has increased in recent
years.

      At this time,  the Company  believes  that there are four  publicly-traded
companies actively competing in the orthodontic  practice  management market and
that there are several other companies participating in the market. In addition,
the  Company   believes  that  several   general  dental   management   services
organization  may be taking steps to enter the  orthodontic  management area and
are  establishing  divisions to compete in the  Company's  target  markets.  The
Company believes that of the above-mentioned competitors, most are significantly
larger  and have  greater  financial,  marketing  and other  resources  than the
Company.  Management  still believes the Company appeals to a niche  orthodontic
market  that  relies  primarily  on  traditional  patient  and  general  dentist
referrals to generate new business rather than relying on mass marketing and low
fees. However, given the disparity in resources,  there can be no assurance that
the Company will be able to compete effectively.

Government Regulation

      The  field of  orthodontics  is  highly  regulated,  and  there  can be no
assurance that the regulatory environment in which the Company operates will not
change  significantly  in the  future.  In  general,  regulation  of health care
companies in increasing.

      Every  state  imposes  licensing   requirements  on  orthodontics  and  on
facilities operated and services provided by orthodontists. In addition, federal
and state laws regulate health maintenance  organizations and other managed care
organizations for which  orthodontists may be providers.  In connection with the
entry into new markets, the Company and its Affiliated  Orthodontists may become
subject to compliance with additional regulations.

      The operations of the Orthodontic  Affiliates must meet federal, state and
local  regulatory  standards  in the areas of safety  and  health.  Based on its
familiarity  with the  operations  of its current  Affiliated  practices and the
activities  of the  Affiliated  Orthodontists,  the  Company  believes  that its
Orthodontic  Affiliates  are in  compliance  in all material  respects  with all
applicable federal, state and local laws and regulations.

      The laws of many states  prohibit  orthodontists  from splitting fees with
non-orthodontists  and prohibit  non-orthodontic  entities (such as the Company)
from  practicing   dentistry,   including   orthodontics,   and  from  employing
orthodontists or, in certain circumstances,  orthodontic assistants. The laws of
some  states  prohibit  advertising  of  orthodontic  services  under a trade or
corporate  name  and  require  that  all  advertising  be in  the  name  of  the
orthodontist.  A number of states also regulate the content of  advertisement or
orthodontic  services and the use of promotional  gift items. A number of states
limit the ability of a non-licensed dentist or non-licensed  orthodontist to own
equipment or offices used in an orthodontic practice. Some of these states allow
leasing  of  equipment  and office  space to an  orthodontic  practice,  under a
bona-fide  lease,  if the  equipment  and office remain in the complete care and
custody of the orthodontist.  Management believes, based on its familiarity with
the  operations  of its current  Affiliated  Practices,  the  activities  of the
Company's  Affiliated  Orthodontists  and the applicable  regulations,  that the
Company's  current and  planned  activities  do not  constitute  the  prohibited
practices  contemplated  by these  statutes  and  regulations.  There  can be no
assurance,  however, that future  interpretations of such laws, or the enactment
of  more  stringent  laws,  will  not  require   structural  and  organizational
modifications  of the  Company's  existing  relationships  with  its  Affiliated
Orthodontists  or the  operation  of the  Orthodontic  Affiliates.  In addition,
statutes in some states could restrict  expansion of Company operations in those
jurisdictions.

      The  Company  regularly  monitors  developments  in laws  and  regulations
relating to  dentistry.  The  Company may be required to modify its  agreements,
operations  and  marketing  from  time to time in  response  to  changes  in the
business and regulatory  environment.  The Company plans to structure all of its
agreements, operations and marketing in accordance with applicable law, although
there  can be no  assurance  that  its  arrangements  will  not be  successfully
challenged or that required changes may not affect operations or profitability.

Employees

      At December 31, 1998,  the Company had  approximately  160  employees  and
utilized a number of independent  contractors  to assist with certain  corporate
functions and to provide consulting services to orthodontic  practices.  None of
the Company's  employees are represented by a collective  bargaining  agreement.
The Company considers its relationship with its employees to be satisfactory.

Insurance

      Providing  orthodontic  services  entails an inherent risk of professional
malpractice and other similar claims. Although the Company does not influence or
control the  practice  of  dentistry  by the  Affiliated  Orthodontists  or have
responsibility  for compliance  with certain  regulatory and other  requirements
directly  applicable to Orthodontic  Affiliates,  the  contractual  relationship
between the Company and the  Orthodontic  Affiliates  may subject the Company to
medical  malpractice  actions.  There can be no assurance that claims,  suits or
complaints relating to services and products provided by Orthodontic  Affiliates
will not be asserted  against the Company in the future.  The  availability  and
cost of professional  liability  insurance has been affected by various factors,
many of which are beyond the control of the Company.  The cost of such insurance
to the  Orthodontic  Affiliates  may have an  adverse  effect  on the  Company's
operations.

      The Management Services Agreements will require the Orthodontic Affiliates
to maintain, at their expense,  professional  liability insurance for themselves
and each orthodontist employed by or otherwise providing orthodontic services on
behalf of the  Orthodontic  Affiliate  in the  minimum  amount of  $500,000  per
occurrence  and  $1,000,000  in the  aggregate.  In addition,  each  Orthodontic
Affiliate  will  undertake  to  comply  with  all  applicable   regulations  and
requirements,  and the Company will be 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.

      The  Company  maintains  other  insurance  coverages  including  property,
workers'  compensation  and directors' and officers'  liability  insurance which
Management  considers  to be adequate for the size of the Company and the nature
of its business.

Item 2.     Description of Property

      The Company leases  facilities for each of its current  affiliates,  under
various operating leases which expire at various times through October 2017. The
Company   subleases   office  space  and  maintain  its  financial   records  in
Massachusetts.

Item 3.     Legal Proceedings

      The Company is not a party to any material pending legal proceedings.

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

      None.

                                     PART II

Item 5.     Market for Common Equity and Related Stockholder Matters

(a)   Market Information

      The Company's Common Stock and Redeemable  Common Stock Purchase  Warrants
are traded on The Nasdaq Stock Market  ("Nasdaq")  under the symbols  "ORTH" and
"ORTHW," respectively.  Prior to October 3, 1997, there was no public market for
the Common Stock or the Redeemable Common Stock Purchase Warrants. The following
table sets forth the high and low bid quotation  information for 1998 by quarter
for each of the Common Stock and the Redeemable Common Stock Purchase  Warrants,
as reported on Nasdaq.  The  quotations  reflect  inter-dealer  prices,  without
retail  mark-up,   mark-down  or  commission,   and  may  not  represent  actual
transactions.

                                        High        Low
First Quarter, 1998
      Common Stock                     $3.25       $2.88
      Warrants                         $0.44       $0.38

Second Quarter, 1998
      Common Stock                     $2.38       $1.69
      Warrants                         $0.31       $0.19

Third Quarter, 1998
      Common Stock                     $1.44       $0.50
      Warrants                         $0.13       $0.06

Fourth Quarter, 1998
      Common Stock                     $0.94       $0.44
      Warrants                         $0.06       $0.06

The Company has been  notified by Nasdaq that it may be subject to  delisting of
the Company's Common Stock and Warrants from the Nasdaq Stock Market for failure
to maintain a bid price in accordance  with the Nasdaq's  rules.  The Company is
currently appealing Nasdaq's delisting notification and a written hearing on the
issues is anticipated to occur in April, 1999.

(b)   Holders

      As of February 27,  1999,  there were  approximately  50  stockholders  of
record and  approximately  three (3) holders of record of the Redeemable  Common
Stock  Purchase  Warrants.  The  number  of  record  holders  does  not bear any
relationship to the number of beneficial owners of common stock or warrants.

(c)   Dividends

      The Company has never declared or paid dividends on its Common Stock.  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. The declaration, payment and amount of future dividends,
if any, will depend upon the future earnings,  results of operations,  financial
position and capital requirements of the Company, among other factors.

(d)   Use of Proceeds from Registered Securities

      The net proceeds to the Company from the sale of  securities on October 1,
1997 after deduction of underwriting  discounts and other offering  expenses was
approximately $9.5 million.  The company used such net proceeds as follows:  (i)
$1.1  million  for the  repayment  of debt;  (ii)  $4.9  million  to  consummate
affiliations  with the  Affiliated  Practices;  (iii) $2.5  million  for working
capital, equipment, leasehold improvements, repayment of notes payable and other
corporate purposes.

Item 6.     Management's Discussion and Analysis

General

      Omega was  incorporated in Delaware in August 1996.  Following its initial
public  offering  ("IPO") on October 1,  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 a 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 or her 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,  5-year  notes and  unregistered  Common Stock or stock
options. As of December 31, 1998, the Company had completed 17 affiliations 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 facility and the  Company's  services for a period of 20 years,
with two  10-year  extensions.  While  each  Management  Services  Agreement  is
negotiated  based  on  specific  circumstances,   the  management  fees  charged
typically range between 65% and 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 twelve months of 1998, the Company entered into
Affiliation  Agreements  with nine additional  practices  (three 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,  and a support staff of
three dental assistants and three office personnel. As of December 31, 1998, the
Company had 15 operating  Affiliated  Practices,  consisting of 18 doctors in 10
states.  Included in the Affiliated Practices is an interim management agreement
with one  practice  under  terms  similar to its  standard  Management  Services
Agreement.

      In  consideration  for  acquiring  the nine MSOs during the twelve  months
ended  December 31, 1998,  the Company paid an aggregate of  approximately  $2.7
million in cash, issued an aggregate of approximately  $986,000 in notes bearing
interest at 8.5%,  assumed  approximately  $393,000 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  through  the
implementation of a comprehensive restructuring program to be implemented in the
first quarter of 1999.

      As a result of the  affiliations  consummated  by the  Company  during the
twelve (12) months ended December 31, 1998, the Company has depleted its capital
resources and is exploring  avenues through which to improve its working capital
and cash position.  The Company  believes that active  recruitment of additional
practice  affiliations  in the first  half of 1999 will  only  serve to  further
deplete the capital  resources of the Company.  Accordingly,  the ability of the
Company to continue to pursue its  business  strategy  will depend on  obtaining
additional  outside  financing or pursuing other  strategic  alternatives.  Such
financing  and other  alternatives  may include  the  development  of  strategic
alliances  with  other  companies,  including  competitors  or  other  similarly
situated  companies  which present  synergistic  opportunities  for the Company.
Other strategic alternatives may include merger opportunities.

      From time to time the Company has evaluated and held discussions regarding
potential strategic alliances and merger opportunities with other companies. The
Company's policy is to make a public  announcement only upon signing  definitive
agreements.  While the Company is  seriously  exploring a  particular  strategic
opportunity  currently,  there  can be no  assurance  that the  Company  will be
successful in structuring an alliance which will foster the continued pursuit of
its current business strategy and goals. See, Recent Developments, above.

Results of Operations

      For the year ended December 31, 1998,  compared to the year ended December
31, 1997.

Revenues

      Net revenue increased approximately $6,412,000 to approximately $7,388,000
for 1998 from approximately  $976,000 in 1997. This growth was attributable to a
full year of  operations  for the  seven  affiliates  purchased  in 1997 and the
addition of eight affiliates in 1998.

Costs and Expenses

      Costs and expenses  increased  approximately  $3,344,000 to  approximately
$7,950,000 for 1998 from approximately $4,606,000 in 1997. The company completed
its initial public offering on October 1, 1997 and completed  affiliations  with
seven practices.  The costs and expenses increase for 1998 was attributable to a
full  year of  operations  for the  practices  affiliated  with in 1997  and the
addition of eight affiliations in 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  $2,970,000 to  approximately
            $3,715,000 for 1998 from approximately $745,000 in 1997.

            Other Direct Costs. Includes dental and office supplies,  laboratory
            costs,  facilities  and equipment for the  Affiliated  Practices and
            corporate   office   and   increased   approximately   $963,000   to
            approximately  $1,136,000  for 1998 from  approximately  $173,000 in
            1997.

            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  $1,664,000 to approximately  $2,643,000 for 1998 from
            approximately $979,000 in 1997.

            Depreciation and  Amortization.  Includes  depreciation of equipment
            and  leasehold   improvements   of  the  Affiliated   Practices  and
            amortization of intangible assets related to the Management Services
            Agreements  and increased  approximately  $340,000 to  approximately
            $456,000 for 1998 from approximately $116,000 in 1997.

            Non-recurring  Consulting  Expense.  Relates to  approximately  $2.3
            million  value  ascribed  to  stock  and  stock  options  issued  to
            consultants  of the  Company in April 1997 and  $305,000  relates to
            cash payments made in 1998 in connection with those stock grants.

Interest Expense

      Interest expense of approximately $107,000 for the year ended December 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 expense of approximately $91,000 for the year ended December
31, 1997,  reflects the cost of borrowing under bridge financing  outstanding at
that time used to finance  the cost of  operations  and IPO costs as well as the
cost of borrowing  under notes payable to Affiliated  Practices from the date of
the IPO until  December 31, 1997. The bridge  financing  notes were paid in full
with a portion of the proceeds of the IPO.

Interest Income

      Interest income was approximately $127,000 for the year ended December 31,
1998,  and reflects  interest  earned on the Company's net proceeds from the IPO
and notes from  related  parties.  Interest  income was  approximately  $79,000.
Interest  income is derived  from  interest  earned on the net  proceeds  of the
bridge  financing  notes  and net  proceeds  from the IPO from  October, 1997 to
December 31, 1997.

Net Loss

      As a result of the foregoing factors,  the Company generated a net loss of
approximately $525,000, or $.11 per share, for the year ended December 31, 1998,
respectively, compared to a net loss of approximately $3.6 million, or $1.59 per
share, for the year ended December 31, 1997.

Liquidity and Capital Resources

      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,  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 year
ended December 31, 1998 of $525,000.

      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 December 31, 1998 was $300,000.  Pursuit
of the Company's  business  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.  During 1998,  the ability of the Company to use shares of Common
Stock for  affiliations  was  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 for their  affiliations.  Even if future  affiliations  could be
funded with the Company's  Common Stock,  such a use would result in substantial
dilution to existing shareholders.  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 additional  financing or other
strategic  alternatives  become  available.  During the year ended  December 31,
1998, the Company paid approximately $2.7 million in cash and issued $986,000 in
notes  bearing  interest  at 8.0% to 8.5%,  assumed  approximately  $393,000  of
liabilities  and  issued  approximately   707,511  shares  of  Common  Stock  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 the year ended December
31, 1998 the Company had approximately  $1,064,000 of working capital consisting
of cash and cash equivalents of approximately $982,000, 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  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  assurance,  however,  that the Company will be able to obtain  additional
financing for future  affiliations or its working  capital and liquidity  needs.
See "Safe Harbor Statement Under the Private Securities Litigation Reform Act of
1995 - Doubt About Ability to Continue as a Going Concern."

      As  noted  above,  the  Company  is  considering  a  number  of  strategic
alternatives,  including specific strategic  alliances and merger  opportunities
with other companies. See "Recent Developments."

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 Year 2000
dates and will review any  embedded  technology  in its software and hardware to
determine  whether the  technology is  compliant.  If necessary the company will
update and remediate any non-compliant technology. 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
cost 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.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995

      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
restructuring  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
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 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,  Omega 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, Omega had an accumulated  deficit of $4,400,736.  The Company
incurred an operating  loss in the year ended December 31, 1998, of $525,000 and
may incur operating losses for the foreseeable future  thereafter.  There can be
no assurances as to whether the Company will ever be profitable.

      Doubt  About  Ability  to  Continue  as a  Going  Concern.  The  Company's
independent public  accountants have audited the attached  financial  statements
and have prepared such financial  statements  assuming the Company will continue
as a going concern. See Note 1 to the financial statements.

      Risks  Associated  with  Expansion.   Omega  has  consummated  Affiliation
Agreements  with the 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  and the net proceeds of this  Offering.  To finance its future
capital needs,  the Company is exploring  various  financing and other strategic
alternatives.   These   include   possible   strategic   alliances   and  merger
opportunities with other companies. With respect to additional financing,  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.  With respect to other strategic  alternatives,
there can be no assurance  that the Company will be successful in structuring an
opportunity  which will foster the  Company's  continued  pursuit of its current
strategy and goals.

      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 the  Orthodontic  Affiliates  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 beheld liable
for negligence on their part.

      The Management Services  Agreements require the Orthodontic  Affiliates 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.  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  Affiliate  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 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.

      Government Regulations. As noted above, 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 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 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
prohibitations on physician ownership,  directly or indirectly, of facilities to
which they refer  patients,  which  prohibitations  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  fee",  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 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 to certain  jurisdictions  may require  structural and
organizations   modifications  of  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 upon 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
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  and other  resources  than the
Orthodontic  Affiliate.  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 market and compete with the Company. Many of the Company's competitors
may have  substantially  greater financial and other resources than the Company.
There can be assurance that the Company will be able to compete effectively.

      Absence of Dividends.  Omega 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-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.  There can be no  assurance  that the  Company  will
continue to satisfy the  requirements  for maintaining a Nasdaq Small Cap Market
listing. As discussed above, the Company has been notified by Nasdaq that it may
be subject to delisting for failure to maintain the minimum bid price. A hearing
on this issue is anticipated to occur in April 1999. 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.

      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.

Item 7.     Financial Statements

                            OMEGA ORTHODONTICS, INC.
                       CONSOLIDATED FINANCIAL STATEMENTS

                                     INDEX


Consolidated Financial Statements:

      Report of Independent Public Accountants                             F-1

      Consolidated Balance Sheets                                          F-2

      Consolidated Statements of Operations                                F-3

      Consolidated Statements of Stockholders' Equity                      F-4

      Consolidated Statements of Cash Flows                                F-5

      Notes to Consolidated Financial Statements                           F-7
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Omega Orthodontics, Inc.:

We  have  audited  the  accompanying   consolidated   balance  sheets  of  Omega
Orthodontics,  Inc. (a Delaware corporation) and subsidiaries as of December 31,
1998  and  1997,  and  the  related   consolidated   statements  of  operations,
stockholders' equity and cash flows for the years then ended. These consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material respects,  the financial position of Omega Orthodontics,
Inc. and subsidiaries as of December 31, 1998 and 1997, and the results of their
operations and cash flows for the years then ended, in conformity with generally
accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has suffered recurring losses from operations
that raises  substantial doubt about its ability to continue as a going concern.
Management's  plans in regard to these matters are also described in Note 1. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.


Boston,  Massachusetts                      /s/ ARTHUR  ANDERSEN  LLP  
February 16, 1999
(except for the matter observed in Note 12, for which is March 15, 1999)
<PAGE>
                           OMEGA ORTHODONTICS, INC.
                          CONSOLIDATED BALANCE SHEETS

                                                                December 31,
                                                             1998          1997
ASSETS
Current assets:
   Cash and cash equivalents (includes restricted
     cash of $150,000)                                $   982,157  $  5,421,721
   Receivable from affiliated practices, net of
     allowance for doubtful accounts of
     $121,583 in 1998                                   2,485,991       836,189
   Notes and interest receivable from affiliated
     practices                                             74,824        50,348
   Notes and interest receivable from related parties     129,259       120,859
   Prepaid expenses and other current assets              109,464        55,791
                                                          -------        ------
      Total current assets                              3,781,695     6,484,908

Property and equipment, at cost, net                      908,484       503,339
Intangible assets, net of accumulated amortization of
     $337,059 and $35,145 in 1998 and 1997,
     respectively                                       9,721,133     5,099,043
Other assets                                               42,985        80,303
                                                           ------        ------

      Total assets                                    $14,454,297   $12,167,593
                                                      ===========   ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
   Demand line of credit                              $   149,772   $        -
   Current portion of long-term debt                      366,585        76,130
   Accounts payable                                       158,537       155,671
   Accrued expenses                                       229,602       359,540
   Patient prepayments                                  1,813,433       775,699
   Due to related parties                                      -        305,000
                                                      -----------   -----------
      Total current liabilities                         2,717,929     1,672,040

Long-term debt, less current  portion                   1,055,206       468,551

      Total liabilities                                 3,773,135     2,140,591
                                                      -----------   -----------

Commitments and contingencies (Note 10)
Stockholders' equity:
  Preferred stock, $.01 par value; 500,000
  shares authorized; no shares issued                          -             -
Common  stock,  $.01 par  value;  9,500,000
  shares  authorized; 5,052,584 and 4,338,823 shares
  outstanding at December 31, 1998 and 1997,
  respectively                                             50,526        43,388
Additional paid-in capital                             15,031,372    13,858,851
Accumulated deficit                                   ( 4,400,736)  ( 3,875,237)

      Total stockholders' equity                       10,681,162    10,027,002
                                                      -----------   -----------

   Total liabilities and stockholders' equity         $14,454,297   $12,167,593
                                                      ===========   ===========

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

                                               Year Ended          Year Ended
                                           December 31, 1998   December 31, 1997

Revenues:
   Service fees                                 $ 7,366,192       $   918,312
   Consulting fees                                   21,393            57,606
                                                -----------       -----------
      Total revenues                              7,387,585           975,918
                                                -----------       -----------

Costs and expenses:
   Employee costs                                 3,715,246           744,731
   General and administrative                     2,643,084           979,247
   Other direct costs                             1,136,270           173,538
   Depreciation and amortization                    455,583           116,203
   Non-recurring consulting expense                      -          2,592,500
                                                -----------       -----------
      Total costs and expenses                    7,950,183         4,606,219
                                                -----------       -----------

Loss from operations                            (   562,598)      ( 3,630,301)

Interest expense                                (   106,800)      (    91,489)
Interest income                                     126,564            78,665
Other income                                         17,335                -
                                                -----------       -----------

      Net loss                                  ($  525,499)      ($3,643,125)
                                                ============      ============

Basic and diluted net loss per share            ($        0.11)   ($     1.59)
                                                ===============   ============

Weighted average number of common shares
  outstanding                                     4,895,394         2,289,623
                                                ============      ============

The  accompanying  notes are an integral  part of these  consolidated  financial
statements.
<PAGE>
<TABLE>
<CAPTION>
                            OMEGA ORTHODONTICS, INC.
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

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

<S>                                   <C>          <C>           <C>            <C>         <C>           <C>
Balance, December 31,
   1996                           1,615,000   $   16,150            -     ($  232,112)  ($  4,500)  ($   220,462)
Issuance of common stock
   in connection with debt
   offering                          60,000          600            -              -           -             600
Release from escrow of
   common stock previously
   issued to advisors                    -            -      2,020,500             -        4,500      2,025,000
Issuance of common stock to
   consultants                       10,000          100            -              -           -             100
Initial public offering of
   common stock and warrants,
   net of issuance costs of       2,070,000       20,700     9,504,487             -           -       9,525,187
   $3,101,831
Issuance of common stock
   and stock options to new
   affiliated practices             583,823        5,838     2,071,364             -           -       2,077,202
Issuance of stock options to
   non-employee                          -            -        262,500             -          -          262,500
Net loss                                 -            -             -     ( 3,643,125)        -     (  3,643,125)
                                  ---------   ----------   -----------     ----------    --------    -----------

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 non-employee                    6,250           62         8,375             -          -            8,437
Net loss                                 -            -             -     (   525,499)        -     (    525,499)
                                  ---------   ----------   -----------     ----------    --------    -----------

Balance, December 31,
   1998                           5,052,584   $   50,526   $15,031,372   ($ 4,400,736)          -     10,681,162
                                  =========   ==========   ===========   ============    ========    ===========
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements. 
<PAGE>
                            OMEGA ORTHODONTICS, INC.
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                Year Ended        Year Ended
                                             December 31, 1998 December 31, 1997
Cash flows from operating activities:
      Net loss                                  ($   525,499)     ($ 3,643,125)
Adjustments to reconcile net loss to net
 cash used in operating activities:
    Provision for bad debts                          121,583                -
    Depreciation and amortization                    455,583           116,203
    Stock compensation                                 8,437         2,288,200

Changes in assets and liabilities,
 excluding the effects of acquisitions:
    Receivable from affiliated practices        (  1,520,063)     (    661,125)
    Prepaid expenses and other current assets   (     53,673)     (     51,791)
    Accounts payable                                   2,866           134,437
    Accrued expenses                            (    374,813)     (    260,890)
    Patient prepayments                              982,423           436,782
    Due to related parties                      (    305,000)          277,964
                                                 -----------       -----------
      Net cash used in operating activities     (  1,208,156)     (  1,363,345)
                                                 -----------       -----------

Cash flows from investing activities:
    Purchases of property and equipment, net    (    377,972)     (     93,716)
    Decrease (increase) in other assets               27,721      (     80,648)
    Acquisition of management services
     agreements and related assets              (  2,749,355)     (  2,216,134)
    Notes receivable                            (     82,876)     (    170,859)
                                                 -----------      ------------
      Net cash used in investing activities     (  3,182,482)     (  2,561,357)
                                                 -----------       -----------

Cash flows from financing activities:
    Debt financing costs                                  -       (     22,049)
    Repayment of borrowings                     (    198,926)     (  1,089,000)
    Proceeds from issuance of notes payable               -            510,000
    Proceeds from line of credit                     150,000                -
      Net proceeds from issuance of common
       stock and warrants                                 -          9,626,415
                                                 -----------       -----------
      Net cash (used in) provided by
       financing activities                     (     48,926)        9,025,366
                                                 -----------       -----------

      Net increase (decrease) in cash and
       cash equivalents                         (  4,439,564)        5,100,664

Cash and cash equivalents, beginning of period     5,421,721           321,057
                                                 -----------       -----------
Cash and cash equivalents, end of period         $   982,157       $ 5,421,721
                                                 ===========       ===========
Supplemental disclosure of cash flow information:
 Cash paid during the year for interest          $   103,387       $    97,607
                                                 ===========       ===========

Supplemental disclosure of cash flows related
 to acquisitions:
    Fair value of assets acquired, excluding
     cash                                        $ 5,355,008       $ 5,708,177
    Issuance of common stock                    (  1,171,222)     (  2,077,202)
    Issuance of notes payable                   (    986,435)     (    440,868)
    Payments in connection with acquisitions,
     net of cash acquired                       (  2,749,355)     (  2,216,134)
                                                 -----------       -----------

      Liabilities assumed                        $   447,996       $   973,973
                                                 ===========       ===========

   The accompanying notes are an integral part of these  consolidated  financial
statements.
<PAGE>
                            OMEGA ORTHODONTICS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1998

Note 1 - Organization and Basis of Presentation

Omega  Orthodontics,  Inc. (the Company) was  incorporated in Delaware in August
1996 and subsequently  acquired the assets and certain consulting contracts held
by The Orthodontic Management  Effectiveness Group of America, LLC (Omega, LLC),
a  California-based  orthodontic  practice  management and  consulting  firm, in
exchange for 1,050,000 shares of the Company's common stock.

The Company provides  management and marketing services to orthodontic and other
dental specialty practices in the United States. The Company offers its services
primarily  under an  "affiliate"  relationship  whereby it purchases  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
selling  orthodontist  or other  dental  specialist  (Affiliated  Practitioner).
Pursuant to that agreement, the Company receives a monthly management fee, based
on the revenue of the Affiliated  Practice,  for providing all of the Affiliated
Practice's needs,  including facility,  staff and supplies, as well as a program
of systems,  methods and procedures  designed to enhance the growth,  efficiency
and profitability of the Affiliated Practices.

On October 1, 1997,  the  Company  completed  its  initial  public  offering  of
securities  pursuant to which the Company sold 2,070,000  shares of common stock
and 2,070,000 common stock purchase warrants. The Company received proceeds from
the  offering,  net  of  the  underwriter's  discount,  fees  and  expenses,  of
approximately $9.5 million. From the net proceeds,  the Company paid in full the
notes payable used to finance operations prior to the offering and paid the cash
portion of the affiliations with seven orthodontists.

The Company is subject to a number of risks  associated  with  emerging,  growth
companies.  Principal among these are the risks associated with managing growth,
marketing  the  Company's  services and the need to obtain  adequate  additional
financing to fund future  operations and  acquisitions.  Management's  financial
plans  indicate  that  additional   financing  and/or  strategic  alliances  and
partnerships will be required in future periods to meet the Company's  strategic
business plan; therefore, management is exploring various alternatives.

The Company has incurred  cumulative losses of $4,400,736 from inception through
December 31, 1998.  Information  subsequent to December 31, 1998  indicates that
losses are continuing. The Company has funded those losses primarily through the
sale of common stock.  The Company is dependent on the proceeds from  additional
financing,  finding strategic  alliances and/or  restructuring its operations to
achieve its business  plan.  Management  has entered into a merger  agreement as
discussed in Note 12 and will  implement as  necessary a  restructuring  plan to
reduce operating expenses.
<PAGE>
Note 2 - Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  wholly-owned   subsidiaries.   All  material   intercompany   accounts  and
transactions have been eliminated in consolidation.

During 1997, the Emerging Issues Task Force (EITF) of the FASB issued EITF 97-02
Application  of FASB  Statement  No.  94 and APB  Opinion  No.  16 to  Physician
Practice  Management  Entities  and  Certain  Other  Entities  with  Contractual
Management   Arrangements  which  provides  guidance  regarding  the  accounting
treatment of contractual management relationships. The EITF established specific
criteria to be met for consolidating  physician practices.  The criteria include
the  existence by the  Physician  Practice  Management  Entity of a  controlling
financial interest in the physician's  practice based on terms of the agreement,
control of the non-medical operating decisions, and financial interest. Based on
its most  recent  analysis,  management  believes  the  Company  does not have a
controlling  financial  interest  in the  orthodontic  practices  with  which it
contracts.

Use of Estimates

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amount of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original  maturities of
three  months  or less  when  purchased  to be cash and cash  equivalents.  Cash
equivalents consist primarily of a money market account at December 31, 1998 and
commercial   paper  at  December  31,  1997  and  are  carried  at  cost,  which
approximates market value. In addition, the Company has collateralized  $150,000
of cash for a line of credit. (See Note 5)

Property and Equipment

Property  and  equipment is stated at cost.  Equipment  under  capital  lease is
stated at the net  present  value of the future  minimum  lease  payments at the
inception  of the  related  leases.  Depreciation  and  amortization  expense is
provided using the  straight-line  method over the estimated useful lives of the
assets,  three to seven years.  Leasehold  improvements  are amortized using the
straight-line method over the shorter of the lease term or estimated useful life
of the assets.

Intangible Assets

Intangible assets consist primarily of the value ascribed to Management Services
Agreements  which  are  amortized  over  the  life  of the  Management  Services
Agreements  (ranging  from  25 to  40  years)  with  the  respective  Affiliated
Practices.  The Company's management periodically evaluates the realizability of
the intangible  assets on a practice by practice basis  considering such factors
as  profitability  and net  cash  flow.  Should  this  evaluation  result  in an
assessment that the value of the intangible  asset is overstated,  an adjustment
will  be  made  in the  period  that  the  adjustment  is  identified.  If it is
determined that the estimated  remaining service period requires revision,  that
revision will be made on a prospective basis. Based on its most recent analysis,
management believes that no impairment of intangible assets exists.

Reclassifications

Certain  amounts in the prior year have been  reclassified  to conform  with the
current year presentation.

Revenue Recognition

The Company's services are provided under Management  Services Agreements and an
interim   management   agreement   with  an  Affiliated   Practice   (Management
Agreements).  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,
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 Affiliate Practice is entitled to retain 50%
of the difference.  Under the terms of the Management Agreements, the Affiliated
Practices assign their receivables to the Company in payment of their management
fees. The Company is responsible for  collections.  The Company also assumes its
portion of patient  prepayments,  deposits  from  patients for dental care to be
performed in future periods.

Loss Per Share

The Company  reports  earnings  (loss) per share in accordance with Statement of
Financial Accounting Standards (SFAS) No. 128, Earnings per Share and Securities
and Exchange Commission (SEC) Staff Accounting Bulletin No. 98 (SAB 98).
<PAGE>

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
are  antidilutive.  During the period  preceding  the Company's  initial  public
offering,  the  Company  issued  185,000  shares of common  stock that have been
treated as "nominal  issuances" in accordance  with SAB 98 in the calculation of
net loss per share.  Basic and diluted loss per share do not include options and
warrants  to purchase  2,323,333  shares of common  stock in 1998 and  2,303,333
shares of common stock in 1997 because the effects are antidilutive.

Concentration of Credit Risk

SFAS No.  105,  Disclosure  of  Information  About  Financial  Instruments  with
Off-Balance-Sheet  Risk and Financial  Instruments with Concentrations of Credit
Risk, requires disclosures of any significant  off-balance-sheet and credit risk
concentrations. The Company has no significant off-balance-sheet risk and credit
risk  concentrations.  The Company  maintains  the majority of its cash balances
with one financial institution. The Company maintains reserves for the potential
write-off of accounts receivable.  The Company's accounts receivable credit risk
is  concentrated  within  the  United  States,  and  no  customer  represents  a
significant credit risk to the Company.

Financial Instruments

SFAS No. 107,  Disclosures About Fair Value of Financial  Instruments,  requires
disclosure about fair value of financial  instruments.  The Company's  financial
instruments  consist of cash, cash equivalents,  receivables,  accounts payable,
patient  prepayments  and debt  instruments.  The estimated  fair value of these
financial instruments approximate their carrying value.

Segment Reporting

The  Company  has  adopted  SFAS No.  131,  Disclosures  about  Segments  of and
Enterprise  and Related  Information in the fiscal year ended December 31, 1998.
SFAS No. 131 establishes standards for reporting information regarding operating
segments in annual financial  statements and requires  selected  information for
those  segments  to  be  presented  in  interim   financial  reports  issued  to
stockholders.  SFAS No. 131 also establishes  standards for related  disclosures
about  products  and  services  and  geographic  areas.  Operating  segments are
identified  as  components  of  an  enterprise  about  which  separate  discrete
financial  information  is  available  for  evaluation  by the  chief  operating
decision maker,  or decision  making group, in making  decisions how to allocate
resources and assess performance.  The Company's chief decision maker as defined
under SFAS No. 131 is the Senior  Management  Team.  To date,  the  Company  has
viewed its  operations  and manages its business as  principally  one  operating
segment.

Post-retirement Benefits

The Company has no obligations for post-retirement benefits.
<PAGE>

Comprehensive Income

In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income. SFAS
No. 130 requires  disclosure  of all  components of  comprehensive  income on an
annual  and  interim  basis.  Comprehensive  income is  defined as the change in
equity of a business  enterprise  during a period  from  transactions  and other
events and circumstances  from nonowner  sources.  SFAS No. 130 is effective for
the fiscal years  beginning  after December 15, 1997 because there were no items
of comprehensive income, other than the Company's net loss.

New Accounting Standards

In  June  1998,  the  FASB  issued  SFAS  No.  133,  Accounting  for  Derivative
Instruments and Hedging  Instruments.  SFAS No. 133  establishes  accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments   embedded  in  other  contracts,   (collectively   referred  to  as
derivatives)  and for hedging  activities.  It requires that an entity recognize
all  derivatives  as either assets or  liabilities in the statement of financial
position and measure  those  instruments  at fair value.  Based upon the current
structure and operations,  the Company does not anticipate that adoption of SFAS
No. 133 will have any effect on the financial statements.

Note 3 - Orthodontic Affiliations

On October 1, 1997, the Company entered into Management Services Agreements with
seven Affiliated Practices in the United States, simultaneously with the closing
of its initial public  offering (see Note 1). During the period from the initial
public  offering,  October  1, 1997  through  December  31,  1997,  the  Company
completed  affiliations  with  two  additional  practices.  For the  year  ended
December 31, 1998, the Company completed affiliations with nine practices, three
of which merged with existing affiliated practices.

Total  consideration  related to the  affiliated  practices  for the years ended
December 31, 1998 and 1997 are summarized as follows:

                                                       1998             1997
                                                    ----------       ----------
     Value of common stock and options issued      $ 1,171,222      $ 2,077,202
     Cash paid                                       2,749,355        2,216,134
     Notes payable                                     986,435          440,868
                                                    ----------       ----------
            Total                                  $ 4,907,012      $ 4,734,204
                                                    ==========       ==========
<PAGE>

The cost of each MSO has been allocated on the basis of the estimated fair value
of the assets acquired and liabilities assumed,  resulting in management service
contract intangibles of approximately $4.9 million and $5.1 million for 1998 and
1997,  respectively.  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 MSO, including  acquisition costs of
approximately  $192,000  and  $67,000  for 1998 and  1997,  respectively,  is as
follows:

                                                       1998             1997
                                                    ----------       ----------
     Patient receivables                           $   234,910      $   152,090
     Property and equipment                            196,094          421,900
     Management service contract intangibles         4,924,004        5,134,187
     Patient prepayments                          (     55,311)    (    338,916)
     Assumed liabilities                          (    392,685)    (    635,057)
                                                    ----------       ----------
                                                   $ 4,907,012      $ 4,734,204
                                                    ==========       ==========

Concurrent with the affiliation  with the MSOs, the Company and each MSO entered
into a 20-year  Management  Services  Agreement,  renewable  for two  additional
10-year periods,  with each Affiliated  Practice.  The agreement stipulates that
the MSO provide  practice  management  and marketing  services,  facilities  and
non-clinical  personnel to the Affiliated Practices for a monthly fee, generally
equal to 65% to 75% of the Affiliated  Practice's gross patient fee collections.
If  the  total  expenses  of  each  Affiliated  Practice  are  below  prescribed
percentages,  the  Affiliated  Practice  is  entitled  to  receive  50%  of  the
difference.  The Affiliated  Practice has sole authority to direct the business,
professional and ethical aspects of the practice,  make all professional  hiring
decisions,  render patient care, and keep all patient  records.  Each Affiliated
Practice   has   also   entered   into  an   employment   agreement,   including
non-competition  provisions,  with each orthodontist  employed and has agreed to
pay all  salaries for dental  professionals,  professional  licensure  and board
certification fees and professional liability insurance premiums.

Each Affiliated  Practitioner  has certain rights and obligations to repurchase,
and each MSO has the right to require the Affiliated Practitioner to repurchase,
the  non-clinical  practice  assets  held  by such  MSO in the  event  that  the
Management  Services  Agreement is  terminated.  Such  purchases  will generally
require payment of the book value of the net assets of the MSO. The MSO also has
certain rights to designate a successor  orthodontist to acquire the practice of
the Affiliated Practitioner when the Affiliated Practitioner ceases practice.

In  addition,  during  1998,  the  Company  entered  into an interim  management
agreement with a separate  orthodontic  practice,  pursuant to which the Company
provides  management services under essentially the same terms as its Management
Services Agreement.
<PAGE>
Note 4 - Property and Equipment

Property and equipment consist of the following at December 31:

                                                       1998             1997
                                                    ----------       ----------
     Leasehold improvements                        $   399,935      $   163,138
     Office equipment                                  324,530           45,072
     Dental equipment                                  253,756          272,486
     Furniture and fixtures                             90,648           46,132
                                                    ----------       ----------
                                                     1,068,869          526,828


     Less: accumulated depreciation
      and amortization                                 160,385           23,489
                                                    ----------       ----------
                                                   $   908,484      $   503,339
                                                    ==========       ==========

Note 5 - Debt

Long Term Debt

Long-term debt consisted of the following at December 31:

                                                       1998             1997
                                                    ----------       ----------

Notes payable of affiliate practices assumed by the
 Company, due in monthly installments ranging
 from $100 to $1,213 through December, 2003,
 with interest ranging from 4% to 13.2% and
 secured by the personal guarantees of
 the affiliated orthodontists.                     $   192,441      $    51,948

Unsecured notes payable to affiliate practices,
 issued in connection with affiliation agreement
 (see Note 3 ) due in monthly installments
 ranging from $630 to $4,860 through January,
 2003, with interest ranging from 8% to 8.5%.        1,219,068          436,868

Capitalized lease obligations, due in monthly
 installments ranging from $652 to $1,646  through
 December, 2003, with interest ranging from 13% to
 23% and secured by certain equipment. Paid in full
 in 1999.                                               10,282           55,865
                                                    ----------        ---------
                                                     1,421,791          544,681
Less: current portion                                  366,585           76,130

                                                   $ 1,055,206      $   468,551
                                                    ==========       ==========
<PAGE>

Maturities of long-term debt at December 31, 1998 are as follows:

                  1999                       $   366,585
                  2000                           346,522
                  2001                           361,135
                  2002                           242,173
                  2003                            33,142
                  Thereafter                      72,234
                                              ----------
                                             $ 1,421,791
                                              ==========

Line of Credit

The Company has a demand line of credit with a bank that  provides for borrowing
up to $200,000 and expires on demand.  Borrowings  under the line of credit bear
interest at the bank's  prime rate plus .5% (7.75% at December  31,  1998).  The
line of credit is  collateralized  by $150,000  of cash held by the bank.  As of
December 31, 1998, $149,772 was outstanding under the line of credit.

Note 6 - Stock Option Plan

The  Company has adopted an  Incentive  Stock Plan (the Plan)  pursuant to which
700,000 shares of common stock have been reserved for under the plan.  Awards in
the form of stock options, stock appreciation rights, restricted stock and stock
grants may be issued to  employees,  consultants  and advisors of the Company at
prices to be determined by a committee of the Board of Directors.
The Plan will terminate on January 31, 2007.

The  Plan  is  administered  by  the  Compensation  Committee  of the  Board  of
Directors,  which has the  authority to designate  participants,  determine  the
number  and  type of  options  to be  granted,  the time at  which  options  are
exercisable,  the method of payment  and any other  terms or  conditions  of the
options.  Options generally vest annually over a three-year period and generally
expire 10 years from the date of grant.

While the  Compensation  Committee  determines the price at which options may be
exercised  under the Plan, the exercise price of an incentive stock option shall
be at least 100% (110% for incentive stock options granted to a 10% stockholder)
of the fair value of the Company's common stock on the date of grant.
<PAGE>

The following table summarizes option activity under the Plan:

                                                              1997
                                                     ----------------------
                                                        Weighted Average
                                                                   Exercise
                                                     Shares         Price
                                                     ------        --------

Outstanding, December 31, 1996                           -             -
    Granted                                         370,000            5.84
    Exercised                                            -             -
    Terminated                                           -             -
                                                    -------          ------
Outstanding, December 31, 1997                      370,000            5.84
                                                    =======          ======
Exercisable, December 31, 1997                      150,000         $  6.00
                                                    =======          ======

                                                              1998
                                                     ----------------------
                                                        Weighted Average
                                                                   Exercise
                                                     Shares         Price
                                                     ------        --------

Outstanding, December 31, 1997                      370,000            5.84
    Granted                                          75,000            3.00
    Exercised                                            -             -
    Terminated                                           -             -
                                                    -------          ------
Outstanding, December 31, 1998                      445,000            5.36
                                                    =======          ======
Exercisable, December 31, 1998                      270,000        $   5.78
                                                    =======          ======

The following table summarizes  information  about stock options  outstanding at
December 31, 1998:

Options Exercisable                                        Options Exercisable
    Weighted                                                      Weighted
    --------                                                      --------

                   Number         Average     Weighted     Number       Weighted
Exercise/Price  Outstanding as   Remaining    Average    Exercisable     Average
  Range of      of December 31,  Contractual  Exercise  at December 31  Exercise
   Prices           1998           Life        Price        1998          Price
--------------  --------------   ---------    -------    -----------     -------

 $    3.00         95,000          9.25      $   3.00       20,000       $  3.00
 $    6.00        350,000          8.32      $   6.00      250,000       $  6.00
  --------        -------          ----       -------      -------        ------

$3.00 - $6.00     445,000          8.52      $   5.36      270,000       $  5.78
 ============     =======          ====       =======      =======          ====

Options  available  for future grant under the Plan as of December 31, 1998 were
255,000.

In October  1995,  the FASB  issued  SFAS No. 123,  Accounting  for  Stock-Based
Compensation.  SFAS No. 123 requires the  measurement of the fair value of stock
options or warrants to be included in the  statement of  operations or disclosed
in the notes to financial  statements.  The Company has determined  that it will
continue to account for stock-based  compensation for employees under Accounting
Principles Board Opinion No. 25 and will elect the  disclosure-only  alternative
under SFAS No. 123.

The Company has computed the  compensation  expense  required under SFAS No. 123
for  options  granted in 1997 and 1998 using the  Black-Scholes  option  pricing
model prescribed by SFAS No. 123, using the following assumptions:

                                        December 31, 1998     December 31, 1997
                                        -----------------     -----------------

    Risk-free interest rate                5.39% - 5.65%             6.61%
    Expected dividend yield                      -                     -
    Expected lives                          7 years                7 years
    Expected volatility                       108%                   48%
    Weighted average fair value of
       options granted                      $   2.21               $  3.37
    Weighted average remaining
       contractual life                     8.52 years             9.36 years

Had  compensation  cost for the  Company's  stock  option  plan been  determined
consistent  with SFAS No. 123, the  Company's net loss and basic and diluted net
loss per common share would have been the following:

                                                          1998
    Net loss available to common stockholders
         As reported                                 (    525,499)
         Proforma                                    (    913,899)

    Basic and diluted net loss per common share
         As reported                                 (       0.11)
         Proforma                                    (       0.19)

As of December 31, 1997, none of the options granted to employees under the plan
had vested,  and therefore,  no proforma  disclosure of compensation  expense is
necessary.  As of December 31, 1997, the Company  granted  150,000  nonqualified
stock options  exercisable at $6.00,  which are fully vested, to a consultant as
payment for services  performed.  The Company recorded $262,500 of non-recurring
consulting expense in the accompanying consolidated statements of operations for
the year ended December 31, 1997 related to this  transaction,  which represents
the  estimated  fair  value of the  services  received.  The  options  are fully
exercisable and expire ten years from the date of grant.

Note 7 - Stockholders' Equity

(a) Preferred Stock

   The Company is  authorized to issue 500,000  shares of preferred  stock.  The
   preferred  stock will be issuable in one or more series,  each such series to
   have such rights and preferences,  including voting rights,  dividend rights,
   conversion  rights,  redemption  privileges and liquidation  preferences,  as
   shall be determined by the Board of  Directors.  At December 31, 1998,  there
   are no shares of preferred stock outstanding.

(b) Initial Public Offering

   Pursuant to the Company's  initial public  offering (see Note 1), the Company
   issued  2,070,000  warrants.  Each  warrant  entitles the  registered  holder
   thereof to purchase one share of common stock at an initial exercise price of
   $6.60 per share, at any time during the period  commencing  April 1, 1998 and
   terminating  September  30, 2002.  The warrant  exercise  price is subject to
   adjustment under certain circumstances. Commencing April 1, 1999, the Company
   may  redeem  the  warrants,  in whole but not in part,  at $.10 per  warrant,
   provided the average  closing bid price of the common stock equals or exceeds
   $12.00 per share for a period of time.

   In addition,  the Company issued 180,000 warrants to its  underwriter.  These
   warrants  entitle the holder to purchase up to 180,000 shares of common stock
   and/or  180,000  warrants at an initial  exercise price of $9.90 per share of
   common stock and $0.165 per  warrant,  commencing  after  October 1, 1998 and
   expiring October 1, 2001.

(c) Reserved Common Stock

   The Company has reserved common stock for the following:

    Options to purchase common stock          783,333
    Warrants to purchase common stock       2,070,000
    Underwriter's warrants                    360,000
                                            ---------
                                            3,213,333
                                            =========

Note 8 - Income Taxes

The  Company  accounts  for  income  taxes in  accordance  with  SFAS  No.  109,
Accounting  for  Income  Taxes.  Under  SFAS No.  109,  deferred  tax  assets or
liabilities are computed based on the difference between the financial statement
and income  tax basis of assets and  liabilities  using the  enacted  tax rates.
Deferred  income tax  expense  or  credits  are based on changes in the asset or
liability from period to period.

As  of  December  31,  1998,  the  Company  had  available  net  operating  loss
carryforwards  of  approximately  $2,940,000  available to reduce future federal
income taxes, if any. These carryforwards expire through 2013 and are subject to
review and possible  adjustment by the Internal Revenue Service.  The Tax Reform
Act of 1986 limits a corporation's ability to utilize certain net operating loss
carryforwards in the event of a cumulative change in ownership in excess of 50%,
as defined. Note 8 - Income Taxes - (Continued)

The  approximate  income tax  effect of each type of  temporary  difference  and
carryforward and valuation allowance is summarized as follows:

                                         1998            1997
                                         ----            ----
    Net operating losses             $ 1,177,000     $ 1,084,000
    Other temporary differences           44,000    (      1,000)
    Less: valuation allowance       (  1,221,000)   (  1,083,000)
                                     -----------     -----------
                                     $        -      $        -
                                     ===========     ===========

Due to the  uncertainty  relating to the timing of realizing the benefits of its
favorable tax attributes in future income tax returns,  the Company has placed a
full valuation allowance against its net deferred tax asset.

Note 9 - Related Party Transactions

The Company has an agreement  with a private  merchant  bank and the Chairman of
the Board of Directors (the Consultants), whereby the Consultants have agreed to
provide  certain  consulting  services  to  the  Company.  In  August  1996,  as
consideration for such services,  the Company contingently issued 450,000 shares
of common stock to the  Consultants  at no cost and  simultaneously  placed such
shares in escrow.

In April 1997, following the completion of the consulting  services,  all of the
shares were released from escrow at an imputed aggregate value of $2,025,000. In
addition,   the  Company  paid  additional  cash  payments  to  the  Consultants
aggregating  $305,000  in 1998.  Total  expense of  $2,330,000  was  recorded as
non-recurring consulting expense in the accompanying  consolidated statements of
operations in 1997.

During 1997,  three  directors of the Company loaned an aggregate of $140,000 to
the  Company  and  received  6,000  shares  of the  Company's  common  stock  in
connection  therewith.  In addition,  the three directors  performed  consulting
services for the Company, for which they were paid an aggregate of approximately
$166,000 in 1997.

The  Company  has  employment  contracts  with two  directors  and a  consulting
contract with one director,  which became  effective  upon the completion of the
Company's initial public offering. The Company paid $360,000 and $75,000 in 1998
and 1997,  respectively,  in connection  with these  employment  and  consulting
contracts.  In  addition,  during  1997,  the Company  granted two  directors an
aggregate of 200,000 stock options  exercisable at $6.00 per share (see Note 6).
In December 1997, the Company granted two directors  non-qualified stock options
under the  Incentive  Stock  Option Plan to each  acquire  10,000  shares of the
Company's  common stock at an exercise  price of $3.00 per share.  In 1998,  the
Company  granted  options  to  purchase  10,000  shares of  common  stock to its
Director Observer at an exercise price of $3.00 per share.
<PAGE>

During 1997, the Company entered into a consulting  agreement with an accounting
firm for services  relating to the Company's initial public offering and for the
services  of the  Company's  Chief  Financial  Officer  who is also a  principal
stockholder of the accounting firm. The Company paid consulting fees of $120,000
and  $203,565  in 1998 and  1997,  respectively  in  connection  with the  above
services.  In addition, in 1998 the Company paid the accounting firm $63,244 for
additional   accounting  and  computer   consulting  services  and  $38,944  for
reimbursed  expenses The Company also granted the accounting  firm 10,000 shares
of common stock and non-qualified stock options under the Stock Incentive Option
Plan to acquire  150,000  shares of the  Company's  common  stock at an exercise
price of $6.00 per share in 1997 (see Note 6).

The Company entered into an affiliation agreement with a director,  which became
effective  concurrently  with  the  closing  of  the  Company's  initial  public
offering.  Pursuant to the affiliation  agreement,  the Company acquired certain
assets of the Director's  orthodontic practice in exchange for a cash payment of
$333,567,  issuance  of 129,721  shares of the  Company's  common  stock and the
assumption of certain liabilities.

During 1997,  the Company  loaned its  President and CEO $100,000 and a director
$20,000 in exchange  for demand  promissory  notes,  which bear  interest at the
prime rate (7.75% at December 31, 1998) plus 2%.  Principal and interest are due
upon demand, but not later than December, 2000.

Note 10 - Commitments and Contingencies

Operating Leases

The Company  leases  facilities  under  various  operating  leases  which expire
through  October 2017.  Future  minimum lease  payments at December 31, 1998 are
approximately as follows:

                          1999           $   631,000
                          2000               585,000
                          2001               580,000
                          2002               541,000
                          2003               290,000
                    Thereafter               807,000
                                          ----------
                                         $ 3,434,000
                                          ==========

Rent expense for all operating leases was approximately $648,000 and $86,100 for
the years ended December 31, 1998 and 1997, respectively.

Litigation

In the  ordinary  course of business,  the Company is party to various  types of
litigation. The Company believes it has meritorious defenses to all claims, and,
in its opinion,  all litigation  currently pending or threatened will not have a
material effect on the Company's financial position or results of operations.

Other

The Company is contingently  liable for any increase in the purchase price to an
Affiliated  Practitioner  for an Affiliation  completed in April 1998. Under the
terms of the agreement,  the Company agreed to pay additional  cash and stock if
certain operating  criteria were met for the year ending March 31, 1999; the one
year anniversary of the affiliation. Any additional consideration payable to the
Affiliated Practitioner will be charged to operations when determined.

Note 11 - Accrued Expenses

Accrued expenses consist of the following at December 31:

                                              1998            1997

    Salary and related                   $   117,155     $    18,403
    Professional fees                        105,000         327,721
    Rents                                      3,000          13,416
    Other                                      4,447              -
                                          ----------      ----------
                                         $   229,602     $   359,540
                                          ==========      ==========

Note 12 - Subsequent Event

On March 15, 1999, the Company entered into an Agreement and Plan of Merger with
Pentegra Dental Group,  Inc.  ("Pentegra"),  a  multi-specialty  dental practice
management company located in Arizona. The Company has agreed to exchange all of
its outstanding  common stock for 1,800,000  shares of Pentegra's  common stock.
The transaction requires shareholder approval of both companies.

Item 8.     Changes in and  Disagreements  With  Accountants  on  Accounting
            and Financial Disclosure

      None.

                                    PART III

Item 9.     Directors,  Executive Officers,  Promoters and Control Persons;
            Compliance With Section 16(a) of the Exchange Act

      The  following  table sets forth certain  information  with respect to the
directors and executive officers of the Company.

                                                                      DIRECTOR
NAME                         AGE   POSITION                             SINCE

Robert J. Schulhof            57   President, Chief Executive           1996
                                   Officer, Treasurer and Director

Dr. Dean C. Bellavia          55   Director of Affiliate Programs       1996
                                   and Director

John J. Clarke, Jr. (1)(2     56   Director                             1997

Floyd V. Elliott              56   Director of Professional             1996
                                   Relations and Staff Development
                                   and Director

Dr. C. Joel Glovsky (1)(2)    66   Chairman of the Board                1996

Dr. David T. Grove (2)        58   Director                             1996

-----------------------
(1)   Member of the Company's Audit Committee.
(2)   Member of the Company's Compensation.

    Robert J. Schulhof,  the Company's founder, has been the President and Chief
Executive  Officer of the Company  since its  formation in August 1996. In 1995,
Mr. Schulhof founded OMEGA, LLC, a principal  stockholder of the Company, and is
the sole manager of OMEGA,  LLC. From 1990 to 1994,  Mr.  Schulhof was the Chief
Executive Officer of Solutions Providers, a California general partnership and a
firm  that  offered  integrated  computer  technology  and  practice  management
consulting services to the orthodontic industry,  and from 1994 until he founded
OMEGA,  LLC in  1995,  Mr.  Schulhof  was an  officer,  director  and  principal
stockholder of Integrated  Management  Systems,  Inc., a firm providing software
and consulting services to the orthodontic  industry.  He holds a masters degree
in Mathematical  Statistics and Probability from the University of California at
Los Angeles.

    Dean C.  Bellavia is a  co-founder  of the  Company and was  employed as the
Director of Affiliate Programs since its formation in August 1996 until December
31,  1997.  As of  January 1,  1998,  Dr.  Bellavia  entered  into a  consulting
agreement  with the  Company  pursuant  to which he  continues  to  perform  the
services he was performing as the Director of Affiliate  Programs.  Dr. Bellavia
is also the founder and President of The Bio Engineering  Company,  a consulting
firm serving the  orthodontic  industry which he will continue to operate to the
extent it does not adversely affect his duties for the Company. He holds a Ph.D.
in Bio-Engineering from Carnegie Mellon University.

    John J. Clarke, Jr., was elected to the Board of Directors of the Company in
March 1997.  Since  1971,  Mr.  Clarke has been a principal  in Baldwin & Clarke
Companies,   a  diversified   financial  services   organization  that  provides
investment banking and other financial  advisory  services.  He is a director of
Centerpoint  Bank, a wholly-owned  subsidiary of Community  Bankshares,  Inc., a
bank holding company in Concord, New Hampshire. Mr. Clarke holds a B.A.
from Northeastern University.

    Floyd V.  ("Sonny")  Elliott,  joined the  Company's  Board of  Directors in
December  1996 and since  October  1, 1997 has been the  Company's  Director  of
Professional  Relations and Staff  Development.  Mr.  Elliott is the founder and
President  of Elliott  Enterprises,  a consulting  firm serving the  orthodontic
industry  which he will  continue to operate to the extent it does not adversely
affect his duties for the Company.  Prior to founding Elliott  Enterprises,  Mr.
Elliott was President of Paradigm Practice Management,  a management  consulting
firm working primarily with orthodontic practices.

    C. Joel Glovsky, a co-founder of the Company,  has served as the Chairman of
the Board of Directors of the Company  since its  formation in August 1996.  Dr.
Glovsky has been engaged in the private practice of orthodontics  since 1961. He
is a graduate of the dental school of Tufts  University  and served as Assistant
Clinical Professor there for 15 years. Dr. Glovsky is a diplomat of the American
Board of Orthodontics. In October 1989, Dr. Glovsky co-founded The Standish Care
Company, an assisted living company,  and he served on the Board of Directors of
Standish from 1989 to 1994.

    David T. Grove,  has served on the Board of Directors  of the Company  since
its  inception  in August 1996.  Dr.  Grove has been in the private  practice of
orthodontics  in Nevada  since 1971.  Dr.  Grove holds a dental  degree from the
University  of  Louisville,  a Masters  degree in  Orthodontics  from St.  Louis
University  and a  Masters  degree in  education  from the  University  of South
California.  He  served  as Clinic  Director  for two years in the  Orthodontics
Department at the University of California at San Francisco.  He is the Chairman
of the Company's Clinical Advisory Board.

Meetings of the Board of Directors and Committees

      The Board of Directors of the Company held five meetings  during 1998. The
Board of Directors also acted on three occasions by unanimous written consent in
lieu of special  meetings.  Each director attended at least 75% of the aggregate
number of all meetings of the Board of Directors and  committees of which he was
a member during 1998.

Board Committees

    The Board of Directors has established an Audit Committee and a Compensation
Committee.

    Audit Committee.  The Audit Committee has the  responsibility  for reviewing
and supervising the financial controls of the Company. The Audit Committee makes
recommendations  to the Board of  Directors  of the Company  with respect to the
Company's  financial  statements and the  appointment  of independent  auditors,
reviews significant audit and accounting policies and practices,  meets with the
Company's  auditors  concerning,  among  other  things,  the scope of audits and
reports,  and  reviews  the  performance  of overall  accounting  and  financial
controls of the Company.  The Audit  Committee  consists of Dr.  Glovsky and Mr.
Clarke. The Audit Committee did not meet in 1998.

    Compensation  Committee.  The Compensation  Committee has the responsibility
for reviewing the performance of the officers of the Company and recommending to
the Board of Directors of the Company  salary and bonus amounts for all officers
of the  Company,  subject to the terms of existing  employment  agreements.  The
Compensation   Committee   also  has  the   responsibility   for  oversight  and
administration  of  the  Company's  stock  and  other  compensatory  plans.  The
Compensation  Committee  consists of Dr. Glovsky,  Dr. Grove and Mr. Clarke. The
Compensation Committee met twice in 1998.

Director Compensation

    Members  of the  Board  who  are  not  full-time  employees  of the  Company
(currently  Dr.  Grove  and Mr.  Clarke)  receive  a fee of $500 for each  Board
meeting  attended and a fee of $250 for each committee  meeting  attended.  Such
Board members are reimbursed for their  out-of-pocket  expenses for each meeting
attended.

Executive Officers and Compensation

    Executive officers of the Company hold their positions until the next annual
meeting of the Board of  Directors  and until their  respective  successors  are
elected and qualified.  In addition to Mr. Schulhof (President,  Chief Executive
Officer and Treasurer) and Mr. Elliott  (Director of Professional  Relations and
Staff Development), Mr. Edward M. Mulherin and Mr. Peter I. Wexler are executive
officers of the Company.

    Edward M. Mulherin has provided  consulting  services as the Chief Financial
Officer of the Company  since  October  1996.  Such  services have been provided
through LMG, a firm in which Mr.  Mulherin is a principal  stockholder  and with
which he has been  associated  since 1991.  Mr.  Mulherin is a certified  public
accountant  and holds a B.S. in Accounting  from Boston  College and a J.D. from
Suffolk University Law School. Mr. Mulherin is 39.

    Peter I. Wexler has served as the General Counsel of the Company since March
1998. From 1995 to 1998, Mr. Wexler was Corporate Counsel and Commercial Manager
for  Stone  and  Webster  Engineering  Corporation,  a  global  engineering  and
construction  company,  where  he  specialized  in  domestic  and  international
transactions. Prior to Stone and Webster, Mr. Wexler was associated with the law
firm Jackson Parton in London, England. Mr. Wexler is 31.

Section 16(a) Beneficial Ownership Reporting Compliance

      Section  16(a) of the  Exchange  Act  requires  the  Company's  directors,
executive  officers  and  persons  who  beneficially  own  more  than  10%  of a
registered  class  of the  Company's  equity  securities,  to  file  reports  of
ownership and changes in ownership on Forms 3, 4 and 5 with the  Commission  and
the Nasdaq  Stock  Market.  Directors,  executive  officers and greater than 10%
stockholders  are  required to furnish the Company with copies of all Forms 3, 4
and 5 they file.

      Based  solely on the  Company's  review of the copies of such Forms it has
received and written  representations  from certain  reporting persons that they
were not required to file Forms 5, the Company believes that each person who was
a director,  executive officer or greater than 10% beneficial owner of any class
of its equity  securities  during the year  December 31, 1998  complied with all
Section 16(a) filing requirements applicable to them.

Item 10.    Executive Compensation

            The following  Summary  Compensation  Table sets forth  compensation
awarded  to,  earned by or paid to  Robert  J.  Schulhof,  the  Company's  Chief
Executive  Officer.  No other executive  officer or director earned a salary and
bonus of more than  $100,000  during  either (a) the period from August 30, 1996
(inception)  to December 31, 1996 or (b) either of the years ended  December 31,
1997 or 1998. The Company entered into an employment agreement with Mr. Schulhof
effective  January 1, 1997.  See  "Employment  Agreements."  The Company did not
grant any restricted stock awards,  options or stock appreciation rights or make
any long-term  incentive plan payouts to any named executive officer during such
periods,  nor did any of the  named  executive  officers  own  options  or stock
appreciation  rights during such periods.  The Company has no defined benefit or
actuarial plans covering its employees.
<TABLE>
<CAPTION>
                           Summary Compensation Table
                              Annual Compensation

                                                               Long Term
                                                               Compensation
Name and             Fiscal Year                               Awards; Securities   All Other
Principal Position   Ended         Salary ($)     Bonus ($)    Underlying Options   Compensation ($)
------------------   -----         ----------     ---------    ------------------   ----------------
<S>                  <C>           <C>            <C>          <C>                  <C>
Robert J. Schulhof   12/31/98      $ 120,000(1)   $ 0          ---                  $ 3,400 (2)
President, Chief     12/31/97      $ 120,000(1)   $ 0          ---                  $ 3,500 (2)
Executive Officer    12/31/96(3)      49,200      $ 0          ---                       ---

Edward Mulherin      12/31/98      $ 120,000      $ 0          ---                       ---
Chief Financial
Officer

Dean Bellavia        12/31/98      $ 120,000      $ 0          ---                       ---
Director of
Affiliate Programs
and Director

Floyd V. Elliott     12/31/98      $ 120,000      $ 0          ---                       ---
Director of
Professional
Relations and Staff
Development and
Director

====================================================================================================
</TABLE>
(1) Reflects amounts paid pursuant to an employment agreement between the 
    Company and Mr. Schulhof which became effective January 1, 1997.
    See "Employment Agreements."

(2) Reflects amounts paid to Mr. Schulhof as an automobile allowance.

Employment Agreements

      The Company has  entered  into  employment  agreements  (individually,  an
"Employment Agreement" and collectively,  the "Employment Agreements") with each
of Mr. Schulhof,  Dr. Bellavia (whose agreement has been terminated and replaced
with  a  consulting   agreement  --  see  "Certain   Relationships  and  Related
Transactions") and Mr. Elliott (collectively,  the "Executives"). Mr. Schulhof's
Employment  Agreement became  effective  January 1, 1997 and provides that he is
employed  as the  President  and Chief  Executive  Officer of the  Company.  The
initial term of Mr.  Schulhof's  Employment  Agreement is three years,  and such
term will be  extended  automatically  on January 1, 2000 and on each  January 1
thereafter  for an  additional  year,  unless Mr.  Schulhof  receives  notice of
termination prior to such extension.  Mr. Schulhof is paid an annual base salary
of $120,000,  which amount is subject to annual review, and bonuses, the amounts
of which are determined by the Compensation Committee. Mr. Schulhof also has the
use of a company car or, at his election,  will be paid an automobile  allowance
of $700 per month. During 1998, Mr. Schulhof received an automobile allowance of
$8,400.

      Dr. Bellavia's  Employment  Agreement became effective upon the closing of
the Company's  initial  public  offering of securities  (the "IPO") and provided
that he was employed as the Director of Affiliate  Programs of the Company.  The
initial  term of Dr.  Bellavia's  Employment  Agreement  was  three  years.  Dr.
Bellavia  was paid a monthly  advance of $10,000,  which  advance was subject to
review and reduction in the event that certain  affiliation targets were not met
by the  Company.  The Board of  Directors  of the Company  determined  that such
targets had been met during 1997,  and no reduction of Dr.  Bellavia's  advances
was imposed.  As of January 1, 1998, Dr. Bellavia and the Company terminated his
Employment   Agreement   and  replaced  it  with  a   consulting   agreement  on
substantially   the  same  terms.   See  "Certain   Relationships   and  Related
Transactions" under Item 12 hereof.

    Mr. Elliott's  Employment Agreement became effective upon the closing of the
IPO and provides that he is employed as the Director of  Professional  Relations
and  Staff  Development  of the  Company.  The  initial  term  of Mr.  Elliott's
Employment   Agreement  is  three   years,   and  such  term  will  be  extended
automatically  on the third  anniversary date of the  effectiveness  and on each
anniversary date thereafter for an additional year, unless either party receives
notice of termination  prior to such  extension.  Mr. Elliott was paid a monthly
advance of $10,000,  which  advance was subject to review and  reduction  in the
event that certain affiliation targets were not met by the Company. The Board of
Directors of the Company  determined that such targets had been met during 1997,
and no reduction of Mr.  Elliott's  advances was imposed.  Beginning in 1998 and
thereafter,  Mr. Elliott's  Employment  Agreement  provides for a base salary of
$10,000 per month,  which amount is subject to annual review,  and bonuses,  the
amounts of which are determined by the Compensation Committee.

    The Employment Agreements may be terminated by the Company or the respective
Executives  without cause with 90 days' prior written  notice.  If the Executive
suffers a  "termination  other  than for cause"  (as  defined in the  Employment
Agreements),  including  such  termination  within 24 months  after a "change in
control" (as defined in the Employment Agreements), the Executive is entitled to
receive  his  accrued  salary,   earned  bonus  compensation,   vested  deferred
compensation  (other than plan benefits which will be payable in accordance with
the  applicable  plan) and other benefits  through the date of  termination  and
severance  payments  of  salary  (at  the  rate  payable  at the  time  of  such
termination) for the longer of 12 months or the remaining term of the Employment
Agreement.  Each of the  Executives may elect to receive from the Company a lump
sum  severance  payment equal to the present value of the flow of cash flow from
the severance payments of salary. In addition,  each Executive is entitled to an
accelerated  vesting of any awards granted to the Executive  under the Incentive
Stock Plan.  Notwithstanding  the foregoing,  the Company is not required to pay
any amount which is not deductible for federal income tax purposes.

    If the  Executive is  terminated  for "cause" (as defined in the  Employment
Agreements),  he is  entitled  to  receive  his  accrued  salary,  earned  bonus
compensation,  vested deferred compensation (other than plan benefits which will
be payable in accordance  with the applicable  plan) and other benefits  through
the date of termination,  but shall receive no other severance benefits. Each of
the  Executives  may also be  terminated  if he dies or becomes  disabled  for a
period of 12 consecutive  months.  In the event of  termination  due to death or
disability,  the Executive (or his estate) shall receive the same payments,  but
no additional  severance,  except that, if the Executive becomes  disabled,  the
Company will  maintain his  insurance  benefits  for the  remaining  term of his
Employment Agreement.

Incentive Stock Plan

    Effective as of January 31, 1997, the Company adopted the Omega Orthodontics
Incentive Stock Plan (the "Incentive Stock Plan").  The Company reserved 300,000
of the authorized  shares of Common Stock for issuance under the Incentive Stock
Plan. On April  28,1997,  the  Incentive  Stock Plan was amended to increase the
number of shares of Common Stock  authorized  for issuance  under the  Incentive
Stock Plan to 450,000.  On April 24, 1998, the Incentive  Stock Plan was further
amended to increase the number of shares of Common Stock authorized for issuance
under such Plan to 700,000.  Unless terminated earlier, the Incentive Stock Plan
will terminate on January 30, 2007. The Incentive  Stock Plan is administered by
a  committee  consisting  solely  of two or  more  non-employee  Directors  (the
"Committee").

     On April 28, 1997,  the Committee  granted  options with respect to 350,000
shares of Common Stock to Dr.  Bellavia,  Mr.  Elliott and LMG in the amounts of
50,000, 150,000 and 150,000 shares, respectively,  at an exercise price of $6.00
per share.  On December 24, 1997, the Committee  granted options with respect to
20,000  shares of Common  Stock to Mr.  Clarke and Dr.  Grove in the  amounts of
10,000 shares each at an exercise  price of $3.00 per share.  On March 25, 1998,
the Committee  granted  options with respect to 25,000 shares of Common Stock to
Mr. Wexler and an aggregate of 30,000 shares of Common Stock to two employees at
an exercise price of $3.0625 per share. On August 28, 1998,  10,000 options were
granted to one employee and 10,000  options to Mr.  Robert  Daskal,  an Observer
Director appointed by National  Securities.  At March 15, 1999 255,000 shares of
Common  Stock were  reserved for  issuance  pursuant to future  grants under the
Incentive Stock Plan.

      The options granted to Mr. Elliott,  LMG, Mr. Wexler and the two employees
vest in three equal installments on each of the first three anniversaries of the
date of grant,  the  options  granted  to Dr.  Bellavia  vest fully on the first
anniversary  of the date of grant and the options  granted to Mr. Clarke and Dr.
Grove  vest six  months  following  the date of grant.  On March 25,  1998,  the
Committee  voted  to  accelerate  the  vesting  of the  options  granted  to LMG
retroactively to December 31, 1997.

Item 11.    Security Ownership of Certain Beneficial Owners and Management

      The following  table sets forth certain  information  as of March 15, 1999
with respect to the beneficial  ownership of the Company's  Common Stock by each
director,  each named executive officer in the Summary  Compensation Table under
"Executive  Officers and Compensation"  under Item 10 hereof,  all directors and
executive  officers as a group,  and each person  known by the Company to be the
beneficial owner of 5% or more of the Company's  Common Stock.  This information
is based upon information received from or on behalf of the named individuals.

        Name and Address of               Number of Shares
        Beneficial Owner (1)              Beneficially Owned         Percentage

The Orthodontic Management Effectiveness
Group of America, LLC (2)
     3621 Silver Spur Lane
     Acton, CA 93510                        1,050,000                   20.8%
Robert J. Schulhof (3)
     3621 Silver Spur Lane
     Acton, CA 93510                        1,050,000                   20.8%
Putnam Investments, Inc. (4)
     One Post Office Square
     Boston, MA 02109                         332,953                    6.6%
C. Joel Glovsky (5)
     44 Grey Lane
     Lynnfield, MA 01940                      231,000                    4.6%
The Mayflower Group Ltd. (6)
     393 Commonwealth Avenue
     Boston, MA 02115                         225,000                    4.4%
David T. Grove (7)
     581 12th Street
     Elko, NV 89801                           144,721                    2.9%
Dean C. Bellavia (8)
     44 Capen Boulevard
     Buffalo, NY 14214                         68,850                    1.3%
Edward M. Mulherin (9)
     63 Chatham Street
     Boston, MA 02109                         160,000                    3.1%
Floyd V. Elliott (10)
     2555 Homeland Drive
     Elko, NV  89801                           50,000                    *
John J. Clarke, Jr. (11)
     116 B South River Road
     Bedford, NH 03110                         10,000                    *
All directors and executive officers as
a group (7 persons) (12)                    1,714,571                   32.2%
----------------------------
*   Represents less than 1%.

(1)   Except as otherwise indicated, the Company believes that the persons named
      in the table above, based upon information furnished by such persons, have
      sole  voting and  investment  power  with  respect to all shares of Common
      Stock shown as beneficially  owned by them,  subject to community property
      laws  where  applicable.  Amounts  and  percentages  shown  are  based  on
      calculations  that,  pursuant to Rule 13d-3 under the Securities  Exchange
      Act of 1934, as amended (the  "Exchange  Act"),  include  shares  issuable
      pursuant to stock  options  which may be  exercised on or before March 15,
      1999.

(2)   The Company has relied on information  reported on a Statement on Schedule
      13G dated  February 24, 1999 filed jointly by The  Orthodontic  Management
      Effectiveness Group of America,  LLC ("OMEGA,  LLC") and Mr. Schulhof with
      the Securities and Exchange  Commission (the  "Commission").  Mr. Schulhof
      holds 330 membership points in OMEGA, LLC, or 27.7% of the voting power of
      OMEGA,  LLC, and is the sole manager of OMEGA,  LLC with authority to vote
      and dispose of shares of the Common  Stock of the  Company  held by OMEGA,
      LLC. Each of the following  other  directors of Omega holds more than five
      percent of the  membership  points of OMEGA,  LLC,  and the amount of such
      holdings is as set forth in the parenthetical following the holder's name:
      C. Joel Glovsky (75 points or 6.3%); David T. Grove (150 points or 12.6%);
      Dean C. Bellavia (100 points or 8.4%);  and Floyd V. Elliott (20 points or
      1.7%).

(3)   The Company has relied on information  reported on a Statement on Schedule
      13G dated February 24, 1999 filed jointly by OMEGA,  LLC and Mr.  Schulhof
      with the  Commission.  Includes the  1,050,000  shares held by OMEGA,  LLC
      which Mr.  Schulhof  may be deemed to  beneficially  own as the  principal
      membership point holder and the sole manager of OMEGA,  LLC. In connection
      with that  certain  Underwriting  Agreement  dated as of  October  1, 1997
      between  the  Company  and  National   Securities   Corporation,   as  the
      representative of the several underwriters of the Company's initial public
      offering of securities (the  "Underwriting  Agreement"),  Mr. Schulhof has
      agreed in his individual capacity and not as an officer or director of the
      Company, that for a period of two years after the date of the Underwriting
      Agreement,  in  any  stockholder  vote  other  than  the  election  of the
      directors of the Company,  or security holder proposals  presented for the
      vote of stockholders in accordance with Rule 14a-8 under the Exchange Act,
      he will  vote  all  shares  of  Common  Stock  beneficially  owned  by him
      individually  or in his  capacity as the sole  manager of OMEGA,  LLC with
      authority  to vote shares of the Common  Stock of the Company held by such
      entity, but no other affiliates, in accordance with the vote of a majority
      of the holders of Common  Stock of the Company  which has been  registered
      under the Securities Act,  except if such action,  in the opinion of legal
      counsel,  would not be consistent with his fiduciary  duties as a director
      or officer or principal stockholder of the Company.

(4)   The Company has relied on information  reported on a Statement on Schedule
      13G/A dated  February 9, 1999 filed by Putnam  Investments,  Inc. with the
      Commission.

(5)   The Company has relied on information  reported on a Statement on Schedule
      13G dated  February  12, 1998 filed by Dr.  Glovsky  with the  Commission.
      Includes  5,000  shares  held  of  record  by  Dr.  Glovsky's   Individual
      Retirement Account.

(6)   The Company has relied on information  reported on a Statement on Schedule
      13G dated  February 12, 1998 filed by The  Mayflower  Group Ltd.  with the
      Commission.

(7)   Includes  10,000  shares  issuable  upon the exercise of options  held  by
      Dr. Grove.

(8)   Includes  50,000 shares  issuable upon the exercise of options held by Dr.
      Bellavia.  Also  includes  8,100  shares  held by  certain  trusts for the
      benefit  of Dr.  Bellavia  and 750 shares  held by certain  trusts for the
      benefit of Dr. Bellavia's spouse.

(9)   Includes 10,000 shares held of record by Leonard,  Mulherin & Greene, P.C.
      ("LMG"), a public accounting firm that provides accounting services to the
      Company  and  makes  Mr.  Mulherin  available  to be the  Company's  Chief
      Financial  Officer  pursuant to a consulting  agreement,  and of which Mr.
      Mulherin is a principal stockholder. Also includes 150,000 shares issuable
      upon the exercise of options held by LMG.

(10)  Includes 50,000 shares issuable upon the exercise of options held  by  Mr.
      Elliott.

(11)  Includes 10,000 shares issuable upon the exercise of options held  by  Mr.
      Clarke.

(12)  See Notes 3, 5, 7, 8, 9, 10 and 11.

Item 12.    Certain Relationships and Related Transactions

      On August 31, 1996, the Company acquired OMEGA, LLC's orthodontic practice
management  business  and  certain  related  assets,  management  contracts  and
practice  affiliation  agreements  in  exchange  for  1,050,000  shares  of  the
Company's  Common Stock. The related assets,  contracts and agreements  included
certain computer and other office equipment;  non-binding letters of intent with
orthodontic  practices  to  affiliate  with  OMEGA,  LLC,  four  of  which  were
superseded by affiliation  agreements that closed  simultaneously  with the IPO;
consulting  services  agreements  which provided limited revenues to the Company
pending the closing of the IPO; consulting  agreements with Dr. Bellavia and Mr.
Elliott,  both of  which  were  superseded  by  Employment  Agreements;  and the
consulting  agreement (which is described below) with Dr. Glovsky and Mayflower.
Mr.  Schulhof and Drs.  Glovsky and Bellavia,  all of the then  directors of the
Company,  held 330  (27.7%),  75  (6.3%),  150  (12.6%)  and 100  (8.4%)  of the
membership points of OMEGA, LLC,  respectively,  at the time of the transaction,
and Mr. Schulhof was the sole manager of OMEGA, LLC.

      In  connection  with  the  acquisition  by the  Company  of  OMEGA,  LLC's
orthodontic  practice  management  business,  the Company  assumed OMEGA,  LLC's
rights and  obligations  under an agreement with Dr.  Glovsky and  Mayflower,  a
private  banking firm,  whereby Dr.  Glovsky and Mayflower  (the  "Consultants")
agreed to provide  certain  consulting  services  to the Company  regarding  the
Company's  business plan,  initial capital  structure and private  financing and
orthodontic  practice  affiliation   transactions  and  the  identification  and
retention  of the  Company's  Board of  Directors,  senior  management  team and
professional  advisors.  Under  the  terms  of the  agreement,  as  amended  and
restated,  225,000  shares of the Company's  Common Stock were issued to each of
the  Consultants  to be held in escrow pending  fulfillment of their  consulting
obligations. Following completion of the consulting services, all of such shares
were  released  from  the  escrow  on  April  28,  1997 at an  imputed  value of
approximately $4.50 per share and delivered to the Consultants. In addition, the
Company  agreed to make cash payments to the  Consultants  aggregating  $842,000
over three years  beginning  in January  1998.  The Company is obligated to make
quarterly  payments to each of Dr.  Glovsky and Mayflower on January 1, April 1,
June 1 and  September  1, 1998,  1999 and 2000 of $67,500,  $27,000 and $10,800,
respectively.  The  Company  made  payments  under  this  agreement  aggregating
$305,000 to Dr. Glovsky and Mayflower during 1998. Mayflower is a stockholder of
the  Company  and  holds 75  membership  points  of OMEGA,  LLC,  the  Company's
principal stockholder.  See "Security Ownership of Certain Beneficial Owners and
Management" under Item 9 hereof.

      The Company has entered into another consulting agreement with Dr. Glovsky
which  became  effective  upon the closing of the IPO.  The initial  term of the
agreement is three years,  and Dr. Glovsky provides  consulting  services to the
Company in connection with identifying  orthodontic  practices with potential to
affiliate with the Company and  negotiating and closing  affiliation  agreements
with such  practices.  Dr. Glovsky was paid a monthly  advance of $5,000,  which
advance  was  subject  to  review  and  reduction  in  the  event  that  certain
affiliation  targets were not met by the Company.  The Board of Directors of the
Company  determined that such targets had been met during 1997, and no reduction
of Dr.  Glovsky's  advances was imposed.  Beginning in 1998 and thereafter,  Dr.
Glovsky's  consulting agreement provides for a maximum monthly fee of $5,000. In
1998,  the Company paid Dr.  Glovsky fees of $60,000 and expects to pay him fees
of approximately $60,000 under this agreement in 1999.

      The Company  entered  into a  consulting  agreement  with LMG which became
effective  on May 1, 1997 and  provides  that LMG  shall  make Mr.  Mulherin,  a
principal  stockholder  of  LMG,  available  to  serve  as the  Company's  Chief
Financial  Officer.  The initial term of the  agreement is three years.  For the
services of Mr.  Mulherin  as Chief  Financial  Officer,  LMG was paid a monthly
retainer  fee of $5,000  prior to the closing of the IPO and a monthly  retainer
fee of $10,000  thereafter  and for the term of the agreement.  In addition,  in
connection  with work done by LMG in preparation  for and completion of the IPO,
the  Company  paid LMG  fees of $  148,565  and  issued  LMG  10,000  shares  of
unregistered  Common Stock. The Company granted LMG a non-qualified stock option
under the Incentive Stock Plan to acquire 150,000 shares of the Company's Common
Stock at an  exercise  price of $6.00 per share.  The Company has also agreed to
indemnify LMG against certain  liabilities that may arise in connection with the
services to be rendered by LMG under the agreement.

      During  September 1996, Drs.  Glovsky and Bellavia,  both directors of the
Company  and  more  than 5%  owners  of  OMEGA,  LLC,  the  Company's  principal
stockholder,  purchased $25,000 and $50,000, respectively, of certain 15% bridge
financing  notes issued prior to the IPO (the "Bridge Notes") and received 5,000
and 10,000  shares,  respectively,  of the Company's  Common Stock in connection
therewith.  In April,  1997, Dr.  Glovsky and Dr. Grove,  also a director of the
Company,   purchased  an   additional   $5,000  and  $25,000  of  Bridge  Notes,
respectively,  and received an  additional  1,000 and 5,000 shares of the Common
Stock,  respectively,  in connection  therewith.  In October  1997,  the Company
repaid all of its Bridge Notes (including interest accrued thereon) from the net
proceeds of the IPO,  including the Bridge Notes held by Drs. Glovsky,  Bellavia
and Grove.

      In June, 1997, Dr. Glovsky and Dr. Grove purchased $25,000 each of certain
16% interim financing notes issued prior to the IPO (the "Interim  Notes"),  and
Dr. Glovsky  subsequently  purchased an additional  $60,000 of Interim Notes. In
October 1997,  the Company repaid all of its Interim Notes  (including  interest
accrued  thereon) from the net proceeds of the IPO,  including the Interim Notes
held by Dr. Glovsky and Dr. Grove.

      The Company entered into an affiliation agreement with Dr. Grove which the
Company  closed  concurrently  with  the  closing  of the IPO.  Pursuant  to its
agreement  with Dr.  Grove,  a director of the  Company,  the  Company  acquired
certain  assets of Dr.  Grove's  orthodontic  practice  in  exchange  for a cash
payment of $333,567 and 129,721 shares of the Company's Common Stock.

      In December 1997, the Company loaned Mr. Schulhof $100,000 in exchange for
his promissory  note (the "Schulhof  Note").  The Schulhof Note is a demand note
which  bears  interest  at the rate of prime (as  published  in The Wall  Street
Journal) plus two percent.  Principal  and interest are due upon demand,  but if
not sooner demanded, then in December 2000.

      Effective as of January 1, 1998, the Company and Dr.  Bellavia  terminated
his Employment  Agreement and entered into a consulting  agreement.  The initial
term of the  agreement  is three  years.  Dr.  Bellavia  will  provide  services
relating  to  the  design,  schedule  of  installation  and  follow  up  on  the
effectiveness  of  all  managerial  systems  used  by the  Company's  affiliated
orthodontic  practices and the management of the consultants used by the Company
to optimize and maintain the affiliate practices' programs. Dr. Bellavia is paid
a monthly retainer fee of $10,000, and the Company expects to pay Dr.
Bellavia consulting fees in 1998 of approximately $120,000.

      The Company  entered into a  consulting  agreement  with Mr.  Wexler which
became effective on March 9, 1998 and provides that Mr. Wexler will serve as the
Company's Chief Legal Officer. The initial term of the agreement is three years.
Mr. Wexler is paid a monthly retainer fee of $7,350,  and the Company has agreed
to reimburse Mr. Wexler for certain bar association and  professional  liability
expenses he incurs in connection with his services as Chief Legal Officer of the
Company.  The Company granted Mr. Wexler a non-qualified  stock option under the
Incentive  Stock Plan to acquire 25,000 shares of the Company's  Common Stock at
an exercise price of $3.0625 per share. The Company has also agreed to indemnify
Mr. Wexler against  certain  liabilities  that may arise in connection  with the
services to be  rendered  under the  agreement  and to pay him in a lump sum the
amount  that he would be entitled to receive  under the  agreement  in the event
that his employment  terminates  within six months following a change in control
of the Company.

      The Company has adopted a policy to the effect that  transactions  between
it and its officers, directors, principal stockholders and the affiliates of the
foregoing  persons  be on terms no less  favorable  to the  Company  than  could
reasonably  be obtained  in  arms-length  transactions  with  independent  third
parties,  and that any such  transactions  also be approved by a majority of the
Company's outside independent directors disinterested in the transaction.

Item 13     Exhibits, List and Reports on Form 8-K

(a)   Exhibits

 Exhibit No.                   Exhibit Description                   Reference

2.1           Asset Purchase Agreement dated as of August 31, 1996       A
              by and between Omega Orthodontics, Inc. and The
              Orthodontic Management Effectiveness Group of
              America, LLC

2.2           Form of Affiliation Agreement and Agreement and Plan       A
              of Merger by and among Omega Orthodontics, Inc.,
              Robert R. Schmisseur, D.D.S. and Robert R.
              Schmisseur, D.D.S., M.S., P.C., as amended

2.3           Affiliation Agreement and Agreement and Plan of            A
              Merger by and among Omega Orthodontics, Inc.,
              Theodore G. Saydyk, Jr., D.D.S. and Theodore G.
              Saydyk, Jr., D.D.S., P.C., as amended

2.4           Form of Affiliation Agreement and Asset Purchase           A
              Agreement by and among Omega Orthodontics, Inc. and
              Scott E. Feldman, D.D.S.

2.5           Form of Affiliation Agreement and Stock Purchase           A
              Agreement by and between Omega Orthodontics, Inc.
              and Jeff S. Zapalac, D.D.S.

2.6           Form of Affiliation Agreement and Asset Purchase           A
              Agreement by and between Omega Orthodontics, Inc.
              and David T. Grove, D.M.D.

2.7           Affiliation Agreement and Agreement and Plan of            A
              Merger by and among Omega Orthodontics, Inc.,
              Michael G. Churosh, D.D.S. and Michael G. Churosh,
              D.D.S., M.S., LTD., as amended

2.8           Affiliation Agreement and Agreement and Plan of            A
              Merger by and among Omega Orthodontics, Inc., Clark
              E. Schneekluth, D.D.S. and Clark E. Schneekluth,
              D.D.S., P.C., as amended

2.9           Affiliation Agreement and Asset Purchase Agreement         B
              by and between Omega Orthodontics, Inc. and Leon J.
              Leonard, D.D.S.

2.10          Affiliation Agreement and Asset Purchase Agreement         B
              by and between Omega Orthodontics, Inc. and David
              Longworth, D.D.S.

2.11          Affiliation Agreement and Asset Purchase Agreement         B
              by and between Omega Orthodontics, Inc. and Rodney
              A. Gray, D.D.S.

2.12          Agreement for the Purchase and Sale of Assets by and       B
              between Sharon M. Crowder, D.D.S., Inc. and Omega
              Orthodontics of Reseda, Inc.

2.13          Affiliation Agreement and Agreement and Plan of            B
              Merger by and among Omega Orthodontics of Woodland
              Hills, Inc., Omega Orthodontics, Inc., Sharon M.
              Crowder, D.D.S., Scott E. Feldman, D.D.S. and Omega
              Orthodontics of Reseda, Inc.

2.14          Affiliation Agreement and Asset Purchase Agreement         B
              by and among Omega Orthodontics, Inc., Richard H.
              Villa, D.D.S. and Richard H. Villa, D.D.S., Inc.

2.15          Affiliation Agreement and Agreement and Plan of            B
              Merger by and among Omega Orthodontics of Woodland
              Hills, Inc., Omega Orthodontics, Inc., Azani Dental
              Services, Inc., Daniel Azani, D.D.S. and Daniel
              Azani, D.D.S., Inc.

2.15a         Amendment to Affiliation Agreement and Plan of             B
              Merger by and among Omega Orthodontics of Woodland
              Hills, Inc., Omega Orthodontics, Inc., Azani Dental
              Services, Inc., Daniel Azani, D.D.S. and Daniel
              Azani, D.D.S., Inc.

2.16          Affiliation Agreement and Asset Purchase Agreement         B
              by and among Omega Orthodontics, Inc., William W.
              Beazley, D.D.S. and William W. Beazley, D.D.S., Inc.

2.17          Affiliation Agreement and Asset Purchase Agreement       Filed
              by and between Omega Orthodontics, Inc. and Dennis      Herewith
              E. Holt, D.D.S., M.S.

2.18          Asset Purchase Agreement by and among Omega              Filed
              Orthodontics, Inc., Richard A. Levin, D.D.S. and        Herewith
              Richard A. Levin, D.D.S. Inc.

2.19          Affiliation Agreement and Stock Purchase Agreement       Filed
              by and among Omega Orthodontics, Inc., and John F.      Herewith
              Whitaker, D.D.S.

3.1           Certificate of Incorporation of Omega Orthodontics,        A
              Inc.

3.2           Certificate of Amendment of Certificate of                 A
              Incorporation of Omega Orthodontics, Inc. filed
              February 12, 1997

3.3           By-Laws of Omega Orthodontics, Inc., as amended            A

4.1           Specimen Certificate for Common Stock                      A

4.2           Warrant Agreement by and between Omega Orthodontics,       A
              Inc. and Continental Stock Transfer & Trust Company,
              including form of Warrant

4.3           Representative's Warrant Agreement by and between          A
              National Securities Corporation and Omega
              Orthodontics, Inc., including form of
              Representative's Warrant.

10.1          Form of Management Services Agreement by and among a       A
              professional corporation to be formed by Dr.
              Schmisseur, Omega Orthodontics of Champaign, Inc.
              and OMEGA Orthodontics, Inc.

10.2          Form of Management Services Agreement b and among a        A
              professional corporation to be formed by Dr. Saydyk,
              Omega Orthodontics of Colorado Springs, Inc. and
              OMEGA Orthodontics, Inc.

10.3          Form of Management Services Agreement by and among a       B
              professional corporation to be formed by Dr.
              Feldman, Omega Orthodontics of Woodland Hills, Inc.
              and OMEGA Orthodontics, Inc.

10.4          Form of Management Services Agreement by and among a       A
              professional corporation to be formed by Dr.
              Zapalac, Omega Orthodontics of Austin, Inc. and
              OMEGA Orthodontics, Inc.

10.5          Form of Management Services Agreement by and among a       A
              professional corporation to be formed by Dr. Grove,
              Omega Orthodontics of Elko, Inc. and OMEGA
              Orthodontics, Inc.

10.6          Form of Management Services Agreement by and among a       A
              professional corporation to be formed by Dr.
              Churosh, Omega Orthodontics of Goodyear, Inc. and
              OMEGA Orthodontics, Inc.

10.7          Form of Management Services Agreement by and among a       A
              professional corporation to be formed by Dr.
              Schneekluth, Omega Orthodontics of Huntington Beach,
              Inc. and OMEGA Orthodontics, Inc.

10.8          Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Schmisseur, Robert
              R. Schmisseur, D.D.S., Omega Orthodontics, Inc. and
              Omega Orthodontics of Champaign, Inc.

10.9          Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Saydyk, Theodore G.
              Saydyk, Jr., D.D.S., Omega Orthodontics, Inc. and
              Omega Orthodontics of Colorado Springs, Inc.

10.10         Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Feldman, Scott E.
              Feldman, D.D.S., Omega Orthodontics, Inc. and Omega
              Orthodontics of Woodland Hills, Inc.

10.11         Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Zapalac, Jeff S.
              Zapalac, D.D.S., Inc., Omega Orthodontics, Inc. and
              Omega Orthodontics of Austin, Inc.

10.12         Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Grove, David T.
              Grove, D.M.D., Omega Orthodontics, Inc. and Omega
              Orthodontics of Elko, Inc.

10.13         Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Churosh, Michael G.
              Churosh, D.D.S., Omega Orthodontics, Inc. and Omega
              Orthodontics of Goodyear, Inc.

10.14         Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Schneekluth, Clark
              E. Schneekluth, D.D.S., Omega Orthodontics, Inc. and
              Omega Orthodontics of Huntington Beach, Inc.

10.15         Form of Non-negotiable Promissory Note from Omega          A
              Orthodontics, Inc. payable to Robert R. Schmisseur

10.16         Form of Non-negotiable Promissory Note from Omega          A
              Orthodontics, Inc. payable to Theodore G. Saydyk, Jr.

10.17         Form of Non-negotiable Promissory Note from Omega          A
              Orthodontics, Inc. payable to Scott E. Feldman

10.18         Form of Non-negotiable Promissory Note from Omega          A
              Orthodontics, Inc. payable to David T. Grove

10.19         Form of Non-negotiable Promissory Note from Omega          A
              Orthodontics, Inc. payable to Clark E. Schneekluth

10.20         General Assignment and Assumption Agreement dated as       A
              of August 31, 1997 by and between The Orthodontic
              Management Effectiveness Group of America, LLC and
              Omega Orthodontics, Inc.

10.21*        Employment Agreement by and between Robert J.              A
              Schulhof and Omega Orthodontics, Inc.

10.22*        Employment Agreement by and between F.V. Elliott and       A
              Omega Orthodontics, Inc.

10.23*        Omega Orthodontics Incentive Stock Plan, as amended        A

10.24*        Subscription Agreement dated as of September 9, 1996       A
              and April 28, 1997 by and between Omega
              Orthodontics, Inc. and C. Joel Glovsky Rollover IRA

10.25*        Subscription Agreement dated as of September 25,           A
              1996 by and between Omega Orthodontics, Inc. and
              Dean C. Bellavia.

10.26*        Amended and Restated Consulting Agreement by and           A
              among Omega Orthodontics, Inc., The Mayflower Group,
              Ltd., and C. Joel Glovsky, as amended

10.27*        Amendment to the Amended and Restated Consulting           B
              Agreement by and among Omega Orthodontics, Inc., The
              Mayflower Group, Ltd., and C. Joel Glovsky as amended

10.28*        Agreement dated as of October 23, 1996 by and              A
              between Leonard, Mulherin & Greene, P.C. and Omega
              Orthodontics, Inc.

10.29*        Consulting Agreement by and between C. Joel Glovsky        A
              and Omega Orthodontics, Inc.

10.30*        Consulting Agreement by and between Leonard,               A
              Mulherin & Greene, P.C. and Omega Orthodontics, Inc.

10.31         Subscription Agreement dated as of April 28, 1997 by       A
              and between Omega Orthodontics, Inc. and David T.
              Grove

10.32         Management Services Agreement by and among Leon J.         B
              Leonard, D.M.D., P.C., Omega Orthodontics of
              Conyers, Inc. and Omega Orthodontics, Inc.

10.33         Stock Put/Call Option and Successor Designation            B
              Agreement by and among Leon J. Leonard, D.M.D.,
              P.C., Leon J. Leonard, D.D.S., Omega Orthodontics,
              Inc. and Omega Orthodontics of Conyers, Inc.

10.34         Non-negotiable Promissory Note from Omega                  B
              Orthodontics, Inc. payable to Leon Leonard

10.35         Management Services Agreement by and among David W.        B
              Longworth, P.C., Omega Orthodontics of Watertown,
              Inc. and Omega Orthodontics, Inc.

10.36         Stock Put/Call Option and Successor Designation            B
              Agreement by and among David W. Longworth, P.C.,
              David Longworth, D.D.S., Omega Orthodontics, Inc.
              and Omega Orthodontics of Watertown, Inc.

10.37         Non-negotiable Promissory Note from Omega                  B
              Orthodontics, Inc. payable to David W. Longworth
              Trust and Jacquelyn L. Longworth Trust

10.38         Management Services Agreement by and among Rodney A.       B
              Gray, D.D.S., M.S., Ltd., Omega Orthodontics of
              Reno, Inc. and Omega Orthodontics, Inc.

10.39         Stock Put/Call Option and Successor Designation            B
              Agreement by and among Rodney A. Gray, D.D.S., M.S.,
              Ltd., Rodney A. Gray, D.D.S., Omega Orthodontics,
              Inc. and Omega Orthodontics of Reno, Inc.

10.40         Non-negotiable Promissory Note from Omega                  B
              Orthodontics, Inc. payable to Rodney A. Gray

10.41         Management Services Agreement by and among Scott E.        B
              Feldman, D.D.S., M.S., Inc., Omega Orthodontics of
              Reseda, Inc. and Omega Orthodontics, Inc.

10.42         Management Services Agreement by and among Richard         B
              H. Villa, D.M.D., P.C., Omega Orthodontics of
              Virginia, Inc. and Omega Orthodontics, Inc.

10.43         Stock Put/Call Option and Successor Designation            B
              Agreement by and among Richard H. Villa, D.M.D.,
              P.C., Richard H. Villa, D.M.D., Omega Orthodontics,
              Inc. and Omega Orthodontics of Virginia, Inc.

10.44         Non-negotiable Promissory Note from Omega                  B
              Orthodontics, Inc. payable to Richard H. Villa,
              D.M.D.

10.45*        Consulting Agreement by and between Dean C. Bellavia       B
              and Omega Orthodontics, Inc.

10.46         Demand Note dated December 3, 1997 made by Robert J.       B
              Schulhof in favor of Omega Orthodontics, Inc.

10.47         Management Services Agreement by and among Daniel          B
              Azani, D.D.S., Inc., Azani Dental Services, Inc. and
              Omega Orthodontics, Inc.

10.47a        Amendment to Management Services Agreement by and          B
              among Daniel Azani, D.D.S., Inc., Azani Dental
              Services, Inc. and Omega Orthodontics, Inc.

10.48         Stock Put/Call Option and Successor Designation            B
              Agreement by and among Daniel Azani,  D.D.S.,  Inc.,
              Daniel Azani,  D.D.S.,  Azani Dental Services, Inc.
              and Omega Orthodontics, Inc.

10.48a        Amendment to Stock Put/Call Option and Successor           B
              Designation Agreement by and among Daniel Azani,
              D.D.S., Inc., Daniel Azani, D.D.S., Azani Dental
              Services, Inc. and Omega Orthodontics, Inc.

10.49*        Consulting Agreement by and between Peter I. Wexler        B
              and Omega Orthodontics, Inc.

10.50         Non-negotiable Promissory Note from Omega                  B
              Orthodontics, Inc. payable to Daniel Azani, D.D.S.

10.51         Form of Letter of Intent for Management Services by      Filed
              and between Omega Orthodontics, Inc. and Jack A.        Herewith
              Hill D.D.S., Inc.

10.52         Management Agreement by and among Omega                  Filed
              Orthodontics, Inc., Omega Orthodontics of Austin,       Herewith
              Inc., and Jack A. Hill D.D.S., Inc.

10.53         Management Services Agreement by and among Dennis E.     Filed
              Holt, P.C., Omega Orthodontics of Woodland Hills,       Herewith
              Inc. and Omega Orthodontics, Inc.

10.54         Stock Put/Call Option and Successor Designation          Filed
              Agreement by and among Dennis E. Holt, P.C., Dennis     Herewith
              E. Holt, DDS, M.S., Omega Orthodontics, Inc. and
              Omega Orthodontics of Woodland Hills, Inc.

10.55         Management Services Agreement by and among Clark E.      Filed
              Schneekluth, D.D.S. M.S., Inc., Omega Orthodontics      Herewith
              of Woodland Hills, Inc., and Omega Orthodontics, Inc.

10.56         Management Services Agreement by and among J.F.          Filed
              Whitaker, D.D.S. Inc., Omega Orthodontics of            Herewith
              Woodland Hills, Inc. and Omega Orthodontics, Inc.

10.57         Form of Stock Put/Call Option and Successor              Filed
              Designation Agreement by and among J.F. Whitaker,       Herewith
              D.D.S. Inc., John F. Whitaker, D.D.S., Omega
              Orthodontics, Inc., and Omega Orthodontics of
              Woodland Hills, Inc.

10.58         Stock Put/Call Option and Successor Designation          Filed
              Agreement by and among Clark E. Schneekluth, D.D.S.     Herewith
              M.S., Inc., Clark E. Schneekluth, D.D.S., Omega
              Orthodontics, Inc., and Omega Orthodontics of
              Woodland Hills, Inc.

10.59         Management Services Agreement by and among Rodney        Filed
              A. Gray, D.D.S., Omega Orthodontics of Reno, Inc.,      Herewith
              and Omega Orthodontics, Inc.

10.60         Form of Non-negotiable Promissory Note from Omega        Filed
              Orrthodontics, Inc. payable to Dr. John F. Whitaker     Herewith

11            Computation of Pro Forma Earnings Per Share              Filed
                                                                      Herewith

21.1          List of Subsidiaries of Omega Orthodontics, Inc.         Filed
                                                                      Herewith

27.1          Financial Data Schedule                                  Filed
                                                                      Herewith

____________________
A     Incorporated by reference to the Company's  registration statement on Form
      SB-2, as amended (Registration No. 333-27179).

B     Incorporated  by reference to the  Company's  Annual Report for the fiscal
      year ended December 31, 1997 on Form 10-KSB.

*     Management contract or compensatory plan or arrangement.

**    In accordance with Rule 12b-32 under the Securities  Exchange Act of 1934,
      as amended,  reference is made to the documents  previously filed with the
      Securities   and  Exchange   Commission,   which   documents   are  hereby
      incorporated by reference.

(b)   Reports on Form 8-K

      None.

<PAGE>
                                   SIGNATURES

      In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.



                            OMEGA ORTHODONTICS, INC.


                            By:  /s/ Robert J. Schulhof
                                 Robert J. Schulhof, Chief Executive Officer


      In  accordance  with the  Securities  Exchange  Act,  this report has been
signed below by the  following  persons on behalf of the  registrant  and in the
capacities and on the dates indicated.

         Signature                    Title                      Date

                            Director, President and        March 30, 1999
                            Chief Executive Officer
/s/ Robert J. Schulhof      (Principal Executive Officer)
    Robert J. Schulhof

                            Chief Financial Officer        March 30, 1999
/s/ Edward M. Mulherin      (Principal Financial and
    Edward M. Mulherin       Accounting Officer)


                                     Director              March 30, 1999
/s/ Dean C. Bellavia
    Dean C. Bellavia


                                     Director              March 30, 1999
/s/ John C. Clarke, Jr.
    John C. Clarke, Jr.


                                     Director              March 30, 1999
/s/ Floyd V. Elliott
    Floyd V. Elliott


                                     Director              March 30, 1999
/s/ C. Joel Glovsky
    C. Joel Glovsky


                                     Director              March 30, 1999
/s/ David T. Grove
    David T. Grove

                                 EXHIBIT INDEX

Exhibit No.                   Exhibit Description                    Reference

2.1           Asset Purchase Agreement dated as of August 31, 1996       A
              by and between Omega Orthodontics, Inc. and The
              Orthodontic Management Effectiveness Group of
              America, LLC

2.2           Form of Affiliation Agreement and Agreement and Plan       A
              of Merger by and among Omega Orthodontics, Inc.,
              Robert R. Schmisseur, D.D.S. and Robert R.
              Schmisseur, D.D.S., M.S., P.C., as amended

2.3           Affiliation Agreement and Agreement and Plan of            A
              Merger by and among Omega Orthodontics, Inc.,
              Theodore G. Saydyk, Jr., D.D.S. and Theodore G.
              Saydyk, Jr., D.D.S., P.C., as amended

2.4           Form of Affiliation Agreement and Asset Purchase           A
              Agreement by and among Omega Orthodontics, Inc. and
              Scott E. Feldman, D.D.S.

2.5           Form of Affiliation Agreement and Stock Purchase           A
              Agreement by and between Omega Orthodontics, Inc.
              and Jeff S. Zapalac, D.D.S.

2.6           Form of Affiliation Agreement and Asset Purchase           A
              Agreement by and between Omega Orthodontics, Inc.
              and David T. Grove, D.M.D.

2.7           Affiliation Agreement and Agreement and Plan of            A
              Merger by and among Omega Orthodontics, Inc.,
              Michael G. Churosh, D.D.S. and Michael G. Churosh,
              D.D.S., M.S., LTD., as amended

2.8           Affiliation Agreement and Agreement and Plan of            A
              Merger by and among Omega Orthodontics, Inc., Clark
              E. Schneekluth, D.D.S. and Clark E. Schneekluth,
              D.D.S., P.C., as amended

2.9           Affiliation Agreement and Asset Purchase Agreement         B
              by and between Omega Orthodontics, Inc. and Leon J.
              Leonard, D.D.S.

2.10          Affiliation Agreement and Asset Purchase Agreement         B
              by and between Omega Orthodontics, Inc. and David
              Longworth, D.D.S.

2.11          Affiliation Agreement and Asset Purchase Agreement         B
              by and between Omega Orthodontics, Inc. and Rodney
              A. Gray, D.D.S.

2.12          Agreement for the Purchase and Sale of Assets by and       B
              between Sharon M. Crowder, D.D.S., Inc. and Omega
              Orthodontics of Reseda, Inc.

2.13          Affiliation Agreement and Agreement and Plan of            B
              Merger by and among Omega Orthodontics of Woodland
              Hills, Inc., Omega Orthodontics, Inc., Sharon M.
              Crowder, D.D.S., Scott E. Feldman, D.D.S. and Omega
              Orthodontics of Reseda, Inc.

2.14          Affiliation Agreement and Asset Purchase Agreement         B
              by and among Omega Orthodontics, Inc., Richard H.
              Villa, D.D.S. and Richard H. Villa, D.D.S., Inc.

2.15          Affiliation Agreement and Agreement and Plan of            B
              Merger by and among Omega Orthodontics of Woodland
              Hills, Inc., Omega Orthodontics, Inc., Azani Dental
              Services, Inc., Daniel Azani, D.D.S. and Daniel
              Azani, D.D.S., Inc.

2.15a         Amendment to Affiliation Agreement and Plan of             B
              Merger by and among Omega Orthodontics of Woodland
              Hills, Inc., Omega Orthodontics, Inc., Azani Dental
              Services, Inc., Daniel Azani, D.D.S. and Daniel
              Azani, D.D.S., Inc.

2.16          Affiliation Agreement and Asset Purchase Agreement         B
              by and among Omega Orthodontics, Inc., William W.
              Beazley, D.D.S. and William W. Beazley, D.D.S., Inc.

2.17          Affiliation Agreement and Asset Purchase Agreement       Filed
              by and between Omega Orthodontics, Inc. and Dennis      Herewith
              E. Holt, D.D.S., M.S.

2.18          Asset Purchase Agreement by and among Omega              Filed
              Orthodontics, Inc., Richard A. Levin, D.D.S. and        Herewith
              Richard A. Levin, D.D.S. Inc.

2.19          Affiliation Agreement and Stock Purchase Agreement       Filed
              by and among Omega Orthodontics, Inc., and John F.      Herewith
              Whitaker, D.D.S.

3.1           Certificate of Incorporation of Omega Orthodontics,        A
              Inc.

3.2           Certificate of Amendment of Certificate of                 A
              Incorporation of Omega Orthodontics, Inc. filed
              February 12, 1997

3.3           By-Laws of Omega Orthodontics, Inc., as amended            A

4.1           Specimen Certificate for Common Stock                      A

4.2           Warrant Agreement by and between Omega Orthodontics,       A
              Inc. and Continental Stock Transfer & Trust Company,
              including form of Warrant

4.3           Representative's Warrant Agreement by and between          A
              National Securities Corporation and Omega
              Orthodontics, Inc., including form of
              Representative's Warrant.

10.1          Form of Management Services Agreement by and among a       A
              professional corporation to be formed by Dr.
              Schmisseur, Omega Orthodontics of Champaign, Inc.
              and OMEGA Orthodontics, Inc.

10.2          Form of Management Services Agreement b and among a        A
              professional corporation to be formed by Dr. Saydyk,
              Omega Orthodontics of Colorado Springs, Inc. and
              OMEGA Orthodontics, Inc.

10.3          Form of Management Services Agreement by and among a       B
              professional corporation to be formed by Dr.
              Feldman, Omega Orthodontics of Woodland Hills, Inc.
              and OMEGA Orthodontics, Inc.

10.4          Form of Management Services Agreement by and among a       A
              professional corporation to be formed by Dr.
              Zapalac, Omega Orthodontics of Austin, Inc. and
              OMEGA Orthodontics, Inc.

10.5          Form of Management Services Agreement by and among a       A
              professional corporation to be formed by Dr. Grove,
              Omega Orthodontics of Elko, Inc. and OMEGA
              Orthodontics, Inc.

10.6          Form of Management Services Agreement by and among a       A
              professional corporation to be formed by Dr.
              Churosh, Omega Orthodontics of Goodyear, Inc. and
              OMEGA Orthodontics, Inc.

10.7          Form of Management Services Agreement by and among a       A
              professional corporation to be formed by Dr.
              Schneekluth, Omega Orthodontics of Huntington Beach,
              Inc. and OMEGA Orthodontics, Inc.

10.8          Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Schmisseur, Robert
              R. Schmisseur, D.D.S., Omega Orthodontics, Inc. and
              Omega Orthodontics of Champaign, Inc.

10.9          Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Saydyk, Theodore G.
              Saydyk, Jr., D.D.S., Omega Orthodontics, Inc. and
              Omega Orthodontics of Colorado Springs, Inc.

10.10         Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Feldman, Scott E.
              Feldman, D.D.S., Omega Orthodontics, Inc. and Omega
              Orthodontics of Woodland Hills, Inc.

10.11         Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Zapalac, Jeff S.
              Zapalac, D.D.S., Inc., Omega Orthodontics, Inc. and
              Omega Orthodontics of Austin, Inc.

10.12         Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Grove, David T.
              Grove, D.M.D., Omega Orthodontics, Inc. and Omega
              Orthodontics of Elko, Inc.

10.13         Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Churosh, Michael G.
              Churosh, D.D.S., Omega Orthodontics, Inc. and Omega
              Orthodontics of Goodyear, Inc.

10.14         Form of Stock Put/Call Option and Successor                A
              Designation Agreement by and among a professional
              corporation to be formed by Dr. Schneekluth, Clark
              E. Schneekluth, D.D.S., Omega Orthodontics, Inc. and
              Omega Orthodontics of Huntington Beach, Inc.

10.15         Form of Non-negotiable Promissory Note from Omega          A
              Orthodontics, Inc. payable to Robert R. Schmisseur

10.16         Form of Non-negotiable Promissory Note from Omega          A
              Orthodontics, Inc. payable to Theodore G. Saydyk, Jr.

10.17         Form of Non-negotiable Promissory Note from Omega          A
              Orthodontics, Inc. payable to Scott E. Feldman

10.18         Form of Non-negotiable Promissory Note from Omega          A
              Orthodontics, Inc. payable to David T. Grove

10.19         Form of Non-negotiable Promissory Note from Omega          A
              Orthodontics, Inc. payable to Clark E. Schneekluth

10.20         General Assignment and Assumption Agreement dated as       A
              of August 31, 1997 by and between The Orthodontic
              Management Effectiveness Group of America, LLC and
              Omega Orthodontics, Inc.

10.21*        Employment Agreement by and between Robert J.              A
              Schulhof and Omega Orthodontics, Inc.

10.22*        Employment Agreement by and between F.V. Elliott and       A
              Omega Orthodontics, Inc.

10.23*        Omega Orthodontics Incentive Stock Plan, as amended        A

10.24*        Subscription Agreement dated as of September 9, 1996       A
              and April 28, 1997 by and between Omega
              Orthodontics, Inc. and C. Joel Glovsky Rollover IRA

10.25*        Subscription Agreement dated as of September 25,           A
              1996 by and between Omega Orthodontics, Inc. and
              Dean C. Bellavia.

10.26*        Amended and Restated Consulting Agreement by and           A
              among Omega Orthodontics, Inc., The Mayflower Group,
              Ltd., and C. Joel Glovsky, as amended

10.27*        Amendment to the Amended and Restated Consulting           B
              Agreement by and among Omega Orthodontics, Inc., The
              Mayflower Group, Ltd., and C. Joel Glovsky as amended

10.28*        Agreement dated as of October 23, 1996 by and              A
              between Leonard, Mulherin & Greene, P.C. and Omega
              Orthodontics, Inc.

10.29*        Consulting Agreement by and between C. Joel Glovsky        A
              and Omega Orthodontics, Inc.

10.30*        Consulting Agreement by and between Leonard,               A
              Mulherin & Greene, P.C. and Omega Orthodontics, Inc.

10.31         Subscription Agreement dated as of April 28, 1997 by       A
              and between Omega Orthodontics, Inc. and David T.
              Grove

10.32         Management Services Agreement by and among Leon J.         B
              Leonard, D.M.D., P.C., Omega Orthodontics of
              Conyers, Inc. and Omega Orthodontics, Inc.

10.33         Stock Put/Call Option and Successor Designation            B
              Agreement by and among Leon J. Leonard, D.M.D.,
              P.C., Leon J. Leonard, D.D.S., Omega Orthodontics,
              Inc. and Omega Orthodontics of Conyers, Inc.

10.34         Non-negotiable Promissory Note from Omega                  B
              Orthodontics, Inc. payable to Leon Leonard

10.35         Management Services Agreement by and among David W.        B
              Longworth, P.C., Omega Orthodontics of Watertown,
              Inc. and Omega Orthodontics, Inc.

10.36         Stock Put/Call Option and Successor Designation            B
              Agreement by and among David W. Longworth, P.C.,
              David Longworth, D.D.S., Omega Orthodontics, Inc.
              and Omega Orthodontics of Watertown, Inc.

10.37         Non-negotiable Promissory Note from Omega                  B
              Orthodontics, Inc. payable to David W. Longworth
              Trust and Jacquelyn L. Longworth Trust

10.38         Management Services Agreement by and among Rodney A.       B
              Gray, D.D.S., M.S., Ltd., Omega Orthodontics of
              Reno, Inc. and Omega Orthodontics, Inc.

10.39         Stock Put/Call Option and Successor Designation            B
              Agreement by and among Rodney A. Gray, D.D.S., M.S.,
              Ltd., Rodney A. Gray, D.D.S., Omega Orthodontics,
              Inc. and Omega Orthodontics of Reno, Inc.

10.40         Non-negotiable Promissory Note from Omega                  B
              Orthodontics, Inc. payable to Rodney A. Gray

10.41         Management Services Agreement by and among Scott E.        B
              Feldman, D.D.S., M.S., Inc., Omega Orthodontics of
              Reseda, Inc. and Omega Orthodontics, Inc.

10.42         Management Services Agreement by and among Richard         B
              H. Villa, D.M.D., P.C., Omega Orthodontics of
              Virginia, Inc. and Omega Orthodontics, Inc.

10.43         Stock Put/Call Option and Successor Designation            B
              Agreement by and among Richard H. Villa, D.M.D.,
              P.C., Richard H. Villa, D.M.D., Omega Orthodontics,
              Inc. and Omega Orthodontics of Virginia, Inc.

10.44         Non-negotiable Promissory Note from Omega                  B
              Orthodontics, Inc. payable to Richard H. Villa,
              D.M.D.

10.45*        Consulting Agreement by and between Dean C. Bellavia       B
              and Omega Orthodontics, Inc.

10.46         Demand Note dated December 3, 1997 made by Robert J.       B
              Schulhof in favor of Omega Orthodontics, Inc.

10.47         Management Services Agreement by and among Daniel          B
              Azani, D.D.S., Inc., Azani Dental Services, Inc. and
              Omega Orthodontics, Inc.

10.47a        Amendment to Management Services Agreement by and          B
              among Daniel Azani, D.D.S., Inc., Azani Dental
              Services, Inc. and Omega Orthodontics, Inc.

10.48         Stock Put/Call Option and Successor Designation            B
              Agreement by and among Daniel Azani,  D.D.S.,  Inc.,
              Daniel Azani,  D.D.S.,  Azani Dental Services, Inc.
              and Omega Orthodontics, Inc.

10.48a        Amendment to Stock Put/Call Option and Successor           B
              Designation Agreement by and among Daniel Azani,
              D.D.S., Inc., Daniel Azani, D.D.S., Azani Dental
              Services, Inc. and Omega Orthodontics, Inc.

10.49*        Consulting Agreement by and between Peter I. Wexler        B
              and Omega Orthodontics, Inc.

10.50         Non-negotiable Promissory Note from Omega                  B
              Orthodontics, Inc. payable to Daniel Azani, D.D.S.

10.51         Form of Letter of Intent for Management Services by      Filed
              and between Omega Orthodontics, Inc. and Jack A.        Herewith
              Hill D.D.S., Inc.

10.52         Management Agreement by and among Omega                  Filed
              Orthodontics, Inc., Omega Orthodontics of Austin,       Herewith
              Inc., and Jack A. Hill D.D.S., Inc.

10.53         Management Services Agreement by and among Dennis E.     Filed
              Holt, P.C., Omega Orthodontics of Woodland Hills,       Herewith
              Inc. and Omega Orthodontics, Inc.

10.54         Stock Put/Call Option and Successor Designation          Filed
              Agreement by and among Dennis E. Holt, P.C., Dennis     Herewith
              E. Holt, DDS, M.S., Omega Orthodontics, Inc. and
              Omega Orthodontics of Woodland Hills, Inc.

10.55         Management Services Agreement by and among Clark E.      Filed
              Schneekluth, D.D.S. M.S., Inc., Omega Orthodontics      Herewith
              of Woodland Hills, Inc., and Omega Orthodontics, Inc.

10.56         Management Services Agreement by and among J.F.          Filed
              Whitaker, D.D.S. Inc., Omega Orthodontics of            Herewith
              Woodland Hills, Inc. and Omega Orthodontics, Inc.

10.57         Form of Stock Put/Call Option and Successor              Filed
              Designation Agreement by and among J.F. Whitaker,       Herewith
              D.D.S. Inc., John F. Whitaker, D.D.S., Omega
              Orthodontics, Inc., and Omega Orthodontics of
              Woodland Hills, Inc.

10.58         Stock Put/Call Option and Successor Designation          Filed
              Agreement by and among Clark E. Schneekluth, D.D.S.     Herewith
              M.S., Inc., Clark E. Schneekluth, D.D.S., Omega
              Orthodontics, Inc., and Omega Orthodontics of
              Woodland Hills, Inc.

10.59         Management Services Agreement by and among Rodney        Filed
              A. Gray, D.D.S., Omega Orthodontics of Reno, Inc.,      Herewith
              and Omega Orthodontics, Inc.

10.60         Form of Non-negotiable Promissory Note from Omega        Filed
              Orrthodontics, Inc. payable to Dr. John F. Whitaker     Herewith

11            Computation of Pro Forma Earnings Per Share              Filed
                                                                      Herewith

21.1          List of Subsidiaries of Omega Orthodontics, Inc.         Filed
                                                                      Herewith

27.1          Financial Data Schedule                                  Filed
                                                                      Herewith

____________________
A     Incorporated by reference to the Company's  registration statement on Form
      SB-2, as amended (Registration No. 333-27179).

B     Incorporated  by reference to the  Company's  Annual Report for the fiscal
      year ended December 31, 1997 on Form 10-KSB.

*     Management contract or compensatory plan or arrangement.

**    In accordance with Rule 12b-32 under the Securities  Exchange Act of 1934,
      as amended,  reference is made to the documents  previously filed with the
      Securities   and  Exchange   Commission,   which   documents   are  hereby
      incorporated by reference.