<PAGE>   1

================================================================================
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
 
                                   FORM 10-K
(MARK ONE)
     [X]
                 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
             OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998

                                       OR

     [ ]
               TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
            OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
                    FOR THE TRANSITION PERIOD FROM       TO

                        COMMISSION FILE NUMBER 000-23092
 
                          NATIONAL DENTEX CORPORATION
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                MASSACHUSETTS                                    04-2762050
       (State or Other Jurisdiction of              (I.R.S. Employer Identification No.)
        Incorporation or Organization)
 
      526 BOSTON POST ROAD, WAYLAND, MA                            01778
   (Address of Principal Executive Offices)                      (Zip Code)
</TABLE>
 
                                 (508) 358-4422
               (Registrant's Telephone No., including Area Code)
 
       Securities registered pursuant to Section 12(b) of the Act: None
   Securities registered pursuant to Section 12(g) of the Act: Common Stock,
                            par value $.01 per share
                                (Title of Class)
 
     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

                              Yes [X]        No [ ]
 
     Indicated by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this
Form 10-K. [ ]
 
     As of February 16, 1999, the aggregate market value of the 3,266,274
outstanding shares of voting stock held by non-affiliates of the registrant was
$52,260,384.
 
     As of February 16, 1999, 3,532,031 shares of the registrant's Common Stock,
par value $.01 per share, were issued and outstanding.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     The Registrant's definitive Proxy Statement for the Registrant's Special
Meeting in Lieu of Annual Meeting of Stockholders to be held on April 6, 1999 is
incorporated by reference into Part III.
================================================================================
<PAGE>   2
 
                                     PART I
 
ITEM 1.  BUSINESS
 
GENERAL
 
     National Dentex Corporation (the "Company") was founded in 1982 as H&M
Laboratories Services, Inc., a Massachusetts corporation, which acquired six
full-service dental laboratories and related branch laboratories from Healthco,
Inc. In 1983, the Company changed its name to National Dentex Corporation and
acquired 20 additional full-service dental laboratories and related branch
laboratories from Lifemark Corporation. The Company today owns and operates 33
dental laboratories, consisting of 28 full-service dental laboratories and five
branch laboratories located in 22 states through the United States. The
Company's dental laboratories custom design and fabricate dentures, crowns and
fixed bridges, and other dental prosthetic appliances. Each dental laboratory
operates under its own business name. The Company's principal executive offices
are located at 526 Boston Post Road, Wayland, MA 01778, telephone number (508)
358-4422.
 
INFORMATION AS TO INDUSTRY SEGMENTS
 
     The Company's business consists of only one industry segment, which is the
design, fabrication, marketing and sale of custom dental prosthetic appliances
for and to dentists.
 
DESCRIPTION OF BUSINESS
 
     The Company's dental laboratories design and fabricate custom dental
prosthetic appliances such as dentures, crowns and bridges. These products are
produced by trained technicians working primarily in dental laboratories in
accordance with work orders and cases (consisting of impressions, models and
occlusal registrations of a patient's teeth) provided by the dentist. Dentists
are the direct purchasers of the Company's products.
 
     The Company's products are grouped into the following three main
categories:
 
     Restorative Products.  Restorative products sold by the Company's dental
laboratories consist primarily of crowns and bridges. A crown replaces the part
of a tooth which is visible, and is usually made of gold or porcelain. A bridge
is a restoration of one or more missing teeth which is permanently attached to
the natural teeth or roots. In addition to the traditional crown, the Company
also makes porcelain jackets, which are crowns constructed entirely of
porcelain; onlays, which are partial crowns which do not cover all of the
visible tooth; and precision crowns, which are restorations designed to receive
and connect a removable partial denture. The Company also makes inlays, which
are restorations made to fit a prepared tooth cavity and then cemented into
place.
 
     Reconstructive Products.  Reconstructive products sold by the Company's
dental laboratories consist primarily of partial dentures and full dentures.
Partial dentures are removable dental prostheses which replace missing teeth and
associated structures. Full dentures are dental prostheses which substitute for
the total loss of teeth and associated structures. The Company also sells
precision attachments, which connect a crown and an artificial prosthesis, and
implants, which are fixtures anchored securely in the bone of the mouth to which
a crown, partial or full denture is secured by means of screws or clips.
 
     Cosmetic Products.  Cosmetic products sold by the Company's dental
laboratories consist primarily of porcelain veneers and ceramic crowns.
Porcelain veneers are thin coverings of porcelain cemented to the front of a
tooth to enhance personal appearance. Ceramic crowns are crowns made from
ceramic materials which most closely replicate natural teeth. The Company also
sells composite inlays and onlays, which replace silver fillings for a more
natural appearance, and orthodontic appliances, which are products fabricated to
move existing teeth to enhance function and appearance.
 
LABORATORY AND CORPORATE OPERATIONS
 
     The Company's full-service dental laboratories design and fabricate a full
range of custom-made dental prosthetic appliances. These custom products are
manufactured from raw materials, such as high noble, noble
 
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<PAGE>   3
 
and predominantly base alloys, dental resins, composites and porcelain. There
are different production processes for the various types of prosthetic
appliances depending upon the product and the materials used in the type of
appliance being fabricated, each of which requires different skills and levels
of training. The Company's dental laboratories perform numerous quality control
checks throughout the production cycle to improve the quality of its products
and to make certain the design and appearance satisfy the needs of the dentist
and the patient. The Company's branch dental laboratories are smaller in size
and offer a limited number of products. When a branch receives an order that it
cannot fill, the branch refers the business to its affiliated full-service
dental laboratory.
 
     The Company operates each of its dental laboratories as a stand-alone
facility under the direction of a local manager responsible for operation of the
dental laboratory, supervision of its technical and sales staff and delivery of
quality products and services. The Company's dental laboratories market and sell
their products through their own direct sales force, supported by regional sales
managers and Company-wide marketing programs. Employees at each dental
laboratory have a direct stake in the financial success of the dental laboratory
through participation in the Company's cash and stock incentive plans.
 
     The Company's corporate management provides overall strategy, direction and
financial management for the Company and negotiates all acquisitions. Corporate
personnel also support the operations of its dental laboratories by performing
functions which are not directly related to the production and sale of dental
laboratory products, such as processing payroll and related benefit programs,
obtaining insurance and procuring financing. The Company's corporate management
provides marketing, financial and administrative services, negotiates
Company-wide purchasing arrangements, and sets quality and performance standards
for the dental laboratories.
 
SALES AND MARKETING
 
     The Company's local dental laboratories market and sell their products
through their own direct sales force. The sales force interacts with dentists
within its market area, primarily through visits to dentists' offices, to
introduce the dental laboratory's services and products offered, and to promote
new products and techniques that can assist dentists in expanding their
practices. The Company has developed a customer-focused marketing and sales
program entitled "Knowledge Based Relationships"(TM). The Company believes that
this unique approach to assist the dentist and his or her staff to improve
chairtime efficiencies will enhance its ability to expand its base of business
by establishing lasting professional relationships with its customers. The
Company presently has a total of 19 sales representatives. In addition, the
dental laboratories, either alone or with local dental societies, dental schools
or study clubs, sponsor technical training clinics for dentists on topics such
as advanced clinical techniques. The local dental laboratories also exhibit at
state and local dental conventions.
 
COMPETITION
 
     The dental laboratory industry is highly competitive and fragmented. A
typical dental laboratory's business originates from dentists located within 50
miles of the dental laboratory. There are approximately 12,000 dental
laboratories in the United States, ranging in size from one to approximately 200
technicians. The Company estimates that presently its sales represent less than
3% of the total sales of custom-made dental prosthetic appliances in the United
States. Competition is primarily from other dental laboratories in the
respective local market areas. The vast majority of dental laboratories consist
of single units, although the Company believes there is one national chain,
Dental Services Group -- Sentage Corporation, which competes with the Company in
two market areas. There is also limited competition from mail order dental
laboratories.
 
     Most dentists use a limited number of dental laboratories, relying on those
laboratories which produce quality products delivered on a timely basis and
which carry all of the products which the dentist may need, even if a particular
item is a newer specialty product used only sporadically by the dentist. While
price is one of the competitive factors in the dental laboratory industry, the
Company believes that most dentists consider product quality and service to be
more important. The Company believes that it competes favorably with respect to
these factors. The Company considers that its ability to produce quality
products locally and to

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<PAGE>   4
 
deliver such products on a timely basis, the breadth of its product line, the
use of innovative marketing programs, and its sponsorship of educational clinics
provide a competitive advantage over other dental laboratories in the local
markets in which its dental laboratories operate. The Company's ability to
provide newer specialty products for implantology, adult orthodontics and
cosmetic dentistry, which require highly skilled technicians, more extensive
inventories, additional working capital, and investment in both training and
capital equipment, also distinguishes it from many smaller dental laboratories
which do not have comparable resources to provide these products. While such
specialty products presently represent less than 20% of the Company's business,
the Company believes that the ability to offer these products is essential for
dental laboratories to remain competitive.
 
EMPLOYEES
 
     As of December 31, 1998, the Company had 1,211 employees, 1,182 of whom
worked at individual laboratories. Corporate management and administrative staff
totaled 29 people. None of the Company's employees is covered by a collective
bargaining agreement. Management considers the Company's employee relations to
be good.
 
INTELLECTUAL PROPERTY
 
     The Company's general technological know-how and experience are important
to the conduct of the Company's business. The Company has several trademarks and
licenses to use trademarks, but does not deem any of such trademarks or licenses
to be material to the conduct of its business. Each of its dental laboratories
operates under its own trade name, and the Company considers these trade names
to be important to the goodwill of its dental laboratories.
 
ITEM 2.  PROPERTIES
 
     The Company currently leases a total of approximately 158,000 square feet
of space. As of December 31, 1998, the aggregate minimum annual rent payable for
all of its leased real properties was approximately $1,207,000. The Company
considers these properties to be modern, well maintained and suitable for its
purposes and believes that its current facilities are adequate to meet its needs
for the foreseeable future. The Company also believes that suitable substitute
or replacement space is readily available. The Company's principal executive and
administrative offices occupy approximately 10,200 square feet of space in
Wayland, Massachusetts. Its 27 leased dental laboratories range in size from
1,000 to 21,000 square feet and average $45,100 in annual base rent.
 
     The Company owns six dental laboratory facilities, which are located in
Denver, Colorado; Metairie, Louisiana; Dallas, Texas; Houston, Texas;
Jacksonville, Florida; and Waukesha, Wisconsin. These locations total
approximately 70,000 square feet and range in building size from 4,000 to 20,000
square feet.
 
ITEM 3.  LEGAL PROCEEDINGS
 
     The Company is involved from time to time in litigation incidental to its
business. Management believes that the outcome of current litigation will not
have a material adverse effect upon the operations or financial condition of the
Company and will not disrupt the normal operations of the Company.
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None.
 
                                        4
<PAGE>   5
 
                                    PART II
 
ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     The Company's Common Stock, $.01 par value, is traded on the
over-the-counter market, on the Nasdaq National Market System, under the symbol
"NADX". The following table presents low and high bid information for the time
periods specified. The over-the-counter market quotations reflect inter-dealer
prices, without retail markup, markdown or commission and may not necessarily
represent actual transactions. The over-the-counter market quotations have been
furnished by the Nasdaq Stock Market, Inc. Trading in the Company's Common Stock
commenced on December 21, 1993.
 
<TABLE>
<CAPTION>
                                                                   PRICE
                                                             ------------------
QUARTER ENDING                                               LOW BID   HIGH BID
--------------                                               -------   --------

<S>                                                          <C>       <C>
03/31/97...................................................  $16.625   $20.750
06/30/97...................................................  $16.250   $19.250
09/30/97...................................................  $18.375   $23.750
12/31/97...................................................  $18.750   $23.000
03/31/98...................................................  $21.000   $25.750
06/30/98...................................................  $21.000   $26.750
09/30/98...................................................  $15.000   $24.000
12/31/98...................................................  $14.500   $19.000
</TABLE>
 
     The Company has paid no cash dividends in the past and has no plans to pay
cash dividends in the foreseeable future.
 
     As of February 16, 1999, there were approximately 430 registered record
holders of the Company's Common Stock, which the Company believes represented
approximately 1,400 beneficial holders. As of February 16, 1999, the low and
high bid prices of the Common Stock were $16.00 and $16.00, respectively.
 
ITEM 6.  SELECTED FINANCIAL DATA
 
     The following selected financial data for the five years ended December 31,
1998 are derived from the audited consolidated financial statements of the
Company. The data should be read in conjunction with the financial statements
and the related notes included in this Report and in conjunction with Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
 
<TABLE>
<CAPTION>
                                                    1994      1995      1996      1997      1998
                                                    ----      ----      ----      ----      ----
                                                        (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                                <C>       <C>       <C>       <C>       <C>
CONSOLIDATED STATEMENTS OF INCOME:
     Net sales...................................  $37,788   $44,283   $51,971   $59,196   $63,817
     Cost of goods sold..........................   21,334    24,853    29,627    33,755    36,697
                                                   -------   -------   -------   -------   -------
     Gross profit................................   16,454    19,430    22,344    25,441    27,120
     Total operating expenses....................   12,729    14,440    16,462    18,370    19,545
                                                   -------   -------   -------   -------   -------
     Operating income............................    3,725     4,990     5,882     7,071     7,575
     Other income................................      136       187       141        69        18
     Interest expense (income)...................     (144)     (234)     (131)      (81)     (187)
                                                   -------   -------   -------   -------   -------
     Income before provision for income taxes....    4,005     5,411     6,154     7,221     7,780
     Provision for income taxes..................    1,602     2,167     2,449     2,874     3,097
                                                   -------   -------   -------   -------   -------
     Net income..................................  $ 2,403   $ 3,244   $ 3,705   $ 4,347   $ 4,683
                                                   =======   =======   =======   =======   =======
     Net income per share - basic................  $   .79   $  1.02   $  1.09   $  1.26   $  1.34
                                                   =======   =======   =======   =======   =======
     Net income per share - diluted..............  $  0.72   $  0.95   $  1.06   $  1.24   $  1.32
                                                   =======   =======   =======   =======   =======
     Weighted average shares
       outstanding - basic.......................    3,025     3,175     3,414     3,454     3,486
     Weighted average shares
       outstanding - diluted.....................    3,322     3,427     3,509     3,517     3,560
</TABLE>
 
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<PAGE>   6
 
<TABLE>
<CAPTION>
                                                    1994      1995      1996      1997      1998
                                                    ----      ----      ----      ----      ----
                                                        (IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                                                <C>       <C>       <C>       <C>       <C>
CONSOLIDATED BALANCE SHEET DATA:
     Working capital.............................  $ 8,742   $ 7,557   $ 9,859   $ 9,611   $13,219
     Total assets................................   21,405    28,202    30,234    35,730    42,470
     Long-term obligations, including current
       portion...................................       39       298       204        --        --
     Stockholders' equity........................  $16,030   $19,956   $24,036   $28,669   $33,877
</TABLE>
 
ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company's working capital increased from $9,611,000 at December 31,
1997 to $13,219,000 at December 31, 1998. Cash and equivalents increased
$3,614,000 from $4,912,000 at December 31, 1997 to $8,526,000 at December 31,
1998. Operating activities provided $6,678,000 in cash flow for the year ended
December 31, 1998. Inventories increased $246,000 from December 31, 1997. The
increase in inventory was attributable to the acquisition of dental laboratories
and the increased cost of palladium, a component of many dental alloys.
 
     Cash outflows related to dental laboratory acquisitions totaled $2,759,000
for the year ended December 31, 1998. Capital expenditures for the same period
were $831,000. The Company expects that increases in capital expenditures, if
any, will be in proportion with increasing revenues.
 
     The Company maintains a financing agreement (the "Agreement") with State
Street Bank and Trust Company (the "Bank"). The Agreement, as amended and
extended on June 27, 1997, includes revolving lines of credit of $4,000,000 and
$8,000,000. The interest rate on both revolving lines of credit is the prime
rate minus one half of one percent or Libor rate plus 1.5%, at the Company's
option. Both revolving lines of credit mature on June 1, 2001. A commitment fee
of one eighth of one percent is payable on the unused amount of both lines of
credit. At December 31, 1998, the full principal amount was available to the
Company under both revolving lines of credit. The Agreement requires compliance
with certain covenants, including the maintenance of net worth and other
financial ratios. As of December 31, 1998, the Company was in compliance with
these covenants.
 
     Management believes that cash flow from operations and existing financing
will be sufficient to meet contemplated operating and capital requirements,
including costs associated with anticipated acquisitions, if any, in the
foreseeable future.
 
RESULTS OF OPERATIONS
 
     The following table sets forth for the periods indicated the percentage of
net sales represented by certain items in the Company's Consolidated Financial
Statements:
 
<TABLE>
<CAPTION>
                                                             YEARS ENDED DECEMBER 31,
                                                            --------------------------
                                                             1996      1997      1998
                                                             ----      ----      ----
<S>                                                         <C>       <C>       <C>
Net sales.................................................  100.0%    100.0%    100.0%
Cost of goods sold........................................   57.0      57.0      57.5
                                                            -----     -----     -----
Gross profit..............................................   43.0      43.0      42.5
Total operating expenses..................................   31.7      31.0      30.6
                                                            -----     -----     -----
Operating income..........................................   11.3      12.0      11.9
Other income..............................................    0.3       0.1       0.0
Interest income...........................................    0.2       0.1       0.3
                                                            -----     -----     -----
Income before provision for income taxes..................   11.8      12.2      12.2
Provision for income taxes................................    4.7       4.9       4.9
                                                            -----     -----     -----
Net income................................................    7.1%      7.3%      7.3%
                                                            =====     =====     =====
</TABLE>
 
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<PAGE>   7
 
YEAR ENDED DECEMBER 31, 1998 COMPARED WITH YEAR ENDED DECEMBER 31, 1997
 
  Net Sales
 
     Net sales increased $4,621,000 or 7.8% for the year ended December 31, 1998
over the year ended December 31, 1997. Approximately $3,014,000 of this increase
was attributable to acquisitions, with the remaining increase representing same
laboratory sales growth.
 
  Cost of Goods Sold
 
     Cost of goods sold, which consists principally of labor and related
benefits, cost of materials, and laboratory overhead, increased by $2,942,000.
As a percentage of sales, cost of goods sold increased from 57.0% to 57.5%,
representing a gross margin decrease of 0.5%. Increases in materials costs and
laboratory overhead expenses were partially offset by improvements in labor
productivity. The rising cost of palladium, a component of dental alloys used in
the manufacture of many of the Company's goods, was a factor in the increased
materials costs. The Company has attempted to address the cost of this material
in each marketplace and has made efforts to recover costs through price
increases, temporary surcharges and the use of substitute metals in place of
palladium-based materials.
 
  Total Operating Expenses
 
     Total operating expenses, which consist of (i) selling expenses, the cost
of the Company's pick-up and delivery services and administrative expenses at
the dental laboratory level, (ii) costs of operation by the Company's corporate
headquarters and field support services and (iii) amortization expense,
increased by $1,175,000 or 6.4% during the year ended December 31, 1998 over the
corresponding period in 1997. This increase was primarily attributable to the
operating and amortization expenses associated with acquired dental
laboratories.
 
     Operating expenses decreased as a percentage of net sales from 31.0% to
30.6% during the year ended December 31, 1998 compared with the corresponding
period in 1997.
 
  Operating Income
 
     Operating income increased by $504,000 or 7.1% for the year ended December
31, 1998 over the corresponding period in 1997. The increase was the result of
higher sales volume and reductions in operating expenses as a percentage of net
sales, partially offset by an increase in cost of goods sold.
 
  Interest Income
 
     Interest income increased by $106,000 or 130.9% in the year ended December
31, 1998 over the corresponding period in 1997. The increase was primarily due
to increased investment principal, partially offset by declining interest rates.
 
  Provision for Income Taxes
 
     The Company's provision for income taxes for the year ended December 31,
1998 increased to $3,096,000 from $2,874,000 in the corresponding period in
1997. The effective tax rate remained constant at 39.8%.
 
  Net Income
 
     As a result of the factors discussed above, net income for the year ended
December 31, 1998 increased by $337,000 or 7.7% over the corresponding period in
1997. Net income per share, on a diluted basis, increased from $1.24 per share
to $1.32 per share.
 
                                        7
<PAGE>   8
 
YEAR ENDED DECEMBER 31, 1997 COMPARED WITH YEAR ENDED DECEMBER 31, 1996
 
  Net Sales
 
     For the year ended December 31, 1997, net sales increased $7,225,000 or
13.9% over the prior year. Of this increase approximately $2,377,000 or 4.6%
came from same laboratory sales, while approximately $4,848,000 came from
acquisitions.
 
  Cost of Goods Sold
 
     The Company's cost of goods sold increased by $4,128,000 or 13.9% in the
fiscal year ended December 31, 1997 over the prior fiscal year, attributable
primarily to increased unit sales. The Company continued its emphasis on
training of technical personnel at individual dental laboratories and cross
training programs, which resulted in cost of goods sold as a percentage of sales
remaining constant at 57.0%.
 
  Total Operating Expenses
 
     Operating expenses, which consist of selling, delivery and administrative
expenses both at the laboratory and corporate level, increased by $1,908,000 or
11.6% in the year ended December 31, 1997 over 1996. During this same period
operating expenses decreased as a percentage of net sales from 31.7% in 1996 to
31.0% in 1997.
 
  Operating Income
 
     Due to the increase in net sales and improved productivity, which held
constant the cost of goods sold and reduced the operating expenses as a percent
of net sales, operating income increased $1,189,000 or 20.2% in fiscal year 1997
over fiscal year 1996.
 
  Interest (Income) Expense
 
     Interest income decreased by $50,000 in the year ended December 31, 1997
from 1996. The decrease was due to decreased investment principal following two
laboratory acquisitions during the year.
 
  Provision for Income Taxes
 
     The provision for income taxes increased to $2,874,000 in 1997 from
$2,449,000 in 1996. This $425,000 increase was the result of increased income.
The 39.8% effective tax rate for fiscal year 1997 remained consistent with the
39.8% effective tax rate for fiscal year 1996.
 
  Net Income
 
     As a result of all the factors discussed above, net income increased to
$4,347,000 or $1.24 per share on a diluted basis in 1997 from $3,705,000 or
$1.06 per share on a diluted basis in 1996.
 
YEAR 2000 (Y2K) COMPLIANCE
 
     The Company faces potential Year 2000 ("Y2K") compliance issues in the
areas of computerized data processing using the Company's own equipment along
with third party software, and to a lesser extent, vendor issues in procuring
raw materials and difficulties with embedded microprocessors in communications
systems and dental laboratory equipment.
 
  Information Technology Issues
 
     The central focus of the Company's Y2K plan has been to mitigate the data
processing issues. The areas that are being addressed are the Company's
centralized corporate financial systems along with individual laboratory billing
systems. The corporate systems embody the Company's general ledger and accounts
payable systems. The laboratory systems handle production scheduling, billing
and accounts receivable. Purchasing and inventory control records are generally
kept manually.
 
                                        8
<PAGE>   9
 
     The Company is in the final testing phase of its central corporate
financial systems. The Company has licensed and installed an upgrade from an
existing vendor. While the vendor has represented that the software is Y2K
compliant, the Company intends to complete testing to gain further confidence in
the vendor's representations. It is expected that this testing will be completed
during the second quarter of 1999.
 
     The Company has also licensed an upgrade for each laboratory system. The
Company has successfully implemented the upgrade at most of its locations and
expects to complete implementation by August 1999. While the vendor has
represented that the software is Y2K compliant, the Company has performed its
own internal testing and has discovered programming errors. The Company has
communicated these flaws to the vendor and expects to receive and install
corrections by June, 1999.
 
     Costs of both the upgrade of the central corporate financial systems and
the laboratory systems of approximately $60,000 have been incurred. While the
Company is currently unable to estimate a cost for the replacement of
non-compliant hardware, management is confident that these costs when identified
and prioritized will not materially increase the Company's normal capital
expenditure requirements.
 
     The Company's laboratories use personal computers for word processing and
spreadsheets. An effort is underway to identify non-compliant hardware and
software. While these computers are not critical to business operations, the
Company expects to upgrade necessary equipment during the course of 1999.
 
  Business Partners
 
     The Company does business with a multitude of vendors and is in the process
of gathering Y2K assurances from its key business partners. The Company does not
rely on a single vendor for raw materials inventory. The Company does not
operate a "Just In Time" inventory system. Company inventory levels are
sufficient to absorb temporary delays in raw materials shipments. Alternative
materials and vendors are readily available.
 
  Embedded Systems
 
     The Company uses equipment in manufacturing. While some equipment uses
computer chips for the purpose of temperature regulation and timing, most of the
manufacturing process does not rely on computerized machinery. In most cases,
the equipment uses timers operating at an hourly level. The Company has not yet
identified equipment which is date sensitive. Should equipment fail, an
individual laboratory can make use of older backup equipment. The Company is now
in the process of identifying communications equipment and other systems which
may lose needed functionality due to Y2K issues.
 
GENERAL
 
     This Form 10-K contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. The Company's actual results could
differ materially from those set forth in the forward-looking statements.
Certain factors that could affect capital expenditures, the Company's
requirements for capital, the costs associated with anticipated acquisitions and
the Company's results of operations include general economic conditions, the
availability of laboratories for purchase by the Company, the ability of the
Company to acquire and successfully operate additional laboratories,
governmental regulation of health care, trends in the dental industry towards
managed care, other factors affecting patient visits to the Company's clients,
increases in labor and materials costs and other risks indicated from time to
time in filings with the Securities and Exchange Commission.
 
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     Not applicable.
 
                                        9
<PAGE>   10
 
ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
QUARTERLY RESULTS
 
     The following table sets forth certain selected financial information for
the Company for its eight most recent fiscal quarters. In the opinion of the
Company, this unaudited information has been prepared on the same basis as the
audited financial information and includes all adjustments (consisting of only
normal, recurring adjustments) necessary to present this information fairly when
reviewed in conjunction with the Company's Consolidated Financial Statements and
notes thereto contained herein.
 
<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED
                       -----------------------------------------------------------------------------------------
                       MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MARCH 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                         1997        1997       1997        1997       1998        1998       1998        1998
                       ---------   --------   ---------   --------   ---------   --------   ---------   --------
                                             (DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S>                    <C>         <C>        <C>         <C>        <C>         <C>        <C>         <C>
Net sales............   $13,981    $15,267     $15,118    $14,831     $15,140    $16,710     $15,801    $16,166
Gross profit.........   $ 5,981    $ 6,873     $ 6,333    $ 6,254     $ 6,423    $ 7,441     $ 6,366    $ 6,890
Gross margin.........      42.8%      45.0%       41.9%      42.2%       42.4%      44.5%       40.3%      42.6%
Operating income.....   $ 1,539    $ 2,195     $ 1,626    $ 1,711     $ 1,708    $ 2,459     $ 1,614    $ 1,794
Operating margin.....      11.0%      14.4%       10.8%      11.5%       11.3%      14.7%       10.2%      11.1%
Net income...........   $   956    $ 1,349     $ 1,002    $ 1,039     $ 1,054    $ 1,495     $ 1,016    $ 1,118
Net income per
  share..............   $  0.27    $  0.38     $  0.28    $  0.29     $  0.30    $  0.42     $  0.29    $  0.32
</TABLE>
 
     The Company's results of operations have historically fluctuated on a
quarterly basis and are expected to be subject to quarterly fluctuations in the
future. As a result, the Company believes that the results of operations for the
interim periods are not necessarily indicative of the results to be expected for
any future period or for a full year. Quarterly results are subject to
fluctuations resulting from a number of factors, including the number of working
days in the quarter for both dentists and Company employees, the number of paid
vacation days and holidays in the period and general economic conditions.
Historically, the second quarter has generated the highest quarterly net sales
for the year and has been the most profitable for the Company due to the greater
number of working days in the quarter and more patients scheduling visits with
their dentists before departing for summer vacation.
 
LOCATION OF FINANCIAL STATEMENTS
 
     The financial statements furnished in connection with this Report are
attached immediately following the Signatures.
 
ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     None.
 
                                    PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     (a) Directors.  The information with respect to directors required by this
item is incorporated herein by reference from Registrant's Proxy Statement dated
March 5, 1999 for the Special Meeting in Lieu of Annual Meeting of Shareholders
to be held on April 6, 1999 (the "1999 Proxy Statement").
 
     (b) Executive Officers.  The information with respect to executive officers
required by this item is incorporated herein by reference from the 1999 Proxy
Statement.
 
ITEM 11.  EXECUTIVE COMPENSATION
 
     The information required by this item is incorporated herein by reference
from the 1999 Proxy Statement.
 
                                       10
<PAGE>   11
 
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information required by this item is incorporated herein by reference
from the 1999 Proxy Statement.
 
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information required by this item is incorporated herein by reference
from the 1999 Proxy Statement.
 
                                    PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
     (a), (d) Financial Statements and Schedules.
 
     (1) The financial statements set forth in the list below are filed as part
of this Report.
 
     (2) The financial statement schedules set forth in the list below are filed
as part of this Report.
 
     (3) Exhibits filed herewith or incorporated herein by reference are set
forth in Item 14(c) below.
 
     List of Financial Statements and Schedules Referenced in this Item 14
 
     The historical consolidated financial statements of National Dentex
Corporation included herein are as listed below:
 
                                                                   PAGE
                                                                   ----
     
     Report of Independent Public Accountants....................   F-2
     Consolidated Balance Sheets as of December 31, 1997 and
       1998......................................................   F-3
     Consolidated Statements of Income for the three years ended
       December 31, 1998.........................................   F-4
     Consolidated Statements of Stockholders' Equity for the
       three years ended December 31, 1998.......................   F-5
     Consolidated Statements of Cash Flows for the three years
       ended December 31, 1998...................................   F-6
     Notes to Consolidated Financial Statements..................   F-7
 
     Certain Financial Schedules included herewith:
 
     Schedule II: Valuation and Qualifying Accounts
 
     Exhibit 11: Computation of Net Income Per Share
 
All other schedules are omitted because they are not applicable or not required,
or because the required information is shown either in the financial statements
or in the notes thereto.
 
     (b) Reports on Form 8-K.
 
     During the Company's fiscal quarter ended December 31, 1998, the Company
was not required to file, and did not file, any Current Report on Form 8-K.
 
     (c) Exhibits.
 
     (i) The following exhibits, required by Item 601 of Regulation S-K, are
filed herewith:
 
     EXHIBIT NO.                                  TITLE
     -----------                                  -----
     
         11            Computation of Net Income Per Share
         23            Consent of Arthur Andersen LLP
         27            Financial Data Schedule
 

                                       11
<PAGE>   12
 
     (ii) The following exhibits were filed with the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 and are herein incorporated by
reference:
 
EXHIBIT NO.                                  TITLE
-----------                                  -----

   *10a           Long Term Incentive Plan, as amended.

   *10b           Employment Agreement between the Company and Richard F.
                  Becker, Jr., dated April 1, 1995.

   *10c           Change of Control Severance Agreement between the Company
                  and Richard F. Becker, Jr., dated April 1, 1995.

   *10d           Employment Agreement between the Company and David L. Brown,
                  dated April 1, 1995.

   *10e           Change of Control Severance Agreement between the Company
                  and David L. Brown dated April 1, 1995.

   *10f           Employment Agreement between the Company and William M.
                  Mullahy, dated April 1, 1995.

   *10g           Change of Control Severance Agreement between the Company
                  and William M. Mullahy, dated April 1, 1995.
 
     (iii) The following exhibits were filed as part of the Company's Form S-1
Registration Statement (File No. 33-70440) declared effective by the Securities
and Exchange Commission on December 21, 1993 and are herein incorporated by
reference:
 
EXHIBIT NO.                                  TITLE
-----------                                  -----

    3a            Restated Articles of Organization of the Company, filed with
                  Massachusetts Secretary of State on October 14, 1993.

    3b            By-Laws of the Company, as amended on December 31, 1982 and
                  May 26, 1992.

    4a            Restated Letter Agreement, dated February 22, 1993, between
                  the Company and State Street Bank and Trust Company (the
                  "Bank").

  *10h            Salary Continuation Agreement, dated April 1, 1985, between
                  the Company and Mullahy.

  *10i            Salary Continuation Agreement, dated April 1, 1985, between
                  the Company and Merz.

  *10j            National Dentex Corporation Laboratory Incentive
                  Compensation Plan.

  *10k            National Dentex Corporation Corporate Executives Incentive
                  Compensation Plan.

  *10l            National Dentex Corporation Group Managers Incentive
                  Compensation Plan.

  *10m            National Dentex Corporation Dollars Plus Plan, as amended on
                  January 3, 1986.

  *10n            National Dentex Corporation Employees' Stock Purchase Plan.
 
---------------
 
* These exhibits relate to a management contract or to a compensatory plan or
  arrangement.
 
                                       12
<PAGE>   13
 
                                   SIGNATURES
 
     Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
 

                                          NATIONAL DENTEX CORPORATION
 

                                          By:      /s/ DAVID L. BROWN
                                             -----------------------------------
                                                 DAVID L. BROWN, PRESIDENT
 
March 5, 1999
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE                        DATE
                      ---------                                    -----                        ----
<S>                                                    <C>                             <C>
 
               /s/ WILLIAM M. MULLAHY                  Chief Executive Officer and           March 5, 1999
-----------------------------------------------------    Director (Principal
                 WILLIAM M. MULLAHY                      Executive Officer)
 
                /s/ DAVID V. HARKINS                   Chairman of the Board and             March 5, 1999
-----------------------------------------------------    Director
                  DAVID V. HARKINS
 
                 /s/ JACK R. CROSBY                    Director                              March 5, 1999
-----------------------------------------------------
                   JACK R. CROSBY
 
               /s/ WILLIAM H. MCCLURG                  Director                              March 5, 1999
-----------------------------------------------------
                 WILLIAM H. MCCLURG
 
                /s/ NORMAN F. STRATE                   Director                              March 5, 1999
-----------------------------------------------------
                  NORMAN F. STRATE
 
                 /s/ DAVID L. BROWN                    President, Treasurer, Chief           March 5, 1999
-----------------------------------------------------    Financial Officer, and
                   DAVID L. BROWN                        Director (Principal
                                                         Financial Officer)
 
             /s/ RICHARD F. BECKER, JR.                Vice President, Finance and           March 5, 1999
-----------------------------------------------------    Assistant Treasurer
               RICHARD F. BECKER, JR.                    (Principal Accounting
                                                         Officer)
</TABLE>
 
                                       13
<PAGE>   14
 
                          NATIONAL DENTEX CORPORATION
 
            INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
 
                                                                 PAGE
                                                                 ----

Financial Statements:
The historical consolidated financial statements of National
  Dentex Corporation included herein are as listed below.
     Report of Independent Public Accountants...............      F-2
     Consolidated Balance Sheets as of December 31, 1997 and      F-3
      1998..................................................
     Consolidated Statements of Income for the three years        F-4
      ended December 31, 1998...............................
     Consolidated Statements of Stockholders' Equity for the      F-5
      three years ended December 31, 1998...................
     Consolidated Statements of Cash Flows for the three          F-6
      years ended December 31, 1998.........................
     Notes to Consolidated Financial Statements.............      F-7

Schedules:
     Valuation and Qualifying Accounts......................  Schedule II
     Computation of Net Income Per Share....................  Exhibit 11

 
                                       F-1
<PAGE>   15
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
To National Dentex Corporation:
 
     We have audited the accompanying consolidated balance sheets of National
Dentex Corporation (a Massachusetts corporation) as of December 31, 1998 and
1997, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1998. These consolidated financial statements and the schedule referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated 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 audit 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 National
Dentex Corporation as of December 31, 1998 and 1997, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting principles.
 
     Our audits were made for the purpose of forming an opinion on the basic
consolidated financial statements taken as a whole. The schedules in the index
to consolidated financial statements are presented for purposes of complying
with the Securities and Exchange Commission's rules and are not a required part
of the basic consolidated financial statements. These schedules have been
subjected to the auditing procedures applied in the audits of the basic
consolidated financial statements and, in our opinion, fairly state, in all
material respects, the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

                                            /s/ ARTHUR ANDERSEN LLP
                                            Arthur Andersen LLP
 

Boston, Massachusetts
February 5, 1999

 
                                       F-2
<PAGE>   16
 
                          NATIONAL DENTEX CORPORATION
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                              DECEMBER 31,   DECEMBER 31,
                                                                  1997           1998
                                                              ------------   ------------
<S>                                                           <C>            <C>
                              ASSETS
CURRENT ASSETS:
    Cash and equivalents....................................  $ 4,912,097    $ 8,525,648
    Accounts receivable:
        Trade, less allowance of $146,000 in 1997 and
          $145,000 in 1998..................................    6,708,260      7,322,515
        Other...............................................      208,799        272,280
    Inventories.............................................    3,091,800      3,338,103
    Prepaid expenses........................................      493,781        714,066
    Deferred tax asset......................................      364,979        373,800
                                                              -----------    -----------
        Total current assets................................   15,779,716     20,546,412
                                                              -----------    -----------
PROPERTY AND EQUIPMENT:
    Land and buildings......................................    3,590,720      3,683,402
    Leasehold and building improvements.....................    3,142,342      3,297,586
    Laboratory equipment....................................    6,491,244      6,797,200
    Furniture and fixtures..................................    1,832,982      1,940,580
    Capital leases..........................................      342,819        342,819
                                                              -----------    -----------
                                                               15,400,107     16,061,587
    Less -- Accumulated depreciation and amortization.......    7,981,989      8,561,566
                                                              -----------    -----------
    Net property and equipment..............................    7,418,118      7,500,021
                                                              -----------    -----------
OTHER ASSETS, net:
    Goodwill................................................    8,254,191      9,763,813
    Non-competition agreements..............................    3,508,875      3,639,302
    Other...................................................      768,953      1,020,016
                                                              -----------    -----------
                                                               12,532,019     14,423,131
                                                              -----------    -----------
                                                              $35,729,853    $42,469,564
                                                              ===========    ===========
            LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
    Accounts payable........................................  $ 1,137,701    $ 1,383,928
    Accrued liabilities:
        Payroll and employee benefits.......................    2,826,089      3,682,551
        Deferred purchase price.............................    1,868,577      1,839,856
        Other...............................................      336,661        421,158
                                                              -----------    -----------
            Total current liabilities.......................    6,169,028      7,327,493
                                                              -----------    -----------
LONG TERM LIABILITIES:
    Deferred tax liability..................................      195,827        101,277
    Deferred purchase price.................................      696,367      1,163,300
                                                              -----------    -----------
            Total long-term liabilities.....................      892,194      1,264,577
                                                              -----------    -----------
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY:
    Preferred stock, $.01 par value Authorized -- 500,000
     shares None issued and outstanding.....................           --             --
    Common stock, $.01 par value Authorized -- 8,000,000
     shares Issued and outstanding --
        3,460,829 shares at December 31, 1997, and 3,513,148
        shares at December 31, 1998.........................       34,608         35,131
    Paid-in capital.........................................   13,968,731     14,493,655
    Retained earnings.......................................   14,665,292     19,348,708
                                                              -----------    -----------
            Total stockholders' equity......................   28,668,631     33,877,494
                                                              -----------    -----------
                                                              $35,729,853    $42,469,564
                                                              ===========    ===========
</TABLE>

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

 
                                       F-3
<PAGE>   17
 
                          NATIONAL DENTEX CORPORATION
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                                       YEARS ENDED
                                                        ------------------------------------------
                                                        DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                            1996           1997           1998
                                                        ------------   ------------   ------------

<S>                                                     <C>            <C>            <C>
Net sales.............................................  $51,971,105    $59,196,110    $63,817,100
Cost of goods sold....................................   29,627,013     33,755,470     36,697,495
                                                        -----------    -----------    -----------
     Gross profit.....................................   22,344,092     25,440,640     27,119,605
Total operating expenses..............................   16,462,045     18,370,360     19,545,023
                                                        -----------    -----------    -----------
     Operating income.................................    5,882,047      7,070,280      7,574,582
Other income..........................................      141,000         69,265         17,922
Interest income.......................................      131,316         81,114        187,257
                                                        -----------    -----------    -----------
     Income before provision for income taxes.........    6,154,363      7,220,659      7,779,761
Provision for income taxes............................    2,449,437      2,873,823      3,096,345
                                                        -----------    -----------    -----------
     Net income.......................................  $ 3,704,926    $ 4,346,836    $ 4,683,416
                                                        ===========    ===========    ===========
Net income per share -- basic.........................  $      1.09    $      1.26    $      1.34
                                                        ===========    ===========    ===========
Net income per share -- diluted.......................  $      1.06    $      1.24    $      1.32
                                                        ===========    ===========    ===========
Weighted average shares outstanding -- basic..........    3,414,411      3,454,473      3,485,763
                                                        ===========    ===========    ===========
Weighted average shares outstanding -- diluted........    3,509,231      3,516,770      3,560,392
                                                        ===========    ===========    ===========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-4
<PAGE>   18
 
                          NATIONAL DENTEX CORPORATION
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                              PREFERRED STOCK          COMMON STOCK
                                            --------------------   --------------------
                                            NUMBER OF   $.01 PAR   NUMBER OF   $.01 PAR     PAID-IN      RETAINED
                                             SHARES      VALUE      SHARES      VALUE       CAPITAL      EARNINGS        TOTAL
                                            ---------   --------   ---------   --------     -------      --------        -----

<S>                                         <C>         <C>        <C>         <C>        <C>           <C>           <C>
BALANCE, December 31, 1995................      --       $ --      3,271,468   $32,715    $13,309,336   $ 6,613,530   $19,955,581
 
Issuance of 155,028 shares of common stock
  under the stock option plans............      --         --        155,028     1,550        217,228            --       218,778
Issuance of 13,634 shares of common stock
  under the employee stock purchase
  plan....................................      --         --         13,634       136        145,049            --       145,185
Issuance of 608 shares of common stock as
  director's fees.........................      --         --            608         6         12,002            --        12,008
Net income................................      --         --             --        --             --     3,704,926     3,704,926
                                              ----       ----      ---------   -------    -----------   -----------   -----------
BALANCE, December 31, 1996................      --         --      3,440,738    34,407     13,683,615    10,318,456    24,036,478
                                              ----       ----      ---------   -------    -----------   -----------   -----------
 
Issuance of 6,295 shares of common stock
  under the stock option plans............      --         --          6,295        63         79,635            --        79,698
Issuance of 12,386 shares of common stock
  under the employee stock purchase
  plan....................................      --         --         12,386       124        181,525            --       181,649
Issuance of 1,410 shares of common stock
  as director's fees......................      --         --          1,410        14         23,956            --        23,970
Net income................................      --         --             --        --             --     4,346,836     4,346,836
                                              ----       ----      ---------   -------    -----------   -----------   -----------
BALANCE, December 31, 1997................      --         --      3,460,829    34,608     13,968,731    14,665,292    28,668,631
                                              ----       ----      ---------   -------    -----------   -----------   -----------
 
Issuance of 24,844 shares of common stock
  under the stock option plans............      --         --         36,758       367        287,470            --       287,837
Issuance of 14,601 shares of common stock
  under the employee stock purchase
  plan....................................      --         --         14,601       146        213,464            --       213,610
Issuance of 960 shares of common stock as
  director's fees.........................      --         --            960        10         23,990            --        24,000
Net income................................      --         --             --        --             --     4,683,416     4,683,416
                                              ----       ----      ---------   -------    -----------   -----------   -----------
BALANCE, December 31, 1998................      --       $ --      3,513,148   $35,131    $14,493,655   $19,348,708   $33,877,494
                                              ====       ====      =========   =======    ===========   ===========   ===========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-5
<PAGE>   19
 
                          NATIONAL DENTEX CORPORATION
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                            YEARS ENDED
                                                             ------------------------------------------
                                                             DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                                                 1996           1997           1998
                                                             ------------   ------------   ------------
<S>                                                          <C>            <C>            <C>
Cash flows from operating activities:
    Net income.............................................  $ 3,704,926    $ 4,346,836    $ 4,683,416
    Adjustments to reconcile net income to net cash
       provided by operating activities, net of effects of
       acquisitions:
         Depreciation and amortization.....................    1,350,314      1,753,376      2,004,927
         (Increase) decrease in accounts receivable........       35,788        (47,640)      (271,559)
         Increase in inventories...........................     (385,004)      (106,745)      (114,255)
         (Increase) decrease in prepaid expenses...........        3,241        178,355       (219,137)
         (Increase) decrease in deferred tax asset.........      (26,228)        47,724          1,179
         Increase in other assets..........................      (63,973)      (309,343)      (262,907)
         Increase (decrease) in accounts payable and
            accrued liabilities............................     (694,129)        19,480        950,704
         Decrease in deferred tax liability................      (29,277)      (108,992)       (94,550)
                                                             -----------    -----------    -----------
              Net cash provided by operating activities....    3,895,658      5,773,051      6,677,818
                                                             -----------    -----------    -----------
Cash flows from investing activities:
    Payment for acquisitions, net of cash acquired.........     (839,017)    (3,691,799)    (2,066,966)
    Payment of deferred purchase price.....................   (1,607,826)      (684,631)      (691,949)
    Additions to property and equipment, net...............     (964,894)    (1,524,666)      (830,799)
                                                             -----------    -----------    -----------
         Net cash used in investing activities.............   (3,411,737)    (5,901,096)    (3,589,714)
                                                             -----------    -----------    -----------
Cash flows from financing activities:
    Net payments of current and long-term obligations......      (94,248)      (204,213)            --
    Net proceeds from issuance of common stock.............      375,971        285,317        525,447
                                                             -----------    -----------    -----------
         Net cash provided by financing activities.........      281,723         81,104        525,447
                                                             -----------    -----------    -----------
Net increase (decrease) in cash and equivalents............      765,644        (46,941)     3,613,551
Cash and equivalents at beginning of period................    4,193,394      4,959,038      4,912,097
                                                             -----------    -----------    -----------
Cash and equivalents at end of period......................  $ 4,959,038    $ 4,912,097    $ 8,525,648
                                                             ===========    ===========    ===========
Supplemental disclosures of cash flow information:
    Interest paid..........................................  $    22,098    $    11,179    $    12,084
                                                             ===========    ===========    ===========
    Income taxes paid......................................  $ 2,739,444    $ 3,071,545    $ 2,993,473
                                                             ===========    ===========    ===========
Supplemental schedule of noncash investing and financing
  activities:
    The Company purchased the operations of certain dental
       laboratories in 1996, 1997 and 1998. In conjunction
       with these acquisitions, liabilities were assumed as
       follows:
    Fair value of assets acquired..........................  $ 1,618,000    $ 5,735,000    $ 3,434,000
    Cash paid..............................................     (910,000)    (3,893,000)    (2,067,000)
    Deferred purchase price at date of acquisition.........     (468,000)    (1,545,000)    (1,080,000)
                                                             -----------    -----------    -----------
Liabilities assumed........................................  $   240,000    $   297,000    $   287,000
                                                             ===========    ===========    ===========
</TABLE>
 
  The accompanying notes are an integral part of these consolidated financial
                                  statements.

                                       F-6
<PAGE>   20
 
                          NATIONAL DENTEX CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                               DECEMBER 31, 1998
 
(1)  ORGANIZATION
 
     National Dentex Corporation (the "Company") owned and operated 27
full-service dental laboratories and five branch laboratories in 21 states
throughout the United States as of December 31, 1998. Working from dentists'
work orders, the Company's dental laboratories custom design and fabricate
dentures, crowns and fixed bridges, and other dental prosthetic appliances.
 
(2)  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
  Principles of Consolidation
 
     The consolidated financial statements include all operations of the
Company. Acquisitions are reflected from the date acquired by the Company (see
Note 3) to December 31, 1998. All significant intercompany balances and
transactions have been eliminated in consolidation.
 
  Revenue Recognition
 
     Revenue is recognized as the dentists' orders are shipped.
 
  Inventories
 
     Inventories, consisting principally of raw materials, are stated at the
lower of cost (first-in, first-out) or market.
 
  Property and Equipment
 
     Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is calculated using the straight-line method over the following
estimated depreciable lives:
 
     Buildings...................................................  25 years
     Furniture and fixtures......................................  5-10 years
     Automobiles and trucks......................................  5 years
     Laboratory equipment........................................  10 years
 
     Leasehold improvements and capital leases are amortized over the lesser of
the assets' estimated useful lives or the lease terms.
 
     Gains and losses are recognized upon the disposal of property and
equipment, and the related accumulated depreciation and amortization are removed
from the accounts. Maintenance, repairs and betterments that do not enhance the
value of or increase the life of the assets are charged to operations as
incurred.
 
  Other Assets
 
     Included in other assets are the costs of noncompetition agreements which
are deferred and amortized on a straight-line basis according to the terms of
the agreements over five to ten years. Goodwill is being amortized using the
straight-line method over a period of 20 years, the estimated useful life. The
Company continually evaluates whether events and circumstances have occurred
that indicate the remaining estimated useful life of goodwill may warrant
revision or that the remaining balance of goodwill may not be recoverable. When
factors indicate that goodwill should be evaluated for possible impairment, the
Company uses an estimate of the related business segment's undiscounted
operating income over the remaining life of the goodwill in measuring whether
the goodwill is recoverable. As of December 31, 1998 there have been no write-
downs of goodwill.
 
                                       F-7
<PAGE>   21
                          NATIONAL DENTEX CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998 -- (CONTINUED)
 
     Accumulated amortization on these intangible assets was approximately
$2,840,000 and $3,972,000 at December 31, 1997 and 1998, respectively.
 
  Income Taxes
 
     The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109). Under SFAS 109, deferred tax assets
and liabilities are recognized for the expected future tax consequences of
events that have been included in the financial statements or tax returns. The
amount of deferred tax asset or liability is based on the difference between the
financial statement and tax basis of assets and liabilities using enacted tax
rates in effect for the year in which the differences are expected to reverse.
 
  Net Income per Common Share
 
     In 1997 the Company adopted the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." This statement was issued by
the Financial Accounting Standards Board (the "FASB") in March 1997 and
establishes the standards for computing and presenting earnings per share
("EPS") and applies to entities with publicly held common stock or potential
common stock. This statement requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerators and denominators of
the basic and diluted EPS computations for all prior period EPS data presented.
 
  Cash and Equivalents
 
     The Company considers all highly liquid investments purchased with a
maturity of three months or less to be cash equivalents.
 
  Stock-Based Compensation
 
     Effective January 1, 1996, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." The Company has elected to continue to account for stock options
at intrinsic value with disclosure of the effects of fair value accounting on
net income and earnings per share on a pro forma basis.
 
  Use of Estimates in the Financial Statements
 
     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 amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
 
  Disclosures About the Fair Value of Financial Instruments
 
     The Company's financial instruments consist mainly of cash and equivalents,
accounts receivable, accounts payable, accrued liabilities and long-term
liabilities. The carrying amounts of the Company's cash and equivalents,
accounts receivable, accounts payable and accrued liabilities approximate their
fair value due to the short-term nature of these instruments. The carrying
amounts of the long-term liabilities also approximates their fair value, based
on rates available to the Company for debt with similar terms and remaining
maturities.
 
                                       F-8
<PAGE>   22
                          NATIONAL DENTEX CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998 -- (CONTINUED)
 
  New Accounting Pronouncements
 
     The FASB issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which is required to be adopted by the Company no later
than fiscal year 2000. This statement establishes accounting and reporting
standards requiring that every derivative instrument (including certain
derivative instruments embedded in other contracts) be recorded in the balance
sheet as either an asset or a liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
formally document, designate and assess the effectiveness of transactions that
receive hedge accounting. The Company plans to adopt this statement in fiscal
year 2000. Management does not believe that the adoption of SFAS No. 133 will
have a material effect on the Company's financial position or results of
operations.
 
     The FASB issued SFAS No. 131, "Disclosures About Segments of an Enterprise
and Related Information," which is required to be adopted by the Company no
later than fiscal year 1998. This statement introduces a new model for segment
reporting, called the management approach. The management approach is based on
the way that the chief operating decision maker organizes segments within a
company for making operating decisions and assessing performance. Reportable
segments are based on products and services, geography, legal structure,
management structure -- any manner in which management disaggregates the
company. The Company adopted this statement in fiscal year 1998. This statement
has no impact on the Company's financial statement presentation.
 
(3)  ACQUISITIONS
 
     During 1997, the Company acquired the following dental laboratory
operations:
 
        Scrimpshire Dental Studio.............................  January 1997
        TLC Dental Laboratory.................................  July 1997
 
     During 1998, the Company acquired the following dental laboratory
operations:
 
        Continental Dental Laboratory.........................  March 1998
        Monroe Dental.........................................  July 1998
        Excel Berger Dental...................................  November 1998
        Hearn Dental Laboratory...............................  November 1998
 
     These acquisitions, which have been reflected in the accompanying
consolidated financial statements from the dates of acquisition, have been
accounted for as purchases in accordance with Accounting Principles Board (APB)
Opinion No. 16. The excess of the total purchase price over the prior carrying
amount of the net
 
                                       F-9
<PAGE>   23
                          NATIONAL DENTEX CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998 -- (CONTINUED)
 
assets acquired, based on preliminary estimates of their related fair values
(which are subject to revision), was allocated as follows as of December 31,
1997 and 1998:
 
<TABLE>
<CAPTION>
                                                       1997         1998
                                                    ----------   ----------
<S>                                                 <C>          <C>
Total Purchase Price..............................  $5,438,000   $3,323,000
Less fair market values assigned to assets and
  liabilities:
     Cash.........................................     202,000      101,000
     Accounts receivable..........................     521,000      407,000
     Property and equipment.......................     191,000      123,000
     Noncompete agreements........................   1,295,000      720,000
     Inventories..................................      55,000      132,000
     Other assets.................................     151,000       11,000
     Accounts payable.............................    (134,000)      (8,000)
     Accrued liabilities and other................    (163,000)    (203,000)
                                                    ----------   ----------
Goodwill..........................................  $3,320,000   $2,040,000
                                                    ==========   ==========
</TABLE>
 
     In connection with these acquisitions, the Company has incurred certain
deferred purchase costs relating to noncompete agreements with certain
individuals, ranging over periods of five to ten years and other contingent
payments provided for in the purchase agreements.
 
     The following unaudited pro forma operating results of the Company assume
the acquisitions had been made as of January 1, 1997. Such information includes
adjustments to reflect additional depreciation, noncompete amortization,
amortization of goodwill and interest expense, does not purport to represent
what the Company's results of operations would actually have been, and is not
necessarily indicative of the results of operations in future periods.
 
<TABLE>
<CAPTION>
                                                           YEAR ENDED
                                                  -----------------------------
                                                  DECEMBER 31,    DECEMBER 31,
                                                      1997            1998
                                                  ------------    ------------
                                                           (UNAUDITED)
<S>                                               <C>             <C>
Net sales.......................................   $63,938,000     $65,487,000
Net income......................................     4,690,000       4,798,000
Net income per share:
  - Basic.......................................   $      1.35     $      1.38
  - Diluted.....................................   $      1.33     $      1.35
</TABLE>
 
                                      F-10
<PAGE>   24
                          NATIONAL DENTEX CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998 -- (CONTINUED)
 
(4)  INCOME TAXES
 
     The following is a summary of the provision for income taxes:
 
<TABLE>
<CAPTION>
                                                       YEARS ENDED
                                        ------------------------------------------
                                        DECEMBER 31,   DECEMBER 31,   DECEMBER 31,
                                            1996           1997           1998
                                        ------------   ------------   ------------
<S>                                     <C>            <C>            <C>
Federal --
     Current..........................   $2,092,021     $2,343,556     $2,660,011
     Deferred.........................     (140,849)       (70,966)       (92,012)
                                         ----------     ----------     ----------
                                          1,951,172      2,272,590      2,567,999
                                         ----------     ----------     ----------
State --
     Current..........................      523,121        613,756        544,583
     Deferred.........................      (24,856)       (12,523)       (16,237)
                                         ----------     ----------     ----------
                                            498,265        601,233        528,346
                                         ----------     ----------     ----------
                                         $2,449,437     $2,873,823     $3,096,345
                                         ==========     ==========     ==========
</TABLE>
 
     Deferred income taxes are comprised of the following at December 31, 1997
and 1998:
 
<TABLE>
<CAPTION>
                                                              1997       1998
                                                            --------   --------
<S>                                                         <C>        <C>
Deferred Tax Assets:
     Vacation benefits....................................  $182,515   $182,515
     Inventory basis differences..........................    59,896     59,896
     Receivables basis differences........................    38,581     47,402
     Other reserves.......................................    83,987     83,987
                                                            --------   --------
          Total deferred tax assets.......................   364,979    373,800
                                                            --------   --------
Deferred Tax Liabilities:
     Property basis differences...........................  (345,681)  (407,544)
     Noncompete agreements................................    89,217    195,366
     Other liabilities....................................    60,637    110,901
                                                            --------   --------
          Total deferred tax liabilities..................  (195,827)  (101,277)
                                                            --------   --------
Net deferred tax (liability) asset........................  $169,152   $272,523
                                                            ========   ========
</TABLE>
 
     A reconciliation between the provision for income taxes computed at
statutory rates and the amount reflected in the accompanying statements of
income is as follows:
 
<TABLE>
<CAPTION>
                                                                     YEARS ENDED
                                                    --------------------------------------------
                                                    DECEMBER 31,    DECEMBER 31,    DECEMBER 31,
                                                        1996            1997            1998
                                                    ------------    ------------    ------------
<S>                                                 <C>             <C>             <C>
Statutory federal income tax rate.................      34.0%           34.0%           34.0%
State income tax, net of federal income tax
  benefit.........................................       5.6             5.6             4.6
Other.............................................       0.2             0.2             1.2
                                                        ----            ----            ----
Effective income tax rate.........................      39.8%           39.8%           39.8%
                                                        ====            ====            ====
</TABLE>
 
(5)  LONG-TERM OBLIGATIONS
 
     The Company maintains a financing agreement (the "Agreement") with State
Street Bank and Trust Company (the "Bank"). The Agreement, as amended on June
27, 1997, includes revolving lines of credit of $4,000,000 and $8,000,000. The
interest rate on both revolving lines of credit is the prime rate minus one half
of one percent or the LIBOR rate plus 1.5%, at the Company's option. Both
revolving lines of credit matures on June 1, 2001.
 
                                      F-11
<PAGE>   25
                          NATIONAL DENTEX CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998 -- (CONTINUED)
 
     A commitment fee of one eighth of one percent is payable on the unused
amount of both revolving lines of credit. The Agreement requires compliance with
certain covenants, including the maintenance of net worth and other financial
ratios. As of December 31, 1998, the Company was in compliance with these
covenants.
 
(6)  BENEFIT PLANS
 
     The Company has an employee savings plan (the "Plan") under IRS Code
Section 401(k). The Plan allows contributions of up to 10% of a participant's
salary, a portion of which is matched in cash by the Company. The Company
contributes this amount once a year, within 120 days after December 31, the
Plan's year-end. All employees are eligible to participate in the Plan after
completing one year of service with the Company and the attainment of age 21.
Participants become fully vested after six years of service or upon attaining
age 65. The Company has incurred charges to operations of approximately
$240,000, $253,000 and $334,000 to match contributions for the years ended
December 31, 1996, 1997 and 1998, respectively.
 
     The Company has an incentive plan, the Laboratory Plan, for dental
laboratory management and other designated key employees who could directly
influence the financial performance of an individual dental laboratory.
Eligibility is determined annually for each laboratory. Each participant is
eligible to receive an amount based on the achievement of certain earnings
levels of the participant's laboratory, as defined. The Company has incurred
charges to operations of approximately $1,689,000, $1,897,000 and $2,117,000 for
the years ended December 31, 1996, 1997 and 1998, respectively, under the
Laboratory Plan.
 
     The Company has an executive bonus plan (the "Executive Plan") for key
executives and management of the Company, and a management bonus plan (the
"Managers Plan") for laboratory group managers. Eligibility to participate in
each plan is determined annually. Participants are eligible to receive a bonus,
based on a percentage of salary, dependent upon the achievement of earnings
targets, as defined. The bonus is distributed within 90 days after year-end. The
Company has incurred aggregate charges to operations of approximately $486,000,
$592,000 and $480,000 for the years ended December 31, 1996, 1997 and 1998,
respectively, with respect to these plans.
 
     The Company established a Supplemental Executive Retirement Plan ("SERP")
for certain key employees providing for annual benefits payable over a period of
ten years beginning at age 65 or date of retirement. Benefits will be funded by
life insurance contracts purchased by the Company. The cost of these benefits is
being charged to expense and accrued using a present value method over the
expected terms of employment. The charges to expense for the years ended
December 31, 1996, 1997 and 1998 were approximately $106,000, $124,000 and
$146,000, respectively.
 
(7)  COMMITMENTS AND CONTINGENCIES
 
  Operating Leases
 
     The Company is committed under various noncancelable operating lease
agreements covering its office space and dental laboratory facilities. Certain
of these leases also require the Company to pay maintenance, repairs, insurance
and related taxes. The total rental expense for the years ended December 31,
1996, 1997 and
 
                                      F-12
<PAGE>   26
                          NATIONAL DENTEX CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998 -- (CONTINUED)
 
1998 was approximately $976,000, $1,095,000 and $1,207,000, respectively. The
approximate aggregate minimum lease commitments under these leases as of
December 31, 1998 are as follows:
 
YEAR                                                            AMOUNT
----                                                            ------

1999........................................................  $1,265,000
2000........................................................   1,238,000
2001........................................................   1,052,000
2002........................................................     974,000
2003........................................................     799,000
Thereafter..................................................   3,146,000
                                                              ----------
                                                              $8,474,000
                                                              ==========
 
  Employment Contracts and Change-In-Control Arrangements
 
     In April 1995 the Company entered into employment contracts and
change-in-control arrangements with certain key executives. The initial term of
these employment contracts expired in April 1998, and the contracts by their
terms renew automatically thereafter until termination by the Company or the
executive. The change-in-control arrangements provide certain severance benefits
in the event that the executive is terminated by the Company without cause or
the executive terminates his employment contract for certain specified reasons.
 
  Legal Proceedings
 
     The Company is involved from time to time in litigation incidental to its
business. Management believes that the outcome of current litigation will not
have a material adverse effect upon the operations or financial condition of the
Company and will not disrupt the normal operations of the Company.
 
(8)  STOCK OPTIONS AND WARRANTS
 
  Stock Option Plans
 
     On April 24, 1991, the Board granted a nonqualified stock option to an
officer of the Company to purchase 104,399 shares of common stock of the Company
at an exercise price of $1.00 per share (representing the fair market value at
that time). The option expired five years from the date of grant and was
nontransferable. During 1996, the last of these options were exercised.
 
     In addition, an Incentive Stock Option Plan (the "ISO Plan") was adopted by
the Board in February 1983. An aggregate of 268,325 shares of the Company's
common stock had been reserved for issuance under the ISO Plan to employees of
the Company. The options are granted at the direction of the Board and may be
exercised by the individual as the options vest over a three-year period, but no
later than five years from the date of grant. In May 1992, the ISO Plan was
terminated. No additional options will be granted under the ISO Plan; however,
the then outstanding options remained exercisable in accordance with the ISO
Plan's provisions. During 1996 the last of these options were exercised.
 
     In May 1992, the Company's Board of Directors (the "Board") adopted the
1992 Long-Term Incentive Plan (the "LTIP"). Under the LTIP, the Board may grant
stock options, stock appreciation rights, restricted stock, deferred stock,
stock purchase rights and other stock-based compensation to key employees,
officers and directors of the Company. In August 1995 the Board amended the LTIP
to increase the number of shares of common stock reserved for issuance under the
plan from 150,000 to 235,000, in April 1997 to 335,000 and in April 1998 to
485,000. As of December 31, 1998, 369,138 options were outstanding, at between
$9.50 and $25.00 per share, the fair market value on the dates of grant, 183,223
of which were exercisable.
 
                                      F-13
<PAGE>   27
                          NATIONAL DENTEX CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998 -- (CONTINUED)
 
     The following summarizes the transactions of the Company's LTIP for the
years ended December 31, 1996, 1997 and 1998:
 
<TABLE>
<CAPTION>
                                       1996                  1997                  1998
                                -------------------   -------------------   -------------------
                                           WEIGHTED              WEIGHTED              WEIGHTED
                                           AVERAGE               AVERAGE               AVERAGE
                                           EXERCISE              EXERCISE              EXERCISE
                                 SHARES     PRICE      SHARES     PRICE      SHARES     PRICE
                                 ------    --------    ------    --------    ------    --------
<S>                             <C>        <C>        <C>        <C>        <C>        <C>
Outstanding at beginning of
  year........................   135,730    $12.35     209,302    $15.25     320,771    $17.28
Granted.......................    81,210     19.80     124,960     20.38      83,930     15.48
Exercised.....................    (3,183)    10.13      (4,295)    10.64     (24,844)   (11.59)
Canceled......................    (4,455)    13.56      (9,196)    16.41     (10,719)   (18.29)
                                --------              --------              --------
Outstanding at end of year....   209,302    $15.25     320,771    $17.28     369,138    $17.22
                                ========    ======    ========    ======    ========    ======
Exercisable at end of year....    64,924    $11.79     116,620    $13.77     183,223    $16.32
Weighted average fair value of
  options granted.............  $   3.97              $   4.64              $   3.40
</TABLE>
 
     Of the options outstanding at December 31, 1998, 156,651 have exercise
prices between $9.50 and $15.25, with a weighted average price of $13.55 and a
weighted average remaining contractual life of 7.3 years. Of these options,
79,221 are exercisable at a weighted average exercise price of $11.89. Another
85,262 of the options outstanding have exercise prices between $16.25 and
$19.75, with a weighted average exercise price of $18.88 and a weighted average
remaining contractual life of 7.4 years. Of these options 58,714 are exercisable
at a weighted average exercise price of $18.94. The remaining 127,225 options
have exercise prices between $20.125 and $25.00, with a weighted average
exercise price of $20.64 and a weighted average remaining contractual life of
8.6 years. Of these options 45,288 are exercisable at a weighted average
exercise price of $16.32.
 
     Also, the Company has the 1992 Employees' Stock Purchase Plan (the "Stock
Purchase Plan") under which an aggregate of 100,000 shares of the Company's
common stock may be purchased, through a payroll deduction program, primarily at
a price equal to 85% of the fair market value of the common stock on either the
grant date or the exercise date, whichever is lower. The number of shares of
common stock purchased through the Stock Purchase Plan for 1996, 1997 and 1998
were 13,634, 12,386 and 14,601, respectively. The Stock Purchase Plan was
renewed with a grant date of April 1, 1998 and an exercise date of March 31,
1999.
 
     The Company accounts for the LTIP and Stock Purchase Plan under APB Opinion
No. 25 under which no compensation cost has been recognized. Had compensation
costs for these plans been determined consistent with Statement of Financial
Accounting Standards No. 123 ("SFAS No. 123"), the Company's net income and
earnings per share would have been reduced to the following pro forma amounts:
 
<TABLE>
<CAPTION>
                                                     DECEMBER 31,
                                         ------------------------------------
                                            1996         1997         1998
                                         ----------   ----------   ----------
<S>                                      <C>          <C>          <C>
Net Income:
     As reported.......................  $3,704,926   $4,346,836   $4,683,416
     Pro forma.........................   3,446,190    4,026,642    4,216,387
Earnings per share
     As reported.......................  $     1.06   $     1.24   $     1.32
     Pro forma.........................         .99         1.15         1.19
</TABLE>
 
     Because the SFAS No. 123 method of accounting has not been applied to
options granted prior to January 1, 1995, the resulting pro forma compensation
cost may not be representative of that to be expected in future years.
 
                                      F-14
<PAGE>   28
                          NATIONAL DENTEX CORPORATION
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        DECEMBER 31, 1998 -- (CONTINUED)
 
     In calculating the pro forma information set forth above, the fair value of
each option grant under the LTIP and the Stock Purchase Plan is estimated as of
the date of grant using the Black-Scholes option pricing model with the
following weighted average assumptions used for grants in 1996, 1997 and 1998,
respectively: risk-free interest rates of between 4.91% and 5.98% for the 1996
option grants, between 5.19% and 5.48% for the 1997 option grants and between
4.45% and 4.72% for the 1998 option grants; no expected dividend yield for any
plan year; expected lives of between one and three years for the 1996, 1997 and
1998 option grants, based on vesting periods; expected volatility of between
33.19% and 35.84% for 1996 option grants, between 33.34% and 36.74% for option
grants in 1997 and between 31.63% and 33.77% for option grants in 1998.
 
  Warrants
 
     In December 1993, the Company issued warrants to the representative of the
underwriter to purchase 100,000 shares of common stock of the Company at an
exercise price of 135% of the initial offering price of $8.00, or $10.80 per
share. In January 1996, 35,806 shares of common stock of the Company were issued
in a cashless exercise of 70,000 of these warrants. In December 1998, the
remaining 30,000 warrants were exercised in a cashless transaction and 11,914
shares of common stock were issued.
 
(9)  EVENT (UNAUDITED) SUBSEQUENT TO DATE OF AUDITOR'S REPORT
 
     Effective January 1, 1999, the Company completed a transaction to acquire
all of the outstanding capital stock of Advanced Dental Arts, Inc. of Bellevue,
Washington.
 
     Effective February 1, 1999, the Company completed a transaction to acquire
all of the assets of TVC Dental Laboratory of Denver, Colorado.
 
                                      F-15
<PAGE>   29
 
                                                                     SCHEDULE II
 
                          NATIONAL DENTEX CORP0RATION
 
                       VALUATION AND QUALIFYING ACCOUNTS
 
<TABLE>
<CAPTION>
                                        BALANCE
                                          AT        CHARGED TO                               BALANCE AT
                                       BEGINNING    COSTS AND                                  END OF
                                       OF PERIOD     EXPENSES     WRITE-OFFS    DEDUCTION      PERIOD
                                       ---------    ----------    ----------    ---------    ----------
<S>                                    <C>          <C>           <C>           <C>          <C>
Allowance for Doubtful Accounts:
     December 31, 1996...............  $179,996      $69,124       $ 44,981        $--        $204,139
     December 31, 1997...............   204,139       49,473        107,936        --          145,676
     December 31, 1998...............   145,676       64,661         65,788        --          144,549
</TABLE>