<PAGE>   1

                                  FORM 10-QSB
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


            [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) of
                      THE SECURITIES EXCHANGE ACT OF 1934
                                        
                  For the Quarterly Period Ended June 30, 1998
                                        
                                       OR

           [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) of
                      THE SECURITIES EXCHANGE ACT OF 1934
                                        
              For the transition period from ________ to ________
                                        
                         Commission File Number 0-20222

                    PRINCETON DENTAL MANAGEMENT CORPORATION
             (Exact name of Registrant as specified in its charter)


          DELAWARE                                             36-3484607
------------------------------                          ----------------------
State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                          Identification Number)


             7421 West 100th Place, Bridgeview, Illinois 60455-2442
                    (Address of principal executive offices)
                                   (Zip Code)
                                        
                                 (708) 974-4000
              (Registrant's telephone number, including area code)


    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 SUCH SHORTER PERIOD THAT THE REGISTRANT
  WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
               REQUIREMENTS FOR THE PAST 90 DAYS,    YES  X    NO


  INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
    COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE: 2,040,965 SHARES OF THE
     COMPANY'S COMMON STOCK ($.0001 PAR VALUE) PER SHARE OUTSTANDING AS OF
                                 JUNE 30, 1998.



<PAGE>   2

                    PRINCETON DENTAL MANAGEMENT CORPORATION
                                        
                                  FORM 10-QSB

                                        
                               TABLE OF CONTENTS

<TABLE>
<CAPTION>

PART I - FINANCIAL INFORMATION                              PAGE (S)
         <S>                                                   <C>
         CONDENSED CONSOLIDATED BALANCE SHEETS                  3-4

         CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS          5

         CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW           6

         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS   7-9

         MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS                   10-11



         PART II - OTHER INFORMATION                           12-16
</TABLE>
<PAGE>   3

                    PRINCETON DENTAL MANAGEMENT CORPORATION
                     Condensed Consolidated Balance Sheets
     For Six Months Ending June 30, 1998 and Year Ending December 31, 1997

<TABLE>
<CAPTION>

 ASSETS                                                                   June 30, 1998       December 31, 1997
                                                                         ---------------     -------------------
                                                                           (Unaudited)
<S>                                                                       <C>                 <C>
Current Assets:

     Cash and cash Equivalents                                           $   318,569             $   46,644
     Accounts Receivable, net of allowances
       for doubtful accounts of $189,000 and
       $189,000 respectively                                                 836,647                922,383
     Current portion of loan receivable - affiliate                          143,045                298,637
     Inventories                                                             117,790                107,951
     Other Current Assets                                                     57,628                 89,513
                                                                        -------------           ------------     
          Total Current Assets                                             1,473,679              1,465,128


Property and equipment, net                                                  644,856                756,579
Goodwill, net of accumulated amortization of
  $2,312,306 and 2,081,576, respectively                                   5,311,628              5,542,358
Loan Receivable - affiliate                                                   50,000                 50,000
Other Assets, net                                                            404,812                441,936
                                                                        -------------           ------------

          Total Other Assets                                               6,411,296               6,790,873





          Total Assets                                                   $ 7,884,975             $ 8,256,001
                                                                        =============           =============
</TABLE>




<PAGE>   4


                    PRINCETON DENTAL MANAGEMENT CORPORATION
                     Condensed Consolidated Balance Sheets
     For Six Months Ending June 30, 1998 and Year Ending December 31, 1997

<TABLE>
<CAPTION>

LIABILITIES AND SHAREHOLDER'S EQUITY                                      June 30, 1998               December 31, 1997
                                                                       ------------------        ------------------------
                                                                           (Unaudited)
<S>                                                                     <C>                        <C>
Current Liabilities:                                                    
     Notes Payable                                                      $     60,591                $      60,591
     Bank Debit Balance                                                          -                         69,849
     Current portion of capital lease obligations                              8,992                       18,849
     Current portion of long-term debt                                       849,184                      849,184
     Convertible secured debt                                              2,133,428                    2,133,428
     Accounts Payable                                                        882,700                      922,994
     Accrued salaries and wages                                              466,976                      476,178
     Other accrued expenses                                                1,045,990                      711,930
                                                                       ---------------              --------------
          Total Current Liabilities                                        5,447,861                    5,243,003

Long-term debt, excluding current portion                                  1,568,410                    1,787,436
Capital lease obligations, excluding current portion                          18,588                       18,588
                                                                       ---------------              --------------
          Total Liabilities                                                7,034,859                    7,049,027
                                                                       ---------------              --------------
Shareholder's Equity:
     Series A 11.75% Cumulative Convertible
      Preferred Stock par value $1.00 per share;
      authorized shares - 1,000,000; issued and
      outstanding - 2,848 at December 31, 1997                                 2,848                        2,848
     Series B Preferred Stock, par value $1.00
      per share; authorized shares - 100; issued
      and outstanding - 100 at December 31, 1997                                 100                          100
     Common stock, par value $0.0001 per share;
      authorized shares - 25,000,000; issued and
      outstanding - 2,040,965 at June 30, 1998
      and 2,024,465 at December 31, 1997                                         204                          202
     Less: 8,462 shares Common Stock held
      in treasury, at cost                                                  (181,771)                    (181,771)

     Additional Paid-In Capital                                           15,140,769                   15,108,366
     Accumulated Deficit                                                 (14,112,034)                 (13,722,771)
                                                                       ---------------              ---------------
          Net Shareholders' Equity                                           850,116                    1,206,974
                                                                       ---------------              ---------------
          Total Liabilities and Stockholders' Equity                    $  7,884,975                $   8,256,001
                                                                       ===============              ===============
</TABLE>

<PAGE>   5


                   PRINCETON DENTAL MANAGEMENT CORPORATION
               Condensed Consolidated Statements of Operation
                                 (Unaudited)

<TABLE>
<CAPTION>

                                                                    Three Months Ended                 Six Months Ended
                                                                        June 30                            June 30
Revenue:                                                         1998            1997                1998            1997
                                                                ------          ------              ------          ------
<S>                                                          <C>             <C>                 <C>             <C>
     Practice Revenue                                       $ 1,978,801     $ 2,656,539         $ 4,169,361     $ 5,589,326
     Laboratory Revenue                                       1,127,586       1,100,787           2,139,970       2,161,485
                                                            -----------     -----------         -----------     -----------
          Total Revenue                                     $ 3,106,387     $ 3,757,326         $ 6,309,331     $ 7,750,811
                                                            -----------     -----------         -----------     -----------
Expenses:

     Practice compensation and Benefits                       1,526,490       1,829,361           3,126,328       3,997,879
     Other Practice Expense                                     494,144         536,731             897,145       1,088,865
     Cost of Laboratory Revenue & Expenses                      832,446         894,723           1,613,018       1,720,495
     General Corporate Expenses                                 135,355         162,119             236,702         405,257
     Depreciation and Amortization                              208,877         138,043             417,754         363,325
                                                            -----------     -----------         -----------     -----------
          Total Operating Expenses                            3,197,312       3,560,977           6,290,947       7,575,821
                                                            -----------     -----------         -----------     -----------
          Operating Gain/(Loss)                                 (90,925)        196,349              18,384         174,990

     Gain from sale of practices & laboratory                       -           246,526                 -           213,954
     Interest Expense                                          (215,741)       (258,411)           (423,406)       (448,439)
     Other Income                                                11,928           7,798              15,759          19,926
                                                            ------------    -----------         -----------     -----------
          Net Income (Loss)                                 $  (294,738)    $   192,262         $  (389,263)    $   (39,569)
                                                            ============    ===========         ===========     ===========
          Net Loss Per Share                                $     (0.14)    $      0.09         $     (0.19)    $     (0.02)
                                                            ============    ===========         ===========     ===========
          Weighted Average
           Number of Shares Outstanding                       2,040,965       2,024,465           2,038,215       2,024,465

</TABLE>


<PAGE>   6
 

                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Condensed Consolidated Statements of Cash Flow
                For the Six Months Ended June 30, 1998 and 1997
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                     June 30, 1998             June 30, 1997
                                                                                     -------------             -------------
<S>                                                                                  <C>                       <C>
Operating Activities:                                                                
    Net Loss                                                                         $   (389,263)              $  (39,569)

    Cash Provided by (Used In) Operating Activities:
          Depreciation and Amortization                                                   417,754                  363,325
          Gain on sale of Dental Practices                                                    -                   (213,954)
          Issuance of stock under Incentive Stock Bonus Plan                               32,405                      -
          Changes in Operating Assets and Liabilities:
               Accounts Receivable                                                         85,736                 (132,792)
               Inventories                                                                 (9,839)                 (27,075)
               Other Current Assets                                                        31,885                    2,093
               Accounts Payable                                                           (40,294)                (197,198)
               Accrued Expenses                                                           324,858                  193,107
                                                                                     ------------               ---------- 
    Net Cash Used In Operating Activities                                                 453,242                  (52,063)
                                                                                     ------------               ---------- 
    Cash Provided by (Used In) Investing Activities:
          Other Assets                                                                     37,124                   15,613
          Proceeds from notes receivable                                                  155,592                    4,404
          Purchase of property and equipment - Net                                        (75,301)                 (41,560)
          Proceeds from sale of Dental Practices                                              -                    710,000
                                                                                     ------------               ----------  
    Net Cash Provided by Investing Activities                                             117,415                  688,457
                                                                                     ------------               ----------  
    Cash Provided by (Used In) Financing Activities:
          Principal payments on capital lease obligations                                  (9,857)                 (21,715)
          Principal payments on notes payable                                            (219,026)                 (93,311)
          Principal payments on long term debt and
            notes payable to shareholders                                                     -                   (193,765)
                                                                                     ------------               ----------  
    Net Cash Used In Financing Activities                                                (228,883)                (308,791)
                                                                                     ------------               ----------  
    Increase in Cash and Cash Equivalents                                                 341,774                  327,603

    Cash and Cash Equivalents at beginning of period                                      (23,205)                 185,235
                                                                                     ------------               ----------  
    Cash and Cash Equivalents at end of period                                       $    318,569               $  512,838
                                                                                     ============               ==========  
</TABLE>

<PAGE>   7


                    PRINCETON DENTAL MANAGEMENT CORPORATION
            Notes to the Condensed Consolidated Financial Statements
                                 June 30, 1998
                                  (Unaudited)


Note 1 - SIGNIFICANT ACCOUNTING POLICIES

     The accounting policies followed by Princeton Dental Management Corporation
(the Company) for quarterly financial reporting purposes are the same as those
disclosed in the Company's annual financial statements.  In the opinion of
management, the accompanying condensed consolidated financial statements reflect
all adjustments necessary for a fair presentation of the information presented.

     The quarterly condensed consolidated financial statements herein have been
prepared by the Company without audit. Certain information and footnote
disclosures included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Although the Company's management believes the disclosures are adequate to make
the information not misleading, it is suggested that these quarterly condensed
financial statements be read in conjunction with the audited annual financial
statements and footnotes thereto.

     The Company had a five-for-one reverse stock split of its common stock
effective August 18, 1997.  All share information and per share information in
these consolidated financial  statements have been retroactively restated to
reflect the reverse stock split.

Note 2 - RECLASSIFICATIONS

     The accompanying condensed consolidated financial statements contain
certain reclassifications of previously reported information.  The
reclassifications have been made to more appropriately reflect the operating
results of the Company.

Note 3 - FINANCING AGREEMENT

1. On April 22, 1996, the Company entered into a financing arrangement pursuant
to which the Company issued Convertible Debt (the Convertible Debt) to
Amsterdam Equities Limited in the amount of $2,483,620 and 3,599.77 shares of
Series A 11.75% Cumulative Convertible Preferred Stock (the Preferred Stock) to
Amsterdam Equities Limited (195 shares), Frank Leonard Laport (1,904.77
shares), and Beverly Trust Company, as custodian for the Frank Leonard Laport
Rollover Individual Retirement Account No. 75-49990 (1,500 shares)
(collectively, the Investor Group).   The  Convertible  Debt  and  Preferred
Stock  replaced indebtedness of the Company at April 22, 1996, in the amount of
$1,976,700 incurred under that certain letter agreement dated December 7, 1994
(the Letter Agreement) and that certain Secured Revolving Demand Note dated
January 27, 1995 (the Secured Note). Under the terms of the Convertible Debt
and Preferred Stock Agreements (also referred to herein collectively as the
Financing Arrangement) the Investor Group could choose to lend additional
funds, in increments to be determined solely by the Investor Group. The
Convertible Debt and Preferred Stock were initially to bear interest and have a
coupon rate, respectively of 11.75%, plus the payment of any withholding taxes
which might be due and owing with respect to any person which is a foreign
entity.  Payments on the Convertible Debt/Preferred Stock were interest only
due in quarterly installments which were to begin in September 1996.  The
Convertible Debt/Preferred Stock originally had a maturity of seven years from
the date of closing, subject to acceleration in the event of a default.
Subsequent to September 30, 1996 the Company was unable to pay the interest
only requirements of the Convertible Debt and Preferred Stock Agreements,
therefore, effective October 1, 1996 interest began to accrue at the default
rate of 21.75%.

     Pursuant to that certain Modification Agreement ("Modification Agreement")
entered into between the Investor Group and the Company and dated as of July 1,
1997, the Investor Group agreed, conditioned upon continued listing by the
Company on the Nasdaq SmallCap Market and similar concessions by another
significant Company creditor, to waive all accumulated and ongoing interest
and/or dividends on the Convertible Debt/Preferred Stock for the period from
January 1, 1997 through December 31, 1997.  That waiver ended on January 1,
1998, and interest and dividends have again been accruing.


                                       7
                                        
<PAGE>   8

                    PRINCETON DENTAL MANAGEMENT CORPORATION
            Notes to the Condensed Consolidated Financial Statements
                                 June 30, 1998
                                  (Unaudited)


     The waiver of interest and dividends during 1997 on the part of the
Investor Group resulted in a total savings to the Company in excess of $700,000.

     In addition to the amounts owed under the Letter Agreement and the Secured
Note, the terms of the Convertible Debt and Preferred Stock Agreements called
for the conversion of 58,333 shares of the Company's Regulation D stock held by
the Investor Group into $350,000 of Convertible Debt and Preferred Stock. The
shares of common stock were being held in treasury at time of redemption.

     An additional provision of the Convertible Debt and Preferred Stock
Agreements included the payment of $300,000 as a closing fee and required the
Company to reimburse the legal fees and costs and expenses of the Investor Group
in connection with the negotiation and the closing of the transaction which
totaled $216,897. The closing fees and reimbursement of the costs and expenses
were payable in the form of Convertible Debt and Preferred Stock. In total, the
Company incurred costs of $544,716 in connection with the refinancing which has
been capitalized and will be amortized over a period of seven years or until the
Convertible Debt/Preferred Stock is called.

     The terms of the Convertible Debt and Preferred Stock Agreements provided
the Investor Group with certain rights pertaining to the registration of any
common stock to which the Investor Group may convert from Convertible Debt or
Preferred Stock, certain anti-dilution rights, and a right of first refusal on
any future offering of Company securities.

     Under the terms of the transaction, the Company also issued a warrant to
purchase 100 shares of Series B Preferred Stock. The Series B Preferred Stock
entitled Amsterdam Equities Limited, to elect a Class B director who would have
super-majority voting powers on the Company's Board of Directors.

     The Convertible Debt and Preferred Stock may be converted into the common
stock of the Company, at the sole option of the Investor Group, at various
conversion rates as set forth in the conversion formula contained in the
Convertible Debt and Preferred Stock Agreements. Conversion pursuant to such
conversion formula would result in a conversion price per share of the Company's
common stock below present market levels.  If the Investor Group were to convert
all outstanding Convertible Debt and Preferred Stock at the present time, and
exercise the default warrants (see below), the conversion would result in the
issuance to the Investor Group of a majority interest representing approximately
eighty-five percent (85.0%) of the issued and outstanding shares of Company's
common stock (after conversion and assuming full conversion and anti-dilution).
In the event of such a conversion and exercise, the 85% of the Class would be
held almost entirely by Amsterdam Equities, with Mr. Laport holding less then 8%
of the stock resulting from such conversion and exercise.

     In addition, pursuant to the terms of the Financing Arrangement, the
Company issued to the holders of the Convertible Debt and the Preferred Stock a
series of default warrants to purchase an aggregate number of shares of common
stock equivalent to fifty percent (50.0%) of the issued and outstanding Common
Stock of the Company at an exercise price of $0.50 per share (subsequently
reduced to $0.05 per share under the terms of the Modification Agreement). This
modification effectively reduced the aggregate exercise price of approximately
$412,500 for the default warrants to an aggregate exercise price of
approximately $41,250 (not accounting for any adjustments due to the
anti-dilution provision of the Warrants and due to changes in the total issued
and outstanding shares of the Company's common stock).  Initially, the Investor
Group could exercise the warrants only upon the occurrence of an event of
default under the terms of the Financing Arrangement or upon the failure by the
Company to achieve certain minimum financial goals of net income of at least one
dollar in the fiscal year ending December 31, 1996, and various net income tests
in subsequent years. The Company has been in ongoing default under the Financing
Arrangement and the stated financial goals have not been met, and, accordingly,
these default warrants have been capable of being exercised by the Investor
Group upon payment of a minimal exercise

                                        
                                       8


<PAGE>   9

                    PRINCETON DENTAL MANAGEMENT CORPORATION
            Notes to the Condensed Consolidated Financial Statements
                                 June 30, 1998
                                  (Unaudited)

price since January 1, 1997. The cumulative effect of the issuance of shares
pursuant to the default warrants to the Investor Group and the conversion of
outstanding Convertible Debt/Preferred Stock could result in ownership by the
Investor Group of approximately 85% of the Company's total issued and
outstanding common stock after such conversion and exercise. In the event of
such a conversion and exercise, the 85% of the Class would be held almost
entirely by Amsterdam Equities with Mr. Laport holding less then 8% of the stock
resulting from such conversion and exercise.  To date, while the Company could
potentially cure these defaults, the Investor Group has taken no steps to
exercise these default  warrants.


2.   In  August  1996,   the  Company  entered  into  a  Letter  Agreement  by
and  among  the  Company; Dr. Charles R. Mitchell, a former President of the
Company; Stratum Management, Inc., a former consultant to the Company; John H.
Hagan, a former director of the Company; Dr. Seymour Kessler, a former director
of the Company; and Amsterdam Equities Limited, Frank Leonard Laport, and
Beverly Trust Company, as Custodian of the Frank Leonard Laport Rollover
Individual Retirement Account No. 75-49990, each members of the Investor Group.
Under the Letter Agreement, which became effective on August 9, 1996, the
Series B Preferred Stock previously referred to in the Convertible Debt
Agreement executed by the Company on April 22, 1996 was amended to be
immediately effective and Class B Preferred Stock was immediately issued to
Amsterdam.

     The Class B Preferred Stock entitled Amsterdam to elect a Director to the
Board of Directors of the Company who would have super majority voting powers.
In effect, the Class B director appointed by Amsterdam has the number of votes
on the Board of Directors as the current Board currently holds, plus one vote.
The amendment and activation of the Class B Preferred Stock occurred upon the
satisfaction of the following two conditions:  (i) delivery to the Company of a
notice, pursuant to which the Investor Group would convert an aggregate amount
of U.S. $700,000 of currently outstanding Convertible Debt/Preferred Stock into
the Company's Common Stock in accordance with the contractual terms of the
Convertible Debt and Preferred Stock Agreements executed on April 22, 1996 and
(ii) upon the advance to the Company of an additional $200,000.00 pursuant to
the Convertible Debt and the Preferred Stock Agreements executed April 22, 1996.
As of August 9, 1996, the Investor Group had satisfied these two conditions and
the Class B Preferred Stock was issued to Amsterdam.

     Frank Leonard Laport, Chairman and CEO of the Company, was elected as the
Series B Director effective as of August 9, 1996. The Series B Director has not
voted on any matters to date or taken any action whatsoever to date.


Note 4 - CONVERSION OF DEBT

     Pursuant to the Allonge and Fifth Amendment ("Allonge") to Acquisition
Promissory Note dated as of July 1, 1997, the Company, Mason Dental Midwest,
Inc. and the Constituent Shareholders of the Delaware corporation formally known
as Mason Dental, Inc., agreed to convert $150,000.00 worth of the outstanding
debt held by the Constituent Shareholders into 53,381 shares of the Company's
common stock which was previously held as treasury stock.


                                       9
                                        


<PAGE>   10

                    PRINCETON DENTAL MANAGEMENT CORPORATION
            Notes to the Condensed Consolidated Financial Statements
                                 June 30, 1998
                                  (Unaudited)


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


     The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto, and with the
Company's audited financial statements and notes thereto for the period ended
December 31, 1997.

Results of Operations

     Revenue for the six month period ended June 30, 1998 was $6,309,331
compared with $7,750,811 for the six month period ended June 30, 1997, a
decrease of $1,441,480.  The change in revenue is due primarily to the sale of
three dental practices and one dental laboratory during 1997.  Operating
expenses decreased $1,284,874 to $6,290,947 for  the  six  month  period  ended
June 30, 1998  from  $7,575,821  for  the  six  month period ended June 30,
1997.  This decrease is due in large part to the sales of the practices and
dental laboratory, as well as several cost cutting measures related to
compensation, benefits, and various other practice expenses.

     Interest expense decreased $25,033 to $423,406 for the six month period
ended June 30, 1998 versus $448,439 incurred in the comparable six month period
last year.  The decrease is primarily the result of the Modification Agreement
and the Allonge (see Exhibits 10.55 and 10.56) having a material positive effect
upon the Company's interest expense.

     The net loss for the six month period ended June 30, 1998 was $389,263. The
net loss increased by $349,694 when compared with the six month period ended
June 30, 1997.  This increase in the net loss is primarily due to the
elimination of the practice sales gain, reduced production and increased
amortization.

Financial Condition

     The Company is currently in the process of developing revenue enhancement
programs in both the dental practice segment as well as the laboratory segment.
In addition, the Company is also working to improve the operating results of the
various operations by reducing the costs of patient services including a
significant reduction in payroll.  The Company has begun steps to reduce general
and administrative expenses. However, the Company can make no assurances in
regards to the results of these programs.

     In the past the Company did not pay certain state tax liabilities in the
State of Michigan.  Currently the Company is in the process of negotiating with
the State to abate penalties with respect to the late payment.  The Company
estimates its total liability in this regard to be $175,000.


Liquidity and Capital Resources

     As of June 30, 1998, the Company had a working capital deficit of
$3,974,182 and a financial accumulated deficit of $14,112,034.  Goodwill and
other intangibles comprise approximately 67% of total assets, leaving tangible
assets of approximately $2,573,347 and negative tangible net worth of
approximately $4,461,512.

     During the six month period ended June 30, 1998, the Company's cash and
cash equivalents increased $341,773.  Cash generated from depreciation and
amortization was $417,954.

                                        
                                       10


<PAGE>   11


                    PRINCETON DENTAL MANAGEMENT CORPORATION
            Notes to the Condensed Consolidated Financial Statements
                                 June 30, 1998
                                  (Unaudited)

     As disclosed in Note 3, the Company's primary source of outside financing
is from the Investor Group.  Given the Company's working capital deficit and
negative tangible net worth, the Company is heavily reliant on the Investor
Group's financing to continue to provide working capital to fund operations. The
Company has not needed to obtain additional material amounts of funding from the
Investor Group during the past year.  However, the Company remains heavily
reliant on the Investor Group.


                                       11
                                        

<PAGE>   12

                    PRINCETON DENTAL MANAGEMENT CORPORATION
            Notes to the Condensed Consolidated Financial Statements
                                 June 30, 1998
                                  (Unaudited)


PART II - OTHER INFORMATION

Item 1.   Legal Proceedings

     a)   On October 16, 1996, the Company was sued for $160,000 by
          Romajo Partners Limited Partnership, a Partnership controlled by Dr.
          Seymour Kessler, a former director of the Company.  While the
          Company is appealing this decision, the Company received an adverse
          judgement in that suit in October, 1997 and has paid Romajo Partners
          Limited Partnership $162,627 as the judgement amount.

     b)   On June 12, 1998, the Company sued Dr. Charles Mitchell, a
          former officer and director of the Company, and Stratum Management,
          Inc. an affiliate of Dr. Mitchell and a former consultant to the
          Company, for breach of contract and breach of fiduciary duty.  That
          lawsuit is still pending.

     c)   In July,  1998,  the  Company  obtained  service  in  a
          lawsuit  brought,  in April 1998,  against Dr. Richard Sokol, a
          former officer and director of the company, and Lawrence Ceraulo and
          Primecast Dental, former contractors for the Company, for breach of
          contract and breach of fiduciary duty.  That lawsuit is still
          pending.

     d)   The Company is involved in a number of other legal
          proceedings related to malpractice, worker's compensation, general
          employment and contract disputes all in various stages of
          proceedings, most of which will be covered by insurance.

Item 2.   Changes in Securities

     a)   Effective August 18, 1997, the Company's shareholders approved a
          five-for-one reverse Stock split of the company's common stock.

Item 5.   Other Information

     a)   Effective as of July 1, 1998 the Company entered into that
          certain Allonge and Amendment to Balloon Promissory Note and All
          Related Agreements with Dr. Glenn C. Lehr and certain related
          entities.  This Agreement serves to restructure the debt owed by the
          Company in connection with the Amdent practices.  (See Exhibit
          10.61).

     b)   The Company has been advised by NASDAQ that it does not
          presently meet the new listing criteria for the NASDAQ Small Cap
          Market.  While the Company has requested a hearing from NASDAQ in
          this regard, the Company can make absolutely no assurances regarding
          the Company's continued listing on the NASDAQ Small Cap Market.

Item 6.   Exhibits and Reports on Form 8-K

     a)   Exhibits

     The following documents are filed as an exhibit to this Report:

          (10.51) Letter Agreement dated February 4, 1997 between Dr. Richard
          Staller and the Registrant regarding the sale of the assets of the
          Dental Team of Delray Beach.  (Incorporated by reference to Exhibit
          10.51 to the Registrant's Form 10-KSB for the fiscal year ended
          December 31, 1996 filed with the Commission on March 31, 1997)

                                        
                                       12

<PAGE>   13

                                        
                    PRINCETON DENTAL MANAGEMENT CORPORATION
            Notes to the Condensed Consolidated Financial Statements
                                 June 30, 1998
                                  (Unaudited)


            (10.52) Letter Agreement effective as of January 10, 1997 by and
            among the Registrant and Drs. Barfield and Payne regarding the sale
            of the assets of the Fairfield Dental Center practice.
            (Incorporated by reference to Exhibit 10.52 to the Registrant's
            Form 10-KSB for the fiscal year ended December 31, 1996 filed with
            the Commission on March 31, 1997)

            (10.53) Agreement effective as of May 20, 1997 by and among the
            Registrant and Valley Forge Dental Associates regarding the sale of
            the assets of the Century Dental Center practice, (Incorporated by
            reference to Exhibit 10.53 to the Registrant's Form 10QSB for the
            period ended June 30, 1997).

            (10.54) Letter Agreement effective as of June 1, 1997 by and among
            the Registrant and Mr. Larry Ceraulo d/b/a Certex Dental Studio
            regarding the sale of the assets comprising Mason Dental Southeast,
            Inc. and Renaissance Dental Studio, (Incorporated by reference to
            Exhibit 10.54 to the Registrant's Form 10QSB for the period ended
            June 30, 1997).

            (10.55) Modification Agreement dated as of July 1, 1997 by and
            among the Registrant, Amsterdam Equities Limited, Frank Leonard
            Laport, and Beverly Trust Company, as Custodian of the Frank
            Leonard Laport Rollover Individual Retirement Account No. 75-49990,
            (Incorporated by reference to Exhibit 10.55 to the Registrant's
            Form 10QSB for the period ended June 30, 1997).

            (10.56) Allonge and Fourth Amendment to Acquisition Promissory Note
            dated as of July 1, 1997, the Company, Mason Dental Midwest, Inc.
            and the Constituent Shareholders of the Delaware corporation
            formally known as Mason Dental, Inc, (Incorporated by reference to
            Exhibit 10.56 to the Registrant's Form 10QSB for the period ended
            June 30, 1997).

            (10.57) Promissory  Note   in   the   initial  principal  amount
            of  $96,357  executed  by Lawrence Ceraulo, Victor Texidor, and
            Certex Dental Studio, Inc. in favor of Mason Dental Southeast and
            dated as of August 1, 1997, (Incorporated by reference to Exhibit
            10.57 to the Registrant's Form 10QSB for the period ended June 30,
            1997).

            (10.58) Allonge & Fifth Amendment to Acquisition Promissory Note
            dated as of July 1, 1997, among the Company, Mason Dental Midwest,
            Inc. and the Constituent Shareholders of the Delaware Corporation
            formally known as Mason Dental, Inc.  (Incorporated by reference to
            Exhibit 10.58 to the Registrant's Form 10KSB for the period ended
            December 31, 1997).

            (10.59) Agreement of Purchase and Sale dated as of May 1, 1997
            between Princeton Medical Management Northeast, Inc. and Valley
            Forge Dental Associates, Inc.  (Incorporated by reference  to
            Exhibit  10.59  to  the  Registrant's  Form  10KSB  for  the
            period  ended December 31, 1997).

            (10.60) Financial Consulting Agreement between the Company and
            BullsEye Marketing, Inc., dated as of July 14, 1998.

            (10.61)   Allonge and Amendment to Balloon Promissory Note and All
            Related Agreements dated as of July 1, 1998 by and among the
            Company, Dr. Lehr and certain related entities.


                                       13
                                       
<PAGE>   14
                                        
                    PRINCETON DENTAL MANAGEMENT CORPORATION
            Notes to the Condensed Consolidated Financial Statements
                                 June 30, 1998
                                  (Unaudited)


(b)  Reports on Form 8-K  The Registrant filed the following Form 8-K's during
the period from January 1, 1998 through July 31, 1998:

     1)   Effective as of July 14, 1998, PDMC entered into a Financial
          Consulting Agreement with BullsEye Marketing, Inc.

          The Agreement anticipates that BullsEye Marketing, Inc. will assist
          PDMC in generally building market awareness of PDMC.  As specified
          in the Agreement, (see Exhibit 10.60), PDMC will pay the consultant
          $1,000 per month plus reasonable expenses and issue 250,000
          warrants to the consultant.  The warrants are exercisable at the
          same exercise price as the current publicly held warrants.


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<PAGE>   15


                                   SIGNATURE

                                      
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this quarterly report of Form 10-QSB for the quarter
ended June 30, 1998, to be signed on its behalf, by the undersigned there unto
duly authorized.



DATED:                              Princeton Dental Management Corporation



                                    By:
                                       -------------------------------------
                                       Gary A. Lockwood
                                       President and Chief Operating Officer




                                   SIGNATURE

                                      
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this quarterly report of Form 10-QSB for the quarter
ended June 30, 1998, to be signed on its behalf, by the undersigned there unto
duly authorized.



DATED:                              Princeton Dental Management Corporation



                                    By:
                                       -------------------------------------
                                       Barbara M Kamenczak
                                       Chief Accounting Officer


                                       15