<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, 1997

                                       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: 10,122,323 SHARES OF THE
COMPANY'S COMMON STOCK ($.0001 PAR VALUE) PER SHARE OUTSTANDING AS OF
JUNE 30, 1997.


<PAGE>   2




                    PRINCETON DENTAL MANAGEMENT CORPORATION

                                  FORM 10-QSB


                               TABLE OF CONTENTS


PART I - FINANCIAL INFORMATION                                  PAGE (S)


     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                         9-11



PART II - OTHER INFORMATION                                     11-15



<PAGE>   3
                   PRINCETON DENTAL MANAGEMENT CORPORATION
                    Condensed Consolidated Balance Sheets
    For Six Months Ending June 30, 1997 and Year Ending December 31, 1996



<TABLE>
<CAPTION>                                                                                      
                 ASSETS                              June 30, 1997        December 31, 1996    
                                                     -------------        -----------------    
                                                      (Unaudited)                              
<S>                                                   <C>                 <C>                  
Current Assets:                                                                                
                                                                                               
     Cash and cash Equivalents                         $   512,838         $   185,235         
     Accounts Receivable, net of allowances                                                    
       for doubtful accounts of $301,336 and                                                   
       $265,000 respectively                             1,040,799           1,170,640         
     Current portion of loan receivable - affiliate          9,991               9,991         
     Inventories                                           122,421             105,193         
     Other Current Assets                                   93,754              95,847         
                                                       -----------         -----------         
                                                                                               
          Total Current Assets                           1,779,803           1,566,906         
                                                                                               
                                                                                               
Property and equipment, net                                810,957           1,159,524         
Goodwill, net of accumulated amortization of                                                   
  $1,880,295 and $1,829,516, respectively                5,723,273           7,002,192         
Loan Receivable - affiliate                                  6,416              10,820         
Other Assets, net                                          934,276             543,512         
                                                       -----------         -----------         
                                                                                               
          Total Other Assets                             7,474,922           8,716,048         
                                                       -----------         -----------         




                                                                                               
                                                                                               
          Total Assets                                 $ 9,254,725         $10,282,954         
                                                       ===========         ===========         
</TABLE> 


<PAGE>   4
                   PRINCETON DENTAL MANAGEMENT CORPORATION
                    Condensed Consolidated Balance Sheets
    For Six Months Ending June 30, 1997 and Year Ending December 31, 1996

<TABLE>
<CAPTION>                                                                    
                                                                                               
  LIABILITIES AND SHAREHOLDER'S EQUITY               June 30, 1997         December 31, 1996   
                                                     -------------         -----------------
                                                      (Unaudited)                              

<S>                                                   <C>                   <C>                
Current Liabilities:                                                                           
     Notes Payable                                      $     85,689         $    179,000      
     Notes Payable to shareholders                           122,948              122,948      
     Current portion of capital lease obligations             18,036               25,883      
     Current portion of long-term debt                       715,806              715,806      
     Convertible secured debt                              2,115,924            2,115,924      
     Accounts Payable                                      1,225,810            1,442,487      
     Accrued salaries and wages                              665,273              743,958      
     Other accrued expenses                                  838,652              583,142      
                                                        ------------         ------------      
          Total Current Liabilities                        5,788,138            5,929,148      
                                                                                               
Long-term debt, excluding current portion                  2,432,867            3,267,106      
Capital lease obligations, excluding current portion          24,277               38,145      
                                                        ------------         ------------      
          Total Liabilities                                8,245,282            9,234,399      
                                                        ------------         ------------      
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, 1996                 2,848                2,848      
     Series B Preferred Stock, par value $1.00                                                 
      per share; authorized shares - 100; issued                                               
      and outstanding - 100 at December 31, 1996                 100                  100      
     Common stock, par value $0.0001 per share;                                                
      authorized shares - 25,000,000; issued and                                               
      outstanding - 10,122,323 at March 31, 1997                                               
      and December 31, 1996                                    1,012                1,012      
     Less: 309,217 shares Common Stock held                                                    
      in treasury, at cost                                  (331,771)            (331,771)     
                                                                                               
     Additional Paid-In Capital                           15,107,556           15,107,556      
     Accumulated Deficit                                 (13,770,302)         (13,731,190)     
                                                        ------------         ------------      
          Net Shareholders' Equity                         1,009,443            1,048,555      
                                                        ------------         ------------      
          Total Liabilities and Stockholders' Equity    $  9,254,725         $ 10,282,954      
                                                        ============         ============      
</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:                                            1997              1996               1997              1996          
                                                    ----              ----               ----              ----
<S>                                             <C>               <C>                 <C>              <C>
     Practice Revenue                           $ 2,656,539        $3,696,578         $ 5,589,326        $ 7,439,193       
     Laboratory Revenue                           1,100,787         1,013,830           2,161,485          1,988,311       
                                                -----------        ----------         -----------        -----------   
          Total Revenue                         $ 3,757,326        $4,710,408         $ 7,750,811        $ 9,427,504       
                                                -----------        ----------         -----------        -----------   
                                                                                                                         
Expenses:                                                                                                                
                                                                                                                         
     Practice compensation and Benefits           1,829,361         2,543,628           3,997,879          4,966,673       
     Other Practice Expense                         536,731           971,867           1,088,865          1,932,607       
     Cost of Laboratory Revenue & Expenses          894,723         1,017,142           1,720,495          1,903,430       
     General Corporate Expenses                     162,119           615,584             405,257            996,212       
     Depreciation and Amortization                  138,043           256,250             363,325            487,251       
                                                -----------        ----------         -----------        -----------   
                                                                                                                         
          Total Operating Expenses                3,560,977         5,404,471           7,575,821         10,286,173       
                                                -----------        ----------         -----------        -----------   
                                                                                                                         
          Operating Gain/(Loss)                     196,349          (694,063)            174,990           (858,669)      
                                                                                                                         
     Gain from sale of practices & laboratory       246,526                 0             213,954                  0       
     Interest Expense                              (258,411)         (158,674)           (448,439)          (309,486)      
     Other Income                                     7,798            12,319              19,926             25,190       
                                                -----------        ----------         -----------        -----------   
                                                                                                                         
          Net Income (Loss)                     $   192,262        $ (840,418)        $  (39,569)        $(1,142,965)      
                                                ===========        ==========         ==========         ===========
                                                                                                                         
          Net Loss Per Share                    $      0.02        $    (0.10)        $    (0.00)        $     (0.14)      
                                                ===========        ==========         ==========         ===========
                                                                                                                         
          Weighted Average                                                                                               
           Number of Shares Outstanding          10,122,323         8,169,870         10,122,323           8,169,870       
</TABLE>                                                   
                                          
<PAGE>   6
                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Condensed Consolidated Statements of Cash 
             For the Six Month Period Ending June 30, 1997 and 1996       
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                            June 30, 1997      June 30, 1996
                                                            -------------      -------------
<S>                                                           <C>              <C>
Operating Activities:
     Net Loss                                                $ (39,569)       $(1,142,965)

    Cash Provided by (Used In) Operating Activities:
          Depreciation and Amortization                        363,325            487,251
          Gain on sale of Dental Practices                    (213,954)             1,410
          Provision for Bad Debts                                    -            119,000
          Stock redemption price in excess of market                 -             18,229
          Issuance of stock under Incentive Stock Bonus Plan         -             70,750
          Changes in Operating Assets and Liabilities:
               Accounts Receivable                            (132,792)          (354,364)
               Inventories                                     (27,075)              (681)
               Other Current Assets                              2,093             89,239
               Accounts Payable                               (197,198)           574,497
               Accrued Expenses                                193,107            354,925
                                                             ---------        -----------
     Net Cash Used In Operating Activities                     (52,063)           217,291
                                                             ---------        -----------

    Cash Provided by (Used In) Investing Activities:
          Debt Issuance Costs                                        -            (27,819)
          Other Assets                                          15,613                  -
          Proceeds from notes receivable                         4,404                  -
          Purchase of property and equipment - Net             (41,560)          (117,275)
          Proceeds from sale of Dental Practices               710,000                  -
                                                             ---------        -----------
     Net Cash Provided by Investing Activities                 688,457           (145,094)
                                                             ---------        -----------

    Cash Provided by (Used In) Financing Activities:
          Proceeds from issuance of long-term debt                   0             31,826
          Principal payments on capital lease obligations      (21,715)           (21,081)
          Principal payments on notes payable                  (93,311)           (18,835)
          Principal payments on long term debt and
            notes payable to shareholders                     (193,765)          (154,806)
                                                             ---------        -----------
     Net Cash Used In Financing Activities                    (308,791)          (162,896)
                                                             ---------        -----------

     Increase in Cash and Cash Equivalents                     327,603            (90,699)

     Cash and Cash Equivalents at beginning of period          185,235            124,872
                                                             ---------        -----------

     Cash and Cash Equivalents at end of period              $ 512,838        $    34,173
                                                             =========        ===========
</TABLE>
<PAGE>   7
                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Notes to the Consolidated Financial Statements
                                 June 30, 1997
                                  (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.

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 may 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 until the accrued interest is paid, interest began to accrue at
the default rate of 21.75%. The accrued interest on the Convertible
Debt/Preferred Stock totaled approximately $563,112 at June 30, 1997.

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 has 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 (see Item 5 and Exhibit 10.55).





<PAGE>   8

                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Notes to the Consolidated Financial Statements
                                 June 30, 1997
                                  (Unaudited)



Assuming this waiver continues through December 31, 1997, this waiver on the
part of the Investor Group will result 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 291,667 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 redeemed are being held in treasury at June 30,
1997.

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, after the occurrence of an event of
default, 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, the
conversion would result in the issuance to the Investor Group of a majority
interest representing in excess of Fifty Percent (50.0%) of the issued and
outstanding shares of the Company's common stock (assuming full conversion and
anti-dilution).

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 of 4,125,000 shares of common
stock at an exercise price of $0.10 per share.  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 net income at least equal to 60%
of the dollar amount of Convertible Debt of the Company outstanding at the end
of 1997 for the fiscal year ending December 31, 1997, increased by 10% each
year thereafter, compounded, plus 60% of the additional Convertible debt
outstanding at the end of such year over the immediately preceding year. 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 the exercise price of $412,500 in the aggregate 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 the outstanding
Convertible Debt/Preferred Stock could result in ownership by the Investor
Group of up to 75% of the Company's total issued and outstanding common stock.
To date, the Investor Group has taken no steps to exercise these default
warrants.

Pursuant to the Modification Agreement, and as an absolute pre-condition to the
waiver by the Investor Group of all accumulated and ongoing interest and/or
dividends on the Convertible Debt/Preferred Stock




<PAGE>   9

                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Notes to the Consolidated Financial Statements
                                 June 30, 1997
                                  (Unaudited)


for the period from January 1, 1997 through December 31, 1997 (see Item 5 and
Exhibit 10.55), the Company agreed to reduce the exercise price of the default
warrants from $0.10 per share to $0.01 per share effective as of July 1, 1997.
This modification effectively reduces the aggregate exercise price of $412,000
for the default warrants to an aggregate exercise price of $41,200 (not
accounting for any adjustments due to changes in the total issued and
outstanding shares of the Company's common stock).

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 shall have 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.

In connection with the activation of the Class B Preferred Stock, the provision
of additional funding and conversion of debt, Stratum, Hagan and Kessler agreed
to forfeit, on a pro rata basis, an aggregate amount of 300,000
options/warrants to purchase the Company's Common Stock of the Company.

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 year ended
December 31, 1996.

Results of Operations

Revenue for the six month period ended June 30, 1997 was $7,750,811 compared
with $9,427,504 for the six month period ended June 30, 1996, a decrease of
$1,676,693.  The change in revenue is due primarily to the sale of three dental
practices and one dental laboratory.  Operating expenses decreased $2,710,352
to $7,575,821 for the six month period ended June 30, 1997 from $10,286,173 for
the six month period ended June 30, 1996.  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.




<PAGE>   10
                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Notes to the Consolidated Financial Statements
                                 June 30, 1997
                                  (Unaudited)



Interest expense increased $138,953 to $448,439 for the six month period ended
June 30, 1997 versus $309,486 incurred in the comparable three month period
last year.  The increase is primarily the result of interest accruing on the
Convertible Debt and Preferred Stock Agreements at the default rate.  As
indicated in Item 5, it is anticipated that the Modification Agreement and the
Allonge (see Exhibits 10.55 and 10.56) will have an ongoing material positive
effect upon the Company's interest expense.

The net loss decreased by $1,103,396 from $1,142,965 for the six month period
ended June 30, 1996, to $39,569 for the six month period ended June 30, 1997.
The net loss for the six month period ended June 30,1997 of $39,569 shows
substantial improvement over the prior year six month period ended June 30,
1996, primarily as a result of significant improvement in operations, the gain
from the sale of Century Dental Center, Mason Dental Southeast / Renaissance
Dental Studio, a reduction of the depreciation based on the sales of three
dental practices, and a dental laboratory, and a reduction of the monthly
amortization based on the write down of goodwill at December 31, 1996.  Losses
from operations are attributable to an increase in the overall cost of
providing dental services and expanding the patient base to include more
specialty services as well as the production cost within the laboratory
division.

Financial Condition

Changes in the Company's financial condition at June 30, 1997 as compared with
December 31, 1996 resulted primarily from a general improvement in operations
and the sale of three dental practices and a dental laboratory during the six
month period ended June 30, 1997.  During the six months ended June 30, 1997, 
the Company realized significant proceeds from the sale of Fairfield Dental, 
Center Century Dental Center, and Mason Dental Southeast / Renaissance
Dental Studio.  The sale of the Dental Team of Delray Beach was exclusively
forgiveness of debt.  The Company recognized no cash from the sale of the
Delray Beach practice.

During the first and second quarters of 1997, the Company arranged payment
terms with several of its suppliers.  Those suppliers have once again begun
extending standard credit terms, and orders are no longer shipped on a C.O.D.
basis.  One of the Company's largest suppliers has begun shipping supplies and
providing services based on a mutually agreed upon plan that has been put into
place to reduce the outstanding balances.

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 the
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 addition, the Company has sold its dental practices in Pennsylvania and its
dental laboratory in Florida.  These sales are consistent with the Company's
long-term business plans and should generally have a positive impact upon
operations.  No additional sales have been contemplated at this time.

During the first and second quarters of 1996, the Company did not deposit
certain state payroll tax liabilities totaling approximately $53,000.  The
Company filed the state payroll tax returns for the first and second quarters
of 1996 during the first quarter of 1997.  Management is currently negotiating
with the State to abate penalties associated with the late payment.  These
negotiations are under review by state authorities.

In addition, during 1994 the Company did not make certain federal payroll tax
deposits on a timely basis. The payroll deposits and all outstanding payroll
tax returns have been filed as of January, 1997.




<PAGE>   11
                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Notes to the Consolidated Financial Statements
                                 June 30, 1997
                                  (Unaudited)


Management has provided a reserve of approximately $60,000 for the state tax
penalties and $70,000 to cover any IRS penalties.  Management believes these
reserves are sufficient to cover these obligations.


Liquidity and Capital Resources

As of June 30, 1997, the Company had a working capital deficit of $4,008,335
and a financial accumulated deficit of $13,770,302.  Goodwill and other
intangibles comprise approximately 62% of total assets, leaving tangible assets
of approximately $3,531,452 and negative tangible net worth of approximately
$4,713,830.

During the six month period ended June 30, 1997, the Company's cash and cash
equivalents increased $327,603.  Cash used in operations was $52,063, resulting
primarily from the Company's decrease in accounts receivable, which can be
attributed to the sale of the dental practices, accounts payable, and accrued
expenses.  These operations were partially offset by depreciation and
amortization of $363,325.

Investing activities provided $688,457 of cash, primarily related to the sale
of the dental practices and laboratory.  Cash of $308,791 was used in financing
activities, primarily as a result of the extinguishment of debt and principal
payments on capital lease obligations and notes payable in the amount of
$21,715.

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 the Company's expansion plans and to a larger
extent, provide working capital to fund the operations.  As indicated in Item
5, the Company has reached agreement with the Investor Group as to a temporary
waiver of interest.




<PAGE>   12

                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Notes to the Consolidated Financial Statements
                                 June 30, 1997
                                  (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.  The Company
           intends to vigorously contest the suit and, in connection with this
           litigation, has brought various counterclaims against Dr. Kessler
           and has joined certain other individuals as parties to such
           litigation, including Dr. Charles Mitchell, a former officer and
           director of the Company.

      b)   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 5.  Other Information

      1.   Effective as of August 4, 1997, the Board of Directors
           approved an extension of the expiration date of those warrants
           issued pursuant to that certain Warrant Agreement dated April 15,
           1992 between Princeton Dental Management Corporation and Continental
           Stock Transfer & Trust Company for a period of twelve (12) months,
           from October 13, 1997 through October 12, 1998.

      2.   Effective as of July 1, 1997, the Company entered into that
           certain Modification Agreement with the Investor Group.  Pursuant to
           the Modification Agreement, 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 (see Exhibit 10.55).  Assuming this
           waiver continues through December 31, 1997, this waiver on the part
           of the Investor Group will result in a total savings to the Company
           of in excess of $700,000.  Pursuant to the Modification Agreement,
           and as an absolute pre-condition to the waiver by the Investor Group
           of 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 (see Exhibit 10.55), the Company agreed to
           reduce the exercise price of the default warrants from $0.10 per
           share to $0.01 per share effective as of July 1, 1997.  This
           Modification effectively reduces the exercise price for the default
           warrants from an aggregate exercise price of $412,000 to an
           aggregate exercise price of $41,200 (not accounting for any
           adjustments due to changes in the total issued and outstanding
           shares of the Company's common stock).

      3.    Effective as of July 1, 1997, the Company, Mason Dental Midwest,
            Inc. and the constituent shareholders ("Constituent Shareholders")
            of the Delaware corporation formally known as Mason Dental, Inc.
            entered into that certain Allonge and Fourth Amendment to
            Acquisition Promissory Note ("Allonge").  Pursuant to the Allonge,
            the Constituent Shareholders agreed, conditioned upon continued
            listing by the Company on the Nasdaq SmallCap Market and similar
            concessions by the Investor Group (see Exhibit 10.55 and 10.56), to
            waive all ongoing interest that might be due pursuant to the
            Acquisition Promissory Note (as such term is defined in the
            Allonge) for the period from July 1, 1997 through June 30, 1998
            (see Exhibit 10.56).  Assuming this waiver continues




<PAGE>   13

                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Notes to the Consolidated Financial Statements
                                 June 30, 1997
                                  (Unaudited)


           through June 30, 1998, this waiver on the part of the Constituent
           Shareholders will result in a total savings to the Company of in
           excess of $120,000.

      4.   Previously, the Board of Directors of the Company had
           announced that, effective as of June 1, 1997, the Company had sold
           the assets comprising the Mason Dental Southeast, Inc. / Renaissance
           Dental Studio to Mr. Lawrence Ceraulo, individually and doing
           business as Certex Dental Studio.  The Mason Dental Southeast, Inc.
           / Renaissance Dental Studio, with 1996 revenues of approximately
           $390,000, represented approximately 2.2% of the total revenue of the
           Company, and has represented a loss in 1996 to the company.  The
           Mason Dental Southeast, Inc. / Renaissance Dental Studio was sold
           for $92,096 in the form of a short-term note; an additional
           short-term note payable to purchase supplies in the amount of
           $9,847; and an assumption of an existing note payable of $18,372.
           The sale of Mason Dental Southeast, Inc. / Renaissance Dental Studio
           was a profitable transaction for the Company, in the amount of
           approximately $49,000.
           
           Pursuant to the terms of the Company's agreement with Mr. Lawrence
           Ceraulo, individually and d/b/a Certex Dental Studio, Mr. Ceraulo
           was required to make payment in full of all amounts due and owing
           under the acquisition notes as of July 15, 1997.  Mr. Ceraulo has
           made payments of approximately $9,200, but approximately $100,000
           remains due and owing from Mr. Ceraulo.  The Company has agreed to
           extend the term of the acquisition notes through July, 1998, on
           terms advantageous to the Company (see Exhibit 10.57).
           
      5.   On November 6, 1996, NASDAQ approved, subject to public
           comment, certain modifications to the listing criteria on the NASDAQ
           System. These proposed modifications were extensive, and included a
           proposal that a company whose minimum bid price fell below $1.00 for
           a period of time could, in certain circumstances, be delisted. These
           proposed modifications are currently in the process of examination
           by the Securities and Exchange Commission for final approval. The
           Company's minimum bid price is currently below $1.00, and the
           Company can make absolutely no assurances regarding the final
           outcome of these proposed modifications to the listing criteria on
           the NASDAQ System or the impact which such modifications could have
           on the Company's continued listing on the NASDAQ System.  The
           Company has been advised that it is presently not in compliance with
           NASDAQ listing requirements, and, absent changes in Company
           operations, may, under certain circumstances, be delisted from the
           Nasdaq SmallCap 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)

            (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




<PAGE>   14
                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Notes to the Consolidated Financial Statements
                                 June 30, 1997
                                  (Unaudited)


            Center practice. (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)

            (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.

            (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.

            (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.

            (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.

            (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.


     b.     Reports on Form 8-K

            The Registrant filed the following Form 8-Ks during the period from
            January 1, 1997 through June 30, 1997:

            1)    On January 16, 1997 the Registrant filed with
                  the Securities and Exchange Commission a current report on
                  Form 8-K regarding the sale of the assets of the Fairfield
                  Dental Center practice to Drs. Barfield and Payne. The
                  Fairfield practice, with 1995 revenues of approximately
                  $2,000,000, represented approximately 11.9% of the total
                  revenue of the Company. The Fairfield practice was sold for a
                  purchase price of approximately $885,000, of which
                  approximately $410,000 represented forgiveness of debt.

            2)    On February 11, 1997, the Registrant filed with
                  the Securities and Exchange Commission a current report on
                  Form 8-K regarding the sale of the assets of the Dental Team
                  of Delray Beach practice to Dr. Richard Staller. The Delray
                  Beach practice, with 1995 revenues of approximately $859,135,
                  represented approximately 5.1% of the total revenue of the
                  Company. The Delray Beach practice was sold for a purchase
                  price of approximately $200,000 in the form of forgiveness of
                  debt.

            3)    On May 23, 1997, the Registrant filed with the
                  Securities and Exchange Commission a current report on Form
                  8-K regarding the sale of the assets comprising the Century
                  Dental Center to Valley Forge Dental Associates, P.C.  The
                  Century Dental practice, with 1996 revenues of approximately
                  $965,000, represented approximately 5.3% of the total revenue
                  of PDMC.  The Century practice was sold for $585,000.  The
                  sales




<PAGE>   15
                    PRINCETON DENTAL MANAGEMENT CORPORATION
                 Notes to the Consolidated Financial Statements
                                 June 30, 1997
                                  (Unaudited)


             price includes $235,000 in cash, $140,000 in contingency   
             payments, a $30,000 note receivable, and forgiveness of debt of
             approximately $180,000.

       4)    On June 6, 1997, the Registrant filed with the Securities and
             Exchange Commission a current report on Form 8-K regarding the
             sale of the assets comprising the Mason Dental Southeast, Inc. /
             Renaissance Dental Studio to Mr. Lawrence Ceraulo, individually
             and doing business as Certex Dental Studio.  The Mason Dental
             Southeast, Inc. / Renaissance Dental Studio, with 1996 revenues of
             approximately $390,000, represented approximately 2.2% of the
             total revenue of PDMC, and has represented a loss in 1996 to the
             company.  The Mason Dental Southeast, Inc. / Renaissance Dental
             Studio was sold for $92,096 in the form of a short-term note; an
             additional short-term note payable to purchase supplies in the
             amount of $9,847; and an assumption of an existing note payable of
             $18,372. The sale of Mason Dental Southeast, Inc. / Renaissance
             Dental Studio was a profitable transaction for PDMC, in the amount
             of approximately $49,000.




<PAGE>   16
                                   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, 1997, to be signed on its behalf, by the undersigned there unto
duly authorized.



DATED:                          Princeton Dental Management Corporation



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