<PAGE>   1
                                  UNITED STATES
                        SECURITES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

[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  000-23213

                             YOUNG INNOVATIONS, INC.
             (Exact name of registrant as specified in its charter)

                  Missouri                                43-1718931
(State or other jurisdiction of incorporation          (I.R.S. Employer
             or organization)                         Identification No.)


             13705 Shoreline Court East, Earth City, Missouri 63045
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (314) 344-0010
              (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 for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

Yes ...X... No ........


Number of shares outstanding of the Registrant's Common Stock at  July 31, 1998:
              6,772,796 shares of Common Stock, par value $.01 per share




                                       1



<PAGE>   2
                                     PART 1
                             FINANCIAL INFORMATION

Item 1. Financial Statements.

                            YOUNG INNOVATIONS, INC.
                          CONSOLIDATED BALANCE SHEETS
                       (In thousands, except share data)


<TABLE>
<CAPTION>

                                                              JUNE 30             DECEMBER 31
                                                                1998                  1997
                                                             ----------           -----------
                                                             (UNAUDITED)

                    ASSETS
<S>                                                             <C>                  <C>        
CURRENT ASSETS:                                                                                 
     Cash and cash equivalents                                  $ 2,266               $12,761   
     Trade accounts receivable, net allowance                                                   
      for doubtful accounts of $177 and $80, respectively         3,663                 2,774   
     Inventories                                                  3,138                 2,239   
     Other current assets                                         1,821                 1,316   
                                                                -------               -------   
          Total current assets                                   10,888                19,090   
                                                                -------               -------   
                                                                                                
PROPERTY, PLANT AND EQUIPMENT                                    11,445                 7,441   
                                                                -------               -------   
MARKETABLE SECURITIES                                              ---                    100   
                                                                -------               -------   
OTHER ASSETS                                                        667                   656   
                                                                -------               -------   
INTANGIBLE ASSETS                                                28,404                18,142   
                                                                -------               -------   
          Total assets                                          $51,404               $45,429   
                                                                =======               =======   
                                                                                                
     LIABILITIES AND STOCKHOLDERS' EQUITY                                                       
CURRENT LIABILITIES:                                                                            
     Revolving line of credit                                      ---                   ---    
     Current maturities of long-term debt                          ---                   ---    
     Accounts payable and accrued liabilities                   $ 4,944               $ 2,715   
                                                                -------               -------
          Total current liabilities                               4,944                 2,715   
                                                                -------               -------   
LONG-TERM DEBT                                                     ---                   ---    
                                                                -------               -------   
NONCURRENT LIABILITIES                                              450                   456   
                                                                -------               -------   
DEFERRED INCOME TAXES                                             1,050                 1,050   
                                                                -------               -------   
                                                                                                
STOCKHOLDERS' EQUITY:                                                                           
     Common stock, voting, $.01 par value,                                                      
      25,000,000 shares authorized,                                                             
      6,772,796 and 6,710,296 shares issued                                                     
      and outstanding in 1998 and 1997,                                                         
      respectively                                                   68                    67   
     Additional paid-in capital                                  26,083                25,131   
     Unrealized gain on marketable securities,                                                  
      net of tax                                                    ---                     9   
     Retained earnings                                           19,118                16,310   
     Common stock in treasury, at cost,                                                         
      39,914 and 41,834 shares                                     (309)                 (309)  
                                                                -------               -------   
          Total stockholders' equity                             44,960                41,208   
                                                                -------               -------   
          Total liabilities and stockholders' equity            $51,404               $45,429   
                                                                =======               =======   
  </TABLE>

        The accompanying notes are an integral part of these statements.





                                       2
<PAGE>   3
                           YOUNG INNOVATIONS, INC.
                      CONSOLIDATED STATEMENTS OF INCOME
                    (in thousands, except per share data)
                                 (unaudited)

<TABLE>
<CAPTION>
                                                       THREE MONTHS ENDED    SIX MONTHS ENDED
                                                             JUNE 30             JUNE 30
                                                    --------------------- --------------------
                                                      1998       1997        1998       1997
                                                    -------    -------    --------    --------
<S>                                                 <C>        <C>        <C>         <C>     
NET SALES                                           $ 9,176    $ 5,588    $ 16,342    $ 12,137
COST OF GOODS SOLD                                    4,045      2,326       7,093       5,019
                                                    -------    -------    --------    --------
               Gross profit                           5,131      3,262       9,249       7,118
               
SELLING, GENERAL AND ADMINISTRATIVE
       EXPENSES                                       2,778      1,750       4,890       3,677
                                                    -------    -------    --------    --------                      
               Income from operations                 2,353      1,512       4,359       3,441
                                                    -------    -------    --------    --------
OTHER INCOME (EXPENSE)
       Interest expense                                 ---       (295)        ---        (601)
       Other income (expense), net                       44         (3)        205           2
                                                    -------    -------    --------    --------
                                                         44       (298)        205        (599)
                                                    -------    -------    --------    --------
               Income before provision for income     2,397      1,214       4,564       2,842
               taxes
PROVISION FOR INCOME TAXES                              931        475       1,755       1,079
                                                    -------    -------    --------    --------
               Net income                           $ 1,466    $   739    $  2,809    $  1,763
                                                    =======    =======    ========    ========

BASIC EARNINGS PER SHARE                            $  0.22       0.17    $   0.42    $   0.40
                                                    =======    =======    ========    ========

DILUTED EARNINGS PER SHARE                          $  0.21       0.17    $   0.41    $   0.40
                                                    =======    =======    ========    ========

BASIC WEIGHTED AVERAGE SHARES
       OUTSTANDING                                    6,773      4,410       6,752       4,410
                                                    =======    =======    ========    ========

DILUTED WEIGHTED AVERAGE SHARES
       OUTSTANDING                                    6,824      4,410       6,807       4,410
                                                    =======    =======    ========    ========
</TABLE>


The accompanying notes are an integral part of these statements.

                                      3
<PAGE>   4
 
                            YOUNG INNOVATIONS, INC.
                       CONDENSED STATEMENTS OF CASH FLOWS
                                 (In thousands)
                                  (unaudited)
 
<TABLE>
<CAPTION>
                                                              SIX MONTHS ENDED
                                                                   JUNE 30
                                                               1998      1997
                                                             -------    -------
<S>                                                           <C>        <C>

CASH FLOWS FROM OPERATING ACTIVITIES
  Net income                                                  $2,809     $1,763
                                                             -------    -------
  Adjustments to reconcile net income to cash flows from
    operating activities -
  Depreciation and amortization                                  911        620
  Gain (loss) on sale of property, plant and equipment           (23)         7
  Deferred income taxes                                         ---         (19)
  Changes in assets and liabilities -
    Trade accounts receivable                                     73      1,114
    Inventories                                                 (285)      (209)
    Other current assets                                        (395)      (133)
    Other assets                                                 630         (4)
    Accounts payable and accrued liabilities                     (30)      (514)
  Other                                                         ---        (275)
                                                             =======    =======
      Total adjustments                                          881        587
                                                             -------    -------

      Net cash flows from operating activities                 3,690      2,350
                                                             -------    -------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Payments for acquisitions, net of cash acquired            (13,875)      ---
  Purchases of property, plant and equipment                    (377)      (424)
  Proceeds from sale of property, plant and equipment             14         25
  Purchases of marketable securities                            ---        ---
  Proceeds from marketable securities                            100         102
  Payments on notes receivable                                  ---          10
                                                             -------    -------
      Net cash flows from investing activities               (14,138)      (287)
                                                             -------    -------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Equity issuance costs                                          (47)      ---
  Reissuance of common stock in treasury                        ---          15
  Payments of long-term debt                                    ---      (1,709)
  Change in revolving line of credit                            ---        (341)
                                                             -------    -------
      Net cash flows from financing activities                   (47)    (2,035)
                                                             -------    -------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS         (10,495)        28
CASH AND CASH EQUIVALENTS, beginning of period                12,761         98
                                                             -------    -------

CASH AND CASH EQUIVALENTS, end of period                      $2,266    $   126
                                                             =======    =======
</TABLE>
 
The accompanying notes are an integral part of these statements.


                                        4
<PAGE>   5


                             YOUNG INNOVATIONS, INC.
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1998
                    (Dollars in thousands, except share data)
GENERAL

In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the Company's financial position as of
June 30, 1998 (unaudited) and the unaudited results of operations and cash
flows for the three and six months ended June 30, 1998 and June 30, 1997. The   
financial statements have been prepared in accordance with the requirements of
Form 10-Q and consequently do not include all the disclosures normally made in
an Annual Report on Form 10-K. Accordingly, the consolidated financial
statements included herein should be reviewed in conjunction with the financial
statements and the footnotes thereto included in the Company's 1997 Annual
Report on Form 10-K.

The results of operations for the three and six months ended June 30, 1998
are not necessarily indicative of the results to be expected for the full year.

1. DESCRIPTION OF BUSINESS:

    Young Innovations, Inc. and its subsidiaries (the Company) designs,
manufactures and markets single-use supplies, autoclavable instruments, X-ray
machines and other products used by dental professionals, primarily in
preventive dentistry, diagnostics and infection control. The Company
manufactures and markets metal and disposable prophy angles, cups and brushes
that are integral components used in the cleaning and polishing of teeth by
dental professionals. The Company's manufacturing facilities are located in
Missouri, California, Indiana and Texas. The Company markets its products to
dental professionals worldwide through a network of medical and dental product
distributors. 

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION

    The consolidated financial statements include the accounts of Young
Innovations, Inc. formed in July 1995 and its direct and indirect wholly owned
subsidiaries, Young Dental Manufacturing Company, Lorvic Holdings, Inc., The
Lorvic Corporation, Young Dental International, Inc., Denticator International,
Inc. (Denticator) and Panoramic Corporation (Panoramic). Panoramic is included
since its acquisition on February 27, 1998.. All significant intercompany
accounts and transactions are eliminated in consolidation.

3. ACQUISITIONS:

    On February 27, 1998, the Company, through a wholly-owned subsidiary,
acquired substantially all of the assets and assumed certain liabilities of
Panoramic, an Indiana corporation.The purchase price was financed principally
through cash from the remaining net proceeds of the Company's initial public
offering and additionally through the issuance of $1,000 (62,500 shares) of the
Company's common stock.The acquisition of Panoramic was accounted for as a
purchase transaction. The purchase price was allocated based upon estimates of
fair value. Differences between the amounts included herein, if any, and final
allocations of purchase price are not expected to have a material effect on the
Company's financial statements.

    The excess of purchase price over the estimated fair value of net assets
acquired was $10,744 , is comprised of goodwill and a non-compete covenant and
is being amortized over 40 and 2 years, respectively.The purchase price
allocation is as follows:


        Trade accounts receivable............................. $    865
        Inventories...........................................      637
        Other current assets..................................      163
        Property, plant and equipment.........................    4,040
        Other assets..........................................       20
        Intangible assets (goodwill and non-compete covenant)    10,744






                                      5
<PAGE>   6

        Current liabilities...................................   (1,550)
        Noncurrent liability..................................      (44)
                                                               --------
        Payments, cash ($13,875) and stock ($1,000)........... $ 14,875
                                                               ========

    The results of operations for Panoramic are included in the consolidated
financial statements since February 27, 1998.

    The following unaudited pro forma information presents a summary of
consolidated results of operations of the Company and Panoramic as if the
acquisition had occurred at the beginning of 1998 and 1997, with pro forma
adjustments to give effect to amortization of goodwill and certain other
adjustments, together with related income tax effects. The unaudited pro forma
information does not purport to be indicative of the results of operations had
these transactions been completed as of the assumed dates or which may be
obtained in the future.


<TABLE>
<CAPTION>
                                                            SIX MONTHS     SIX MONTHS
                                                              ENDED          ENDED
                                                             JUNE 30,       JUNE 30,
                                                               1998           1997
                                                            -----------   -----------
                                                            (UNAUDITED)   (UNAUDITED)
<S>                                                         <C>            <C>      
        Net sales.......................................    $   17,766     $  16,565
        Net income......................................         2,827         2,079
        Basic and diluted earnings per share............           .42           .46
</TABLE>







4. INVENTORIES:

    Inventories consist of the following:

<TABLE>
<CAPTION>
                                                                      JUNE 30     DECEMBER 31
                                                                       1998          1997
                                                                     --------     -----------


<S>                                                                  <C>          <C>        
        Finished products......................................      $  1,288     $       824
        Work in process........................................         1,101             975
        Raw materials and supplies.............................           851             543
                                                                     --------     -----------
                                                                        3,240           2,342
        Reserve for obsolete and excess inventories............          (102)           (103)
                                                                     --------     -----------
             Total inventories.................................      $  3,138     $     2,239
                                                                     ========     ===========
</TABLE>





5. COMMON STOCK:

    The Company issued $1,000 (62,500 shares) of its common stock on February
27, 1998 as part of the consideration for the acquisition of the assets and
liabilities of Panoramic (see Note 3).


6. STOCK OPTIONS:

    The Company granted to four former Panoramic employees, who are currently
employees of the Company, stock options to purchase 40,000 shares of the
Company's common stock at an exercise price equal to the closing price of the
Company's common stock on February 27, 1998, the date of closing and the date of
the grant. Each of the options first become exercisable as to 25% of the shares
subject to the options on January 1, 1999, and becomes exercisable as to an
additional 25% on January 1 of each year from 2000 to 2002.These options expire
in ten years from the grant date or, in the event of termination of employment,
at the election of the Company, upon: (i) a cash payment of the amount by which
the fair value of the options exceed the exercise price for such options; or
(ii) the execution of a consulting agreement in which case the options terminate
upon the termination of the consulting agreement.




                                       6
<PAGE>   7
    A summary of the options outstanding and exercisable at June 30, 1998 is as
follows:

 
<TABLE>
<CAPTION>
                                                                                                     WEIGHTED
                                                                                   RANGE OF           AVERAGE
                                                                                   EXERCISE          EXERCISE
                                                                   SHARES           PRICES             PRICE
                                                                  --------      --------------       -------- 
<S>                                                               <C>           <C>     <C>          <C>     
         Outstanding, beginning of year......................     234,600       $12.00--$13.50       $  12.03
 
         Granted.............................................      53,000       $15.00--$17.50       $  16.86
 
         Exercised...........................................         ---                  ---            ---

         Forfeited...........................................       7,600       $        12.00       $  12.00
 
         Outstanding, six months ended June 30, 1998.........     280,000       $12.00--$17.50       $  12.95
 
         Exercisable, six months ended June 30, 1998.........      35,000       $12.00--$17.50       $  13.00

</TABLE>


    In accordance with SFAS No. 123, "Accounting for Stock-Based Compensation,"
the Company elected APB Opinion No. 25, "Accounting for Stock Issued to
Employees," and related interpretations in accounting for the Plan. Accordingly,
no compensation cost has been recognized for the Plan.


7. EARNINGS PER SHARE:

    During 1997, the Company adopted Statement of Financial Accounting Standards
No. 128, Earnings per Share. Basic earnings per share (Basic EPS) is computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the period. Diluted earnings per share (Diluted EPS) include
the dilutive effect of stock options, if any, using the treasury stock method.
For the second quarter ended June 30,1998, the weighted average shares
outstanding during the period of 6,772,796, used for Basic EPS, was increased by
the dilutive impact of stock options of 51,275, for a total of 6,824,071 shares
used for Diluted EPS.  For the six months ended June 30, 1998, the weighted
average shares outstanding during the period of 6,752,078, used for Basic EPS,
was increased by the dilutive impact of stock options of 55,069, for a total of
6,807,147 shares used for Diluted EPS.


8. SUPPLEMENTARY EARNINGS PER SHARE:

    Assuming the Company's revolving line of credit and long-term borrowings
were retired as of January 1, 1997, supplementary earnings per share (unaudited)
would be $.16 and $.37 for the three months ended June 30, 1997 and the six
months ended June 30, 1997, respectively, reflecting the elimination of interest
expense, net of income taxes. Supplementary earnings per share assumes weighted
average shares outstanding (pre-public) plus shares representing those shares of
common stock sold at the initial public offering price, the application of the
net proceeds therefrom sufficient to retire the average outstanding borrowings
for the three months ended June 30, 1997 and the six months ended June 30, 1997.


9. RELATED-PARTY TRANSACTIONS:

    In connection with the acquisition of Denticator on July 22, 1996,an
employment agreement (the Agreement) with Denticator's President and Chief
Executive Officer (the Individual) was executed. On April 6,1998, the Company
agreed to an amendment (the Amendment) to the Agreement. The original Agreement
required the Company to deliver common stock in the number of shares equal to
$800 divided by the last reported sale price to the Individual if the
Individual is employed by the Company on July 22, 1998. The original Agreement
also required the Company to repurchase up to 40% of the stock if the
Individual provided 10 days advance written notice to the Company before
delivery of the common stock. The Amendment required the Company to pay cash in
the amount of $800 on July 22, 1998 with no delivery of any common stock to the
Individual.  On July 22, 1998, the Company made the required cash payment to
the Individual. The Company is accruing $800 evenly over the two year period,
recorded $100 of compensation
        



                                      7
<PAGE>   8

expense for each of the quarters ended June 30, 1998 and June 30,1997 and
recorded $200 of compensation expense for each of the six months ended June 30,
1998 and June 30, 1997.


10. CONTINGENCIES:

    On May 30, 1997, two former employees of Young Dental and a corporation
formed by them (the "Adverse Parties") filed a Petition against Young Dental in
the Circuit Court for the City of St. Louis, Missouri (the "Current Action").
The Current Action results from an action brought in 1993 by Young Dental
against the Adverse Parties in the Federal District Court for the Eastern
District of Missouri (the "Prior Action"), alleging, among other things, patent
infringement and misappropriation of trade secrets. The Prior Action was
resolved in favor of the Adverse Parties. In the Current Action consisting of
three counts alleging malicious prosecution, three counts alleging abuse of
process and three counts alleging tortious interference with business
expectancy related to the Prior Action, the Adverse Parties seek actual damages
in unspecified amounts in excess of $25 and, in a separate count, seek punitive
damages. The Adverse Parties seek to recover their attorneys' fees incurred in
the Prior Action, which they claim to exceed $730. They also allege that their
damages include lost profits, and estimate that their lost profits range
between $4,500 and $18,000. While the Current Action, which is scheduled for
trial in late 1998, is still in the discovery stage and there can be no
assurance as to its outcome, based upon advice of legal counsel, the Company
believes it has defenses to each of plaintiffs' claims and intends to continue
to defend the Current Action vigorously.

    The Internal Revenue Service (the "IRS") examined Lorvic's federal income
tax returns for the years ended March 31, 1992 through 1995, and proposed
deficiencies in federal income taxes for those years in an aggregate amount of
$766 due to the classification of certain intangible assets. Lorvic filed
petitions with the United States Tax Court contesting these proposed
deficiencies and the matter was tried in January 1998. In August, 1998, the Tax
Court entered its findings of fact and opinion that Lorvic's valuation of the
intangible assets should be reduced by 25%. The IRS is now required to
recalculate the deficiencies based upon the Tax Court's findings and opinion,
and, if neither party files an appeal, the decision will become final. In
accordance with the stock purchase agreement pursuant to which the Company
acquired Lorvic in May 1995, the previous stockholders of Lorvic are
responsible for the settlement of this matter to the extent of $700 held in an
escrow fund, together with earnings thereon, plus an additional $200 to cover
any interest and penalties related to such matters. The Company believes the
escrowed amounts will be sufficient to satisfy these deficiencies in full for
all affected years.

11. ACCOUNTING STANDARD NOT IMPLEMENTED:

    In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which requires that all derivatives be
recognized as either assets or liabilities in the statement of financial
position at fair value. The adoption of SFAS 133 is not expected to have a
material effect on the Company's financial position or results of operations.

Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations

RESULTS OF OPERATIONS

THREE MONTHS ENDED JUNE 30, 1998 COMPARED TO THREE MONTHS ENDED JUNE 30, 1997

NET SALES
         Net sales increased $3.6 million, or 64.2%, to $9.2 million in 1998
from $5.6 million in 1997. The increase was the result of sales growth both from
the base business of prophy products and from the acquisition of Panoramic whose
sales were included for the full quarter.

 GROSS PROFIT

         Gross profit increased $1.8 million, or 57.3%, to $5.1 million in 1998
from $3.3 million in 1997. Gross profit benefited from the inclusion of
Panoramic and from the increased prophy product sales. Gross margin decreased to
55.9% of net sales in 1998 from 58.4% in 1997. The Company's gross margin
decreased as a result of the inclusion of sales of Panoramic products, which
carry lower gross margins, and the increased costs incurred in obtaining ISO
certification for Young Dental's manufacturing facilities in Missouri and Texas
and CE Mark approval for its prophy products.



                                      8
<PAGE>   9

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
         SG&A expenses increased $1.0 million, or 58.7%, to $2.8 million in 1998
from $1.8 million in 1997. As a percent of net sales, SG&A expenses decreased to
30.3% in 1998 from 31.3% in 1997. SG&A expenses increased primarily due to the
inclusion of expenses of Panoramic. 

INCOME FROM OPERATIONS
         Income from operations increased $841,000 or 55.6%, to $2.4 million in
1998 from $1.5 million in 1997.

INTEREST EXPENSE
         Interest expense decreased $295,000 to $0 in 1998 from $295,000 in
1997. The decrease was due to the retirement of all of the Company's bank debt
with the net proceeds of the Company's initial public offering in November,
1997.

OTHER INCOME (EXPENSE) 
         Other income (expense) increased $47,000 to $44,000 in 1998 from 
($3,000) in 1997 primarily due to interest income in the 1998 quarter and 
losses incurred on disposal of assets in the year earlier quarter.

PROVISION FOR INCOME TAXES
         Provision for income taxes increased $220,000 for 1998 to $823,000 from
$603,000 for 1997 as a result of a 97% increase in the income before income
taxes versus the year earlier period.


SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997

NET SALES
         Net sales increased $4.2 million, or 34.6%, to $16.3 million in 1998
from $12.1 million in 1997. The increase was primarily attributable to the
inclusion of sales of Panoramic (acquired on February 27, 1998) and the
remaining increase was the result of higher sales of prophy products.

 GROSS PROFIT

        Gross profit increased $2.1 million, or 29.9%, to $9.2 million in 1998
from $7.1 million in 1997. Gross profit benefited from the acquisition of
Panoramic and from the increased prophy product sales. Gross margin decreased to
56.6% of net sales in 1998 from 58.6% in 1997. The Company's gross margin
decreased as a result of the inclusion of sales of Panoramic products, which
carry lower gross margins. The increased costs incurred in obtaining ISO
certification for Young Dental's manufacturing facilities in Missouri and Texas
and CE Mark approval for its prophy products were offset by production
improvements in the Denticator facility.

SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES
         SG&A expenses increased $1.2 million, or 33.0%, to $4.9 million in 1998
from $3.7 million in 1997. As a percent of net sales, SG&A expenses decreased to
29.9% in 1998 from 30.3% in 1997. SG&A expenses increased primarily due to the
inclusion of expenses of Panoramic. 

INCOME FROM OPERATIONS
         Income from operations increased $1.0 million or 26.7%, to $4.4 million
in 1998 from $3.4 million in 1997.

INTEREST EXPENSE
         Interest expense decreased $602,000 to $0 in 1998 from $602,000 in
1997. The decrease was due to the retirement of all of the Company's bank debt
with the net proceeds of the Company's initial public offering in November,
1997.




                                      9
<PAGE>   10



OTHER INCOME (EXPENSE)
         Other income (expense) increased $203,000 to $205,000 in 1998 from
$2,000 in 1997 primarily due to interest income and gains on the disposal of
assets versus losses on disposal of assets in the year earlier period.

PROVISION FOR INCOME TAXES
         Provision for income taxes increased $676,000 for 1998 to $1.8 million
from $1.1 million for 1997 as a result of a 61% increase in the income before
income taxes versus the year earlier period and an effective tax rate of 38.4%
versus 38.0% in the year earlier period.

LIQUIDITY AND CAPITAL RESOURCES
    On February 27, 1998, the Company acquired the net assets of Panoramic in
Fort Wayne, Indiana. The Company paid approximately $13.9 million in cash plus
$1.0 million (62,500 shares) of its common stock. The purchase price was
financed principally through cash from the remaining net proceeds of the
Company's initial public offering.

    Historically, the Company has financed its operations primarily through cash
flow from operating activities and, to a lesser extent, through borrowings under
its credit facilities. Net cash flow from operating activities was $3.7 million
for the six months ended June 30, 1998 compared to $2.4 million for the six
months ended June 30, 1997. Capital expenditures for property, plant and
equipment were $377,000 for the six months ended June 30, 1998 in line with the
Company's estimates for the year. Consistent with the Company's historical
capital expenditures, future capital expenditures are expected to include
injection molding equipment, computer numeric controlled equipment and upgrades
to production machinery and to the Company's information systems.

    On May 30, 1997, two former employees of Young Dental and a corporation
formed by them (the "Adverse Parties") filed a Petition against Young Dental in
the Circuit Court for the City of St. Louis, Missouri (the "Current Action"). 
The Current Action results from an action brought in 1993 by Young Dental
against the Adverse Parties in the Federal District Court for the Eastern
District of Missouri (the "Prior Action"), alleging, among other things, patent
infringement and misappropriation of trade secrets.  The Prior Action was
resolved in favor of the Adverse Parties.  In the Current Action, consisting of
three counts alleging malicious prosecution, three counts alleging abuse of
process and three counts alleging tortious interference with business
expectancy related to the Prior Action, the Adverse Parties seek actual damages
in unspecified amounts in excess of $25,000 and, in a separate count, seek
punitive damages.  The Adverse Parties seek to recover their attorneys' fees
incurred in the Prior Action, which they claim to exceed $730,000.  They also
allege that their damages include lost profits, and estimate that their lost
profits range between $4.5 million and $18 million.  While the Current Action,
which is scheduled for trial in late 1998, is still in the discovery stage and
there can be no assurance as to its outcome, based upon advice of legal
counsel, the Company believes it has defenses to each of plaintiffs' claims and
intends to continue to defend the Current Action vigorously.

    The Internal Revenue Service (the "IRS") examined Lorvic's federal income
tax returns for the years ended March 31, 1992 through 1995, and proposed
deficiencies in federal income taxes for those years in an aggregate amount of
$766,000 due to the classification of certain intangible assets.  Lorvic filed
petitions with the United States Tax Court contesting these proposed
deficiencies and the matter was tried in January 1998.  In August 1998, the Tax
Court entered its findings of fact and opinion that Lorvic's valuation of the
intangible assets should be reduced by 25%.  The IRS is now required to
recalculate the deficiencies based upon the Tax Court's findings and opinion
and, if neither party files an appeal, the decision will become final.  In
accordance with the stock purchase agreement pursuant to which the Company
acquired Lorvic in May 1995, the previous stockholders of Lorvic are
responsible for the settlement of this matter to the extent of $700,000 held in
an escrow fund, together with earnings thereon, plus an additional $200,000 to
cover any interest and penalties related to such matters.  The Company believes
the escrowed amounts will be sufficient to satisfy these deficiencies in full
for all affected years.

RECENT FINANCIAL ACCOUNTING STANDARDS BOARD STATEMENT
    In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), which requires that all derivatives be
recognized as either assets or liabilities in the statement of financial
position at fair value. The adoption of SFAS 133 is not expected to have a
material effect on the Company's financial position or results of operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required.






                                      10

<PAGE>   11

                                     PART II
                                OTHER INFORMATION


Item 6. Exhibits and Reports on Form 8-K

    (a) Exhibits.

        Number           Description
        --------         --------------
          27             Financial Data Schedule

    (b) Reports on Form 8-K.

        One report on Form 8-K/A was filed by the Company during the quarter
        ended June 30, 1998. The purpose of this report, filed on May 12, 1998,
        was to submit financial statements of Panoramic required by Item 7 (a)
        and pro forma financial information required by Item 7 (b).This report
        was an amendment to the report on Form 8-K dated February 27, 1998 in
        which the Company announced that it had acquired the assets and assumed
        certain liabilities of Panoramic.











Signature
---------------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                                YOUNG INNOVATIONS, INC.

August 14, 1998                                 /s/ Michael W. Eggleston 
--------------------                            ---------------------------
Date                                            Michael W. Eggleston
                                                Vice President, Treasurer and
                                                Chief Financial Officer













                                      11