<PAGE>
 
================================================================================

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-Q
                                        

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (fee required) FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
                                       Or
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (NO FEE REQUIRED) For the transition period from     to

Commission file number 0-20993




                                DTM CORPORATION
            (Exact Name of Registrant as Specified in its Charter)
                                        
            TEXAS                                     74-2487065
(State or Other Jurisdiction of                    (I.R.S. Employer 
Incorporation or Organization)                     Identification No.)
                              

 1611 HEADWAY CIRCLE, BUILDING 2, AUSTIN, TEXAS         78754
(Address of Principal Executive Offices)              (Zip Code)
                                   

                                (512) 339-2922
             (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 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 
                                       ---    ---

AS OF APRIL 8, 1998, THE REGISTRANT HAD 6,286,851 OUTSTANDING SHARES OF COMMON
STOCK.


================================================================================

                                       1
<PAGE>
 
                                     PART I
                             FINANCIAL INFORMATION
                                        
ITEM 1.  FINANCIAL STATEMENTS

                                DTM CORPORATION

          CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
               (In thousands, except share and per share amounts)

<TABLE> 
<CAPTION> 
                                                                                   Three Months Ended
                                                                                        March 31,
                                                                                   1998            1997
                                                                                --------------------------
<S>                                                                              <C>             <C> 
 Revenue:
      Products                                                                   $  4,970         $ 7,357
      Service and support                                                             864             666
                                                                                --------------------------
                                                                                    5,834           8,023
 Cost of sales:
      Products                                                                      2,915           4,053
      Service and support                                                             512             488
                                                                                --------------------------
                                                                                    3,427           4,541
                                                                                --------------------------
 Gross Profit                                                                       2,407           3,482

 Operating expenses:
      Selling, general and administrative                                           2,747           2,957
      Research and development                                                        988           1,133
                                                                                --------------------------
                                                                                    3,735           4,090
                                                                                --------------------------
 Operating loss                                                                    (1,328)           (608)

 Other income (expense):
      Interest income                                                                   2               5
      Interest (expense)                                                               (8)           (305)
                                                                                --------------------------
                                                                                       (6)           (300)
                                                                                --------------------------

 Loss before income tax benefit                                                    (1,334)           (908)

 Income tax benefit                                                                     -            (197)
                                                                                --------------------------
 Net loss                                                                       $  (1,334)        $  (711)
                                                                                ==========================

 Net loss per common share - basic                                              $   (0.21)        $ (0.22)
                                                                                ==========================
 Weighted average number of shares
      outstanding                                                               6,286,851       3,243,391
                                                                                ==========================
</TABLE> 



See accompanying notes.


                                       1
<PAGE>
 
                                DTM CORPORATION

               CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
                     (In thousands, except share amounts)

<TABLE> 
<CAPTION> 
                                                                           March 31,        December 31,
                                                                              1998             1997
                                                                         -------------------------------
<S>                                                                        <C>              <C> 
 ASSETS
 Current assets:
      Cash                                                                    $    828        $   2,050
      Accounts receivable, net                                                   5,540            4,981
      Inventory                                                                  4,700            5,839
      Prepaid expenses and other                                                   576              404
                                                                         -------------------------------
 Total current assets                                                           11,644           13,274
 Property, net                                                                   2,991            2,299
 Capitalized software development costs, net                                       750              753
 Patent and license fees, net                                                    1,079            1,080
 Other noncurrent assets                                                           142              142
                                                                         -------------------------------
 Total assets                                                                 $ 16,606        $  17,548
                                                                         ===============================

 LIABILITIES AND SHAREHOLDERS' EQUITY 
 Current liabilities:
      Accounts payable                                                        $  4,220        $   3,839
      Due to BFGoodrich                                                            907              909
      Deferred revenues                                                          1,658            1,604
      Accrued expenses and other liabilities                                     1,797            1,783
      Short-term borrowings                                                        175              175
                                                                         -------------------------------
 Total current liabilities                                                       8,757            8,310

 Shareholders' equity:
      Preferred stock                                                             -                -
      Common stock, 6,286,851 shares outstanding
         at March 31, 1998 and December 31, 1997                                     1                1
      Additional paid-in capital                                                50,256           50,256
      Stock options outstanding                                                  2,905            2,905
      Accumulated deficit                                                      (45,091)         (43,757)
      Cumulative translation adjustment                                           (222)            (167)
                                                                         -------------------------------
 Total shareholders' equity                                                      7,849            9,238
                                                                         -------------------------------
 Total liabilities and shareholders' equity                                   $ 16,606        $  17,548
                                                                         ===============================
</TABLE> 


See accompanying notes.

                                       2
<PAGE>
 
                                DTM CORPORATION

          CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
                                (In thousands)
<TABLE> 
<CAPTION> 

                                                                               Three Months Ended
                                                                                    March 31,
                                                                              1998            1997
                                                                         -----------------------------
<S>                                                                          <C>             <C> 
 Operating activities:
 Net loss                                                                    $ (1,334)       $   (711)
 Adjustments to reconcile net loss to net cash provided by
      or (used) in operating activities:
         Depreciation and amortization                                            445             607
         Changes in assets and liabilities used in operating activities:
             Accounts receivable                                                 (559)            676
             Inventory                                                          1,139              78
             Prepaid expenses and current assets                                 (172)             65
             Accounts payable                                                     381            (202)
             Due to BFGoodrich                                                     (2)            378
             Deferred revenues                                                     54            (150)
             Accrued expenses and other current liabilities                        14               5
                                                                         -----------------------------
 Net cash provided by (used in) operating activities                              (34)            746

 Investing activities:
 Purchases of property                                                           (982)           (273)
 Capitalized software development costs                                           (87)            (67)
 Patent and license expenditures                                                  (64)           (245)
                                                                         -----------------------------
 Net cash used in investing activities                                         (1,133)           (585)

 Financing activities:
 Proceeds from short-term borrowings                                             -                371
 Repayments of short-term borrowings                                             -               (965)
 Proceeds from notes payable                                                     -                800
                                                                         -----------------------------
 Net cash provided by financing activities                                       -                206

 Effect of foreign exchange rate changes on cash                                  (55)            (65)
                                                                         -----------------------------

 Net increase (decrease) in cash                                               (1,222)            302

 Cash at the beginning of the period                                            2,050             329
                                                                         =============================
 Cash at the end of the period                                               $    828        $    631
                                                                         =============================
</TABLE> 

See accompanying notes.

                                       3
<PAGE>
 
                                DTM CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
                                  (unaudited)


1.  BASIS OF PRESENTATION

The accompanying unaudited condensed consolidated financial statements of DTM
Corporation ("DTM or the "Company") have been prepared in accordance with
generally accepted accounting principles for interim financial information.
Accordingly they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year ending December 31,
1998. For further information, refer to the consolidated financial statements
and related footnotes of the Company for the year ended December 31, 1997 as
disclosed in the Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1998.

2.  INVENTORY

Inventory consisted of the following (in thousands):
<TABLE> 
<CAPTION> 

                                                                  March 31,     December 31,
                                                                     1998            1997
                                                               ----------------------------
<S>                                                               <C>           <C> 
              Raw materials and purchased parts                    $ 2,763         $ 2,863
              Finished goods                                         2,187           3,101
                                                               ----------------------------
                                                                     4,950           5,964
              Reserve for obsolesence                                 (250)           (125)
                                                               ----------------------------
                                                                   $ 4,700         $ 5,839
                                                               ============================
</TABLE> 

3.  FINANCIAL INSTRUMENTS

The Company uses forward foreign currency exchange contracts, which typically
expire within one year, to hedge payments and receipts of foreign currencies,
related to the purchase and sale of goods overseas. Realized gains and losses on
these contracts are recognized in the same period as the hedged transactions.
The Company had foreign currency exchange contracts on hand at March 31, 1998,
primarily hedging Yen revenues, totalling $624,000.

4.  FACILITIES LEASE

The Company's main facility has been located in Austin, Texas since 1990 and
contains specialized leasehold improvements. A new operating lease for this
facility and expansion into an additional 20,000 square feet in an adjacent
building was executed in April 1998. The Company intends to consolidate its
inventory, currently housed in short-term off-site storage facilities, into the
new space. Additionally, the new space will be used for an enlarged assembly
operation. The new space is expected to be available to the Company by the end
of 1998. The future minimum annual payments under this lease for the
approximately 50,000 square feet are $250,000 through 2000, $275,000 from 2001
through 2003 and $312,500 from 2004 through 2006.

5.  CONTINGENCIES

In the ordinary course of business, the Company becomes involved in legal
proceedings and claims. In one such instance, DTM filed an action in the United
States District Court for the Eastern District of Wisconsin in October 1995
against three parties who are operating a selective laser sintering system
manufactured by the Company. DTM alleges that the defendants willfully infringed
a DTM patent. In June 1996, DTM amended its lawsuit to also assert that one of
the defendants breached an oral settlement agreement. The 

                                       4
<PAGE>
 
                                DTM CORPORATION

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
                                  (unaudited)


Company seeks injunctive relief, damages and attorneys' fees. The defendants
have denied infringement and the existence of an oral settlement agreement, and
the defendants seek attorneys' fees. The defendants have also asserted the
affirmative defenses of patent invalidity, implied license, and failure to mark
patented articles, patent unenforceability and invalidity of the oral settlement
agreement. Discovery commenced in late 1995. In a subsequent filing, one of the
defendants also has asserted claims against DTM and BFGoodrich for violation of
state and federal antitrust laws. That defendant seeks injunctive relief as well
as damages and attorneys fees. In July 1997, this court granted a temporary
summary judgment that these particular defendants had been given an implied
license by DTM. The Company has filed an appeal of this ruling. The contract
claim against the defendants and the antitrust claim against DTM and BFGoodrich
remain for trial unless this case is settled in the meantime. It is not possible
at this time to predict the outcome of these proceedings, although DTM and
BFGoodrich have indicated that they believe that the subsequent counter and
cross claims for violation of antitrust laws are without merit. However, a
ruling unfavorable to the Company could have a material adverse effect on the
Company's business and financial performance.

The Company has initiated patent infringement litigation in France, Germany and
Italy against a competitor and against one of that competitor's customers. The
Company also initiated patent infringement litigation in Japan against the
competitor's distributor in the Pacific Rim. In each of these cases, the Company
alleges that the competitor is selling rapid prototyping systems in Europe and
Japan that make unauthorized use of selective laser sintering technology covered
by the European and Japanese patents under which the Company has exclusive
rights. The Company seeks injunctive relief plus damages. It is anticipated that
this litigation will be pursued in conjunction with European and Japanese
proceedings in which the competitor has opposed the validity of those European
and Japanese patents. Hearings have begun in the German, French, Italian and
Japanese lawsuits. It is not possible at this time to predict the outcome of
these proceedings.

DTM has been informed by this competitor that it has obtained the worldwide
right to enforce certain U.S. patents and that it may bring patent infringement
litigation against the Company in U.S. courts. It is not possible at this time
to predict the outcome of this possible action, although the Company has
conducted a review of the patents in question and believes that it is not
infringing or would have valid defenses to claims such competitor may make
selective laser sintering. If such a lawsuit is filed, the Company intends to
defend itself vigorously. However, a ruling that would have the effect of
allowing the competitor to sell rapid prototyping systems in the U.S. without a
license from DTM could have a material adverse effect on the Company's business
and financial performance.

A lawsuit has been filed against the Company whereby certain plaintiffs claim
that the Company in connection with the initial public offering of its stock
made material misstatements or omissions. The plaintiffs have styled their
lawsuit as a class action, and they seek to represent the class of all
purchasers of the Company's stock from May 2, 1997 through June 18, 1997. On
June 18, 1997, the Company announced its anticipation that its results for the
quarter ending June 30, 1997 and the year ending December 31, 1997 would be
significantly below previous estimates. There has been no motion to certify the
proposed class to date. Plaintiffs seek rescission and damages. If the class
were certified, damages could include the proceeds of the Company's Initial
Public Offering ($22,818,000), plus interest. It is not possible at this time to
predict the outcome of this lawsuit, although the Company believes that the
allegations are without merit and intends to contest them vigorously. However, a
ruling unfavorable to the Company could have a material adverse effect on the
Company's business and financial performance.


                                       5
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

BUSINESS ENVIRONMENT AND RISK FACTORS

     The following discussion and analysis should be read in conjunction with
the information set forth under the Company's Unaudited Condensed Consolidated
Financial Statements and notes thereto as well as the section below under the
heading "Risk Factors That May Affect Future Results and Safe Harbor Statement."
The Company's future operating results may be affected by various trends and
factors, which are beyond the Company's control. These include, among other
factors, changes in general economic conditions, rapid or unexpected changes in
technologies and uncertain business conditions that affect the rapid prototyping
and rapid tooling industry. Accordingly, past results and trends should not be
used by investors to anticipate future results or trends.

     With the exception of historical information, the matters discussed below
under the heading "Results of Operations" and "Liquidity and Capital Resources"
may include forward-looking statements that involve risks and uncertainties. The
Company wishes to caution readers that a number of important factors, including
those identified in the section entitled "Risk Factors That May Affect Future
Results and Safe Harbor Statement" as well as factors discussed elsewhere in
this report and in the Company's other reports filed with the Securities and
Exchange Commission, could affect the Company's actual results and cause actual
results to differ materially from those forward-looking statements.

OVERVIEW

DTM Corporation designs, develops, manufactures, markets and supports, on an
international basis, rapid prototyping and rapid tooling systems and related
powdered sintering materials and services. The Company's Sinterstation Systems
and powdered sintering materials are based on proprietary and patented selective
laser sintering technology.

                                       6
<PAGE>
 
RESULTS OF OPERATIONS

The following table sets forth for the periods indicated certain income
statement data as a percentage of total revenues and certain cost of sales data
as a percentage of respective product revenues and service and support revenues.
<TABLE> 
<CAPTION> 
                                                                                  Three Months Ended
                                                                                      March 31,
                                                                                1998            1997
                                                                             -----------------------------
<S>                                                                          <C>                 <C> 
Revenue:
     Products                                                                         85.2%           91.7%
     Service and support                                                              14.8             8.3
                                                                             -----------------------------
                                                                                     100.0           100.0
Gross Profit:
     Products                                                                         41.3            44.9
     Service and support                                                              40.7            26.7
                                                                                      41.3            43.4

Operating expenses:
     Selling, general and administrative                                              47.1            36.9
     Research and development                                                         16.9            14.1
                                                                             -----------------------------
                                                                                      64.0            51.0
                                                                             -----------------------------
Operating loss                                                                       (22.8)           (7.6)

Other income (expense):
     Interest income                                                                   -               0.1
     Interest (expense)                                                               (0.1)           (3.8)
                                                                             -----------------------------
                                                                                      (0.1)           (3.7)
                                                                             -----------------------------

Loss before income tax benefit                                                       (22.9)          (11.3)

Income tax benefit                                                                     -              (2.4)
                                                                             -----------------------------
Net loss                                                                             (22.9)%          (8.9)%
                                                                             =============================
</TABLE> 

     Revenues. Revenues decreased 27.3% to $5.8 million in first quarter of
1998, compared to $8.0 million in the first quarter of 1997. This decline was
primarily attributable to softness in international markets as revenues derived
from those areas declined by approximately 38% to $3.3 million. Revenues derived
from the Pacific Rim countries accounted for the majority of the decline in
international revenues. Revenues derived from customers in North America
declined by approximately 5% to $2.5 million. The revenues derived from
manufacturing customers and the revenues derived from service bureau customers
declined by approximately the same percentage. Unit volumes of Sinterstation
Systems declined in the first quarter of 1998 over the first quarter of 1997.
The unit volumes of powdered materials increased during the first quarter of
1998 over the levels of the first quarter of 1997.

     Revenues in past periods may not be indicative of revenues in the future,
which may be affected by other business environment and risk factors previously
discussed, as well as other factors included elsewhere herein.

     Gross Profit.  Gross profit was $2.4 million, or 41.3% of revenue, in the
first quarter of 1998, compared to $3.5 million, or 43.4% of total revenue, in
the first quarter of 1997. The gross profit decrease primarily was due to lower
worldwide unit sales of Sinterstation Systems. The gross margin percentage

                                       7
<PAGE>
 
decrease in the first quarter of 1998 was caused primarily by lower average
selling prices on Sinterstation Systems, without a corresponding decrease in
average unit costs. Additionally, in the first quarter of 1998 the Company
included in its consolidated statement of operations a provision for
obsolescence of $125,000. There was no such provision in 1997. In the first
quarter of 1998, service and support margins improved to 40.7% due to reduced
material costs of servicing certain international customers.

     The Company believes there is a risk that gross margin percentages may
continue to decline in the face of the soft North American market and the strong
U.S. dollar. Other factors, including changes in material and labor costs, may
also have an adverse effect on gross margins. Past gross margins are not
necessarily indicative of future gross margins.

     Selling, General and Administrative Expense.  Selling, general and
administrative expense was $2.8 million, or 47.1% of revenues, in the first
quarter of 1998, compared to $3.0 million, or 36.9% of revenues, in the first
quarter of 1997. The decrease in 1998 was primarily related to lower commission
expenses resulting from lower sales levels.  Selling, general and administrative
expense may vary as a percentage of revenues in the future.

     Research and Development Expense. Research and development expense was
$988,000, or 16.9% of revenues, in the first quarter of 1998, compared to $1.1
million, or 14.1% of revenues, in the first quarter of 1997. The Company plans
to continue its commitment to research and development in 1998, as the Company
believes that the markets for its products are characterized by technological
innovation for hardware, software and powdered materials. Research and
development expense may increase in absolute dollars in future periods, and such
expenditures may vary as a percentage of sales. There can be no assurance that
the Company's research and development efforts will result in commercially
successful new technology and products in the future, and those efforts may be
affected by other factors.

     Interest Expense. Net interest expense for the first quarter of 1998 was
$6,000, compared to interest expense of $300,000 for the first quarter of 1997.
The higher year earlier expense resulted from a greater outstanding debt. In May
1997 the Company repaid substantially all of its then outstanding indebtedness
out of the proceeds of an initial public offering of common stock.

     Income Taxes. As a result of its tax sharing arrangement with BFGoodrich,
the Company was allocated an income tax benefit of $197,000 in the first quarter
of 1997. In May 1997, BFGoodrich ownership interest fell below 80% and such
benefits are no longer available to the Company. In the fourth quarter of 1997
the Company recorded the final accounting for this tax allocation arrangement.

     Net Loss. The Company had net losses of $1.3 million and $711,000 in the
first quarter of 1998 and 1997, respectively.

LIQUIDITY AND CAPITAL RESOURCES


     Net cash used in operating activities (before working capital changes) was
$889,000 in the first quarter of 1998, while it was $104,000 in the first
quarter of 1997. Working capital provided cash of $855,000 in the first quarter
of 1998 and $850,000 in the first quarter of 1997. In the first quarter of 1998,
the apparent aging of receivables increased as sales for the quarter was
weighted to the end of the quarter.

     The Company's investing activities include expenditures for patents and
licenses, capitalized software costs and furniture and equipment, principally
consisting of the Company's Sinterstation Systems built for internal use and
rental purposes. Net cash used by investing activities was approximately $1.1
million and $585,000 in the first quarters of 1998 and 1997, respectively. The
increased investment in 1998 was primarily for Sinterstation Systems for
internal use in development activities.

     The Company currently has a $2.0 million line of credit with Chase Bank,
Texas NA, with no amounts outstanding, expiring in April 1999. Borrowings under
this line of credit bear interest at prime plus 1.5%. Borrowings under this line
must be approved in advance by The B.F.Goodrich Company 

                                       8
<PAGE>
 
("BFGoodrich"), which has guaranteed the line of credit. There can be no
assurance that BFGoodrich will approve such bank loans when and if requested by
DTM. In addition BFGoodrich has expressed its intention to divest its interest
in the Company. If BFGoodrich were to divest its interest in the Company, it is
unlikely that it would subject itself to additional guarantee exposures under
the line of credit.

     The Company has a current liability to BFGoodrich in the amount of
approximately $907,000, which arose in 1997 as the result of certain payments
made by BFGoodrich on behalf of DTM. This liability is currently non-interest
bearing and is due on demand. Although BFGoodrich has not yet set a time frame
for its repayment, it could do so at any time. Additionally, BFGoodrich could
require that the liability bear interest at any time.

     Future capital requirements of the Company will depend on its growth rate,
profitability, working capital requirements, and level of investment in long-
term assets. BFGoodrich has been a significant source of debt and equity funding
in the past. BFGoodrich has indicated that it has no plans to provide future
funding to DTM.

     The Company believes that it has the financial resources, needed to meet
business requirements, including capital expenditures, working capital
requirements, the debt obligations outstanding and operating lease commitments
for facilities through the next twelve months, assuming the availability of the
bank line of credit.  However, there can be no assurance that this will be the
case.

RISK FACTORS THAT MAY AFFECT FUTURE RESULTS AND SAFE HARBOR STATEMENT

     Investors are cautioned that this Quarterly Report on Form 10-Q contains
forward-looking statements that involve risks and uncertainties, including the
following: (i) the Company's plans, strategies, objectives, expectations and
intentions are subject to change at any time at the discretion of management and
the Board of Directors; (ii) the Company's plans and results of operations will
be affected by the Company's ability to manage its growth and working capital;
and (iii) the Company's business is highly competitive and the entrance of new
competitors or the expansion of the operations by existing competitors in the
Company's markets could adversely affect the Company's plans and results of
operations. In addition, the Company identifies the risk factors discussed below
which may affect the Company's actual results and may cause actual results to
differ materially from those contained in forward looking statements.

LIMITED OPERATING HISTORY AND LACK OF PROFITABILITY. The Company was
incorporated in 1987, and prior to shipment of its first Sinterstation Systems
in 1992, it derived revenues solely from a rapid prototyping service bureau that
it operated in Austin, Texas. The Company has been unprofitable from its
inception; most recently recognizing a net loss of approximately $7.3 million
for the year ended December 31, 1997. There can be no assurance that the Company
can achieve, or if it achieves, maintain, profitability in the future.

EMERGING RAPID PROTOTYPING MARKET. The market for rapid prototyping products and
services is in an early stage of development and includes multiple, competing
technologies, many of which are not yet fully developed. Participants in this
market are moving to address new applications, many of which may not yet be
known or accepted by potential users. Rapid prototyping requires that a computer
aided design ("CAD") file describe a design. Organizations who are not using CAD
are not, generally, potential customers for rapid prototyping products and
services. Significant education of the end user in both CAD modeling and rapid
prototyping in general has in some cases been a prerequisite to product
acceptance. It is not clear at this time which one or more technologies will
gain broad market acceptance. There can be no assurance that DTM will emerge as
a market leader, or even a major market participant, as the market matures.

EMERGING RAPID TOOLING MARKET. The market for rapid tooling products and
services is even in an earlier stage of development than rapid prototyping.
Participants in this market are moving to address 

                                       9
<PAGE>
 
new applications, many of which may not yet be known or accepted by potential
users. The companies who make tooling using traditional machining methods have
made large capital investments in traditional equipment and have mature
infrastructures for doing so. They may be highly resistant both on financial and
cultural basis to adopting new technologies. There can be no assurance that
rapid tooling technologies will evolve to the point that the perceived value
will overcome those obstacles. There can be no assurance that DTM will emerge as
a market leader, or even a major market participant, as the market matures.

PENDING CLASS ACTION LITIGATION. The Company is the defendant in a matter styled
as a class action that is pending in a Texas State court. The plaintiffs seek
recission of the May 1997 IPO and the return to certain shareholders the
proceeds of that IPO of approximately $22.8 million, plus interest and costs. An
adverse judgment may have a material adverse effect on the Company's business
and financial performance.

COMPETITION. The market for rapid prototyping systems is intensely competitive.
In marketing its Sinterstation Systems, the Company experiences competition from
many sources. Certain of the Company's competitors are better known and have
greater financial, research and development, production and marketing resources
than DTM. Competition has increased as a result of the introduction of new
products or product enhancements by these competitors or the entry into the
industry by other companies. Industry analysts have estimated that the worldwide
market for rapid prototyping grew in 1997 by 20%. In 1997, the Company's
revenues lagged the overall industry and grew by only 4%.. Increased competition
has resulted in price reductions, reduced margins and loss of market share, all
of which has materially adversely affected the Company's business and financial
results and may continue to do so.

LIMITED PRODUCT COMPANY. The Company currently offers two models of
Sinterstation Systems for sale. The sale of Sinterstation Systems comprised 64%
of revenues in 1998 and 66% of revenues in both 1997 and 1996. The remaining
revenues were comprised of sales of powdered sintering materials, spare parts
and services to the installed base of Sinterstation owners. The Sinterstation
Systems are priced at the premium end of the range of today's rapid prototyping
products and are sold on the basis of performance and suitability to specific
applications. In a downturn or even in a soft market the Company's dependance
upon a limited range of products, as opposed to a wide range of products at
different price points, has caused the Company's financial performance to be
adversely affected and may continue to do so.

CAPITAL RESOURCES. The Company's future capital requirements will depend on a
number of factors, including its profitability, growth rate, working capital
requirements, expenses associated with protection of its patents and other
intellectual property and costs of future research and development activities.
It is typical of developing technology companies to need large amounts of
capital to fund growth. BFGoodrich, the Company's majority shareholder, has been
a significant source of debt and equity funding in the past. BFGoodrich has
indicated to the Company that BFGoodrich has no plans to provide future funding
and in fact intends to divest its position in the Company. Future operating
results will depend, in part, on the Company's ability to obtain and manage
capital sufficient to finance its business. The inability of the Company to
secure capital funding sufficient to meet its needs could have a material
adverse effect on the Company's business and financial performance. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS. Protection of the Company's
intellectual property is an important factor in its ability to be successful in
a highly competitive market that is subject to rapid technological changes.
However, it is expensive and consumes a significant portion of time of DTM's
officers.

     In pursuing protection for its proprietary rights in its Sinterstation
Systems, materials and related technology, the Company currently relies on a
combination of patent, copyright, trademark and trade secret rights, as well as
contractual provisions. The Company typically seeks patent protection for its
selective laser sintering technology, including, where deemed appropriate, the
selective laser sintering process, its Sinterstation Systems and the materials
used in its Sinterstation Systems. However, patent protection may not always be
available. There can be no assurance that patents will be issued under any or
all of the patent applications to which the Company has rights. In addition, the
laws of various countries in which the 

                                      10
<PAGE>
 
Company's products may be sold may not protect the Company's products and
intellectual property rights to the same extent as the laws of the United
States.

     Furthermore, the Company can give no assurance that the issued patents to
which it holds rights will be adequate to protect its interests or, if
challenged, held valid. The Company's competitors could develop non-infringing
systems, materials or technologies that are equivalent or superior to those of
the Company. Competitors currently do and also may practice technology covered
by DTM's patents or other legal or contractual protections regardless of the
fact that it is legally protected, forcing the Company to engage in costly
litigation to defend its interests. While DTM defends its intellectual property
vigorously, there can be no assurance that it will be successful in its various
litigations in many countries. If the Company were unsuccessful in enforcing its
intellectual property rights or other contractual rights in the context of
third-party offers to sell selective laser sintering systems or sintering
powders or if the Company were found to have violated state or federal antitrust
laws, the Company's future revenues might be adversely affected. In 1997, a
court granted a temporary summary judgment, ruling that a customer had been
given an implied personal license by DTM to one of DTM's patented sintering
materials. This ruling has been appealed by the Company. The inability of the
Company to successfully establish and defend its intellectual property rights
could have a material adverse effect on the Company's business and financial
performance.

     Unrelated third parties hold many patents and pending patent applications
under which the Company is not a licensee that relate to the design and
manufacture of rapid prototyping systems and materials. If such a third party
brought infringement litigation against the Company, and if the Company was not
successful in defending such litigation or in obtaining a license, the Company's
business and financial performance could be materially adversely affected. The
Company has been threatened with such litigation by a competitor.

     Certain key intellectual property used in the selective laser sintering
process is licensed to the Company by The University of Texas System. As a
licensee, the Company's rights to practice the technology are not absolute. The
University of Texas could terminate, attempt to terminate or amend the license
if the Company could be shown to be in material default of the terms of the
license. Even if DTM has a basis for objection, defense of its rights as a
licensee could be costly and the outcome would be uncertain. Loss of significant
rights as a licensee under this license could have a material adverse effect on
the Company's business and financial performance.

MANAGEMENT OF VARYING OR NOMINAL GROWTH. DTM has experienced varying revenue
growth or contractions since 1991. DTM experienced increases in total net
revenues from approximately $1.1 million in 1991 to approximately $25.3 million
in 1997. In the third quarter of 1997, however, revenues began to contract
overall and this contraction has continued through the first quarter of 1998.
Throughout 1997 the Company's revenues derived from North America contracted
while its revenues derived from international markets expanded rapidly. In the
first quarter of 1998, revenues derived from both North America and
international markets contracted. Also, in 1997 the Company's revenues from
customers directly involved in product development expanded while its revenues
derived from service bureaus contracted. This varying or nominal growth has,
from time to time, strained its management resources and systems. DTM's ability
to manage its varying growth effectively will depend on, among other things, its
ability to increase the capability and quality of its operational, financial and
management information systems and controls and to train, motivate, in some
cases re-deploy, manage and retain its employees. There can be no assurance that
the Company will experience future growth or be successful in managing any
future growth. Failure to manage or enter into any future growth could have a
material adverse affect on the Company's business and financial performance.

QUARTERLY FLUCTUATIONS IN OPERATING RESULTS. The Company's revenues and
operating results have varied substantially from quarter to quarter and may
continue to do so. DTM typically experiences a relatively long lead-time to
complete a Sinterstation System sale and has historically experienced no
backlog. Furthermore, new product introductions, seasonality of customer buying
patterns and other factors can cause fluctuations in quarterly results. These
fluctuations have and may continue to preclude the Company from managing its
operating results effectively from quarter to quarter. Further, a 

                                      11
<PAGE>
 
majority of the sales of the Company's Sinterstation Systems occur at the end of
the quarter. As the duration of the current manufacturing cycle is approximately
19 weeks, this has a significant impact on the Company's ability to control its
inventories. The bunching of sales at the end of the quarter also negatively
impacts the Company's ability to predict sales, control sales prices and enforce
its standard terms. The failure of the Company to complete a particular
Sinterstation System sale in any given quarter can have a material adverse
effect on the Company's business and financial performance for that quarter and
quarterly fluctuations could cause a material adverse effect on the price at
which the Company's Common Stock trades.

NEW PRODUCTS; ENGINEERING TESTING DELAYS. The Company's ability to achieve and
maintain a significant market share depends heavily on its ability to improve
the perceived value of its Sinterstation Systems, through a combination of lower
installed cost, lower operating costs, higher productivity and improved ease of
use. In addition, DTM must introduce new and innovative products that facilitate
increased use and more specialized applications of existing products. DTM cannot
predict with any certainty the degree to which its ongoing research and
development efforts in the areas of Sinterstation System and materials
enhancements will be successful or, if so, when. In addition, the Company can
provide no assurance of its future success in selecting, developing,
manufacturing and marketing new products. When the Company or its competitors
announce new products with capabilities or technologies that have the potential
to replace the Company's existing product offerings, customers sometimes defer
or forego purchases of Company products. This could materially adversely affect
the Company's business and financial performance. While the Company performs
testing prior to releasing new product designs or product enhancements, products
may contain unforeseen errors or performance problems. The correction of errors
and problems in new products could cause delays in product introductions or
shipments, require design modifications to previously shipped products or cause
adverse publicity, any of which can adversely affect the Company's business and
financial performance.

DEPENDENCE ON KEY PERSONNEL. The Company's success depends to a substantial
extent on certain key employees. Losing the services of one or more key
employees could have a material adverse effect on the Company's business and
financial performance. The Company's success also depends on its ability to
continue to attract highly talented technical personnel. Candidates with
appropriate training and expertise may be in short supply in the geographic
areas where the Company is attempting to recruit personnel. The Company has put
in place incentive compensation plans intended to provide motivation for
continued employment of key employees. However, the exercise prices of employee
stock options are currently above market value and, management incentive goals
have not been met for the past two years and certain sales force incentive goals
were not met last year. This has resulted in reduced incentive compensation for
Company employees. During the last half of 1997, several executive officers left
the Company. The Company can give no assurance that it will be able to retain
employees or continue to attract, assimilate and retain other skilled personnel.

DEPENDENCE ON THIRD-PARTY SUPPLIERS. The Company subcontracts for manufacture of
Sinterstation System components, powdered sintering materials and accessories
from single-source, third-party suppliers. A disruption in supply or failure of
a supplier to remain competitive in functionality or price could have a material
adverse effect on the Company's sales or reputation for timely delivery, and,
hence, on the Company's business and financial performance.

INTERNATIONAL OPERATIONS. The Company competes on an international basis through
its wholly owned subsidiary located in Germany and through export sales derived
from its United States sales operations, principally to the Pacific Rim, Europe
(excluding Germany) and South America. In 1997, approximately 62% of the
Company's sales were made to customers outside of the United States. The Company
expects that sales to customers in countries outside of the United States will
continue to make up a significant percentage of total sales. Fluctuations in
exchange rates as well as interest rates have significantly affected DTM's sales
in foreign markets. In particular, a strengthening U.S. dollar has adversely
affected the price competitiveness of DTM's products and services in the
international markets. The Company also maintains a subsidiary for sales and
technical support in Europe. In addition, exchange rates have adversely affected
the value of receivables arising from foreign sales. The Company does engage in
some hedging to limit the currency exchange risk related to some sales. There
can be no assurance that 

                                      12
<PAGE>
 
the Company's exposure to risks associated with international operations will
not continue to have a material adverse effect on its liquidity, capital
resources and results of operations. The regulatory environment, including
import/export laws, protective trade policies and currency controls of foreign
governments, also could materially adversely affect the Company's business and
financial performance.

CONTROL OF THE COMPANY. BFGoodrich owns approximately 50.2% of the outstanding
Common Stock. At this percentage, BFGoodrich could control elections of the
Company's Board of Directors and could control or substantially affect the
outcome of certain matters submitted to the Company's shareholders for their
vote or consent. BFGoodrich could also cause, prevent or delay a change in
control of the Company. BFGoodrich has advised the Company that its interest in
DTM is primarily financial and that it intends to divest its interest in the
Company. The Company cannot predict the effect of a sale of a controlling
interest in the Company; although, depending on the identity of the purchaser
and its reason for acquiring control of the Company, minority shareholders could
be adversely affected.

LOSS OF TAX ALLOCATION AGREEMENT AND OTHER BENEFITS FROM BFGOODRICH. As a result
of the IPO, the ownership of outstanding Common Stock by BFGoodrich decreased to
less than 80%. BFGoodrich is no longer able to include DTM's income or loss in
BFGoodrich's consolidated federal income tax return; consequently, DTM has lost
the benefit of the tax allocation agreement between DTM and BFGoodrich effective
May, 1997. Without the tax benefit allocated from BFGoodrich, the Company's net
loss for 1997 would have increased from approximately $7.3 million to
approximately $8.1 million. To the extent the Company incurs future losses, the
resulting tax loss carryforward would be deferred until sufficient income is
generated by DTM to utilize the carryforward.

     Historically, DTM has received certain tangible and intangible benefits
from BFGoodrich. For example, BFGoodrich currently provides DTM participation in
a group program for various types of business insurance. This arrangement is on
terms that could be considered more favorable to the Company than those that
would be available to DTM in arms-length transactions with unrelated vendors,
principally because DTM is able to take advantage of cost efficiencies
experienced by BFGoodrich due to the size of its operations. DTM will be
ineligible to take part in any BFGoodrich insurance programs once BFGoodrich no
longer owns a majority of the outstanding Common Stock. Either party has the
option to terminate any of such arrangements at any time.

     In addition at March 31, 1998, DTM had a current liability to BFGoodrich in
the amount of $907,000. This amount is currently non-interest bearing and is due
on demand. The balance is the result of certain payments made by BFGoodrich on
behalf of DTM in 1997. BFGoodrich could require interest on its advance or
require the advance to be repaid at any time.

POSSIBLE ISSUANCE OF PREFERRED STOCK. The Company's Articles of Incorporation
authorize the issuance of up to 3,000,000 shares of preferred stock, $.001 par
value ("Preferred Stock"), the terms of which would be determined by the Board
of Directors at the time of issuance, without further shareholder approval. The
Board of Directors would determine whether these shares would carry voting
rights, preferences in the payment of dividends, sinking fund provisions and
liquidation, redemption or conversion rights, if any. The Company has no current
plans to issue Preferred Stock. However, if such stock is issued in the future,
the rights of the holders of Common Stock could be materially adversely
affected. It is possible that the Board of Directors could grant future holders
of Preferred Stock rights that could restrict the Company's ability to merge or
sell its assets to a third party, resulting in preservation of the control of
the Company by its then current owners. The Preferred Stock provisions of the
Company's Articles of Incorporation could inhibit a third party from acquiring a
significant amount of the Common Stock, thereby delaying or preventing changes
of the management or control of the Company, and possibly materially adversely
affecting the Common Stock price as a result.

SHARES ELIGIBLE FOR FUTURE SALE.  All shares of the Common Stock owned by
BFGoodrich are freely tradeable, subject to volume limitations of Rule 144. In
addition, BFGoodrich has rights to require the Company to register sales of its
shares of Common Stock under the Securities Act in certain circumstances.

                                      13
<PAGE>
 
     DTM employees hold immediately exercisable options to purchase 553,150
shares of Common Stock under the Equity Appreciation Plan. The Company
registered the issuance and the sale of the shares of Common Stock that would be
issued upon exercise of options under the Equity Appreciation Plan on a Form S-8
Registration Statement. As a result, the Common Stock acquired by employees of
DTM upon exercise of options outstanding under the Equity Appreciation Plan will
be freely tradeable (subject to compliance with certain provisions of Rule 144,
in the case of affiliates of the Company).

     Sales of shares of Common Stock into the market by BFGoodrich or employees
exercising options could cause a decline in the price of such stock.

MARKET VOLATILITY. The Company is listed for quotation of the Common Stock on
the Nasdaq National Market. Historically, the stock market has experienced
volatility that has particularly affected the market price of common stock of
technology-related companies. That volatility sometimes has been unrelated to
the operating performance of such companies.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Information related to quantitative and qualitative disclosures regarding
market risk is set forth in Managements Discussion and Analysis of Financial
Condition and Results of Operations and the risk factors under Item 2 above.
Such information is incorporated by reference herein.

                                    PART II
                               OTHER INFORMATION
                                        
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a) Exhibits
          Exhibit 10.21 - DTM Corporation 1998 Stock Option Plan

          Exhibit 10.22 - Amendment to the DTM Corporation Equity
                           Appreciation Plan, effective February 19, 1998

          Exhibit 27.1  - Current Financial Data Schedule for the quarter ended
                           March 31, 1998

                                  SIGNATURES
                                        
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.

Dated:  May 11, 1998


                         DTM Corporation
                         (Registrant)


                         By:  /s/ John S. Murchison, III
                              ---------------------------------------
                                  John S. Murchison, III
                                  President and Chief Executive Officer


                         By:  /s/ Geoffrey W. Kreiger
                              ---------------------------------------
                                  Geoffrey W. Kreiger
                                  Controller, Treasurer and Secretary
                                  (Principal Financial and
                                  Accounting Officer)

                                      14
<PAGE>
 
                               Index to Exhibits
                               -----------------
                                        
Number                    Description
------                    -----------

10.21    DTM Corporation 1998 Stock Option Plan

10.22    Amendment to the DTM Corporation Equity Appreciation Plan, effective 
         February 19, 1998

27.1     Financial Data Schedule for the quarter ended March 31, 1998


                                      15