PRINCETON DENTAL MANAGEMENT CORP, 10KSB, 2000-04-26

PRINCETON DENTAL MANAGEMENT CORP
10KSB, 2000-04-26
HEALTH SERVICES

Previous: AUL AMERICAN UNIT TRUST, 485BPOS, 2000-04-26

Next: METROPOLITAN LIFE SEPARATE ACCOUNT UL, 485BPOS, 2000-04-26

<PAGE> 1
United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB

[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended December 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

Commission File No. 0-20222

PRINCETON DENTAL MANAGEMENT CORPORATION
(exact name of registrant as specified in its charter)

Delaware 36-3484607
(State of Incorporation) (I.R.S. Employer Identification No.)

7421 West 100th Place, Bridgeview, Illinois 60455
(Address of principal executive offices, including zip code)

(708) 974-4000
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.0001 par value

Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
--- ---

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]

The Registrant's revenues for its most recent fiscal year ended December 31,
1999 were $12,456,459.

The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 1, 2000 (based upon the average bid and ask prices of
these shares in the over-the-counter market as of March 1, 2000) was
approximately $300,000.

As of March 1, 2000 there were 3,196,448 shares of the Registrant's Common Stock
outstanding.

1
<PAGE> 2

DOCUMENTS INCORPORATED BY REFERENCE

<PAGE> 3
PART I

ITEM 1. BUSINESS.

Overview

Princeton Dental Management Corporation ("Princeton" or the "Company")
is involved in the management of dental practices and laboratories. The market
of general dental practitioners and dental specialists is characterized as
highly fragmented. The Company's goal has been to acquire and consolidate dental
practices and to increase their profitability by centralizing certain
administrative, purchasing, marketing and other functions and implementing
certain revenue enhancement programs.

Princeton was incorporated in Delaware in October 1986 and commenced
operations in 1987. Princeton's principal executive offices are located at 7421
West 100th Place, Bridgeview, Illinois 60455.

During 1999, Princeton, along with all of its operating subsidiaries,
filed voluntary petitions for reorganization under Chapter 11 of the United
States Bankruptcy Code (See Part IV, Item 13, Note 2). These voluntary petitions
were filed on October 1, 1999 in the United States Bankruptcy Court of the
Middle District of Florida, Tampa Division (Case No. 99-16012-8Cl) and were
subsequently consolidated per the order of the Bankruptcy Court.

General Development of Business.

Princeton was organized in October 1986 for the purposes of acquiring
dental practices and to provide various services to those dental practices,
including marketing, practice development, management, and support services.
From the date of incorporation through April 1992, the Company developed and
provided marketing and practice enhancement services for dental practices and
conducted demographic research.

As of March 1, 2000, the Company managed and/or operated nine dental
practices and one dental laboratory, obtained through the acquisitions and sales
(the "Transactions") described below.

In July 1992, the Company (through an affiliated professional
corporation) acquired all of the issued and outstanding shares of common stock
of American Dental Health-Battle Creek, P.C. ("Battle Creek"). Battle Creek
operated 3 dental practices in Battle Creek, Taylor and Ypsilanti, Michigan. The
acquisition price, which was a total of approximately $2,000,000, consisted of
$500,000 in cash, $1,000,000 in a promissory note and $500,000 worth of Company
common stock. With respect to the stock, the Company issued 163,578 shares,
which equated to $500,000 in market value of the stock at the time of
acquisition.

In March 1993, the Company (through an affiliated professional
corporation) acquired substantially all of the assets of Century Dental Centers
I, P.C. ("Century"), a dental practice located in Springfield, Pennsylvania. The
acquisition price, which was a total of $547,000, consisted of $145,000 in cash,
$269,000 in a promissory note and $133,000 worth of Company common stock. With
respect to the stock, the Company issued 26,394 shares, which equated to
$133,000 in market value of the stock at the time of acquisition.

Effective as of May 20, 1997, the Company sold the assets comprising
the Century Dental Center to Valley Forge Dental Associates, P.C. The Century
Dental practice, with 1996 revenues of approximately $965,000, represented
approximately 5.3% of the total revenue of the Company. The Century practice was
sold for $590,000. The sales price included $235,000 in cash where a $42,000
commission was paid, $140,000 in contingency payments, a $30,000 note
receivable, and forgiveness of debt and assumption of other liabilities of
approximately $185,000. (See Exhibit 10.59).

<PAGE> 4
In December 1993 the Company acquired all of the issued and outstanding
common stock of Mason Dental Inc. ("Mason"), a dental laboratory located in
Livonia, Michigan. The acquisition price, which was a total of $3,490,000,
consisted of no cash, $1,629,000 in a promissory note (subsequently adjusted
upwards by $316,406.25 due to a post-closing adjustment based on the value of
the Company's common stock), and $1,861,000 worth of Company common stock. With
respect to the stock, the Company issued 462,500 shares, which equated to
$1,861,000 in market value of the stock at the time of acquisition.

In July, 1997, the original owners of Mason agreed to convert $150,000
worth of debt owed to them by the Company into 53,381 shares of the Company's
Common Stock. (See Exhibits 10.56 and 10.58).

In February 1994, the Company (through an affiliated professional
corporation) acquired all of the issued and outstanding common stock of C.D.
Nunnelly, D.D.S. & Associates, Inc., d/b/a Fairfield Dental Center
("Fairfield"), a dental facility located in Pensacola, Florida. The acquisition
price, which was a total of $1,397,000, consisted of $366,000 in cash, $541,000
in a promissory note and $490,000 worth of Company common stock. With respect to
the stock, the Company issued 166,667 shares, which equated to $490,000 in
market value of the stock at the time of acquisition.

In January 1997, the Company sold all of the assets of Fairfield back
to Drs. Payne and Barfield, the individuals from whom the Fairfield practice was
originally purchased (See Exhibit 10.52). The sale price, which was a total of
$935,000, consisted of $475,000 in cash and approximately $460,000 in
forgiveness of debt and assumption of other liabilities.

In April 1994, the Company (through an affiliated professional
corporation) acquired all the issued and outstanding stock of seven dental
practices and one dental laboratory, namely The Dental Team of Boca Raton, Inc.,
The Dental Team of Boynton Beach, Inc., The Dental Team of Coral Springs, Inc.,
The Dental Team of Deerfield Beach, Inc., The Dental Team of Delray Beach, Inc.,
The Dental Team of Pompano Beach, Inc., Palm Beach Dental Services, Inc. and
Pompano Square Dental Lab, Inc. (collectively referred to as "The Dental Team")
located in Palm Beach and Broward counties in Southeast Florida. The acquisition
price, which was a total of $4,611,000, consisted of $600,000 in cash, $831,000
in promissory notes and $3,180,000 worth of Company common stock. With respect
to the stock, the Company issued 1,247,059 shares, which equated to $3,180,000
in market value of the stock at the time of acquisition.

In February 1997, the Company sold all of the assets comprising the
Dental Team of Delray Beach to Dr. Richard Staller, a former director of the
Company and one of the individual dentists from whom the Dental Team was
originally purchased (See Exhibit 10.51). The sale price, which was a total of
approximately $175,000, consisted of approximately $175,000 in forgiveness of
debt and assumption of other liabilities resulting from the acquisition notes
and Dr. Staller's employment and management agreements with the Company. An
additional $25,000 owing pursuant to his management agreement was also forgiven
in connection with this sale.

Effective as of June 1, 1997, the Company sold the assets comprising
the Mason Dental Southeast, Inc. / Renaissance Dental Studio to Mr. Lawrence
Ceraulo, individually and doing business as Certex Dental Studio. The Mason
Dental Southeast, Inc. / Renaissance Dental Studio, with 1996 revenues of
approximately $390,000, represented approximately 2.2% of the total revenue of
the. (See Exhibit 10.54). The Mason Dental Southeast, Inc. / Renaissance Dental
Studio was sold for $92,096 in the form of a short-term note; an additional
short-term note payable to purchase supplies in the amount of $9,847; and
assumption of an existing note payable of $18,372.

4
<PAGE> 5
Narrative description of business.

The Company is involved in the management of dental practices and a
dental laboratory. Dental practices provide routine dental services and, in
certain cases, specialty services such as oral surgery, orthodontics,
periodontics, and endodontics. These services arc offered to the general public
on either a fee-for-service basis or through a form of managed care. Dental
laboratories manufacture dental prosthetics (e.g. dentures, bridges, crowns,
etc.) as requested by dental practices.

The business of providing dental care services through dental centers
is highly competitive. The Company's practices compete with both existing
neighborhood general practices as well as franchises and dental practices
located in shopping centers, malls, etc.

The Company's operations are not significantly dependent on the source
or availability of any materials. Rather, the Company's viability and revenue
production is dependent upon the ability to attract and employ dental
practitioners and specialists. The Company's acquisition strategy typically
includes maintaining the employment of the dentists and specialists within the
acquired practice groups. The Company feels that there is no shortage of
qualified available dental professionals that would impair its ability to
maintain and expand its business.

The Company is not dependent upon any single customer or a few major
customers. However, a significant percentage of the Company's revenues are
generated from managed care agreements. Under customary managed care agreements,
providers agree to accept a reduced fee for service or payment on a capitation
(fixed fee) basis. In return for this concession, under the terms of such
agreements, the practice is a preferred or exclusive provider of services to a
certain population of potential patients. The Company recognizes that, while
these managed care contracts can significantly enhance the revenue of a given
practice, the loss of any of these contracts could likewise be significant.

Government Regulation

The field of dentistry is highly regulated, and there can be no
assurance that the regulatory environment in which the Company operates will not
change significantly in the future.

Every state imposes licensing and other requirements on individual
dentists, dental facilities, dental services and dental managed care plans. In
addition, federal and state laws regulate third party payers for dental
services. Insurance laws and regulations and prepaid managed dental care plan
licensing laws and regulations establish licensing, financial, operational,
marketing and other requirements relating to prepaid managed dental care plans.
In the future, the Company may become subject to compliance with additional
regulations.

The practice of dentistry is subject to regulation under state laws
which, among other things, govern the ownership and control of dental practices,
advertising, fee splitting, referral fees, and other financial arrangements. For
example, some states may require the dentists name (or possibly a corporate name
of which the practicing dentist is an officer) to be displayed clearly on an
outside sign or on the door of the practice, while other states may require the
billing for professional services to be made by the dentist who rendered the
services with that dentist's name clearly reflected thereon. No regulatory
authority has formally reviewed or approved Princeton's plan of operations and
no such formal review is presently contemplated or, to Princeton's knowledge,
available. No assurances can be given that, if any such review was available or
occurred, the result would be favorable. In addition, there can be no assurance
that such states will not enact more restrictive legislation that could require
Princeton to modify its operations and possibly adversely affect its
profitability prospects.

In many states, including Florida and Michigan, where all of the
Company's dental centers and dental practices are located, dental practices
must be owned by a licensed dentist. In keeping with these legal requirements,
the Company operates its dental centers and dental practices and derives
revenues from the operations thereof

5
<PAGE> 6
through comprehensive long-term management agreements with corporations owned by
licensed dentists. The Company generally owns the dental equipment utilized by
the practice and provides such equipment, capital, staffing, management and
marketing services to the practice, allowing the dentists employed by such
corporations to focus on delivery of high quality dental care. The licensed
dentists receive compensation directly from the dentist-owned corporation. The
Company receives the remaining gross revenue from dental services provided at
the dental centers and pays all operating and other expenses, including staff
salaries and benefits.

The Company enters into long-term management agreements with licensed
dentists or dentist-owned corporations pursuant to which the Company manages all
non-clinical aspect of the dental practices. The management agreements typically
run for a term of ten years and are subject to automatic renewal. Pursuant to
such management agreements, the Company provides facilities, dental and office
equipment and supplies, non-clinical staffing, management support, marketing and
other ancillary services. The Company bills and collects all receivables on
behalf of the managed practices.

As compensation for all management services provided by the Company the
managed practice agrees to pay to the Company, as an administrative management
fee, all of the practice revenues in excess of the amounts required to pay
compensation to the dentist(s) and dental hygienists employed by the practice.
The Company is responsible for paying all practice expenses including staff
salaries, from and out of the management fee. If revenues are not sufficient to
pay clinical salaries, the unpaid portion of the management fee is accrued.

The operation and management of the dental centers must meet federal,
state and local regulatory standards in the areas of health and safety. Those
standards have not had any material affect on the operation of the dental
centers or the operations of the Company. Management believes that the dental
centers and the dentists are in compliance in all material respects with all
applicable federal, state and local laws and regulations relating to health and
safety. The Company meets certain OSHA and other governmental regulation and
guidelines in its dental practices. The cost of such compliance has not been
material.

The laws of many states prohibit dentists from splitting fees with
non-dentists and prohibit non-dental entities (such as the Company) from
practicing dentistry, and from employing dentists or, in certain circumstances,
dental assistants. The laws of some states prohibit advertising dental services
under a trade or corporate name and further require that all advertisements of
dental services be in the name of the dentist providing the services. A few
states also regulate the content of advertisements of dental services. A few
states also regulate the content of advertisements of dental services and the
use of promotional gift items to attract new clients.

Some states limit the ability of a non-licensed dentist or non-dentists
to own or control equipment or offices used in a dental practice. Some of the
states allow leasing of equipment and office space to a dental practice, under a
bonafide lease, if the equipment and office remains in the complete care and
custody of the dentist. Management believes, based on its familiarity and
knowledge of the operations of the Company and the activities of the affiliated
dentists, that the Company's current and planned activities do not violate
applicable statutes and regulations. There can be no assurance, however, that
future interpretation of such laws, or the enactment of new laws, will not
require structural and organizational modifications of the Company's existing
contractual relationship with the affiliated dentists or the operation of the
dental centers. In additional, statues in some states could restrict expansion
of the Company's operations in those jurisdictions.

Intellectual Property

The Company believes that in certain circumstances, the trade name of
the practice or group of practices acquired may have value within the area it
services. As part of each prior acquisition, the Company acquired the

<PAGE> 7
practices' trade names and trademarks. The Company typically will not change the
name of the acquired practices post-acquisition.

Employees

As of March 1, 2000, Princeton employed approximately 176 individuals,
including an executive officer, and 39 on a part-time basis (defined as less
than 32 hours per week). Princeton is not a party to any collective bargaining
agreement and believes its employee relationships are satisfactory.

ITEM 2. DESCRIPTION OF PROPERTY

The Company's principal executive offices are located at 7421 West
100th Place, Bridgeview, IL 60455. The Company currently leases approximately
2,646 square feet at the Bridgeview location on a month to month basis at a rate
of approximately $1,555.00 per month (plus real estate taxes and CAM) from an
entity controlled by Frank Leonard Laport, Chairman and CEO of Princeton (See
Exhibit 10.49). The Company also rents its phone system at the Bridgeview
location on a month to month basis at a rate of approximately $570.00 per month
from Mr. Laport (See Exhibit 10.50).

The lease on the former corporate office located at 2739 U.S. Highway
19, Holiday, Florida 34691, remained Princeton's obligation through June 30,
1999. Princeton has sublet all of the space at this location. The minimum lease
payments under this operating lease, net of sublease, was $12,313 in 1999.

On July 31, 1992, in connection with the Battle Creek Acquisition,
Princeton was assigned the right, pursuant to license agreements to operate
dental facilities in Meijers Thrifty Acres stores located in Battle Creek,
Taylor, and Ypsilanti, Michigan. In July, 1997 the company entered into a
Termination Agreement with respect to the Meijer leases. In April through June
of 1997, the Company entered into new lease and/or management agreements for new
locations in Ypsilanti, Taylor and Battle Creek. The leases at each of the
Michigan locations are long-term leases, with initial monthly rents ranging from
$1,000 to $3,296.

On December 31, 1993, in connection with the Mason Acquisition,
Princeton assumed the triple net lease for $148,200 per year, payable on a
monthly basis to Stark Enterprises, an entity owned by three individuals who
were at one time shareholders of Princeton as a result of the merger and one of
whom, Gary A. Lockwood, was President and COO of Princeton until his resignation
on December 6, 1999. The lease, which terminates at December 31, 2001 and is
subject to renewal, covers approximately 18,000 square feet.

On April 1, 1994, in connection with the Dental Team acquisition,
Princeton assumed nine facility leases ranging from $7,200 to $68,125 per year,
payable on a monthly basis with expiration dates ranging from April 30, 1998 to
March 1, 2004. The future minimum lease payments under these operating leases
for the years subsequent to December 31, 1999 are $104,563 in 2000, and $256,197
thereafter. In addition, the Boynton Beach office lease and a storage facility
lease are payable to B & S Properties, a partnership owned by two individuals
who are now shareholders of Princeton as a result of the merger, which requires
monthly payments totaling $3,600 through March 1, 2004. In connection with the
sale of the assets of the Dental Team of Delray Beach, the lease for the Delray
Beach location has been terminated. In connection with the sale of the Florida
dental lab, the purchaser assumed responsibility for that lease.

In the opinion of management, the Company's facilities are adequately
covered by insurance.

<PAGE> 8
ITEM 3. LEGAL PROCEEDINGS

As discussed in Note 2 to the 1999 Consolidated Financial Statements,
Princeton, along with all of its operating subsidiaries, filed voluntary
petitions for reorganization under Chapter 11 of the Unites States Bankruptcy
Code (See Part IV, Item 13, Note 2). These voluntary petitions were filed on
October 1, 1999 in the United States Bankruptcy Court of the Middle District of
Florida, Tampa Division (Case No. 99-16012-8C1) and were subsequently
consolidated per the order of the Bankruptcy Court. As a result of the Chapter
11 filings, the Company and those subsidiaries have ceased making certain
interest, trade payables and other liabilities payments that arose prior to the
Chapter 11 filings. Payments relating to these liabilities are deferred, in most
cases, until a plan for reorganization is confirmed by the Bankruptcy Court.

The Company is engaged in various litigation matters, and has a number
of unresolved claims, some of which involve substantial claims which could have
a material impact on the Company. As discussed in Note 2 to the 1999
Consolidated Financial Statements, the claims and litigation have all been
stayed as a result of the Chapter 11 filings.

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

B) The Company is a defendant in a number of pending employee
discrimination and vendor and creditor law suits. Such law suits include law
suits bought against the Company by (i) Henry Schein, Inc./Zahn Dental Company
claiming approximately $500,000 owed, (ii) the Dickerson Investment Group
claiming approximately $70,000 owed, (iii) Stark Properties claiming
approximately $40,000 owed, (iv) J.F. Jelenko & Co. claiming approximately
$90,000 owed, (v) OfficeMax/Office Depot claiming $25,000 owed, (vi) Chuhak &
Tecson claiming approximately $50,000 owed (the Company has counter-claimed
alleging legal malpractice), (vii) Bodman & Longley claiming approximately
$20,000 owed, (viii) a discrimination suit brought against the Company in
Michigan by several plaintiffs seeking damages in excess of $300,000, (ix) a
disability discrimination claim brought against the Company in Michigan seeking
unspecified damages, (x) a sexual discrimination suit brought against the
Company in Florida seeking unspecified damages, (xi) a claim by the Island Group
seeking approximately $1.2 Million due to failure to make payments on an
Installment Note, and (xii) a claim by Dr. Glenn Lehr seeking approximately
$250,000 due to failure to make payments on an Installment Note. The Company was
vigorously defending these lawsuits and, as noted, all such claims and
litigation have been stayed as a result of the Chapter 11 filings.

C) The Company is involved in a number of other legal proceedings
related to malpractice, worker's compensation, general employment and contract
disputes all in various stages of proceedings. There is no other litigation
pending to which the Company is a party, or of which any of its property is
subject, other than routine litigation incidental to its business. There are no
proceedings known to be contemplated by governmental authorities relating to
either the Company or its properties.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Effective August 18, 1997, the Company's shareholders approved a one
to five reverse stock split of the Company's Common Stock. All figures have been
restated to reflect such reverse stock split.

Effective December 18, 1998, the Company held it's Annual Meeting at
which Frank L. Laport, Gary A. Lockwood (Mr. Lockwood subsequently resigned
effective December 6, 1999), George B. Collins and Dr. Zigmund Porter were
elected as directors and Kirkland, Russ, Murphy and Tapp were confirmed as the
auditors for the Company. The Company did not hold an Annual Meeting during
1999.

8
<PAGE> 9
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS

Effective August 18, 1997, the Company's shareholders approved a one to
five reverse stock split of the Company's Common Stock.

Prior to October 15, 1998, the Companies securities were quoted on the
NASDAQ SmallCap Market under the symbols PDMC and PDMCW, respectively, since
April 15, 1992.

Effective as of October 15, 1998, the Company was informed by The
Nasdaq Stock Market, Inc. ("Nasdaq") that the Company's securities would be
delisted from the Nasdaq SmallCap Market effective at the close of business on
October 15, 1998 due to the inability of the Company to meet the Nasdaq listing
requirement that the Company maintain at least $2,000,000 in net tangible
assets.

The Company's common stock and warrants are currently traded in the
OTC:Bulletin Board market. However, due to the Company's failure to provide
audited financial statements for 1999 in connection with the filing of this Form
10-KSB, it is possible that the Company's securities may be delisted from the
OTC:Bulletin Board market, in which case the Company's securities would be
traded on the "Pink Sheets". The Company can make no representations in this
regard.

Additionally, and as indicated in Note 2 to the 1999 Consolidated
Financial Statements, any plan of reorganization approved or confirmed by the
Bankruptcy Court in connection with the Chapter 11 proceedings of the Company is
likely to result in material dilution or elimination of the equity of the
existing shareholders of the Company, as the result of the issuance of equity to
creditors or new investors.

The following table sets forth the high and low bid quotations for the
Company's common stock and warrants for the two most recent fiscal years. Such
quotations reflect inter-dealer quotations, without retail mark-up, markdowns or
commissions, and may not represent actual transactions.

Common Stock Warrants

Fiscal Year Ended
December 31, 1998 High Low High Low

First Quarter $2.25 1.875 .125 .0625
Second Quarter 2.25 1.50 .125 .0625
Third Quarter 1.625 .75 .125 .0625
Fourth Quarter .50 .1875 .05 .0000

Fiscal Year Ended

December 31, 1999

First Quarter $0.3125 0.1875 .0001 .0001
Second Quarter 0.16 0.125 .0001 .0001
Third Quarter 0.16 0.0625 .0001 .0001
Fourth Quarter .0625 0.04 .0001 .0001

<PAGE> 10
Holders

As of March 1, 2000, there were approximately 127 and 83 holders of
record of the Company's common stock and warrants, respectively. These numbers
include shareholders and warrant holders of record who may hold stock and
warrants for the benefits of others. The Company does not consider it practical
to attempt to determine the number of individuals who are beneficial owners of
its shares and warrants.

Also, as described in detail in Item 12, the Investor Group (as
defined in Item 12) presently holds various Convertible Debt and Warrants
which, if exercised or converted, would result in the Investor Group owning a
significant majority of the issued and outstanding shares of Common Stock of the
Company

Dividends

The Company has never paid cash dividends on its common stock and does
not expect to pay such dividends in the foreseeable future. Management currently
intends to retain all available funds for the development of its business and
for use as working capital.

Recent Sales of Unrestricted Securities

None during 1999.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the attached
condensed consolidated financial statements and notes thereto for the period
ended December 31, 1999, and in conjunction with the Company's audited
financial statements and notes thereto for the period ended December 31, 1998.
THE COMPANY'S FINANCIAL STATEMENTS FOR THE PERIOD ENDED DECEMBER 31, 1999 HAVE
NOT BEEN AUDITED AND ARE SUBJECT TO MODIFICATION.

FORWARD LOOKING STATEMENTS

The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a safe harbor for forward-looking statements made by or on behalf of
the Company. All statements contained in this Report, other than statements of
historical facts, which address activities, events or developments that the
Company anticipates will or may occur in the future, including such things as
the Bankruptcy Court actions or proceedings related to the bankruptcy, future
capital expenditures, and other matters, are forward-looking statements within
the meaning of the Act. These forward-looking statements are based largely on
the Company's expectations and assumptions and are subject to a number of risks
and uncertainties, many of which are beyond the Company's control. Actual
results could differ materially from the forward-looking statements as a result
of a number of factors, including but not limited to, the need for additional
financing, intense competition, regulatory changes and other unforeseen
circumstances. In light of these risks and uncertainties, all of the
forward-looking statements made herein are qualified by these cautionary
statements, and there

<PAGE> 11
can be no assurance that the actual results or developments anticipated by the
Company will be realized. The Company undertakes no obligation to update or
revise any of the forward-looking statements contained herein.

Overview

In 1998, the Company incurred significant operating and net losses, due
primarily to the expiration of the waiver of interest and dividends which had
been in place in 1997 (See Exhibits 10.55, 10.56 and 10.58), a one-time charge
of $250,000 for anticipated State of Michigan taxes and a one time charge of
$123,900 incurred in connection with the exercise of certain default warrants.

During 1999, the Company's operating and net losses, while still
significant, were reduced somewhat due to improved performance by the Company's
Mason Dental lab operation and a decrease in amortization and depreciation
expense.

Also during 1999, and as discussed in Note 2 to the Company's unaudited
1999 consolidated financial statements, due to the inability of the Company to
negotiate out of court settlements with its various lenders and trade creditors,
the Company, along with all of its operating subsidiaries, filed voluntary
petitions for reorganization under Chapter 11 of the Unites States Bankruptcy
Code. These voluntary petitions were filed on October 1, 1999 in the United
States Bankruptcy Court of the Middle District of Florida, Tampa Division (Case
No. 99-16012-8C1) and were subsequently consolidated per the order of the
Bankruptcy Court.

Results of Operations

Revenue for the year ended December 31, 1999 was $12,456,459 compared
with $12,066,127 for the year ended December 31, 1998, an increase of $390,332.
The change in revenue is due primarily to increased revenue at the Mason
laboratory. Operating expenses decreased $24,393 to $12,674,373 for the year
ended December 31, 1999 from $12,698,766 for the year ended December 31, 1998.
This decrease is due to two offsetting factors, namely the decreased
depreciation expense and the increase in operating expenses attributable to the
Mason revenue increase.

Interest expense increased $81,617 to $961,762 for the year ended
December 31, 1999 versus $880,145 incurred in the comparable period last year.
This increase is primarily attributable to increased accruals on the Michigan
single business tax liability and continued accrual of interest on the
Investment Group debt.

The Company showed a net loss of $1,173,325 for the year ended December
31, 1999, as compared to a loss of $1,618,476 year ended December 31, 1998. The
net loss for the year ended December 31, 1999 shows some improvement over the
prior year ended December 31, 1998, primarily as a result of the decreasing
depreciation deductions ($137,217 decrease over a two year period) and improved
revenues at the Mason laboratory.

Financial Condition

Changes in the Company's financial condition at December 31, 1999 as
compared with December 31, 1998 resulted primarily from an increase in accrued
expenses, as well as a shift in pre-bankruptcy accounts payable from short-term
to a long-term liability.

In the period from 1993 to present, the Company did not make certain
Michigan state tax filings. The Company has made these filings and estimates its
liability at approximately $538,000.

<PAGE> 12
As discussed in Note 2 to the Company's unaudited 1999 consolidated
financial statements, due to the inability of the Company to negotiate out of
court settlements with its various lenders and trade creditors, the Company,
along with all of its operating subsidiaries, filed voluntary petitions for
reorganization under Chapter 11 of the Unites States Bankruptcy Code. These
voluntary petitions were filed on October 1, 1999 in the United States
Bankruptcy Court of the Middle District of Florida, Tampa Division (Case No.
99-16012-8C1) and were subsequently consolidated per the order of the Bankruptcy
Court.

Given the Company's recurring losses from operations, the significant
working capital deficits and the uncertainty in obtaining additional funding to
provide working capital in the short term, a substantial doubt has been raised
as to the Company's ability to continue as a going concern. The Company
presently has no source for any additional funding.

Liquidity and Capital Resources

As of December 31, 1999, the Company had a working capital deficit of
$3,847,983 and a financial accumulated deficit of $16,514,572. Goodwill and
other intangibles comprise approximately 65% of total assets, leaving tangible
assets of approximately $2,481,024 and negative tangible net worth of
approximately $5,906,732.

During the year ended December 31, 1999, the Company's cash and cash
equivalents increased $535,968. Cash provided by operations was $846,319,
resulting primarily from the Company's increase in accrued expenses of
$1,035,871 and depreciation and amortization of $744,628.

Investing activities provided $52,143 of cash, primarily related to a
note payment related to the sale of a dental practice. Cash of $362,494 was used
in financing activities, primarily as a result of the extinguishment of debt and
payment of capital leases.

The Company has extensive deferred maintenance on all of it's
facilities. The Company estimates that it could cost in excess of $1.5 Million
to properly re-equip and refurbish all facilities. At present the Company has
no source of funding to address such matters.

As previously disclosed, the Company has reviewed the Year 2000 problem
as it relates to the Company's internal system and does not believe at this time
that it will have a material impact upon its business, operations or financial
condition. However, the Company's review is continuing and the Company can make
no absolute assurances in this regard.

As discussed in Note 2 to the Company's unaudited 1999 consolidated
financial statements, due to the inability of the Company to negotiate out of
court settlements with its various lenders and trade creditors, the Company,
along with all of its operating subsidiaries, filed voluntary petitions for
reorganization under Chapter 11 of the Unites States Bankruptcy Code. These
voluntary petitions were filed on October 1, 1999 in the United States
Bankruptcy Court of the Middle District of Florida, Tampa Division (Case No.
99-16012-8C1) and were subsequently consolidated per the order of the
Bankruptcy Court.

12
<PAGE> 13
ITEM 7. FINANCIAL STATEMENTS

The Company's financial statements for the fiscal year ended December
31, 1999 and 1998 accompany this report as Item 13. The Company's financial
statements for the fiscal year ended December 31, 1998 are audited. THE
COMPANY'S FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999 ARE
NOT AUDITED AND ARE SUBJECT TO MODIFICATION.

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.

None. However, due to the filing of the bankruptcy proceedings by the
Company and the ongoing financial difficulties which the Company has been
experiencing, the Company was not able to arrange for an audit of its 1999
financial statements.

PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT

The following persons are the directors and executive officers of the
Company as of the date of this report:

<TABLE>
<CAPTION>
First Became Beneficially Owned Beneficially Owned
Employment Age a Director Number of Shares Percent of Shares
---------- --- ------------ ------------------- ------------------
<S> <C> <C> <C> <C>
Frank Leonard Laport 59 8/9/96 1,101,233(1)(3) 34.45%

George B. Collins 69 8/9/96 0(2)(3) 0.0%

Dr. Zigmund C. Porter 62 8/15/97 0 0.0%
</TABLE>

(1) With respect to Mr. Laport, includes shares currently held by Mr. Laport's
Individual Retirement Account. With respect to both Mr. Laport and
Amsterdam Equities Limited, does not include shares issuable upon full
conversion of Series A Stock and Convertible Debt currently held by
Amsterdam Equities Limited and Mr. Laport. See "Certain Relationships and
Related Transactions".

(2) Mr. Collins serves as a representative of Amsterdam Equities Limited.
Conversion of the Convertible Debt and Series A Stock presently held by
Amsterdam Equities Limited, which totals approximately $3.5 Million is of
this date, would result in the additional issuance to Amsterdam Equities
Limited of approximately 1,800,000 shares of Company Common Stock. On a
fully diluted basis and assuming full conversion, this would result in
Amsterdam Equities Limited owning shares of Company Common Stock which,
when added to its existing stock holdings, would be equal to approximately
40% of the Company. As of this date, the conversion of this debt into
equity at the existing conversion formula would result in a conversion
price per share significantly in excess of current market levels for the
Company's Common Stock. Amsterdam Equities Limited has not indicated to the
Company whether intends to convert its debt to equity. See "Certain
Relationships and Related Transactions".

(3) Conversion of the Series A Stock presently held by Mr. Laport, which totals
approximately $450,000 as of this date, would result in the additional
issuance to Mr. Laport of approximately 150,000 shares of Company Common
Stock. On a fully diluted basis, and assuming full conversion by Amsterdam
Equities Limited, this would result in Mr. Laport owning shares of Common
Stock which, when added to his existing stock holdings, would be equal to
approximately 30% of the Company (on a fully diluted basis and assuming
conversion in full by Amsterdam Equities Limited and Mr. Laport). Mr.
Laport is contractually prohibited from converting his Series A Stock
unless Amsterdam Equities Limited also decides to convert its Convertible
Debt. See "Certain Relationships and Related Transactions".

<PAGE> 14
Frank Leonard Laport. Mr. Laport has served as CEO and Chairman and head of the
Florida operations of the Company. Mr. Laport, born Chicago, Illinois, March 8,
1941, admitted to the Bar: 1966, Illinois; 1969, Florida; 1974, Indiana; 1966,
U.S. Tax Court; 1967, U.S. District Court, Northern District of Illinois; 1969,
U.S. District, Southern District of Florida; 1974, U.S. District, Southern
District of Indiana; U.S. Supreme Court. Licensed as Illinois Real Estate Broker
on July 1, 1964. Earned the Certified Commercial Investment Member (C.C.I.M.)
Designation of the Realtors National Marketing Institute, an affiliate of the
National Association of Realtors in 1983. Education: Elmhurst College (B.S., in
B.A., 1963); DePaul University, Law School (J.D. 1966).

George B. Collins. Mr. Collins, Born Kansas City, Missouri, April 23, 1931;
admitted to bar, 1953, Arkansas; 1955 Illinois; 1970, U.S. Tax Court; 1972, U.S.
Supreme Court; 1982, U.S. District Court, Northern District of Illinois, Trial
Bar; U.S. Court of Appeals, Second, Seventh and Ninth Circuits. Education:
Arkansas A. & M. College (B.S. 1952); University of Arkansas (L.L.B., 1954).
Omicron Delta Kappa. Associate Editor, Arkansas Law Review, 1951-1952. Author:
"Usury," 8 Arkansas Law Review, September 1954. Teaching Associate, Northwestern
University School of Law, 1954-1955. co-author: "Defending White Collar Crimes,"
Practicing Law Institute 1976; "White Collar Crimes; Defense Strategies",
Practicing Law Institute, 1977; "White Collar Crimes:, Practicing Law Institute,
1978; "White Collar Crimes." Practicing Law Institute, 1980. Member: Chicago
Member, 1955-1978, Vice Chairman, 1967 and Chairman, 1968, Committee on Legal
Education, Member, Committee on Professional Fees, 1966; Vice Chairman, 1973;
1974-1975; Chairman, 1975, Committees on: Environmental Law, 1973; Circuit Court
Operations, 1976. Member 1976-1986, Vice Chairman, 1979-1980; 2981 and chairman
1980-1981, Lawyers Referral Plan Committee), Illinois State, Arkansas and
American Bar Associations.

Dr. Zigmund C. Porter. Dr. Porter, born Chicago, Illinois, April 20, 1938. Dr.
Porter received his B.S. from the University of Illinois in 1960 and his D.D.S.
from the University of Illinois in 1962. Dr. Porter also received a Certificate
of Periodontics and Oral Medicine from Tufts University School of Dental
Medicine, Boston, in 1962-64. Dr. Porter has been a licensed periodontist for
over 25 years and has held numerous teaching and hospital positions. Including
serving as Professor of Periodontics, University of Illinois, and Director of
Post-Graduate Periodontics from 1964-85, and holding positions at Hinsdale
Hospital, MacNeal Hospital, Illinois Masonic Hospital and the University of
Illinois. Dr. Porter has given numerous lectures and published numerous articles
and texts regarding periodontics and has received a number of citations and
awards for his work in the dental field.

Compliance with Section 16 of the Exchange Act

Section 16 of the Securities and Exchange Act of 1934 requires the
Company's Directors and Executive Officers, and persons who own more than 10% of
the Company's Common Stock, to file with the Securities and Exchange Commission
(the "SEC") and the NASDAQ System, initial reports of ownership and reports of
changes in ownership of Common Stock. In addition these individuals are also
required by SEC regulations to furnish the Company with copies of all Section 16
forms they file. To the Company's knowledge, during the fiscal year ended
December 31, 1999, all Section 16 filing requirements applicable to its
executive officers, directors and greater than 10% beneficial owners were
complied with.

[TABLE TO FOLLOW ON NEXT PAGE]

14
<PAGE> 15
ITEM 10. EXECUTIVE COMPENSATION

The following table sets forth the compensation accrued by the Company
for the last three fiscal years to the Company's Chief Executive Officers and to
those executive officers whose compensation exceeded $100,000 in any of the
last two fiscal years.

SUMMARY
COMPENSATION TABLE

<TABLE>
<CAPTION>
Restricted LTIP
Other Annual Stock Options Payouts All Other
Name and Principal Position Year Salary($) Compensation Awards SARS (#) (#) Compensation
- --------------------------- ---- ---------- ------------ ---------- -------- ------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gary A. Lockwood 1999 85,799(2) 0 0 0 0 0
President and 1998 123,077(2) 0 0 0 0 0
Chief Operating Officer 1997 119,095(2) 0 0 0 0 0

(President 8/96 to 12/99)

Frank Leonard Laport, Esq 1999 0(3) 0(3) 0 0 0 0
CEO & Chairman of the Board 1998 0(3) 0(3) 0 0 0 0
1997 0(3) 0(3) 0 0 0 0

</TABLE>

(1) [Intentionally Omitted]

(2) Compensation received was primarily for the management of Dental Labs. G.
Lockwood did not receive compensation in an executive officer capacity
during 1995. Compensation does not include (i) amounts received by Stark
Enterprises, of which Mr. Lockwood is a partial owner, pursuant to the
lease for the Company's lab facility in Livonia, MI, or (ii) amounts
received by The Island Group, of which Mr. Lockwood is a partial owner
pursuant to that certain Acquisition Promissory Note. See "Certain
Relationships and Related Transactions". Mr. Lockwood resigned as an
officer and director effective December 6, 1999.

(3) Mr. Laport currently serves without direct compensation, although a
compensation committee has been formed to develop a compensation package
for Mr. Laport. Compensation does not include amounts received by Mr.
Laport pursuant to the Leases between the Company and Mr. Laport for the
Company offices at 7421 W 100th Place, Bridgeview, IL. In addition, Mr.
Laport is a member of the Investor Group along with Amsterdam Equities
Limited. See "Certain Relationships and Related Transactions".

<PAGE> 16
Compensation of Outside Directors

Each outside director of the Company receives $1,000 for each meeting
attended, and directors are entitled to be reimbursed for all reasonable
out-of-pocket expenses incurred in connection with their duties as directors.
For the year ended December 31, 1999, outside directors' fees and expenses
amounted to $0, with all directors waiving fees.

Option Grants in Last Fiscal Year

As of March 1, 2000 options to purchase an aggregate of approximately
110,000 shares of Common Stock at exercise prices ranging from $20.00 to $4.35
had been granted and were outstanding under the Company's 1993 Incentive and
Non-Statutory Stock Option Plan. The dates such options were granted range from
June 3, 1993 to June 6, 1996.

As of March 21, 1996, as amended on July 17, 1996, the Company issued
to each of John H. Hagan and Dr. Seymour Kessler options to purchase 16,200
shares each (reduced from options to purchase 25,000 shares each originally
granted). The options were exercisable at a price of $5.95 per share, and
expired in March 1999.

In June 1996, the Company issued to Gary A. Lockwood options to
purchase 20,000 shares. The options vest over a 3.5 year period. The options
were exercisable at a price of $4.35 per share, and expire in January 2003.

Effective as of April 1996, the Company issued Warrants to purchase to
the Investor Group for an aggregate of 4,125,000 shares of Company common stock
(subject to anti-dilution provision). The Warrants had an exercise price of
$0.10 per share and, due to the failure by the Company to achieve certain stated
financial goals, were exercisable after January 1, 1997 and are presently
exercisable (See Item 12). Effective as of July, 1997 the exercise price of the
warrants were reduced to $0.01 per share (subject to anti-dilution adjustment)
in connection with a year-long interest waiver by the Investor Group, which
saved the Company in excess of $700,000 in interest expense. Effective as of
November 4, 1998, the Company was advised that (i) Amsterdam Equities Limited
had transferred any and all interest which they had in the default warrants to
Frank Leonard Laport, and (ii) that Mr. Laport had proceeded to exercise such
default warrants. Exercise of all of the default warrants for the stated
exercise price resulted in Mr. Laport receiving approximately 1,065,483
additional shares of Company Common Stock.

Aggregated Option Exercises In Last Fiscal Year and Fiscal Year-End Option
Values

<PAGE> 17
Frank Leonard Laport, Chairman and CEO of the Company, currently serves
without compensation or an employment agreement.

Effective as of June 1, 1996, the Company entered into an Amendment to
Employment Agreement with Gary A. Lockwood, formerly President and COO of the
Company, which provided for (i) an increase in annual salary, effective as of
June 1, 1996, from $97,000 to $105,469.71 (with subsequent annual increases
based on the Consumer Price Index) for Mr. Lockwood's operation of the Company's
Mason Dental subsidiaries, and (ii) a salary of $12,000 per annum and options
to purchase up to 10,000 shares of Company stock for Mr. Lockwood's services as
President and COO of the Company (See Exhibit 10.48). Effective December 6,
1999, Mr. Lockwood resigned from all positions with the Company.

ITEM 11. SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Security Ownership by Certain Beneficial Owners

The following table sets forth the security ownership by certain
beneficial owners for persons owning 5% or more of the Company's Common Stock
as of March 1, 2000.

<TABLE>
<CAPTION>
Name and Address of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
---------------- ----------------------- --------
<S> <C> <C>
Amsterdam Equities Limited 189,002(1)(2) 5.91%

Bay Street
Nassau, N.P., Bahamas

Frank Leonard Laport 1,101,233(1)(3) 34.45%

7421 W. 100th Place
Bridgeview, IL 60455
Chairman, CEO
- ---------------------------------------
Total 1,290,235 40.36%
</TABLE>

(2) Conversion of the Convertible Debt and Series A Stock presently held by
Amsterdam Equities Limited, which totals approximately $3.5 Million as of
this date, would result in the additional issuance to Amsterdam Equities
Limited of approximately 1,800,000 shares of Company Common Stock. On a
fully diluted basis and assuming full conversion, this would result in
Amsterdam Equities Limited owning shares of Company Common Stock which,
when added to its existing stock holdings, would be equal to approximately
40% of the Company. As of this date, the conversion of this debt into
equity at the existing conversion formula would result in a conversion
price per share significantly in excess of current market levels for the
Company's Common Stock. Amsterdam Equities Limited has not indicated to the
Company whether it intends to convert its debt to equity. See "Certain
Relationships and Related Transactions".

18
<PAGE> 18

(3) Conversion of the Series A Stock presently held by Mr. Laport, which
totals approximately $450,000 as of this date, would result in the
additional issuance to Mr. Laport of approximately 150,000 shares of
Company Common Stock. On a fully diluted basis, and assuming full
conversion by Amsterdam Equities Limited, this would result in Mr. Laport
owning shares of Common Stock which, when added to his existing stock
holdings, would be equal to approximately 30% of the Company (on a fully
diluted basis and assuming conversion in full by Amsterdam Equities
Limited and Mr. Laport). Mr. Laport is contractually prohibited from
converting his Series A Stock unless Amsterdam Equities Limited also
decides to convert its Convertible Debt. See "Certain Relationships and
Related Transactions".

19
<PAGE> 19
Security Ownership by Management

The following table sets forth as of March 1, 2000 the number of shares
of Common Stock of the Company beneficially owned by each named Executive
Officer and Director and by each director and officer as a group. Except as
otherwise indicated all shares are owned directly.

<TABLE>
<CAPTION>
Name and Address of Amount and Nature Percent
Beneficial Owner of Beneficial Ownership of Class
------------------- ------------------------ --------
<S> <C> <C>
Frank Leonard Laport 1,101,233(1)(2) 34.45%
7421 W. 100th Place
Bridgeview, IL 60455
Chairman, CEO

George B. Collins 0(2) 0%
One North LaSalle
Chicago, IL 60602
Director

Dr. Zigmund C. Porter 0 0%
3200 N. Lake Shore Drive
Chicago, IL 60657
Director

- ----------

All officers as a group 1,101,233(1)(2) 34.45%
</TABLE>

(1) With respect to Mr. Laport, includes shares currently held by Mr. Laport's
Individual Retirement Account. Does not include shares issuable upon full
conversion of Series A Stock and Convertible Debt currently held by
Amsterdam Equities Limited and Mr. Laport. See "Certain Relationships and
Related Transactions".

(2) Mr. Collins currently serves as a representative of Amsterdam Equities
Limited. Conversion of the Convertible Debt and Series A Stock presently
held by Amsterdam Equities Limited, which totals approximately $3.5 Million
as of this date, would result in the additional issuance to Amsterdam
Equities Limited of approximately 1,800,000 shares of Company Common Stock.
On a fully diluted basis and assuming full conversion, this would result in
Amsterdam Equities Limited owning shares of Company Common Stock which,
when added to its existing stock holdings, would be equal to approximately
40% of the Company. As of this date, the conversion of this debt into
equity at the existing conversion formula would result in a conversion
price per share significantly in excess of current market levels for the
Company's Common Stock. Amsterdam Equities Limited has not indicated to the
Company whether it intends to convert its debt to equity. See "Certain
Relationships and Related Transactions".

20
<PAGE> 20
Conversion of the Series A Stock presently held by Mr. Laport, which totals
approximately $450,000 as of this date, would result in the additional
issuance to Mr. Laport of approximately 150,000 shares of Company Common
Stock. On a fully diluted basis, and assuming full conversion by
Amsterdam Equities Limited, this would result in Mr. Laport owning shares
of Common Stock which, when added to his existing stock holdings, would be
equal to approximately 30% of the Company (on a fully diluted basis and
assuming conversion in full by Amsterdam Equities Limited and Mr. Laport).
Mr. Laport is contractually prohibited from converting his Series A Stock
unless Amsterdam Equities Limited also decides to convert its Convertible
Debt. See "Certain Relationships and Related Transactions".

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Financing Arrangements

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

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

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

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

An additional provision of the Convertible Debt and Preferred Stock
Agreements included the payment of $300,000 as a closing fee and required the
Company to reimburse the legal fees and costs and expenses of the Investor
Group in connection with the negotiation and the closing of the transaction
which totaled $216,897. The closing fees

<PAGE> 21
and reimbursement of the costs and expenses were payable in the form of
Convertible Debt and Preferred Stock. In total, the Company incurred costs of
$544,716 in connection with the refinancing which has been capitalized and will
be amortized over a period of seven years or until the Convertible
Debt/Preferred Stock is called.

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

Under the terms of the transaction, the Company also issued a warrant
to purchase 100 shares of Series B Preferred Stock. The Series B Preferred Stock
entitled Amsterdam Equities Limited to elect a Class B director who would have
super-majority voting powers on the Company's Board of Directors. Effective as
of August, 1996, Mr. Laport was elected as the Class B Director. The Class B
Director has taken no action to date.

The Convertible Debt and Preferred Stock may be converted into the
common stock of the Company, at the sole option of the Investor Group, at
various conversion rates as set forth in the conversion formula contained in the
Convertible Debt and Preferred Stock Agreements. If the Investor Group were to
convert all outstanding Convertible Debt and Preferred Stock at the present
time, and exercise the default warrants (see below), the conversion would result
in the issuance to the Investor Group of a significant majority interest of the
issued and outstanding shares of Company's common stock (after conversion and
assuming full conversion and anti-dilution). At present, conversion pursuant to
the conversion rates set forth in the Convertible Debt and Preferred Stock
Agreement would result in a conversion at rates significantly in excess of the
current market price for the Company's Common Stock.

In addition, pursuant to the terms of the Financing Arrangement, the
Company issued to the holders of the Convertible Debt and the Preferred Stock a
series of default warrants to purchase an aggregate number of shares of common
stock equivalent to fifty percent (50.0%) of the issued and outstanding Common
Stock of the Company at an exercise price of $0.10 per share (subsequently
reduced to $0.01 per share under the terms of the Modification Agreement). The
Company has been in ongoing default under the Financing Arrangement and,
accordingly, these default warrants have been capable of being exercised by the
Investor Group upon payment of a minimal exercise price since January 1, 1997.

Effective as of November 4, 1998, (i) Amsterdam Equities Limited
transferred any and all interest which they had in the default warrants to Frank
Leonard Laport, and (ii) Mr. Laport proceeded to exercise such default warrants.
Exercise of all of the default warrants for the stated exercise price resulted
in Mr. Laport receiving approximately 1,065,483 shares of Company Common Stock,
(i.e. approximately 30%) of the Company Common Stock.

At present, taking into account all accrued interest and dividends, but
without taking into account any potential liability of the Company for
withholding taxes, the Investor Group is owed in excess of $3,500,000 pursuant
to the Convertible Debt/Preferred Stock Agreement.

2. George B. Collins, a director of the Company, holds a Power of Attorney from
Amsterdam Equities Limited and generally serves as the representative of
Amsterdam Equities Limited on the Board of the Company.

22
<PAGE> 22
3. Mr. Laport, an officer and director of the Company, owns the property and the
phone system located at 7421 West 100th Place, Bridgeview, IL and leases a
portion of such space and phone system to the Company. The Leases between the
Company and Mr. Laport are on a month-to-month basis and provide for aggregate
monthly payments from the Company to Mr. Laport of approximately $2,000. In
addition, the Company is responsible for a pro-rata portion of the expenses
associated with the property, including real estate taxes, utilities, etc. This
lease was entered into subsequent to Mr. Laport becoming an officer and
director.

4. Mr. Lockwood, formerly an officer and director of the Company, is a part
owner of Stark Enterprises, which owns the property located at 12752 Stark Road
in Livonia, MI. The Company leases such property from Stark Enterprises.
Pursuant to such lease, which expires in 2002, the Company pays monthly
payments of $13,901 to Stark Enterprises. In addition, Mr. Lockwood also has a
partial ownership interest in The Island Group. In connection with the Company's
initial acquisition of its Mason Dental lab facility, the Company issued a
promissory note to The Island Group, which such Note requires monthly payments
of $21,000 and runs through 2005. Effective December 6, 1999, Mr. Lockwood
resigned as an officer and director of the Company.

Note 4 - CONVERSION OF DEBT

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

PART IV

ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a)(1) Financial Statements:

Consolidated Balance Sheets as of December 31, 1998 and 1999

Consolidated Statements of Operations for the years ended December 31, 1998 and
1999

Consolidated Statements of Shareholders' Equity for the years ended December 31,
1998 and 1999

Consolidated Statements of Cash Flows for the years ended December 31, 1998 and
1999

Notes to Consolidated Financial Statements

ALL 1999 FINANCIAL STATEMENTS HAVE BEEN PREPARED WITHOUT AUDIT AND ARE SUBJECT
TO MODIFICATION.

1998 Auditors Report and Notes attached for reference.

<PAGE> 23
PRINCETON DENTAL MANAGEMENT CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND DECEMBER 31, 1998

<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
(Unaudited)
----------------- -----------------
<S> <C> <C>
ASSETS

Current Assets:

Cash and Cash Equivalents $ 724,692 $ 188,724
Accounts Receivable, net of allowances
for doubtful accounts of $127,238 and
$129,000 respectively 827,909 821,190
Current portion of loan receivable - affiliate 64,792 163,336
Inventories 122,928 100,048
Other Current Assets 48,690 73,373
----------- -----------

Total Current Assets 1,789,011 1,346,671
----------- -----------

Property and equipment, net 392,300 550,976

Goodwill, net of accumulated amortization of
$3,004,501 and $2,543,041, respectively 4,619,432 5,080,892
Other Assets, net 299,713 377,804
----------- -----------
Total Other Assets 5,311,445 6,009,672
----------- -----------
Total Assets $ 7,100,456 $ 7,356,343
=========== ===========
</TABLE>

<PAGE> 24
PRINCETON DENTAL MANAGEMENT CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND DECEMBER 31, 1998

<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
(Unaudited)
----------------- -----------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Liabilities not Subject to Compromise
Accounts Payable $ 341,622 $ 976,901
Accrued salaries and wages 554,309 297,618
Other accrued expenses 2,601,892 1,822,712
Notes Payable 0 130,591
Current portion of capital lease obligations 5,743 17,345
Current portion of long-term debt 0 500,947
Convertible secured debt 2,133,428 2,133,428

Total Current Liabilities 5,636,994 5,879,542
------------ ------------

Liabilities Subject to Compromise 2,750,762 1,592,928
------------ ------------

Total Liabilities 8,387,756 7,472,470
------------ ------------
Shareholders Equity:
Series A 11.75% Cumulative Convertible
Preferred Stock par value $1.00
per share; 1,000,000 shares authorized;
5,000 shares issued and outstanding 5,000 2,848
Series B Preferred Stock, par value $1.00
per share; 100 shares authorized; 100 shares
issued and outstanding 100 100
Common stock, par value $0.0001 per share;
25,000,000 shares authorized; 3,196,448
issued and outstanding 320 320
Less: 8,462 shares Common Stock held
in treasury, at cost (181,771) (181,771)

Additional Paid-in Capital 15,403,623 15,403,623
Accumulated Deficit (16,514,572) (15,341,247)
------------ ------------

Net Shareholders' Equity (1,287,300) (116,127)
------------ ------------

Total Liabilities and Shareholders' Equity $ 7,100,456 $ 7,356,343
============ ============
</TABLE>

<PAGE> 25
PRINCETON DENTAL MANAGEMENT CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
For the years ended
December 31
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
Revenue:
Practice Revenue $ 7,499,010 $ 7,715,627
Laboratory Revenue 4,957,449 4,350,500
------------ ------------
Total Revenue 12,456,459 12,066,127
------------ ------------
Expenses:
Practice compensation and Benefits 6,737,866 6,095,367
Other Practice Expense 1,802,891 1,740,066
Cost of Laboratory Revenue & Expenses 2,772,462 3,176,887
General Corporate Expenses 618,678 853,171
Depreciation and Amortization 744,628 833,275
------------ ------------
Total Operating Expenses 12,676,525 12,698,766
------------ ------------
Operating Gain/(Loss) (220,066) (632,639)
------------ ------------
Other Income (Expense):
Gain from sale of practices & laboratory 0 (123,900)
Interest Expense (961,762) (880,145)
Other Income 8,503 18,208
------------ ------------
Total Other Income (Expense) (953,259) (985,837)
------------ ------------
Earnings Before Reorganization Items and Income
Tax Benefit $ (1,173,325) $ (1,618,476)
============ ============

Basic and Diluted Net Loss Per Share $ (0.37) $ (0.72)
============ ============

Basic and Diluted Weighted Average Number
of Shares Outstanding 3,196,448 2,258,046
</TABLE>
<PAGE> 26
PRINCETON DENTAL MANAGEMENT CORPORATION
(DEBTOR-IN-POSSESSION)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(UNAUDITED)

<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Net Loss $(1,173,325) $(1,618,476)
----------- -----------
Cash Provided by (Used for) Operating Activities:
Depreciation and Amortization 744,628 833,275
Provision for Bad Debts (1,762) (60,495)
Default warrants issued and exercised below market 0 123,900
Changes in Operating Assets and Liabilities:
Accounts Receivable (4,957) 161,688
Inventories (22,880) 7,903
Other Current Assets 24,683 16,140
Accounts Payable 244,061 53,907
Accrued Expenses 1,035,871 932,222
----------- -----------
Net Cash Provided by (Used for) Operating Activities 846,319 450,064
----------- -----------
Cash Provided by (Used for) Investing Activities:
Other Assets 78,091 (13,685)
Proceeds from notes receivable 98,544 185,301
Purchase of property and equipment - Net (124,492) (88,389)
----------- -----------
Net Cash Provided by (Used for) Investing Activities 52,143 83,227
----------- -----------
Cash Provided by (Used for) Financing Activities:
Principal payments on capital lease obligations (12,845) (18,849)
Proceeds from issuance of common stock 2,152 171,475
Principal payments on long term debt and
notes payable to shareholders (351,801) (473,988)
----------- -----------
Net Cash Provided by (Used for) Financing Activities (362,494) (321,362)
----------- -----------
Increase in Cash and Cash Equivalents 535,968 211,929
Cash and cash equivalents, beginning of year 188,724 (23,205)
----------- -----------
Cash and cash equivalents, end of year $ 724,692 $ 188,724
=========== ===========
</TABLE>

<PAGE> 27
PRINCETON DENTAL MANAGEMENT CORPORATION
(DEBTOR-IN-POSSESSION)
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
(UNAUDITED)

<TABLE>
<CAPTION>
Series A 11.75%
Cumulative Convertible Series B
Preferred Stock Preferred Stock Common Stock
---------------------- --------------- -----------------
Shares Amount Shares Amount Shares Amount
--------- ----------- ------ ------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1997 2,848 $ 2,848 100 $100 2,024,465 $202

Issuance of common stock of
106,500 shares at $1.08-$1.98
per share 106,500 11

Issuance of common stock of
1,065,483 shares, upon
conversion of default warrants 1,065,483 107

Net loss
----- ------- --- ---- --------- ----

Balances at December 31, 1998 2,848 2,848 100 100 3,196,448 $320

Issuance of common stock 2,152 2,152

Net loss
----- ------- --- ---- --------- ----

Balances at December 31, 1999 5,000 $ 5,000 100 100 3,196,448 320
===== ======= === ==== ========= ====

Additional Net
Treasury Paid-in Accumulated Shareholders'
Stock Capital Deficit Equity (Deficit)
---------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Balance at December 31, 1997 $ (181,771) $15,108,366 $ (13,722,771) $ 1,206,974

Issuance of common stock of
106,500 shares at $1.08-$1.98
per share 130,215 130,226

Issuance of common stock of
1,065,483 shares, upon
conversion of default warrants 165,042 165,149

Net loss (1,618,476) (1,618,476)
---------- ----------- ------------- ------------

Balances at December 31, 1998 (181,771) 15,403,623 (15,341,247) (116,127)

Issuance of common stock

Net loss (1,173,325) (1,173,325)
---------- ----------- ------------- ------------

Balances at December 31, 1999 $ (181,771) $15,403,623 $ (16,514,572) $ (1,289,452)
========== =========== ============= ============
</TABLE>
<PAGE> 28
Note 1 - SIGNIFICANT ACCOUNTING POLICIES

Except as noted, the accounting policies followed by Princeton Dental
Management Corporation (the Company) for its 1999 annual financial reporting
purposes are the same as those disclosed in the Company's audited 1998 annual
financial statements. In the opinion of management, the accompanying condensed
consolidated financial statements reflect all adjustments necessary for a fair
presentation of the information presented.

The 1999 annual condensed consolidated financial statements herein have
been prepared by the Company without audit. Certain information and footnote
disclosures included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Although the Company's management believes the disclosures are adequate to make
the information not misleading, it is suggested that these 1999 annual condensed
financial statements be read in conjunction with the 1998 audited annual
financial statements and footnotes thereto.

The consolidated financial statements include the accounts of the
Company, its wholly owned subsidiaries and dental practices affiliated with the
Company and its subsidiaries. All material intercompany accounts and
transactions have been eliminated in consolidation.

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

Note 2 - SUBSEQUENT EVENTS/REORGANIZATION

During 1999, the Company, along with all of its operating subsidiaries,
filed voluntary petitions for reorganization under Chapter 11 of the United
States Bankruptcy Code. These voluntary petitions were filed on October 1, 1999
in the United States Bankruptcy Court of the Middle District of Florida, Tampa
Division (Case No. 99-16012-8C1) and were subsequently consolidated per the
order of the Bankruptcy Court.

The Company has been unable for an extended period to make the required
payments of interest or principal on a significant portion of its secured and
unsecured debt. The Company has also been unable to make payments on significant
amounts of outstanding trade debt and was faced with multiple lawsuits with
respect to this failure to make required payments. After a period of
negotiation, the Company was unable to reach out-of-court settlements with its
various lenders and trade creditors. Accordingly, bankruptcy petitions were
filed in order to obtain an opportunity to reorganize and begin implementing the
Company's strategies while working to restructure its indebtedness. The Company
expects to reorganize its affairs under the protection of Chapter 11 and to
propose a Chapter 11 plan of reorganization for itself and the other filing
subsidiaries which will be confirmed.

Under the Bankruptcy Code, actions to collect pre-petition indebtedness are
stayed and certain other contractual obligations may not be enforced against the
Company. In addition, the Company may reject executory contracts and lease
obligations. Parties affected by these rejections may file claims with the
Bankruptcy Court in accordance with the reorganization process. If the Company
is able to successfully reorganize, substantially all unsecured liabilities as
of the petition date would be subject to settlement under a plan of
reorganization to be voted
<PAGE> 29
upon by all impaired classes of creditors and equity security holders and
approved by the Bankruptcy Court.

As a result of the Chapter 11 filings, absent approval of the Bankruptcy Court,
the Company is prohibited from paying, and creditors are prohibited from
attempting to collect, claims or debts arising pre-petition. The consummation of
a plan of reorganization is the principal objective of the Company's Chapter 11
case. A plan of reorganization sets forth the means of satisfying claims and
interests in the Company and its subsidiaries, including liabilities subject to
compromise. The consummation of a plan of reorganization for the Company and its
subsidiaries will require the requisite vote of the impaired creditors and
stockholders under the Bankruptcy Code and confirmation of the plan by the
Bankruptcy Court.

The Company expects to reorganize its affairs under the protection of Chapter 11
and to propose a Chapter 11 plan of reorganization and the Bankruptcy Court has
granted the Company an extension of time with respect to its exclusive right to
file a plan of reorganization. Although management expects to file a plan of
reorganization within a timely fashion which would contemplate emergence from
bankruptcy, there can be no assurance at this time that a plan of reorganization
will be proposed by the Company or approved or confirmed by the Bankruptcy
Court, or that such a plan will be consummated. After the expiration of the
exclusivity period, creditors of the Company have the right to propose
alternative plans of reorganization. In addition, the U.S. Trustee has filed a
Motion to dismiss or convert the Company's Chapter 11 case to a case under
Chapter 7 of Title 11 of the United States Bankruptcy Code. While the Bankruptcy
Court has not yet ruled on such Motion, there can be no assurance that such
Motion will not be approved. Any plan of reorganization, among other things, is
likely to result in material dilution or elimination of the equity of the
existing shareholders, as a result of the issuance of equity to creditors or new
investors.

The accompanying financial statements have been prepared on a going concern
basis, which contemplates continuity of operations, realization of assets and
liquidation of liabilities in the ordinary course of business. However, as a
result of the Chapter 11 filing and circumstances relating to this event,
including the Company's leveraged financial structure and losses from
operations, such realization of assets and liquidation of liabilities is subject
to significant uncertainty. While under the protection of Chapter 11, the
Company may sell or otherwise dispose of assets, and liquidate or settle
liabilities, for amounts other than those reflected in the financial statements.
Further, a plan to reorganize could materially change the amounts reported in
the financial statements, which do not give effect to all adjustments of the
carrying value of assets or liabilities that might be necessary as a consequence
of a plan of reorganization. The appropriateness of using the going concern
basis is dependent upon, among other things, confirmation of a plan of
reorganization, future profitable operations and the ability to generate
sufficient cash from operations and financing operations to meet obligations.

In connection with the reorganization, the Company may, in the future, adopt
Statement of Position 90-7, Financial Reporting by Entities in Reorganization
Under the Bankruptcy Code. This statement provides guidance on financial
reporting for entities that have filed petitions with the Bankruptcy Court and
expect to reorganize as going concerns under Chapter 11 of Title 11 of the
United States Code. At present the Company has not adopted such Statement of
Position 90-7.

<PAGE> 30
Note 3 - RECLASSIFICATIONS

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

Note 4 - FINANCING AGREEMENT

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

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

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

An additional provision of the Convertible Debt and Preferred Stock
Agreements included the payment of $300,000 as a closing fee and required the
Company to reimburse the legal fees and costs and expenses of the Investor Group
in connection with the negotiation and the closing of the transaction which
totaled $216,897. The closing fees and reimbursement of

<PAGE> 31
the costs and expenses were payable in the form of Convertible Debt and
Preferred Stock. In total, the Company incurred costs of $544,716 in connection
with the refinancing which has been capitalized and will be amortized over a
period of seven years or until the Convertible Debt/Preferred Stock is called.

<PAGE> 32

PRINCETON DENTAL
MANAGEMENT CORPORATION

CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1998 AND 1997
(WITH INDEPENDENT AUDITORS' REPORT THEREON)

<PAGE> 33
INDEPENDENT AUDITORS' REPORT

Board of Directors
Princeton Dental Management Corporation:

We have audited the accompanying consolidated balance sheets of Princeton Dental
Management Corporation as of December 31, 1998 and 1997, and the related
consolidated statements of operations, shareholders' equity (deficit), and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Princeton Dental Management Corporation at December 31, 1998 and 1997, and the
consolidated results of its operations and its cash flows for the years then
ended in conformity with generally accepted accounting principles.

The accompanying consolidated financial statements have been prepared assuming
that Princeton Dental Management Corporation will continue as a going concern.
As discussed in Note 15 to the consolidated financial statements, the Company's
recurring losses from operations and its net working capital deficiency raise
substantial doubt about the entity's ability to continue as a going concern.
Management's operational plans in regard to these matters are also described in
Notes 13 and 15. The consolidated financial statements do not include any
adjustments relating to the recoverability and classification of reported asset
amounts or the amounts and classification of liabilities that might result from
the outcome of this uncertainty.

March 4, 1999
Clearwater, Florida

<PAGE> 34
PRINCETON DENTAL MANAGEMENT CORPORATION

CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31, 1998 1997
- ----------- ---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 188,724 46,644
Accounts receivable, net of allowances for doubtful
accounts of $129,000 and $189,000, respectively 821,190 922,383
Current portion of loans receivable 163,336 298,637
Inventories 100,048 107,951
Other current assets 73,373 89,513
---------- ---------
Total current assets 1,346,671 1,465,128

Property and equipment, net 550,976 756,579
Goodwill, net of accumulated amortization of $2,543,042
and $2,081,576, respectively 5,080,892 5,542,358
Loans receivable -- 50,000
Other assets, net 377,804 441,936
---------- ---------
$7,356,343 8,256,001
========== =========
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
December 31, 1998 1997
- ----------- ----------- ---------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Bank debit balances $ -- 69,849
Notes payable 130,591 130,591
Current portion of capital lease obligations 17,345 18,849
Current portion of long-term debt 500,947 779,184
Convertible secured debt 2,133,428 2,133,428
Accounts payable 976,901 922,994
Accrued salaries and wages 297,618 476,178
Other accrued expenses 1,822,712 711,930
----------- -----------

Total current liabilities 5,879,542 5,243,003

Long-term debt, excluding current portion 1,591,685 1,787,436
Capital lease obligations, excluding current portion 1,243 18,588
----------- -----------

Total liabilities 7,472,470 7,049,027
----------- -----------
Shareholders' equity (deficit):
Series A 11.75% Cumulative Convertible Preferred Stock
par value $1.00 per share; authorized shares - 1,000,000;
issued and outstanding - 2,848 at December 31, 1998
and 1997 2,848 2,848
Series B Preferred stock, par value $1.00 per share;
authorized shares - 100; issued and outstanding - 100
at December 31, 1998 and 1997 100 100
Common stock, par value $0.0001 per share; authorized
shares - 25,000,000; issued and outstanding - 3,196,448
and 2,024,465 at December 31, 1998 and 1997 320 202
Less: 8,452 shares Common stock held in treasury, at cost
at December 31, 1998 and 1997 (181,771) (181,771)
Additional paid-in capital 15,403,623 15,108,366
Accumulated deficit (15,341,247) (13,722,771)
----------- -----------
Net shareholders' equity (deficit) (116,127) 1,206,974
----------- -----------

$ 7,356,343 8,256,001
=========== ===========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE> 36
PRINCETON DENTAL MANAGEMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1998 1997
- ----------------------- ------------ ----------
<S> <C> <C>
Revenue:
Practice revenue $ 7,715,627 9,604,047
Laboratory revenue 4,350,500 4,191,745
------------ ----------
Total revenue 12,066,127 13,795,792
------------ ----------

Expenses:
Practice compensation and benefits 6,095,367 7,166,391
Other practice expenses 1,740,066 1,895,492
Cost of laboratory revenue and laboratory expenses 3,176,887 3,389,324
General corporate expenses 853,171 548,917
Depreciation and amortization 833,275 881,845
------------ ----------
Total operating expenses 12,698,766 13,881,969
------------ ----------
Operating loss (632,639) (86,177)
Gain on sale of practices/lab -- 282,590
Loss on disposal of property and equipment -- (7,896)
Interest expense (880,145) (236,391)
Default warrants redemption (123,900) --
Other income 18,208 56,293
------------ ----------
Net income (loss) $ (1,618,476) 8,419
============ ==========

Basic net income (loss) per share of common stock (.72) --
Basic weighted common shares outstanding 2,258,046 2,024,465
============ ==========
Diluted net income (loss) per share of common stock (.72) --
Diluted weighted common shares outstanding 2,258,046 3,019,483
============ ==========
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE> 37
PRINCETON DENTAL MANAGEMENT CORPORATION

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIT)

YEARS ENDED DECEMBER 31, 1998 AND 1997

<TABLE>
<CAPTION>
Series A 11.75%
Cumulative Convertible Series B
Preferred Stock Preferred Stock Common Stock
---------------------- --------------- -----------------
Shares Amount Shares Amount Shares Amount
-------- ------------ ------ ------- --------- -------
<S> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1996 2,848 $ 2,848 100 $100 2,024,465 $202

Issuance of common stock of
53,381 shares held in treasury
upon conversion of convertible debt -- -- -- -- -- --

Net income -- -- -- -- -- --
----- ------- --- ---- --------- ----

Balances at December 31, 1997 2,848 2,848 100 100 2,024,465 202

Issuance of common stock of 106,500
shares of $1.08 - $1.98 per share -- -- -- -- 106,500 11

Issuance of common stock of 1,065,483
shares, upon conversion of default
warrants -- -- -- -- 1,065,483 107
Net loss -- -- -- -- -- --
----- ------- --- ---- --------- ----

Balances at December 31, 1998 2,848 $ 2,848 100 $100 3,196,448 $320
===== ======= === ==== ========= ====

Additional Net
Treasury Paid-in Accumulated Shareholders'
Stock Capital Deficit Equity (Deficit)
---------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Balances at December 31, 1996 (331,771) 15,108,366 (13,731,190) 1,048,555

Issuance of common stock of
53,381 shares, held in treasury
upon conversion of convertible debt 150,000 -- -- 150,000

Net income -- -- 8,419 8,419
---------- ----------- ------------- ------------

Balances at December 31, 1997 (181,771) 15,108,366 (13,722,771) 1,206,974

Issuance of common stock of
106,500 shares at $1.08 - $1.98 per share -- 130,215 -- 130,226

Issuance of common stock of 1,065,483
shares, upon conversion of default
warrants -- 165,042 -- 165,149
Net loss -- -- (1,618,476) (1,618,476)
---------- ----------- ------------- ------------

Balances at December 31, 1998 (181,771) 15,403,623 (15,341,247) (116,127)
========== =========== ============= ============
</TABLE>

See accompanying notes to consolidated financial statements.
<PAGE> 38
PRINCETON DENTAL MANAGEMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1998 1997
- ----------------------- ----------- -------
<S> <C> <C>
Operating activities:
Net income (loss) $(1,618,476) 8,419
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 833,275 881,845
Loss on disposal of property and equipment -- 7,896
Provision for bad debts (60,495) (108,298)
Default warrants issued and exercised below
market 123,900 --
Gain on sale of practices/lab -- (282,590)
Changes in operating assets and liabilities:
Accounts receivable 161,688 95,802
Inventories 7,903 (12,605)
Other current assets 16,140 6,334
Accounts payable 53,907 (443,661)
Accrued expenses 932,222 (180,944)
----------- -------
Net cash provided (used) by
operating activities 450,064 (27,802)
----------- -------

Investing activities:
Purchase of property and equipment (88,389) (145,971)
Proceeds from notes receivable 185,301 108,551
Proceeds from sale of equipment -- 2,528
Other assets (13,685) 12,093
Proceeds from sale of practices/lab -- 668,461
----------- -------
Net cash provided by investing activities 83,227 645,662
----------- -------

Financing activities:
Proceeds from issuance of common stock 171,475 --
Proceeds from issuance of convertible secured debt -- 17,504
Principal payments on notes payable -- (118,409)
Principal payments on long-term debt (473,988) (578,847)
Principal payments on note payable to shareholders -- (122,948)
Principal payments on capital lease obligations (18,849) (23,600)
----------- -------
Net cash used in financing activities (321,362) (826,300)
----------- -------
Increase (decrease) in cash and bank debit balances 211,929 (208,440)
Cash and bank debit balances at beginning of period (23,205) 185,235
----------- -------
Cash and bank debit balances at end of period $ 188,724 (23,205)
=========== =======
</TABLE>

(continued)

<PAGE> 39

PRINCETON DENTAL MANAGEMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS - CONTINUED

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31, 1998 1997
- ----------------------- ---- ----
<S> <C> <C>
Supplemental schedule of non-cash financing and investing activities:

During 1997, the Company incurred $12,734 of capital lease obligations.

During 1997, the Company converted $150,000 of outstanding debt into 53,381
shares of common stock, previously held as treasury stock.

Interest paid was approximately $132,000 and $179,000 for the years ended
December 31, 1998 and 1997, respectively.

Taxes paid was approximately $15,000 for the year ended December 31, 1998.
</TABLE>

See accompanying notes to consolidated financial statements.

<PAGE> 40
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1998 AND 1997

(1) ORGANIZATION, BASIS OF PRESENTATION AND SUMMARY OF ACCOUNTING POLICIES

On October 22, 1986, the Company was organized as Princeton Dental
Management Corporation, a Delaware corporation. The Company had limited
activity up through its first issuances of common stock in June 1987. The
Company owns a lab in Michigan and provides management services to dental
practices (DP) under long-term management service agreements (MSA).
Corporate practices of dentistry laws in the states in which the Company
currently operates prohibit the Company from owning dental practices. In
response to these laws, the Company has executed management service
agreements with various dental practices. Under the terms of the MSA, the
Company, among other things, bills and collects patient receivables and
provides all administrative support to the DP. The DP are owned by
corporations whose sole shareholder is a licensed dentist. Licensed
dentists at each practice supervise the professional dental staff and
provide all of the clinical services to the patients.

In 1997, the Emerging Issues Task Force (EITF) of the Financial Accounting
Standards Board evaluated certain matters relating to the physician
practice management industry (EITF issue number 97-2) and reached a
consensus on the accounting for transactions between physician practice
management companies (PPM) and physician practices and the financial
reporting of such entities. For financial reporting purposes, EITF 97-2
mandates the consolidation of affiliated physician practices with the PPM
when certain conditions have been met, even though the PPM does not have an
equity investment in the physician practice. The accompanying consolidated
financial statements are prepared in conformity with the consensus reached
in EITF 97-2.

The consolidated financial statements include the accounts of the Company,
its wholly owned subsidiaries and the affiliated DP. All material
intercompany accounts and transactions have been eliminated in
consolidation.

(a) Accounts Receivable

Accounts receivable are comprised primarily of receivables from dental
patients and insurance carriers. Credit is extended based on an
evaluation of the customer's financial condition, and generally
collateral is not required.

(b) Inventories

Inventories, consisting principally of dental prosthetics, are stated
at the lower of cost, determined by the first-in, first-out method, or
market.

(continued)

<PAGE> 41
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Property and equipment are stated at cost less accumulated depreciation
and amortization. Depreciation is recorded using the straight-line
method over estimated useful lives of five to nine years. Property and
equipment held under capital leases and leasehold improvements are
amortized straight-line over the shorter of the lease term or the
estimated useful life of the asset.

(d) Goodwill

Goodwill represents excess of purchase price over the fair value of net
assets acquired, net of any liabilities assumed, from dental practices
and other operations acquired by the Company. Amortization of goodwill
totaled approximately $462,000 and $473,000 for the years ended
December 31, 1998 and 1997, respectively.

(e) Revenue Recognition

The Company recognizes revenue in the month the related service is
provided. Operating revenues include amounts estimated by management to
be receivable from Medicaid and other third-party programs under
provisions of reimbursement terms in effect. Differences between
estimated payments and final payments are reflected as charges or
credits to operating revenues when the payment is received.

(f) Income Taxes

The Company uses the liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and
laws that will be in effect as the differences reverse.

(g) Estimates

In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures
of contingent assets and liabilities at the date of the financial
statements, as well as the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.

(h) Concentrations of Credit Risk

Cash balances are maintained in financial institutions. Occasionally,
deposits exceed amounts insured by the Federal Deposit Insurance
Corporation.

(continued)

<PAGE> 42
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(i) Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of

The Company has adopted Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed of (SFAS 121).

SFAS 121 requires that long-lived assets and certain identifiable
intangibles held and used by an entity be reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. If the sum of the expected
future cash flows (undiscounted and without interest) is less than the
carrying amount of the asset, an impairment loss is recognized.
Measurement of that loss would be based on the fair value of the asset.
SFAS 121 also generally requires long-lived assets and certain
identifiable intangibles to be disposed of to be reported at the lower
of the carrying amount or the fair value less cost to sell.

(j) Fair Value of Financial Instruments

At December 31, 1998 and 1997, the carrying value of all financial
instruments approximated their fair values.

(k) Reclassifications

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

(l) Reverse Stock Split

The Board of Directors authorized a one-for-five reverse stock split
effective August 18, 1997. All share and per share data have been
retroactively restated to give effect to this reverse stock split.

(m) Net Income (Loss) Per Share of Common Stock

The Company has adopted Statement of Financial Accounting Standards No.
128, Earnings per Share (SFAS 128). Under SFAS 128, basic net income
(loss) per share of common stock is computed by dividing income
available to common stockholders by the weighted average number of
common shares actually outstanding during the period. Diluted net
income (loss) per share of common stock presents income attributable to
common shares actually outstanding plus dilutive potential common
shares outstanding during the period. See Note 9 for the computation of
basic and diluted net income (loss) per common stock as required by
SFAS No. 128.

(continued)

<PAGE> 43
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(2) LOANS RECEIVABLE

The majority of loans receivable have resulted from the sale of various
practices/lab during 1997 (Note 11).

(3) PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31:

1998 1997
----------- ----------
Dental equipment $ 852,895 $ 817,826
Laboratory and delivery equipment 349,611 266,951
Office furniture and equipment 208,465 247,142
Computer equipment and software 313,371 306,361
Leasehold improvements 238,759 236,591
----------- ----------
1,963,101 1,874,871

Less accumulated depreciation
and amortization (1,412,125) (1,118,292)
----------- ----------

$ 550,976 $ 756,579
=========== ==========

Depreciation and amortization related to property and equipment totaled
approximately $294,000 and $320,000, respectively for the years ended
December 31, 1998 and 1997, including amounts classified within cost of
laboratory revenue.

(4) NOTES PAYABLE

Unsecured notes payable, bearing interest from 1% over the prime rate
(7.75% at December 31, 1998) to 12%, are due on demand.

(continued)

<PAGE> 44

PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5) LONG-TERM DEBT

<TABLE>
<CAPTION>
Long-term debt as of December 31 consists of the following: 1998 1997
---------- ----------
<S> <C> <C>
Note payable to shareholders, issued in connection with the acquisition of
Mason. Payments may be contractually restricted based on Mason's average
monthly cash flow before intercompany transactions as defined in the
purchase agreement. If restricted, principal and interest payments may be
made in common stock of the Company. Beginning January, 1997, the Company
began making monthly installments of $21,610 with interest at 8% through
March 2006. Effective July, 1997, interest was waived through June, 1998.
The monthly principal installments approximate $10,300 during this period.
This waiver reduced the effective interest rate over the remaining life of
the loan. During 1997, $150,000 of this note was converted to common stock,
previously held in treasury. $1,290,223 $1,416,572

Note payable to shareholder in monthly installments of $12,133, including
interest at 8% through January 1, 1998, with remaining principal due
January 1, 1998, secured by stock of American Dental Health - Battle Creek,
P.C. Effective August 1998, the note was renegotiated to include monthly
installments of $15,000, including interest at 9% through October 2000. 305,601 430,300

Notes payable to individual investors, unsecured, bearing interest at rates
ranging from 8% to 10%, requiring various quarterly installments ranging
from $320 to $1,280, including interest, through October 1997. Balance of
$20,000, payable in equal quarterly installments of $5,000, including
interest at 12% through December 1998. Repaid in 1998. -- 20,000

Notes payable to seller of laboratory assets of Mason in monthly
installments of $5,000 including interest at 9% ($25,000 payable October,
1998) through September, 1999. Balloon payment of approximately $30,000 due
October, 1999. 71,243 140,867

Note payable to shareholders in monthly installments of $12,102 including
interest at 7.48% through June 30, 2002, secured by all assets transferred
in connection with the acquisition of The Dental Team and the stock of
The Florida Dental Team P.A. 419,659 539,703

</TABLE>

(continued)

<PAGE> 45
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(5) LONG-TERM DEBT - CONTINUED

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Notes payable to various sellers of dental laboratory assets bearing
interest at rates ranging from 7% to 8%, payable in monthly installments
totaling $269, including interest through April, 1998. Repaid in 1998. $ -- $ 1,062

Notes payable to financial institutions, secured by delivery equipment,
bearing interest ranging from 7.9% to 11.75%, payable in monthly
installments totaling $1,109, including interest through February, 1999;
$706 through June, 1999 and $304 through November, 1999. 5,906 18,116
---------- ----------
2,092,632 2,566,620

Current portion of long-term debt (500,947) (779,184)
---------- ----------

Long-term debt, excluding current portion $1,591,685 $1,787,436
========== ==========
</TABLE>

Substantially all long-term debt is secured by the assets of the Company,
its subsidiaries, life insurance policies or various other assets.

Scheduled maturities of long-term debt for the years subsequent to December
31, 1998 are as follows: 1999 - $500,947; 2000 - $421,499; 2001 - $277,999;
2002 - $221,299; 2003 - $188,240 and thereafter - $482,648.

(continued)

<PAGE> 46
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(6) CAPITAL LEASE OBLIGATIONS

The Company is obligated under various lease agreements for certain office
equipment. These leases are noncancelable and require monthly payments
through April 2000. Following is a schedule of future minimum lease
payments under capital leases:

Year Ended December 31,
-----------------------
1999 $19,033
2000 1,343
-------
Total minimum lease payments 20,376

Less amount representing interest (1,788)

Present value of net minimum lease payments 18,588

Less current portion of capital lease obligations (17,345)

Capital lease obligations, excluding current portion $ 1,243
=======

The amortization of assets recorded under capital leases is included with
depreciation expense.

(7) SHAREHOLDERS' EQUITY

(a) Preferred Stock

The Company has authorized 1,000,000 shares of $1.00 par value Series
A 11.75% Cumulative Preferred Stock and 100 shares of $1.00 par value
Series B Preferred Stock. Series of the Preferred Stock may be created
and issued from time to time, with such designations, preferences,
conversion rights (including voting rights), qualifications,
limitations or restrictions thereof as shall be stated and expressed
in the resolution or resolutions providing for the creation and
issuance of such series of Preferred Stock.

(b) Common Stock

During 1998, the Company issued 106,500 unregistered shares of
restricted common stock of the Company at prices ranging from $1.98 to
$1.08 per share in a private placement exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.

During 1998, the Company issued 1,065,483 shares of unregistered
restricted common stock of the Company for an aggregate price of
$41,250 upon conversion of certain default warrants (Note 13). Based
on the fair market value at the date of exercise exceeding the
exercise price, the Company recognized a charge of $123,900, included
in the accompanying consolidated statement of operations. The issuance
of common stock is exempt from registration requirements pursuant to
Section 4(2) of the Securities Act of 1933.

(continued)

<PAGE> 47
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(7) SHAREHOLDERS' EQUITY - CONTINUED

During 1993, the Company's Board of Directors adopted an Incentive and
Non-Statutory Stock Option Plan (the 1993 Option Plan). Options under
the 1993 Option Plan are either "incentive stock options" (ISOs),
which are intended to qualify under Section 422A of the Internal
Revenue Code of 1986, as amended, or "nonstatutory stock options"
(NSOs), which are not intended to qualify. The exercise price of ISOs
granted must be at least 100% of the fair market value of the common
stock on the grant date, except that the exercise price of options
granted to shareholders possessing more than 10% of the voting power
of the Company's voting stock must be at least 110% of such fair
market value.

The price of NSOs shall be specified by the Board at the time the
option is granted, and may be less than the fair market value of the
underlying shares of common stock on the date such NSO is granted, but
may not be less than the par value of the underlying shares of common
stock. Each stock option granted under the 1993 Option Plan expires on
the date specified in the option agreement, which date shall not be
later than the tenth anniversary of the date on which the option was
granted (fifth anniversary in the case of a greater-than-10%
shareholder). The Board of Directors approved 67,900 shares to be
reserved for issuance pursuant to the 1993 Option Plan. The 1993
Option Plan will terminate in June 2003, or on such earlier date as
the Board of Directors may determine.

During 1996, the Company issued ISO's to two directors to purchase an
aggregate of 50,000 shares of the Company's common stock at $5.95 per
share, vesting in equal installments over three years commencing one
year from the date of grant and expiring in March 1999. Subsequent to
the initial grant and pursuant to an agreement with the directors, the
ISO grant was reduced to 32,400 shares of the Company's common stock.

During September 1996, the Company and certain investors reached a
settlement after a lawsuit was filed against two former officers and
shareholders of the Company. As a result, the former officers and
shareholders surrendered 3,555 shares of common stock to the Company.
These surrendered shares are being held in treasury.

During 1996, the Company issued a warrant to Stratum Management, Inc.
and certain consultants to purchase 120,000 shares of the Company's
common stock at $5.00 per share. The warrant expired December 31, 1998
without being exercised. Subsequent to issuance and pursuant to an
agreement with Stratum Management, Inc. and certain consultants, the
warrant was reduced to 77,600 shares of the Company's common stock
(Note 13).

During 1996, the Company issued ISO's to an employee to purchase
20,000 shares of the Company's common stock at $4.35 per share
vesting in varying installments over three and one-half years and
expiring in January 2003.

(continued)

<PAGE> 48
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

During 1998, the Company issued options to BullsEye Marketing, Inc. to
purchase 250,000 shares of the Company's common stock at $2.00 per share
and terms similar to the current publicly held warrants. Subsequent to
December 31, 1998, these options expired.

On September 3, 1998, the Board of Directors declared an extension period
of twelve months for the expiration date of the warrants issued pursuant to
the Company's initial public offering on April 15, 1992. Further extensions
beyond October 11, 1999 of the expiration date of these warrants may
hereafter be determined by the Board of Directors up to a total of an
additional twelve months or such additional time in such increments as the
Board of Directors may determine in accordance with the terms of the
related Warrant Agreement.

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation (SFAS 123). Accordingly, no compensation cost has been
recognized for the stock option plans. Had compensation and other cost for
the Company's stock option plan for employees or directors or issued
warrants been determined based on the fair value at the grant date or
issuance for awards in 1996, consistent with the provisions of SFAS 123,
the impact on net loss would have been immaterial.

Information regarding the employee option plan for 1998 and 1997 is as
follows:

Summary of the Status of the Company's Stock Options and Warrants

<TABLE>
<CAPTION>
1998 1997
--------------------------- ---------------------------
Weighted Average Weighted Average
Shares Exercise Price Shares Exercise Price
--------- ---------------- --------- ----------------
<S> <C> <C> <C> <C>
Outstanding at the beginning
of the year 140,000 $5.90 140,000 $5.90
Granted (exercise price equals
market) 250,000 2.00 -- --
Exercised -- -- -- --
Forfeited 77,600 5.00 -- --
------- ----- ------- -----
Outstanding at year end 312,400 $3.00 140,000 $5.90
======= ===== ======= =====
Options and warrants
exercisable at year end 291,600 103,400
======= =======
Weighted average fair value of
options granted and warrants
issued during the year $2.00 N/A

</TABLE>

(continued)
<PAGE> 49
PRINCETON DENTAL MANAGEMENT CORPORATION

Notes to Consolidated Financial Statements

Summary of Company Stock Options and Warrants Prices

<TABLE>
<CAPTION>
Options and
Warrants Exercisable Options and Warrants Outstanding
-------------------- -----------------------------------------------------------------
Weighted average
Range of Number remaining Number
exercise Outstanding contractual Weighted average exercisable Exercise
price 12/31/98 life (years) exercise price 12/31/98 price
--------- ----------- ---------------- ---------------- ----------- ---------
<S> <C> <C> <C> <C> <C>
$ 20.00 4,000 4.07 $20.00 4,000 $20.00
13.15 6,000 .32 13.15 6,000 13.15
5.95 32,400 .32 5.95 21,600 5.95
4.35 20,000 4.07 4.35 10,000 4.35
2.00 250,000 .11 2.00 250,000 2.00
------- ------- ---- ------ ------- -----
$ 2.00-
20.00 312,400 .44 $ 3.00 291,600 $2.85
======= ======= ==== ====== ======= =====
</TABLE>

Additionally, certain default warrants are outstanding under
the terms of the Financing Agreement (Note 13) which can be
exercised only upon certain events of default, as defined.

(8) INCOME TAXES

The Company had no income tax expense in 1998 and 1997. The Company
utilized tax net operating loss (NOL) carryforwards to offset taxable
income in 1998.

As of December 31, 1998, the Company has approximately $7,200,000 in tax
net operating loss (NOL) carryforwards available to offset future taxable
income through 2013.

For financial statement reporting purposes, a valuation allowance of
approximately $2,880,000 and $2,627,000 has been recognized to offset net
deferred tax assets in 1998 and 1997, respectively. This valuation
allowance increased (decreased) approximately $253,000 and $(85,000) during
1998 and 1997, respectively. The utilization of NOL carryforwards may be
delayed because of ownership changes resulting from the Company's initial
public offering and other issuances of stock. The maximum amount of loss
carryforwards allowed to be utilized each year is determined by multiplying
the value of the Company at the time of the change in ownership by the
federal long-term tax-exempt rate.

(continued)
<PAGE> 50

PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(8) INCOME TAXES - CONTINUED

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
as of December 31 are as follows:

1998 1997
----------- -----------
Deferred tax assets:
Net operating loss carryforwards $ 2,800,000 $ 2,533,000
Allowance for doubtful accounts 50,00 74,000
Other 30,000 20,000
----------- -----------
Total deferred tax assets 2,880,000 2,627,000

Valuation allowance for deferred tax assets (2,880,000) (2,627,000)
----------- -----------

Net deferred tax assets $ -- $ --
=========== ===========

(9) NET INCOME (LOSS) PER SHARE OF COMMON STOCK

The following table represents the computation of basic and diluted net
income (loss) per share of common stock as required by SFAS No. 128.

December 31, December 31,
1998 1997
----------- -----------
Net income (loss) $(1,618,476) $ 8,419
Preferred dividends -- --
----------- ---------
Net income applicable to common
share owners $(1,618,476) 8,419
=========== =========
Basic weighted common shares outstanding 2,258,046 2,024,465
----------- ---------
Net income (loss) per common share (.72) --
=========== =========

Effect of dilutive securities:
Warrants $ -- 995,018
Dilutive weighted common shares
outstanding 2,258,046 3,019,483
----------- ---------

Dilutive net income (loss) per common
share $ (.72) $ --
=========== =========

(continued)

<PAGE> 51
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(9) NET INCOME (LOSS) PER SHARE OF COMMON STOCK - CONTINUED

The outstanding default warrants were not included in computing the 1998
dilutive net loss per share of common stock because their effects were
anti-dilutive.

Certain options, convertible debt and convertible preferred stock were not
included in computing dilutive net income (loss) per share of common stock
because their effects were also anti-dilutive.

(10) COMMITMENTS AND CONTINGENCIES

(a) Operating Leases

The Company leases office facilities and equipment under various
operating leases. Rent expense under operating leases was approximately
$635,000 and $690,000 for the years ended December 31, 1998 and 1997,
respectively.

The Company has an operating lease for its dental lab in Michigan,
which expires in 2002, with an affiliated company whereby the Company's
President and Chief Operating Officer is part owner. Rent expense under
this lease is approximately $160,000 for the years ended December 31,
1998 and 1997.

The Company entered into operating leases for its corporate office and
its telephone system, on a month to month basis, from its Chairman and
Chief Executive Officer in September 1996. Rent expense under these
leases are approximately $25,000 for the years ended December 31, 1998
and 1997.

The future minimum lease payments under these operating leases for the
years subsequent to December 31, 1998 are as follows: 1999; $598,000,
2000; $445,000, 2001; $446,000, 2002; $262,000; 2003 - $154,000 and
thereafter $343,000.

(b) Consulting and Employment Agreements

During 1996, the Company amended two employment agreements to increase
annual compensation to approximately $107,000 per employee. In
addition, one employee receives an additional $12,000 for assuming the
position of President and Chief Operating Officer and was granted
incentive stock options (Note 7). The agreements provide for annual
compensation increases and expire in May 2001 although either the
employee or the Company may terminate the agreement upon ninety days
written notice.

During 1998, the Company entered into an agreement with BullsEye
Marketing, Inc. (Consultant) for consulting services at $1,000 per
month effective July 1998 and continuing on a month to month basis
terminable by either party at any time. Effective August 1998, the
Consultant received 250,000 options to purchase the Company's common
stock (Note 7).

(continued)

<PAGE> 52
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is insured with respect to medical malpractice risks up to
$1,000,000 per claim with a $3,000,000 annual aggregate claims limit.

(11) BUSINESS ACQUISITIONS/SALES

During 1997, the Company sold three dental practices and a laboratory for
approximately $668,000 in cash, $436,000 in loans receivable (Note 2) and
the buyers' assumption of certain debt and other liabilities of $674,000.
The Company recognized a gain on sale of these practices/lab of
approximately $283,000. Combined sales of these entities for their last
complete fiscal year (1996) was approximately $4,000,000.

(12) LITIGATION

The Company is involved in a number of legal proceedings related to
malpractice, workers' compensation, general employment and contract
disputes all in various stages of proceedings. In the opinion of management
the amount of the ultimate liability with respect to those actions will not
materially affect the Company's financial position or results of
operations.

(13) FINANCING AGREEMENT

On April 22, 1996, the Company entered into a financing agreement pursuant
to which the Company issued Convertible Secured Debt (Convertible Debt) of
$2,483,620 and 3,599.77 shares of Series A 11.75% Cumulative Convertible
Preferred Stock (Preferred Stock) to Amsterdam Equities Limited, Frank
Leonard Laport and St. Paul Trust, as custodian for the Frank Leonard
Laport Rollover Individual Retirement Account No. 75-49990 (Investor
Group). The Convertible Debt and Preferred Stock replaced indebtedness of
the Company at April 22, 1996, in the amount of $1,976,700 incurred under a
letter agreement dated December 7, 1994 (Letter Agreement) and that certain
Secured Revolving Demand Note dated January 27, 1995 (the Secured Note).
Under the terms of the Convertible Debt and Preferred Stock Agreements
(also referred to herein collectively as the Financing Arrangements) the
Investor Group may lend additional funds, in increments to be determined
solely by the Investor Group. The funds may be used by the Company subject
to the approval of the Investor Group, to fund certain acquisitions. The
Convertible Debt and Preferred Stock were initially to bear interest and
have a coupon rate, respectively of 11.75%, plus the payment of any
withholding taxes which may be due and owing with respect to any person
which is a foreign entity. Payments on the Convertible Debt/Preferred Stock
were interest only due in quarterly installments which were to begin in
September 1996. Interest accrued of $57,136 under the Financing
Arrangements at June 30, 1996 was added to the principal balance at that
date. The Convertible Debt/Preferred Stock originally had a maturity of
seven years from the date of closing, subject to acceleration in the event
of a default. Subsequent to September 30, 1996, the Company was unable to
pay the interest only requirements of the Financing Arrangements, therefore
effective October 1, 1996 until the accrued interest is paid, interest
began to accrue at the default rate of 21.75%. The accrued interest on the
Convertible Debt totaled approximately $790,000 and $190,000 at December
31, 1998 and 1997, respectively.

(continued)

<PAGE> 53
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In addition to the amount owed under the Letter Agreement and the Secured
Note, the terms of the Financing Arrangements called for the conversion of
58,333 shares of Regulation D stock held by the Investor Group into
$350,000 of Convertible Debt and Preferred Stock. The shares of common
stock redeemed are being held in treasury.

An additional provision of the Financing Arrangements included the payment
of $300,000 as a closing fee and required the Company to reimburse the
legal fees and out-of-pocket costs and expenses of the Investor Group in
connection with the negotiation and the closing of the transaction totaling
$216,897. The closing fees and reimbursement of the costs and expenses were
paid in the form of Convertible Debt and Preferred Stock.

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

Under the terms of the transaction, the Company issued a warrant to
purchase 100 shares of Series B Preferred Stock. The Series B Preferred
Stock entitles Amsterdam Equities Limited (Amsterdam), after the occurrence
of an event of default, to elect a Class B director who would have
super-majority voting powers on the Company's Board of Directors.

The Convertible Debt and Preferred Stock may be converted into common stock
of the Company, at the sole option of the Investor Group, at various
conversion rates as set forth in the conversion formula contained in the
Financing Arrangements. Conversion pursuant to such conversion formula
would result in a conversion price per share of the Company's common stock
significantly below present market levels.

In addition, pursuant to the terms of the Financing Arrangements, the
Company issued to the holders of the Convertible Debt and the Preferred
Stock warrants to purchase shares of common stock. The Investor Group may
exercise the warrants only upon the occurrence of an event of default under
the terms of certain minimum financial goals, as defined in the Financing
Arrangements.

During 1998, Amsterdam Equities Limited transferred any and all interest
which they had in certain default warrants to Frank Leonard Laport. Mr.
Laport exercised such warrants, which resulted in the issuance of 1,065,483
shares of common stock (Note 7). The cumulative effect of the issuance of
shares pursuant to the remaining default warrants and conversion of all
Convertible Debt and Preferred Stock could result in ownership by the
Investor Group of approximately 65% of the Company's total issued and
outstanding common stock. The remaining default warrants are held by St.
Paul Trust, as custodian for the Frank Leonard Laport Rollover Individual
Retirement Account No. 75-49990, and are exercisable at $.01 per share and
approximate 130,000 common shares.

(continued)

<PAGE> 54
PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(13) FINANCING AGREEMENT - CONTINUED

In August 1996, the Company entered into a Letter Agreement by and among
the Company, Dr. Charles R. Mitchell, a former President of the Company;
the former Consultants to the Company, certain directors of the Company
and the Investor Group. Under the Letter Agreement, the Series B Preferred
Stock was amended to be immediately effective and Class B Preferred Stock
was issued to Amsterdam. The Class B Preferred Stock entitled Amsterdam to
elect a Director to the Board of Directors of the Company who would have
super majority voting powers. In effect, the Class B director appointed by
Amsterdam shall have the number of votes on the Board of Directors as the
current Board currently holds, plus one vote. The amendment and activation
of the Class B Preferred Stock occurred upon the satisfaction of the
following two conditions: (i) delivery to the Company of a notice, pursuant
to which the Investor Group would convert an aggregate amount of $700,000
of currently outstanding Convertible Debt and Preferred Stock into the
Company's Common Stock in accordance with the contractual terms of the
Financing Arrangements and (ii) upon the advance to the Company of an
additional $200,000 pursuant to the Financing Arrangements.

In connection with the issuance of the Class B Preferred Stock, the
provision of additional funding and conversion of debt, the Consultants and
certain directors of the Company agreed to forfeit, on a pro rata basis, an
aggregate amount of 60,000 options and warrants to purchase the Company's
Common Stock.

Pursuant to a Modification Agreement (Modified Agreement) entered into
between the Investor Group and the Company dated July 1, 1997, the Investor
Group agreed, conditioned upon continued listing by the Company on the
Nasdaq SmallCap Market and similar concessions by another significant
Company creditor, to waive all accumulated and ongoing interest and/or
dividends on the Convertible Debt/Preferred Stock for the period from
January 1, 1997 through December 31, 1997.

The Convertible Debt is secured by substantially all assets of the Company
and requires the Company to comply with certain financial and non-financial
debt covenants.

At December 31, 1998, the Company was in violation of certain debt
covenants. As such, the Company has classified the Convertible Debt as a
current liability. To date, the Investor Group has not made formal claim
under the debt covenant violation.

(14) YEAR 2000 ISSUE

Management has developed a plan to modify its information technology to be
ready for year 2000 and has begun converting critical data processing
systems. Management expects the project to be substantially complete by
November, 1999 and incur total expenditures of approximately $190,000
related to the project. At the discretion of the Investor Group, the
Financing Agreement (Note 13) could potentially provide funding for these
capital expenditures, however, no assurances can be made.

(continued)

<PAGE> 55

PRINCETON DENTAL MANAGEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(15) GOING CONCERN

As shown in the accompanying consolidated financial statements, the Company
has incurred recurring losses from operations resulting in cash flow
problems. Additionally, the Company is in default with regards to the
Convertible Debt. To date, the Investor Group has not demanded payment.
These factors raise doubt about the Company's ability to continue as a
going concern.

Management has instituted a cost reduction program, has sold economically
inefficient practices and is emphasizing operational efficiencies.
Management believes if implementation of these actions is unsuccessful,
relief under Chapter 11 of the United States Bankruptcy Code will be
considered as a possibility.

<PAGE> 56
(a)(2) Exhibits:

The following documents are filed as exhibits to this Report:

2.1 Agreement and Plan of Reorganization between the Registrant and Dental Laser
Center of the Palm Beaches, Inc., The Dental Team of Boca Raton, Inc., The
Dental Team of Boynton Beach, Inc., The Dental Team of Coral Springs, Inc., The
Dental Team of Deerfield Beach, Inc., The Dental Team of Delray Beach, Inc., The
Dental Team of Pompano Beach, Inc., Palm Beach Dental Service, Inc., PBD Supply,
Inc., and Pompano Square Dental Lab, Inc. (incorporated by reference to Exhibit
2.1 to the Registrant's Form 10-KSB for the fiscal year ended December 31, 1993
(Registration Number 33-43298-A) filed with the Commission on April 14, 1994).

2.2 Share Acquisition and Merger Agreement between Registrant and C.D.
Nunnelley, D.D.S. & Associates (incorporated by reference to the Exhibit to the
Company's Form 8-K filed with the Commission on March 15, 1994).

2.3 Agreement and Plan of Reorganization between the Registrant and Mason
Dental, Inc. (incorporated by reference to the Exhibit to the Registrants
Registration Statement on Form S-4 (Registration No. 33-69406) filed with the
Commission on September 27, 1993).

3.1 Restated Certificate of Incorporation of the Registrant, as restated through
August 19, 1991 (incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form S-18 (Registration No. 33-43298-A) filed with the
Commission on October 10, 1991).

3.2 Amendments to the Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 3.1 to Amendment No. 3 to the Registrant's
Registration Statement on Form S-18 (Registration No. 33-43298-A) filed with the
Commission on April 10, 1992).

3.3 Bylaws of the Registrant, as amended and restated December 1, 1992
(incorporated by reference to Exhibit 3.2 or the Registrant's Registration
Statement on Form SB-2 (Registration No. 33-57698) filed with the Commission of
February 1, 1993).

4.2 Warrant Agreement between the Registrant and the Warrant Agent
(incorporated by reference to Exhibit 4.4 to the Registrant's Registration
Statement on Form SB-2 (Registration No. 33-57698) filed with the Commission on
February 1, 1993).

4.3 Letter Amendment to Warrant Agreement between the Registrant and the Warrant
Agent (incorporated by reference to Exhibit 4.5 to the Registrant's Registration
Statement on Form SB-2 (Registration No. 33-57698) filed with the Commission on
February 1, 1993).

9.1 Voting Trust Agreement between the Registrant and Jerry I. Bratman, D.D.S.,
Judith K. Bratman, Theodore M. Strauss, D.D.S., Madelyn Strauss, and Richard J.
Staller, D.D.S. (incorporated by reference to Exhibit 9.1 to the

<PAGE> 57
Registrant's Form 10-KSB for the fiscal year ended December 31, 1993
(Registration Number 33-43298-A) filed with the Commission on April 14, 1994.)

10.1 Registrant's Stock Option Plan, as amended (incorporated by reference to
the exhibit of the same number to the Registration Statement on Form SB-2
(Registration No. 33-57698) filed with the Commission on February 1, 1993).

10.2 Letter Agreement dated December 7, 1994 between an investment group and the
Registrant (incorporated by reference to Exhibit 10.1 to the Registrant's
Form 10-QSB/A (Amendment No. 1) (Registration No. 33-43298-A) filed with the
Commission on December 20,1994).

10.2/A Amendment to Letter Agreement dated April 10, 1995 between an investment
group and the Registrant (incorporated by reference to the Exhibit to the
Registrant's Form 10-KSB for the fiscal year ended December 31, 1994
(Registration Number 33-43298-A) filed with the Commission on April 14, 1995)

10.3 $300,000 Line of Credit Agreement with First American Bank-Northeast
Illinois, as amended (incorporated by reference to Exhibit 10.4 to the
Registrant's Registration Statement on Form S-18 (Registration No. 33-43298-A)
filed with the Commission on October 10, 1991).

10.3/A Modification Agreement and Installment Note dated February 3, 1995
between First of America Bank-Illinois, N.A. and the Registrant (incorporated by
reference to the Exhibit to the Registrant's Form 10-KSB for the fiscal year
ended December 31, 1994 (Registration Number 33-43298-A) filed with the
Commission on April 14, 1995.)

10.4 Secured Revolving Demand Note dated January 27, 1995 between an investment
group and the Registrant (incorporated by reference to the Exhibit to the
Registrant's Form 10-KSB for the fiscal year ended December 31, 1994
(Registration Number 33-43298-A) filed with the Commission on April 14, 1995.)

10.4/A Allonge and Amendment to Secured Revolving Demand Note dated March 9,
1995 between an investment group and the Registrant (incorporated by reference
to the Exhibit to the Registrant's Form 10-KSB for the fiscal year ended
December 31, 1994 (Registration Number 33-43298-A) filed with the Commission on
April 14, 1995.)

10.5 Share Purchase Agreement between Princeton Management and Glenn C. Lehr,
D.D.S. (incorporated by reference to the Exhibit to Registrant's Form 8-K filed
with the Commission on October 13, 1992).

10.6 Balloon Promissory Note Payable to Glenn C. Lehr, D.D.S. (incorporated by
reference to the Exhibit of the same number to the Registrant's Registration
Statement on Form SB-2 (Registration No. 33-57698) filed with the Commission on
February 1, 1993).

10.7 Installment Promissory Note Payable to Glenn C. Lehr, D.D.S. (incorporated
by reference to the Exhibit of the same number to the Registrants Registration
Statement on Form SB-2 (Registration No. 33-57698) filed with the Commission on
February 1, 1993).

10.8 Stock Pledge and Escrow Agreement between Princeton Management and Glenn C.
Lehr incorporated by reference to the Exhibit of the same number to the
Registrant's Registration Statement on Form SB-2 (Registration No. 33-57698)
filed with the Commission on February 1, 1993).

<PAGE> 58
10.9 Sublicense Agreement and Consent between Princeton Management and Amdent,
P.C. (Battle Creek, MI) (incorporated by reference to the Exhibit of the same
number to the Registrant's Registration Statement on Form SB-2 (Registration No.
33-57698) filed with the Commission on February 1, 1993).

10.10 Sublicense Agreement and Consent between Princeton Management and Amdent,
P.C. (Taylor, MI) (incorporated by reference to the Exhibit of the same number
to the Registrant's Registration Statement on Form SB-2 (Registration No.
33-57698) filed with the Commission on February 1, 1993).

10.11 Sublicense Agreement and Consent between Princeton Management and Amdent,
P.C. (Ypsilanti, MI) (incorporated by reference to the Exhibit of the same
number to the Registrant's Registration Statement on Form SB-2 (Registration No.
33-57698) filed with the Commission on February 1, 1993).

10.12 Management Agreement between Princeton Dental Management Corporation and
Amdent P.C. (incorporated by reference to the Exhibit of the same number to the
Registrant's Registration Statement on Form SB-2 (Registration No. 33-57698)
filed with the Commission on February 1, 1993).

10.13 Dental Equipment Lease between Princeton Management and Amdent, P.C.
(Ypsilanti, MI) (incorporated by reference to the Exhibit of the same number to
the Registrant's Registration Statement on Form SB-2 (Registration No. 33-57698)
filed with the Commission on February 1, 1993).

10.14 Dental Equipment Lease between Princeton Management and Amdent, P.C.
(Taylor, MI) (incorporated by reference to the Exhibit of the same number to the
Registrant's Registration Statement on Form SB-2 (Registration No. 33-57698)
filed with the Commission on February 1, 1993).

10.15 Dental Equipment Lease between Princeton Management and Amdent, P.C.
(Battle Creek, MI) incorporated by reference to the Exhibit of the same number
to the Registrant's Registration Statement on Form SB-2 (Registration No.
33-57698) filed with the Commission on February 1, 1993).

10.16 Facilities Management Agreement between Princeton Management and Glenn C.
Lehr, D.D.S. incorporated by reference to the Exhibit of the same number to the
Registrant's Registration Statement on Form SB-2 (Registration No. 33-57698)
filed with the Commission on February 1, 1993).

10.17 Management Agreement and Stock Pledge and Escrow Agreement between
Princeton Management, Glenn C. Lehr, D.D.S., and Lebow and Tobin (incorporated
by reference to the Exhibit of the same number to the Registrant's Registration
Statement on Form SB-2 (Registration No. 33-57698) filed with the Commission on
February 1, 1993).

10.18 Assignment and Consent Agreement (Ypsilanti, MI) (incorporated by
reference to the Exhibit of the same number to the Registrant's Registration
Statement on Form SB-2 (Registration No. 33-57698) filed with the Commission on
February 1, 1993).

10.19 Assignment and Consent Agreement (Taylor, MI) (incorporated by reference
to the Exhibit of the same number to the Registrants Registration Statement on
Form SB-2 (Registration No. 33-57698) filed with the Commission on February 1,
1993).

10.20 Assignment and Consent Agreement (Battle Creek, MI) (incorporated by
reference to the Exhibit of the same number to the Registrant's Registration
Statement on Form SB-2 (Registration No. 33-57698) filed with the Commission on
February 1, 1993).

<PAGE> 59
10.21 Asset Purchase Agreement between Princeton Management Northeast and
Century Dental Center 1, P.C. (incorporated by reference to the Exhibit to the
Company's Form 8-K, as filed with the Commission on April 15, 1993).

10.22 The Company's 1993 Incentive and Non-Statutory Stock Option Plan
(incorporated by reference to the Exhibit of the same number to the Registrant's
Registration Statement on Form SB-2 (Registration No. 33-57698) filed with the
Commission on June 18, 1993).

10.23 Installment Promissory Note payable to Mason Dental, Inc. shareholders
(incorporated by reference to Exhibit 10.30 to the Registrant's Form 10-KSB for
the fiscal year ended December 31, 1993 (Registration Number 33-43298-A) filed
with the Commission on April 14, 1994).

10.24 Allonge and Amendment to Acquisition Promissory Note dated April 10, 1995
between Mason Dental, Inc. and the Registrant (incorporated by reference to the
Exhibit to the Registrants Form 10-KSB for the fiscal year ended December 31,
1994 (Registration Number 33-43298-A) filed with the Commission on April 14,
1995.)

10.25 Shareholder Agreement between the Registrant and Mason Dental, Inc.
Affiliate Shareholders (incorporated by reference to Exhibit 10.31 to the
Registrant's Form 10-KSB for the fiscal year ended December 31, 1993
(Registration Number 33-43298-A) filed with the Commission on April 14, 1994).

10.26 Security Agreement between Princeton Medical Management Southeast, Inc.
and Clement W. Barfield, D.D.S., and Philip A. Payne, D.D.S. (incorporated by
reference to Exhibit 10.32 the Registrant's Form 10-KSB for the fiscal year
ended December 31, 1993 (Registration Number 33-43298-A) filed with the
Commission on April 14, 1994).

10.27 Security Agreement between Princeton Medical Management Southeast, Inc.
and Jerry I. Bratman, D.D.S., Theodore M. Strauss, D.D.S., and Richard J.
Staller, D.D.S. (incorporated by reference to Exhibit 10.33 to the Registrant's
Form 10-KSB for the fiscal year ended December 31, 1993 (Registration Number
33-43298-A) filed with the Commission on April 14, 1994).

10.28 Installment Promissory Notes payable to The Dental Team Shareholders
(incorporated by reference to Exhibit 10.34 to the Registrant's Form 10-KSB for
the fiscal year ended December 31, 1993 (Registration Number 33-43298-A) filed
with the Commission on April 14, 1994).

10.28/A Binding letter of agreement dated February 6, 1995 between The Dental
Team Shareholders and the Registrant (incorporated by reference to the Exhibit
to the Registrant's Form 10-KSB for the fiscal year ended December 31, 1995
(Registration Number 33-43299-A) filed with the Commission on April 14, 1995).

10.29 Settlement Agreement and Release between A.S. Goldmen & Co., Inc.
Shoenberg & Hieber, Inc. and the Company, dated April 10, 1995 and effective May
12, 1995 (incorporated by reference to Exhibit 10.1 to the Registrant's Form
10-QSB for the quarterly period ended March 31, 1995 (Registration No. 0.20222)
filed with the Commission of May 15, 1995.

10.30 Allonge and Amendment to Secured Revolving Demand Note, dated April 15,
1995, between the Investment Group and the Registrant (incorporated by reference
to Exhibit 10.2 to the Registrant's Form 1O-QSB/A for the quarterly period ended
March 31, 1995 (Registration No. 0-20222) filed with the Commission on May 30,
1995).

27
<PAGE> 60
10.31 Amendment to Letter Agreement, dated May 22, 1995, between the Investor
Group and the Registrant (incorporated by reference to Exhibit 10.3 to the
Registrant's Form 10-QSB/A for the quarterly period ended March 31, 1995
(Registration No. 0-20222) filed with the Commission on May 30, 1995).

10.32 Allonge and Amendment to Secured Revolving Demand Note, dated June 23,
1995, between the Investor Group and the Registrant (incorporated by reference
to Exhibit 10.4 to the Registrant's Form 10-QSB for the quarterly period ended
March 31, 1996 (Registration No. 0-20222) filed with the Commission on June 12,
1996).

10.33 Allonge and Amendment to Secured Revolving Demand Note, dated August 24,
1995, between the Investor Group and the Registrant (incorporated by reference
to Exhibit 10.6 to the Registrant's Form 10-QSB for the quarterly period ended
March 31, 1996 (Registration No. 0-20222) filed with the Commission on June 12,
1996).

10.34 Amendment to Letter Agreement, dated August 24, 1995, between the Investor
Group and the Registrant (incorporated by reference to Exhibit 10.7 to the
Registrant's Form 1O-QSB for the quarterly period ended March 31, 1996
(Registration No. 0-20222) filed with the Commission on June 12, 1996).

10.35 Allonge and Amendment to Secured Revolving Demand Note, dated September 8,
1995, between the Investor Group and the Registrant (incorporated by reference
to Exhibit 10.8 to the Registrant's Form 10-QSB for the quarterly period ended
March 31, 1996 (Registration No. 0-20222) filed with the Commission on June 12,
1996).

10.36 Amendment to Letter Agreement, dated September 8, 1995, between the
Investor Group and the Registrant (incorporated by reference to Exhibit 10.9 to
the Registrant's Form 10-QSB for the quarterly period ended March 31, 1996
(Registration No. 0-20222) filed with the Commission on June 12, 1996).

10.37 Employment Agreement by and between the Company and Dr. Charles R.
Mitchell, D.D.S. dated March 1996, with an effective date of January 1, 1996
(incorporated by reference to the exhibit to the Registrant's Form 10-QSB filed
with the Commission on September 23, 1996).

10.38 Consulting Agreement by and between the Company and Stratum Management,
Inc. dated January 1, 1996 (incorporated by reference to the exhibit to the
Registrant's Form 10-QSB filed with the Commission on September 23, 1996).

10.39 Amendment to the Warrant Agreement by and between the Company and Stratum
Management, Inc., dated July 17, 1996 (incorporated by reference to the exhibit
to the Registrant's Form 10-QSB filed with the Commission on September 23,
1996).

10.40 Non-Statutory Stock option agreement by and between the Company and John
H. Hagan, dated March 21, 1996 (incorporated by reference to the exhibit to the
Registrant's Form 10-QSB filed with the Commission on September 23, 1996).

10.41 Amendment to the Non-Statutory Stock Option Agreement by and between the
Company and John H. Hagan dated July 17, 1996 (incorporated by reference to the
exhibit to the Registrant's Form 10-QSB filed with the Commission on
September 23, 1996).

10.42 Non-Statutory Stock Option Agreement by and between the Company and Dr.
Seymour Kessler dated March 21, 1996 (incorporated by reference to the exhibit
to the Registrant's Form 10-QSB filed with the Commission on September 23,
1996).

28
<PAGE> 61
10.43 Amendment to the Non-Statutory Stock Option Agreement dated July 17, 1996,
by and between the Company and Dr. Seymour Kessler (incorporated by reference to
the exhibit to the Registrant's Form 10-QSB filed with the Commission on
September 23, 1996).

10.44 Series A 11.75% Cumulative Convertible Preferred Stock Purchase Agreement
by and between Frank Leonard Laport, Beverly Trust Company, as Custodian of the
Frank Leonard Laport Rollover Individual Retirement Account Number 75-49990, and
Amsterdam Equities Limited, dated April 22, 1996 (incorporated by reference to
the exhibit to the Registrant's Form 10-QSB filed with the Commission on
September 23, 1996).

10.45 Convertible Debt Agreement by and between the Company and Amsterdam
Equities Limited, dated April 22, 1996 (incorporated by reference to the exhibit
to the Registrant's Form 10-QSB filed with the Commission on September 23,
1996).

10.46 Letter of Agreement dated July 15, 1996 and effective August 9, 1996, by
and between the Company, Dr. Charles R. Mitchell, Stratum Management Inc., John
H. Hagan, Dr. Seymour Kessler, Amsterdam Equities Limited, Frank Leonard Laport,
and Beverly Trust Company (incorporated by reference to the exhibit to the
Registrant's Form 10-QSB filed with the Commission on September 23,1996).

10.47 Settlement Agreement dated as of September 26, 1996, and effective as of
the date of filing, by and between the Gingle Group, the Investor Group and the
Company. (Incorporated by reference to Exhibit 10.47 to the Registrant's
Form 10-QSB for the period ended December 30, 1996).

10.48 Amendment to Employment Agreement made as of June 1, 1996 by and among
Gary A. Lockwood, the Company and Mason Dental Midwest, Inc. (Incorporated by
reference to Exhibit 10.48 to the Registrant's Form 10-QSB for the period ended
December 30, 1996).

10.49 Office Lease dated as of September 13, 1996 between the Company and
EquiVest, Inc., a company owned by Frank Leonard Laport. (Incorporated by
reference to Exhibit 10.49 to the Registrant's Form 10-QSB for the period ended
December 30, 1996).

10.50 Equipment Lease dated as of September 13, 1996 between the Company and
Frank Leonard Laport. (Incorporated by reference to Exhibit 10.50 to the
Registrant's Form l0-QSB for the period ended December 30, 1996).

10.51 Letter Agreement dated February 4, 1996 between Dr. Richard Staller and
the Registrant regarding the sale of the assets of the Dental Team of Delray
Beach. (Incorporated by reference to Exhibit 10.51 to the Registrant's Form
10-QSB for the period ended June 30, 1997).

10.52 Letter Agreement effective as of January 10, 1997 by and among the
Registrant and Drs. Barfield and Payne regarding the sale of the assets of the
Fairfield Dental Center practice. (Incorporated by reference to Exhibit 10.52 to
the Registrant's Form 10-QSB for the period ended June 30, 1997).

10.53 Letter Agreement dated as of December 1996 between the Registrant and
Dickerson Investment Group, Inc., an entity affiliated with a shareholder of the
Registrant, regarding the loan of $175,000 to the Registrant. (Incorporated by
reference to Exhibit 10.53 to the Registrant's Form 10-QSB for the period ended
June 30, 1997).

10.54 Letter Agreement effective as of June 1, 1997 by and among the Registrant
and Mr. Larry Ceraulo d/b/a Certex Dental Studio regarding the sale of the
assets comprising Mason Dental Southeast, Inc. and Renaissance Dental

<PAGE> 62
Studio, (Incorporated by reference to Exhibit 10.54 to the Registrant's Form
1O-QSB for the period ended June 30, 1997).

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

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

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

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

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

10.60 Financial Consulting Agreement between the Company and BullsEye Marketing,
Inc., dated as of July 14, 1998. (Incorporated by reference to Exhibit 10.60 to
the Registrant's Form 10-QSB for the period ended June 30, 1998).

10.61 Allonge and Amendment to Balloon Promissory Note and All Related
Agreements dated as of July 1, 1998 by and among the company, Dr. Lehr and
certain related entities. (Incorporated by reference to Exhibit 10.61 to the
Registrant's Form 10-QSB for the period ended June 30, 1998).

21.1 Subsidiaries of the Small Business Issuer (incorporated by reference to
Exhibit 22.1 to the Registrant's Form 10-KSB for the fiscal year ended December
31, 1993 (Registration Number 33-43298-A) filed with the Commission on April 14,
1994).

<PAGE> 63

(b) Reports on Form 8-K The Registrant filed the following Form 8-K's during
the period from January 1, 1999 through March 31, 2000:

1) On October 5, 1999, the Registrant filed a Form 8-K stating that:

A) Effective as of October 1, 1999, the Registrant, along with all of its
operating subsidiaries, filed voluntary petitions with the United
States Bankruptcy Court for the Middle District of Florida pursuant to
Chapter 11 of the United States Bankruptcy Code (Case No. 99-16012-8C1).

B) Effective as of September 27, 1999, the Board of Directors of the
Registrant approved an extension of the expiration date of those
certain warrants issued pursuant to that certain Warrant Agreement
dated April 15, 1992 by and between the Registrant and Continental
Stock Transfer & Trust Company. The expiration date of the warrants
has been extended for a period of twelve (12) months, expiring October
10, 2000.

2) On December 13, 1999, the Registrant filed a Form 8-K stating that,
effective as of December 6, 1999, Gary A. Lockwood resigned as an
officer and director of the Registrant and all related subsidiary
corporations. A copy of Mr. Lockwood's resignation letter was attached
and summarized.

<PAGE> 64

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report of Form 10-KSB for the year ended
December 31, 1999, to be signed on its behalf, by the undersigned thereunto duly
authorized.

DATED: Princeton Dental Management Corporation
-----------------

By:
------------------------------------
Frank L. Laport
Chairman, CEO and Director

SIGNATURE

DATED: Princeton Dental Management Corporation
-----------------

By:
------------------------------------
Frank Leonard Laport
Chairman, CEO, and Director

DATED: Princeton Dental Management Corporation
-----------------

By:
------------------------------------
George B. Collins
Director

DATED: Princeton Dental Management Corporation
-----------------

By:
------------------------------------
Dr. Zigmund C. Porter
Director

DATED: Princeton Dental Management Corporation
-----------------

By:
------------------------------------
Florence Wagner
Chief Accounting Officer

<PAGE> 1
EXHIBIT 21.1

Subsidiaries of the Registrant

1. Princeton Medical Management Midwest, Inc., a Michigan Corporation.

2. Princeton Medical Management Northeast, Inc., a Florida Corporation.

3. Princeton Medical Management Southeast, Inc., a Florida Corporation.

4. Mason Dental Midwest, Inc., a Michigan Corporation.

5. Mason Dental Southeast, Inc., a Florida Corporation.

6. Amdisco, Inc., an Illinois Corporation.

7. Princeton Medical Management, Inc., a Florida Corporation.

<ARTICLE> 5

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 724,692
<SECURITIES> 0
<RECEIVABLES> 1,019,939
<ALLOWANCES> 127,238
<INVENTORY> 122,928
<CURRENT-ASSETS> 1,789,011
<PP&E> 1,968,858
<DEPRECIATION> 1,576,558
<TOTAL-ASSETS> 7,100,456
<CURRENT-LIABILITIES> 5,636,994
<BONDS> 1,897,422
5,100
0
<COMMON> 320
<OTHER-SE> (1,110,949)
<TOTAL-LIABILITY-AND-EQUITY> 7,100,456
<SALES> 0
<TOTAL-REVENUES> 12,456,459
<CGS> 0
<TOTAL-COSTS> 12,676,525
<OTHER-EXPENSES> (709,527)
<LOSS-PROVISION> (4,851)
<INTEREST-EXPENSE> (961,762)
<INCOME-PRETAX> (1,173,325)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,173,325)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,173,325)
<EPS-BASIC> (.37)
<EPS-DILUTED> (.37)

</TABLE>