<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended January 31, 1998         Commission File Number 1-4338

                              EAC INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

         New York                                       21-0702336
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

22 Blackstone Avenue
Branford, CT                                                            06405
(Address of principal executive offices)                              (Zip Code)

        Registrant's telephone number, including area code: 203-315-8020

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

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.10
par value (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrants' knowledge, in definitive proxy or information statement
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

Issuers revenues for the most recent fiscal year - $5,992,174.
The aggregate market value of voting stock held by non-affiliates of the
registrant as of April 30, 1998 was $545,105.

Indicate by check mark whether the registrant has filed all documents and
reports required by Sections 12, 13, or 15(d) of the Securities Exchange Act of
1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes X  No___

As of April 30, 1998, the registrant had outstanding 2,311,687 shares of Common
Stock ($.10 par value).


<PAGE>   2
                                     PART I


ITEM 1.           BUSINESS

The Registrant (also referred to as "EAC" or "the Company") was organized in
1958 as a New York corporation. The common stock of the Company is currently
traded on the over-the-counter market and the principal market makers are Bishop
Rosen & Company and Troster, Singer Corporation.

The Company has three operating subsidiaries, Goodren Products Corporation
("Goodren"), Athena Packaging, Inc. ("Athena") and Flexible Printed Products,
Inc. ("Flexible"). Goodren designs and provides point-of-purchase advertising
displays and wall decorations on semi-durable plastic. Goodren's major market is
consumer product manufacturers and one marketer of children's wall decorations.
Goodren's sales were backlogged at approximately $175,000 and $218,000 at
January 31, 1998 and 1997, respectively.

On January 8, 1998, EAC announced the restructuring of Goodren by ceasing
operations related to the production and printing of its point of purchase
products and the establishing an outsourcing and distribution arrangement with
another full line producer of such materials. Over 60% of Goodren's sales in the
current year, primarily wall decorations, have already been outsourced for the
last several years.

The business and all of the outstanding common shares of Athena were acquired on
September 27, 1996. Athena produces printed, laminated, embossed and hot stamped
labels, wraps, seals and decals for the cosmetics, pharmaceutical and health and
beauty aids industries. Athena's production equipment and administrative
operations were moved to Goodren's facility in Englewood, New Jersey in January
1997. Athena's sales were backlogged at approximately $70,000 and $65,000 at
January 31, 1998 and 1997, respectively. Athena believes that it can fulfil the
1998 backlog on a timely basis.

Goodren and Athena both face strong competition in their respective businesses,
based mainly on quality, service and price. Goodren and Athena combined, employ
30 persons of whom 12 are represented by unions.

The business and certain of the assets of Flexible were acquired on December 11,
1994. Flexible produces and prints on plastic, pre-cure in-mold heat transfer
labels for the identification and decoration of rubber and silicone hoses, belts
and tire patches. Flexible's sales were backlogged at approximately $75,000 at
January 31, 1998 and $80,000 at January 31, 1997. Flexible believes that it can
fulfill its 1998 backlog on a timely basis.

Flexible also faces strong competition in its business and its competition has
been mainly on the basis of quality, service and price. Flexible employs 14
persons, none of whom are represented by unions.


                                      - 2 -
<PAGE>   3
FINANCIAL CONDITION OF THE COMPANY

The following is a discussion concerning the Company, Goodren, Athena and
Flexible.

The Company's financial condition has declined from January 31, 1997. The
primary reasons for this decline were: (a) the Company's operating loss for the
1998 fiscal year, (b) the restructuring of Goodren including the elimination of
goodwill related to Goodren and (c) the write-off of the deferred tax asset
established in fiscal 1996. The combination of the above factors has resulted in
the Company's working capital declining to $465,587 in 1998 from $581,412 in
1997. Current assets decreased to $1,561,112 in 1998 from $1,636,936 in 1997
while current liabilities increased to $1,095,525 in 1998 from $1,055,524 in
1997. Also due to the above factors, shareholder's equity decreased to $818,132
in 1998 from $1,818,627 in 1997. The Company's secured debt obligations are
lower in 1998 that 1997, having decreased to $118,372 in 1998 from $290,966 in
1997.

The Company's and Goodren's credit line and Note Agreement with Chemical Bank of
New Jersey, N.A., which was originally entered into on September 29, 1994,
expired February 1998. The Company is currently negotiating a new borrowing
facility.

POINT-OF-PURCHASE ADVERTISING
Goodren designs and markets point-of-purchase advertising and sales aids such as
signs, posters, decals and product identifiers. These products are used in
retail stores on shelves, price channels, floor graphics and display cases.
Other products include wall decorations. Goodren's products are produced for
them by several outside suppliers and are printed on semi-durable plastic
through processes known as flexographic, lithographic and silk screen printing.

Goodren's products are sold nationwide to manufacturers of consumer products by
both an in-house sales force as well as regional, independent manufacturers'
representatives. Goodren is a service business which competes on the basis of
its ability to supply quality printing on very short notice. The following table
summarizes the percentage of sales attributable to major classes of products:

<TABLE>
<CAPTION>
                                               For the Fiscal Years
                                                 ended January 31,
                                               --------------------
                                                 1998         1997
                                                 ----         ----

<S>                                             <C>          <C>
            Point-of-Purchase                     41%          45%
            Wall coverings                        59%          55%
                                                 ---          ---

                                                 100%         100%
                                                 ===          ===
</TABLE>



                                      - 3 -
<PAGE>   4
Management estimates that Goodren has a 5% share in its portion of the printed
on plastic point-of-purchase ("P.O.P.") advertising industry. Overall, the
P.O.P. industry is a $16 billion business with over 200 manufacturing companies
involved. Products for the entire industry range from a wide variety of counter
displays and large end-of-aisle displays to small printed products produced by
Goodren. The total printed-on-plastic portion of the industry in which Goodren
competes, represents approximately $40 million. The Company estimates that
approximately ten companies compete directly with Goodren.

PRESSURE SENSITIVE LABELS, WRAPS, SEALS AND DECALS
Athena produces and markets primarily pressure sensitive labels for the premium
cosmetics, pharmaceutical, health and beauty aids industries. Other products
include non-pressure sensitive labels, soap wraps, decals and seals. Athena's
products are sold primarily in the Northeast by manufacturer's representatives
as well as in-house sales personnel.

IN-MOLD HEAT TRANSFER LABELS
Flexible produces and markets in-mold, pre-cure heat transfer labels to the
rubber and silicone industry primarily for identification and decoration of
hoses and belts. Other products include post cure heat transfer labels for
rubber patches, tires and other rubber and silicone products.

Flexible's products are sold nationwide primarily to rubber and silicone hose
and belt manufacturers, principally by its in-house sales personnel. The
remainder is sold by a limited number of manufacturers' representatives.

Management believes that the total in-mold decal/label market for decorating
rubber hoses and belts is approximately $9 million with Flexible's share
estimated at approximately 19%. The Company estimates that approximately five
companies compete directly with Flexible, including the parent company of one of
its customers. Flexible is a service business which competes on the basis of its
ability to produce and deliver high quality printing on short notice.


                                      - 4 -
<PAGE>   5
ITEM 2.           PROPERTIES

The following table shows the location of each plant or facility of the
Registrant and its subsidiaries and sets forth related information. The
properties listed below are believed adequate to serve the Company's needs for
the foreseeable future.

<TABLE>
<CAPTION>
                                              Approx.       Lease
                                              Area         Expiration       Annual
                                             (Sq. Ft.)      Date            Rental      Principal Use
                                             ---------      ----            ------      -------------
<S>                                         <C>             <C>         <C>            <C>                               
101 W. Forest Avenue
Englewood, New Jersey                          20,000          6/2000      $57,000      Manufacturing and general offices
                                                                                        for Goodren and Athena
1600 North Orangethorp Avenue
Anaheim, California                             7,500          3/2001      $41,600      Manufacturing and general office for
                                                                                        Flexible

2911 East Miraloma Avenue, #20
Anaheim, California                               500        Month to       $6,000      Ink manufacturing and screen
                                                             Month                       supplies for Flexible
22 Blackstone Avenue
Branford, Connecticut                             500        Month to       $6,000      Office space and headquarters
                                                             Month                      for the Company
</TABLE>


ITEM 3.           LEGAL PROCEEDINGS

Goodren is included in a threatened claim concerning environmental cleanup
costs. Goodren is included among a large number of companies involved, and is
not one of the major parties. Goodren previously settled the Federal claims
related to such cleanup costs and is in the process of settling the State of New
Jersey claims related thereto. The amount, if any, that Goodren may ultimately
have to pay, is subject to change and is uncertain at this time. It is
management's opinion that the Company is adequately reserved for this matter and
the ultimate resolution of this case should not have a material impact on the
financial condition of the Company.

For additional information regarding contingencies and/or litigation see Note
12c of notes to consolidated financial statements.

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

                  Not Applicable

                                      - 5 -
<PAGE>   6
                                     PART II


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

The Company's stock is traded on the over-the-counter market. Bishop Rosen &
Company (212-602-0681) and Troster, Singer Corporation are the principal market
makers. As of April 15, 1998, the Company believes there were approximately
1,650 shareholders of record. The Company's line of credit agreement (which is
presently being renegotiated) with Chemical Bank prohibits it from paying
dividends without the lender's consent. No dividends have been declared or paid
during the past two fiscal years. The following table sets forth, by fiscal
quarters, the closing bid prices of the Registrant's Common Stock per share for
1997 and 1998:

<TABLE>
<CAPTION>
                               1997                                                    1998
                   -------------------------------                     -----------------------------------
<S>                                        <C>                         <C>                        <C>
                   First Quarter           $   3/8                     First Quarter              $    3/6
                   Second Quarter              1/4                     Second Quarter                  3/8
                   Third Quarter              3/16                     Third Quarter                  3/16
                   Fourth Quarter             3/16                     Fourth Quarter                 3/16
</TABLE>

The volume of trading is sporadic and infrequent and the prices quoted may not
be representative.


ITEM 6.            MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS

In fiscal 1998, the Company had a net loss of $1,000,495 ($.43 per share) as
compared to a net loss of $161,270 ($.07 per share) in fiscal 1997.

The loss for fiscal 1998 was due to lower sales and gross profit margins at
Goodren and the costs associated with the write offs of Goodren's goodwill and
deferred tax asset. EAC's selling, general and administrative costs declined
approximately 12% in 1998 compared to 1997.

On September 27, 1996, the Company acquired the business and all of the
outstanding shares of Athena Packaging, Inc., a manufacturer of labels, wraps,
seals, and decals for premium cosmetics, pharmaceutical and health and beauty
aids manufacturers. Athena's operations are included in the consolidated
operations of the Company from the date of acquisition.


                                      - 6 -
<PAGE>   7
NET SALES
1998 TO 1997

Goodren's sales for 1998 declined 16% from 1997, due to lower sales of both the
point of purchase and wall covering segments of its business. Flexible's sales
increased by 13% compared to last year. Athena's sales for fiscal 1998 were
$728,272. Sales for the period commencing October 1, 1996 (when Athena was
acquired) through January 31, 1997 were $238,338.

EARNINGS FROM CONSOLIDATED CONTINUING OPERATIONS
1998 TO 1997

The decrease in the Company's loss from operations from $459,296 in 1997 to
$312,194 in 1998 was primarily attributable to the increased sales and profit
margins at both Flexible and Athena and the decline in EAC's selling, general
and administrative expenses, all of which exceeded the decline in Goodren's
operating income due to its lower sales and gross profit margins.

Goodren's gross profit margins decreased from 25% in 1997 to 10% in 1998.
Goodren's selling, general and administrative expenses decreased 27%,
representing 21% of sales in 1998 compared to 26% of sales in 1997.

Flexible's gross profit margins increased from 30% in 1997 to 35% in 1998.
Flexible's selling, general and administrative expenses decreased 27%,
representing 21% of sales in 1998 compared to 37% of sales in 1997. Gross profit
for Athena for fiscal 1998 was 46% as compared to 30% in fiscal 1997.

INFLATION

The Company expects inflation to be moderate and to be offset by cost reduction
programs and price increases.

INTEREST AND OTHER

The Company's interest expense increased in 1998 over 1997 as a result of higher
average borrowings for the year. The Company's outstanding debt was $471,611 at
January 31, 1998 compared to $664,504 at January 31, 1997.

PROVISION (BENEFIT) FOR INCOME TAXES

The 1998 and 1997 federal income tax provisions are offset in their entirety by
net operating loss carryforwards from prior years. The Company has a loss
carryforward of approximately $7,500,000 at January 31, 1998 which is available
to offset future operating earnings. These carryforward losses will expire in
years after 2005. At January 31, 1998 the Company wrote off its deferred tax
asset of $510,000 since there was no assurance it would be realized.


                                      - 7 -
<PAGE>   8
FINANCIAL RESOURCES AND LIQUIDITY

The Company's financial condition declined in 1998 from 1997. The Company had
working capital of $465,587 as of January 31, 1998 compared to $581,412 as of
January 31, 1997. The Company and its subsidiaries, Goodren, Athena and Flexible
are current on all of their accounts payable and accrued expenses.

In March 1996, the Company entered into an agreement to make quarterly payments
of $7,548 against a union pension withdrawal liability/shortfall (see Note 12d
of Notes to the Consolidated Financial Statements). Subsequently, on September
30, 1996, the Company and Goodren entered into a Settlement Agreement with the
Trustees of the union pension plan whereby Goodren's pension fund liability was
reduced from $560,000 to $360,000 payable in 80 equal quarterly payments of
$8,752 including annual interest at a rate of 8%. The Company applied for a
hardship case pursuant to the Settlement Agreement, whereby the Company would
reduce its quarterly obligations to $3,000 until such time as the Company is out
of hardship. The hardship application and settlement was approved in December
1997.

The Company believes that its cash on hand will be sufficient to fund planned
operations for at least the next 12 month period. The Company (primarily
Flexible) is anticipating capital expenditures of approximately $50,000, during
the next year. Management believes that these expenditures can be funded from
existing resources.

ITEM 7.            FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENT

<TABLE>
<CAPTION>
                                                                                                        Page Number
                                                                                                        -----------
<S>                                                                                                      <C>
                  Independent Auditors' Report                                                            F - 1
                  Consolidated Balance Sheets                                                             F - 2
                  Consolidated Statements of Operations                                                   F - 3
                  Consolidated Statement of Changes in Shareholders' Equity                               F - 4
                  Consolidated Statements of Cash Flows                                                   F - 5
                  Notes to the Consolidated Financial Statements                                          F - 6
</TABLE>


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

                  None


                                      - 8 -
<PAGE>   9
                                    PART III

ITEMS 9, 10, 11 AND 12, DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
EXECUTIVE COMPENSATION; SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT; AND CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:

The response to these items will be included in a definitive proxy statement
filed within 120 days after the end of the Registrant's fiscal year, which proxy
statement is incorporated herein by reference.


                                     PART IV

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

                  (a)  1.  FINANCIAL STATEMENTS

                           Consolidated Financial Statements of the Registrant
                           (Included in Part II, Item 7)

                       2.  EXHIBITS

                           (22) Subsidiaries of the Registrant 
                           Goodren Products Corporation 
                           Flexible Printed Products, Inc. 
                           Athena Packaging, Inc.

                           (27) Financial Data Schedule

                  (b)      REPORTS ON FORM 8-K
                           None

                                      - 9 -
<PAGE>   10
                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                       EAC INDUSTRIES, INC.
                                       (REGISTRANT)


                                   By: /s/Peter B. Fritzsche
                                       -------------------------------
                                       Peter B. Fritzsche
                                       President, Chief Executive
                                       Officer and Principal Financial
                                       and Accounting Officer



Date: May 11, 1998


Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.



/s/ Peter B. Fritzsche                                              May 11, 1998
---------------------------------
Peter B. Fritzsche, Director


/s/ P. Bartley Fritzsche                                            May 11, 1998
---------------------------------     
P. Bartley Fritzsche, Director        
                                      
/s/ John B. Millet, Jr                                              May 11, 1998
---------------------------------     
John B. Millet, Jr., Director         
                                      
/s/ E. Donald McKenzie, Jr.                                         May 11, 1998
---------------------------------     
E. Donald McKenzie, Jr., Director

                                     - 10 -
<PAGE>   11
                          INDEPENDENT AUDITORS' REPORT



To the Board of Directors
EAC Industries, Inc.
Branford, Connecticut


We have audited the accompanying consolidated balance sheets of EAC Industries,
Inc. and subsidiaries as of January 31, 1998 and 1997 and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the two year period ended January 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these 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 audits 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 financial position of EAC Industries, Inc.
and subsidiaries as of January 31, 1998 and 1997 and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.






                                                        LAZAR LEVINE & FELIX LLP


New York, New York
April 23, 1998




                                      F - 1
<PAGE>   12
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                         AS OF JANUARY 31, 1998 AND 1997

                               - ASSETS (NOTE 6) -

<TABLE>
<CAPTION>
                                                                                     1998                1997
                                                                                 ------------        ------------
<S>                                                                              <C>                 <C>         
CURRENT ASSETS:
   Cash (Notes 2d and 2h)                                                        $    450,031        $    619,412
   Accounts receivable - net of allowance for doubtful accounts of $55,000
     and $45,566 for 1998 and 1997, respectively (Note 2d)                            775,748             666,379
   Inventories (Notes 2e and 4)                                                       293,089             300,238
   Prepaid taxes and expenses                                                          42,244              50,907
                                                                                 ------------        ------------

TOTAL CURRENT ASSETS                                                                1,561,112           1,636,936
                                                                                 ------------        ------------

PROPERTY, PLANT AND EQUIPMENT, NET (NOTES 2F, 5 AND 8)                                472,291             710,166
                                                                                 ------------        ------------

OTHER ASSETS:
   Costs in excess of net assets acquired (Notes 2g and 3)                            269,269             453,601
   Deferred taxes (Notes 2i and 9)                                                         --             510,000
   Other assets (Note 2h)                                                               4,182               4,182
                                                                                 ------------        ------------
                                                                                      273,451             967,783
                                                                                 ------------        ------------

                                                                                 $  2,306,854        $  3,314,885
                                                                                 ============        ============

                    - LIABILITIES AND SHAREHOLDERS' EQUITY -
CURRENT LIABILITIES:
   Accounts payable                                                              $    434,383        $    247,152
   Accrued expenses (Note 7)                                                          580,528             579,441
   Capital lease obligations - current portion (Note 8b)                               30,500              34,589
   Long-term liabilities - current portion (Note 8a)                                    8,914              14,181
   Acquisition note payable (Note 3)                                                   39,000             175,000
   Income taxes payable (Notes 2i and 9)                                                2,200               5,161
                                                                                 ------------        ------------

TOTAL CURRENT LIABILITIES                                                           1,095,525           1,055,524
                                                                                 ------------        ------------

LONG-TERM DEBT - NET OF CURRENT PORTION (NOTE 8):
   Capital lease obligations                                                           48,872              81,377
   Other liabilities                                                                  344,325             359,357
                                                                                 ------------        ------------

                                                                                      393,197             440,734
                                                                                 ------------        ------------

COMMITMENTS AND CONTINGENCIES  (NOTES 10, 11 AND 12)

SHAREHOLDERS' EQUITY:
   Common stock, $.10 par value; 20,000,000 shares authorized;
     2,319,285 shares issued                                                          231,929             231,929
   Capital in excess of par value                                                  10,504,380          10,504,380
   Accumulated deficit                                                             (9,867,577)         (8,867,082)
                                                                                 ------------        ------------
                                                                                      868,732           1,869,227
   Less: Common stock in treasury, 7,598 shares at cost                               (50,600)            (50,600)
                                                                                 ------------        ------------

                                                                                      818,132           1,818,627
                                                                                 ------------        ------------

                                                                                 $  2,306,854        $  3,314,885
                                                                                 ============        ============
</TABLE>

  The accompanying notes are an integral part of these consolidated financial
                                  statements.


                                      F - 2
<PAGE>   13
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS



<TABLE>
<CAPTION>
                                                           Year Ended January 31,
                                                           ----------------------
                                                          1998               1997
                                                       -----------        -----------
<S>                                                    <C>                <C>        
NET SALES  (NOTE 11)                                   $ 5,992,174        $ 5,988,315
                                                       -----------        -----------

COSTS AND EXPENSES:
    Cost of products sold                                4,495,241          4,392,978
    Selling, general and administrative expenses         1,809,127          2,054,633
                                                       -----------        -----------
TOTAL COSTS AND EXPENSES                                 6,304,368          6,447,611
                                                       -----------        -----------

(LOSS) FROM OPERATIONS                                    (312,194)          (459,296)
                                                       -----------        -----------

OTHER INCOME (EXPENSE):
    Goodwill impairment charge (Note 2g)                  (147,000)                --
    Interest expense                                       (40,364)           (22,176)
    Gain on sale of fixed assets                            19,745            242,000
    Interest and other income                                4,688             99,072
                                                       -----------        -----------
                                                          (162,931)           318,896

(LOSS) BEFORE PROVISION FOR INCOME TAXES                  (475,125)          (140,400)

    Provision for income taxes  (Notes 2i and 9)           525,370             20,870
                                                       -----------        -----------

NET (LOSS)                                             $(1,000,495)       $  (161,270)
                                                       ===========        ===========

BASIC LOSS PER SHARE  (NOTE 2J)                        $      (.43)       $      (.07)
                                                       ===========        ===========

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING               2,311,687          2,311,687
                                                       ===========        ===========
</TABLE>




  The accompanying notes are an integral part of these consolidated financial
                                  statements.





                                      F - 3
<PAGE>   14
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY



<TABLE>
<CAPTION>
                                                                     Capital in                         Common            Total
                                  Number of          Common            Excess         Accumulated       Stock in       Shareholders'
                                   Shares            Stock             of Par           Deficit         Treasury          Equity

<S>                             <C>                <C>              <C>               <C>              <C>              <C>        
Balance at January 31, 1996        2,319,285       $   231,929      $10,504,380       $(8,705,812)     $   (50,600)     $ 1,979,897

Net loss for the year                     --                --               --          (161,270)              --         (161,270)
                                 -----------       -----------      -----------       -----------      -----------      -----------

Balance at January 31, 1997        2,319,285           231,929       10,504,380        (8,867,082)         (50,600)       1,818,627

Net loss for the year                     --                --               --        (1,000,495)              --       (1,000,495)
                                 -----------       -----------      -----------       -----------      -----------      -----------

BALANCE AT
  JANUARY 31, 1998                 2,319,285       $   231,929      $10,504,380       $(9,867,577)     $   (50,600)     $   818,132
                                 ===========       ===========      ===========       ===========      ===========      ===========
</TABLE>




  The accompanying notes are an integral part of these consolidated financial
                                  statements.




                                      F - 4
<PAGE>   15
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                                                           Year Ended January 31,
                                                                                           ----------------------
                                                                                           1998               1997
                                                                                        -----------        -----------
<S>                                                                                     <C>                <C>         
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS:

CASH FLOWS FROM OPERATING ACTIVITIES:
  Net (loss)                                                                            $(1,000,495)       $  (161,270)
  Adjustments to reconcile net (loss) to cash (utilized) by operating activities:
    Depreciation and amortization                                                           180,006            141,035
    Allowance for doubtful accounts                                                           9,470             75,000
    Amortization of deferred rental income                                                       --            (75,268)
    Gain on sale of fixed assets                                                            (19,745)          (242,000)
    Goodwill impairment charge                                                              147,000                 --
    Deferred income taxes                                                                   510,000                 --
  Changes in assets and liabilities:
    (Increase) decrease in accounts and notes receivable                                   (114,369)           461,728
    Decrease in inventories                                                                   7,149            105,166
    Decrease in prepaid expenses                                                              8,663            116,880
    Increase (decrease) in accounts payable, accrued expenses and accrued
       income taxes                                                                         199,945           (442,961)
                                                                                        -----------        -----------
       NET CASH (UTILIZED) BY OPERATING ACTIVITIES                                          (72,376)           (21,690)
                                                                                        -----------        -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Proceeds from sale of fixed assets                                                        113,249            242,000
  Capital expenditures                                                                       (2,773)           (48,598)
  Investment in new subsidiary                                                                   --           (175,000)
                                                                                        -----------        -----------
       NET CASH PROVIDED BY INVESTING ACTIVITIES                                            110,476             18,402
                                                                                        -----------        -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Decrease in short-term debt                                                               (29,604)                --
  Payments of capital lease obligations                                                     (36,594)           (25,870)
  Payments of long-term debt                                                               (141,283)            (4,810)
                                                                                        -----------        -----------
       NET CASH (USED BY) FINANCING ACTIVITIES                                             (207,481)           (30,680)
                                                                                        -----------        -----------

(DECREASE) IN CASH AND CASH EQUIVALENTS                                                    (169,381)           (33,968)

  Cash and cash equivalents, at beginning of year                                           619,412            653,380
                                                                                        -----------        -----------

CASH AND CASH EQUIVALENTS, AT END OF YEAR                                               $   450,031        $   619,412
                                                                                        ===========        ===========

SUPPLEMENTAL CASH FLOW INFORMATION:
  Interest paid                                                                         $    40,364        $    17,906
  Income taxes paid                                                                          15,170              6,260
</TABLE>


  The accompanying notes are an integral part of these consolidated financial
                                   statements.




                                      F - 5
<PAGE>   16
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1998 AND 1997



NOTE   1   -     DESCRIPTION OF THE COMPANY:

                 EAC Industries, Inc., the Company, was organized in 1958 as a
                 New York corporation. The Company is a holding company with
                 three wholly-owned operating subsidiaries, Goodren Products
                 Corporation ("Goodren"), Flexible Printed Products, Inc.
                 ("Flexible") and Athena Packaging, Inc. ("Athena"), see Note 3.
                 Goodren designs and produces point-of-purchase advertising
                 displays and wall decorations on semi-durable plastic.
                 Goodren's major market is consumer product manufacturers and
                 one marketer of children's wall decorations. Flexible produces
                 and prints on plastic, pre-cure in-mold heat transfer labels
                 for the identification and decoration of rubber and silicone
                 hoses, belts and tire patches. Athena produces printed
                 laminated, embossed and hot stamped labels, wraps, seals and
                 decals for the cosmetics, pharmaceutical and health and beauty
                 aids industries. Each of these subsidiaries sells their
                 products to customers throughout the United States.

                 In December 1997, the Company decided to cease Goodren's
                 production operations and establish an outsourcing arrangement
                 with another manufacturer. Goodren still continues to market
                 and distribute these products (see also Note 2g).


NOTE   2   -     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

                 The Company's accounting policies are in accordance with
                 generally accepted accounting principles. Outlined below are
                 those policies considered particularly significant.

        (a)      USE OF ESTIMATES:

                 In preparing financial statements in accordance with generally
                 accepted accounting principles, management makes certain
                 estimates and assumptions, where applicable, 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. While actual results
                 could differ from those estimates, management does not expect
                 such variances, if any, to have a material effect on the
                 financial statements.

        (b)      BASIS OF CONSOLIDATION:

                 The consolidated financial statements include the accounts of
                 the Company and its operating subsidiaries. All material
                 intercompany balances and transactions have been eliminated in
                 consolidation.

        (c)      STATEMENTS OF CASH FLOWS:

                 For purposes of the statements of cash flows, the Company
                 considers all investments purchased with a remaining maturity
                 of three months or less to be a cash equivalent.



                                      F - 6
<PAGE>   17
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1998 AND 1997



NOTE   2   -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED):

         (d)    CONCENTRATION OF CREDIT RISK/ FAIR VALUE:

                Financial instruments that potentially subject the Company to
                concentrations of credit risk consist principally of cash
                investments and accounts receivable.

                The Company and its subsidiaries maintain, at times, deposits,
                in federally insured financial institutions, in excess of
                federally insured limits. Management attempts to monitor the
                soundness of these financial institutions and feels the
                Company's risk is negligible.

                Concentrations of credit risk with respect to accounts
                receivable are limited.

                The carrying value of cash and cash equivalents, accounts
                receivable and accounts payable reasonably approximate fair
                value because of the short maturity of those instruments.

         (e)    INVENTORIES:

                Inventories are stated at the lower of cost or market,
                determined on a first-in, first-out basis.

         (f)    PROPERTY, PLANT AND EQUIPMENT:

                Fixed assets are reflected at cost. The Company principally uses
                the straight-line method to compute depreciation of fixed
                assets. Depreciation lives generally range from three to ten
                years for furniture and fixtures, machinery and equipment and
                transportation equipment. Buildings are being amortized over 20
                years and leasehold improvements are amortized over the useful
                life of the asset or the term of the lease, whichever is
                shorter. Major renewals and betterments of fixed assets are
                capitalized while maintenance and repairs are expensed as
                incurred. Upon retirement of fixed assets, the related cost and
                accumulated depreciation are written off and any gain or loss is
                reflected in income.

         (g)    GOODWILL:

                Costs in excess of net assets acquired are considered goodwill
                and are being amortized over periods ranging from 15 to 40 years
                on a straight line basis. Amortization costs were $37,332 and
                $24,208 for the years ended January 31, 1998 and 1997,
                respectively. Accumulated amortization as of January 31, 1998
                and 1997 aggregated $294,582 and $257,250, respectively.

                The Company periodically reviews the valuation and amortization
                of goodwill to determine possible impairment by comparing the
                carrying value to the undiscounted future cash flows of the
                related assets in accordance with Statement of Financial
                Accounting Standard No. 121 Accounting for the Impairment of
                Long-lived Assets and for Long-lived Assets to be Disposed of.



                                      F - 7
<PAGE>   18
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1998 AND 1997



NOTE   2   -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED):

         (g)    GOODWILL (CONTINUED):

                During the current year the Company recorded a goodwill
                writedown of $147,000, thereby eliminating all remaining
                goodwill of Goodren. The asset of goodwill was determined to be
                impaired because of the cessation of production operations at
                Goodren (see Note 1). Anticipated future cash flows of Goodren,
                from its marketing and distribution efforts, is uncertain,
                indicating that the recoverability of the asset is not
                reasonably assured.

         (h)    RECLASSIFICATIONS:

                Certain reclassifications have been made to the 1997 financial
                statements in order to conform to the 1998 presentation.

         (i)    INCOME TAXES:

                The Company adopted Statement of Financial Accounting Standards
                No. 109, "Accounting for Income Taxes" ("SFAS No. 109")
                effective February 1, 1993. The standards of SFAS No. 109
                require that the Company utilize an asset and liability approach
                for financial accounting and reporting for income taxes. The
                primary objectives of accounting for income taxes under SFAS No.
                109 are to (a) recognize the amount of tax payable for the
                current year and (b) recognize the amount of deferred tax
                liability or asset based on management's assessment of the tax
                consequences of events that have been reflected in the Company's
                financial statements or tax returns. See also Note 9.

         (j)    INCOME PER SHARE:

                The Company has adopted SFAS 128 "Earnings Per Share" ("SFAS
                128"), which has changed the method of calculating earnings per
                share. SFAS 128 requires the presentation of "basic" and
                "diluted" earnings per share on the face of the income
                statement. Basic loss per common share is computed by dividing
                net loss by the weighted average number of common shares
                outstanding during each period.

          (k)   NEW ACCOUNTING PRONOUNCEMENTS:

                SFAS 130 "Reporting Comprehensive Income" is effective for years
                beginning after December 15, 1997 and early adoption is
                permitted. This statement prescribes standards for reporting
                comprehensive income and its components. The Company will adopt
                these standards effective for the year ending January 31, 1999.

                SFAS 131 "Disclosures About Segments of an Enterprise and
                Related Information" is effective for years beginning after
                December 15, 1997 and early adoption is encouraged. The Company
                does not presently believe that it operates in more than one
                identifiable segment.

                See also Earnings (Loss) Per Share.

                                      F - 8
<PAGE>   19
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1998 AND 1997



NOTE   2   -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  (CONTINUED):

        (l)     IMPACT OF THE YEAR 2000 ISSUE:

                The year 2000 issue is the result of computer programs being
                written using two digits rather than four to define the
                applicable year. Any of the Company's computer programs that
                have date-sensitive software may recognize a date using "00" as
                the year 1900 rather than the year 2000. This could potentially
                result in a system failure or miscalculations causing
                disruptions of operations, including, among other things, a
                temporary inability to process transactions, send invoices, or
                engage in other similar normal business activities. The Company
                has ensured that its software is already year 2000 compliant,
                and as such this issue is not expected to have a material effect
                on the operations of the Company.


NOTE   3   -    ACQUISITION:

                On September 27, 1996, the Company purchased all of the
                outstanding capital stock of Athena Packaging, Inc. ("Athena"),
                for $350,000. The acquisition agreement required that 50% of the
                purchase price be paid at closing and the balance paid on March
                1, 1997. As of January 31, 1998, the Company still owned $39,000
                to the sellers. The acquisition was accounted for as a purchase,
                accordingly, the acquired assets and liabilities assumed through
                this purchase have been recorded at their estimated fair market
                values at the date of acquisition. The cost of the acquisition
                exceeded the fair market value of the assets acquired by
                $124,050, which amount was assigned to goodwill and is being
                amortized on a straight-line basis over 15 years (see Note 2g).

                The Company's consolidated statements of operations include the
                revenues and expenses of Athena beginning September 27, 1996,
                the date of acquisition. The following pro forma results were
                developed assuming the acquisition had occurred at the beginning
                of the earliest period presented (February 1, 1996).

<TABLE>
<CAPTION>
                                                                     1997
                                                                     ----
                                                                  (Unaudited)

<S>                                                               <C>       
                       Net sales                                  $6,541,000
                       Net (loss) earnings                         $(135,000)
                       (Loss) earnings per share                       $(.06)
</TABLE>


NOTE   4   -    INVENTORIES:

                Inventories at January 31, 1998 and 1997 consisted of the
following:

<TABLE>
<CAPTION>
                        1998           1997
                      --------       --------
<S>                   <C>            <C>     
Raw materials         $248,393       $234,768
Work in process          5,000          5,000
Finished goods          39,696         60,470
                      --------       --------
                      $293,089       $300,238
                      ========       ========
</TABLE>

                                      F - 9
<PAGE>   20
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1998 AND 1997



NOTE   5   -    PROPERTY, PLANT AND EQUIPMENT:

                Fixed assets and accumulated depreciation at January 31, 1998
                and 1997 consisted of the following:

<TABLE>
<CAPTION>
                                                         1998             1997
                                                      ----------       ----------
<S>                                                   <C>              <C>       
Building and improvements                             $  203,529       $  343,874
Machinery and equipment                                1,095,943        1,093,170
Label artwork                                            150,000          150,000
Transportation equipment                                  22,275           22,275
Furniture and fixtures                                    65,977           65,977
                                                      ----------       ----------
                                                       1,537,724        1,675,296
Less: accumulated depreciation and amortization        1,065,433        1,002,630
                                                      ----------       ----------
                                                         472,291          672,666
Add:  Land                                                    --           37,500
                                                      ----------       ----------
                                                      $  472,291       $  710,166
                                                      ==========       ==========
</TABLE>

For the years ended January 31, 1998 and 1997, depreciation expense aggregated
$147,144 and $116,827, respectively.


NOTE   6   -    SHORT-TERM DEBT:

                In May 1997, Goodren entered into a loan agreement with its bank
                for a line of credit in the aggregate amount of $500,000 through
                March 31, 1998. Interest is payable at an annual rate of 2% in
                excess of the bank's prime lending rate. Borrowings are
                collateralized by all assets of Goodren and are guaranteed by
                the Company and its other subsidiaries. This line of credit
                replaced a previous facility which expired in January 1997. As
                of January 31, 1998 there were no outstanding borrowings under
                this new facility.


NOTE   7   -    ACCRUED EXPENSES:

                At January 31, 1998 and 1997 accrued expenses consisted of the
                following:

<TABLE>
<CAPTION>
                           1998           1997
                         --------       --------
<S>                      <C>            <C>     
Salaries and wages       $ 39,978       $ 47,649
Employee benefits         216,591        282,558
Other                     323,959        249,234
                         --------       --------
                         $580,528       $579,441
                         ========       ========
</TABLE>



                                     F - 10
<PAGE>   21
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1998 AND 1997



NOTE   8   -    LONG-TERM DEBT:

          (a)   OTHER LIABILITIES:

                At January 31, 1998 and 1997 long-term liabilities included the
following:

<TABLE>
<CAPTION>
                                                                1998           1997
                                                              --------       --------

<S>                                                           <C>            <C>     
9% equipment note payable in monthly installments of
$427, inclusive of interest                                   $     --       $  5,283

Union pension withdrawal liability/shortfall, presently
payable in quarterly installments of $3,000 (including
interest at 8% per annum (see Note 12d)                        353,239        368,255
                                                              --------       --------
                                                               353,239        373,538
Less: current portion                                            8,914         14,181
                                                              --------       --------
                                                              $344,325       $359,357
                                                              ========       ========
</TABLE>

                Aggregate maturities of long-term liabilities for the next five
                and in the aggregate are $8,914, $9,603, $10,346, $11,146,
                $12,007 and $301,223 thereafter.

        (b)     CAPITAL LEASE OBLIGATIONS:

                The Company and its subsidiaries are the lessees of machinery
                and equipment under leases expiring at various dates through
                July 2001. The assets and liabilities are recorded at the lower
                of the present value of the minimum lease payments or the fair
                market value of the assets. The assets are depreciated over
                their estimated useful lives. Depreciation of assets under
                capital leases included in depreciation expense for the years
                ended January 31, 1998 and 1997, aggregated $8,880 and $4,440,
                respectively.

                Minimum future lease payments under capital leases as of January
                31, 1998 and for each of the next five years are as follows:

<TABLE>
<S>                    <C>                                         <C>      
                       1999                                        $  40,978
                       2000                                           33,228
                       2001                                           17,448
                       2002                                            8,724
                                                                   ---------
                Total minimum lease payments                         100,378
                Less: amount representing interest                    21,006
                                                                   ---------
                                                                   $  79,372
                                                                   =========
</TABLE>






                                     F - 11
<PAGE>   22
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1998 AND 1997




NOTE   9   -    INCOME TAXES:


The provision for income taxes consisted of the following for the years ended
January 31, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                        1998             1997
                                                                    ----------       ----------
<S>                                                                 <C>              <C>       
Current:
  Federal                                                           $       --       $       --
  State and local                                                       15,370           20,870
                                                                    ----------       ----------
                                                                        15,370           20,870
Deferred:
  Federal, state and local                                             510,000               --
                                                                    ----------       ----------

PROVISION FOR INCOME TAXES                                          $  525,370       $   20,870
                                                                    ==========       ==========
</TABLE>

The components of the net deferred income tax asset, pursuant
to SFAS 109, as of January 31, 1998 and 1997 are as follows:

<TABLE>
<CAPTION>
                                                                       1998             1997
                                                                    ----------       ----------
<S>                                                                 <C>              <C>       
Deferred tax assets:
  Accounts receivable                                               $    3,700       $    5,400
  Inventory                                                              2,800            1,800
  Operating loss carryforward                                        3,000,000        2,040,000
                                                                    ----------       ----------

Total deferred tax asset                                             3,006,500        2,047,200

  Valuation allowance                                                3,006,500        1,537,200
                                                                    ----------       ----------
NET DEFERRED INCOME TAX ASSET                                       $       --       $  510,000
                                                                    ==========       ==========
</TABLE>

                 The Company has available operating loss carryforwards for
                 federal tax purposes of approximately $8,000,000. These losses
                 expire in various years beginning in 2005 and may result in
                 deferred tax assets. The Company had previously recorded a
                 deferred tax asset based on the assumed recoverability of the
                 net operating loss carryforward. Since the Company realized a
                 significant net operating loss for the current year, this
                 deferred tax asset has been reversed. The Company has provided
                 a 100% valuation allowance against its deferred tax asset since
                 it is not more likely than not that such asset will be realized
                 in the near future. This allowance will be evaluated at the end
                 of each year, considering both positive and negative evidence
                 concerning the realizability of the asset, and will be
                 increased or reduced accordingly.

                 Reconciliation of the statutory Federal income tax rate to the
                 Company's negative effective tax rate for the years ended
                 January 31, 1998 and 1997 is not meaningful and therefore not
                 provided due to the reversal of the deferred tax asset.






                                     F - 12
<PAGE>   23
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1998 AND 1997



NOTE  10  -      RETIREMENT PLANS:

                 Goodren has a defined contribution profit sharing plan covering
                 substantially all of its employees. Contributions are based on
                 a percentage of each participant's compensation or a fixed
                 annual contribution for union employees based on a collective
                 bargaining agreement. The cost of the plan approximated $35,000
                 in 1998 and 1997. See also Note 12d.


NOTE  11  -      ECONOMIC DEPENDENCY:

                 One of the Company's customers accounted for approximately 39%
                 of net sales for each of the years ended January 31, 1998 and
                 1997.


NOTE  12  -      COMMITMENTS AND CONTINGENCIES:

          (a)    OPERATING LEASES:

                 The Company and its subsidiaries lease certain administrative
                 and manufacturing facilities and equipment under operating
                 leases expiring at various times through 2002. Other locations
                 are rented on a month to month basis. Rental and lease expense
                 aggregated approximately $102,000 and $136,000 for the years
                 ended January 31, 1998 and 1997, respectively.

                 Future minimum rental commitments for existing operating
                 leases and in the aggregate are as follows:

<TABLE>
<S>                                                        <C>     
                Fiscal year ending January 31, 1999 -      $103,762
                                               2000 -       108,325
                                               2001 -        71,075
                                               2002 -         3,639
                                                           --------
                                                           $286,801
                                                           ========
</TABLE>

        (b)     EMPLOYMENT CONTRACTS:

                The Company has an employment contract (the "Contract") with the
                President of Goodren which originally expired on January 31,
                1994 and is subject to automatic renewals for successive one
                year terms. The contract specifies base compensation of $155,000
                for the initial term and is subject to annual increases based on
                changes in the consumer price index. The contract also provides
                for additional compensation equal to 5% of the operating income
                of Goodren provided such operating income exceeds $650,000 for
                the fiscal year. In December 1994, Goodren entered into a
                further agreement with this executive whereby the proceeds of a
                newly purchased term life insurance policy in the amount of
                $250,000 will be paid to the spouse upon the death of this
                executive.



                                     F - 13
<PAGE>   24
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1998 AND 1997



NOTE  12  -     COMMITMENTS AND CONTINGENCIES  (CONTINUED):

        (b)     EMPLOYMENT CONTRACTS (CONTINUED):

                Flexible entered into an employment contract with its President
                for a three year period ending December 15, 1997, which is
                subject to renewals for successive one year terms. The base
                compensation under this contract is $75,000 with adjustments to
                be made annually based on changes in the consumer price index.
                The contract also provides for additional compensation based on
                annual sales revenue and/or gross profit performance of
                Flexible. The contract also encompasses non-compete provisions,
                availability of medical benefits and the use of an automobile.

        (c)     LITIGATION:

                Goodren is included in a threatened claim concerning
                environmental cleanup costs. Goodren is included among a large
                number of companies involved, and is not one of the major
                parties. The amount, if any, that Goodren may ultimately have to
                pay, is not considered material, is subject to change and is
                uncertain at this time. It is management's opinion that the
                Company is adequately reserved for this matter and the ultimate
                resolution of this case should not have a material impact on the
                financial condition of the Company.

        (d)     OTHER:

                Goodren has withdrawn from participating in the District 65
                Union Pension Plan (the "Plan"), see Note 10. The withdrawal has
                resulted in the assessment of a withdrawal liability owed to the
                Plan by Goodren. During the year ended January 31, 1995, the
                Company accrued a reserve for an estimated liability of $560,000
                which counsel to the Company believed would be payable over a
                period of approximately 22 years beginning approximately one
                year from the withdrawal date. In March of 1996, the Company
                signed an agreement with the Plan whereby they will make
                quarterly payments of $7,548. At September 30, 1996, the Company
                and Goodren entered into a Settlement Agreement with the
                Trustees of the union pension plan whereby Goodren's pension
                fund liability was reduced to $360,000 payable in 80 equal
                quarterly payments of $8,752 including annual interest at a rate
                of 8%. The Company applied for relief as a "hardship case"
                pursuant to the Settlement Agreement, and received approval to
                reduce its quarterly obligations to $3,000 until such time as
                the Company is out of hardship. See also Note 8a.





                                     F - 14
<PAGE>   25
                      EAC INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                      YEARS ENDED JANUARY 31, 1998 AND 1997



  NOTE  12  -     COMMITMENTS AND CONTINGENCIES  (CONTINUED):

         (e)      In November 1997, the Company filed a statement with the
                  Securities and Exchange Commission to register 2,283,551
                  shares of its common stock to be issued upon exercise of the
                  rights to subscribe for such shares, "the Rights Offering".
                  Shareholders holding 100 shares of common stock or more at the
                  close of business on November 10, 1997 (the record date) will
                  receive one non-transferable Right for each share of common
                  stock held. Each Right entitles the holder to purchase one
                  share of Company common stock at an exercise price of $.22 per
                  share. This offering closed in February 1998, subsequent to
                  the balance sheet date. Simultaneously with the closing, the
                  Company effected (i) a 100 to 1 reverse split of its common
                  stock through a reclassification of its common stock and (ii)
                  an immediate subsequent reclassification with a forward stock
                  split pursuant to which each holder of the reclassified common
                  stock would receive 99 additional shares of reclassified
                  common stock. The effect of this was to eliminate all holders
                  of less than 100 shares (pre-reverse split) of common stock,
                  such stockholders receiving cash of $.28125 per share in lieu
                  of their fractional interests.






                                     F - 15