<PAGE>   1
 
     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 4, 1998
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
 
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-Q
 
<TABLE>
<C>               <S>
   (MARK ONE)
      [X]         QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998
                                     OR ___________________
      [  ]        TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
                  THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE TRANSITION PERIOD FROM ____________ TO ____________
</TABLE>
 
                         COMMISSION FILE NUMBER 0-07477
 
                             THE ENSTAR GROUP, INC.
             (Exact name of registrant as specified in its charter)
 
<TABLE>
<S>                                            <C>
                   GEORGIA                                      63-0590560
        (State or other jurisdiction                         (I.R.S. Employer
      of incorporation or organization)                     Identification No.)
</TABLE>
 
                         172 COMMERCE STREET--3RD FLOOR
                           MONTGOMERY, ALABAMA 36104
                    (Address of principal executive offices)
 
                                 (334) 834-5483
              (Registrant's telephone number, including area code)
 
     Indicate by check mark whether the registrant (1) has filed all reports
required 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 whether the registrant has filed all documents and
reports required to be filed by Section 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 [ ]
 
     The number of shares of Registrant's Common Stock, $.01 par value per
share, outstanding at July 28, 1998 was 4,106,709.
 
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>   2
 
     THIS FORM 10-Q AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME BY THE
ENSTAR GROUP, INC. OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY
CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933, AS AMENDED, AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED BY THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, 15 U.S.C.A. SECTIONS 77Z-2 AND
78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE INTENT,
BELIEF OR CURRENT EXPECTATIONS OF THE ENSTAR GROUP, INC. AND MEMBERS OF ITS
MANAGEMENT TEAM, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE
NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND
THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING
STATEMENTS ARE SET FORTH IN THE SAFE HARBOR COMPLIANCE STATEMENT FOR
FORWARD-LOOKING STATEMENTS INCLUDED AS EXHIBIT 99.1 TO THIS FORM 10-Q, AND ARE
HEREBY INCORPORATED BY REFERENCE. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE
OR REVISE FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE
OCCURRENCE OF UNANTICIPATED EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER
TIME.
                                        i
<PAGE>   3
 
                                     PART I
                             FINANCIAL INFORMATION
 
ITEM 1.  FINANCIAL STATEMENTS
 
                             THE ENSTAR GROUP, INC.
 
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                              JUNE 30,     DECEMBER 31,
                                                                1998           1997
                                                              ---------    ------------
                                                                   (IN THOUSANDS)
                                                                     (UNAUDITED)
<S>                                                           <C>          <C>
                                        ASSETS
Cash and cash equivalents...................................  $     339     $     700
Certificates of deposit.....................................      3,446         3,322
Other.......................................................        470           484
Investment in First Union...................................     71,782        68,380
Property and equipment, net.................................         41            46
                                                              ---------     ---------
          Total assets......................................  $  76,078     $  72,932
                                                              =========     =========
 
                         LIABILITIES AND SHAREHOLDERS' EQUITY
Note payable................................................  $     100     $     513
Reserve for litigation settlements..........................      1,949         1,877
Accounts payable and accrued liabilities....................         42            47
Deferred liabilities........................................      1,133           473
Other.......................................................        364           358
                                                              ---------     ---------
          Total liabilities.................................      3,588         3,268
                                                              ---------     ---------
Shareholders' equity:
  Common stock ($.01 par value; 55,000,000 shares
     authorized, 4,549,060 shares issued at June 30, 1998
     and December 31, 1997).................................         45            45
  Additional paid-in capital................................    167,878       167,878
  Accumulated other comprehensive income -- unrealized gain
     on investment in First Union...........................     43,314        37,606
  Accumulated deficit.......................................   (133,372)     (134,825)
  Treasury stock, at cost (413,676 and 84,126 shares at June
     30, 1998 and December 31, 1997, respectively)..........     (5,375)       (1,040)
                                                              ---------     ---------
          Total shareholders' equity........................     72,490        69,664
                                                              ---------     ---------
          Total liabilities and shareholders' equity........  $  76,078     $  72,932
                                                              =========     =========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                        1
<PAGE>   4
 
                             THE ENSTAR GROUP, INC.
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                        THREE MONTHS ENDED         SIX MONTHS ENDED
                                                             JUNE 30,                  JUNE 30,
                                                      -----------------------   -----------------------
                                                         1998         1997         1998         1997
                                                      ----------   ----------   ----------   ----------
                                                       (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
                                                                         (UNAUDITED)
<S>                                                   <C>          <C>          <C>          <C>
Investment income...................................  $     561    $     559    $   2,731    $   1,054
Litigation income (expense), net....................         70           (6)          70          (35)
General and administrative expenses.................       (476)        (477)      (1,215)        (863)
Reorganization items, net...........................         --           --           --         (484)
Interest expense....................................        (47)        (333)         (93)        (651)
                                                      ---------    ---------    ---------    ---------
Income (loss) before income taxes...................        108         (257)       1,493         (979)
Income taxes........................................         --           --          (40)          --
                                                      ---------    ---------    ---------    ---------
Net income (loss)...................................  $     108    $    (257)   $   1,453    $    (979)
                                                      =========    =========    =========    =========
Weighted average shares outstanding.................  4,146,853    4,448,720    4,251,402    2,345,079
                                                      =========    =========    =========    =========
Weighted average shares outstanding -- assuming
  dilution..........................................  4,211,913    4,448,720    4,300,205    2,345,079
                                                      =========    =========    =========    =========
Net income (loss) per common share..................  $    0.03    $   (0.06)   $    0.34    $   (0.42)
                                                      =========    =========    =========    =========
Net income (loss) per common share -- assuming
  dilution..........................................  $    0.03    $   (0.06)   $    0.34    $   (0.42)
                                                      =========    =========    =========    =========
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                        2
<PAGE>   5
 
                             THE ENSTAR GROUP, INC.
 
                CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 
<TABLE>
<CAPTION>
                                                              THREE MONTHS
                                                                  ENDED        SIX MONTHS ENDED
                                                                JUNE 30,           JUNE 30,
                                                             ---------------   ----------------
                                                              1998     1997     1998     1997
                                                             ------   ------   ------   -------
                                                                      (IN THOUSANDS)
                                                                        (UNAUDITED)
<S>                                                          <C>      <C>      <C>      <C>
Net income (loss)..........................................  $  108   $ (257)  $1,453   $  (979)
Other comprehensive income:
  Unrealized gains on investment in First Union:
  Unrealized holding gains arising during period...........   1,771    9,708    8,526    15,789
  Less: reclassification adjustment for gains included in
     net income............................................      --       --   (2,818)       --
                                                             ------   ------   ------   -------
Other comprehensive income.................................   1,771    9,708    5,708    15,789
                                                             ------   ------   ------   -------
Comprehensive income.......................................  $1,879   $9,451   $7,161   $14,810
                                                             ======   ======   ======   =======
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                        3
<PAGE>   6
 
                             THE ENSTAR GROUP, INC.
 
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                               SIX MONTHS ENDED
                                                              -------------------
                                                              JUNE 30,   JUNE 30,
                                                                1998       1997
                                                              --------   --------
                                                                (IN THOUSANDS)
                                                                  (UNAUDITED)
<S>                                                           <C>        <C>
Cash flows from operating activities:
  Net income (loss).........................................  $ 1,453    $  (979)
  Adjustments to reconcile net income to net cash provided
     by (used in) operating activities:
     Depreciation...........................................        7          5
     Gain on sale of First Union common stock...............   (2,818)        --
     Loss on call option transactions.......................    1,127         --
  Changes in assets and liabilities:
     Accounts payable and accrued liabilities...............       67       (566)
     Other..................................................       91       (259)
                                                              -------    -------
          Net cash used in operating activities.............      (73)    (1,799)
                                                              -------    -------
Cash flows from investing activities:
  Proceeds from sale of First Union common stock............    5,125         --
  Proceeds from sale of call options........................      363         --
  Repurchases of call options sold..........................     (902)        --
  Purchases of certificates of deposit......................   (4,902)    (4,513)
  Maturities of certificates of deposit.....................    4,778      1,938
  Purchase of property and equipment........................       (2)       (16)
                                                              -------    -------
          Net cash provided by (used in) investing
           activities.......................................    4,460     (2,591)
                                                              -------    -------
Cash flows from financing activities:
  Proceeds from note payable................................    1,311         --
  Repayment of note payable.................................   (1,724)        --
  Purchase of treasury stock................................   (4,335)        --
                                                              -------    -------
          Net cash used in financing activities.............   (4,748)        --
                                                              -------    -------
Decrease in cash and cash equivalents.......................     (361)    (4,390)
Cash and cash equivalents at the beginning of the period....      700      4,749
                                                              -------    -------
Cash and cash equivalents at the end of the period..........  $   339    $   359
                                                              =======    =======
Supplemental disclosures of cash flow information:
  Interest paid.............................................  $    17    $   723
                                                              =======    =======
  Income taxes paid.........................................  $    48    $    --
                                                              =======    =======
</TABLE>
 
   The accompanying notes are an integral part of the consolidated financial
                                  statements.
 
                                        4
<PAGE>   7
 
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)
 
NOTE 1: GENERAL
 
     The consolidated financial statements of The Enstar Group, Inc. (the
"Company") are unaudited and, in the opinion of management, include all
adjustments consisting solely of normal recurring adjustments necessary to
fairly state the Company's financial condition and results of operations for the
interim period. The results of operations for the three and six months ended
June 30, 1998 are not necessarily indicative of the results to be expected for
the full year. These statements should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1997 included in
the Company's Form 10-K/ A-1 as filed with the Securities and Exchange
Commission on April 21, 1998 under the Securities Exchange Act of 1934, as
amended. Certain prior year amounts have been reclassified in the financial
statements to conform with the current year presentation.
 
NOTE 2: INVESTMENT IN FIRST UNION
 
     In February 1998, the Company sold 101,939 shares of common stock of First
Union Corporation ("First Union") for net proceeds of $5,125,000 which were used
to repay indebtedness owed to First Union National Bank and to repurchase shares
of the Company's common stock. The First Union indebtedness was incurred in
conjunction with a stock repurchase program. The sale of the First Union common
stock resulted in a realized gain of $2,818,000. At June 30, 1998, the Company
held 1,232,307 shares of First Union common stock. See Notes 6 and 8.
 
NOTE 3: TREASURY STOCK
 
     During the first quarter of 1998, the Company repurchased 303,700 shares of
its common stock for approximately $3,955,000. The purchase of such shares was
financed through borrowings of approximately $1,211,000 under a revolving credit
agreement with First Union National Bank and the proceeds from the sale of
101,939 shares of the Company's First Union common stock. The purchases made in
the first quarter of 1998 completed a stock repurchase program announced in July
1997 under which the Company could repurchase up to $5 million of its common
stock. Under the program, the Company repurchased a total of 387,826 shares for
approximately $4,995,000. On April 21, 1998, the Company announced a second
stock repurchase program under which the Company could repurchase up to $5
million of its common stock in the open market at prices deemed favorable from
time to time by the Company. As of June 30, 1998, the Company had repurchased
25,850 shares of its common stock for approximately $380,000 as part of this
plan. See Note 8.
 
NOTE 4: LITIGATION CONTINGENCIES
 
     In February 1993, the Company obtained a $15 million judgement against
Richard Grassgreen, one of the Company's former officers, who subsequently filed
for bankruptcy. In connection with the settlement of the Company's claims
against the Grassgreen bankruptcy estate (the "Estate") and others, the Company
agreed to pay certain taxes of the Estate in the event the Estate did not have
sufficient funds. The United States Internal Revenue Service (the "IRS")
appealed a determination by the bankruptcy court that the IRS cannot seek
payment of the taxes from the Estate. On March 25, 1998, the United States
District Court for the Middle District of Florida reversed and remanded the case
to the bankruptcy court to determine whether the Estate has any assets from
which to satisfy any such tax liability, and if so, for further proceedings to
determine pursuant to Section 505(a) of the Bankruptcy Code whether the Estate
has any additional income tax liability.
 
     On February 11, 1997, fifteen former shareholders of the Company filed a
lawsuit against the Company. The complaint, which deals with actions occurring
prior to the Company's filing for bankruptcy in 1991, alleges that the Company
along with its then principal officers and others defrauded the plaintiffs in
violation
                                        5
<PAGE>   8
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
of the Alabama Securities Act and other Alabama statutory provisions. The
plaintiffs seek compensatory damages in the amount of their alleged losses of
approximately $2 million and unspecified punitive damages. The Company filed a
motion to dismiss and/or for summary judgement on March 17, 1997. The motion
filed by the Company contends that the claims asserted are barred by the
applicable statutes of limitations. The motion is still pending before the
court. In the event the plaintiffs' claims are not dismissed pursuant to the
Company's motion, the Company intends to contest the plaintiffs' claims
vigorously. The Company cannot, however, reasonably predict the outcome of this
lawsuit.
 
NOTE 5: INVESTMENT INCOME
 
     Investment income for the three and six months ended June 30, 1998 and
1997, respectively, is made up of the following components:
 
<TABLE>
<CAPTION>
                                                    THREE MONTHS ENDED        SIX MONTHS ENDED
                                                         JUNE 30,                 JUNE 30,
                                                    -------------------   ------------------------
                                                      1998       1997        1998          1997
                                                    --------   --------   -----------   ----------
<S>                                                 <C>        <C>        <C>           <C>
Gain on sale of First Union common stock..........        --         --   $ 2,818,000           --
Gain (loss) on call option transactions...........  $ 47,000         --    (1,127,000)          --
Dividend and interest income......................   514,000   $559,000     1,040,000   $1,054,000
                                                    --------   --------   -----------   ----------
          Total investment income.................  $561,000   $559,000   $ 2,731,000   $1,054,000
                                                    ========   ========   ===========   ==========
</TABLE>
 
NOTE 6: FINANCIAL INSTRUMENTS
 
     During the first quarter of 1998, the Company sold call options for 205,000
shares of its First Union common stock for total proceeds of approximately
$363,000. The options contained call prices of $50 and $55 a share and had
expiration dates ranging from February 21, 1998 to July 18, 1998. Call options
for 55,000 shares of the Company's First Union common stock, which had been
issued prior to December 31, 1997, expired unexercised resulting in a realized
gain of approximately $7,000. The 55,000 call options issued with an expiration
date of February 21, 1998 were exercised in conjunction with the sale of First
Union common stock. In March 1998, the Company repurchased call options for
290,000 shares of its First Union common stock for approximately $902,000. At
June 30, 1998, the Company had 205,000 call options outstanding with call prices
of $50 and $55 with an expiration date of July 18, 1998. See Note 8.
 
NOTE 7: INVESTMENT COMPANY ACT OF 1940
 
     As a result of holding the shares of First Union common stock as its
primary asset for a period of time longer than the twelve months ending March
27, 1998, the Company may be required to register as an investment company under
the Investment Company Act of 1940 (the "1940 Act"). On March 19, 1998, the
Company filed a document with the Securities and Exchange Commission (the "SEC")
entitled "Application for an Order Pursuant to Sections 6(c) and 6(e) of the
Investment Company Act of 1940." This document requests a two year exemption
from registration requirements of the 1940 Act. In April 1998, the Company
received initial comments on the original application from the staff of the SEC
and filed an amended application on May 22, 1998. If such application is denied
and/or the Company is otherwise deemed to be an investment company, the Company
would be required to register under the 1940 Act and would thereafter be subject
to regulation thereunder. If this occurred, it would add complexity to the
Company's pursuit of its acquisition strategy, add to the administrative
expenses of the Company and fundamentally alter the presentation of the
Company's financial statements.
 
                                        6
<PAGE>   9
                     THE ENSTAR GROUP, INC. AND SUBSIDIARY
 
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
 
NOTE 8: SUBSEQUENT EVENTS
 
     In July 1998, the Company sold 205,000 shares of its First Union common
stock in conjunction with the exercise of call options outstanding at June 30,
1998. The Company received net proceeds of approximately $11 million and
realized a gain of approximately $8.8 million on the sale of the shares.
Additionally, the Company recognized a cumulative loss of approximately $2
million (approximately $614,000 through June 30, 1998) on mark-to-market
adjustments on such call options through the date of sale. Following the sale,
the Company holds 1,027,307 shares of First Union common stock. See Notes 2 and
6.
 
     In connection with a second stock repurchase program announced in April
1998, the Company purchased 28,675 shares of its common stock in July 1998 for
approximately $435,000. Since the announcement of the plan, a total of 54,525
shares have been purchased for approximately $815,000. See Note 3.
 
                                        7
<PAGE>   10
 
                        INDEPENDENT ACCOUNTANTS' REPORT
 
Board of Directors and Shareholders of
The Enstar Group, Inc.
Montgomery, Alabama
 
     We have reviewed the accompanying consolidated balance sheet of The Enstar
Group, Inc. and subsidiary as of June 30, 1998, and the related consolidated
statements of income, comprehensive income and cash flows for the three-month
and six-month periods ended June 30, 1998 and 1997. These financial statements
are the responsibility of The Enstar Group, Inc. and subsidiary's management.
 
     We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
 
     Based on our review, we are not aware of any material modifications that
should be made to such consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
 
     We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of The Enstar Group, Inc. and
subsidiary as of December 31, 1997 and the related consolidated statements of
income, comprehensive income, shareholders' equity and cash flows for the year
then ended (not presented herein); and in our report dated January 30, 1998
(March 23, 1998 as to Note 14 and April 15, 1998 as to Note 13), we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying consolidated balance sheet as of
December 31, 1997 is fairly stated, in all material respects, in relation to the
consolidated balance sheet from which it has been derived.
 
DELOITTE & TOUCHE LLP
 
Atlanta, Georgia
July 28, 1998
 
                                        8
<PAGE>   11
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS
 
Liquidity and Capital Resources
 
     The Company's assets, aggregating approximately $76.1 million at June 30,
1998, consisted primarily of 1,232,307 shares of the common stock of First Union
Corporation ("First Union Common Stock") (with a market value of $71.8 million),
cash, cash equivalents and certificates of deposit. Based on the average daily
trading volume of shares of First Union Common Stock, the Company believes that
its investment in First Union is readily marketable.
 
     In February 1998, the Company sold 101,939 shares of First Union Common
Stock for net proceeds of approximately $5.1 million which were used to repay
indebtedness owed to First Union National Bank and to repurchase shares of the
Company's common stock. The First Union indebtedness was incurred in conjunction
with a stock repurchase program.
 
     During the first quarter of 1998, the Company sold call options for 205,000
shares of its First Union Common Stock for net proceeds of approximately
$363,000. The options contained call prices of $50 and $55 a share and had
expiration dates ranging from February 21, 1998 to July 18, 1998. Call options
for 55,000 shares of the Company's First Union Common Stock, which had been
issued prior to December 31, 1997, expired unexercised resulting in a realized
gain of approximately $7,000. The 55,000 call options issued with an expiration
date of February 21, 1998 were exercised in conjunction with the sale of First
Union Common Stock. In March 1998, the Company repurchased call options for
290,000 shares of its First Union Common Stock for approximately $902,000. At
June 30, 1998, there were 205,000 call options outstanding with call prices of
$50 and $55 expiring on July 18, 1998. These options were exercised in July
1998, resulting in the receipt of net proceeds of approximately $11 million and
a realized gain of approximately $8.8 million on the sale. In addition, the
Company recognized a cumulative loss of approximately $2 million on
mark-to-market adjustments on such call options. The Company intends to continue
to evaluate ways in which it may attempt to maximize the value of its shares of
First Union Common Stock. This may include sales of First Union Common Stock at
prices deemed attractive by management, sales of covered call options on First
Union Common Stock, and other derivative transactions involving First Union
Common Stock, in compliance with applicable laws.
 
     The Company is seeking to acquire an operating business. Until such time as
the Company uses its assets for an acquisition, the Company's only liquidity
needs are to fund operating expenses. In the event the Company fails to acquire
an operating business within a reasonable period of time, the Company will
consider other alternatives, including, but not limited to, liquidation of the
Company.
 
Financial Condition
 
     The Company had total assets of $76.1 million at June 30, 1998 compared to
$72.9 million at December 31, 1997. The change in total assets was primarily due
to an increase in the market value of the Company's First Union Common Stock of
approximately $8.5 million less $5.1 million which represents the value of the
101,939 shares sold in February 1998.
 
     During the first quarter of 1998, the Company repurchased 303,700 shares of
its common stock for approximately $3,955,000. The purchase of such shares was
financed through borrowings of approximately $1,211,000 under a revolving credit
agreement with First Union National Bank and the proceeds from the sale of
101,939 shares of the Company's First Union Common Stock. The purchases made in
the first quarter of 1998 completed a stock repurchase program announced in July
1997 under which the Company could repurchase up to $5 million of its common
stock. Under the program, the Company repurchased a total of 387,826 shares for
approximately $4,995,000. In April 1998, the Company announced a second stock
repurchase program under which the Company could repurchase up to $5 million of
its common stock in the open market at prices deemed favorable from time to time
by the Company. As of June 30, 1998, the Company had repurchased 25,850 shares
of its common stock for approximately $380,000 as part of this plan.
 
                                        9
<PAGE>   12
 
Results of Operations
 
     The Company reported net income of $108,000 and $1,453,000 for the three
and six month periods ended June 30, 1998, compared to losses of $257,000 and
$979,000 for the same periods in the prior year. The increase in net income for
the three and six month periods ended June 30, 1998 is primarily attributable to
the increase in investment income and the reduction in interest expense,
partially offset by increases in certain general and administrative expenses.
 
     Investment income increased by $2,000 and $1,677,000 in the three and six
month periods ended June 30, 1998, respectively, over the same periods in 1997.
The increase in investment income for the six month period ended June 30, 1998
over the same period in 1997 can be attributed to the gain of $2,818,000 on the
sale of 101,939 shares of First Union Common Stock in the first quarter of 1998,
reduced by losses of $1,127,000 on call option transactions on the Company's
First Union Common Stock. The losses on the call option transactions are
primarily mark-to-market adjustments on call options sold but not exercised at
June 30, 1998, and the net cost of repurchases of certain call options.
Investment income for the six months ended June 30, 1998 also includes dividend
and interest income of $1,040,000, compared to $1,054,000 for the same period in
the prior year.
 
     General and administrative expenses were $476,000 and $1,215,000 for the
three and six months ended June 30, 1998, respectively, compared to $477,000 and
$863,000 for the same periods in 1997. The increase in the six month period
ended June 30, 1998 was primarily due to $213,000 in additional franchise taxes
and an increase in legal and professional fees, both of which occurred in the
first quarter of 1998.
 
     Interest expense was $47,000 and $93,000 for the three and six month
periods ended June 30, 1998, respectively. Interest expense for the
corresponding periods in 1997 was $333,000 and $651,000, respectively, and
included $291,000 and $570,000, respectively, relating to an $18.1 million loan.
The indebtedness was incurred by the Company in October 1996 for the purpose of
repaying certain of the Company's liabilities subject to compromise. The loan
was subsequently repaid in July 1997.
 
     Since the completion of the Company's reorganization in March 1997, no
reorganization expenses have been incurred. Prior to that date, reorganization
items consisted of interest income less expenses directly related to the
reorganization of the Company. Net expenses of the reorganization for the six
months ended June 30, 1997 were $484,000.
 
     Income tax expense was zero and $40,000 for the three and six month periods
ended June 30, 1998, respectively, and zero for the comparable periods in 1997
due to recognition of tax benefits of the Company's net operating loss
carryforwards.
 
ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 
     Inapplicable.
 
                                       10
<PAGE>   13
 
                                    PART II
 
                               OTHER INFORMATION
 
ITEM 1.  LEGAL PROCEEDINGS
 
     Since May 31, 1991, the Company has been involved in extensive litigation
relating to its bankruptcy case. The Company's bankruptcy case was closed by
final decree dated July 17, 1997. Except as described below, the Company is not
aware of any pending litigation matters that could have a material adverse
effect on the Company.
 
     In February 1993, the Company obtained a $15 million judgement against
Richard Grassgreen, one of the Company's former officers, who subsequently filed
for bankruptcy. In connection with the settlement of the Company's claims
against the Grassgreen bankruptcy estate (the "Estate"), and others, and the
confirmed plan of reorganization of the Estate (the "Grassgreen Bankruptcy
Estate Settlement") the Company agreed to pay certain taxes of the Estate in the
event the Estate did not have sufficient funds. The United States Internal
Revenue Service (the "IRS") asserted a liability of the Company for taxes
allegedly owed by the Estate. In December 1996, the IRS appealed a determination
by the United States Bankruptcy Court for the Middle District of Florida (the
"Florida Bankruptcy Court") that the IRS cannot seek payment of the taxes. The
alleged tax liability, for calendar year 1994, is for sums paid to the Company
in connection with the Grassgreen Bankruptcy Estate Settlement by third parties
to resolve the Company's claims against those parties. In United States of
America v. Richard J. Grassgreen and The Enstar Group, Inc., Case No. 96-1099-
CIV-J-10 (U.S.D.C. M.D. Fla.), the IRS claims that it should be entitled to
assess additional taxes in the approximate amount of $1.6 million against the
Estate for 1994 and that the IRS should be able to seek payment of those taxes
from the Company by virtue of the Company's agreement to pay certain taxes of
the Estate. On March 25, 1998, the United States District Court for the Middle
District of Florida reversed and remanded the case to the Florida Bankruptcy
Court to determine whether the Estate has any assets from which to satisfy any
such tax liability, and if so, for further proceedings to determine pursuant to
Section 505(a) of the Bankruptcy Code whether the Estate has any additional
income tax liability. Although the Company has accrued a liability for the
potential tax and accrued interest, the Company intends to vigorously contest
that the Estate has any assets from which to pay any taxes that might be
determined to be owed or that the Company has any obligation to pay such taxes.
In addition, the Company intends to contest vigorously that any taxes are owed
by the Estate.
 
     On February 11, 1997, fifteen former shareholders of the Company filed a
lawsuit against the Company in the Circuit Court of Montgomery County, Alabama
styled Peter N. Zachary, et al. v. The Enstar Group, Inc., Case No.
CV-97-257-Gr. The complaint, which deals with actions occurring prior to the
Company's filing for bankruptcy in 1991, alleges that the Company along with its
then principal officers and others defrauded the plaintiffs in violation of the
Alabama Securities Act and other Alabama statutory provisions. The plaintiffs
seek compensatory damages in the amount of their alleged losses of approximately
$2 million and unspecified punitive damages. The complaint is virtually
identical to a complaint brought by these plaintiffs against the Company's
former chairman, former president and others in December 1991, during the
pendency of the Company's bankruptcy case and prior to the confirmation of the
reorganization plan. The plaintiffs allege that the United States Bankruptcy
Court for the Middle District of Alabama ("Alabama Bankruptcy Court") issued an
order on January 15, 1997, allowing them to litigate their claims against the
Company. The Alabama Bankruptcy Court's order actually held that the plaintiffs
could not bring a late claim against the Company in its bankruptcy case and then
went on to state that because of facts relating to these particular plaintiffs,
they were not bound by the provisions of the reorganization plan and their
claims were not subject to discharge under the Bankruptcy Code. On March 17,
1997, the Company filed a motion to dismiss and/or for summary judgment in
response to the complaint on the basis that the claims asserted are barred by
the applicable statute of limitations. The motion is still pending before the
court. In the event the plaintiffs' claims are not dismissed pursuant to the
Company's motion, the Company intends to contest the plaintiffs' claims
vigorously.
 
                                       11
<PAGE>   14
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     The Company held its Annual Meeting of Shareholders on May 21, 1998.
Matters voted upon at the meeting and the number of votes cast for, against or
withheld, are as follows:
 
          (1) To consider and act upon a proposal to elect the following
     nominees to be Directors:
 
<TABLE>
<CAPTION>
                                                                       VOTES
                        NOMINEE                           VOTES FOR   WITHHELD
                        -------                           ---------   --------
<S>                                                       <C>         <C>
J. Christopher Flowers *................................  3,250,326   118,493
Jeffrey S. Halis *......................................  3,278,313    90,506
</TABLE>
 
---------------
 
* Elected to hold office until the 2001 annual meeting of shareholders.
 
          In addition to Messrs. Flowers and Halis, the continuing directors are
     Nimrod T. Frazer, T. Whit Armstrong and T. Wayne Davis. Mr. Frazer's term
     expires in 1999 while Messrs. Armstrong and Davis' terms expire in the year
     2000.
 
          (2) To appoint Deloitte & Touche LLP as independent auditors for the
     year ended December 31, 1998. Votes cast were: 3,249,846 for, 110,569
     against and 8,404 abstentions.
 
ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K
 
     (a) Exhibits
 
<TABLE>
<CAPTION>
REFERENCE
NUMBER                       DESCRIPTION OF EXHIBITS
---------                    -----------------------
<C>   <C>  <S>
 3.1   --  Articles of Incorporation of the Company, as amended on June
           10, 1998.
 3.2   --  Bylaws of the Company, as amended (incorporated by reference
           to Exhibit 3.2 to the Annual Report on Form 10-K/A-1, dated
           April 21, 1998).
 4.1   --  Rights Agreement between the Company and American Stock
           Transfer & Trust Company, as Rights Agent, dated as of
           January 20, 1997 (incorporated by reference to Exhibit 4.1
           to the Amendment No. 2 to Registration Statement on Form 10,
           dated March 27, 1997).
27.1   --  Financial Data Schedule (For SEC use only)
99.1   --  The Enstar Group, Inc. Private Securities Litigation Reform
           Act of 1995 Safe Harbor Compliance Statement for
           Forward-Looking Statements (incorporated by reference to Ex-
           hibit 99.1 to the Annual Report on Form 10-K/A-1, dated
           April 21, 1998).
99.2   --  Application for an Order Pursuant to Sections 6(c) and 6(e)
           of the Investment Company Act of 1940 (incorporated by
           reference to Application for an Order Pursuant to Sections
           6(c) and 6(e) of the Investment Company Act of 1940, dated
           March 19, 1998).
99.3   --  Amendment No. 1 to the Application for an Order Pursuant to
           Sections 6(c) and 6(e) of the Investment Company Act of 1940
           (incorporated by reference to Amendment No. 1 to the
           Application for an Order Pursuant to Sections 6(c) and 6(e)
           of the Investment Company Act of 1940, dated May 22, 1998).
</TABLE>
 
     (b) Reports on Form 8-K
 
     There were no reports filed on Form 8-K for the quarter ended June 30,
1998.
 
                                       12
<PAGE>   15
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
 
                                          THE ENSTAR GROUP, INC.
 
                                          By:      /s/ Cheryl D. Davis
                                            ------------------------------------
                                                      Cheryl D. Davis
                                               Chief Financial Officer, Vice
                                                          President
                                               of Corporate Taxes, Secretary
                                                    (Authorized Officer)
                                               (Principal Financial Officer)
 
Date: August 4, 1998
 
                                       13