<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

MARK (ONE)
       [X] Quarterly Report pursuant to Section 13 or 15(d) of the
           Securities Exchange Act of 1934 For the quarterly period
           ended June 30, 1998

                                       or

       [ ] Transition Report pursuant to Section 13 or 15(d) of the
           Securities Exchange Act of 1934 For the transition period
           from _________________ to ____________________


                         Commission file number 0-26096


                             THE UNIMARK GROUP, INC.
             (Exact name of registrant as specified in its charter)


               TEXAS                                     75-2436543
(State of incorporation or organization)    (I.R.S. Employer Identification No.)


         UNIMARK HOUSE
        124 MCMAKIN ROAD
        BARTONVILLE, TEXAS                                  76226
(Address of principal executive offices)                  (Zip Code)



       Registrant's telephone number, including area code: (817) 491-2992


         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    .
                                             ---    ---

         As of August 12, 1998, the number of shares outstanding of each class 
of common stock was:

                 Common Stock, $.01 par value: 11,938,326 shares



<PAGE>   2

                                      INDEX

<TABLE>
<CAPTION>
                                                                                         PAGE
<S>                                                                                       <C>
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements (Unaudited)
         Condensed Consolidated Balance Sheets,
            December 31, 1997 and June 30, 1998............................................3
         Condensed Consolidated Statements of Operations
            for the three months and six months ended June 30, 1997 and 1998...............4
         Condensed Consolidated Statements of Cash Flows
            for the six months ended June 30, 1997 and 1998................................5
         Notes to Condensed Consolidated Financial Statements - June 30, 1998..............6

Item 2.   Management's Discussion and Analysis of Financial Condition
                and Results of Operations..................................................8

PART II.  OTHER INFORMATION

Item 6.   Exhibits and Reports on Form 8-K................................................14


SIGNATURES................................................................................14
</TABLE>



                                       2
<PAGE>   3



                             THE UNIMARK GROUP, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
             (IN THOUSANDS, EXCEPT FOR SHARE AND PER SHARE AMOUNTS)


<TABLE>
<CAPTION>

                                                                          DECEMBER 31,     JUNE 30,
                                                                              1997           1998
                                                                          ------------     ---------
                                                                           (NOTE 1)       (UNAUDITED)
                                                  ASSETS
<S>                                                                         <C>            <C>      
Current assets:
    Cash and cash equivalents ........................................      $   1,237      $   2,939
    Accounts receivable -- trade, net of allowance of $685 in
      1997 and $803 in 1998 ..........................................         11,599         15,529
    Accounts receivable -- other .....................................            716            838
    Inventories ......................................................         25,726         27,111
    Income and value added taxes receivable ..........................          2,312          2,272
    Prepaid expenses .................................................          1,605            918
                                                                            ---------      ---------
         Total current assets ........................................         43,195         49,607
Property, plant and equipment, net of accumulated depreciation
  of $5,227 in 1997 and $6,552 in 1998 ...............................         38,130         38,673
Deferred income taxes ................................................          1,847          1,847
Goodwill .............................................................          6,606          6,515
Identifiable intangible assets .......................................          1,823          1,744
Due from related parties .............................................          1,678          1,692
Other assets .........................................................          1,337          1,545
                                                                            ---------      ---------
         Total assets                                                       $  94,616      $ 101,623
                                                                            =========      =========

                                   LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    Short-term borrowings ............................................      $  31,452      $  34,779
    Current portion of long-term debt ................................          1,655            815
    Accounts payable .................................................          4,087          6,807
    Accrued expenses .................................................          4,439          5,533
    Income taxes payable .............................................             40             --
    Deferred income taxes ............................................          6,050          6,551
                                                                            ---------      ---------
         Total current liabilities ...................................         47,723         54,485
Long-term debt, less current portion .................................          8,626          8,361
Deferred income taxes ................................................             15             15
Shareholders' equity:
    Common stock, $0.01 par value:
       Authorized shares - 20,000,000
       Issued and outstanding shares - 8,598,833 in
         1997 and 8,632,826 in 1998 ..................................             86             86
    Additional paid-in capital .......................................         45,419         44,448
    Retained earnings (deficit) ......................................         (7,253)        (5,772)
                                                                            ---------      ---------
         Total shareholders' equity ..................................         38,252         38,762
                                                                            ---------      ---------
         Total liabilities and shareholders' equity ..................      $  94,616      $ 101,623
                                                                            =========      =========
</TABLE>

                             See accompanying notes.




                                       3

<PAGE>   4


                             THE UNIMARK GROUP, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                      THREE MONTHS ENDED                    SIX MONTHS ENDED
                                                           JUNE 30,                             JUNE 30,
                                                   --------------------------            -------------------------
                                                     1997              1998                1997             1998
                                                   --------          --------            --------         --------
                                                               (In thousands, except per share data)
<S>                                                <C>               <C>                 <C>              <C>     
Net sales....................................      $ 19,784          $ 25,509            $ 37,059         $ 50,041
Cost of products sold........................        12,691            16,904              24,546           33,527
                                                   --------          --------            --------         --------
                                                      7,093             8,605              12,513           16,514

Selling, general and administrative
  expenses...................................         6,589             5,999              12,411           11,890
                                                   --------          --------            --------         --------
Income from operations.......................           504             2,606                 102            4,624

Other income (expense):
    Interest expense.........................          (749)           (1,234)             (1,292)          (2,379)
    Interest income..........................            52                42                 154               94
    Foreign currency transaction loss........          (286)             (256)                (77)              (8)
    Other....................................             8                11                  12               60
                                                   --------          --------            --------         --------
                                                       (975)           (1,437)             (1,203)          (2,233)
                                                   --------          --------            --------         --------
Income (loss) before income taxes............          (471)            1,169              (1,101)           2,391
Income tax expense (benefit).................           (82)              273                 (71)             910
                                                   --------          --------            --------         --------
Income (loss) before extraordinary gain......          (389)              896              (1,030)           1,481

Extraordinary gain on forgiveness of debt,
  net of applicable income taxes of $109.....           139                --                 139               --
                                                   --------          --------            --------         --------

Net income (loss)............................      $   (250)         $    896            $   (891)        $  1,481
                                                   ========          ========            ========         ========        


Earnings (loss) per share: 
Income (loss) before extraordinary item:
        Basic................................      $ (0.05)          $  0.10             $ (0.12)         $  0.17
                                                   ========          ========            ========         ========        
        Diluted..............................      $ (0.05)          $  0.10             $ (0.12)         $  0.17
                                                   ========          ========            ========         ========        
    Net income (loss):
        Basic................................      $ (0.03)          $  0.10             $ (0.10)         $  0.17
                                                   ========          ========            ========         ========        
        Diluted..............................      $ (0.03)          $  0.10             $ (0.10)         $  0.17
                                                   ========          ========            ========         ========        
</TABLE>

                             See accompanying notes.


                                       4
<PAGE>   5



                             THE UNIMARK GROUP, INC.

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       SIX MONTHS ENDED
                                                                            JUNE 30,
                                                                    ----------------------
                                                                      1997          1998
                                                                    --------      --------
                                                                      (IN THOUSANDS)
<S>                                                                 <C>           <C>     
OPERATING ACTIVITIES
Net income (loss) ...............................................   $   (891)     $  1,481
Adjustments to reconcile net income (loss) to net cash provided
   by (used in) operating activities:
     Depreciation and amortization ..............................      1,599         1,805
     Deferred income taxes ......................................        283           501
     Changes in operating assets and liabilities:
        Receivables .............................................     (1,400)       (4,012)
        Inventories .............................................    (13,209)       (1,385)
        Prepaid expenses ........................................       (281)          687
        Payables and accrued expenses ...........................        677         2,768
                                                                    --------      --------
Net cash provided by (used in) operating activities .............    (13,222)        1,845

INVESTING ACTIVITIES
Purchases of property, plant and equipment ......................     (6,220)       (2,056)
Increase in identifiable intangible assets ......................        (24)         (122)
Increase in amounts due from related parties ....................       (915)          (14)
Increase in other assets ........................................       (345)         (208)
                                                                    --------      --------
Net cash used in investing activities ...........................     (7,504)       (2,400)

FINANCING ACTIVITIES
Net proceeds from issuance of common stock ......................         79            35
Net increase in short-term borrowings ...........................     17,482         3,327
Proceeds from long-term debt ....................................      1,798           240
Payments of long-term debt ......................................     (1,609)       (1,345)
                                                                    --------      --------
Net cash provided by financing activities .......................     17,750         2,257
                                                                    --------      --------

Net increase (decrease) in cash and cash equivalents ............     (2,976)        1,702
Cash and cash equivalents at beginning of period ................      4,268         1,237
                                                                    --------      --------
Cash and cash equivalents at end of period ......................   $  1,292      $  2,939
                                                                    ========      ========
</TABLE>


                             See accompanying notes.



                                       5

<PAGE>   6



                             THE UNIMARK GROUP, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


NOTE  1  -  SIGNIFICANT ACCOUNTING POLICIES

    Description of Business: At June 30, 1998, the Company has several projects
and commitments requiring substantial capital. Although the Company is exploring
various financing options and believes sufficient capital will ultimately be
available, there can be no assurances that adequate financing or capital can be
obtained on acceptable terms or at all. The inability to obtain sufficient debt
or equity capital for these projects and commitments could have a material
adverse effect on the Company and its projects including the realization of the
amounts capitalized and costs deferred related to these projects and
commitments.

    Additionally, the Company has recently relied upon bank financing to finance
its working capital and certain of its capital expenditure needs. Although the
principal loan facilities have been extended until January 1, 1999, no
assurances can be given that the lender will continue to renew such loan
facilities. The Company's cash requirements for 1998 and beyond will depend
primarily upon the level of sales, expenditures for capital equipment and
improvements, investments in agricultural projects, the timing of inventory
purchases, the success of newly introduced products and necessary reductions of
debt. Presently, the Company is in discussions with its primary lender and other
financial institutions regarding extending or replacing its existing debt
facilities. Although no assurances can be given, the Company believes it will be
able to obtain such debt facilities on terms acceptable to the Company. The
failure to obtain such debt facilities would have a material adverse affect on
the Company. For additional information see Note 5.

    Interim Financial Statements: The condensed consolidated financial
statements at June 30, 1998, and for the three month and six month periods then
ended are unaudited and reflect all adjustments (consisting only of normal
recurring adjustments) which are, in the opinion of management, necessary for a
fair presentation of the financial position and operating results for the
interim period. These condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and notes thereto,
together with Management's Discussion and Analysis of Financial Condition and
Results of Operations, contained in the Company's Annual Report on Form 10-K
incorporated herein by reference. The results of operations for the six months
ended June 30, 1998 and for the year ended December 31, 1997 are not necessarily
indicative of future financial results.

    Year End Financial Statement: The condensed consolidated balance sheet at
December 31, 1997 has been derived from the audited financial statements at that
date but does not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.

    Reclassifications: Certain prior year items have been reclassified to
conform to the current year presentation in the accompanying financial
statements.

NOTE  2  -  ARBITRATION AWARD

    On June 29, 1998 an arbitration award was issued against the Company in its
proceedings with the former shareholders of Simply Fresh Fruit, Inc. ("Simply
Fresh") regarding the price protection provisions of the May 9, 1996 acquisition
agreement and related issues. Pursuant to the award, on August 5, 1998 the
Company paid in cash the former Simply Fresh shareholders (i) $1,005,036 in
settlement of the common stock price protection issues, (ii) $67,391 in interest
on the price protection settlement amount and (iii) $110,000 in settlement of
related employment contract issues. The effect of this award has been reflected
in the accompanying financial statements.



                                       6
<PAGE>   7


NOTE  3  -  EARNINGS PER SHARE

    The following table sets forth the computation of basic and diluted earnings
(loss) per share for income (loss) from continuing operations:

<TABLE>
<CAPTION>
                                                   THREE MONTHS ENDED        SIX MONTHS ENDED 
                                                        JUNE 30,                JUNE 30,
                                                   -------------------     --------------------
                                                    1997         1998        1997         1998
                                                   ------      -------     -------      -------
                                                   (IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<S>                                                <C>         <C>         <C>          <C>    
NUMERATOR
Net income (loss) before extraordinary gain.....   $ (389)     $   896     $(1,030)     $ 1,481

DENOMINATOR
Denominator for basic earnings per share -
  weighted average shares outstanding...........    8,584        8,623       8,581        8,611
Effect of dilutive securities:
  Employee and director stock options...........       --           76          --           60
  Warrants......................................       --            2          --            1
                                                   ------      -------     -------      -------
Dilutive potential common shares................       --           78          --           61
                                                   ======      =======     =======      =======
Denominator for diluted earnings per share -
  Weighted average shares outstanding adjusted
  for assumed conversions.......................    8,584        8,701       8,581        8,672
                                                   ======      =======     =======      =======

Basic earnings (loss) per share.................   $(0.05)     $  0.10     $ (0.12)     $  0.17
                                                   ======      =======     =======      =======
Diluted earnings (loss) per share...............   $(0.05)     $  0.10     $ (0.12)     $  0.17
                                                   ======      =======     =======      =======
</TABLE>


NOTE  4  -  INVENTORIES

    Inventories consist of the following:


<TABLE>
<CAPTION>

                                             DECEMBER 31, JUNE 30,
                                               1997       1998
                                             -------     -------
                                               (IN THOUSANDS)
<S>                                          <C>         <C>    
  Finished goods:
      Cut fruits .........................   $12,983     $12,662
      Juice and oils .....................     2,592       4,065
                                             -------     -------
                                              15,575      16,727
  Advances to suppliers and orchards .....     5,718       6,328
  Raw materials and supplies .............     4,433       4,056
                                             -------     -------
                                             $25,726     $27,111
                                             =======     =======
</TABLE>



NOTE  5  -  SUBSEQUENT EVENTS

    On July 20, 1998, the Company sold 3,305,500 newly issued shares of common
stock at a purchase price of $4.5375 per share, for an aggregate purchase price
of $14,998,706 to M&M Nominee L.L.C., an affiliate of the Mexico Strategic
Investment Fund, Ltd. In connection with the transaction, the Company granted
the Fund options to acquire an additional 2,000,000 shares of common stock at a
purchase price of $4.5375 per share, representation on the Company's Board of
Directors and certain veto rights regarding financial and corporate matters. The
Company subsequently retired $10 million in short-term debt and intends to
utilize the remaining net proceeds to help finance its lemon project and for
working capital purposes.



                                       7

<PAGE>   8

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                       CONDITION AND RESULTS OF OPERATIONS



CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

    The discussion in this Quarterly Report on Form 10-Q contains
forward-looking statements that involve risks and uncertainties. Actual
consolidated results of the UniMark Group, Inc. ("UniMark" or the "Company")
could differ significantly from those discussed herein. Factors that could cause
or contribute to such differences include, but are not limited to, those
discussed in "Management's Discussion and Analysis of Financial Condition and
Results of Operations". Statements contained in this report that are not
historical facts are forward-looking statements that are subject to the safe
harbor created by the Private Securities Litigation Reform Act of 1995. A number
of important factors could cause the Company's actual results for 1998 and
beyond to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. These factors include, without
limitation: growth and integration of new businesses; uncertainty of new product
development and market acceptance of new products; dependence upon availability
and price of fresh fruit; competition; dependence upon significant customers;
seasonality and quarterly fluctuations; risk related to product liability and
recall; limited intellectual property protection; government regulation;
dependence on key management; economic, political and social conditions in
Mexico; exchange rate fluctuations and inflation; and labor relations and costs.
These factors are listed under "Risk Factors" in the Company's prospectus dated
June 14, 1996.


CONVERSION TO U.S. GAAP

    The Company conducts substantially all of its operations through its wholly
owned operating subsidiaries: UniMark Foods, Inc., UniMark International, Inc.,
Industrias Citricolas de Montemorelos, S.A. de C.V. ("ICMOSA"), Grupo Industrial
Santa Engracia, S.A. de C.V. ("GISE"), Agromark, S.A. de C.V. ("Agromark"),
Simply Fresh Fruit, Inc. ("Simply Fresh") and Les Produits Deli-Bon, Inc.
("Deli-Bon"). ICMOSA is a Mexican corporation with its headquarters located in
Montemorelos, Nuevo Leon, Mexico, whose principal activities consist of
operating five citrus processing plants and various citrus groves throughout
Mexico. GISE is a Mexican corporation with its headquarters located in Victoria,
Tamaulipas, Mexico, whose principal activities consist of operating three citrus
juice and oil processing plants. Agromark is a Mexican corporate entity under
which the Company's agricultural projects are reported. ICMOSA, GISE and
Agromark maintain their accounting records in Mexican pesos and in accordance
with Mexican generally accepted accounting principles and are subject to Mexican
income tax laws. ICMOSA's, GISE's and Agromark's financial statements have been
converted to United States generally accepted accounting principles ("U.S.
GAAP") and U.S. dollars. Deli-Bon maintains its accounting records in Canadian
dollars and in accordance with Canadian generally accepted accounting principles
and is subject to Canadian income tax laws.

    Unless otherwise indicated, all dollar amounts included herein are set forth
in U.S. dollars in accordance with U.S. GAAP. The functional currency of UniMark
and its subsidiaries is the U.S. dollar.

RECENT DEVELOPMENTS

    On July 20, 1998, the Company sold 3,305,500 newly issued shares of common
stock at a purchase price of $4.5375 per share, for an aggregate purchase price
of $14,998,706 to M&M Nominee L.L.C., an affiliate of the Mexico Strategic
Investment Fund, Ltd. In connection with the transaction, the Company granted
the Fund options to acquire an additional 2,000,000 shares of common stock at a
purchase price of $4.5375 per share, representation on the Company's Board of
Directors and certain veto rights regarding financial and corporate matters. The
Company subsequently retired $10 million in short-term debt and intends to
utilize the remaining net proceeds to help finance its lemon project and for
working capital purposes.



                                       8
<PAGE>   9




RESULTS OF OPERATIONS

    The following table sets forth certain consolidated financial data expressed
as a percentage of net sales for the periods indicated:


<TABLE>
<CAPTION>
                                                       THREE MONTHS                   SIX MONTHS
                                                        ENDED JUNE 30,               ENDED JUNE 30,
                                                   -----------------------       -----------------------
                                                     1997           1998           1997           1998
                                                   --------       --------       --------       --------
<S>                                                <C>            <C>            <C>            <C>   
Net sales.......................................      100.0%         100.0%         100.0%         100.0%
Cost of products sold...........................       64.2           66.3           66.2           67.0
                                                   --------       --------       --------       --------
Gross profit....................................       35.8           33.7           33.8           33.0
Selling, general and administrative expenses....       33.3           23.5           33.5           23.8
                                                   --------       --------       --------       --------
Income from operations..........................        2.5           10.2            0.3            9.2
Other income (expense):
    Interest expense............................       (3.8)          (4.8)          (3.5)          (4.8)
    Interest income.............................        0.3            0.2            0.4            0.2
    Foreign currency transaction gain (loss)....       (1.4)          (1.0)          (0.2)          --
    Other.......................................       --             --             --              0.2
                                                   --------       --------       --------       --------
 ................................................       (4.9)          (5.6)          (3.3)          (4.4)
                                                   --------       --------       --------       --------
Income (loss) before income taxes...............       (2.4)           4.6           (3.0)           4.8
Income tax expense (benefit)....................       (0.4)           1.1            0.2            1.8
                                                   --------       --------       --------       --------
Income (loss) before extraordinary gain.........       (2.0)           3.5           (2.8)           3.0
Extraordinary gain, net of income tax...........        0.7           --              0.4           --
                                                   --------       --------       --------       --------
Net income (loss)...............................       (1.3)%          3.5%          (2.4)%          3.0%
                                                   ========       ========       ========       ========
</TABLE>




Three Months Ended June 30, 1997 and 1998

    Net sales increased 28.9% from $19.8 million in 1997 to $25.5 million in
1998. This increase was primarily due to increases in citrus juice and oil
sales, retail sales and sales to Japan. Citrus juice and oil sales increased
from $2.6 million in 1997 to $6.9 million in 1998. Due to a large Mexican orange
crop this season, the Company has experienced favorable raw material costs and
has significantly increased production volume. These factors have helped control
the average unit cost of citrus juice inventories and has allowed the Company to
sell its frozen concentrate orange juice competitively in the European market as
well as the US market. Retail sales increased 20.4% from $6.7 million in 1997 to
$8.1 million in 1998 primarily as the result of continued growth in the
Company's 26 oz. chilled product line, success of the new branded canned
products and increased distribution and demand. Sales to Japan increased from
$421,000 in 1997 to $1.0 million in 1998 as the Company has broadened its
customer base in Japan.

    Foodservice sales decreased 9.8% from $6.3 million in 1997 to $5.7 million
in 1998 primarily as the result of increased competition and the Company's
decision to close its plant facility in the Northeast US in the fourth quarter
of 1997 (see "Restructuring Initiatives"). Club sales decreased 27.0% from $3.2
million in 1997 to $2.3 million in 1998 primarily as a result of discontinuing
production of the Company's avocado products in the first quarter of 1998 and
increased competition particularly on mixed fruit items.

    Gross profit as a percentage of net sales decreased from 35.8% in 1997 to
33.7% in 1998. Gross profit on cut fruit sales increased from 36.4% in 1997 to
37.2% in 1998. This increase is primarily the result of lower costs of
inventories due to increased production volume and efficiencies (see
"Restructuring Initiatives") and a price increase implemented in the first
quarter of 1998. Gross profit on citrus juice and oil sales decreased from
32.4% in 1997 to 24.4% in 1998 primarily as the result of a relative increase
in sales to Europe which yield lower margins.



                                       9
<PAGE>   10

    Selling, general and administrative expenses ("SG&A") as a percentage of net
sales decreased from 33.3% in 1997 to 23.5% in 1998. This decrease is primarily
the result of the relative increase in juice and oil sales that do not require
significant sales and marketing expenditures, cost savings realized from the
Company's reorganization of its cut fruit operations (See "Restructuring
Initiatives") and the increase in sales volume.

    Interest expense increased from 3.8% of net sales in 1997 to 4.8% in 1998.
Actual interest expense increased from $749,000 in 1997 to $1.2 million in 1998.
This increase was primarily the result of increased levels of debt necessary to
support increased levels of inventory and trade receivables associated with the
increase in sales volume and to support the development of the lemon project.

    Interest income of $52,000 was earned in 1997 and $42,000 in 1998 primarily
from the temporary cash investment of excess cash balances.

    A foreign currency transaction net loss of $286,000 in 1997 and $256,000 in
1998 resulted primarily from the conversion of Company's foreign subsidiaries'
financial statements to U.S. GAAP.

    Income taxes. A consolidated income tax benefit of $82,000 in 1997 resulted
from the recognition of future benefits from tax losses generated while a tax
expense of $273,000 was incurred in 1998.

    Extraordinary gain. In 1997, the Company reported a gain from the
forgiveness of debt of $139,000 net of applicable taxes.

    As a result of the foregoing, the Company reported a net loss of $250,000 in
1997 while reporting net income of $896,000 in 1998.

Six Months Ended June 30, 1997 and 1998

    Net sales increased 35.0% from $37.1 million in 1997 to $50.0 million in
1998. This increase was primarily due to increases in citrus juice and oil
sales, retail sales and sales to Japan. Citrus juice and oil sales increased
259.5% from $3.9 million in 1997 to $14.2 million in 1998. Retail sales
increased 21.4% from $13.3 million in 1997 to $16.2 million in 1998 and sales to
Japan increased 97.4% from $1.3 million in 1997 to $2.6 million in 1998. Due to
favorable raw materials costs and improved market prices the Company has
increased its citrus juice and oil production and has expanded its sales to
Europe. Retail sales have increased as the result of continued growth in the
Company's 26 oz. chilled product line, success of the new branded canned
products and increased distribution and demand. Sales to Japan have increased as
the Company has broadened its customer base in Japan.

    Gross profit as a percentage of net sales decreased from 33.8% in 1997 to
33.0% in 1998. Gross profit was negatively impacted by the relative increase in 
citrus juice and oil sales as compared to cut fruit sales since citrus juice 
and oil sales generally yield lower margins.

    Gross profit on cut fruit sales increased from 34.2% in 1997 to 35.8% in
1998. This increase is primarily the result of lower costs of inventories due to
increased production volume and efficiencies (see "Restructuring Initiatives")
and a price increase implemented in the first quarter of 1998. Gross profit on
citrus juice and oil sales decreased from 32.4% in 1997 to 24.4% in 1998
primarily as the result of a relative increase in sales to Europe which yield 
lower margins.

    Selling, general and administrative expenses ("SG&A") as a percentage of net
sales decreased from 33.5% in 1997 to 23.8% in 1998. This decrease is primarily
the result of the relative increase in juice and oil sales that do not require
significant sales and marketing expenditures, cost savings realized from the




                                       10

<PAGE>   11

Company's reorganization of its cut fruit operations (See "Restructuring
Initiatives") and the increase in sales volume.

    Interest expense increased from 3.5% of net sales in 1997 to 4.8% in 1998.
Actual interest expense increased from $1.3 million in 1997 to $2.4 million in
1998. This increase was primarily the result of increased levels of debt
necessary to support increased levels of inventory and trade receivables
associated with the increase in sales volume and to support the development of
the lemon project.

    Interest income of $154,000 in 1997 and $94,000 in 1998 resulted primarily
from the temporary cash investment of excess cash balances.

    A foreign currency transaction net loss of $77,000 in 1997 and $8,000 in
1998 resulted primarily from the conversion of Company's foreign subsidiaries'
financial statements to U.S. GAAP.

    Income taxes. The consolidated provision for income taxes was a benefit of
$71,000 in 1997 and an expense of $910,000 in 1998. The tax benefit resulted
from the recognition of future benefits from tax losses generated.

    Extraordinary gain. In 1997, the Company reported a gain from the
forgiveness of debt of $139,000 net of applicable taxes.

    As a result of the foregoing, the Company reported a net loss of $891,000 in
1997 while reporting net income of $1.5 million in 1998.

RESTRUCTURING INITIATIVES

    During the second half of 1997, the Company began implementing an internal
operating reorganization plan that involved consolidating fruit processing
operations in Mexico and distribution functions in the United States. In this
regard, the Company ceased operations at the Lawrence, Massachusetts, San Rafael
and Zamora plants and moved this production to the main Montemorelos plants. In
addition, the Company began originating all US distribution from the McAllen,
Texas warehouse facility. Although no assurances can be given, this internal
reorganization is expected to result in a number of benefits including
increasing operating efficiencies at existing plants, streamlining
organizational structure and reducing overhead and administrative costs.
Implementation of the reorganization plan was substantially completed during the
first quarter of 1998.

STATUTORY EMPLOYEE PROFIT SHARING

    All Mexican companies are required to pay their employees, in addition to
their agreed compensation benefits, profit sharing in an aggregate amount equal
to 10% of net income, calculated for employee profit sharing purposes, of the
individual corporation employing such employees. All of UniMark's Mexican
employees are employed by its subsidiaries, each of which pays profit sharing in
accordance with its respective net income for profit sharing purposes. Tax
losses do not affect employee profit sharing. Statutory employee profit sharing
expense is reflected in the Company's cost of goods sold and selling, general
and administrative expenses, depending upon the function of the employees to
whom profit sharing payments are made. The Company's net income on a
consolidated basis as shown in the Consolidated Financial Statements is not a
meaningful indication of net income of the Company's subsidiaries for profit
sharing purposes or of the amount of employee profit sharing.

EXCHANGE RATE FLUCTUATIONS

    The Company procures and processes substantially all of its products in
Mexico, through its wholly owned subsidiaries ICMOSA and GISE, for export to the
United States, Canada, Europe and Japan. Generally, the cost of citrus procured
in Mexico reflects the spot market price for citrus in the United 




                                       11
<PAGE>   12


States. All of UniMark's sales are denominated in U.S. dollars. As such, UniMark
does not anticipate sales revenues and raw material expenses to be materially
affected by changes in the valuation of the peso. Labor and certain other
production costs are peso denominated. Consequently, these costs are impacted by
fluctuations in the value of the peso relative to the U.S. dollar.

    The Company's consolidated results of operations are affected by changes in
the valuation of the Mexican peso to the extent that ICMOSA or GISE has peso
denominated net monetary assets or net monetary liabilities. In periods where
the peso has been devalued in relation to the U.S. dollar, a gain will be
recognized to the extent there are peso denominated net monetary liabilities
while a loss will be recognized to the extent there are peso denominated net
monetary assets. In periods where the peso has gained value, the converse would
be recognized.

    The Company's consolidated results of operations are also subject to
fluctuations in the value of the peso as they affect the translation to U.S.
dollars of ICMOSA's net deferred tax assets or net deferred tax liabilities.
Since these assets and liabilities are peso denominated, a falling peso results
in a transaction loss to the extent there are net deferred tax assets or a
transaction gain to the extent there are net deferred tax liabilities.

DEPENDENCE UPON AVAILABILITY AND PRICE OF FRESH FRUIT

    Certain regions of Mexico are currently experiencing drought conditions.
The Company obtains a substantial amount of its raw materials from third-party
suppliers throughout various growing regions in Mexico, Texas and California. A
crop reduction or failure in any of these fruit growing regions resulting from
factors such as weather, pestilence, disease or other natural disasters, could
increase the cost of the Company's raw materials or otherwise adversely affect
the Company's operations. Competitors may be affected differently depending
upon their ability to obtain adequate supplies from sources in other geographic
areas. If the Company is unable to pass along the increased raw materials cost,
the financial condition and results of operations of the Company could be
materially and adversely affected.

SEASONALITY

    Demand for UniMark's citrus and tropical fruit products is strongest during
the fall, winter and spring when seasonal fresh products such as mangos,
peaches, plums, and nectarines are not readily available for sales in
supermarkets in North America. Management believes UniMark's quarterly net sales
will continue to be impacted by this pattern of seasonality.

LIQUIDITY AND CAPITAL RESOURCES

    At June 30, 1998, cash and cash equivalents totaled $2.9 million, an
increase of $1.7 million from year end 1997. During 1998, operating activities
provided net cash of $1.8 million. Cash was utilized to finance a $3.9 million
increase in trade receivables and a $1.4 million increase in inventories
resulting from the increased sales volume in 1998.

    During 1998, UniMark utilized cash of $2.4 million in investing activities.
Of this amount, $2.1 million was expended on property, plant and equipment
primarily in Mexico.

    The Company's financing activities provided net cash of $3.3 million from
additional short-term borrowings and $240,000 from additional long-term
borrowings, primarily equipment financing. Cash was utilized to reduce long-term
debt by $1.3 million in 1998.

    On June 29, 1998 an arbitration award was issued against the Company in its
proceedings with the former shareholders of Simply Fresh Fruit, Inc. ("Simply
Fresh") regarding the price protection provisions of the May 9, 1996 acquisition
agreement and related issues. Pursuant to the award, on August 5, 1998 the
Company subsequently paid in cash the former Simply Fresh shareholders (i)
$1,005,036 in settlement of the common stock price protection issues, (ii)
$67,391 in interest on the price protection settlement amount and (iii) $110,000
in settlement of related employment contract issues. The effect of this award
has been reflected in the accompanying financial statements.

    The Company has entered into loan agreements with Cooperatieve Centrale
Raiffeisen-Boerenleenbank B.A. ("Rabobank Nederland") to provide short-term
dollar denominated debt of up to $34.5 million. These agreements are as follows:
(i) a revolving credit agreement to provide up to $9.5 million collateralized by
finished goods inventories in the US and accounts receivable from US customers,
(ii) revolving credit agreements to provide up to $15.0 million collateralized
by finished goods inventories in Mexico and accounts receivable from export
sales by the Company's Mexican subsidiaries and (iii) a loan agreement to
provide up to $10.0 million to partially finance investments in plants,
expansion and upgrading of facilities 




                                       12


<PAGE>   13

and agricultural operations in Mexico. This bridge loan was collateralized by
land and improvements and equipment in Mexico.

    These agreements are cross-collateralized and guaranteed by the Company and
its subsidiaries and require the Company to maintain certain consolidated
financial performance levels relative to tangible net worth, working capital,
total debt and debt service. In addition, the agreements contain restrictions on
the issuance of additional shares of stock and the payment of dividends, among
other things, without the prior written consent of the bank. At June 30, 1998
the Company was in violation of certain financial covenants and restrictions
under these agreements, which Rabobank Nederland has waived as of that date. At
June 30, 1998, the Company had outstanding loan balances under the revolving
credit agreements and bridge loan agreement of $18.8 and $10.0 million,
respectively, with $1.2 million available under the US revolving line. These
agreements are scheduled to mature on January 1, 1999.

    On July 20, 1998, the Company sold 3,305,500 newly issued shares of common
stock at a purchase price of $4.5375 per share, for an aggregate purchase price
of $14,998,706 to M&M Nominee L.L.C., an affiliate of the Mexico Strategic
Investment Fund, Ltd. In connection with the transaction, the Company granted
the Fund options to acquire an additional 2,000,000 shares of common stock at a
purchase price of $4.5375 per share, representation on the Company's Board of
Directors and certain veto rights regarding financial and corporate matters. The
Company subsequently retired its $10 million short-term bridge loan with
Rabobank Nederland and intends to utilize the remaining net proceeds to help
finance its lemon project and for working capital purposes.

    During 1998, the Company has relied upon bank financing, principally short
term, to finance its working capital and certain of its capital expenditure
needs. Although these loan facilities with Rabobank Nederland have been extended
until January 1, 1999, no assurances can be given that Rabobank Nederland will
continue to renew such loan facilities. Presently, the Company is in discussions
with Rabobank Nederland and other financial institutions to extend or replace
existing working capital facilities and to establish a permanent long-term debt
facility. Although no assurances can be given, the Company believes it will be
able to obtain such working capital and long-term debt facilities on terms
acceptable to the Company. The failure to obtain such facilities would have a
material adverse affect on the Company and its ability to continue as a going
concern.

    In April , 1998, GISE and The Coca-Cola Export Corporation ("Coca-Cola"), an
affiliate of The Coca-Cola Company, entered into a new twenty year Supply
Contract, with a ten year renewal option, for the production of Italian lemons.
Pursuant to the terms of the new Supply Contract which supersedes all previous
agreements, GISE will plant and grow 3,500 hectares (approximately 8,650 acres)
of Italian lemons within the next three years for sale to Coca-Cola at
pre-determined prices. The Supply Contract requires Coca-Cola to provide, free
of charge, up to 875,000 lemon trees, enough to plant approximately 2,800
hectares. In addition, the Supply Contract requires Coca-Cola to purchase all
the production from the project. The planting program began in November, 1996
and harvesting of the first crops is now projected to begin in late 2000 with
full production scheduled for 2013. Total capital requirements for the project
including land acquisition, seedlings, capital equipment and planting costs are
estimated to be approximately $17.5 million over the next four years of which
$5.3 million will be required in 1998. Presently, the Company is exploring
various financing alternatives for this project. There can be no assurances that
financing for this project can be obtained on acceptable terms, or at all. The
inability to obtain third party financing for the project could have a material
adverse effect on the Company.

    The Company's cash requirements for 1998 and beyond will depend primarily
upon the level of sales, expenditures for capital equipment and improvements,
investments in agricultural projects, the timing of inventory purchases, the
success of newly introduced products and necessary reductions of debt.
Presently, the Company is in discussions with Rabobank Nederland and other
financial institutions regarding extending or replacing it's existing debt
facilities. Although no assurances can be given, the Company believes it will be
able to obtain such debt facilities on terms acceptable to the Company. The
failure to obtain such debt facilities would have a material adverse affect on
the Company. UniMark believes that 




                                       13
<PAGE>   14

anticipated revenue from operations and existing and future debt facilities will
be adequate for its working capital requirements for at least the next twelve
months.




                        EXHIBITS AND REPORTS ON FORM 8-K


A.       Exhibits

         10.33    Supply Agreement between The Coca-Cola Export Corporation and
                  Grupo Industrial Santa Engracia, S.A. de C.V. dated April 2,
                  1998.

         27       Financial Data Schedule

B.       Reports on Form 8-K

             On June 24, 1998 the Company filed a current report on Form 8-K
         announcing that the Company had entered into a Letter of Intent dated
         June 22, 1998 by and between The UniMark Group, Inc. and Mexico
         Strategic Investment Fund, Ltd. ("MSIF") pursuant to which MSIF or an
         affiliate would purchase 3,305,500 shares of common stock of the
         Company.

             On July 22, 1998 the Company filed Amendment No. 1 to Current
         Report on Form 8-K/A announcing that on July 20, 1998 the Company had
         sold 3,305,500 newly issued shares of common stock to M&M Nominee
         L.L.C., an affiliate of the Mexico Strategic Investment Fund, Ltd.






                                   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 UNIMARK GROUP, INC.
                                                    -------------------------
                                                            Registrant



         Date:     August 12, 1998                     /s/  Rafael Vaquero
                                                    -------------------------
                                                     Rafael Vaquero, President
                                                   (Principal Executive Officer)


         Date:      August 12, 1998                    /s/  Keith Ford
                                                    -------------------------
                                                   Keith Ford, Vice President
                                                  (Principal Accounting Officer)




                                       14
<PAGE>   15




                                INDEX TO EXHIBITS

<TABLE>
<CAPTION>
    EXHIBIT
    NUMBER                         DESCRIPTION
----------------     -----------------------------------------------------------
      <S>            <C>
      10.33          Supply Agreement between The Coca-Cola Export Corporation
                     and Grupo Industrial Santa Engracia, S.A. de C.V. dated 
                     April 2, 1998.
 
      27             Financial Data Schedule

</TABLE>