UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    Form 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934.

    For the fiscal year ended August 31, 1998   Commission File Number 0-15587
                              ---------------                   ---------------

                  EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.

             (Exact Name of Registrant as Specified in its Charter)

                     Delaware                      52-0991911
                     --------                      ----------
      (State or Other Jurisdiction of    (I.R.S. Employer Identification No.)
       Incorporation or Organization)

                11019 McCormick Road, Hunt Valley, Maryland     21031
                -------------------------------------------     -----
                 (Address of Principal Executive Offices)     (Zip Code)

        Registrant's Telephone Number Including Area Code: (410) 584-7000
                                                           --------------

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

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

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

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

The aggregate  market value of the voting and  non-voting  common equity held by
non-affiliates  of the  Registrant  as of  October  30,  1998 was  approximately
$5,000,000.

The number of shares outstanding of the Registrant's  Common Stock as of October
30, 1998 was 6,386,484.

                       DOCUMENTS INCORPORATED BY REFERENCE

1.   Portions of the 1998 Annual Report to Stockholders are incorporated by
     reference in Part II of this Report.
2.   Portions of the Proxy Statement for the Annual Meeting of Stockholders
     scheduled for January 14, 1999 are incorporated by reference in Part III of
     this Report.

<PAGE>

                  EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC.

                                    FORM 10-K
                                TABLE OF CONTENTS

Item                                                                        Page

                                     PART I


   1  Business                                                                1
   2  Properties                                                              9
   3  Legal Proceedings                                                       9
   4  Submission of Matters to a Vote of Security Holders                     9

                                     PART II

   5  Market for the Registrant's Common Stock and Related
        Stockholder Matters                                                  10
   6  Selected Financial Data                                                11
   7  Management's Discussion and Analysis of Financial Condition
        and Results of Operation                                             12
   7A Quantitative and Qualitative Disclosure About Market Risk              19
   8  Financial Statements and Supplementary Data                            20
   9  Changes in and Disagreement on Accounting and Financial Disclosure     37

                                    PART III

  10  Directors and Executive Officers of the Registrant                     38
  11  Executive Compensation                                                 38
  12  Security Ownership of Certain Beneficial Owners and Management         38
  13  Certain Relationships and Related Transactions                         38

                                           PART IV

  14  Exhibits, Financial Statement Schedules, and Reports on Form 8-K       39
      Signatures                                                             43
      Exhibit Index                                                          44

<PAGE>

                                     PART I

ITEM 1. BUSINESS

General

EA Engineering,  Science,  and Technology,  Inc., together with its wholly-owned
subsidiaries  ("EA"  or  the  "Company")  is an  international  consulting  firm
specializing in the fields of energy,  the  environment,  and health and safety.
Through  its  network  of more  than 20 branch  and  satellite  offices  and its
analytical and international  operations,  EA provides scientific,  engineering,
economic,  analytical,  and management  solutions to government,  industrial and
utility  clients.  The goal of the Company is to help management in industry and
government   improve  their   performance   and  achieve   their   business  and
organizational objectives.

EA's  organizational  structure consists of the parent company,  EA Engineering,
Science, and Technology, Inc.; its wholly-owned subsidiaries,  EA International,
Inc. and EA Financial,  Inc.; and EA Financial's wholly-owned  subsidiaries,  EA
Global, Inc. and EA de Mexico, S.A. de C.V.

The Company was founded and initially  incorporated in Maryland in 1973; after a
name change, the Company was subsequently  incorporated in Delaware in 1986. The
Company was initially engaged in environmental assessment and permitting related
to power plant siting and expansion.  Since that time, the Company has responded
to market  conditions  and  opportunities  by expanding  its services and client
base.  Today, we provide services in areas ranging from energy  conservation and
process  safety,  to water  quality and resources  management.  EA has organized
itself   around   two   service   segments:   Management   Consulting   Services
(approximately 90% of net revenue) provided through a network of offices located
throughout the United States, Mexico and Guam; and Analytical Services, provided
through its 16,500 sq. ft. laboratory division located near Baltimore, Maryland.
Although the Analytical  Services  segment has been relatively small in terms of
revenue  generation,  EA has  decided to  implement  the  guidance  in SFAS 131,
"Disclosure  About Segments of an Enterprise and Related  Information." As such,
this is the first Form 10-K filing with segmented information.

Historically,  the demand for EA's services was driven largely by federal, state
and local  environmental  enactments  and  regulations  impacting  the Company's
clients.  A great deal of cleanup  activity and progress has been generated as a
result of those laws and  regulations;  in 1996, the U.S.  environmental  market
reported  revenues  of $186  billion.  However,  as with  all  regulatory-driven
businesses,  the industry and the Company's  performance are inextricably linked
to the pace and intensity with which the regulations  are written,  promulgated,
and  enforced.  During the past several  years the  regulatory  pace has slowed,
resulting in an increasingly competitive environmental market.

More recently, the demand for the Company's services has been stimulated by new,
more  business-oriented  factors,  including  the  recognition  that  it is more
cost-effective to prevent pollution than to remediate it after discharge and the
success of market-based programs such as emissions trading and wetlands banking.
Additionally,  many  clients  now see  environmental  strategy  as a  method  of
increasing global competitiveness and enhanced  profitability.  EA believes that
this  strategic  shift  will  stimulate  opportunity  for its  business-oriented
consulting services in both the domestic and international markets.

In our role as an advocate and  strategic  resource to our clients,  EA provides
the management perspective and technical skills to anticipate, identify, address
and resolve those  energy,  environmental,  health and safety  issues  affecting
business performance and profitability.

Management Consulting Services

EA provides  management  consulting  services to clients in the areas of energy,
environment,  and health and safety.  The  Company's  primary  service areas are
Water Quality and Water Resources Management, Air Quality

                                        1

<PAGE>

Management and Process  Engineering,  Ecotoxicology and  Bioassessment,  Natural
Resource Management, Dredging and Sediment Management, Site Characterization and
Remediation,  Solid Waste Management, Health and Safety Reviews, Energy Planning
and  Audits,  Due  Diligence  Reviews,  Information  Management,  and  Strategic
Planning of Environmental Issues.

The multi-faceted  nature of most environmental  problems,  however,  requires a
cross-section  of professionals  to provide an integrated  solution,  and strict
classification  by  service  area is not  practical  for  most of the  Company's
projects.  In providing its  services,  EA has  developed  certain  remedial and
analytical technologies, planning and management services, and processes for the
mitigation and control of environmental damage and risks. In addition, we assist
clients in  responding  to issues  raised by  regulatory  agencies and community
groups.  All  of  the  service  areas  are  part  of  the  vertically-integrated
capabilities the Company may offer its clients.

The  Company's  services  normally  are  performed  by  a  team  of  scientists,
engineers, planners and economists and include a combination of the following:

- Consultation   to   determine   the  nature   and  scope  of   potential
  environmental, energy, or health and safety problems.
- Development and implementation of solutions to identified environmental,
  energy, or health and safety issues.
- Economic analyses, database development, strategic and tactical planning
  of environmental, energy, and health and safety programs.
- On-site sampling, monitoring and measurement of discharges and emissions.
- Evaluation of environmental or human health risks.
- Preparation of reports for regulatory agencies.
- Participation and representation of clients in public and regulatory hearings.
- Engineering certification of design specifications.
- Implementation of remedial action.
- Environmental program management and outsourced support.

The  Company's  contracts  are  generally  undertaken  on a  time-and-materials,
fixed-price,  or  cost-plus-fixed-fee  basis.  Fixed-price contracts and certain
time-and-materials  and cost-plus contracts with upset limits require EA to bear
the risk of cost  overruns.  Most of the  Company's  contracts  provide that the
client may at any time cancel any portion of the work not yet performed.

The following  table reflects the  approximate  percentage of  consolidated  net
revenue  derived by contract type in each of the three years in the period ended
August 31, 1998:

<TABLE>
                                                       Year Ended August 31,
---------------------------------------------------------------------------------------

                                                   1998           1997           1996
---------------------------------------------------------------------------------------

<S>                                                 <C>            <C>            <C>
Time-and-materials                                  33%            34%            33%
Fixed-price                                          48             44             41
Cost-plus-fixed-fee                                  19             22             26
---------------------------------------------------------------------------------------

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

During  fiscal 1998,  the majority of the  Company's  work  continued to be from
fixed-price and time-and-materials  contracts.  The Company considers this to be
an  industry  trend  whereby  clients  transfer  additional  risk  to the  prime
contractor and the Company transfers additional risk to its subcontractors, when
applicable.

                                                         2

<PAGE>

In general,  the Company's  contracts vary in length from one month to ten years
and  require  performance  of a  particular  project  within  the  contractually
specified  timeframe.  Although the Company holds certain federal contracts with
options for longer durations, most of these contracts require annual renewals by
the client. A substantial  portion of EA's contracts  represent the provision of
separate services required from time to time by ongoing clients.

Analytical Services

EA Laboratories,  a division of EA Engineering,  Science,  and Technology,  Inc.
("EA Laboratories"),  is located in a 16,500 sq. ft.,  state-of-the-art facility
in  Sparks,  Maryland.  The  division  is  a  multi-disciplinary   environmental
laboratory  providing a wide  variety of chemical,  biological,  and services to
industrial, utility and government clients. The facility,  specifically designed
for laboratory operations, has the capacity to process well over 17,000 analyses
per month.  State-of-the-art  features  include an  uninterrupted  power supply,
limited-access  security,  and an  air  handling  system  designed  to  minimize
cross-contamination  between work areas.  Currently,  EA Laboratories  maintains
certifications/approval  in all 50 states and many of the largest  Department of
Defense programs.

The majority of orders  processed by EA Laboratories  are on a  price-per-sample
unit basis.  These orders are received from both within the Company and directly
from outside  clients.  The following table reflects the overall sales generated
by EA  Laboratories,  as well as the  percentage  of sales  provided to external
clients for the three-year period ended August 31, 1998.


-----------------------------------------------------------------------------
                                                         % of Sales
   Year Ended August 31,          Total Sales         to External Clients
-----------------------------------------------------------------------------

           1998                    $6,253,300               56.0%
           1997                     6,135,700               28.0
           1996                     8,572,100               35.0
=============================================================================

Clients

EA  provides  services to  industrial,  utility,  and  government  clients  both
directly  and  indirectly  through  work  performed  for   architects/engineers,
engineer/contractors,  law firms and financial institutions.  The Company's goal
is to assist its clients in achieving  their  business and growth  objectives as
cost-effectively and dependably as possible.

During fiscal 1998, the Company  provided  services to more than 525 industrial,
utility and government  clients  through more than 1,600 projects in the private
sector  and  500  projects  in the  federal  government  sector.  Although  more
private-sector  projects were performed,  the portion of net revenue provided by
the federal  government was 50%, 46%, and 45% fiscal years 1998,  1997 and 1996,
respectively.  The Company  believes that a diversified mix of business  revenue
derived  from  each of its  client  sectors  will  help  ensure  its  continuing
financial success.  To achieve this goal, the Company has established a business
development  program  focused on specific  client  sectors.  Those  sectors are:
federal government, state and local governments, industry (for example, pulp and
paper, oil and gas,  chemical),  and electric  utility.  In fiscal year 1998, EA
added more than 150 new clients.

Although a  significant  portion of net revenue was derived from agencies of the
federal  government,  the Company's  services are  performed for many  different
department and in many different  regions of the country,  thereby  reducing the
financial  risks  associated  with  delays  or  cancellation  of any  particular
contract.  In management's opinion, the loss of any one of the Company's clients
other than a major government client within its major revenue-generating sectors
would not have a material effect on operations or profitability.

                                                         3

<PAGE>

The following table reflects the  approximate  percentage of net revenue derived
from the  Company's  major  client  sectors  for each of the three  years in the
period ended August 31, 1998:


                                            Year Ended August 31,
-----------------------------------------------------------------------------

                                     1998            1997          1996
-----------------------------------------------------------------------------

Federal government                     50%             46%           45%
Industrial and other private sector    37              42            41
Utilities                               6               5             6
State and local government              7               7             8
-----------------------------------------------------------------------------
                                      100%            100%          100%
=============================================================================

Sales and Marketing

The Company markets its services from its headquarters in Hunt Valley,  Maryland
and through its network of branch and  satellite  offices  located in and around
major  metropolitan  cities  across the United  States.  The  Company  employs a
variety of business development and marketing  techniques,  including one-on-one
client  meetings  and  presentations,  hosting  and  participating  in  industry
seminars,  responding to formal requests for proposals,  initiating  direct-mail
programs, and establishing an ongoing public relations/technical article program
within industry trade journals.

A  significant  portion of new business  arises from prior  client  engagements.
Clients  frequently expand the scope of work to include follow-on  complementary
activities and new  activities  and often refer us to their  colleagues at other
locations.  Additionally, the Company has an active business development program
to identify  new clients  that have not yet  engaged its  services.  The Company
often  teams  with  other  consulting  firms  or  provides  its  services  as  a
subcontractor to larger  architect/engineer  or  engineer/contractor  firms. The
Company tracks prospective business through an opportunity pipeline network.

The Company employs a matrix approach involving branch operations, Client Sector
Directors, and National Technical Directors to maximize the effectiveness of its
sales and  marketing  organization.  The  Company's  market  sectors are federal
government,  state and local governments,  industry,  and electric utility.  The
Company's product lines are Energy Management and Air Quality, Ecotoxicology and
Bioassessment,  Hazardous Waste  Management,  Information  Technology,  In-Plant
Services,   Management  Consulting,   Natural  Resources  Management,   Sediment
Management,  Solid  Waste  Management,  and Water  Quality  and Water  Resources
Management.

Backlog

At August 31, 1998, the Company's total contract backlog was approximately $43.4
million  compared to contract  backlog of $48.4 million at August 31, 1997.  The
decrease in total contract backlog is largely attributable to the absence of new
construction awards, a business line the Company no longer pursues, which have a
high  percentage  of  subcontracts  and  other   pass-through   costs.   Because
subcontractor  and other  direct  project  costs can change  significantly  from
project to project,  the change in total contract  backlog is not  necessarily a
true  indication  of business  trends.  Accordingly,  the Company  considers net
backlog  (total less  estimated  subcontractor  and other project  costs) as its
primary measure of backlog. The Company's net contract backlog was approximately
$22.2 million at the end of fiscal 1998, compared to approximately $22.6 million
at the end of fiscal 1997.  The Company  expects that  approximately  80% of the
contract  backlog will be completed in fiscal 1999. The Company's total contract
backlog  attributable to federal government  contracts as of August 31, 1998 was
$28 million ($13.5 million,  net), compared to $34 million ($14 million,  net) a
year earlier.

                                                         4

<PAGE>

In addition to this  contract  backlog,  at August 31,  1998,  the Company  held
indefinite  delivery/indefinite  quantity  (ID/IQ) type  contracts  from various
clients, principally government agencies for up to $217 million compared to $246
million at August 31,  1997.  Ending in fiscal  1999 are three  ID/IQ  contracts
which have a remaining  value of $133  million as of August 31,  1998.  Over the
past five-year period, these expiring ID/IQ contracts averaged approximately $18
million in new awards annually.

There can be no assurance,  however, that work under any of these contracts will
be  authorized  or that work once  authorized  will not be canceled.  Generally,
these  contracts  provide for a fixed  percentage  of profit  based on estimated
costs.  In the event of  cancellation,  the  Company is  entitled to recover its
incurred  costs  and  associated  profit.   Terminations  and  cancellations  of
government  contracts  have not been material in the past.  The level of backlog
may fluctuate  during each year,  and  accordingly,  the backlog at any point in
time does not  necessarily  reflect  near-term  anticipated  operating  results.
Reliance on major government  contracts subjects the Company to risks associated
with public budgetary  restrictions  and  uncertainties,  discrepancies  between
awarded contract amounts and actual revenues,  and cancellation at the option of
the government. The Company attempts to mitigate these risks by staffing only to
meet reasonably anticipated average workloads, by using subcontractors to handle
peak  workloads,  and by  obtaining  termination  benefit  contract  provisions.
Cancellation of any of the Company's major government contracts,  however, could
have a material adverse effect on the Company.

As the amount of work available from federal agencies  declines and becomes more
competitive as indicated by our smaller backlog from previous years, the Company
is shifting its  marketing  efforts to the  industrial,  utility,  and state and
local  levels.  Particular  attention  is being given to  expanding  the overall
management  consulting  practice  in the  energy  and  environmental  areas with
emphasis also on health and safety issues.

The Company also provides  services on major long-term  private sector contracts
under continuing  service agreements that provide for work on a task basis. Upon
receipt of related  authorizations,  the work is included  in contract  backlog.
Because such specific  authorizations  are  generally  for periods  considerably
shorter than the duration of the period the Company expects to perform  services
for a particular  client,  management  believes that its backlog figures are not
necessarily indicative of its future revenue.

Employees

As of August 31, 1998, the Company had approximately 400 full-time employees, of
which  approximately  50 are in the  Analytical  Services  segment,  compared to
approximately  560  full-time  employees  at August 31,  1997.  The  decrease in
employees was a result of staff reductions in overhead  positions and a shift in
technical  needs. In an effort to control costs,  many full-time  positions were
filled with part-time employees.  Most of the Company's employees are engaged in
performing  scientific,  engineering,  remediation and consulting services;  the
remainder provide  executive,  administrative  and other support  services.  The
Company also hires part-time or temporary  personnel to meet the requirements of
a particular contract. EA's staff includes professional  engineers,  biologists,
chemists,   geologists,   industrial   hygienists,   public  health  scientists,
regulatory specialists, toxicologists, industrial planners, computer scientists,
and business managers.

The  Company  has  invested  in  training  and  mentoring  programs to promote a
"continuing  learning" process within the firm. In 1998, the Company  instituted
several programs including project manager training,  sales management  seminars
and technical  development  programs,  and has established a professional career
ladder  development  program.   Additionally,   the  Company  offers  a  tuition
reimbursement program for all employees of the firm.

None of the Company's employees is represented by a union. The Company considers
its relationship with employees to be good.

                                                         5

<PAGE>

Competition

Nationwide,  the  environmental  industry  employs more than one million people,
working at over 100,000 firms and generating revenues in excess of $186 billion.
The   environmental   engineering  and  consulting  market  is  becoming  highly
competitive and requires skilled and experienced  professional,  technical,  and
management personnel.  Today, the domestic market for environmental services can
be characterized as flat in revenue and income.  Over the past several years, in
an effort to  reduce  costs and  increase  volume,  the  environmental  industry
experienced an increase in merger and acquisition activity, resulting in several
mega-environmental  firms with revenues  greater than $500 million.  In fact, in
1995 these "large" firms captured 20% of market;  in 1997 that market share grew
to 41%.

Typical projects, especially those in excess of $100,000, are bid on by numerous
firms.  The principal  competitive  factors are client  relationships,  pricing,
reputation,  quality of services,  expertise, and local presence.  Increasingly,
multiple firms are deemed "technically qualified," leaving price and established
relationships to determine the winning bid.

EA believes that its  favorable  competitive  factors are its  multidisciplinary
capabilities,  its reputation  for quality of services,  its  certifications  to
provide  analytical and  consulting  services to a broad  constituency,  and its
geographical dispersion. In each market sector, EA competes with engineering and
consulting  firms which are both larger and smaller than the  Company,  although
management believes no one firm currently dominates a significant portion of any
of the service areas.

Licensing and Certification

The Company's laboratory has been approved/validated to perform analyses for the
Naval Facilities  Engineering  Services Center (NFESC), the Air Force Center for
Environmental  Excellence  (AFCEE),  the U.S. Army Corps of Engineers  (Missouri
River  Division),  and the American  Association  for  Laboratory  Accreditation
(A2LA). Regulatory authorities frequently will not accept analytical evidence of
compliance  unless the analysis has been performed by a laboratory with relevant
certifications such as those described above.

The laboratory is also certified by 41 different states including, among others,
Maryland,  New Jersey,  New York and  California,  and  maintains  certain local
permits and licenses.  Additionally,  the laboratory  has been  authorized to do
work by the District of Columbia,  Puerto Rico, and nine states that do not have
formal certification  programs. The laboratory has certifications and permits to
operate in states and jurisdictions where the Company performs its services.  To
support all these  programs,  the  laboratory  must be  periodically  audited by
appropriate  regulatory  agencies and is required to participate in a variety of
performance  evaluations  such as those conducted by the EPA and U.S. Army Corps
of Engineers.

The criteria necessary for obtaining and maintaining  laboratory  certifications
and permits vary by agency and state. Generally the criteria include:

   - Application for certification/permit
   - Request and initial  review for  compliance  with  comprehensive  rules 
     and regulations 
   - Periodic verification of compliance through proficiency samples
   - Periodic onsite audits 
   - Payment of annual fees

Historically,  the laboratory has  experienced  no significant  audit  problems.
While audits may result in certain  "findings," these are usually  procedural in
nature  and  prompt  changes  or other  adjustments  to bring the  Company  into
compliance with the auditor's  request.  The Company has been able to obtain and
maintain its certifications and permits without  interruption.  However,  if the
Company is unable to obtain and maintain such participation and  certifications,
the operation of the  laboratory  and the Company's  financial  condition may be
adversely affected. Management believes that the Company currently possesses the
licenses  or  permits  necessary  to  perform  its  engineering  and  consulting
services.

                                                         6

<PAGE>

Regulatory Matters

Environmental laws and regulations have been enacted by federal, state and local
governments in response to public pressure and scientific  evidence  identifying
adverse  effects of public and business  activity on the  environment  and human
health and safety. Historically,  compliance with these laws and regulations was
the primary driver in creating  demand for the Company's  services and continues
to be a prime  source of demand for EA's  services.  Among the dozens of federal
environmental  statutes and regulations under which EA provides services are the
following, broad-based statutes:

The Safe Drinking Water Act (SDWA) of 1974, reauthorized in 1996. In addition to
its primary mission of protecting the nation's  drinking water supplies  through
the regulation of public water systems,  the reauthorized Act expands  watershed
protection,  emphasizes the control of non-point sources of  contamination,  and
introduces a revolving  funding  program of nearly $9.6 billion through the year
2006. The reauthorized SDWA will have a strong impact on the Company's state and
local  government  clients,  who are  responsible  for  ensuring the quality and
quantity of their drinking water supplies.

The Federal Water Pollution Control Act of 1972 (known as the Clean Water Act or
CWA)  established a framework for controlling the discharge of pollutants to the
environment from public and private facilities.  The Act centers on the National
Permit Discharge  Elimination  System (NPDES),  which establishes  controls over
discharges  from  regulated  facilities,  and  includes  provisions  to  control
stormwater,  industrial runoff, and nonpoint sources of pollution.  In addition,
the CWA establishes  standards to manage ecological  habitats,  coastal regions,
watersheds and wetlands.

The  Resource   Conservation  and  Recovery  Act  of  1976  (RCRA)   establishes
"cradle-to-grave" regulations affecting the generation,  management and disposal
of hazardous  waste. In addition,  the Act regulates  non-hazardous  solid waste
generated  by  households,  commercial  and public  facilities,  and  industrial
sources.  Specific RCRA  provisions  focus on land disposal of hazardous  waste,
underground and  above-ground  storage tanks,  site  remediation and groundwater
decontamination.

The Clean Air Act (CAA)  Amendments  of 1990,  which was  reauthorized  in 1990,
established a series of programs to control  airborne  emissions from mobile and
stationary sources. The Act confirmed the goal of attaining National Ambient Air
Quality  Standards  (NAAQS) air quality levels  throughout  the U.S.,  requiring
"nonattainment"  areas to establish compliance  programs.  The amendments target
nonattainment problems with a broad array on requirements,  including additional
controls  on  industrial  facilities,  tighter  emissions  standards  from motor
vehicles, and the use of alternative clean fuels.

The CAA Amendments of 1990 also  established  requirements  for the EPA to adopt
Risk  Management  Program  (RMP)  requirements,  affecting an  estimated  64,000
facilities nationwide,  handling toxic,  flammable,  and /or reactive chemicals.
These  regulations  were adopted in June, 1996 and become  effective June, 1999.
The regulations  address programs and procedures designed to prevent or minimize
the consequences of accidental releases of hazardous materials that could affect
the public or environment.  Affected  facilities will be required to develop RMP
programs  and to share the  results  of that  RMP,  including  their  worst-case
scenario data, via the Internet.

The Comprehensive Environmental Response, Compensation and Liability Act of 1980
(CERCLA, or Superfund) and its subsequent  reauthorizations seeks to address the
current  consequences  of  past  hazardous  waste  management   practices.   Any
organization that owns or owned a site on which hazardous materials are present,
or that  operates  or operated a facility  generating  or  containing  hazardous
materials, may be liable under CERCLA for cleanup responsibility.

The  Brownfields  Initiative  was  introduced by the Clinton  Administration  to
resolve the cleanup and liability  issues  associated with  contaminated,  often
abandoned,  industrial and commercial  facilities  known as  "brownfields."  The
Initiative  sought to  encourage  economic  development  and  property  reuse of
brownfields, which typically are located

                                                         7

<PAGE>

in urban areas, by resolving  cleanup and liability issues to owners,  operators
and prospective developers of such sites. Most states and many local governments
now have voluntary or mandatory brownfields programs in place.

The  Intermodal   Surface   Transportation   Efficiency  Act  (ISTEA)  of  1991,
established  funding  for  mass  transportation  and  public  transit  programs;
introduced the  Congestion  Mitigation and Air Quality (CMAQ) program to provide
funding for non-attainment areas under the CAA to meet attainment deadlines; and
included  funding  for  alternative-fuel  transit  buses.  In  1998,  ISTEA  was
reauthorized  as the  Transportation  Equity Act for the 21st Century  (TEA-21).
TEA-21 earmarks $218 billion for highway and transit  projects over the next six
year period, streamlining the environmental review process, promoting the use of
market-based  incentives,  and giving  states the  flexibility  to use funds for
transportation projects that include reuse of brownfield sites.

The  National  Energy  Policy  Act  (EPAct)  of  1992  established  the  use  of
energy-efficient  technologies  as a national  priority for  improvement  of air
quality and set a goal of 30%  displacement of petroleum fuels with  alternative
fuels in vehicles by the year 2010.  To that end,  EPAct set a schedule by which
industrial  sectors  beginning with the federal  government would be required to
purchase alternative-fueled vehicles.

In addition to the historic EA markets represented by these federal regulations,
two key factors have emerged to expand the Company's market  opportunities.  The
first factor centers on  international  environmental  standards and regulations
including  the  International   Standard  Organization  (ISO)  14000  series  of
certifications,   which  commits  participants  to  an  approach  of  continuous
environmental  improvement and exacting environmental performance standards, and
the Kyoto  Accord,  which the United States  signed in December,  1997,  thereby
committing to a reduction of greenhouse gas emissions to 1990. The second factor
stems  from  a  strategic  shift  in  approach  by US  environmental  regulators
including  the  US  Environmental   Protection  Agency.   Illustrated  by  EPA's
"Common-Sense  Initiative" and the Vice President's "Reinvention of Government,"
this  new  approach  emphasizes   market-based   incentives,   industry-specific
regulation,  pollution  prevention  and  voluntary  responses  by the  regulated
community.  The  interest  of a  growing  number  of  companies  to move  beyond
compliance  to  a  higher,   self-imposed   standard  of   "sustainability"   or
"environmental   stewardship"   introduces  substantial  new  markets  for  EA's
management consulting services.

Insurance

The Company maintains a full range of insurance coverage including  professional
liability insurance and pollution liability coverage.  There can be no assurance
that the  Company  will not incur  liability  with  respect to the  professional
services  it  renders  or that  such  liability,  if  incurred,  will not have a
material adverse effect upon the Company. However, these insurance policies will
provide limited protection and defense up to their stated amounts.

EA has  endeavored to protect itself through  contractual  indemnification  from
clients when  possible and by  intensifying  its  existing  quality  control and
assurance,  internal risk management, and health and safety programs. Generally,
indemnification is not available under the Company's government  contracts.  The
Company's  quality control and assurance  program includes a control function to
establish   standards  and  procedures  for  performance  and  documentation  of
performance  of project  tasks,  and an assurance  function to audit the control
function and to monitor  compliance  with procedures and quality  standards.  An
additional  objective  of this  program  has  been to  establish  practices  and
procedures to protect EA personnel from hazardous substance situations.  This is
accomplished  through a company-wide  occupational  safety and health monitoring
program managed by corporate health and safety professionals.

Equipment

The Company owns  substantially  all of the  analytical,  computer,  monitoring,
testing  and other  equipment  required  to render its  various  consulting  and
testing services. Additionally, the Company leases certain computer, office

                                                         8

<PAGE>

furniture,  and other  equipment.  Equipment  and various  other items which the
Company  purchases on behalf of clients are available from several suppliers and
the Company is not dependent on any one supplier.

Environmental and Other Considerations

The Company does not believe that its compliance  with federal,  state and local
laws and regulations relating to the protection of the environment will have any
material effect on its capital expenditures, earnings or competitive position.


ITEM 2.  PROPERTIES

The  Company's  headquarters  and  Baltimore  regional  office  are  located  in
approximately  76,100 square feet of leased space, of which  approximately 4,200
square feet is being  sublet.  The  Company's  central  laboratory is located in
approximately   16,500  square  feet.  Leases  for  these  facilities  are  with
partnerships  whose members  include the Chairman of the Board of EA and certain
members of his family.

The  Company's  primary  branch and  satellite  offices in the United States are
located in:

 Baltimore, Maryland          Boston, Massachusetts     Williamsburg, Virginia
 Washington, DC               San Francisco, California Dallas, Texas
 New Castle, Delaware         Sacramento, California    Anchorage, Alaska
 Newburgh, New York           Seattle, Washington       Fairbanks, Alaska
 Syracuse, New York           Chicago, Illinois         Honolulu, Hawaii
 Berkeley Heights, New Jersey Lincoln, Nebraska         Miami, Florida


In addition, the Company has established office locations in Pensacola, Florida;
Mexico City, Mexico; and Yigo, Guam.

The Company  leases the office,  laboratory,  and  storage  facilities  for each
regional office. Presently, the facilities are suitable, adequate, and generally
utilized to capacity.


ITEM 3.  LEGAL PROCEEDINGS

There are no material pending legal proceedings to which the Company is a party.
The  Company is  involved  in various  claims and legal  actions  arising in the
ordinary course of business.  In the opinion of the Company,  the disposition of
these matters will not have a material adverse effect on the financial position,
results of operations or liquidity of the Company.


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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter ended August 31, 1998.


                                                         9

<PAGE>

                                                       PART II


ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
            MATTERS

On  October  31,   1986,   EA  common   stock  began   public   trading  in  the
over-the-counter  market under the symbol "EACO." The following  table shows the
high and low closing sales price reported on the NASDAQ  National  Market System
("NASDAQ").   Such   over-the-counter   market  quotations,   however,   reflect
inter-dealer prices,  without retail markup,  markdown or commission and may not
necessarily represent actual transactions.

                                      High           Low
Fiscal 1997:  First Quarter           $2.59         $1.50
              Second Quarter           2.75          1.75
              Third Quarter            2.25          1.63
              Fourth Quarter           2.22          1.75

Fiscal 1998:  First Quarter           $2.44         $1.88
              Second Quarter           2.50          1.75
              Third Quarter            4.00          2.25
              Fourth Quarter           3.25          1.56


On October 30, 1998, the closing price of the common stock as reported by NASDAQ
was $1.375 per share. On that date,  there were  approximately  1,001 holders of
record.

To date the Company has not paid any cash dividends on its common stock and does
not anticipate paying such dividends in the foreseeable future.

                                                         10

<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The selected financial data for the periods indicated have been derived from the
audited  consolidated  financial statements of the Company and reflect the stock
splits  described in note (2). This data should be read in conjunction  with the
consolidated financial statements and notes thereto included in Item 8.

<TABLE>
                                                             Year Ended August 31,
----------------------------------------------------------------------------------------------------------------------------------
                                                     1998           1997           1996           1995           1994
----------------------------------------------------------------------------------------------------------------------------------
                                                                        (in thousands, except per share amounts)
Operations data:
<S>                                                <C>            <C>            <C>            <C>            <C>    
  Total revenue                                    $59,987        $73,891        $88,308        $92,365        $76,873
  Net revenue(1)                                    41,697         41,020         54,064         60,238         52,542
  Income (loss) from operations                      1,110        (8,022)          (444)          4,141          3,305
  Net income (loss)                                    605        (5,408)          (580)          2,227          1,823
  Basic earnings (loss) per share(2)                 $0.10        $(0.87)        $(0.09)          $0.37          $0.32
  Diluted earnings (loss) per share(2)               $0.10        $(0.87)        $(0.09)          $0.36          $0.30

  Weighted average shares outstanding(2)             6,255          6,206          6,138          5,998          5,727
  Diluted weighted average shares outstanding(2)     6,347          6,206          6,138          6,174          6,077

Balance sheet data:                                                                                        
  Working capital                                  $ 9,932        $10,182        $15,955        $17,663        $14,317
  Total assets                                      23,475         26,642         33,329         36,368         31,575
  Short-term borrowings                                 --             --             --             --        --

  Long-term debt, net of current portion             1,280          2,332          2,665          4,033          4,798
  Stockholders' equity                             $14,009        $13,257        $18,558        $18,880        $15,177
</TABLE>

   (1) Net  revenue  represents  total  revenue  less  subcontractor  and  other
       non-labor project costs.

   (2) Results for the year ended August 31, 1998 have been restated to reflect
       the two 3-for-2 stock  splits,  each effected in the form of a 50% stock
       dividend, distributed on February 23, 1994 and July 5, 1994.

                                                         11

<PAGE>

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
        RESULTS OF OPERATIONS

General

The Company's results of operations are significantly  affected by the timing of
the award of contracts,  the timing of performance on contracts,  and the extent
to which the Company's  employees are  performing  billable  tasks as opposed to
engaging in preparing contract proposals,  bids and other required  non-billable
activities.  Results of  operations  may also be affected to the extent that the
Company chooses not to reduce its professional  staff during a period of reduced
demand for its services.  Due to these factors,  quarterly results of operations
are not necessarily indicative of the results of operations for longer periods.

The Company,  in the course of providing  its services,  routinely  subcontracts
such services as drilling,  certain laboratory  analyses,  and other specialized
services.  In addition, as described in the "General" section of Item 1, the use
of teaming  partners  for the  performance  of services  similar to those of the
Company,  is included in subcontracts.  In accordance with industry practice and
contract terms that generally provide for the recovery of overhead costs,  these
costs are passed directly  through to clients and are included in total revenue.
Because  subcontractor  costs and direct charges can change  significantly  from
project to  project,  the  change in total  revenue  is not  necessarily  a true
indication of business trends.  Accordingly,  the Company considers net revenue,
which is total  revenue  less  subcontractor  costs,  as its primary  measure of
revenue.

Results of Operations

The following table sets forth the percentage relationships of selected items in
the consolidated statement of operations to net revenue for the years indicated.
For historical comparisons,  operating costs in past years have been adjusted to
include sales and marketing related costs in sales,  general, and administrative
costs. In previous years, these costs were included in direct salaries and other
operating expenses.

                                                    Year Ended August 31,
                                       -----------------------------------------
                                                   1998       1997        1996
--------------------------------------------------------------------------------
Net revenue                                        100.0%     100.0%     100.0%
--------------------------------------------------------------------------------
Operating expenses:
  Direct salaries and other operating expenses      75.4       91.6       86.1
  Sales, general and administrative                 22.5       20.7       14.7
  Gain on "key employee" life insurance             (0.6)      --         --
  Restructuring charges                             --          7.3       --
--------------------------------------------------------------------------------
    Total operating expenses                        97.3      119.6      100.8
--------------------------------------------------------------------------------
Income (loss) from operations                        2.7      (19.6)      (0.8)
Interest expense, net                               (0.3)      (0.9)      (0.7)
--------------------------------------------------------------------------------
Income (loss) before income taxes                    2.4      (20.4)      (1.5)
(Benefit from) provision for income taxes            0.9       (7.2)      (0.4)
--------------------------------------------------------------------------------
    Net income (loss)                                1.5%     (13.2)%     (1.1)%
================================================================================


Fiscal 1998 Compared to Fiscal 1997

Net revenue during fiscal 1998 increased 1.6% to $41,696,900  from  $41,020,200.
This  $676,700  increase is due in part to the  recognition  of contract  losses
related to certain  landfill  contracts in fiscal 1997.  The loss  provision for
these  contracts,  a business  line the  Company no longer  pursues,  recognized
anticipated  future  project  expenses  which lowered fiscal 1997 net revenue by
$1,400,000. Adjusting for this loss recognition, net revenue in fiscal 1998

                                                         12

<PAGE>

decreased  by 1.71%.  The  overall  decrease in net revenue is due to lower than
anticipated sales in the industrial sector. Although sales and marketing efforts
have targeted this market and won approximately  150 new clients,  larger-volume
projects have not been  achieved as of the end of the fiscal 1998 period.  Lower
industrial sector sales were offset by improved net sales in the federal,  state
and local government, and utility sectors.

Direct salaries and other operating costs decreased 16.2% to $31,473,800 in 1998
from $37,560,300 in 1997, or 75.4% and 91.6% of net revenue,  respectively.  The
decreases were  attributable  to increased  staff  utilization and lower overall
non-labor  operating  costs.  The Company  maintained a  utilization  rate (time
charged  to  clients)  of more than 95% for its  technical  staff and an overall
Company  rate of  74%.  Significant  savings  were  also  achieved  by  lowering
equipment  and property  lease costs by  $1,900,000  in fiscal 1998  compared to
fiscal  1997.  These  savings were  achieved by  subletting  unused  facilities,
renegotiating  existing  leases,  and  changing  to  a  different  supplier  for
computer-related items.

Sales,  general and  administrative  costs increased 10.5% to $9,374,400 in 1998
from  $8,481,900 in 1997, or 22.5% and 20.7% of net revenue,  respectively.  The
increase in cost was  primarily  related to  additional  investment in sales and
marketing expenses in fiscal 1998 compared to the prior year.

In the third  quarter of fiscal 1998,  the Company  recorded a gain of $261,100,
reducing  its  operating  expenses.  The gain was related to the increase in the
cash surrender value of "key employee" life insurance  policies  included on the
Company's balance sheet.

In  the  third  quarter  of  fiscal  1997,  the  Company   implemented  a  major
organizational   realignment  to  reposition  itself  in  the  marketplace.   In
connection with the  restructuring,  the Company  incurred charges of $3,000,100
related to severance,  planned  reduction in office space, the suspension of the
implementation of a new project/financial  system, and other related costs. This
restructuring  included a staff reduction of 125 employees.  During fiscal 1998,
the Company  incurred  $803,500 in operating  related costs that were associated
with the FY97 restructuring and charged against the reserve instead of income.

As a result of the above factors,  the income from operations in fiscal 1998 was
$1,109,800,  compared to a loss from operations of $8,022,100 in the prior year.
Interest  expense,  net,  decreased  to $145,800  from the prior year's total of
$354,800. This 58.9% decrease is attributed to lower interest paid in connection
with the Company's line of credit, reduction of certain long-term debt principal
balances,  and the absence of an interest  payment in connection with a Maryland
tax settlement in fiscal 1997.

The net income for the twelve  months ended August 31, 1998,  was  $604,800,  or
1.5% of net  revenue,  compared  to a net  loss of  $5,407,600,  or 13.2% of net
revenue for the prior year.

Fiscal 1997 Compared to Fiscal 1996

Net revenue during fiscal 1997 decreased 24.1% to $41,020,200 from  $54,064,500.
The decrease was  attributable  to lower  contract  volume  associated  with the
Department of Defense,  industrial, and federal non-DOD agency activities. Also,
realized losses related to certain landfill projects  amounting to approximately
$1,400,000 of costs in excess of contract values were recognized in fiscal 1997,
further reducing net revenue.  Additionally,  price competition remained intense
within the  environmental  services  industry,  further  suppressing net revenue
levels compared to the prior year.

Due to the  aforementioned  restructuring,  direct  salaries and other operating
costs decreased 19.3% to $37,560,300  from  $46,535,500.  As a percentage of net
revenue,  however,  direct salaries and other operating costs increased to 91.6%
from 86.1% a year earlier.  This increase was  primarily  attributable  to lower
staff utilization,  especially in the second quarter,  related to a reduction in
available  work,  which produced an increase in operating  costs relative to net
revenue.  In  March  1997,  the  Company  implemented  a  major   organizational
realignment  to reposition  itself in the  marketplace.  In connection  with the
restructuring,  the  Company  incurred  charges of  $3,000,100  during the third
quarter related to severance,  planned reduction in office space, the suspension
of the  implementation  of a new  project/financial  system,  and other  related
costs.  This  restructuring  included a staff  reduction  of  approximately  125
employees.

                                                         13

<PAGE>

Sales,  general and  administrative  costs  increased 6.4% to $8,481,900 in 1997
from  $7,972,600 in 1996, or 20.7% and 14.7% of net revenue,  respectively.  The
increase was due  primarily to bonus  amounts paid to  management as a result of
the  Company's  exceeding  its profit  targets  for the final five months of the
year. No bonuses were paid in fiscal 1996.

As a result of the above  factors,  the loss from  operations in fiscal 1997 was
$8,022,100  compared  to a loss from  operations  of $443,600 in the prior year.
Interest  expense,  net,  decreased  slightly to $354,800 from  $357,500.  A net
decrease in interest  expense from  lower-than-average  borrowings was offset by
higher rates and an interest  payment made in connection with a state income tax
settlement.

The benefit from income taxes was $2,969,300 for the year ended August 31, 1997,
compared  to a benefit  from income  taxes of $221,000  for the year ended 1996,
representing  effective  rates of 35% and 28%,  respectively.  The difference in
effective  tax rates  between  years is largely  attributable  to  increases  in
certain permanent differences between financial and income tax reporting, and to
the  non-recognition  of the future benefits  attributable to a foreign loss for
the fiscal year ended 1996. It is the opinion of management  that these recorded
benefits are more likely than not to be realized.

The net loss for the twelve  months ended August 31, 1997,  was  $5,407,600,  or
13.2% of net revenue,  compared to net loss of $580,100,  or 1.1% of net revenue
for the prior year.

Analysis by Segment

The following table provides selected financial information by segment:

<TABLE>
                                                             Year Ended August 31,
                                                  ----------------------------------------------------
                                                       1998              1997              1996
------------------------------------------------------------------------------------------------------
Gross sales
<S>                                                 <C>              <C>                <C>        
   Management Consulting Services (external)        $56,483,800      $72,559,500        $86,390,100
   Management Consulting Services (internal)         (2,869,900)      (4,370,500)        (5,456,900)
                                                  -------------    -------------      -------------

     Total Management Consulting Services (gross)    53,613,900       68,189,000         80,933,200


   Analytical Services (external)                     3,503,400        1,331,400          1,917,700
   Analytical Services (internal)                     2,869,900        4,370,500          5,456,900
                                                    -----------      -----------        -----------

     Total Analytical Services (gross)                6,373,300        5,701,900          7,374,600
======================================================================================================

Net sales to unaffiliated customers
   Management Consulting Services                    36,696,400       37,442,900         48,495,100
   Analytical Services                                5,000,500        3,577,300          5,569,400
======================================================================================================
Income (loss) from operations
   Management Consulting Services                     1,189,500       (6,862,500)            38,300
   Analytical Services                                  (79,700)      (1,159,600)          (481,900)
======================================================================================================
Identifiable assets (net property and equipment)
   Management Consulting Services                     1,132,700        1,534,000          1,999,900
   Analytical Services                                  648,400          862,800          1,125,000
======================================================================================================
</TABLE>

Note:    Sales are  considered  external when a segment  directly  enters into a
         contract with a client.  Internal sales are generated by the use of the
         Company's  Analytical  Services  required  by the  external  clients of
         Management  Consulting  Services.  Internal sales are duplicated within
         each segment and are eliminated through intercompany adjustments.

                                                         14

<PAGE>

1998 Results

Net sales for Management  Consulting  Services decreased 2% in the fiscal period
ended August 31, 1998 to  $36,696,400  from  $37,442,900  in fiscal  1997.  This
decrease is due to the  lower-than-anticipated  sales in the industrial  sector.
Net sales in Analytical  Services  increased  39.8% in fiscal 1998 to $5,000,500
from  $3,577,300 in fiscal 1997.  This increase is mainly  attributable to a new
contract with an industrial client.

The Management  Consulting Services segment contributed  $1,189,500,  or 3.2% of
net revenue,  to income from operations in fiscal year 1998,  compared to a loss
from operations of $6,862,500,  or 18.3% of net revenue, in the prior year. This
improvement  is  due  to a 20%  year-to-year  reduction  in  segment  costs  and
operating expenses.  Cost and operating cost savings were due to increased staff
utilization,  fiscal year 1997 restructuring  efforts,  and savings in equipment
and property leases.

The Analytical Services segment had a loss from operations of $79,700 or 1.6% of
net revenue for the fiscal  period ended August 31, 1998 compared to a loss from
operations of  $1,159,600,  or 32.4% of net revenue,  the prior fiscal year. The
improvement in earnings is mainly attributable to the $1,423,200 increase in net
revenue in fiscal year 1998,  offset by a slight increase to the segment's costs
and  operating  expenses.  Because the  Analytical  Services  segment has a high
percentage of overall fixed  indirect  expenses  (approximately  40% of indirect
operating costs),  changes in net revenue  significantly impact its contribution
to operating income.

1997 Results

Net sales for Management  Consulting Services fell to $37,442,900 for the fiscal
period  ended  August 31,  1997,  compared to  $48,495,100  for the period ended
August 31, 1996.  This decrease was  attributable  to lower contract volume with
the federal  government and realized losses related to certain landfill projects
amounting to  approximately  $1,400,000  in costs in excess of contract  volume.
Additionally,  price competition  remained intense within this segment,  further
suppressing sales. Net sales for Analytical  Services also fell to $3,577,300 in
fiscal 1997,  compared to $5,569,400  in fiscal 1996.  The decrease in sales was
mainly attributable to the $1,086,400 decrease in intercompany sales provided by
the clients of Management Consulting Services.

Management Consulting Services had a loss from operations of $6,862,500,  or 19%
of net revenue,  in fiscal 1997, compared to a $38,300 income from operations in
fiscal 1996.  The decrease in income from  operations  was due to lower sales in
fiscal 1997 and $3,000,100 in restructuring charges taken in fiscal 1997.

Analytical  Services had a loss from  operations of $1,159,600,  or 32.4% of net
sales, in fiscal 1997, compared to a loss from operations of $481,900,  or 8.7%,
in fiscal 1996. The increased loss from operations was due to lower sales.

Inflation

Because of its ability to generally pass through increased costs to its clients,
as well as the  generally  low levels of  inflation,  the Company  believes that
inflation has not had a material impact on its operations.

Liquidity and Capital Resources

Cash and cash equivalents  (cash) decreased by $550,700 in 1998,  compared to an
increase  of  $1,024,700  in 1997 and a  decrease  of  $2,505,300  in 1996.  The
decrease in 1998  principally  resulted  from the payout of cash  related to the
fiscal 1997  restructuring  expenses and reduced  borrowings  from the Company's
revolving line of credit, aided by the collection of income tax refunds.

The  Company's  capital  expenditures  (consisting  primarily  of  purchases  of
equipment and leasehold improvements) of approximately  $546,500,  $699,000, and
$1,008,500 in 1998,  1997, and 1996,  respectively,  have been funded  primarily
from cash flows.

Near  the end of  fiscal  1997,  the  Company  entered  into a new  bank  credit
arrangement with a regional bank consisting of: (i) an $8,500,000 revolving line
of credit  secured  by  receivables;  (ii) a $500,000  term  loan;  and (iii) an
equipment

                                                         15

<PAGE>

line of  credit of  $1,500,000.  Of the  $8,500,000  revolving  line of  credit,
$2,500,000  is  available  for   acquisitions,   joint  ventures  and  licensing
agreements.  Borrowings from the revolving line of credit are limited to certain
percentages of accounts receivable and costs and estimated earnings in excess of
billings (up to a maximum of  $4,000,000).  The interest on all  borrowings  was
LIBOR +250, through March 1998. However,  the interest was reduced to LIBOR +200
in May 1998 due to the Company achieving  certain  financial  ratios,  which the
Company expects to be reduced to LIBOR +150 in the first quarter of fiscal 1999.

At August 31, 1998, the Company had outstanding  long-term  debt,  including the
current portion, of $1,718,600,  which represented a decrease of $1,261,400 from
the August 31,  1997  balance  of  $2,980,000.  The  Company  had no  short-term
borrowings under its line of credit at August 31, 1998 and 1997.

The Company's existing funds, cash from operations, and the available portion of
its $8,500,000 bank line of credit and $1,500,000 equipment line are expected to
be  sufficient  to meet the  Company's  present  cash needs.  The  Company  also
currently believes it has the ability to raise capital through placement of debt
and may  pursue  such  options  if the need  arises to expand  facilities,  make
acquisitions  or  acquire  equipment  in  conjunction  with a review of the most
cost-effective means for the Company and its stockholders.

While the Company believes that there is sufficient demand for current operating
levels,  there can be no  assurance  that this  demand  will exist or  continue.
Although the Company has the ability to reduce its professional staff in periods
of reduced  demand,  it may choose not to make full  reductions in such periods,
with resulting adverse effects on operations.

             -------------------------------------------------------

Year 2000 Readiness Disclosures

EA Engineering, Science, and Technology, Inc. ("EA" or the "Company") recognizes
the  seriousness of the challenge  businesses  worldwide face as a result of the
Year 2000  problem.  EA  formally  began to address  its own Year 2000 status in
early 1998.  The Company  believes the measures it has already  taken,  together
with those planned for 1999,  will minimize any impact the Year 2000 problem may
have on EA's ability to deliver services to its clients,  financial  performance
or results of operations.

Definitions

During fiscal 1998, EA developed a three-phase program for Year 2000 compliance.
Phase I identified those systems,  hardware and software that posed a compliance
risk for EA.  Phase II  assessed  the  business  and  financial  impact of these
at-risk  systems;  established  priorities  to  address  these risk  areas;  and
prescribed  remediation schedules and details. Phase III is the final testing of
the major systems to ensure compliance.

Assessment

EA's information  technology  infrastructure can be broadly categorized into the
following  major  systems:   networking  and  communication   systems,   desktop
computing, major application systems, EA Laboratory,  non-information technology
(non-IT) and other miscellaneous systems.

The Company's Phase I assessment  identified  several critical  elements of EA's
networking and communications  infrastructure that are potentially vulnerable to
Year 2000 issues.  These elements  include various types of computer servers and
network routers. Additionally,  various software components require new revision
to ensure  compliance.  Numerous  databases  and  database  access  programs are
currently believed to be non-compliant.

EA's desktop computing environment is comprised  predominantly of Compaq desktop
computer systems,  IBM notebooks,  the Microsoft Windows 95 operating system and
numerous  versions  and  variations  of  commercially  available  software.  The
majority  of the  desktop  computer  systems,  notebooks  and  operating  system
software  with  applicable  Y2K patches,  is currently  believed to be Year 2000
compliant. EA leases all of its computer hardware

                                                         16

<PAGE>

and consequently replaces all equipment on a three-year schedule.  This rotation
minimizes  any Year 2000  problems in this area.  Desktop  application  software
varies greatly in its ability to accurately process Year 2000 information.

It is currently  believed that the Company's major  applications,  including its
financial  management,  human resources,  and laboratory  (LIMS) systems are not
Year 2000  compliant.  However,  a full  assessment  was not  completed on these
systems  because they are  scheduled  for  replacement  in the  upcoming  fiscal
period.  These  systems are being  replaced  to improve  their  performance  and
functionality.  Replacement of these systems was not accelerated due to the Year
2000 issue.

EA's  laboratory  is  comprised  of many  different  models  of  Hewlett-Packard
laboratory  equipment.  The hardware is currently believed to be compliant.  The
system level software used on this equipment is still under review.

The non-IT and  miscellaneous  category  includes items such as phone  switches,
voice mail systems,  environmental  controls  systems,  and the like.  The phone
switches are believed to be Year 2000 compliant. The voice mail system and other
remaining systems are currently under review.

Remediation / Replacement

Networking and Communications  Systems - In early calendar 1998, EA restructured
its network topology. The Company currently believes that this redefinition will
significantly  upgrade  EA's  overall   communications   capabilities,   improve
reliability and performance,  and believes it will be Year 2000 compliant.  This
upgrade will be  accomplished  through the  replacement  of all critical  system
components  that have potential  Year 2000 problems.  Two of four critical field
systems have already been  replaced.  The remaining two will be completed by the
spring of 1999.  The  upgrading  of the EA  corporate  headquarters'  systems is
underway and will be completed  during the first  quarter of calendar  1999.  EA
selected MCI Worldcom as its communications  services provider. MCI Worldcom has
advised EA that it is fully Year 2000 compliant.

Coincident with the hardware upgrades, EA is upgrading its database capabilities
to be Year 2000 compliant.  The database  capabilities are presently expected to
be in place  during  the first  quarter  of  calendar  1999.  EA has  retained a
consultant  to convert all  applicable  databases to compliant  software.  These
database  conversions will continue through the first three quarters of calendar
1999.

Desktop Computing - To address EA's desktop software computing  environment,  EA
standardized on the Microsoft Office Suite of application products in the second
quarter  of fiscal  1998.  The MS Office  product  is not fully  compliant.  Any
remaining non-compliant applications are being addressed on a project-by-project
basis.  We  anticipate  this  process to be  completed  in the third  quarter of
calendar 1999.

Major  Applications  - EA plans  to  replace  its  financial  management,  human
resources and laboratory systems in 1998/99.  The Company has selected financial
and  laboratory  packages  that are fully Year 2000  compliant.  The  process to
replace  these  systems  will begin in December  of 1998.  We  anticipate  these
systems  to be fully  operational  by the end of the third  calendar  quarter of
1999. The Company is completing its review of fully  compliant  human  resources
systems.  Once selected,  the  implementation  will begin in January 1999 and is
expected to be completed in April 1999.

EA  Laboratories - As part of the EA  Laboratories'  maintenance  agreement with
Hewlett-Packard  (HP), the manufacturer will be completing an independent review
of the labs'  hardware and software  systems during  November 1998.  This review
will be at no cost to EA Laboratories. We have already determined the laboratory
hardware is  compliant.  HP's review will  confirm this  assessment  and provide
additional  insight  into the status of the  software  required to operate  this
equipment. Any deficiencies with this software will be addressed early in 1999.

                                                         17

<PAGE>

Non-IT and  Miscellaneous  Systems - Phone  switches  in the branch  offices are
currently under review.  The manufacturer of our voice mail systems is currently
providing input  regarding the status of the systems.  Should Year 2000 upgrades
be required for these systems,  they will be performed  during the first half of
1999.  We will begin a formal review of our  environmental  control and facility
systems  early in 1999.  Issues with these systems will be addressed as they are
identified.

Testing

EA has  tested  and will  continue  to test,  the Year 2000  worthiness  of each
upgraded  system,  as it is  installed.  In each case,  e.g.,  desktop  systems,
networks,  major systems,  etc., this  compliance  testing is comprised of three
independent  assessments:  first, review of the product manufacturer's Year 2000
compliance testing  certifications and results--no product is selected unless it
has been identified by the  manufacturer to have passed a comprehensive  battery
of Year 2000 tests;  second,  testing of these products  prior to  installation;
third,   outside   consultants  or  subcontractors   will  conduct   independent
assessments of all of these products.

Risks and Contingency Plans

Based on the  progress the Company has made toward Year 2000  compliance  during
1998, together with its plans for 1999, the Company does not foresee significant
risks associated with these efforts at this time. Since EA has adopted a plan to
address these issues in a timely  manner,  it has not developed a  comprehensive
contingency  plan should these issues fail to be  completed  successfully  or in
their entirety.  However, as we monitor our progress during 1999, if the Company
identifies  significant risks or is unable to meet its anticipated timeline, the
Company will develop contingency plans as deemed necessary at that time.

Third-Party Vendors, Utilities and Customers

The fact that EA provides environmental consulting services, which are primarily
labor-based,  substantially  minimizes the risks  associated with potential Year
2000 problems with its internal systems and suppliers.  The Company  maintains a
broad base of vendors and  suppliers  and  believes  there is little risk to its
ongoing operations from Year 2000 problems encountered by its outside vendors.

EA will be contacting  each of its major vendors and utilities early in calendar
1999 to inquire into each  system's  Year 2000  compliance.  The Company  cannot
fully  assess  the  degree  to  which  its  customers,   particularly  the  U.S.
Government,  will  successfully  complete a Year 2000 upgrade on a timely basis.
Because a significant  portion of the Company's  business is from contracts with
various federal government agencies, a failure by the U.S. Government to achieve
Year 2000  compliance  could have a significant  adverse effect on the Company's
future business, financial operations and results of operations.

Reasonably Likely "Worst-Case" Scenarios

EA has gone to significant  lengths to provide  redundancy in each major system.
For example, four independent communication paths have been defined between EA's
branch offices and its  headquarters  location.  Any of these paths will provide
data access to the systems  required to continue normal business  operations.  A
failure in any single  major  system will not result in the  cessation of normal
work  processes.  When fully  implemented  during the final quarter of 1999, the
failure of any single system will pose only a minimal risk.

The greatest  "reasonably  likely,  worst-case  scenario" to EA will be from the
outside,   primarily   customers  and   subcontractors.   If  our  customers  or
subcontractors fail to prepare adequately for Year 2000, there could be numerous
and significant  effects on EA. For example,  subcontractors  may not be able to
obtain or deliver  needed data;  EA employees  might be unable to perform  work,
resulting in a loss of revenue;  payments may fail to arrive on time. Any or all
of  these  contingencies  could,  under  certain  circumstances,   result  in  a
substantial and material impact on EA's financial performance.

                                                         18

<PAGE>

Costs to Address Year 2000 Issues

In  summary,  the Company  does not believe  that Y2K costs will have a material
impact to its operating income.  Because the Company leases all of its hardware,
remediation  of these  items  will be  completed  by  replacing  them,  with the
associated  lease expense  included in the Company's normal operating costs. The
cost  of  remediation  of  database  software,  miscellaneous  desktop  software
upgrades, and non-IT systems is expected to be less than $30,000. However, it is
possible that non-compliant Hewlett-Packard software in EA Laboratories may have
a material  impact,  although  the exact  amount is not known at this time.  The
replacement of major applications was previously planned to improve  performance
and functionality  requirements.  These replacements were not accelerated due to
Year 2000 issues;  as such the costs of these  systems are part of the Company's
capital budget.

Forward-Looking Statements

The foregoing contains  "forward-looking  information" within the meaning of The
Private  Securities   Litigation  Reform  Act  of  1995.  Such   forward-looking
statements  may be  identified  by an  asterisk  (*) or by such  forward-looking
terminology  as "may,"  "will,"  "believe,"  "anticipate,"  "expect," or similar
words or variations thereof. Such forward-looking statements involve significant
risks and uncertainties,  including,  among other things,  risks associated with
(1) substantial reliance on government contracts,  public budgetary restrictions
and  uncertainties,  discrepancies  between awarded  contract amounts and actual
revenues,  and  cancellation of contracts at the option of the  government,  (2)
timing and award of contracts,  (3) timing and performance of contracts, and (4)
successful  bidding  of  government  and  non-government  contracts  in  a  very
competitive environment. IN EACH CASE, ACTUAL RESULTS MAY DIFFER MATERIALLY FROM
SUCH  FORWARD-LOOKING  STATEMENTS.  Other  important  factors  that the  Company
believes may cause actual results to differ materially from such forward-looking
statements  are  discussed  throughout  this Report and in the  Company's  other
filings  with the  Securities  and  Exchange  Commission.  The Company  does not
undertake to publicly  update or revise its  forward-looking  statements even if
experience or future changes indicate that any such results or events (expressed
or implied) will not be realized.

                                                 -------------------

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

None

                                                         19

<PAGE>

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Index to Consolidated Financial Statements and Supplementary Financial Data


                                                                            Page

Report of Independent Public Accountants                                      21

Consolidated Financial Statements:

     Consolidated Balance Sheets as of August 31, 1998 and 1997               22

     Consolidated Statements of Operations for the years ended
        August 31, 1998, 1997, and 1996                                       24

     Consolidated Statements of Changes in Stockholders' Equity for
        the years ended August 31, 1998, 1997, and 1996                       25

     Consolidated Statements of Cash Flows for the years ended
        August 31, 1998, 1997, and 1996                                       26

     Notes to Consolidated Financial Statements for the years ended
        August 31, 1998, 1997, and 1996                                       27


                                                         20

<PAGE>

                                REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To the Board of Directors and Stockholders of
EA Engineering, Science, and Technology, Inc.:

We have audited the accompanying  consolidated balance sheets of EA Engineering,
Science,  and Technology,  Inc. (a Delaware  corporation) and subsidiaries as of
August 31, 1998 and 1997, and the related consolidated statements of operations,
changes in  stockholders'  equity and cash flows for each of the three  years in
the  period  ended  August  31,  1998.   These  financial   statements  are  the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of EA Engineering,  Science,  and
Technology,  Inc.  and  subsidiaries  as of August  31,  1998 and 1997,  and the
results of their  operations and their cash flows for each of the three years in
the  period  ended  August 31,  1998,  in  conformity  with  generally  accepted
accounting principles.


/s/ ARTHUR ANDERSEN LLP


 Baltimore, Maryland
 October 30, 1998

                                                   21

<PAGE>



          EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                     ASSETS


                                                            August 31,

                                                    ---------------------------
                                                        1998            1997
-------------------------------------------------------------------------------

Current Assets:

   Cash and cash equivalents                        $ 1,782,600     $ 2,333,300

   Accounts receivable, net                           8,441,900       9,498,800

   Costs and estimated earnings in excess
       of billings on uncompleted contracts           6,394,900       5,653,800


   Refundable income taxes                              407,600       1,883,900


   Prepaid expenses and other                         1,090,600       1,865,500
-------------------------------------------------------------------------------

      Total Current Assets                           18,117,600      21,235,300
-------------------------------------------------------------------------------

Property and Equipment, at cost:

   Furniture, fixtures, and equipment                13,106,900      12,599,200

   Leasehold improvements                             3,675,600       3,664,800
-------------------------------------------------------------------------------

   Total property and equipment, at cost             16,782,500      16,264,000

   Less-Accumulated depreciation and amortization   (15,001,400)    (13,867,200)
-------------------------------------------------------------------------------

      Net Property and Equipment                      1,781,100       2,396,800
-------------------------------------------------------------------------------

Other Assets                                          3,576,200       3,009,800
-------------------------------------------------------------------------------

      Total Assets                                  $23,474,900     $26,641,900
===============================================================================

      The accompanying notes are an integral part of these balance sheets.

                                                   22

<PAGE>

          EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                      LIABILITIES AND STOCKHOLDERS' EQUITY

                                                           August 31,
                                                -------------------------------
                                                        1998           1997
-------------------------------------------------------------------------------
Current Liabilities:
   Accounts payable                                 $ 4,494,300     $ 4,306,900
   Accrued expenses                                     735,100       2,694,600
   Accrued salaries, wages and benefits               2,270,800       2,891,200
   Current portion of long-term debt                    438,800         648,300

   Billings in excess of costs and estimated
      earnings on uncompleted contracts                 246,700         512,200
-------------------------------------------------------------------------------
      Total Current Liabilities                       8,185,700      11,053,200
-------------------------------------------------------------------------------
Long-Term Debt, net of current portion                1,279,800       2,331,700
-------------------------------------------------------------------------------
      Total Liabilities                               9,465,500      13,384,900
-------------------------------------------------------------------------------
Commitments
-------------------------------------------------------------------------------
Stockholders' Equity:
   Common stock, $.01 par value; voting;
      10,000,000 shares authorized; 6,285,000
      and 6,227,300 shares issued and outstanding        62,900          62,300
   Preferred stock, $.01 par value;
      8,000,000 shares authorized; none issued             --              --
   Capital in excess of par value                    11,049,300      10,902,300
   Retained earnings                                  2,897,200       2,292,400
-------------------------------------------------------------------------------
      Total Stockholders' Equity                     14,009,400      13,257,000
-------------------------------------------------------------------------------
      Total Liabilities and Stockholders' Equity    $23,474,900     $26,641,900
===============================================================================

      The accompanying notes are an integral part of these balance sheets.

                                                   23

<PAGE>

          EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
                                                            Year Ended August 31,
                                                 -----------------------------------------
                                                    1998           1997           1996
------------------------------------------------------------------------------------------
<S>                                             <C>            <C>            <C>         
Total revenue                                   $ 59,987,200   $ 73,890,900   $ 88,307,800

Less - Subcontractor costs                      (11,406,600)   (21,435,800)   (23,954,100)
Less - Other direct project costs                (6,883,700)   (11,434,900)   (10,289,200)

      Net revenue                                 41,696,900     41,020,200     54,064,500
------------------------------------------------------------------------------------------
Operating costs and expenses:
   Direct salaries and other operating            31,473,800     37,560,300     46,535,500
   Sales, general and administrative               9,374,400      8,481,900      7,972,600
   Gain on "key employee" life insurance           (261,100)             --             --
   Restructuring charges                                  --      3,000,100             --
------------------------------------------------------------------------------------------
      Total operating expenses                    40,587,100     49,042,300     54,508,100
------------------------------------------------------------------------------------------
Income (loss) from operations                      1,109,800     (8,022,100)      (443,600)
------------------------------------------------------------------------------------------
Interest expense                                    (244,600)      (446,400)      (464,900)
Interest income                                       98,800         91,600        107,400
------------------------------------------------------------------------------------------
Income (loss) before income taxes                    964,000     (8,376,900)      (801,100)
------------------------------------------------------------------------------------------
Provision for (benefit from) income taxes            359,200     (2,969,300)      (221,000)
------------------------------------------------------------------------------------------

Net income (loss)                               $    604,800    $(5,407,600)     $(580,100)
==========================================================================================

Basic earnings (loss) per share                        $0.10         $(0.87)        $(0.09)

Diluted earnings (loss) per share                      $0.10         $(0.87)        $(0.09)
==========================================================================================

Weighted average shares outstanding                6,255,500      6,205,700      6,138,100

Effect of dilutive stock options                      91,100             --             --

Diluted weighted average shares outstanding        6,346,600      6,205,700      6,138,100
==========================================================================================
</TABLE>

        The accompanying notes are an integral part of these statements.

                                                   24

<PAGE>

          EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES

           CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

               FOR THE YEARS ENDED AUGUST 31, 1998, 1997, AND 1996


<TABLE>

                                                                        Capital in
                                                       Common           Excess of           Retained
                                                       Stock            Par Value           Earnings         Total
-----------------------------------------------------------------------------------------------------------------------

<S>             <C> <C>                                   <C>               <C>               <C>           <C>        
Balance, August 31, 1995                                  $60,900           $10,538,700       $8,280,100    $18,879,700

Issuance of stock                                             900               233,000               --        233,900

Tax benefit from stock options exercised                       --                24,600               --         24,600

Net loss                                                       --                    --         (580,100)      (580,100)
-----------------------------------------------------------------------------------------------------------------------

Balance, August 31, 1996                                   61,800            10,796,300        7,700,000     18,558,100

Issuance of stock                                             500               106,000               --        106,500

Net loss                                                       --                    --       (5,407,600)    (5,407,600)
-----------------------------------------------------------------------------------------------------------------------

Balance, August 31, 1997                                   62,300            10,902,300        2,292,400     13,257,000

Issuance of stock                                             600               147,000               --        147,600

Net income                                                     --                    --          604,800        604,800
-----------------------------------------------------------------------------------------------------------------------

Balance, August 31, 1998                                  $62,900           $11,049,300       $2,897,200    $14,009,400
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

        The accompanying notes are an integral part of these statements.

                                                               25

<PAGE>

          EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>

                                                                                   Year Ended August 31,
                                                             ------------------------------------------------------------------
                                                                     1998                  1997                   1996
-------------------------------------------------------------------------------------------------------------------------------

Cash Flows From (Used For) Operating Activities:
<S>                                                                  <C>                   <C>                   <C>         
   Net income (loss)                                                 $   604,800           $(5,407,600)          $  (580,100)
   Noncash expenses included in net income (loss) -
      Depreciation and amortization                                    1,162,200             1,427,100             1,683,900
      Current benefit from income taxes                                       --            (2,969,300)             (221,000)
   Changes in operating assets and liabilities -
      Decrease in accounts receivable, net                             1,056,900             3,193,900             2,165,400
      (Increase) decrease in costs and estimated earnings
         in excess of billings on uncompleted contracts                 (741,100)            6,828,400            (1,747,200)
      Increase in prepaid expenses and other assets                     (183,500)             (314,000)             (110,800)
      Decrease in accounts payable and accrued expenses               (2,392,500)             (370,900)           (1,149,400)
      Refunds of income taxes (net of payments)                        1,868,300               244,200              (430,800)
      Decrease (increase) in billings in excess of costs and
         estimated earnings on uncompleted contracts                    (265,500)             (685,500)              148,400
-------------------------------------------------------------------------------------------------------------------------------

      Net cash flows from (used for) operating activities              1,109,600             1,946,300              (241,600)
-------------------------------------------------------------------------------------------------------------------------------

Cash Flows Used For Investing Activities:
   Purchase of equipment, net                                           (546,500)              (699,000)           (1,008,500)
-------------------------------------------------------------------------------------------------------------------------------

      Net cash flows used for investing activities                      (546,500)              (699,000)           (1,008,500)
-------------------------------------------------------------------------------------------------------------------------------

Cash Flows From (Used For) Financing Activities:
   Net borrowings from revolving line of credit                         (635,400)                481,200            3,000,000
   Proceeds from issuance of common stock                                147,600                 106,500              233,900
   Reduction of long-term debt and short-term borrowings                (626,000)               (810,300)          (4,489,100)
-------------------------------------------------------------------------------------------------------------------------------

      Net cash flows from (used for) financing activities             (1,113,800)               (222,600)          (1,255,200)
-------------------------------------------------------------------------------------------------------------------------------

Net (Decrease) Increase in Cash and Cash Equivalents                    (550,700)              1,024,700           (2,505,300)

Cash and cash equivalents, beginning of period                         2,333,300               1,308,600            3,813,900
-------------------------------------------------------------------------------------------------------------------------------

Cash and cash equivalents, end of period                             $ 1,782,600              $2,333,300           $1,308,600
===============================================================================================================================
</TABLE>

        The accompanying notes are an integral part of these statements.

                                                               26

<PAGE>

          EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
               FOR THE YEARS ENDED AUGUST 31, 1998, 1997, AND 1996


Note 1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation--

The accompanying  consolidated  financial  statements present the accounts of EA
Engineering,  Science, and Technology, Inc. (EA); its wholly-owned subsidiaries,
EA  International,  Inc.  and  EA  Financial,  Inc.;  and EA  Financial,  Inc.'s
wholly-owned  subsidiaries,  EA Global,  Inc. and EA de Mexico, S.A. de C.V. The
entities are  collectively  referred to herein as the "Company." All significant
intercompany transactions have been eliminated in consolidation.

Segment Information--

The Company is organized around two operating  segments.  The primary segment is
Management Consulting Services, provided through a network of offices throughout
the United States, Mexico and Guam; and Analytical Services provided through its
laboratory facility located in Maryland.

Revenue Recognition--

The Company is an  international  consulting firm  specializing in the fields of
energy,  the  environment,  health and safety,  and analytical  services.  These
services are  generally  performed  under  time-and-material,  fixed-price,  and
cost-plus-fixed-fee  contracts.  Task orders from these contracts vary in length
from one month to two years.

The  Company's  Management  Consulting  Services  segment  accounts for contract
revenues    and    costs    under     fixed-price     contracts     using    the
percentage-of-completion  method.  The  percentage  of  completion is determined
using the  "cost-to-cost"  method for each contract cost  component.  Under this
method,  direct labor and other  contract costs incurred to date are compared to
periodically  revised  estimates of the total of each contract cost component at
contract  completion to determine the  percentage of revenues to be  recognized.
Revenues from time-and-material and cost-plus-fixed-fee contracts are recognized
currently  as the work is  performed.  The majority of the  Analytical  Services
segment  contracts  are on a fixed-unit  priced  basis.  Revenue for  fixed-unit
priced  contracts  is  recognized  currently  as  sample  units  are  processed.
Provision for estimated losses on uncompleted  contracts,  to the full extent of
the loss,  is made during the period in which the Company  first  becomes  aware
that a loss on a contract is probable.

Contract costs and estimated earnings recognized in excess of amounts billed are
classified as current  assets under "costs and  estimated  earnings in excess of
billings on  uncompleted  contracts."  Billings in excess of contract  costs and
estimated  earnings are  classified as current  liabilities  under  "billings in
excess of costs and estimated earnings on uncompleted contracts."

Generally,  contracts  provide for the billing of costs  incurred and  estimated
fees on a monthly basis.  Amounts  included in "costs and estimated  earnings in
excess of billings  on  uncompleted  contracts"  in the  accompanying  financial
statements will be billed within twelve months of the balance sheet date.

Major Clients--

Various agencies of the federal government accounted for approximately 50%, 46%,
and 45% of the Company's (primarily  Management Consulting Services) net revenue
for the years ended August 31, 1998, 1997, and 1996, respectively. Additionally,
various agencies of the federal  government  accounted for approximately 45% and
40% of

                                                         27

<PAGE>

the Company's accounts  receivable and costs and estimated earnings in excess of
billings on uncompleted contracts as of August 31, 1998 and 1997,  respectively.
One industrial client accounted for approximately 54% of the Analytical Services
segment's gross sales and over 70% of its external client billings.  In addition
to this one client,  major external  clients for  Analytical  Services in fiscal
1997 and 1996 included the federal government and two other industrial clients.

Cash and Cash Equivalents--

Cash equivalents  consist of money market  instruments with a purchased original
maturity of three  months or less,  stated at cost,  which  approximates  market
value.

Property and Equipment--

Property and equipment are depreciated using the straight-line method over their
estimated  useful lives ranging from 3 to 10 years.  Leasehold  improvements are
amortized  over the  shorter  of the  estimated  useful  life or the term of the
lease. Depreciation expense for the fiscal years ended August 31, 1998, 1997 and
1996 was $1,162,200, $1,427,100 and $1,683,900, respectively.

Reclassifications--

For  historical  comparisons,  net revenue in past periods has been  adjusted to
include other direct project costs in addition to subcontract costs. In previous
years,  only subcontract costs were deducted from total revenue to arrive at net
revenue.  Additionally,  operating  costs in past  years have been  adjusted  to
include  sales  and  marketing  costs in the  category  of  sales,  general  and
administrative  costs. In previous periods,  these costs were included in direct
salaries and other operating costs.

Risks and Uncertainties--

Reliance on major government  contracts subjects the Company to risks associated
with public budgetary  restrictions  and  uncertainties,  discrepancies  between
awarded contract amounts and actual revenues,  and cancellation at the option of
the government. The Company attempts to mitigate these risks by staffing only to
meet reasonably anticipated average workloads, by using subcontractors to handle
peak  workloads,  and by  obtaining  termination  benefit  contract  provisions.
Cancellation of any of the Company's major government contracts,  however, could
have a material adverse effect on the Company.

Use of Estimates--

The preparation of financial  statements in accordance  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amount of assets, liabilities,  revenues and expenses in the
financial   statements  and  in  the   disclosures  of  contingent   assets  and
liabilities. While actual results could differ from these estimates,  management
believes  that actual  results  will not be  materially  different  from amounts
provided in the accompanying consolidated financial statements.

Supplemental Disclosures of Cash Flow Information--

Cash paid during the years ended August 31, 1998,  1997,  and 1996 for interest,
was $233,700, $467,200, and $474,200, respectively.  Retirements of property and
equipment  for  the  same  periods  were  $28,000,   $897,200,  and  $2,602,400,
respectively.

                                                         28

<PAGE>

Accounting for Income Taxes--

Deferred  income  taxes are recorded to reflect the tax  consequences  on future
years for differences  between the tax basis of assets and liabilities and their
financial reporting amounts.

Accounting Pronouncements--

In February  1997, the FASB issued  Statement No. 128 (SFAS 128),  "Earnings Per
Share," which  establishes  new standards for computing and presenting  earnings
per share.  SFAS 128 is effective  for financial  statements  issued for periods
ending after  December 15,  1997,  including  interim  periods.  Management  has
implemented SFAS 128.

In February 1997, the FASB issued  Statement No. 129 (SFAS 129),  "Disclosure of
Information  about  Capital   Structure,"  which  eliminates  the  exemption  of
nonpublic entities from certain disclosure requirements of APB Opinion No. 15 as
provided by FASB  Statement  No. 21. SFAS 129 is  effective  for periods  ending
after December 15, 1997.
Management has implemented SFAS 129.

In June  1997,  the  FASB  issued  Statement  No.  130  (SFAS  130),  "Reporting
Comprehensive  Income,"which  establishes standards for reporting and display of
comprehensive  income  and  its  components  in a full  set of  general  purpose
financial  statements.  SFAS 130 is effective for fiscal years  beginning  after
December 15, 1997.  Management is currently  evaluating the impact SFAS 130 will
have on the  Company's  financial  reporting  for fiscal year ending  August 31,
1999.

In July 1997, the FASB issued Statement No. 131 (SFAS 131),  "Disclosures  About
Segments of an  Enterprise  and Related  Information,"  which  establishes a new
approach for determining segments within a company and reporting  information on
those segments.  SFAS 131 is effective for fiscal years beginning after December
15, 1997.  Management  has elected to implement  SFAS 131 for the fiscal  period
ended August 31, 1998.

In February  1998,  the FASB  issued  Statement  No. 132 (SFAS 132),  "Employers
Disclosure about Pensions and Other Postretirement Benefits," which standardizes
the disclosure requirements for pensions and other postretirement benefit plans.
SFAS 132 is  effective  for fiscal  years  beginning  after  December  15, 1997.
Management has not yet determined  whether the  implementation  of SFAS 132 will
have an impact on the Company's  financial  reporting for the fiscal year ending
August 31, 1999.

In June 1998,  the FASB issued  Statement  No. 133 (SFAS 133),  "Accounting  for
Derivative Instruments and Hedging Activities," which establishes accounting and
reporting  standards for derivative  instruments,  including certain  derivative
instruments embedded in other contracts and for hedging activities.  SFAS 133 is
effective for all fiscal quarters of fiscal years beginning after June 15, 1999.
The Company does not hold  derivatives  and, as such,  SFAS 133 will not have an
impact.

Note 2.  SEGMENT FINANCIAL INFORMATION:

The following table provides selected  financial  information as reviewed by the
Company's  management in making  decisions  about  allocating  resources to each
segment and assessing its performance.

                                                         29

<PAGE>

<TABLE>

                                                                          Year ended August 31,
                                       ------------------------------------------------------------------------------------------
                                                                (in thousands, except per share amounts)
                                              Management Consulting Services                       Analytical Services
                                             1998          1997          1996                1998          1997        1996
                                       --------------------------------------------     -----------------------------------------
<S>                                          <C>           <C>           <C>                 <C>          <C>          <C>    
Gross revenue                                $56,484       $72,559       $86,390             $ 3,503      $ 1,332      $ 1,918
Intercompany sales                            (2,870)       (4,370)       (5,457)              2,870        4,370        5,457
                                       ------------------------------------------------------------------------------------------
Total gross revenue                            53,614       68,189        80,933               6,373        5,702        7,375
Net revenue                                    36,696       37,443        48,495               5,000        3,577        5,569
                                       ------------------------------------------------------------------------------------------
Operating and administrative expenses          35,506       44,305        48,457               5,080        4,737        6,051
                                       ------------------------------------------------------------------------------------------
Income (loss) from operations                   1,190       (6,862)           38                 (80)      (1,160)        (482)
Net interest                                    (122)         (287)         (209)                (24)         (67)        (148)
Income taxes                                    (401)        2,534            47                  42          435          174
                                       ------------------------------------------------------------------------------------------
Net income (loss)                            $    667      $(4,615)      $  (124)            $   (62)      $ (792)      $ (456)
                                       ==========================================================================================
Diluted earnings (loss) per share             $  0.11     $  (0.74)      $ (0.02)             $(0.01)      $(0.13)      $(0.07)

Net property/equipment                         $1,133      $ 1,534        $2,000              $  648       $  863       $1,125
</TABLE>


Furthermore,  the Company's  management  team reviews its Management  Consulting
Services by each  geographical  office  location.  The following  represents net
revenue, by office, for the fiscal year ended August 31, 1998.

    Management Consulting Services (in 000s)
--------------------------------------------------

Boston, MA                               $ 1,195
Newburgh, NY                               2,420
Berkeley Heights, NJ                       2,220
Baltimore, MD                             14,631
Washington, DC                               865
Dallas, TX                                 2,201
Chicago, IL                                  630
Lincoln, NB                                1,700
San Francisco, CA                          3,426
Sacramento, CA                             1,435
Seattle, WA                                2,109
Anchorage, AK                                917
Guam                                       2,030
Mexico                                       218
Hawaii                                       175
Others                                       524
--------------------------------------------------
    Total net revenue                    $36,696
==================================================

Prior to fiscal  1998,  the Company did not keep  revenue  data by  geographical
region.  To gather this information would be impractical;  therefore,  it is not
included. Additionally, in the past the Company has not identified assets by

                                                         30

<PAGE>

segments;  therefore,  any  asset  information  provided  by  segment  has  been
estimated.


Note 3.  INCOME TAXES:

The provision for (benefit from) income taxes includes  current and deferred tax
amounts summarized as follows:

<TABLE>
                                                          Year Ended August 31,
--------------------------------------------------------------------------------------------
                                                 1998            1997               1996
--------------------------------------------------------------------------------------------
Current tax expense (benefit):
<S>                                           <C>             <C>               <C>       
   Federal                                    $ (43,500)      $(1,659,500)      $ (18,400)
   State                                              --                --         (4,300)
--------------------------------------------------------------------------------------------
                                                (43,500)       (1,659,500)        (22,700)
--------------------------------------------------------------------------------------------
Deferred tax expense (benefit):
   Federal                                       337,400       (1,309,800)       (160,600)
   State                                          65,300                --        (37,700)
--------------------------------------------------------------------------------------------
                                                 402,700       (1,309,800)       (198,300)
--------------------------------------------------------------------------------------------
Provision for (benefit from) income taxes       $359,200      $(2,969,300)      $(221,000)
============================================================================================
</TABLE>


Total deferred tax assets and liabilities as of August 31, 1998 and 1997 and the
sources of the differences  between the tax and financial reporting basis of the
Company's assets and liabilities  which give rise to the deferred tax assets and
liabilities are as follows:

                                          Year Ended August 31,
-------------------------------------------------------------------
                                       1998                 1997
-------------------------------------------------------------------
Deferred tax assets:
    Property and equipment           $1,031,300       $   929,600
    Accrued expenses and reserves       493,900         1,878,900
    Net operating loss                1,254,900           398,200
-------------------------------------------------------------------
                                      2,780,100         3,206,700
===================================================================
Deferred tax liabilities:
    Prepaid expenses                      9,300            99,300
    Miscellaneous                       269,600           203,500
-------------------------------------------------------------------
                                    $   278,900       $   302,800
===================================================================

The net deferred tax assets of $2,501,200  and  $2,903,900 as of August 31, 1998
and 1997 are included to the extent  appropriate  in Prepaid  expenses and other
and Other Assets in the accompanying consolidated balance sheets.

                                                         31

<PAGE>

Reconciliation of the statutory federal income tax rate and the effective income
tax rate is summarized as follows:

                                                         Year Ended August 31,
-------------------------------------------------------------------------------
                                                        1998    1997     1996
-------------------------------------------------------------------------------

Statutory federal income tax rate                       34.0%   34.0%    34.0%

State income tax, net of federal income tax effect       5.3     5.3      5.3

Non-recognition of future benefit from foreign loss      1.9    (0.4)    (4.8)

Other                                                   (3.9)   (3.5)    (6.9)
------------------------------------------------------------------------------

Effective income tax rate                               37.3%   35.4%    27.6%
==============================================================================

Note 4.  ACCOUNTS RECEIVABLE:

Accounts receivable consist of the following:


                                            Year Ended August 31,
----------------------------------------------------------------------
                                           1998                 1997
----------------------------------------------------------------------
Contract accounts receivable            $ 7,383,500        $ 8,802,400
Retainage by clients                      1,315,600          1,228,400
----------------------------------------------------------------------
Total accounts receivable                 8,699,100         10,030,800
Less-Allowance for doubtful accounts       (257,200)          (532,000)
----------------------------------------------------------------------
Accounts receivable, net                $ 8,441,900        $ 9,498,800
======================================================================

Management  anticipates that  substantially all retainages will be billed within
one year.

Note 5.  CONSTRUCTION LOSS:

In fiscal  1997,  the Company  recognized  estimated  losses  related to certain
landfill  projects.  These  losses  are  included  in  accrued  expenses  in the
consolidated  balance  sheets.  As of  August  31,  1998 and 1997,  the  related
balances were $90,100 and $1,337,900,  respectively. For the period ended August
31, 1998, a total of $829,500 of the previously  recognized  losses was reversed
into income as change orders and various settlements were realized.

Note 6.  BANK FINANCING ARRANGEMENTS:

The Company  entered into a new credit  arrangement  with a regional bank during
fiscal  year 1997  consisting  of: (i) an  $8,500,000  revolving  line of credit
secured by  receivables;  (ii) a $500,000 term loan; and (iii) an equipment line
of credit of $1,500,000.  Of the $8,500,000 revolving line of credit, $2,500,000
is  available  for  acquisitions,   joint  ventures  and  licensing  agreements.
Borrowings  under the  revolving  line of credit are limited to a percentage  of
certain  accounts  receivable  and costs  and  estimated  earnings  in excess of
billings on uncompleted contracts (up to a

                                                         32

<PAGE>

maximum of  $4,000,000).  The agreement was  effective  August 22, 1997.  During
fiscal years 1998,  1997,  and 1996, the Company was either in compliance or had
obtained   waivers  on  all  covenants   related  to  these  and  prior  related
arrangements.

Short-term borrowings  information resulting from the financing  arrangements is
as follows:

<TABLE>
                                                              Year Ended August 31,
                                                     ------------------------------------
                                                       1998         1997          1996
-----------------------------------------------------------------------------------------

<S>                                                  <C>        <C>            <C>     
Balance as of end of period                          $   --     $      --      $     --
Maximum outstanding month-end balance during
   the period                                            --      3,615,300      5,490,900

Average outstanding month-end balance during
   the period                                            --        564,000        598,800

Weighted average interest rate during the period         --           11.5%           8.4%
Interest rate at the end of period                       --           11.5%           8.3%
==========================================================================================
</TABLE>

The weighted  average  interest rate has been  calculated  based upon the actual
daily interest  expense and the daily average balance  outstanding.  The Company
had no short-term  borrowing  during fiscal 1998.  For the year ended August 31,
1997,  the Company only  maintained  short-term  borrowing  balances  during the
months of April  through  August.  Prior to April and at the end of August 1997,
all borrowings  were  considered  long term. For the year ended August 31, 1996,
short-term balances were for nine months through May 31, 1996.

Long-term debt consists of the following:

<TABLE>
                                                                         August 31,
--------------------------------------------------------------------------------------------
                                                                  1998               1997
--------------------------------------------------------------------------------------------

<S>                           <C>                               <C>               <C>       
Revolving credit facility  payable to commercial bank effective 
   August 22, 1997, interest charged at LIBOR plus 200;
   facility expires September 2000                              $1,192,400        $1,827,700
Note payable to a commercial bank payable in equal monthly
   installments of $29,600, which includes interest at 9.1%,
   through December 1999 secured by certain computer
   equipment                                                       418,300           720,500
Note payable to a commercial bank payable in equal monthly
   installments of $43,651 through December 1997.  There-
   after, $21,429, plus interest charged at LIBOR plus 200
   through January 1999; secured by leasehold improvements
   and certain analytical laboratory equipment                     107,900           431,800
----------------------------------------------------------------------------------------------
Total long-term debt                                             1,718,600         2,980,000
Less-current portion                                             (438,800)         (648,300)
----------------------------------------------------------------------------------------------
Long-term portion                                               $1,279,800        $2,331,700
==============================================================================================
</TABLE>

                                                         33

<PAGE>

The debt repayment schedule for the outstanding notes payable is as follows:

Year Ending
 August 31,
----------------------------------------------------------------

1999............................................   $     438,800
2000............................................          87,500
2001 and thereafter.............................       1,192,300
----------------------------------------------------------------

Total notes payable.............................      $1,718,600
================================================================

The fair  value  of the  Company's  outstanding  indebtedness  approximated  its
carrying value at August 31, 1998.

Note 7.  LEASE COMMITMENTS:

The Company's  central office,  laboratory  facilities,  regional  offices,  and
certain  furniture and equipment are held under operating  leases.  These leases
expire at various dates through  fiscal 2007, and certain leases call for annual
proportionate  increases  due to  property  taxes and  certain  other  operating
expenses. Lease expense amounted to $6,061,000,  $8,030,200, and $8,912,300, for
the years ended August 31, 1998,  1997,  and 1996,  respectively.  Lease expense
included payments of approximately $1,900,400,  $2,016,500,  and $2,054,900, for
years ended August 31, 1998, 1997, and 1996, respectively, to partnerships whose
partners  include the  Chairman  of the Board of EA and  certain  members of his
family for its  central  office,  and  Loveton,  Maryland,  regional  office and
laboratory  facility.  These payments  include  reimbursements  of approximately
$873,000 per year for pass-through  taxes and operating expenses incurred by the
lessor which include local property taxes,  janitorial and mechanical  equipment
maintenance,  and  utility  costs  related to the  operation  of both office and
laboratory  leased  space.  Management  of the  Company  believes  the terms and
conditions of the  transactions  between the Company and entities with which the
Chairman is  affiliated,  are at least as favorable to the Company as could have
been obtained from third parties and are in the best interest of the Company.

The minimum  lease  commitments  under  noncancellable  operating  leases are as
follows:

Year Ending
 August 31,
---------------------------------------------
1999.......................      $ 3,549,900
2000.......................        2,774,900
2001 ......................        2,400,000
2002.......................        2,139,800
2003.......................        2,023,800
2004 and thereafter........        6,470,700
=============================================
Total minimum payments.....      $19,359,100
=============================================

                                                         34

<PAGE>

Note 8.  NET INCOME (LOSS) PER SHARE:

In accordance with Statement of Financial  Accounting  Standards  (SFAS) No. 128
"Earnings per Share," basic  earnings  (loss) per share is based on the weighted
average number of shares of common stock outstanding during the period.  Diluted
earnings  (loss) per share is based on the weighted  average number of shares of
common stock and common stock equivalents  outstanding during the period. Common
stock   equivalents  are  calculated  using  the  treasury  stock  method.   All
disclosures  with  regard  to the  shares  of common  stock  have been  adjusted
retroactively  to reflect two 3-for-2 stock splits,  effected in the form of 50%
stock dividends  wherein,  on February 23, 1994 and July 5, 1994, one additional
share of stock was issued for each two shares outstanding as of the record dates
of February 8, 1994 and June 28, 1994, respectively.


Note 9.  PROFIT SHARING:

EA maintains a defined contribution plan in which all employees who are at least
21 years of age and have completed six months of credited service, as defined by
the plan,  are eligible to  participate.  The plan  provides  for  discretionary
employer  contributions for each fiscal year, in amounts determined  annually by
the Board of Directors. The plan also includes a 401(k) provision,  allowing for
Company matching  contributions.  For the years ended August 31, 1998, 1997, and
1996, matching contributions to the plan made under the 401(k) provisions of the
plan, were $472,100, $534,900, and $729,200, respectively.  Certain officers and
stockholders  of the Company serve as trustees to the plan under  appointment of
the Board of Directors.


Note 10.  STOCK OPTION AND EMPLOYEE STOCK PURCHASE PLANS:

The Company  maintains an Amended and Restated  Stock Option Plan (the  "Plan"),
which provides for the grant of  nonqualified  stock options and incentive stock
options to certain key employees and officers of the Company. The exercise price
of an option  granted  under the Plan may not be less than the fair market value
of the  underlying  shares of Common Stock on the date of the grant.  A total of
799,800  options are issued and  outstanding  as of August 31,  1998,  having an
average exercise price of $2.43. The exercise prices of the outstanding  options
ranged  between  $1.39 and $11.75,  which  equaled the fair market  value at the
dates of grant.  Of the outstanding  options,  400,000 are held by the President
and CEO. The  exercise  price of the 400,000  shares  ranges  between  $2.25 and
$3.67, which was equal to the market value on the dates of grant.

The Company  maintains an Employee Stock Purchase Plan (the "Purchase  Plan") to
provide  eligible  employees  with the  opportunity  to  purchase  shares of the
Company's Common Stock through voluntary payroll deductions.  Under the Purchase
Plan,  eligible employees may purchase shares through monthly payroll deductions
at 95% of current  market  value at the time of  purchase.  The Company pays all
administrative expenses related to employee purchases. A total of 120,600 shares
remain  authorized  for  distribution  under the Purchase  Plan as of August 31,
1998.

The Company  maintains two  Non-Employee  Director  Stock Option Plans (1993 and
1995)  which  provide  for the  granting of  nonqualified  stock  options to its
non-employee  directors.  The exercise price of the 17,000  options,  which were
outstanding as of August 31, 1998, ranged between $2.03 and $6.13, which equaled
the fair market value at the dates of grant.  A total of 33,500  options  remain
reserved for the Director Stock Option Plans as of August 31, 1998.

The Company  accounts  for these plans under APB Opinion No. 25,  under which no
compensation  cost has been  recognized.  Had  compensation  cost for plans been
determined  consistent  with FASB  Statement  No. 123, the  Company's net income
(loss) and earnings  (loss) per share would have changed the following pro forma
amounts:

                                                         35

<PAGE>
                                            1998        1997          1996
-------------------------------------------------------------------------------

Net income (loss)          As Reported    $604,800  $(5,407,600)   $(580,100)
                           Pro Forma       513,200   (5,470,200)    (580,100)

Earnings (loss) per share  As Reported       $0.10       $(0.87)      $(0.09)
                           Pro Forma          0.08        (0.88)       (0.09)

Diluted earnings (loss)    As Reported       $0.10       $(0.87)      $(0.09)
     per share             Pro Forma          0.08        (0.88)       (0.09)


A summary of the status of  activity in fiscal  years 1998,  1997 and 1996 under
the Company's Employee Stock Option Plan and Non-Employee  Director Stock Option
Plans (1993 and 1995) follows:

<TABLE>
                                                     1998                          1997                         1996
                                         ------------------------------------------------------------------------------------------

                                             Shares       Wgtd.Avg.      Shares       Wgtd.Avg.         Shares       Wgtd.Avg.
                                             (000)        Exer.Price     (000)        Exer.Price        (000)       Exer.Price
                                         ------------------------------------------------------------------------------------------

<S>                                               <C>            <C>         <C>               <C>           <C>            <C>  
Outstanding at beginning of year                  616            $2.37       180               $4.13         341            $4.30
Granted                                           273             2.65       506                2.10          11             4.61
Exercised                                        (27)             2.45        --                  --        (28)             1.41
Forfeited                                        (45)             2.72      (70)                4.96       (144)             5.08
Expired                                            --               --        --                  --          --               --
                                         ------------------------------------------------------------------------------------------
Outstanding at end of year                        817             2.44       616                2.37         180             4.13
                                         ------------------------------------------------------------------------------------------
Exercisable at year end                           269            $2.59       164               $2.99         136            $3.40
Weighted Average Fair Value of                                                                         
Options Granted                                                  $1.35                         $0.96                        $1.79
</TABLE>

The fair value of each option  grant is estimated on the date of grant using the
Black-Scholes   option-pricing   model  with  the   following   weighted-average
assumptions  used for grants in 1998,  1997 and 1996:  Risk-free  interest rates
ranging from 5.19% to 6.68%;  expected volatility is 63% in 1998 and 62% in 1997
and 1996.

Note 11.  COMPANY RESTRUCTURING:

On March 25, 1997 the Company implemented a major organizational  realignment to
reposition itself in the marketplace. In connection with the restructuring,  the
Company  incurred  charges of  $3,000,100  during the fiscal 1997 third  quarter
related  to   severance,   planned   reduction   in  office   space,   suspended
implementation of a new project/financial system, and other related costs.

This restructuring included a staff reduction of approximately 125 employees.

As of August  31,  1998 and 1997,  the  Company  had  accruals  of  $76,600  and
$880,100,   respectively,   included  as  other  current   liabilities   in  the
accompanying  consolidated  balance  sheet  for costs to be  incurred  in future
periods in connection with the restructuring.

                                                         36

<PAGE>

Note 12.  "KEY EMPLOYEE" LIFE INSURANCE

In April  1998,  adjustments  were  made to the  actual  cash  value of two "key
employee"  life insurance  policies for the Chairman of the Board,  of which the
Company is the named  beneficiary.  Prior to April 1998, the policies had a cash
surrender value of $515,500, which was included in Other Assets on the Company's
balance  sheet.  In fiscal 1994,  the asset value of the policies was originally
adjusted downward due to bankruptcy proceedings involving the original insurance
company.  In April 1998,  Phoenix Home Life Mutual  Insurance Co., the successor
underwriter  of the policies,  confirmed  that the cash  surrender  value of the
policies was $776,600. As a result, Other Assets was increased by $261,100,  and
a one-time gain was recognized during the period.

Note 13.  RELATED PARTY TRANSACTIONS

At the  request  of its  former  primary  lender  and in order to  maintain  its
favorable  relationship with that lender, the Company in December 1996 purchased
from  this  lender  the  secured  loans  of  three  former  EA  officers.  These
interest-free demand loans, in the aggregate amount of $301,000,  are secured by
pledges of the Company's common stock. The differential between the current fair
market value of the pledged stock and the amount of the loans is fully  reserved
within the Company's balance sheet.

ITEM 9.  DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

       None.

                                                         37

<PAGE>

                                                      PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

(a)  Directors of the Registrant

Information  on the  Company's  Directors is contained  in the  Company's  Proxy
Statement for its 1998 Annual Meeting of  Stockholders to be held on January 14,
1999, and such information is incorporated herein by reference.

(b)  Executive Officers of the Registrant

Information  on the Company's  Executive  Officers is contained in the Company's
Proxy  Statement  for its 1998  Annual  Meeting  of  Stockholders  to be held on
January 14, 1999, and such information is incorporated herein by reference.

ITEM 11.  EXECUTIVE COMPENSATION

Information  on "Executive  Compensation"  is contained in the  Company's  Proxy
Statement for its Annual Meeting of Stockholders to be held on January 14, 1999,
and such information is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Information on "Security  Ownership of Certain Beneficial Owners and Management"
is  contained  in the  Company's  Proxy  Statement  for its  Annual  Meeting  of
Stockholders  to  be  held  on  January  14,  1999,  and  such   information  is
incorporated herein by reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information on "Certain  Relationships and Related Transactions" is contained in
the Company's  Proxy Statement for its Annual Meeting of Stockholders to be held
January 14, 1999, and such information is incorporated herein by reference.

                                                         38

<PAGE>

                                                       PART IV

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                 FORM 8-K

A.  Financial Statements and Schedule II                                    Page

1. The following financial  statements are included in Item 8 of Part II 
   of this report:

      Report of Independent Public Accountants                                21

      Consolidated Financial Statements:
         Consolidated Balance Sheets as of August 31, 1998 and 1997           22
         Consolidated Statements of Operations for the years ended
            August 31, 1998, 1997, and 1996                                   24
         Consolidated Statements of Changes in Stockholders' Equity 
            for the years ended August 31, 1998, 1997, and 1996               25
         Consolidated Statements of Cash Flows for the years ended
            August 31, 1998, 1997, and 1996                                   26
         Notes to Consolidated Financial Statements for the years ended
            August 31, 1998, 1997, and 1996                                   27

2.    The following  financial statement schedule for the years ended 
         August 31, 1998, 1997, and 1996 is submitted herewith:

         Report of Independent Public Accountants on Schedule                 41
         Schedule II - Valuation and Qualifying Accounts and Reserves         42

   All other  schedules  are  omitted  because  they are not  applicable  or the
   required information is shown in the financial statements or notes thereto.

3. Exhibits

   The following exhibits are filed herewith unless otherwise indicated:

Exhibit
  No.          Description                                               

    3.1  Certificate of Incorporation of the Company.(1)

    3.2  By-laws of the Company.(1)

    4.1  Article SIXTH of the Company's Certificate of Incorporation.(1)

   10.1  The Company's Profit Sharing Plan.(1)

   10.2  The Company's Stock Option Plan.(2)

   10.3  The Company's Employee Stock Purchase Plan.(3)

   10.4  1993 Non-Employee Director Stock Option Plan.(4)

   10.5  The 1993 Stock Incentive Plan.(4)

                                                         39

<PAGE>

   10.6  The Amended and Restated Stock Option Plan.(5)

   10.7  1995 Non-Employee Director Stock Option Plan.(6)

   10.8  Employment Agreement dated March 17, 1997, between the Company and 
         Donald A. Deieso.(7)

   10.9  Lease,  dated  August 6, 1997,  between  ARE Sparks  Limited
         Partnership, as landlord, and the Company as tenant.(8)

   10.10 Lease,   dated  August  6,  1997,  between  Ecolair  Limited
         Partnership, as landlord, and the Company, as tenant.(8)

   10.11 Lease,  dated  August 6,  1997,  between  Merrymack  Limited
         Partnership, as landlord, and the Company, as tenant.(8)

   10.12 Loan Agreement,  dated August 22, 1997,  between the Company
         and First National Bank of Maryland.(8)

   13    1998 Annual Report to Stockholders.

   21    Subsidiaries of the Company.

   27    Financial Data Schedule.

   (1) Incorporated by reference to the Registrant's  Registration Statement
       on Form  S-1,  No.  33-8958,  which  was  declared  effective  by the
       Commission on October 31, 1986.

   (2) Incorporated by reference to the Company's  Registration Statement on
       Form S-8, File Number 0-15587 filed on October 15, 1990.

   (3) Incorporated by reference to the  Registrant's  Annual Report on Form
       10-K, File Number 0-15587 filed on November 28, 1990.

   (4) Incorporated by reference to the Company's  Registration Statement on
       Form S-8, File Number 0-15587 filed on April 15, 1998.

   (5) Incorporated by reference to the Company's  Registration Statement on
       Form S-8, File Number 0-15587 filed on April 15, 1998.

   (6) Incorporated by reference to the Company's  Registration Statement on
       Form S-8, File Number 0-15587 filed on April 15, 1998.

   (7) Incorporated  by reference to the  Registrant's  Quarterly  Report on
       Form 10-Q, File Number 0-15587 filed on April 18, 1997.

   (8) Incorporated by reference to the  Registrant's  Annual Report on Form
       10-K, File Number 0-15587 filed on November 17, 1997.

b.  Reports on Form 8-K

    The Company filed no reports on Form 8-K during the fourth quarter of fiscal
year 1998.

                                                         40

<PAGE>


              REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULE


To the Board of Directors and Stockholders of
EA Engineering, Science, and Technology, Inc.:


We have audited in accordance with generally  accepted auditing  standards,  the
financial  statements  of EA  Engineering,  Science,  and  Technology,  Inc. and
subsidiaries included in this Form 10-K and have issued our report thereon dated
October  30,  1998.  Our audit was made for the purpose of forming an opinion on
the basic  financial  statements  taken as a whole.  The schedule  listed in the
foregoing  index  is the  responsibility  of  the  Company's  management  and is
presented  for  purposes  of  complying   with  the   Securities   and  Exchange
Commission's  rules  and is not part of the  basic  financial  statements.  This
schedule has been subjected to the auditing  procedures applied in the audits of
the basic financial statements and, in our opinion, fairly state in all material
respects the financial  data required to be set forth therein in relation to the
basic financial statements taken as a whole.


/S/ ARTHUR ANDERSEN LLP

Baltimore, Maryland
October 30, 1998

                                                       41

<PAGE>


          EA ENGINEERING, SCIENCE, AND TECHNOLOGY, INC. & SUBSIDIARIES

          SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
                   Years Ended August 31, 1998, 1997, and 1996


      Allowance   Balance at
    for Doubtful   Beginning         Charged to                    Balance at
      Accounts     of Period      Cost and Expense  Write-offs    End of Period


          1998       $    532,000   $130,500        $ 405,300        $257,200


          1997          1,612,200    339,100        1,419,300         532,000


          1996          1,385,700    328,000          101,500       1,612,200

                                                       42

<PAGE>

SIGNATURES

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

                                       EA ENGINEERING, SCIENCE, AND
                                       TECHNOLOGY, INC.

Date: November 24, 1998                 By     /s/ Loren D. Jensen
                                          --------------------------------------
                                          Loren D. Jensen
                                          Chairman of the Board


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

<TABLE>
           Name                                   Title                                 Date



    /s/ Loren D. Jensen                   
<S>                                       <C>                                      <C> 
-------------------------------------     Chairman of the Board                    November 24, 1998
Loren D. Jensen                                                                               


    /s/ Donald A. Deieso                               
-----------------------------------       President and Chief Executive Officer    November 24, 1998
Donald A. Deieso                          (Principal Executive Officer)


   /s/ Barbara L. Posner                 
-----------------------------------       Senior Vice President,                   November 24, 1998
Barbara L. Posner                         Finance and Administration
                                          (Principal Financial Officer)


   /s/ Edmund J. Cashman, Jr.             
--------------------------------          Director                                 November 24, 1998
Edmund J. Cashman, Jr.


   /s/ Rudolph P. Lamone                  
---------------------------------         Director                                 November 24, 1998
Rudolph P. Lamone                         


   /s/ George G. Radcliffe                
----------------------------------        Director                                 November 24, 1998
George G. Radcliffe


   /s/ Cleaveland D. Miller               
----------------------------------        Director                                 November 24, 1998
Cleaveland D. Miller
</TABLE>

                                                          43

<PAGE>
                                  EXHIBIT INDEX


  Exhibit
    No.                         Description                                 Page

  3.1   Certification of Incorporation of the Company.                        39

  3.2   By-laws of the Company.                                               39

  4.1   Article SIXTH of the Company's Certificate of Incorporation.          39

 10.1   The Company's Profit Sharing Plan.                                    39

 10.2   The Company's Stock Option Plan.                                      39

 10.3   The Company's Employee Stock Purchase Plan.                           39

 10.4   1993 Non-Employee Director Stock Option Plan                          39

 10.5   The 1993 Stock Incentive Plan.                                        39

 10.6   The Amended and Restated Stock Option Plan.                           40

 10.7   1995 Non-Employee Director Stock Option Plan.                         40

 10.8   Employment Agreement dated March 17, 1997 between the Company and
        Donald A. Deieso.                                                     40

 10.9   Lease, dated August 6, 1997 between ARE Sparks Limited Partnership,
        as Landlord, and the Company as tenant.                               40

 10.10  Lease, dated August 6, 1997, between Ecolair Limited Partnership,
        as landlord, and the Company, as tenant.                              40

 10.11  Lease, dated August 6, 1997, between Merrymack Limited Partnership,
        as landlord, and the Company, as tenant.                              40

 10.12  Loan Agreement, dated August 22, 1997, between the Company and 
        First National  Bank of Maryland.                                     40

 13     1998 Annual Report to Stockholders.                                   40

 21     Subsidiaries of the Company.                                          40

 27     Financial Data Schedule                                               40


                                                          44