<PAGE>   1

================================================================================
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 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 December 31, 1998

                         Commission File Number 1-13747


                          ATLANTIC PREMIUM BRANDS, LTD.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S>                                                                     <C>       
          Delaware                                                      36-3761400

  (STATE OF INCORPORATION)                                       (I.R.S. EMPLOYER ID NO.)
</TABLE>


             650 Dundee Road, Suite 370, Northbrook, Illinois 60062
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

                                 (847) 480-4000
              (REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

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

     Title of Each Class               Name of Each Exchange on Which Registered
----------------------------           -----------------------------------------
Common Stock, $.01 par value                     American Stock Exchange

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

    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. [ ]

    The aggregate market value of the registrant's voting stock held by
non-affiliates of the registrant, based upon the last reported closing price of
the registrant's Common Stock on March 24, 1999: $18,994,744

         The number of shares outstanding of the registrant's Common Stock, par
value $.01, as of March 24, 1999: 7,412,583

                       DOCUMENTS INCORPORATED BY REFERENCE

Certain sections of the registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on May 19, 1999 are incorporated by reference into Part
III of this report.

================================================================================
<PAGE>   2

                                     PART I

ITEM 1.  BUSINESS

RECENT DEVELOPMENTS

         Atlantic Premium Brands, Ltd. (the "Company") has completed the sale of
substantially all the assets of its beverage division. The operations of the
beverage division consisted of the wholesale purchasing, marketing and
distribution of nonalcoholic beverages to retail trade accounts in the greater
Baltimore and Washington D.C. metropolitan areas.

         The disposition of the beverage division's distribution rights and
inventories for the Mistic(R), Stewart's(R) and AriZona(TM) brands, along with
certain other related assets, occurred in two stages on December 1, 1998 and
January 11, 1999. The purchaser of these assets was Canada Dry Potomac
Corporation. The remaining accounts receivable and inventory, and substantially
all the remaining furniture and equipment of the beverage division, were sold to
Master Distributors, Inc. on February 2, 1999.

         The consideration received by the Company from these transactions
totaled approximately $3.5 million and consisted of approximately $3.1 million
in cash, a promissory note payable to the Company for $0.26 million and the
assumption by the purchasers of approximately $0.14 million in liabilities and
obligations of the beverage division.

         As a result of the disposition of the Company's beverage division, the
Company's operations now consist solely of its food manufacturing and
distribution businesses. Therefore, the description of the Company set forth
below in this Item 1 focuses on the Company's food manufacturing and
distribution operations.

GENERAL
         The Company, through its subsidiaries' operations in Texas, Louisiana,
Kentucky and Oklahoma, manufactures, markets and distributes branded and
unbranded food products for customers in a twelve state region.

         Through its Prefco subsidiary, the Company is engaged in the marketing
and distribution of branded and unbranded meats to the retail grocery trade. The
Company markets and distributes its branded meat products under the brand name
Blue Ribbon(R) and Blue Ribbon Texas Traditions. These products, which include
ready to eat entrees, smoked sausages, bacon and packaged, sliced luncheon
meats, account for approximately 16% of the sales of Prefco and are manufactured
by the Company's Carlton subsidiary as well as by third party contract
manufacturing companies. Blue Ribbon is currently the best selling brand of
bacon in the Houston market. In addition to marketing its own branded products,
the Company is also a leading regional distributor of unbranded products
including boxed beef, pork, chicken and related items.

         Through its Carlton subsidiary, the Company manufactures a variety of
smoked sausage products. Approximately 46% of the total volume manufactured is
sold through the Prefco subsidiary under the Blue Ribbon brand name.
Approximately 43% of total volume manufactured reflects private label products
manufactured for other regional sausage brands and selected chain supermarket
house brands, and approximately 11% of total volume manufactured is sold by the
Carlton subsidiary under the brand names Carlton and Country Boy(TM). These
branded products are marketed on a regional basis, principally in south and west
Texas.



                                       2
<PAGE>   3
         Through its Richards subsidiary, the Company manufactures, markets and
distributes Cajun-style, cooked, pork sausage products and specialty foods for
customers in Louisiana under the brand name Richard's(TM) and Richard's Cajun
Favorites.

         Through its Grogan's subsidiary, the Company manufactures, markets and
distributes fresh pork sausage products for customers in a six state region.
These products are sold under the brand names Grogan's Farm(TM) and Partin's
Country Sausage(TM).

         Through its Potter subsidiary, the Company manufactures, markets and
distributes premium, branded breakfast sausage, primarily in Oklahoma, Arkansas
and Texas. These products are sold under the J.C. Potter brand name and are
generally delivered to the retail grocery trade through its own distribution
system. In addition, the Company's Potter subsidiary manufactures products for
other branded food companies on a private-label basis. The Potter subsidiary is
a supplier to the Company's Prefco subsidiary and a customer of its Carlton
subsidiary.

                                CORPORATE HISTORY

         In April 1991, MB Acquisition Corp. ("MB Acquisition"), a corporation
owned by a group of individuals including the Company's Chairman of the Board
and certain of the Company's directors and stockholders, acquired the business
of the Company from a company now known as S&B Ventures, Inc. (the
"Predecessor") for a purchase price of $1,158,000 (the "Acquisition"). In
connection with the Acquisition, MB Acquisition also assumed certain obligations
to pay the owners of the Predecessor $2,000,000 pursuant to a non-compete
agreement and $829,000 pursuant to consulting agreements. MB Acquisition
financed the Acquisition through a bridge loan provided by nine of its current
stockholders, including an officer and certain directors. In September 1991,
Maryland Beverage, L.P. (the "Partnership") was formed with the Company and
Strategic Investment Corporation ("Strategic"), a wholly owned subsidiary of T.
Rowe Price Strategic Partners Fund, L.P., as its sole partners, and MB
Acquisition was merged with and into the Company, and its assets and liabilities
were contributed to the Partnership. In September 1993 the Company was
reincorporated in Delaware and adopted the name "Atlantic Beverage Company,
Inc." In November 1993, in connection with the Company's initial public
offering, Strategic (whose only asset was its partnership interest in the
Partnership) merged with and into the Company. Subsequently, the Partnership was
dissolved and the Company succeeded to the Partnership's assets and liabilities.

         On April 27, 1994, the Company entered into and consummated an
agreement to acquire certain assets and marketing rights from Flying Fruit
Fantasy, USA, Inc. ("FF") for total consideration of approximately $1.2 million.
Under the terms of this agreement, the Company obtained worldwide marketing and
distribution rights to a frozen beverage served through automated dispensing
machines. In December 1995, the Company adopted a plan to discontinue this
business. 

         In the first quarter of 1996, a newly formed, wholly-owned subsidiary
of the Company acquired the outstanding common stock of Prefco, Inc. ("Prefco").
Prefco, based in Houston, Texas, markets and distributes its own branded meat
products as well as unbranded meat products to the retail grocery trade in
Texas. Also in the first quarter of 1996, Carlton Foods, Inc. ("Carlton") was
merged into another newly formed, wholly-owned subsidiary of the Company.
Carlton, based in New Braunfels, Texas, is a manufacturer of branded and private
label meat products. The combined purchase price for these entities 





                                       3
<PAGE>   4
was approximately $11 million, which included approximately $3.0 million in
Carlton refinanced and assumed debt.

         In August 1996, a newly formed, wholly-owned subsidiary of the Company
acquired certain of the assets of Richard's Cajun Country Food Processors
("Richards"). Richards, based in Church Point, Louisiana, is engaged in the
manufacturing, marketing and distribution of Cajun-style processed meat and
specialty food products. The consideration for these assets was $2.5 million
cash and a subordinated promissory note in the amount of $0.875 million (the
"Richards Note").

         In October 1996, Grogan's Merger Corp. ("GMC"), a newly formed,
wholly-owned subsidiary of the Company, acquired and merged with the
distribution and manufacturing business of Grogan's Sausage, Inc. and Grogan's
Farm, Inc. respectively (collectively "Grogan's"), based in Arlington, Kentucky
for total consideration of approximately $3.8 million, consisting of $1.9
million cash, a $0.2 million note (the "Grogan's Note") and 573,810 shares
(approximately $1.7 million) of common stock of the Company.

         In November 1996, GMC acquired the assets of Partin's Sausage
("Partin's") for consideration of $0.4 million cash, a $0.225 million note
(the "Partin's Note"), and 78,310 shares of common stock of the Company.
Partin's, based in Cunningham, Kentucky, is engaged in the manufacturing,
marketing and distribution of pork sausage products.

         In March 1998, the Company and Potter Sausage Co., a newly-formed
subsidiary, acquired substantially all of the assets of J.C. Potter Sausage
Company ("Potter"), a branded food processing company based in Durant, Oklahoma,
for consideration of $13.0 million in cash, assumed liabilities and related
transaction costs.

         As discussed above under the caption "Recent Developments," the Company
recently disposed of its beverage division for consideration of $3.5 million and
has classified the beverage division, as a discontinued operation in the
consolidated financial statements included elsewhere herein.

                                    INDUSTRY

         Following the disposition of its beverage division, the Company's
operations consist of two business segments: food processing and food
distribution. Note 16 to the Company's Consolidated Financial Statements
provides summarized financial information by business segment for continuing
operations for the last three fiscal years. The Company participates in these
two segments of the food industry through its Carlton, Prefco, Richards,
Grogan's and Potter subsidiaries.

         The food processing segment which includes cooking, slicing, mixing, 
grinding and similar functions is generally capital intensive. Unbranded raw
material typically comes from packing companies. In some instances, in the
packaged meat industry, packing and processing are vertically integrated. In
other instances, as is the case with the Company, processing and marketing are
vertically integrated. Because of the cost of transportation and limited shelf
life for the products, processing facilities tend to serve a regional clientele.
Large national meat companies therefore tend to establish strategically located
processing facilities in different geographic regions.

         The food distribution segment which serves several different classes of
customers including retail, restaurant and institutional customers, is generally
not capital intensive but provides lower gross margins and is subject to
intense price competition. Product is generally invoiced and priced according to
weight.




                                       4
<PAGE>   5
Successful distributors typically distinguish themselves through customer
service and low cost position. Price, product selection, reliability, in-stock
rate, promptness of delivery and weekend delivery options are among the benefits
which are most highly valued. It is not uncommon for a grocery retailer to have
one primary supplier in addition to one or more secondary suppliers. Food
distribution companies typically serve a local or regional clientele.

         The branded packaged meat business is generally not capital intensive.
Strong retail brands exist at local, regional or national levels and include
bacon, hot dogs, cooked and uncooked sausage, cooked hams, chicken and turkey
products. Advertising and promotion is generally critical to the maintenance of
brand equity. Companies which market branded meat products can exist on a
stand-alone basis as well as be vertically integrated with processing and/or
distribution. The Company reflects, to a limited extent, both forms of vertical
integration.

                                    STRATEGY

         Operating Strategy. The Company's operating strategy is to grow its
food businesses profitably, while identifying and exploiting synergies among
them. Key elements of this operating strategy include increasing sales to
existing customers, adding new customers, and identifying opportunities to add
new products.

         Corporate Growth Strategy. The Company has identified potential
strategies that will use the combination of its food subsidiaries as a platform
for additional corporate growth. These potential strategies may include
acquisition opportunities that complement the subsidiaries' businesses.

                                    PRODUCTS

         Through its Prefco subsidiary, the Company distributes a wide variety
of unbranded, boxed meat products. The Company maintains an inventory of over
200 different stock keeping units of unbranded product, which include beef,
turkey, pork and chicken. Product is stored in the Company's refrigerated
warehouses in Houston and is delivered on refrigerated vehicles to several
hundred customers including chain and independent supermarkets and discount
clubs. The Company purchases product from approximately one dozen meat packing
companies. Purchases of the same product may be spread among several suppliers
over the course of a year, and purchasing decisions are frequently driven by
price and availability, both of which are likely to vary. Three suppliers
accounted for approximately 21.6%, 15.6% and 10.8% of the Company's boxed meat
purchases during 1998 and 9%, 8% and 8% of such purchases during 1997. No other
supplier accounted for more than 10% of such purchases during either year.

         Also through its Prefco subsidiary, the Company markets and distributes
its own branded dinner entrees, sausage, bacon and packaged, sliced luncheon
meats. These products are stored in the Company's refrigerated warehouses in
Houston. Product is delivered on the Company's refrigerated trucks, and
customers typically include the same retail establishments that purchase the
Company's unbranded meat products. The majority of Blue Ribbon(R) sausage
product is manufactured by the Company's Carlton and Grogan's subsidiaries. The
balance of the sausage product as well as the dinner entrees, bacon and luncheon
meats are purchased from a number of other contract food processing companies.

         In addition to manufacturing product for the Prefco subsidiary, the
Company's Carlton subsidiary manufactures, markets and distributes its own
branded smoked sausage products for the retail grocery trade. The Carlton
subsidiary manufactures similar products on a private label basis for other
branded food companies.



                                       5
<PAGE>   6

         Through its Richards subsidiary, the Company manufactures, markets and
distributes Cajun-style, cooked pork sausage products and specialty foods for
customers in the state of Louisiana under the brand names of  Richards(TM) and
Richards Cajun Favorites.

         Through its Grogan's subsidiary, the Company manufactures, markets and
distributes fresh pork sausage products for customers in a six state region.
These products are sold under the brand names Grogan's(TM) and Partin's(TM).

         Through its Potter subsidiary, the Company manufactures, markets and
distributes premium, branded breakfast sausage, primarily in Oklahoma, Arkansas
and Texas. These products are sold under the J.C. Potter brand name and are
generally delivered to the retail grocery trade through its own distribution
system. In addition, the Company's Potter subsidiary manufactures products for
other branded food companies on a private-label basis. The Potter subsidiary is
a supplier to the Company's Prefco subsidiary and a customer of its Carlton
subsidiary.

                        SALES, MARKETING AND DISTRIBUTION

         The Company's Prefco subsidiary distributes unbranded boxed beef, pork,
and poultry to chain and independent retail grocery customers, most of whom are
located in the Houston metropolitan area, and all of whom are within a 400-mile
radius of the Company's distribution facilities. The Company serves several
hundred such customers as either their primary or secondary fresh meat supplier.
Prefco's direct sales force contacts its customers on a daily basis. The Company
delivers product using refrigerated trucks, generally within one to three days
of receiving an order.

         The Company's Prefco subsidiary also markets and distributes its own
Blue Ribbon(R) and Blue Ribbon Texas Traditions dinner entrees, bacon, sausage
and sliced luncheon meats to the retail grocery trade. Orders are received by
the direct sales force and from the sales force managing the route sales
vehicles. The business has historically engaged in significant radio and
television advertising in the Houston market.

         The Company's Carlton subsidiary solicits and receives customer orders
for branded product through direct salespeople as well as through third-party
food brokers and by telephone and facsimile transmission. Relationships with
private label customers are generally established at the senior management
level, although recurring orders from such customers are normally received over
the telephone or facsimile machine by clerical staff. Branded and private label
orders are generally filled within one to seven days and are either delivered on
one of the Carlton subsidiary's refrigerated vehicles, by common carrier, or are
picked up by customers.

         The Company's Richards subsidiary employs a route delivery sales force.
Orders are taken by the route salespeople and filled immediately from stock on
board the route sales trucks. The subsidiary engages in promotions, including
in-store sampling, as well as in print advertising. All customers are located
within the state of Louisiana.

         The Company's Grogan's subsidiary employs a route delivery sales force.
Orders are taken by the route salespeople and filled immediately from stock
onboard the route sales trucks. In addition, the subsidiary sells approximately
30% of its product to third party distributors. The Company engages in
promotions, including in-store sampling, as well as in print, radio and
television advertising. Customers are located in Kentucky, Illinois, Indiana,
Mississippi, Tennessee, and Arkansas.



                                       6
<PAGE>   7

         The Company's Potter subsidiary employs a route delivery sales force.
Orders are taken by the route salespeople and filled immediately from stock on
board the route sales trucks. In addition, the subsidiary sells approximately
47% of its product to third party distributors. The Company engages in
promotions, including in-store sampling, as well as in print, radio and
television advertising. Customers are located in Arkansas, Oklahoma and Texas.

         One food distribution customer, Sam's Club Inc., accounted for
approximately 47% and 43% of the Company's total net sales during 1997 and 1998,
respectively. No other customer accounted for more than 10% of total net sales
during either year.

                                ASSET MANAGEMENT

         Accounts Receivable. Sales are made almost exclusively on account, and
accounts receivable typically average 15 to 20 days.

         Inventory. The Company maintains its inventory at the manufacturing
facilities operated by its Carlton subsidiary in New Braunfels, Texas, by its
Richards subsidiary in Church Point, Louisiana, by its Grogan's facility in
Arlington, Kentucky, by its Potter subsidiary in Durant, Oklahoma and Malvern,
Arkansas and at two distribution facilities operated by its Prefco subsidiary in
Houston, Texas. The Company generally maintains an average of eight to ten days
of inventory on hand which reflects approximately six to eight days of inventory
at its Prefco subsidiary, approximately 30 days of inventory at its Carlton,
Richards and Grogan's subsidiaries and approximately 15 days of inventory at its
Potter subsidiary. The Company typically places purchase orders to its suppliers
by telephone and by facsimile on a daily basis. Orders are placed both on an
as-needed basis and on a scheduled basis in anticipation of future demand.
Orders are usually filled within one to ten days, and products are transported
to the Company's warehouses by common carrier.

                                   COMPETITION

         Food Distribution. Through its Prefco subsidiary, the Company
believes that it is the second largest of four major fresh meat distributors in
the Houston market. Although this segment of the food industry is extremely
competitive, the Company believes it has generally succeeded in distinguishing
itself through a high level of customer service.

         Food Processing. Through its Potter, Prefco, Carlton, Richards and
Grogan's subsidiaries, the Company competes with several branded meat companies,
and its brands compete with a wide variety of both regional and national brands.
Among the competitive brands are Decker, J. Bar B., Hilshire Farms, Hormel,
Bryan, Bob Evans and Jimmy Dean. The Company's Carlton(TM) and Country Boy(TM)
brands of smoked sausage are sold principally in the Dallas, San Antonio and
Austin markets and currently have limited market share. The Company's Blue
Ribbon(R) brand currently represents the best selling brand of bacon in the
Houston market. The Company's packaged, sliced luncheon meats and entrees were
introduced to the Houston market in 1995 and 1998, respectively, and currently
have limited market share. The Company's Richards(TM), Richards Cajun
Favorites,Grogan's(TM) and Partin's(TM) brands enjoy a strong regional share
within their respective markets. Through its Carlton and Potter subsidiaries,
the Company manufactures smoked sausage and meat products on a private label
basis for other branded food companies and, on a limited basis, for supermarkets
and restaurants. The Company believes that it enjoys a strong reputation for
innovation and responsiveness in creating original recipes for such customers.
The Company competes 





                                       7
<PAGE>   8

with a wide variety of manufacturers, many of whom are significantly larger and
may have greater manufacturing capacity and capital.

                              GOVERNMENT REGULATION

         The Company is subject to various federal, state and local statutes,
including federal occupational safety and health laws. Furthermore, the Company
and its suppliers are subject to various rules and regulations including those
of the United States Department of Agriculture, the United States Food and Drug
Administration and similar state agencies that relate to manufacturing,
nutritional disclosure, labeling requirements and product names.

                         PRODUCT LIABILITY AND INSURANCE

         The Company believes that its present insurance coverage is sufficient
for its current level of business operations, although there is no assurance
that the present level of coverage will be available in the future or at a
reasonable cost. Further, there can be no assurance that such insurance will be
available in the future as the Company expands its operations, that insurance,
if available, will be sufficient to cover one or more large claims, or that the
applicable insurer will be solvent at the time of any covered loss.

                                    EMPLOYEES

         The Company currently has approximately 60 employees in its Prefco
subsidiary, approximately 70 employees in its Carlton subsidiary, approximately
60 employees in its Richards subsidiary, approximately 50 employees in its
Grogan's subsidiary and approximately 225 employees in its Potter subsidiary.
The Company uses temporary employees from time to time.

         The Company believes that its relations with employees are good. The
Company has never suffered a material work stoppage or slow down.




                                       8
<PAGE>   9


ITEM 2.  PROPERTIES

         Prefco Subsidiary. The Company leases a 30,000 square foot refrigerated
warehouse in Houston. The lease for this facility expires November 1999. In
addition to the foregoing, the subsidiary also leases a 5,000 square foot office
facility, the lease for which expires Sept. 30, 2000, with a three-year renewal
option.

         Carlton Subsidiary. The Company leases a 20,000 square foot
manufacturing facility and a 2,000 square foot office facility in New Braunfels,
Texas. The lease on the manufacturing facility expires in September 2000, with
two five-year renewal options, and the lease on the office facility expires in
October 1999.

         Richards Subsidiary. The Company owns a 12,500 square foot
manufacturing facility in Church Point, Louisiana.

         Grogan's Subsidiary. The Company owns an 11,000 square foot
manufacturing facility in Arlington, Kentucky.

         Potter Subsidiary. The Company owns a 120,000 square foot rendering,
processing, distribution, warehouse and administrative facility in Durant,
Oklahoma. In addition, the Company owns a 6,800 square foot distribution
facility in Malvern, Arkansas.


ITEM 3.  LEGAL PROCEEDINGS
         None.




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<PAGE>   10

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 of 1998.


                      EXECUTIVE OFFICERS OF THE REGISTRANT

<TABLE>
<CAPTION>


                            AGE OF
     NAME OF OFFICER        OFFICER        OFFICES HELD AND BUSINESS EXPERIENCE FOR LAST FIVE YEARS
--------------------------  ------- --------------------------------------------------------------------------------
<S>                           <C>   <C>   
Merrick M. Elfman             40    Chairman since July 1996 and a Director since 1993.  Mr. Elfman is Chairman of
                                    Gray Supply Company, Inc., a privately-held distributor of specialty lighting
                                    products, and Carlton Foods, which is now a subsidiary of the Company,
                                    Vice-Chairman of International Collectors Society LP, a privately-held
                                    collectibles company, and a director of Becker Group, Ltd., a privately-held
                                    company in the mall decorations business. Mr. Elfman is the founder of Elfman
                                    Venture Partners, Inc., a private investment firm of which he has been
                                    President since 1987.

Alan F. Sussna                42    Director, President and Chief Executive Officer since March 1996. Mr. Sussna
                                    is also a director of International Collectors Society LP, a privately-held
                                    collectibles company, and Becker Group, Ltd., a privately-held company in the
                                    mall decorations business, positions he has held since June 1998 and December
                                    1998, respectively.  From October 1991 through October 1995, Mr. Sussna was a
                                    director of Bain & Company, a consulting firm. Through his association with
                                    Bain & Company and as a partner in the consulting firm of McKinsey & Company,
                                    he has opened offices as well as led those firms' Consumer Goods practices.
                                    Mr. Sussna has also held industry positions as Executive Vice President--
                                    Sales and Marketing for Jim Beam Brands and in product management at
                                    Frito-Lay, Inc.

Thomas M. Dalton              50    Senior Vice President and Chief Financial Officer since April 1998. Mr. Dalton
                                    served as Executive Vice President and Chief Financial Officer of the
                                    Richelieu Group in 1993 and 1994, and SNA Inc. from 1994 through 1998, and has
                                    been a director of Duo-Fast Corporation since 1998.

Steve Englander               43    Chief Marketing Officer since August 1998.  Prior to his employment with the
                                    Company, Mr. Englander was Vice President of Marketing with Morningstar Foods,
                                    a position he held from September 1995 through March 1998.  From September
                                    1991 through June 1995, he was Vice President of Marketing and Sales at Eagle
                                    Snacks, a division of Anheuser Busch.


</TABLE>
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<PAGE>   11
                                     PART II

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

         Since December 31, 1997, the Company's Common Stock has been
principally traded on the American Stock Exchange ("AMEX") under the symbol
"ABR." Prior to December 31, 1997, the Company's Common Stock was principally
traded on the NASDAQ SmallCap Market under the symbol "ABEV." The following
table sets forth, for the periods indicated, the high and low sales prices of
the Company's Common Stock as reported by AMEX or NASDAQ, as applicable.

<TABLE>
<CAPTION>

=============================================================================================================
                    STOCK PRICES                                         STOCK PRICES
=============================================================================================================
                              High           Low                                   High            Low
=============================================================================================================
1997                                                  1998
=============================================================================================================
<S>                       <C>             <C>         <C>                     <C>            <C>
1st Quarter               4 1/8           2 7/8       1st Quarter              3 7/8          2 15/16
=============================================================================================================
2nd Quarter               4               3 3/8       2nd Quarter              3 1/2          2
=============================================================================================================
3rd Quarter               3 3/4           2 1/2       3rd Quarter              3 1/8          2 1/4
=============================================================================================================
4th Quarter               4 1/2           3 1/8       4th Quarter              2 7/8          1 7/8
=============================================================================================================
</TABLE>

         As of March 24, 1999, there were approximately 155 shareholders of
record of the Company's Common Stock. The Company has not paid any cash
dividends since its initial public offering. The Company anticipates that
earnings, if any, will be retained for use in the business or for other
corporate purposes, and it is not anticipated that any cash dividends on the
Common Stock will be paid in the foreseeable future.





                                       11
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ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

         The following selected financial data for the Company is based on the
consolidated financial statements of the Company. The Company's financial
statements as of December 31, 1997 and 1998 and for each of the years in the
three-year period ended December 31, 1998, including the notes thereto and the
related reports of KPMG LLP, and Arthur Andersen LLP, independent certified
public accountants, are included elsewhere herein.

         The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the financial statements of the Company contained elsewhere
herein.


<TABLE>
<CAPTION>
                                                              (IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
                                                                        YEARS ENDED DECEMBER 31,
                                                            1994         1995        1996         1997        1998
                                                            ----         ----        -----        -----       ----

<S>                                                          <C>      <C>         <C>         <C>          <C>
Income Statement Data
Net sales                                                    $  --    $    --    $ 133,878    $ 151,049    $ 180,818
Income from continuing operations                               --         --          440          434        1,819
Income (loss) from discontinued operations,
   including loss on disposal                                  (38)    (3,091)         455          (77)      (1,301)
Net income (loss)                                              (38)    (3,091)         896          357          324
Basic income per common share from continuing operations        --         --         0.08         0.06         0.25
Diluted income per common share from continuing operations      --         --         0.08         0.06         0.24
Basic and diluted net income (loss) per common share         (0.02)     (1.23)        0.17         0.05         0.04
--------------------------------------------------------------------------------------------------------------------
Balance Sheet Data
Total assets                                               $ 4,072      1,320       32,823       33,245       45,665
Long-term obligations                                           --         --          --         6,270       18,514

</TABLE>

During the fourth quarter of 1998, the Company decided to dispose of its
beverage division. The beverage division has been treated as a discontinued
operation and prior years' financial statements have been restated. In 1994 and
1995, the Company consisted solely of the beverage division.

                                       12
<PAGE>   13

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

GENERAL

         In 1996 the Company implemented a new corporate strategy that resulted
in the acquisition of five food businesses. Each of these businesses represented
a preeminent local or regional branded processed meat company. In addition to
significantly increasing the Company's size, the newly acquired businesses
created a broader platform for future growth.

         In order to acquire and operate its food businesses, the Company formed
four new subsidiaries during 1996: Prefco Corp., Carlton Foods Corp., Richards
Cajun Foods Corp., and Grogan's Farm, Inc. In 1998, the Company formed a fifth
new subsidiary, Potter Sausage Co., to acquire the business of J.C. Potter
Sausage Company and affiliates.

         In conjunction with the new corporate strategy, during 1998 the Company
completed the sale of substantially all the assets of its beverage division,
which operated as a distributor of non-alcoholic beverages in the Baltimore and
Washington D.C. metropolitan areas. The disposition occurred in three
transactions on December 1, 1998, January 11, 1999 and February 2, 1999.

RESULTS OF OPERATIONS

         All of the acquisitions in 1996 and 1998  were recorded utilizing the
purchase method of accounting. Therefore, results of the acquired businesses
prior to the effective date of such acquisitions are not included in the
Company's results of operations. The beverage division has been accounted for as
a discontinued operation and prior years' financial statements have been
restated. The discussion of results of operations below excludes the results of
the beverage division.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

         Net Sales. Net sales increased by $29.8 million or 19.7% from $151.0
million for the year ended December 31, 1997 to $180.8 million for the year
ended December 31, 1998. The increase in net sales was primarily due to the
impact of the acquisition of Potter, which increased net sales for 1998 by $26.4
million. The remainder of the increase relates primarily to the introduction of
new branded product lines.

         Gross Profit. Gross profit increased by $10.5 million or 78.3% from 
$13.4 million for the year ended December 31, 1997 to $23.9 million for the year
ended December 31, 1998. Gross profit as a percentage of net sales increased
from 8.9% for the year ended December 31, 1997 to 13.0% for the year ended
December 31, 1998. These increases primarily reflect the impact of acquisitions
and the availability of certain of the Company's raw materials at prices below
those paid in 1997. Hog prices have a significant impact on the Company's cost
of goods sold and lower hog prices during 1998 favorably impacted gross profit 
as compared to 1997.



                                       13
<PAGE>   14

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $8.0 million or 67.9% from $11.8
million for the year ended December 31, 1997 to $19.8 million for the year ended
December 31, 1998. As a percentage of net sales, selling, general and
administrative expenses increased from 7.8% to 10.9%. This increase was
primarily attributable to a larger percentage of branded product sales in 1998,
which generally require higher selling, general and administrative expenses per
dollar of sales, primarily related to increased advertising support.

         Income from Operations. Income from operations increased $2.6 million
from $1.6 million for the year ended December 31, 1997 to approximately $4.2
million for the year ended December 31, 1998. This increase is attributable to
the factors discussed above.

         Interest Expense. Interest expense increased $0.7 million from $1.5
million for the year ended December 31, 1997 to $2.2 million for the year ended
December 31, 1998. This increase was primarily attributable to increased levels
of debt (and the related amortization of deferred financing costs and debt
discounts) that were necessary to finance the acquisition of Potter. 

         Warrants with a put option were issued by the Company in conjunction
with the debt incurred at the time of the Potter acquisition. The Company is
required to accrete the value of the warrants and mark-to-market the estimated
fair value of the put option. Any increases to such value are charged to
earnings as additional interest expense. To the extent of any charges to
earnings, any subsequent decreases to the value of the warrants are added to
earnings as additional interest income. Furthermore, any such additional
interest expense would not be deductible in the Company's federal or state
income tax returns and, therefore, would increase the effective income tax rate
of the Company. For purposes of these calculations, the fair value of the
warrants was estimated using a Black-Scholes option pricing model. During the
year ended December 31, 1998, the Company recorded no additional interest
expense due to the decrease in the estimated fair value of the warrants.


                                       14
<PAGE>   15

         Income from Continuing Operations. Income from continuing operations 
increased $1.8 million from $0.5 million for the year ended December 31, 1997 to
$2.3 million for the year ended December 31, 1998. This increase reflects the
factors discussed above.


         Income Tax (Expense)Benefit. The effective tax rate differs from the 
statutory rate primarily because of state income taxes, the non-deductibility of
goodwill amortization and the reduction of the valuation allowance of $226,000
and $462,500 in 1997 and 1998, respectively.


         Extraordinary Item. During the year ended December 31, 1998 the Company
recorded a one-time extraordinary loss of $0.3 million resulting from the early
extinguishment of debt and the write-off of the related unamortized deferred
financing costs that occurred at the time the Company's debt facilities were
refinanced. This extraordinary expense was recorded net of the related tax
benefit of $0.1 million.


YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

         Net Sales. Net sales increased by $17.1 million or 12.8% from $133.9
million for the year ended December 31, 1996 to $151.0 million for the year
ended December 31, 1997. The increase in sales reflected increases in the sales
of both Carlton and Prefco. In addition, approximately $8 million of the sales
increase was attributable to a full year of operations for Richards, which the
Company acquired in August 1996, and Grogan's and Partin's, which the Company
acquired during the fourth quarter of 1996. 

         Gross Profit. Gross profit increased by $2.1 million or 18.5% from
$11.3 million for the year ended December 31, 1996 to $13.4 million for the year
ended December 31, 1997. This increase reflects the factors discussed above in
Net Sales.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $1.5 million or 14.6% from $10.3 million for
the year ended December 31, 1996 to $11.8 million for the year ended December
31, 1997. This increase is attributable primarily to the factors discussed above
in Net Sales.


                                       15
<PAGE>   16
         As a percentage of net sales, selling, general and administrative
expenses increased from 7.7% to 7.8%. This increase is primarily attributable to
an increasing proportion of branded product sales, which generally require
higher selling, general and administrative expenses per sales dollar.

         Income from Operations. Income from operations increased $0.6 million
from $1.0 million for the year ended December 31, 1996 to $1.6 million for the
year ended December 31, 1997. This increase is attributable to factors discussed
above.

         Interest Expense. Interest expense increased $0.4 million from $1.1
million for the year ended December 31, 1996 to $1.5 million for the year ended
December 31, 1997. This increase was primarily attributable to debt that the
Company incurred (and the related amortization of deferred financing costs and
note discounts) in connection with the acquisitions of Richards, Grogan's and
Partin's.

         Income From Continuing Operations. Income from continuing operations
was $0.4 million in both the year ended December 31, 1996 and the year ended
December 31, 1997.

         Income Tax (Expense) Benefit. The effective tax rate differs from the
statutory rate primarily because of state income taxes, the non-deductibility of
goodwill amortization and the reduction of the valuation allowance of $460,000
and $226,000 in 1997 and 1998, respectively.

LIQUIDITY AND CAPITAL RESOURCES

         Cash used in operating activities for the year ended December 31, 1996
was $2.3 million. An increase in accounts receivable and decrease in accounts
payable were the primary factors contributing to the use of cash in operating
activities, which was offset by income from continuing operations and
depreciation and amortization. For the year ended December 31, 1997, cash
provided by operating activities was $5.2 million. The cash generated from
operating activities was primarily the result of income from continuing
operations, depreciation and amortization, decreases in accounts receivable and
increases in accounts payable, partially offset by an increase in inventory. Net
cash provided by operating activities for the year ended December 31, 1998 was
$3.9 million. This amount was principally the result of income from continuing
operations, depreciation and amortization and increases in accrued expenses,
partially offset by increases in accounts receivable and decreases in accounts
payable.

         During the years ended December 31, 1996 and 1997, cash used in
investing activities of $9.6 million and $0.8 million, respectively, was
primarily related to capital expenditures and acquisitions. Cash of $11.8
million was used in investing activities during the year ended December 31,
1998, principally as a result of capital expenditures and cash paid for the
acquisition of Potter.

         Cash provided by financing activities was $13.5 million for the year
ended December 31, 1996. During 1996, borrowings under the line of credit and
other term debt and notes payable, along with cash received from the issuance
related to these debt agreements. During the year ended December 31, 1997, cash
used in financing activities was $1.8 million, primarily related to the decrease
in the Company's bank overdraft and payments under term debt and notes payable,
offset by cash received from the issuance of common stock. Cash provided by
financing activities of $8.9 million for the year ended December 31, 1998 was
principally affected by the borrowings under the term debt and notes payable to
finance the acquisition of Potter and an increase in the bank overdraft. These
amounts were partially offset by payments of term debt and notes payable under
the line of credit.


                                       16
<PAGE>   17
         In the first quarter of 1998, the Company acquired substantially all of
the assets of Potter, a branded food processing company located in Durant,
Oklahoma in consideration for approximately $13.0 million cash, assumed
liabilities and related transaction costs. In connection with this acquisition,
the Company borrowed approximately $6.5 million in senior subordinated debt from
Banc One Capital Corporation ("Senior Subordinated Debt"). This Senior
Subordinated Debt included detachable common stock warrants with a put option.
The Company also refinanced its line of credit and term debt through Fleet
Capital ("Fleet Facility"). The Fleet Facility provided a line of credit balance
as of March 31, 1998, of approximately $7 million, which was $0.4 million
greater than the balance previously outstanding under the existing line of
credit facility.

         As of December 31, 1998, the Company had outstanding under the Fleet
Facility approximately $10.3 million in term debt and approximately $1.6 million
in line of credit borrowings. The Company owed $6.5 million to Banc One under
the Senior Subordinated Debt, and approximately $2.7 million of subordinated
debt to former owners of Prefco, Richards, Grogan's and Partin's. The Senior
Subordinated Debt bears interest at 10% per annum. The subordinated debt owed to
former owners bears interest at an average rate of approximately 7.7% per annum.
The term debt and line of credit agreement under the Fleet Facility bear annual
interest at either the bank's prime rate plus 1% (9.00% at December 31, 1998) or
adjusted LIBOR plus 2.5%, at the Company's option.

         Warrants issued in conjunction with the Senior Subordinated Debt
provide that on the occurrence of a Put Trigger Event (defined below), if the
average trading volume of the Company's stock for four consecutive weeks is less
than 15% of the number of shares issuable to the holder of the put warrants,
such holders would have a thirty day right to require the Company to redeem the
warrants for a cash amount equal to the greater of a cash flow formula (defined
in the Warrant Agreement) or the fair market value of the underlying shares
based upon an appraisal, in each case, net of an exercise price of $3.38 per
share. For these purposes, a "Put Trigger Event" would occur upon the earlier of
certain events, including the fifth anniversary of the warrants, a sale of all
or substantially all of the assets of the Company, or a business combination in
which the Company is not the surviving corporation.

         If the holder of the warrants exercises the put option, the Company's
ability to satisfy such obligation will depend on its ability to raise
additional capital. The Company's ability to secure additional capital at such
time will depend upon the company's overall operating performance, which will be
subject to general business, financial, competitive and other factors affecting
the Company and either the processed meat distribution industry certain of which
factors are beyond the control of the Company. No assurance can be given that
the Company will be able to raise the necessary capital on terms acceptable to
the Company, if at all, to satisfy the put obligation in a timely manner. If the
Company is unable to satisfy such obligation, the Company's business, financial
condition and operations will be materially and adversely effected.

         As of December 31, 1998, the Company believes that cash generated from
operations and bank borrowings will be sufficient to fund its debt service,
working capital requirements and capital expenditures as currently contemplated
for 1999. However, the Company's ability to fund its working capital
requirements and capital expenditures will depend in large part on the Company's
ability to continue to comply with covenants in the Fleet Facility. The
Company's ability to continue to comply with the covenants in the Fleet Facility
will depend on a number of factors, certain of which are beyond the Company's
control, including but not limited to, successful integration of acquired
businesses and implementation of its business strategy, prevailing economic
conditions, uncertainty as to evolving consumer preferences, sensitivity to such
factors as weather and raw material costs, the impact of competition and the
effect of each of these factors on its future operating performance. No
assurance can be given that the Company will remain in compliance with such
covenants throughout the term of the Fleet Facility.

         The Company, from time to time, reviews the possible acquisition of
other products or businesses. The Company's ability to expand successfully
through acquisition depends on many factors, including the successful
identification and acquisition of products or businesses and the Company's
ability to integrate and operate the acquired products or businesses
successfully. There can be no assurance that the Company will be successful in
acquiring or integrating any such products or businesses.


                                       17




<PAGE>   18

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         The Company is subject to certain market risks. These risks relate to
commodity price fluctuations, interest rate changes and fluctuations in the
value of the warrants with the put option.
 
         The Company is a purchaser of pork and other meat products. The Company
buys pork and other meat products based upon market prices that are established
with the vendor as part of the purchase process.  The operating results of the 
Company are significantly impacted by pork prices. The Company does not use
commodity financial instruments to hedge pork and other meat products prices.

         The Company's exposure to interest rate risk relates primarily to its 
debt obligations and temporary cash investments.  Interest rate risk is managed
through variable rate borrowings with varying maturities.  The Company does not
use, and has not in the past fiscal year used, any derivative financial
instruments relating to the risk associated with changes in interest rates.

         The Company is required to accrete the value of the warrants and
mark-to-market the estimated fair value of the put option. Any increases to such
value would be charged to earnings as additional interest expense. To the extent
of any charges to earnings, any subsequent decreases to the value of the
warrants would be added to earnings as additional interest income. Furthermore,
any such additional interest expense would not be deductible in the Company's
federal or state income tax returns and, therefore, would increase the effective
income tax rate of the Company. For purposes of these calculations, the fair
value of the warrants will be estimated using a Black-Scholes option pricing
model. During the year ended December 31, 1998, the Company recorded no
additional interest expense resulting from the changes in the estimated fair of
the warrants.

         The Company is exposed to credit risk on certain assets, primarily
accounts receivable.  The Company provides credit to customers in the ordinary
course of business and performs ongoing credit evaluations. The Company
currently believes its allowance for doubtful accounts is sufficient to cover
customer credit risks.

YEAR 2000

         The Year 2000 issue is the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. These
two-digit computer systems will be unable to interpret dates beyond the year
1999, which could cause a system failure or other computer errors, leading to
disruptions in operations. The Company has focused on three major areas in
conducting an assessment of its Year 2000 readiness: (1) information technology,
(2) embedded technology, and (3) third party relationships.

         Information Technology. The Company began its assessment of its Year
2000 readiness by conducting a review of the computer hardware and software
applications which comprise the Company's information technology systems. This
review was completed by the end of the third quarter of 1998. As a result of
this review, the Company believes that, with the exception of its Potter
subsidiary, the information technology being utilized by each of its six
operating subsidiaries is Year 2000 compliant, and the Company has received
written confirmation of Year 2000 compliance from its hardware and software
vendors. The Company has determined that its Potter subsidiary requires the
installation of a new data processing system, after which Potter will also be
Year 2000 compliant. The Company expects that this installation will be
completed in the second quarter of 1999. Through the end of the 1998, the costs
paid to third parties in connection with the Company's review of its information
technology were approximately $50,000, and future estimated expenses are
$100,000, consisting primarily of the costs associated with the new Potter data
processing system.

         Embedded Technology. The next phase of the Company's assessment began 
in the third quarter of 1998 and is expected to be completed by the end of the
second quarter of 1999. This phase involves an audit of the non-information
technology systems and embedded technology at its facilities. The Company does
not anticipate that the costs paid to third parties in connection with its Year
2000 efforts in this area will be material.

                                       18
<PAGE>   19
         Third Party Relationships. The Company relies on third party suppliers
and vendors for raw materials and other key supplies and services. The Company
is also dependent upon its customers for sales and cash flow. Interruption of
supplier or vendor operations or customer sales due to a failure of those third
parties to be Year 2000 compliant could adversely affect the Company's
operations. The Company, however, is not dependent on any particular supplier,
vendor or customer (with the exception of Sam's Club, Inc., which comprises a
significant portion of sales). The Company does not currently have written
documentation concerning the Year 2000 readiness of all its suppliers and
customers, but has surveyed the Year 2000 readiness of suppliers and customers
with whom the Company has an electronic data interface (EDI) and is awaiting
certain responses. While the Company believes that the impact of isolated
occurrences resulting from the failure of third parties to be Year 2000
compliant would not be material, a wide-spread Year 2000 interruption throughout
the food industry or a Year 2000 problem with respect to Sam's Club, Inc., its
largest customer, could have a material adverse effect on the Company's results
of operations and financial position.

         Contingency Plan. Although the Company does not currently have a
contingency plan for Year 2000 issues, it does intend to begin developing one in
the second quarter of 1999 to prepare the Company for Year 2000 interruptions
in processing accounting or operational information and the inability of
its lenders or other sources of capital and liquidity to make funds available
when required.

RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

         During 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use" ("SOP 98-1"). SOP 98-1
requires capitalization of certain costs of computer software developed or
obtained for internal use, provided that those costs are not related to research
and development. SOP 98-1 is effective for fiscal years beginning after December
15, 1998. The AICPA also issued SOP 98-5, "Reporting on the Costs of Start-Up
Activities" during 1998. SOP 98-5 requires costs of start-up activities and
organization costs to be expensed as incurred. The Company is currently
evaluating the requirements of SOP 98-1 and SOP 98-5 and the effects, if any, on
the current policies of the Company.

         Also in 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("Statement 133"). Implementation of
Statement 133 is required for periods beginning after June 15, 1999. Statement
133 establishes accounting and reporting standards for derivative instruments
and hedging activities. It requires that derivative be recognized in the balance
sheet at fair value and specifies the accounting for changes in fair value. The
Company is evaluating the effect of Statement 133 on its accounting policy
related to derivative financial instruments.

FORWARD LOOKING STATEMENTS

         The Company wants to provide stockholders and investors with more
meaningful and useful information. Therefore, this Annual Report on Form 10-K
contains forward looking information and describes the Company's belief
concerning future business conditions and the outlook for the Company based on
currently available information. Whenever possible, the Company has identified
these "forward looking" statements by words such as "believes," "estimates,"
"expects," "intends" and similar expressions. These forward looking statements
are subject to risks and uncertainties which would cause the Company's actual
results or performance to differ materially from those expressed in these
statements. These risks and uncertainties include the following: risks
associated with acquisitions, including integration of acquired businesses; new
product development and other aspects of the Company's business strategy;
uncertainty as to evolving consumer preferences; customer and supplier
concentration; the impact of competition; the impact of change in the valuation
of the warrants with the put option on the Company's net income and effective
tax rate; the Company's ability to raise additional capital; sensitivity to such
factors as weather and raw material costs; and the factors discussed above under
the captions "Quantitative and Qualitative Disclosures About Market Risk" and
"Year 2000." Readers are encouraged to review the Company's Current Report on
Form 8-K dated June 4, 1997 filed with the Securities and Exchange Commission
for a more complete description of these factors. The Company assumes no
obligation to update the information contained in this Annual Report on Form
10-K.


                                       19


<PAGE>   20


ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

         See discussion under the caption "Quantitative and Qualitative
Disclosures about Market Risk" in Item 7, "Management's Discussion and Analysis
of Financial Condition and Results of Operation."


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Company's 1998 Financial Statements and the related Reports of
Independent Auditors are set forth on pages F-1 through F-21 of this Form
10-K.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE 

         As previously reported on a Current Report on Form 8-K dated December
14, 1998 (filed with the Securities and Exchange Commission on December 21,
1998) and a Current Report on Form 8-K dated January 25, 1999 (filed with the
Securities and Exchange Commission on February 1, 1999), the Company replaced
Arthur Andersen LLP with KPMG LLP as its independent certified public 
accountants.



                                       20
<PAGE>   21

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Incorporated by reference to "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" in the Company's Proxy Statement for
its Annual Meeting of Stockholders to be held on May 19, 1999 (the "1999 Proxy
Statement").


ITEM 11. EXECUTIVE COMPENSATION

         Incorporated by reference to "Compensation" in the 1999 Proxy
Statement.


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Incorporated by reference to "Security Ownership of Certain Beneficial
Owners and Management" in the 1999 Proxy Statement.


ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Incorporated by reference to "Certain Transactions with Management and
Others" in the 1999 Proxy Statement.





                                       21
<PAGE>   22


                                     PART IV

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

     (a)  The following documents are filed as part of this Form 10-K:

          1.    The consolidated financial statements of the Company and its
          subsidiaries, together with the applicable report of independent
          public accountants: 

<TABLE>
<CAPTION>
                           
                                                                                     Page
                                                                                     ----

          <S>   <C>                                                                  <C>          
                Independent Auditors Report                                           F-2

                Report of Independent Public Accountants                              F-3                             

                Consolidated Balance Sheets - as of December 31, 1997 and 1998        F-4

                Consolidated Income Statements - for the years 
                ended December 31, 1996, 1997 and 1998                                F-5

                Consolidated Statements of Stockholders' Equity - for the years
                ended December 31, 1996, 1997 and 1998                                F-6

                Consolidated Statements of Cash Flows - for the years
                ended December 31, 1996, 1997 and 1998                                F-7

                Notes to Consolidated Financial Statements                            F-8

          2.    The following exhibits are filed with this report or 
          incorporated by reference as set forth below:

<CAPTION>
          Exhibit
          Number   Description
          ------   -----------
          <S>      <C>
          3.1      Certificate of Incorporation of the Company,
                   including all amendments thereto (9)

          3.2      By-Laws of the Company (1)

          4.1      Specimen Stock Certificate (1)

          4.2      Registration Rights Agreement between T. Rowe Price
                   Strategic Partners Fund, L.P. and the Company (1)

          4.3      Stock Option Plan (1)

          4.4      Amendment dated as of April 15, 1998 to the Company's
                   Stock Option Plan (8)

          4.5      Atlantic Premium Brands, Ltd. Employee Stock Purchase
                   Plan dated November 1, 1997 (2)

          4.6      $1.4 million Subordinated Note made by ABEV
                   Acquisition Corp. in favor of Franklin Roth and Allen
                   Pauly (4)

          4.7      6.35% Subordinated Non-Negotiable Promissory Note due
                   July 31, 2001 made by Richards Cajun Foods Corp. and
                   the Company in favor of J.L. Richard in the original
                   principal amount of $850,000 (6)
</TABLE>


                                       22
<PAGE>   23


<TABLE>
                  <S>      <C> 

                  4.8      8% Subordinated Non-Negotiable Promissory Note due
                           September 30, 2001 made by Grogan's Merger Corp. in
                           favor of Bobby L. Grogan and Betty R. Grogan in the
                           original principal amount of $219,593 (6)

                  4.9      8% Subordinated Non-Negotiable Promissory Note due
                           December 31, 2003 made by Grogan's Farm, Inc. in
                           favor of Jefferson Davis and Roger Davis in the
                           original principal amount of $219,593 (6)

                  4.10     Secured Promissory Note dated as of March 20, 1998 of
                           the Company and certain of its subsidiaries payable
                           to Fleet Capital Corporation in the original
                           principal amount of $11,000,000 (6)

                  4.11     Loan and Security Agreement dated as of March 20,
                           1998 among Fleet Capital Corporation, the Company and
                           certain of its subsidiaries (6)

                  4.12     Stock Pledge Agreement dated as of March 20, 1998
                           between the Company and Fleet Capital Corporation (6)

                  4.13     Atlantic Premium Brands, Ltd. and Subsidiaries Senior
                           Subordinated Note and Warrant Purchase Agreement
                           dated as of March 20, 1998 among the Company, certain
                           of its subsidiaries and Banc One Capital Partners,
                           LLC ("Banc One") (6)

                  4.14     Senior Subordinated Note due March 31, 2005 of the
                           Company payable to Banc One dated as of March 20,
                           1998 in the original principal amount of $6,500,000
                           (6)

                  4.15     Atlantic Premium Brands, Ltd. Warrant Certificate
                           Common Stock Purchase Warrant of Banc One dated as of
                           March 20, 1998 (6)

                  4.16     Atlantic Premium Brands, Ltd. Warrant Certificate
                           Contingent Common Stock Purchase Warrant of Banc One
                           dated as of March 20, 1998 (6)

                  4.17     Put Option Agreement dated as of March 20, 1998
                           between the Company and Banc One (6)

                  4.18     Registration Rights Agreement dated as of March 20,
                           1998 between the Company and Banc One (6)

                  4.19     Shareholders Agreement dated as of March 20, 1998
                           among the Company, certain of its shareholders and
                           Banc One (6)

                  4.20     Preemptive Rights Agreement dated as of March 20,
                           1998 between the Company and Banc One (6)

                  4.21     Debt Subordination Agreement dated as of March 20,
                           1998 among Banc One Capital Partners, LLC, the
                           Company, certain of its subsidiaries and Fleet
                           Capital Corporation (6)

                  4.22     Lien Subordination Agreement dated as of March 20,
                           1998 between Fleet Capital Corporation and Banc One
                           Capital Partners, LLC (6)

                  10.1     Non-Compete and Non-Disclosure Agreement dated
                           September 24, 1993 among the Company, Sterling Group,
                           Inc., Eric D. Becker, Steven M. Taslitz, Douglas L.
                           Becker and R. Christopher Hoehn-Saric (1)

                  10.2     Consulting Agreement dated March 15, 1996 by and
                           between the Company, Sterling Advisors, L.P. and
                           Elfman Venture Partners, Inc. (3)

                  10.3     Amendment to Consulting Agreement dated as of October
                           16, 1996 among the Company, Sterling Advisors, L.P.
                           and Elfman Venture Partners, Inc. (6)

                  10.4     Second Amendment to Consulting Agreement dated as of
                           September 7, 1997 among the Company, Sterling
                           Advisors, L.P. and Elfman Venture Partners, Inc. (6)

                  10.5     Third Amendment to Consulting Agreement dated as of 
                           December 1, 1998 among the Company, Sterling 
                           Advisors, L.P. and Elfman Venture Partners, Inc. (*)

                  10.6     Form of Tax Indemnification Agreement (1)

                  10.7     Stock Purchase Agreement dated as of January 23, 1996
                           among the Company, ABEV Acquisition Corp., Franklin
                           Roth and Allen Pauly (4)
</TABLE>

                                       23
<PAGE>   24
<TABLE>
                  <S>         <C>                               

                  10.8     Asset Purchase Agreement dated as of March 6, 1998
                           among Potter's Acquisition Corp., J.C. Potter Sausage
                           Company, Potter's Farm, Inc., Potter Rendering Co.
                           and Potter Leasing Company, Ltd. (6)

                  10.9     Asset Purchase Agreement dated as of November 24,
                           1998 between the Company and Canadry Dry Potomac
                           Corporation (10)

                  10.10    Asset Purchase Agreement dated February 2, 1999
                           between the Company and Master Distributors, Inc.
                           (10)

                  10.11    Employment Agreement dated October 29, 1996 between
                           the Company and Alan F. Sussna (5)

                  10.12    Employment Agreement dated as of April 6, 1998
                           between the Company and Thomas M. Dalton (7)

                  10.13    Employment Agreement dated August 10, 1998 between
                           the Company and Steven Englander (9)

                  21       Subsidiaries of the Company (6)

                  23.1     Consent of KPMG LLP (*)

                  23.2     Consent of Arthur Andersen LLP (*)

                  27       Financial Data Schedule (*)



------------------
*    Filed herewith.

(1)      Filed as an exhibit to the Company's Registration Statement No.
         33-69438 or the amendments thereto and incorporated herein by
         reference.

(2)      Filed as an exhibit to the Company's Form S-8 Registration Statement
         No. 333-39561 and incorporated herein by reference.

(3)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
         the quarter ended March 31, 1996 and incorporated herein by reference.

(4)      Filed as an exhibit to the Company's Current Report on Form 8-K dated
         March 15, 1996, filed with the Securities and Exchange Commission on
         April 1, 1996, and incorporated herein by reference.

(5)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
         the quarter ended September 30, 1996 and incorporated herein by
         reference.

(6)      Filed as an exhibit to the Company's Annual Report on Form 10-K for the
         year ended December 31, 1997, and incorporated herein by reference.

(7)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
         the quarter ended March 31, 1998, and incorporated herein by reference.

(8)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
         the quarter ended June 30, 1998, and incorporated herein by reference.

(9)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
         the quarter ended September 30, 1998, and incorporated herein by
         reference.

(10)     Filed as an exhibit to the Company's Current Report on Form 8-K dated
         February 2, 1999, filed with the Securities and Exchange Commission on
         February 16, 1999, and incorporated herein by reference.

         (b)      Reports on Form 8-K:

                  On December 21, 1998, the Company filed a Current Report on
         Form 8-K dated December 14, 1998 disclosing Item 4, a change in its
         certifying accountants from Arthur Andersen LLP to KPMG LLP.


</TABLE>
                                       24

<PAGE>   25



                                   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.

                                ATLANTIC PREMIUM BRANDS, LTD.


                                By:      /s/ THOMAS M. DALTON                   
                                         ---------------------------------------
                                         Thomas M. Dalton
                                         Senior Vice President
                                         and Chief Financial Officer
Dated as of March 31, 1999.

         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>
<CAPTION>

               SIGNATURE                                      TITLE                                 DATE
               ---------                                      -----                                 ----
<S>                                        <C>                                                 <C>
           /s/ ERIC D. BECKER              Director                                            March 29, 1999
-----------------------------------------
             Eric D. Becker
                                
                                           Senior Vice President and Chief Financial           March 29, 1999
                                           Officer (principal financial and
          /s/ THOMAS M. DALTON             accounting officer)
-----------------------------------------
            Thomas M. Dalton


         /s/ MERRICK M. ELFMAN             Director                                            March 29, 1999
-----------------------------------------
           Merrick M. Elfman

                                           Director
                                                                                               March 29, 1999
-----------------------------------------
             Brian Fleming

           /s/ JOHN T. HANES               Director                                            March 29, 1999
-----------------------------------------
             John T. Hanes

            /s/ RICK INATOME               Director                                            March 29, 1999
-----------------------------------------
              Rick Inatome

        /s/ G. COOK JORDAN, JR.            Director                                            March 29, 1999
-----------------------------------------
          G. Cook Jordan, Jr.

           /s/ JOHN A. MILLER              Director                                            March 29, 1999
-----------------------------------------
             John A. Miller
                                           Chief Executive Officer and Director                March 29, 1999
           /s/ ALAN F. SUSSNA              (principal executive officer)
--------------------------------------------
             Alan F. Sussna

         /s/ STEVEN M. TASLITZ             Director                                            March 29, 1999
--------------------------------------------
           Steven M. Taslitz


</TABLE>

                                       25
<PAGE>   26
                          ATLANTIC PREMIUM BRANDS, LTD.

                          INDEX TO FINANCIAL STATEMENTS

                                                                            PAGE

Independent Auditors' Report                                                 F-2

Report of Independent Public Accountants                                     F-3

Consolidated Balance Sheets - as of December 31, 1997 and 1998               F-4

Consolidated Income Statements - for the years ended
  December 31, 1996, 1997 and 1998                                           F-5

Consolidated Statements of Stockholders' Equity - for the years ended
  December 31, 1996, 1997 and 1998                                           F-6

Consolidated Statements of Cash Flows - for the years ended
  December 31, 1996, 1997 and 1998                                           F-7

Notes to Consolidated Financial Statements                                   F-8







                                      F-1
<PAGE>   27



                          INDEPENDENT AUDITORS' REPORT


To the Stockholders of
Atlantic Premium Brands, Ltd.:

We have audited the accompanying consolidated balance sheet of Atlantic Premium
Brands, Ltd. (a Delaware corporation), and subsidiaries as of December 31, 1998,
and the related consolidated statements of income, stockholders' equity and cash
flows for the year then ended. 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 audit. The consolidated balance sheet of
Atlantic Premium Brands, Ltd. and subsidiaries as of December 31, 1997 and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the years in the two-year period ended December 31, 1997, were
audited by other auditors whose report thereon dated March 20, 1998 (except with
respect to the matters discussed in Note 3, as to which the date is March 25,
1999) expressed an unqualified opinion on those statements.

We conducted our audit 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 audit provides 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 Atlantic Premium Brands, Ltd.
and subsidiaries as of December 31, 1998, and the results of their operations
and their cash flows for the year then ended, in conformity with generally
accepted accounting principles.


                                                /s/ KPMG LLP


Chicago, Illinois
March 26, 1999






                                      F-2
<PAGE>   28



                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Stockholders of
Atlantic Premium Brands, Ltd.:

We have audited the accompanying consolidated balance sheets of Atlantic Premium
Brands, Ltd. (a Delaware corporation), and subsidiaries as of December 31, 1996
and 1997, and the related consolidated statements of income, stockholders'
equity and cash flows for each of the two years in the period ended December 31,
1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Atlantic Premium Brands, Ltd.
and subsidiaries as of December 31, 1996 and 1997, and the results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1997, in conformity with generally accepted accounting principles.



                                                  /s/ ARTHUR ANDERSEN LLP


Baltimore, Maryland
   March 20, 1998 (except with
   respect to the matter discussed
   in Note 3, as to which the date
   is March 25, 1999)


                                      F-3

<PAGE>   29

                         ATLANTIC PREMIUM BRANDS, LTD.

                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                        December 31,
                                                                        ------------
                                                                  1997              1998
                                                                  ----              ----
                     ASSETS

<S>                                                                <C>               <C>       
Current assets:
  Cash                                                             $1,183,984        $1,773,813
  Accounts receivable, net of allowance for 
    doubtful accounts of $82,049 and $247,122, respectively         7,379,081        10,437,406
  Inventory                                                         3,188,221         4,456,706
  Prepaid expenses and other current assets                           372,398           235,329
  Deferred income taxes                                                89,500           543,602
  Net assets of discontinued operations                             3,169,420         1,240,276
                                                            -----------------------------------
      Total current assets                                         15,382,604        18,687,132    

Property, plant and equipment, net                                  3,943,818        12,288,196
Goodwill, net                                                      12,745,761        13,516,552
Other assets, net                                                   1,122,340           605,381
Deferred income taxes                                                  50,100           567,808
                                                            ------------------------------------
      Total assets                                                $33,244,623       $45,665,069
                                                            ====================================
                                                           
      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Bank overdraft                                                   $1,402,792       $ 4,073,100
  Notes payable under line of credit                                6,839,323         1,579,037
  Current maturities of long-term debt                              1,659,310         1,377,941
  Accounts payable                                                  7,094,865         5,608,538
  Income taxes payable                                                132,460            79,248
  Accrued expenses                                                    457,341         4,602,290
                                                            ------------------------------------
      Total current liabilities                                    17,586,091        17,320,154

Long-term debt, net of current maturities                           6,270,078        17,078,550
Put warrants                                                        -                 1,435,000
                                                            ------------------------------------

      Total liabilities                                            23,856,169        35,833,704

Stockholders' equity:
  Preferred stock, $.01 par value; 5,000,000
    shares authorized; none issued or outstanding                   -                 -
  Common stock, $.01 par value; 30,000,000 shares
    authorized; 7,373,574 and 7,412,583 shares
    issued and outstanding at December 31, 1997
    and 1998, respectively                                             73,770            74,160
  Additional paid-in-capital                                       12,141,176        12,259,885
  Accumulated deficit                                              (2,826,492)       (2,502,680)
                                                            ------------------------------------
      Total stockholders' equity                                    9,388,454         9,831,365
                                                            ------------------------------------
      Total liabilities and stockholders' equity                  $33,244,623       $45,665,069
                                                            ====================================
</TABLE>


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

                                      F-4

<PAGE>   30




                         ATLANTIC PREMIUM BRANDS, LTD.

                         CONSOLIDATED INCOME STATEMENTS


<TABLE>
<CAPTION>
                                                                         December 31,
                                                                         ------------
                                                        1996                1997               1998
                                                        ----                ----               ----

<S>                                                   <C>                <C>                <C>         
Net sales                                               $133,878,234       $151,048,650        $180,817,500
Cost of goods sold                                       122,606,531        137,617,242         156,869,779
                                                 ----------------------------------------------------------
      Gross profit                                        11,271,703         13,431,408          23,947,721
Selling, general and administrative
      expenses:
  Salaries and benefits                                    4,441,492          4,372,792           8,537,175
  Other operating expenses                                 5,129,541          6,376,960           9,592,661
  Depreciation and amortization                              693,515          1,040,996           1,663,429
                                                 ----------------------------------------------------------
      Total selling, general and
        administrative expenses                           10,264,548         11,790,748          19,793,265
                                                 ----------------------------------------------------------
      Income from operations                               1,007,155          1,640,660           4,154,456
Interest expense                                           1,120,454          1,495,155           2,205,931
Other income, net                                            224,749            368,753             320,878
                                                 ----------------------------------------------------------
      Income from continuing operations                                                                     
        before income taxes                                  111,450            514,258           2,269,403
Income tax (expense) benefit                                 329,007            (79,995)           (450,000)
                                                 ----------------------------------------------------------
      Income from continuing
        operations                                           440,457            434,263           1,819,403
Discontinued operations:
     Income (loss) from discontinued operations              455,302            (77,406)           (741,701)
     Loss on disposal of discontinued
        operations, including provision of 
        $150,000 for operating losses during 
        the phase-out period                                       -                  -            (558,897)
                                                 ----------------------------------------------------------
Income before extraordinary loss                             895,759            356,857             518,805
Extraordinary loss                                                 -                  -            (194,993)
                                                 ----------------------------------------------------------
Net income                                           $       895,759     $      356,857     $       323,812
                                                 ==========================================================
                                                 
                                                 
Weighted average common shares:
  Basic                                                    5,199,171          6,846,013           7,384,372
                                                 ==========================================================
  Diluted                                                  5,349,539          7,102,850           7,576,236
                                                 ==========================================================
Income per common share:
  Basic
    Income from continuing
      operations                                     $          0.08     $         0.06     $          0.25
    Income (loss) from discontinued operations,
      including loss on disposal                                0.09              (0.01)              (0.18)
    Extraordinary loss                                             -                  -               (0.03)
                                                 ----------------------------------------------------------
  Net income                                         $          0.17     $         0.05     $          0.04
                                                 ----------------------------------------------------------
  Diluted:
    Income from continuing
      operations                                     $          0.08     $         0.06     $          0.24
    Income (loss) from discontinued operations,
      including loss on disposal                                0.09              (0.01)              (0.17)
    Extraordinary loss                                             -                  -               (0.03)
                                                 ----------------------------------------------------------
Net income                                           $          0.17     $         0.05     $          0.04
                                                 ==========================================================
</TABLE>



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

                                      F-5

<PAGE>   31
               


                         ATLANTIC PREMIUM BRANDS, LTD.

                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                Additional                       Total
                                                        Common Stock              Paid-in      Accumulated   Stockholders'
                                                   Shares          Amount         Capital        Deficit         Equity
                                                   ------          ------         -------        -------         ------

<S>                                                <C>              <C>          <C>          <C>                <C>     
Balance, December 31, 1995                           2,320,114        $23,235      $4,618,227    ($4,079,108)       $562,354
  Issuance of common stock
    through private placement, net                   2,765,549         27,656       2,754,727              -       2,782,383
  Issuance of common stock in
    connection with businesses
    acquired                                         1,105,430         11,054       2,043,949              -       2,055,003
  Issuance of common stock to
    former noteholders                                 205,517          2,055         306,220              -         308,275
  Net income                                                 -              -               -        895,759         895,759
                                              ------------------------------------------------------------------------------
Balance, December 31, 1996                           6,396,610         64,000       9,723,123     (3,183,349)      6,603,774
  Issuance of common stock
    through private placement, net                     976,964          9,770       2,378,053              -       2,387,823
  Issuance of stock options to non-employee                  -              -          40,000              -          40,000
  Net income                                                 -              -               -        356,857         356,857
                                              ------------------------------------------------------------------------------
Balance, December 31, 1997                           7,373,574         73,770      12,141,176     (2,826,492)      9,388,454
  Issuance of common stock in
    connection with employee stock
    purchase plan                                       26,904            269          59,761              -          60,030
  Exercise of stock options                             12,105            121          46,448              -          46,569
  Issuance of stock options to non-employee                  -              -          12,500              -          12,500
  Net income                                                 -              -               -        323,812         323,812
                                              ------------------------------------------------------------------------------
Balance, December 31, 1998                           7,412,583        $74,160     $12,259,885    ($2,502,680)     $9,831,365
                                             ===============================================================================
</TABLE>



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

                                      F-6

<PAGE>   32
                                                     
                                  
                         ATLANTIC PREMIUM BRANDS, LTD.

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

           
<TABLE>
<CAPTION>
                                                                  December 31,
                                                                  ------------
                                                        1996           1997              1998
                                                        ----           ----              ----
<S>                                                     <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income                                            $895,759       $356,857        $323,812
  Adjustments to reconcile net
      income to net cash provided
      by (used in) operating activities,                                    
      net of assets and liabilities of
      acquired businesses                                                                     
    Loss on disposal of discontinued operations         -              -                558,897
    (Income) loss from discontinued operations          (455,302)        77,406         741,701
    Extraordinary loss                                  -              -                194,993
    Depreciation and amortization                        693,515      1,040,996       1,370,454
    Amortization of debt discount
      and deferred financing costs                       102,217        213,580         292,975
    Deferred income taxes                                130,993        255,995        (268,600)
    Options issued to non-employee                      -                40,000          12,500
    Decrease (increase) in accounts
      receivable, net                                 (2,824,527)     1,470,809      (1,273,258)
    Decrease (increase) in inventory                    (167,373)      (318,893)        483,981
    Decrease (increase) in prepaid                                                          
      expenses and other current assets                 (183,488)      (144,859)        154,004
    Increase (decrease) in accounts
      payable                                           (600,738)     2,400,578      (1,486,327)
    Increase (decrease) in accrued
      expenses and other current liabilities             143,291       (180,259)      2,793,861
                                                 ----------------------------------------------
Net cash provided by (used in)
  operating activities                                (2,265,653)     5,212,210       3,898,993
                                                 ----------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Acquisition of property, plant and
    equipment                                           (159,882)      (375,837)       (888,778)
  Proceeds from sale of property, 
    plant and equipment                                        -              -         178,821
  Cash paid for businesses acquired,
    including deferred acquisition fees, 
    net of cash acquired                              (9,417,351)      (454,912)    (12,870,210)          
  Cash paid for distribution agreements
    and exclusivity rights                               (50,000)        24,679               -
                                                 ----------------------------------------------
      Net cash used in investing
        activities                                    (9,627,233)      (806,070)    (13,580,167)
                                                 ----------------------------------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Increase (decrease) in bank
    overdraft                                           (452,964)    (1,227,943)      2,670,308
  Borrowings (payments) under line of
    credit, net                                        7,255,984       (416,661)     (5,260,286)
  Borrowings (payments) under term
    debt and notes payable, net                        4,658,473     (2,433,809)     11,760,985
  Payments of financing costs                           (706,420)      (134,978)       (351,815)
  Issuance of common stock                             2,782,383      2,387,823         106,599
                                                 ----------------------------------------------
      Net cash provided by (used in) financing                               
        activities                                    13,537,456     (1,825,568)      8,925,791
                                                 ----------------------------------------------

Net cash provided by (used in) discontinued 
  operations                                            (516,241)    (2,524,917)      1,345,212
                                                 ----------------------------------------------
NET INCREASE IN CASH                                   1,128,329         55,655         589,829
Cash, beginning of period                               -             1,128,329       1,183,984
                                                 ----------------------------------------------
Cash, end of period                                   $1,128,329     $1,183,984      $1,773,813
                                                 ==============================================
</TABLE>


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

                                      F-7



         
         
         
       
           
           
           
<PAGE>   33





                          ATLANTIC PREMIUM BRANDS, LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND DESCRIPTION OF COMPANY:

The accompanying consolidated financial statements present the accounts of
Atlantic Premium Brands, Ltd. (formerly Atlantic Beverage Company, Inc.) and
subsidiaries (the "Company"). All significant inter-company transactions have
been eliminated in consolidation. The Company's financial statements have been
restated to classify the results of operations and net assets of the beverage
division as discontinued operations. Accordingly, all amounts included in the
Notes to Consolidated Financial Statements pertain to continuing operations
except where otherwise noted. See further discussion in Note 3 - "Discontinued
Operations".

The Company is engaged in the manufacturing, marketing and distribution of
packaged meat and other food products in Texas, Louisiana, Kentucky, Oklahoma
and surrounding states. The operating results of the Company are impacted by
changes in food commodity markets.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

REVENUE RECOGNITION

The Company records sales when product is delivered to the customers. Discounts
provided, principally volume, are accrued at the time of the sale.

CASH

Cash consists of cash held in various deposit accounts with financial
institutions. As of December 31, 1998, $234,265 was restricted to meet minimum
balance funding requirements.

INVENTORY

Inventory is stated at the lower of cost or market and is comprised of raw
materials, finished goods and packaging supplies. Cost is determined using the
first-in, first-out method.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, net of applicable
depreciation. Depreciation is computed using the straight-line method at annual
rates of 3% to 20% for buildings and building improvements, and 10% to 20% for
equipment, furniture and vehicles. Leasehold improvements are amortized over the
lesser of the lease term or asset life. Additions and improvements that
substantially extend the useful life of a particular asset are capitalized.
Repair and maintenance costs are charged to expense. Upon sale, the cost and
related accumulated depreciation are removed from the accounts.

OTHER ASSETS

Other assets consist of deferred acquisition costs, cash surrender value of life
insurance, and deferred financing costs. Deferred financing costs are being
amortized over 5 to 7 years, representing the term of the related debt, using
the effective interest method.

INTANGIBLE ASSETS

The excess of cost over the fair market value of tangible net assets and
trademarks of acquired businesses is amortized on a straight-line basis over the
periods of expected benefit, which range from 10 years to 40 years. Amortization
expense for each of the years ended December 31, 1996, 1997 and 1998 was
$280,141, $350,268 and $465,451, 



                                      F-8

<PAGE>   34


respectively. Accumulated amortization as of December 31, 1996, 1997 and 1998
was $280,141, $611,501 and $1,095,538, respectively. Subsequent to an
acquisition, the Company continually evaluates whether events and circumstances
have occurred that indicate the remaining estimated useful life of an intangible
asset may warrant revision or that the remaining balance of an intangible asset
may not be recoverable. When factors indicate that an intangible asset should be
evaluated for possible impairment, the Company uses an estimate of the related
business' undiscounted future cash flows over the remaining life of the asset in
measuring whether the intangible asset is recoverable.

ADVERTISING

Advertising expenditures are expensed in the year in which the advertising first
takes place.

INCOME TAXES

Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and operating
loss and tax credit carry forwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income in the
years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

INCOME PER COMMON SHARE

Basic income per common share is based upon the weighted-average number of
common shares outstanding. Diluted income per common share assumes the exercise
of all options which are dilutive, whether exercisable or not. The dilutive
effect of stock options is measured under the treasury stock method.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company selectively uses derivative financial instruments to manage its
market and interest rate risk and does not hold derivative positions for trading
purposes. In 1998, the Company entered into a derivative financial instrument in
connection with the issuance of warrants to purchase shares of common stock. The
structure of the transaction, as discussed further in Note 10, requires that
increases in the value of the common stock underlying the warrants be recognized
currently as interest expense in the income statement. Subsequent to the
effective date of this transaction, the market price of the Company's common
stock was generally lower than the exercise price for the warrants, and
accordingly, no interest expense was recorded for these warrants.

STOCK-BASED COMPENSATION

The Company applies the intrinsic value-based method of accounting for its fixed
plan stock options. As such, compensation expense is recorded on the date of
grant only if the current market price of the underlying stock exceeds the
exercise price.





                                      F-9
<PAGE>   35


SUPPLEMENTAL CASH FLOW INFORMATION

<TABLE>
<CAPTION>

                                                              CASH PAID           CASH PAID
                                                              FOR TAXES         FOR INTEREST
                                                              ---------         ------------
<S>                                                              <C>                <C> 
         Year ended December 31, 1996
           Related parties                                              -             103,642
           Other                                                        -           1,012,307
         Year ended December 31, 1997
           Related parties                                              -             291,752
           Other                                                  112,000           1,170,648
         Year ended December 31, 1998
           Related parties                                              -             199,888
           Other                                                  413,648           1,968,212

</TABLE>

UNREGISTERED SHARES

During 1996, the Company issued 655,429 unregistered shares of its common stock
as part of the consideration paid in connection with the acquisitions of
Grogan's and Partin's (see Note 6). In July 1997, the Company sold approximately
1,000,000 unregistered shares of its common stock at a price of $2.55 per share
through a private placement (see Note 18). 
USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain amounts in the prior years' consolidated financial statements have been
reclassified to conform to the current year's presentation.

3. DISCONTINUED OPERATIONS:

During the fourth quarter of 1998, the Company decided to sell substantially all
the assets of its beverage division. The beverage division has been accounted
for as a discontinued operation and prior years' financial statements have been
restated. Interest expense has been allocated to the beverage division based on
its net assets as a percentage of total consolidated net assets.

The sale was recorded in three separate transactions. Effective December 1,
1998, certain assets were sold for cash of approximately $2.2 million. Effective
January 11, 1999, additional assets were sold for cash of approximately
$900,000. Effective February 2, 1999, the Company completed its disposition of
the beverage division when it sold the remaining assets for approximately
$400,000 in cash and notes. The estimated loss of $293,040, net of income taxes,
related to the asset disposals in January and February 1999, is included as a
component of loss on disposal in the accompanying consolidated statement of
income for the year ended December 31, 1998.

In connection with these transactions, the Company recorded expenses related to
severance; legal, investment banking and accounting fees; and lease obligations
which have no future benefit. These expenses total $1.3 million, and include
investment banking fees of $260,000 which were paid to related parties, Sterling
Advisors, LP and Elfman Venture Partners, Inc., and the related liabilities are
classified in accrued expenses in the accompanying consolidated balance sheet at
December 31, 1998.


                                      F-10
<PAGE>   36

Selected statements of income data for discontinued operations is as follows:

<TABLE>
<CAPTION>
                                                       FOR THE YEARS ENDED DECEMBER 31,
                                                1996                 1997               1998
----------------------------------------------------------------------------------------------------
<S>                                         <C>                   <C>                 <C>       
Net sales                                   $19,401,759           $21,149,844        $19,597,364
Operating income (loss)                         631,108                77,598           (729,309)
Income tax (expense) benefit                   (351,007)               29,995            341,238
Income (loss) from discontinued
   operations                                   455,302               (77,406)          (741,701)
----------------------------------------------------------------------------------------------------
</TABLE>

Net assets of discontinued operations are as follows:

<TABLE>
<CAPTION>

                                                                             DECEMBER 31,
                                                                       1997               1998
----------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>       
Current assets                                                     $ 3,361,157       $ 1,296,591
Property, plant and equipment, net                                     995,718           333,689
Other assets                                                           522,249           369,722
Current liabilities                                                 (1,709,704)         (759,726)
----------------------------------------------------------------------------------------------------
Net assets of discontinued operations                              $ 3,169,420        $1,240,276
----------------------------------------------------------------------------------------------------
</TABLE>

In the accompanying consolidated balance sheet at December 31, 1997, property, 
plant and equipment and non-current other assets of the beverage division are 
classified as net current assets of discontinued operations to conform to the 
presentation at December 31, 1998.

4. INVENTORY:

Inventory consisted of the following as of December 31:

<TABLE>
<CAPTION>

                                                                                  1997                1998
                                                                                  ----                ----

<S>                                                                              <C>                 <C>       
         Raw materials                                                           $  297,297          $  139,655
         Finished goods                                                           2,377,914           2,998,362
         Packaging supplies                                                         513,010           1,318,689
                                                                                 ----------          ----------
           Total                                                                 $3,188,221          $4,456,706
                                                                                 ==========          ==========
</TABLE>

5. PROPERTY, PLANT AND EQUIPMENT:

Property, plant and equipment as of December 31, 1997 and 1998 are summarized as
follows:

<TABLE>
<CAPTION>
                                                                                   1997                1998
                                                                                   ----                ----
<S>                                                                              <C>                 <C>
         Land                                                                    $    85,000          $  663,731
         Buildings and building improvements                                       1,567,368           7,398,286
         Equipment and furniture                                                   2,255,914           4,564,003
         Leasehold improvements                                                      535,064             474,756
         Vehicles                                                                    531,520           1,396,534
                                                                                 -----------         -----------
                                                                                   4,974,866          14,497,310
         Less - accumulated depreciation and amortization                         (1,031,048)         (2,209,114)
                                                                                 -----------         -----------
         Property, plant and equipment, net                                      $ 3,943,818         $12,288,196
                                                                                 ===========         ===========
</TABLE>

Depreciation expense for the years ended December 31, 1996, 1997 and 1998 was
$413,374, $690,728 and $1,197,468, respectively.

6. ACQUISITIONS:

As of January 1, 1996, a newly formed wholly owned subsidiary of the Company
acquired the outstanding common stock of Prefco, Inc. (Prefco). Also as of
January 1, 1996, Carlton Foods, Inc. (Carlton) was merged into another newly
formed, wholly owned subsidiary of the Company. As of August 1, 1996, a
subsidiary of the Company acquired the assets of Richard's Cajun Country Food
Processors (Richards). As of October 1, 1996, a subsidiary of the Company merged
with Grogan's Farm, Inc. and Grogan's Sausage, Inc. (collectively referred to as
"Grogan's") and acquired certain real property previously held by the sellers.
As of November 15, 1996, the Company obtained



                                      F-11

<PAGE>   37


certain operating assets from Partin's Sausage (Partin's). In connection with
these acquisitions, the Company entered into a loan agreement with a commercial
bank which provided a $7.45 million term loan and an $8.5 million revolving line
of credit. As of March 20, 1998, the Company acquired substantially all of the
assets and certain liabilities of J.C. Potter Sausage Company (Potter). At that
time, the $7.45 million term loan and $8.5 million revolving line of credit were
refinanced. The new debt consists of an $11 million term note, a $15 million
line of credit and a $6.5 million senior subordinated note with detachable put
warrants (see Note 10).

The acquisitions were accounted for using the purchase method of accounting,
whereby the purchase price is allocated to the assets acquired and liabilities
assumed based upon fair values. The excess of the purchase price over the fair
values of the assets acquired and liabilities assumed has been recorded as
goodwill and is being amortized on a straight-line basis over 5 years for the
portion related to transaction costs and over 40 years for the remainder.

PREFCO AND CARLTON

In connection with the Prefco and Carlton transactions, the Company paid
approximately $3.6 million, net of cash acquired, and issued approximately
650,000 shares of common stock to the former shareholders. The Company also
issued a subordinated promissory note to the former shareholders of Prefco with
a face amount of $1.4 million. In addition, a former shareholder of Prefco
signed an employment agreement with the Company for five years, with an
automatic one-year extension. If, at the end of each of the first four years,
the shareholder is still employed by the Company and Prefco meets predetermined
operating income growth from the previous years, the Company will grant to the
former shareholder options to acquire additional shares of the Company's common
stock. Based upon Prefco's operating income, as defined, for the year ended
December 31, 1998, the Company will issue 50,000 options to the former
shareholder in 1999. No compensation expense has been recognized in the
accompanying consolidated income statement for the year ended December 31, 1998
as the exercise price exceeds market value at the measurement date.

RICHARDS

In connection with the Richards transaction, the Company paid cash in the
amount of $2.5 million and issued a subordinated promissory note to the former
shareholder with a face amount of $874,786. In addition, the former shareholder
signed an employment agreement with the Company for three years. If, at the end
of three years, the former shareholder is still employed by the Company and
Richards meets certain cumulative operating income targets, the Company will
deliver a pre-determined number of shares of common stock to the former
shareholder. The effect, if any, of issuance of these contingent shares has not
been reflected in the accompanying financial statements.

GROGAN'S

In connection with the Grogan's transaction, the Company issued 573,810 shares
of its common stock to the former shareholders, paid approximately $1.9 million
in cash and issued a subordinated promissory note to the former shareholders
with a face amount of $200,000. In addition, the former shareholder signed an
employment agreement with the Company for one year.

PARTIN'S

In connection with the Partin's transaction, the Company issued 78,310 shares of
its common stock to the former shareholders, paid $419,891 in cash and issued a
subordinated promissory note to the former shareholders in the amount of
$224,891.





                                      F-12
<PAGE>   38


POTTER

In connection with the Potter transaction, the Company paid approximately
$10.5 million in cash plus related transaction costs. The following unaudited
pro forma financial information is provided for 1997 and 1998 as though the
Company had acquired Potter at the beginning of the year being reported on:


<TABLE>
<CAPTION>
                                                                     Unaudited     
                                                            ---------------------------
                                                            1997                   1998
                                                            ----                   ----
<S>                                                  <C>                       <C>         
         Revenue                                     $186,933,510              $187,975,865
         Income from continuing operations              1,376,870                 1,948,305
         Net income                                     1,269,469                   647,707
         Basic income per common share from
          continuing operations                               .20                       .26
         Diluted income per common share from
          continuing operations                               .19                       .26
         Basic net income per common share                    .19                       .09
         Diluted net income per common share                  .18                       .09


</TABLE>

The pro forma financial results do not necessarily reflect actual results which
may have occurred if the acquisition had taken place at the beginning of the
year being reported on, nor are they necessarily indicative of the results of
future combined operations.

7. OTHER ASSETS:

Other assets are comprised of the following as of December 31, 1997 and 1998:

<TABLE>
<CAPTION>

                                                             1997                 1998
                                                             ----                 ----

<S>                                                            <C>                  <C>    
Deferred financing costs                                       841,398              598,815
Cash surrender value of life insurance and other                80,141               98,423
Deferred acquisition costs                                     499,770                    -
                                                          ------------          -----------
                                                             1,421,309              697,238
Less - accumulated amortization                               (298,969)             (91,857)
                                                          ------------          -----------
Other assets, net                                         $  1,122,340          $   605,381
                                                          ============          ===========
</TABLE>

Amortization of deferred financing costs of $81,466, $175,546 and $91,857,
respectively, has been included within interest expense in the accompanying
consolidated income statements for the years ended December 31, 1996, 1997 and
1998, respectively.


8. SIGNIFICANT SUPPLIERS AND CUSTOMERS:

For the year ended December 31, 1996, two suppliers provided approximately 18%
and 12%, respectively, of the Company's total product purchases. A single
customer accounted for approximately 47% of the Company's net sales.

For the year ended December 31, 1997, no single supplier accounted for more than
10% of the Company's total product purchases. A single customer accounted for
approximately 47% of the Company's net sales.

For the year ended December 31, 1998, two suppliers provided approximately 18%
and 13%, respectively, of the Company's total product purchases. A single
customer accounted for approximately 43% of the Company's net sales.


                                      F-13
<PAGE>   39

9. INCOME TAXES:

Total income tax (expense) benefit for the years ended December 31, 1996, 1997
and 1998, were allocated as follows:

<TABLE>
<CAPTION>
                                                                        1996                 1997               1998
<S>                                                                   <C>                    <C>               <C>      
Income from continuing operations                                     $329,007              $(79,995)         $(450,000)
Income (loss) from discontinued operations                            (351,007)               29,995            341,238
Loss on disposal of discontinued operations                               -                     -               287,916
Extraordinary loss                                                        -                     -               122,000
                                                                      -------------------------------------------------
                                                                      $(22,000)             $(50,000)         $ 301,154
                                                                      =================================================

<CAPTION>

Income tax (expense) benefit related to income from 
 continuing operations consisted of the following:

                                                                       1996                   1997               1998
                                                                       ----                   ----               ----
<S>                                                                   <C>                    <C>               <C>      
Current:
         Federal                                                     $    -                $ (10,000)         $(590,700)
         State                                                            -                  (40,000)          (249,900)
Deferred:
         Federal                                                      (118,012)             (230,626)           (65,200)
         State                                                         (12,981)              (25,369)            (6,700)
                                                                     --------------------------------------------------
                                                                      (130,993)             (305,995)          (912,500)
Reduction of valuation allowance                                       460,000               226,000            462,500
                                                                     --------------------------------------------------
Total income tax (expense) benefit                                   $ 329,007             $ (79,995)         $(450,000)
                                                                     ==================================================
</TABLE>

The tax effects of temporary differences and net operating losses that give 
rise to significant portions of the deferred tax assets and liabilities at 
December 31, 1997 and 1998 are presented below:

<TABLE>
<CAPTION>

                                                                   1997                    1998
                                                                   ----                    ----
Deferred tax assets attributable to:
<S>                                                              <C>                        <C>    
         Net operating loss carryforwards                        $  636,800              $  428,962
         Liabilities of discontinued
           operations not assumed by buyers                         368,400                 798,354
         Inventory                                                   41,700                  61,343
         Accrued expenses                                            31,800                 100,082
         Accounts receivable                                         39,000                  93,600
         Other                                                       37,000                  75,902
                                                                 ----------              ----------
           Gross deferred tax assets                              1,154,700               1,558,243
         Valuation allowance                                       (462,500)                   -
                                                                 ----------              ----------
           Net deferred tax assets                                  692,200               1,558,243
                                                                 ----------              ----------
Deferred tax liabilities attributable to:
         Property, plant and equipment                              442,200                 206,281
         Other                                                      110,400                 240,552
                                                                 ----------              ----------
           Deferred tax liabilities                                 552,600                 446,833
                                                                 ----------              ----------
                                                                 $  139,600              $1,111,410
                                                                 ==========              ==========
</TABLE>

As of December 31, 1998, the Company has approximately $1.1 million of 
net operating loss carryforwards for tax purposes, expiring through 2010.

In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred tax
assets will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods in
which those temporary differences become deductible. Management considers the
scheduled reversal of deferred tax liabilities and projected future taxable
income in making this assessment. Based upon the level of projected future
taxable income over the periods in which the deferred tax assets are deductible,
management believes it is more likely than not that the Company will realize the
benefits of these deductible differences at 


                                      F-14
<PAGE>   40

December 31, 1998. The amount of the deferred tax asset considered realizable,
however, could be reduced in the near term if estimates of future taxable income
during the net operating loss carryforward period are reduced.

The items which gave rise to differences between income taxes of continuing
operations in the consolidated income statements and income taxes computed at
the Federal statutory rate are summarized below:

<TABLE>
<CAPTION>
                                                   1996              1997              1998
                                                   ----              ----              ----
<S>                                               <C>              <C>                <C>    
Statutory Federal income tax rate                 (34.0)%          (34.0)%            (34.0)%
State income taxes, net of
  federal income tax effect                        (7.7)            (3.3)              (5.0)
Nondeductible amortization of goodwill            (71.0)           (17.4)              (4.4)
Reduction of valuation allowance                  412.7             43.9               20.4
Other                                              (4.8)            (4.8)               3.2 
                                                  -----            -----               -----
         Total                                    295.2 %          (15.6)%            (19.8)%
                                                  =====            =====               ===== 
</TABLE>

10. DEBT AND EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT:

Long-term debt as of December 31, 1997 and 1998, consisted of the following:

<TABLE>
<CAPTION>
                                                                           1997               1998
                                                                           ----               ----
<S>                                                                    <C>                  <C>
Note payable, bearing interest at either prime plus 
   1.5% or LIBOR plus 3.5%, due in varying
   amounts payable monthly through March 2001                          $  5,067,482                  -
Subordinated promissory note to former shareholders
   of Prefco, bearing interest at 9% annually,
   payable in quarterly installments of interest,
   with all outstanding principal and interest due
   March 2001                                                             1,400,000          1,400,000
Subordinated promissory note to former shareholder
   of Richard's, bearing interest at 6.35%
   annually, payable in quarterly installments
   of interest, with all outstanding principal and
   interest due July 2001                                                   874,786            874,786
Subordinated promissory note to former shareholders
   of Grogan's, effective October 1998, bearing interest 
   at 8% annually, payable in quarterly installments of 
   interest, with all outstanding principal and interest
   due September 2001                                                       200,000            200,000
Subordinated promissory note to former
   shareholders of Partin's, bearing interest
   at 8% annually, payable in quarterly installments
   of interest, with all outstanding principal and
   interest due December 2003                                               224,891            224,891
Senior subordinated debt bearing interest at 10%,
   principal due in quarterly installments beginning
   June 30, 2003, with all outstanding principal and
   interest due March 31, 2005                                                 -             6,500,000
Term note bearing interest at prime rate plus 1% or
   adjusted LIBOR plus 2.5%, principal due in varying
   amounts payable monthly through March 2003                                  -            10,312,400
Capital lease obligations and other                                         330,971            347,038
                                                                       ------------        -----------
   Total                                                                  8,098,130         19,859,115
Less: Current maturities                                                 (1,659,310)        (1,377,941)
      Unamortized debt discount                                            (168,742)        (1,402,624)
                                                                       ------------        -----------
Long-term debt, net of current maturities and
      unamortized debt discount                                        $  6,270,078        $17,078,550 
                                                                       ============       -===========-
</TABLE>

                                      F-15


<PAGE>   41

The future maturities of long-term debt as of December 31, 1998, are as follows:

<TABLE>

<S>                                                           <C>         
   1999                                                       $  1,377,941
   2000                                                          1,811,655
   2001                                                          4,725,702
   2002                                                          2,346,352
   2003                                                          5,534,965
   2004 and thereafter                                           4,062,500
                                                               -----------
                                                               $19,859,115
                                                              ============
</TABLE>


In conjunction with the acquisition of Potter, on March 29, 1998, the
Company refinanced its senior revolver and term debt. The new debt consists of
an $11 million term note, a $15 million line of credit and $6.5 million senior
subordinated debt with warrants with a detachable put option.

The term note bears interest at either the bank's prime rate plus 1% or adjusted
LIBOR plus 2.5%, at the Company's option. This loan is due in varying amounts
payable monthly through March 2003 and is secured by substantially all the
assets of the Company.

Under the terms of the line of credit agreement, which expires in March 2003,
the Company is permitted to borrow up to $15,000,000, subject to advance
formulas based on accounts receivable, inventory and letter of credit
obligations outstanding. Amounts borrowed are due on demand and bear interest at
either the bank's prime rate plus 1% or adjusted LIBOR plus 2.5%. Interest is
payable monthly and amounts are secured by substantially all the assets of the
Company. The weighted average interest rates related to the line of credit
existing at December 31, 1997 and 1998, were 8.96% and 8.53%, respectively. As
of December 31, 1998, approximately $394,265 of standby letters of credit were
outstanding under the line of credit facility.

The $6.5 million senior subordinated debt, maturing on March 31, 2005 bears
interest at 10%. Principal is payable in quarterly installments beginning June
30, 2003. The senior subordinated debt was issued with detachable put warrants 
to purchase 666,947 shares of nonvoting common stock at $3.38 per share and a
contingent warrant to purchase up to a maximum of 428,753 shares of nonvoting
common stock at $3.38 per share based upon the equity value of the Company on
certain dates. The warrants were recorded at an estimated fair value of
$1,435,000, and the related discount on the senior subordinated debt was
recorded for the same amount. This discount is being amortized over the seven
year term of the note as additional interest expense. Amortization of the debt
discount was $159,550 at December 31, 1998.

On the occurrence of a Put Trigger Event, if the average trading volume of the
Company's stock for four consecutive weeks is less than 15% of the number of
shares issuable to the holder of the put warrants, such holders would have a
thirty day right to require the Company to redeem the warrants for a cash amount
equal to the greater of a cash flow formula (defined in the warrant agreement)
or the fair market value of the underlying shares based upon an appraisal, in
each case, net of the exercise price of $3.38 per share. For these purposes, a
"Put Trigger Event" would occur upon the earlier of certain events, including
the fifth anniversary of the warrants, a sale of all or substantially all of the
assets of the Company, or a business combination in which the Company is not the
surviving corporation.

In connection with the Company's line of credit and term note agreements, the
Company is required to meet certain financial and non-financial covenants.

In connection with the debt refinancing, the Company recorded an extraordinary
loss of $194,993, net of an income tax benefit of $122,000, related to the write
off of deferred financing costs. The Company incurred financing costs related to
the new line of credit and term note which have been deferred and are being
amortized over the terms of the related debt.

11. FAIR VALUE OF FINANCIAL INSTRUMENTS:

The carrying amounts reported in the balance sheet for accounts receivable,
accounts payable and accrued expenses approximate fair value because of the
short maturity of those instruments.

Fair value of the Company's long-term debt is estimated using discounted cash
flow analyses, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements. The aggregate face value of the
Company's long-term debt as of December 31, 1997 and 1998, was $8,098,130 and
$19,859,115, respectively. The face amount of the Company's long-term debt
approximated its fair value as of December 31, 1997 and 1998.


                                      F-16


<PAGE>   42

Fair value of the put warrants is estimated using the Black-Scholes option
pricing model. The carrying amount and fair value of the put warrants as of
December 31, 1998, were approximately $1.4 million and  $751,000, respectively.

12. INCOME PER COMMON SHARE:

The weighted average shares used to calculate basic and diluted income per
common share for the years ended December 31, 1996, 1997 and 1998 are as
follows:

<TABLE>
<CAPTION>

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

<S>                                                       <C>                    <C>                     <C>
         Weighted average shares outstanding                                                          
             for basic income per common share            5,199,171              6,846,013               7,384,372
                                                                                                       
         Dilutive effect of stock options                   150,368                256,837                 191,864
                                                        ------------          ------------             -----------
                                                                                                       
         Weighted average shares outstanding                                                           
             for diluted income per common share          5,349,539              7,102,850               7,576,236
                                                        ============          ============             ===========
</TABLE>

Options to purchase 25,000 shares of common stock at a price of $4.00
were outstanding during the years ended 1996 and 1997, and options to purchase
633,591 shares of common stock at prices ranging from $2.875 to $3.625 per
share were outstanding during the year ended December 31, 1998, but were not
included in the computation of diluted income per common share because the
options' exercise prices were greater than the average market price of the
common stock during the year.

Warrants with a put option to purchase up to a maximum of 1,095,700 shares of
common stock at $3.38 per share were outstanding as of December 31, 1998, but
were not included in the computation of diluted income per common share because
the warrants' exercise price was greater than the average market price of the
common stock during the period the warrants were outstanding.

13. STOCK OPTIONS:

The Company has a stock option plan (the Non-Incentive Plan) and a Director's
stock option plan (the Directors' Plan), which authorize the Company to grant,
to eligible individuals, options for the purchase of shares of the Company's
common stock.

Under the terms of the Non-Incentive Plan, the Company may issue up to 2,500,000
options to officers, advisors, full-time employees, non-employees and other
eligible individuals. In general, the option exercise price equals the stock's
market price on the date of grant and the options vest during periods of up to
ten years. Under the terms of the Directors' Plan, the Company may issue up to
500,000 options to eligible outside Directors. Each eligible Director was
granted initial options to purchase 1,500 shares of common stock. Each eligible
Director is granted additional options to purchase 10,000 shares of common stock
at the beginning of each year of service. The option exercise price equals the
common stock's market price on the date of grant and these options vest after
one year and have a term of ten years. No compensation expense was recognized
for the issuance of options under the Non-Incentive and Directors' Plans during
1996, 1997 and 1998.

The Company has elected to account for its stock-based compensation plans using
the intrinsic value method. The Company has computed for pro forma disclosure
purposes the value of all options granted subsequent to 1994, using the
Black-Scholes option pricing model as prescribed by Statement of Financial
Accounting Standards (SFAS) No. 123 and the following assumptions were used for
option grants:












                                      F-17

<PAGE>   43

<TABLE>
<CAPTION>
<S><C>


                                                      1997                           1998
                                                      ----                           ----

<S>                                               <C>                           <C>       
Risk-free interest rate (range)                   5.23 - 5.31%                   5.00% - 5.56%
Expected dividend yield                               0.00%                          0.00%
Expected lives                                      5-6 years                      5-6 years
Expected volatility                                    32%                            52%
</TABLE>

Adjustments were made for options forfeited prior to vesting. Had compensation
expense for these plans been determined in accordance with SFAS No. 123, the
Company's net income and income per common share reflected on the accompanying
consolidated income statements would have been reduced to the following pro
forma amounts:

<TABLE>
<CAPTION>

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

Net income:
<S>                                               <C>                 <C>                   <C>    
         As reported                              $ 895,759           $ 356,857           $ 323,812
         Pro forma                                  715,067             254,657              18,232
Basic income per common share:
         As reported                                    .17                 .05                 .04
         Pro forma                                      .14                 .04                   -
Diluted income per common share:
         As reported                                    .17                 .05                 .04
         Pro forma                                      .13                 .04                   -

</TABLE>

Because the SFAS No. 123 method of accounting has not been applied to options
granted prior to 1995, the resulting pro forma compensation expense may not be
representative of that to be expected in future years.

The following table summarizes option activity and related information.

<TABLE>
<CAPTION>

                                                   1996                         1997                         1998
                                                   ----                         ----                          ---
                                                        WEIGHTED                     WEIGHTED                     WEIGHTED
                                                         AVERAGE                      AVERAGE                      AVERAGE
                                                        EXERCISE                     EXERCISE                     EXERCISE
                                          SHARES          PRICE        SHARES          PRICE        SHARES          PRICE
                                          ------          -----        ------          -----        ------          -----
<S>                                         <C>           <C>            <C>           <C>            <C>         <C>
Outstanding, beginning
  of year                                   233,136       $ 5.47         693,236       $ 3.00       866,236         $ 2.98
Granted                                     464,200         1.76         178,400         2.89       845,491           3.01
Exercised                                         -            -               -            -       (58,535)          2.40
Forfeited                                    (4,100)        3.24          (5,400)        3.21             -              -
Expired                                           -            -               -            -             -              -
                                            -------                      -------                  ---------
Outstanding, end
  of year                                   693,236         3.00         866,236         2.98     1,653,192           3.01
                                            =======                     ========                  =========
Exercisable, end
  of year                                   410,044         3.51         552,344         3.34       692,410           3.30
Weighted average
  fair value of
  options granted                                         $  .81                       $  .88                       $ 1.46

</TABLE>

The Company has a Retirement Savings Plan (401(k) plan) whereby employees may
contribute up to the limits established by the Internal Revenue Service.
Matching contributions are made by the Company equal to 25% of employee
contributions, subject to certain limitations. The Company's matching
contributions during 1996, 1997 and 1998 were $22,645, $57,663 and $106,963,
respectively.

During 1997, the Company approved an Employee Stock Purchase Plan (the "Stock
Purchase Plan"). The Stock Purchase Plan qualified as an "employee stock
purchase plan" under Section 423 of the Internal Revenue Code. All regular
full-time employees, as defined, of the Company (including officers) are
eligible to participate in the Stock Purchase Plan. Directors who are not
employees are not eligible. A maximum of 250,000 shares of the Company's common
stock is reserved for issuance under the Stock Purchase Plan. The Stock Purchase
Plan allows the eligible employees to purchase common stock of the Company,
through payroll deductions, at 85% of the lessor of the market value of the
Company's common stock on two defined dates during the plan year.


                                      F-18


<PAGE>   44

14. COMMITMENTS:

OPERATING LEASES

The Company leases warehouses, office buildings and most of its delivery
vehicles under operating leases. These leases have remaining terms ranging from
one to five years. Rental expense under these leases for the years ended
December 31, 1996, 1997 and 1998 was $1,022,749, $1,559,199 and $1,681,422,
respectively. As of December 31, 1998, future minimum lease payments under these
operating leases are as follows:

<TABLE>


<S>                                                      <C>     
1999                                                     $178,455
2000                                                      133,152
2001                                                      106,410
2002                                                       94,588
2003                                                       67,644
                                                        ---------
                                                         $580,249
                                                        =========
</TABLE>


15. RELATED PARTY TRANSACTIONS:

The accompanying consolidated statements of income include interest expense
related to certain notes payable to related parties (including amortization of
deferred financing costs) and other liabilities to stockholders of approximately
$171,159 and $396,674 for the years ended December 31, 1996 and 1997,
respectively. There was no such interest expense for the year ended December 31,
1998.

The Company has a consulting agreement (the Agreement) with Elfman Venture
Partners, Inc., a corporation whose sole stockholder is Merrick Elfman, the
Chairman and a stockholder of the Company, and Sterling Advisors, LP, a
partnership owned by certain stockholders of the Company who beneficially own in
the aggregate 24.2% of the Company's outstanding common stock (the Advisors).
The Agreement extends through December 31, 2001, and is subject to annual
renewal thereafter. The Agreement provides that the Company would pay a base fee
of $300,000 per year, which would increase 5% for each year the Agreement
remains in effect. The Agreement also stipulates adjustments to the base fee for
future acquisitions or sales. During each year the Agreement is in effect, the
Company is also required to grant options to the Advisors (or their respective
principals) to purchase an aggregate of 25,000 shares of the Company's common
stock. Such options vest on each December 31 at an exercise price equal to the
market price on the preceding January 1 (see Note 13).

The Agreement was amended effective July 1, 1997 in connection with the Potter
acquisition (see Note 6). This amendment (the Potter Amendment) provided for an
aggregate payment to the Advisors of $750,000 for services provided in
connection with the Potter acquisition and the related financing, in lieu of all
other fees  that would have been payable under the Agreement for the period July
1, 1997 through December 31, 1998.

The Agreement was further amended effective as of December 1, 1998 in connection
with the beverage division disposition (see Note 3). This amendment (the
Beverage Amendment) provides for an aggregate payment to the Advisors of
$260,000 for services provided in connection with the disposition of the
beverage division, in lieu of all other base fees that would have been payable
under the Agreement for the period from January 1, 1999 though July 15, 1999.

Subsequent to July 15, 1999, the provisions of the Agreement will again be
effective upon the expiration of the Beverage Amendment. It is expected that
fees paid to the Advisors in the future in connection with services provided for
specific transactions entered into by the Company (e.g., acquisitions or
financings) will reduce the amounts otherwise payable under the terms of the
Agreement.

                                      F-19

<PAGE>   45
16. BUSINESS SEGMENT INFORMATION:

The Company's operations have been classified into two business segments: food
processing and food distribution. The food processing segment includes the
processing and sales of sausage and related food products to distributors and
retailers in the Louisiana, Texas, Kentucky and other surrounding states. The
food distribution segment includes the purchasing, marketing and distribution of
packaged meat products to retailers and restaurants, primarily in Texas.

Summarized financial information, by business segment, for continuing operations
in 1996, 1997 and 1998 is as follows:

<TABLE>
<CAPTION>

                                                  1996                  1997                       1998
                                                  ----                  ----                       ----
<S>                                              <C>                     <C>                      <C>       
Net sales to external customers:
         Food processing                      $  12,864,437           $  22,940,688             $ 49,218,116
         Food distribution                      125,610,141             133,763,274              137,476,130
                                              -------------           -------------            -------------
                                               $138,474,578            $156,703,962             $186,694,246
                                              =============           =============            =============

Interest expense:
         Food processing                      $     573,829           $     637,832              $   315,273
         Food distribution                          425,682                 408,205                  194,083
                                              -------------           -------------            -------------
                                              $     999,511           $   1,046,037              $   509,356
                                              =============           =============            =============

Depreciation and amortization:
         Food processing                      $     447,651           $     752,620              $ 1,384,224
         Food distribution                          201,463                 241,517                  266,926
                                              -------------           -------------            -------------
                                              $     649,114           $     994,137              $ 1,651,150
                                              =============           =============            =============


Income from continuing operations before 
 income taxes:
         Food processing                      $     428,889           $    592,486             $   1,756,238 
         Food distribution                          854,214              1,209,943                 4,662,425 
                                              -------------           -------------            -------------
                                              $   1,283,103           $  1,802,429             $   6,418,663
                                              =============           =============            =============

Capital expenditures:
         Food processing                      $      76,853           $     321,309            $     820,992
         Food distribution                          133,781                  26,256                   91,808
                                              -------------           -------------            -------------
                                              $     210,634           $     347,565            $     912,800
                                              =============           =============            =============

Segment assets:
         Food processing                                              $  13,388,268            $  15,349,433
         Food distribution                                               15,808,920               26,847,133
                                                                      -------------            -------------
                                                                      $  29,197,188            $  42,196,566
                                                                      =============            =============

</TABLE>
                                                                              

The following are reconciliations of reportable segment net sales, income from
continuing operations, assets, and other significant items to the Company's
consolidated totals:

<TABLE>
<CAPTION>

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

Net sales:
<S>                                                     <C>                    <C>                   <C>
      Total net sales for reportable
        segments                                         $138,474,578           $156,703,962             $ 186,694,246
      Elimination of intersegment
        net sales                                          (4,596,344)            (5,655,312)               (5,876,746)
                                                         ------------           ------------             -------------
         Total consolidated net sales                    $133,878,234           $151,048,650             $ 180,817,500
                                                         ============           ============             =============

</TABLE>




                                      F-20
<PAGE>   46

<TABLE>
<CAPTION>


                                                              1996                  1997                       1998
                                                              ----                  ----                       ----
<S>                                                        <C>                    <C>                   <C>
Income from continuing operations before income taxes:
      Total income for reportable segments                $ 1,283,103             $ 1,802,429             $  6,418,663
      Corporate                                           (1,171,653)             (1,288,171)              (4,149,260)
         Total consolidated income                         ----------              ----------             ------------
           from continuing operations                     $   111,450              $  514,258             $  2,269,403
                                                           ==========              ==========             ============


Assets:
      Total assets for reportable segments                                        $29,197,188             $ 42,196,566
      Corporate                                                                       878,015                2,228,227
      Net assets of discontinued                                                      
        operations                                                                  3,169,420                1,240,276
                                                                                  -----------             ------------
         Consolidated total assets                                                $33,244,623             $ 45,665,069
                                                                                  ===========             ============

Other significant items:

    Interest expense
      Total interest expense for reportable segments       $  999,511              $1,046,037              $   509,356
      Corporate                                               120,943                 449,118                1,696,575
                                                           ----------              ----------              -----------
      Consolidated interest expense                        $1,120,454              $1,495,155              $ 2,205,931
                                                           ==========              ==========              ===========
    Depreciation and amortization
      Total depreciation and amortization for 
       reportable segments                                 $  649,114              $  994,137              $ 1,651,150
      Corporate                                                44,401                  46,859                   12,279
                                                           ----------              ----------              -----------
      Consolidated depreciation and amortization           $  693,515              $1,040,996              $ 1,663,429
                                                           ==========              ==========              ===========
    Capital expenditures
      Total capital expenditures
        for reportable segments                            $  210,634              $  347,565              $   912,800
      Corporate and other                                     (50,752)                 28,272                  (24,022)
                                                           ----------              ----------              -----------
      Consolidated capital expenditures                    $  159,882              $  375,837              $   888,778
                                                           ==========              ==========              ===========
</TABLE>

17. CONTINGENCIES:

Lawsuits and claims are filed against the Company from time to time in the
ordinary course of business. These actions are in various preliminary stages,
and no judgments or decisions have been rendered by hearing boards or courts.
Management, after reviewing developments to date with legal counsel, is of the
opinion that the outcome of such matters will not have a material adverse effect
on the Company's financial position or results of operations.

18. PRIVATE PLACEMENTS:

During March 1996, the Company raised approximately $2.8 million in cash, net of
expenses, through the private sale of approximately 2.8 million shares of its
common stock. These shares are subject to certain restrictions regarding their
resale.

During July 1997, the Company raised approximately $2.4 million in cash, net of
expenses, through the private sale of approximately one million shares of its
common stock. These shares are subject to certain restrictions regarding their
resale.

19. ACCRUED EXPENSES:

Accrued expenses consist of the following at December 31:

<TABLE>
<CAPTION>                                                                             1997                   1998
                                                                                      ----                   ----
<S>                                                                                   <C>                    <C>
Compensation and benefits                                                             299,269                1,464,777
Liabilities related to beverage division
   disposal, not assumed by buyers                                                         --                1,297,876    
Acquisition-related accrued liabilities                                                    --                  750,000
Other                                                                                 158,072                1,089,637
                                                                                   ----------            -------------
Total                                                                              $  457,341            $   4,602,290
                                                                                   ==========            =============
</TABLE>



                                     F-21

<PAGE>   47


                                INDEX TO EXHIBITS

Exhibit
Number   Description
------   -----------

3.1      Certificate of Incorporation of the Company, including all amendments
         thereto (9)

3.2      By-Laws of the Company (1)

4.1      Specimen Stock Certificate (1)

4.2      Registration Rights Agreement between T. Rowe Price Strategic Partners
         Fund, L.P. and the Company (1)

4.3      Stock Option Plan (1)

4.4      Amendment dated as of April 15, 1998 to the Company's Stock Option Plan
         (8)

4.5      Atlantic Premium Brands, Ltd. Employee Stock Purchase Plan dated
         November 1, 1997 (2)

4.6      $1.4 million Subordinated Note made by ABEV Acquisition Corp. in favor
         of Franklin Roth and Allen Pauly (4)

4.7      6.35% Subordinated Non-Negotiable Promissory Note due July 31, 2001
         made by Richards Cajun Foods Corp. and the Company in favor of J.L.
         Richard in the original principal amount of $850,000 (6)

4.8      8% Subordinated Non-Negotiable Promissory Note due September 30, 2001
         made by Grogan's Merger Corp. in favor of Bobby L. Grogan and Betty R.
         Grogan in the original principal amount of $219,593 (6)

4.9      8% Subordinated Non-Negotiable Promissory Note due December 31, 2003
         made by Grogan's Farm, Inc. in favor of Jefferson Davis and Roger Davis
         in the original principal amount of $219,593 (6)

4.10     Secured Promissory Note dated as of March 20, 1998 of the Company and
         certain of its subsidiaries payable to Fleet Capital Corporation in the
         original principal amount of $11,000,000 (6)

4.11     Loan and Security Agreement dated as of March 20, 1998 among Fleet
         Capital Corporation, the Company and certain of its subsidiaries (6)

4.12     Stock Pledge Agreement dated as of March 20, 1998 between the Company
         and Fleet Capital Corporation (6)

4.13     Atlantic Premium Brands, Ltd. and Subsidiaries Senior Subordinated Note
         and Warrant Purchase Agreement dated as of March 20, 1998 among the
         Company, certain of its subsidiaries and Banc One Capital Partners, LLC
         ("Banc One") (6)

4.14     Senior Subordinated Note due March 31, 2005 of the Company payable to
         Banc One dated as of March 20, 1998 in the original principal amount of
         $6,500,000 (6)

4.15     Atlantic Premium Brands, Ltd. Warrant Certificate Common Stock Purchase
         Warrant of Banc One dated as of March 20, 1998 (6)

4.16     Atlantic Premium Brands, Ltd. Warrant Certificate Contingent Common
         Stock Purchase Warrant of Banc One dated as of March 20, 1998 (6)

4.17     Put Option Agreement dated as of March 20, 1998 between the Company and
         Banc One (6)

4.18     Registration Rights Agreement dated as of March 20, 1998 between the
         Company and Banc One (6)

4.19     Shareholders Agreement dated as of March 20, 1998 among the Company,
         certain of its Shareholders and Banc One (6)

4.20     Preemptive Rights Agreement dated as of March 20, 1998 between the
         Company and Banc One (6)

4.21     Debt Subordination Agreement dated as of March 20, 1998 among Banc One
         Capital Partners, LLC, the Company, certain of its subsidiaries and
         Fleet Capital Corporation (6)


<PAGE>   48

4.22     Lien Subordination Agreement dated as of March 20, 1998 between Fleet
         Capital Corporation and Banc One Capital Partners, LLC (6)

10.1     Non-Compete and Non-Disclosure Agreement dated September 24, 1993 among
         the Company, Sterling Group, Inc., Eric D. Becker, Steven M. Taslitz,
         Douglas L. Becker and R. Christopher Hoehn-Saric (1)

10.2     Consulting Agreement dated March 15, 1996 by and between the Company,
         Sterling Advisors, L.P. and Elfman Venture Partners, Inc. (3)

10.3     Amendment to Consulting Agreement dated as of October 16, 1996 among
         the Company, Sterling Advisors, L.P. and Elfman Venture Partners, Inc.
         (6)

10.4     Second Amendment to Consulting Agreement dated as of September 7, 1997
         among the Company, Sterling Advisors, L.P. and Elfman Venture Partners,
         Inc. (6)

10.5     Third Amendment to Consulting Agreement dated as of December 1, 1998 
         among the Company, Sterling Advisors, L.P. and Elfman Venture 
         Partners, Inc. (*)

10.6     Form of Tax Indemnification Agreement (1)

10.7     Stock Purchase Agreement dated as of January 23, 1996 among the
         Company, ABEV Acquisition Corp., Franklin Roth and Allen Pauly (4)

10.8     Asset Purchase Agreement dated as of March 6, 1998 among Potter's
         Acquisition Corp., J.C. Potter Sausage Company, Potter's Farm, Inc.,
         Potter Rendering Co. and Potter Leasing Company, Ltd. (6)

10.9     Asset Purchase Agreement dated as of November 24, 1998 between the
         Company and Canadry Dry Potomac Corporation (10)

10.10    Asset Purchase Agreement dated February 2, 1999 between the Company and
         Master Distributors, Inc. (10)

10.11    Employment Agreement dated October 29, 1996 between the Company and
         Alan F. Sussna (5)

10.12    Employment Agreement dated as of April 6, 1998 between the Company and
         Thomas M. Dalton (7)

10.13    Employment Agreement dated August 10, 1998 between the Company and
         Steven Englander (9)

21       Subsidiaries of the Company (6)

23.1     Consent of KPMG LLP (*)

23.2     Consent of Arthur Andersen LLP (*)

27       Financial Data Schedule (*)

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

*        Filed herewith.

(1)      Filed as an exhibit to the Company's Registration Statement No.
         33-69438 or the amendments thereto and incorporated herein by
         reference.

(2)      Filed as an exhibit to the Company's Form S-8 Registration Statement
         No. 333-39561 and incorporated herein by reference.

(3)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
         the quarter ended March 31, 1996 and incorporated herein by reference.

(4)      Filed as an exhibit to the Company's Current Report on Form 8-K dated
         March 15, 1996, filed with the Securities and Exchange Commission on
         April 1, 1996, and incorporated herein by reference.

(5)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
         the quarter ended September 30, 1996 and incorporated herein by
         reference.

(6)      Filed as an exhibit to the Company's Annual Report on Form 10-K for the
         year ended December 31, 1997, and incorporated herein by reference.

(7)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
         the quarter ended March 31, 1998, and incorporated herein by reference.

(8)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
         the quarter ended June 30, 1998, and incorporated herein by reference.

(9)      Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for
         the quarter ended September 30, 1998, and incorporated herein by
         reference.

(10)     Filed as an exhibit to the Company's Current Report on Form 8-K dated
         February 2, 1999, filed with the Securities and Exchange Commission on
         February 16, 1999, and incorporated herein by reference.