UNITED STATES
                       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, 2000

                             THE MORGAN GROUP, INC.

                              2746 Old U.S. 20 West
                             Elkhart, Indiana 46514
                                 (219)295-2200
                         Commission File Number 1-13586

             Delaware                             22-2902315
     (State of Incorporation)        (I.R.S. Employer Identification Number)

           Securities Registered Pursuant to Section 12(b) of the Act:

                             American Stock Exchange
                     Class A common stock, without par value

           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 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 issuer's voting stock held by  non-affiliates,
as of March 26, 2001 was  $3,105,000.  The number of shares of the  Registrant's
Class A common  stock $.015 par value and Class B common  stock $.015 par value,
outstanding as of March 26, 2001, was 1,248,157  shares,  and 1,200,000  shares,
respectively.


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2001 Annual Meeting of Stockholders  are
incorporated into Part III of this report.

<PAGE>
Part I

Item 1.  BUSINESS

Overview

The Morgan Group, Inc. (the "Company" or "Registrant") , a Delaware corporation,
is the nation's  largest publicly owned service company in managing the delivery
of manufactured  homes,  commercial  vehicles and  specialized  equipment in the
United  States,  and through its wholly owned and principal  subsidiary,  Morgan
Drive Away,  Inc.  ("Morgan"),  has been operating  since 1936. The Company is a
subsidiary of Lynch Interactive Corporation, which formed the Company in 1988 to
acquire Morgan and Interstate  Indemnity  Company  ("Interstate"),  an insurance
subsidiary. The Company offers financing to independent  owner-operators through
Morgan Finance,  Inc.  ("Finance").  The Company provides services to the Driver
Outsourcing industry through its subsidiary Transfer Drivers, Inc. ("TDI").

The Company primarily  provides  outsourcing  transportation  services through a
national  network  of  approximately   1,023  independent   owner-operators  and
approximately  1,410 other drivers.  The Company  dispatches its drivers from 74
locations in 28 states.  The Company's  largest  customers include Oakwood Homes
Corporation,  Fleetwood Enterprises, Inc., Champion Enterprises, Inc., Winnebago
Industries,  Inc.,  Cavalier  Homes,  Inc.,  Clayton Homes,  Inc.,  Four Seasons
Housing, Inc., Thor Industries, Inc., Holiday Rambler and Damon Corporation.

The Company  also  provides  certain  insurance  and  financing  services to the
independent  owner-operators  through its  insurance  and finance  subsidiaries,
Interstate and Finance, respectively.

As further described below, the Company's  strategy is to grow through expansion
in the niche businesses already being serviced, along with pursuing acquisitions
or joint ventures in related industries.  In addition,  the Company will look to
expand  insurance  product  offerings  to drivers  and  owner-operators  through
Interstate.

The  Company's  principal  office is located at 2746 Old U.S. 20 West,  Elkhart,
Indiana 46514-1168.

<PAGE>

Company Services

The Company operates in these business segments:  Manufactured  Housing,  Driver
Outsourcing, Specialized Outsourcing Services, and Insurance and Finance.

     o    Manufactured  Housing  Segment.  The largest  portion of the Company's
          operating  revenues is derived  from  transportation  of  manufactured
          housing,  primarily new manufactured homes,  modular homes, and office
          trailers. A manufactured home is an affordable housing alternative. In
          addition,  Manufactured Housing transports used manufactured homes and
          offices for individuals, businesses, and the U.S. Government. Based on
          industry  shipment  data  available  from  the  Manufactured   Housing
          Institute ("MHI"), and the Company's knowledge of the industry and its
          principal  competitors,  the  Company is the  largest  transporter  of
          manufactured  homes in the United States.  Manufactured  Housing ships
          products through approximately 749 independent owner-operators driving
          specially  modified  semi-tractors  referred to as "toters," which are
          used to reduce  combined  vehicle  length.  The number of  independent
          owner-operators decreased approximately 26% in 2000 principally due to
          the decrease in shipments.  Makers of manufactured  housing  generally
          ship  their  products  no more than a few  hundred  miles  from  their
          production facilities.  Therefore,  to serve the regional structure of
          this industry, the Company positions its dispatch offices close to the
          production facilities it is serving and are substantially dedicated to
          serving   such   facilities.   The  Company   reduced  its  number  of
          manufacturing  housing  dispatch  offices  in  2000  by 18  locations,
          primarily  due to  plant  closure  and  internal  consolidation.  Most
          manufactured housing units, when transported, require a special permit
          prescribing  the time and  manner of  transport  for  over-dimensional
          loads. See Item 1. Business - Forward-Looking  Discussion. The Company
          obtains the permits required for each shipment from each state through
          which the shipment will pass.

          In 2000, for the second  consecutive  year, the  manufactured  housing
          industry  experienced a decline in shipments and production.  Industry
          production  by  the   manufactured   housing   industry   (considering
          double-wide  homes  as  two  shipments)  in  the  U.S.   decreased  by
          approximately  26% to 426,000 in 2000 from 574,000 in 1999, after a 5%
          decrease  in 1999  according  to data from the MHI.  The  Manufactured
          Housing  industry  continues  to suffer  from the  combined  impact of
          tightened consumer credit standards,  increased industry repossessions
          and  excess   inventory.   The  Company   believes   that   affordable
          manufactured  housing over the long-term should continue to grow along
          with the general  economy,  especially when employment  statistics and
          consumer  confidence  remain strong.  There is no assurance,  however,
          that manufactured housing production will increase.

     o    Driver Outsourcing  Segment.  The Driver Outsourcing  segment provides
          outsourcing  transportation  services  primarily to  manufacturers  of
          recreational  vehicles,   commercial  trucks,  and  other  specialized
          vehicles  through a network of service centers in nine states.  Driver
          outsourcing  engages the services of  approximately  1,410 drivers who
          are outsourced to customers to deliver the vehicles.  In 2000,  Driver
          outsourcing  delivered  approximately  36,900 units through the use of
          these  drivers.  While the number of deliveries  decreased,  operating
          revenue per unit delivered increased in 2000.

     o    Specialized  Outsourcing Services Segment. The Specialized Outsourcing
          Services  segment  consists  of large  trailer  ("Towaway")  delivery,
          travel and other  small  trailer  ("Pick-up")  delivery.  The  Towaway
          operation moved approximately 8,250 large trailers in 2000 compared to
          14,600 large  trailers in 1999,  primarily the result of a shortage in
          independent  owner-operator  availability.  As of December  31,  2000,
          Towaway   had   contracts    with    approximately    85   independent
          owner-operators  who drive  semi-tractors  compared to 144 independent
          owner-operators  in 1999.  As of December 31,  2000,  travel and other
          small  trailers  are  delivered  by  183  independent  owner-operators
          utilizing pickup trucks compared to 161 independent owner-operators in
          1999.

     o    Insurance  and Finance  Segment.  The  Insurance  and Finance  segment
          provides   insurance  and  financing  to  the  Company's  drivers  and
          independent  owner-operators.   Interstate,  the  Company's  insurance
          subsidiary,  may accept a limited  portion or all of the  underwriting
          risk,  retaining the  appropriate  proportion  of the  premiums.  This
          segment  administers  the cargo,  bodily  injury and  property  damage
          insurance programs.


Selected Operating and Industry Participation Information

The following tables set forth operating information and industry  participation
with respect to the manufactured  housing,  driver outsourcing,  and specialized
outsourcing  services  segments  for each of the five years ended  December  31,
2000.

<TABLE>
<CAPTION>

                                                                      Years Ended December 31,
Manufactured Housing
--------------------
  Operating Information:                          2000          1999           1998           1997           1996
                                                  ----          ----           ----           ----           ----

<S>                                            <C>           <C>            <C>            <C>            <C>
New home shipments                             102,463       148,019        161,543        154,389        121,136
Other shipments                                 13,031        11,871         17,330         24,144         23,465
                                              --------      --------       --------       --------       --------
Total shipments                                115,494       159,890        178,873        178,533        144,601

Linehaul revenues (in thousands)  (1)          $62,526       $88,396        $94,158        $93,092        $72,616

  Industry Participation:

Industry production (2)                        425,919       573,629        601,678        558,435        553,133
New home shipments                             102,463       148,019        161,543        154,389        121,136
Shares of units produced                         24.1%         25.8%          26.8%          27.6%          21.9%

Driver Outsourcing
------------------
  Operating Information:

Shipments                                       36,883        49,892         44,177         45,447         58,368
Linehaul revenues (in thousands)               $21,336       $23,748        $19,979        $19,706        $23,090

Specialized Outsourcing Services
--------------------------------
  Operating Information:

Shipments                                       29,215        32,967         38,167         34,867         41,255
Linehaul revenues (in thousands)               $15,304       $21,115        $23,015        $19,630        $26,169
</TABLE>


(1)  Linehaul revenue is derived by multiplying the miles of a given shipment by
     the stated mileage rate.

(2)  Based on reports of MHI.  To  calculate  shares of new homes  shipped,  the
     Company assumes two unit shipments for each multi-section home.

New home shipments  decreased 31% during 2000 as compared to an overall industry
production reduction of 26%. The Company believes it lost market share primarily
because of lower pricing by its competitors.
<PAGE>

Additional  financial  information  about the  business  segments is included in
Management's  Discussion  and  Analysis of Financial  Conditions  and Results of
Operations and in Note 9 of the Notes to the Consolidated  Financial  Statements
included in Item 8.



Growth Strategy

The  Company's  strategy is to focus on its core  transportation  services.  The
Company will also look for opportunities to capitalize and/or grow its market in
Manufactured  Housing and Driver Outsourcing through  acquisitions,  if suitable
opportunities arise. To enhance its profitability, the Company is continuing the
process of reducing its overhead costs.

     o    Manufactured   Housing.  The  Company  believes  it  can  take  better
          advantage of its position in the manufactured housing industry and its
          relationship   with   manufacturers,    retailers,   and   independent
          owner-operators,  by  expanding  the  services  it offers  within  its
          specialized business. As the nation's largest service company managing
          the  delivery of  manufactured  homes,  Morgan will also pursue  other
          national contracts with manufacturers.  The Company will also continue
          to pursue opportunities to offer new services and consider acquisition
          opportunities.

     o    Driver  Outsourcing.  The Company has  focused its  operations  in two
          broad  markets,   recreational  and  commercial  vehicles.  Given  the
          softness in the recreational vehicle industry,  the Company is looking
          to expand its growth in the delivery of commercial  vehicles,  such as
          school buses, ambulances,  dump trucks and shuttle buses. In addition,
          the Company has strengthened  its sales and marketing staff.  Morgan's
          growth  strategy  within this  market  includes  expanding  its market
          position in this highly fragmented delivery transportation market. The
          future growth rate of the Company's  outsourcing business is dependent
          upon  continuing  to add major  vehicle  customers  and  expanding the
          Company's driver force.

     o    Specialized Outsourcing Services. The Company believes it can grow its
          Towaway  business by  increasing  the number of available  drivers and
          through the use of  transportation  brokers.  The Company has not been
          able to take full  advantage of large trailer  delivery  opportunities
          because it did not have a sufficient  number of towaway drivers or its
          drivers were not in the necessary locations. Additionally, the Company
          continues  to  develop  other  market  opportunities  for the  Pick-up
          portion of this segment.

     o    Acquisitions/Joint  Ventures. The Company is continuously  considering
          acquisition opportunities. The Company may consider acquiring regional
          or national  firms that service the  manufactured  housing  and/or the
          outsourcing industry as well as logistics,  transportation, or related
          industries.   The   Company   is   continually   reviewing   potential
          acquisitions  and  joint  venture  opportunities  and  is  engaged  in
          negotiations  from time to time.  There can be no  assurance  that any
          future transactions will be effected.

  Forward-Looking Discussion

In 2001, the Company could benefit from further  reduction of overhead costs and
an improvement of its safety record.  While the Company remains  optimistic over
the long term,  near term results  could be affected by a number of internal and
external economic conditions.

This report  contains a number of  forward-looking  statements,  including those
contained in the  preceding  paragraph  and the  discussion  of growth  strategy
above.  From  time  to  time,  the  Company  may  make  other  oral  or  written
forward-looking  statements regarding its anticipated operating revenues, costs,
expenses,  earnings and matters  affecting its condition  and  operations.  Such
forward-looking  statements  are subject to a number of material  factors  which
could cause the  statements  or  projections  contained  herein or therein to be
materially inaccurate. Such factors include, without limitation, the following:
<PAGE>

     o    Dependence on Manufactured Housing.  Shipments of manufactured housing
          have  historically   accounted  for  a  substantial  majority  of  the
          Company's operating revenues.  Therefore,  the Company's prospects are
          substantially dependent upon this industry,  which is subject to broad
          production cycles. Currently,  manufactured housing is experiencing an
          industry-wide decline in shipments,  which is having an adverse impact
          on the Company's operating revenues and profitability.

     o    Costs of Accident Claims and Insurance. Traffic accidents occur in the
          ordinary  course of the Company's  business.  Claims arising from such
          accidents can be significant. Although the Company maintains liability
          and  cargo  insurance,  the  number  and  severity  of  the  accidents
          involving the Company's  independent  owner-operators  and drivers can
          have  significant  adverse effect on the  profitability of the Company
          through premium  increases and amounts of loss retained by the Company
          below deductible  limits or above its total coverage.  There can be no
          assurance  that the  Company  can  continue  to  maintain  its present
          insurance  coverage  on  acceptable  terms  nor  that the cost of such
          coverage will not increase significantly.

     o    Customer Contracts and Concentration.  Historically, a majority of the
          Company's  operating  revenues have been derived under  contracts with
          customers.  Such  contracts  generally  have one,  two,  or three year
          terms.  There is no assurance that customers will agree to renew their
          contracts  on  acceptable  terms  or on terms  as  favorable  as those
          currently in force. The Company's top ten customers have  historically
          accounted for a majority of the Company's operating revenues. The loss
          of one or more of these  significant  customers could adversely affect
          the Company's  results of operations.  A number of the Company's major
          customers  are  experiencing  financial  difficulty as a result of the
          softness in the manufactured housing and recreational vehicle markets.

     o    Competition  for  Qualified  Drivers.  Recruitment  and  retention  of
          qualified   drivers   and   independent   owner-operators   is  highly
          competitive.  The Company's contracts with independent owner-operators
          are  terminable  by  either  party on ten  days'  notice.  There is no
          assurance  that the Company's  drivers will continue to maintain their
          contracts  in force  or that the  Company  will be able to  recruit  a
          sufficient  number of new drivers on terms similar to those  presently
          in force. The Company may not be able to engage a sufficient number of
          new  drivers  to meet  customer  shipment  demands  from time to time,
          resulting  in loss of  operating  revenues  that  might  otherwise  be
          available to the Company.

     o    Independent  Contractors,  Labor  Matters.  From  time  to  time,  tax
          authorities have sought to assert that independent  contractors in the
          transportation service industry are employees, rather than independent
          contractors.  Under existing  interpretations of federal and state tax
          laws, the Company  maintains that its independent  contractors are not
          employees.  There can be no assurance  that tax  authorities  will not
          challenge  this  position,  or that  such tax laws or  interpretations
          thereof  will  not  change.   If  the  independent   contractors  were
          determined  to  be  employees,  such  determination  could  materially
          increase the Company's tax and workers' compensation exposure.

     o    Risks of Acquisitions and Expansions.  The Company has sought and will
          continue to seek favorable  acquisition  opportunities.  Its strategic
          plans may also  include the  initiation  of new  services or products,
          either directly or through  acquisition,  within its existing business
          lines or which complement its business. There is no assurance that the
          Company will be able to identify favorable  acquisition  opportunities
          in the  future.  There  is no  assurance  that  the  Company's  future
          acquisitions  will be  successfully  integrated into its operations or
          that they will prove to be  profitable  for the Company.  Such changes
          could have a material adverse effect on the Company.

     o    Seasonality and General Economic Conditions.  The Company's operations
          have  historically  been  seasonal,  with generally  higher  operating
          revenues  generated in the second and third quarters than in the first
          and fourth quarters.  A smaller percentage of the Company's  operating
          revenues  are  generated in the winter  months in areas where  weather
          conditions  limit  highway  use.  The  seasonality  of  the  Company's
          business may cause a significant  variation in its quarterly operating
          results.  Additionally,  the  Company's  operations  are  affected  by
          fluctuations  in  interest  rates  and the  availability  of credit to
          purchasers of manufactured  homes and recreational  vehicles,  general
          economic conditions, and the availability and price of motor fuels.
<PAGE>

     o    Availability of Credit  Facilities.  The Company requires  significant
          credit facilities from independent  financial  institutions to support
          its working capital needs and to provide letters of credit required by
          its insurance  arrangements.  The availability and sufficiency of such
          credit  facilities  depends on the Company's  financial  condition and
          operating  performance,   which  is  affected  by  the  other  factors
          described  herein,  as well as the  willingness  of lenders to provide
          credit support in the transportation and manufacturing housing sector.

Customers and Marketing

The Company's customers  requiring delivery of manufactured homes,  recreational
vehicles,  commercial  trucks,  and specialized  vehicles are located in various
parts of the United States. The Company's largest manufactured housing customers
include  Oakwood  Homes  Corporation,   Fleetwood  Enterprises,  Inc.,  Champion
Enterprises,  Inc.,  Cavalier  Homes,  Inc.,  Clayton Homes,  Inc., Four Seasons
Housing, Inc., Scotsman, and Commodore Corporation. The Company's largest Driver
Outsourcing customers include Winnebago Industries, Inc., Thor Industries, Inc.,
Damon Corporation and Utilimaster. The Company's largest Specialized Outsourcing
Services customers include Fleetwood  Enterprises,  Inc.,  Keystone RV and North
American Van Lines, Inc. While most  manufacturers  rely solely on carriers such
as the Company,  other manufacturers  operate their own equipment and may employ
outside carriers on a limited basis.

The Company's  operating  revenues are comprised  primarily of linehaul revenues
derived by multiplying the miles of a given shipment by the stated mileage rate.
Operating  revenues  also include  charges for permits,  insurance,  escorts and
other items.  A  substantial  portion of the  Company's  operating  revenues are
generated under one, two, or three-year contracts with producers of manufactured
homes,  recreational vehicles,  and the other products. In these contracts,  the
manufacturers   agree  that  a  specific   percentage  (up  to  100%)  of  their
transportation service requirements from a particular location will be performed
by the Company on the basis of a prescribed  rate  schedule,  subject to certain
adjustments  to  accommodate  increases in the Company's  transportation  costs.
Linehaul revenues generated under customer contracts in 2000, 1999 and 1998 were
69%, 71%, and 64% of total linehaul revenues, respectively.

The  Company's  ten  largest  customers  all have been served for at least three
years and accounted for approximately  67%, 68% and 69% of its linehaul revenues
in 2000,  1999 and 1998,  respectively.  Linehaul  revenues  under contract with
Fleetwood Enterprises,  Inc.  ("Fleetwood"),  accounted for over 15% of linehaul
revenues in 2000.  Linehaul revenues with Oakwood Homes Corporation  ("Oakwood")
accounted for over 20% of linehaul revenues in 2000. The Fleetwood  Manufactured
Housing contract is continuous except that it may be terminated upon thirty (30)
day written notice by either party if the other party has  repeatedly  failed to
perform,  persistently disregarded applicable laws or regulations,  or otherwise
committed a  substantial  violation of the  contract.  The Oakwood  manufactured
housing contract is renewed annually.  The Company has been servicing  Fleetwood
for over 25 years and Oakwood  for over ten years.  Most  contracts  provide for
scheduled rate increases  based upon regional fuel prices.  These  increases are
generally passed on to the independent owner-operators who purchase fuel.

The Company  markets and sells its  services  through 74 locations in 28 states,
concentrated  where  manufactured  housing and recreational  vehicle  production
facilities  are located.  Marketing  support  personnel  are located both at the
Company's  Elkhart,  Indiana  headquarters and regionally.  Dispatch offices are
supervised by regional offices.

The Company has 22 dispatch offices each devoted  primarily to a single customer
facility.  This allows the dispatching agent and local personnel to focus on the
needs of each  individual  customer while  remaining  supported by the Company's
nationwide operating  structure.  Sales personnel at regional offices and at the
corporate headquarters meet periodically with manufacturers to review production
schedules, requirements and maintain contact with customers' shipping personnel.
Senior  Management  maintains  personal  contact with corporate  officers of the
Company's  largest  customers.  Regional  and  terminal  personnel  also develop
relationships with manufactured home park owners,  retailers,  finance companies
and others to promote the Company's  shipments of used  manufactured  homes. The
Company also  participates  in industry  trade shows  throughout the country and
advertises in trade magazines, newspapers, and telephone directories.

Independent Owner-Operators

The  shipment of product by  Manufactured  Housing and  Specialized  Outsourcing
Services is conducted by contracting for the use of the equipment of independent
owner-operators.

Owner-operators are independent  contractors who own toters, tractors or pick-up
trucks,  which they  contract  to, and operate  for,  the Company on a long-term
basis.  Independent  owner-operators  are not  generally  approved to  transport
commodities  on their own in  interstate or  intrastate  commerce.  The Company,
however,  possesses such approvals  and/or  authorities  (see Item 1. Business -
Forward-Looking Discussion), and provides marketing,  insurance,  communication,
administrative, and other support required for such transportation.

The  Company   attracts   independent   owner-operators   mainly  through  field
recruiters,  trade magazines,  referrals, and truck stop brochures.  Recruitment
and  retention of qualified  drivers is highly  competitive  and there can be no
assurance  that the  Company  will be able to  attract  a  sufficient  number of
qualified, independent owner-operators in the future.

The contract between the Company and each  owner-operator  can be cancelled upon
ten days' notice by either party.  The weighted average length of service of the
Company's current independent owner-operators is approximately 4.0 years in 2000
and 3.5 years in 1999. At December 31, 2000, 1,023  independent  owner-operators
were under contract to the Company, including 749 operating toters, 91 operating
semi-tractors, and 183 operating pick-up trucks.

In Manufactured Housing,  independent  owner-operators utilizing toter equipment
tend  to  exclusively  transport   manufactured  homes.  Once  modified  from  a
semi-tractor,  a toter has limited  applications  for hauling  general  freight.
Toter drivers are, therefore,  unlikely to be engaged by transport firms that do
not specialize in manufactured  housing.  This gives the Company an advantage in
retaining toter independent owner-operators. The average tenure with the Company
of its toter  independent  owner-operators  is 4.7 years in 2000 compared to 3.9
years in 1999.

In Specialized Outsourcing Services,  Morgan is competing with national carriers
for  the  recruitment  and  retention  of  independent  owner-operators  who own
semi-tractors.  The  average  length of  service  of the  Company's  independent
owner-operators  is  approximately  2.1 years in 2000,  compared to 2.3 years in
1999. During 2000, the number of owner- operators  providing services to Towaway
declined, while the number of owner-operators driving pick-ups increased.

Independent  owner-operators  are generally  compensated  for each trip on a per
mile basis. Independent  owner-operators are responsible for operating expenses,
including fuel,  maintenance,  lodging,  meals, and certain insurance coverages.
The Company provides required permits,  cargo and liability  insurance (coverage
while  transporting  goods  for the  Company),  and  communications,  sales  and
administrative  services.  Independent  owner-operators,  except  for  owners of
certain pick-up trucks, are required to possess a commercial drivers license and
to meet and maintain  compliance  with  requirements  of the U.S.  Department of
Transportation and standards established by the Company.

From time to time,  tax  authorities  have  sought to  assert  that  independent
owner-operators in the trucking industry are employees,  rather than independent
contractors.  No such tax claims  have been  successfully  made with  respect to
independent owner-operators of the Company. Under existing industry practice and
interpretations  of federal and state tax laws, as well as the Company's current
method of operation,  the Company believes that its independent  owner-operators
are not employees.  Whether an  owner-operator  is an independent  contractor or
employee is, however, generally a fact-sensitive  determination and the laws and
their  interpretations  can vary from state to state.  There can be no assurance
that tax authorities will not successfully challenge this position, or that such
tax  laws  or  interpretations  thereof  will  not  change.  If the  independent
owner-operators  were  determined  to be  employees,  such  determination  could
materially  increase the  Company's  employment  tax and  workers'  compensation
exposure.

Driver Outsourcing

The  Company  utilizes  both  independent   contractors  and  employees  in  its
outsourcing  operations.  The  Company  outsources  its over 1,410  drivers on a
trip-by-trip  basis  for  delivery  to  retailers  and  rental  truck  agencies,
recreational and commercial vehicles,  such as buses,  tractors,  and commercial
vans.  These  individuals  are  recruited  through  driver   recruiters,   trade
magazines, brochures, and referrals. Prospective drivers are required to possess
at least a  chauffeur's  license  and are  encouraged  to  obtain  a  commercial
driver's license.  They must also meet and maintain compliance with requirements
of the U.S.  Department  of  Transportation  and  standards  established  by the
Company.  Outsourcing drivers are utilized as needed, depending on the Company's
transportation volume and driver availability. Outsourcing drivers are paid on a
per mile basis. The driver is responsible for most operating expenses, including
fuel, return travel,  lodging,  and meals. The Company provides licenses,  cargo
and liability insurance, communications, sales, and administrative services.


Agents and Employees

The Company  has  approximately  83 terminal  managers  and  assistant  terminal
managers who are involved directly with the management of equipment and drivers.
Of these 83 staff,  approximately  67 are full-time  employees and the remainder
are independent  contractors who earn  commissions.  The terminal  personnel are
responsible for the Company's  terminal  operations  including safety,  customer
relations,  equipment assignment,  and other matters. Because terminal personnel
develop close relationships with the Company's customers and drivers,  from time
to time the Company has suffered a terminal personnel defection, following which
the former staff has sought to exploit such  relationships  in competition  with
the Company.  The Company does not expect that future defections,  if any, would
have a material affect on its operations. In addition to the terminal personnel,
the Company employs approximately 190 full-time employees.  The Company also has
5  full-time  employee  drivers  in  Manufactured   Housing  and  11  in  Driver
Outsourcing.

Seasonality

Shipments of  manufactured  homes tend to decline in the winter  months in areas
where poor weather conditions inhibit transport.  This usually reduces operating
revenues in the first and fourth  quarters of the year. The Company's  operating
revenues, therefore, tend to be stronger in the second and third quarters.

Risk Management, Safety and Insurance

The  risk  of  losses  arising  from  traffic   accidents  is  inherent  in  any
transportation business. The Company carries personal injury and property damage
insurance  with a deductible  of $250,000 per  occurrence  except for the period
from April 1, 1998 to March 31, 1999,  which had a deductible  of $150,000.  The
Company has  obtained,  but has not  activated a  self-insurance  authority  for
personal injury and property  damage  coverage of up to $1,000,000.  The Company
maintains  cargo damage  insurance with a deductible of $1,000,000 from April 1,
1999 to July 1, 2001,  and $150,000  from April 1, 1998 to March 31,  1999,  and
$250,000 for prior periods. The insurance policy for the period of April 1, 1998
to March 31, 1999 included a stop-loss provision.  The frequency and severity of
claims under the Company's  liability insurance affects the cost and potentially
the  availability  of  such  insurance.  If  the  Company  is  required  to  pay
substantially greater insurance premiums, or incurs substantial losses above its
insurance  coverage or below its  deductibles,  its results  could be materially
adversely  affected.  The Company  continues to review its  insurance  programs,
self-insurance  limits and excess policy  provisions.  The Company believes that
its current insurance  coverage is adequate to cover its liability risks.  There
can be no  assurance  that the  Company can  continue  to  maintain  its present
insurance coverage on acceptable terms.

The  following  table  sets forth  information  with  respect to bodily  injury,
property damage,  cargo claims, and automotive  physical damage reserves for the
years ended December 31, 2000, 1999, and 1998, respectively.

                             Claims Reserve History
                            Years Ended December 31,
                                  (in thousands)

                                 2000               1999               1998
                                 ----               ----               ----

Beginning Reserve Balance        $8,418             $8,108             $5,323
Provision for Claims              7,518              8,633              7,698
Payments, net                    (7,590)            (8,323)            (4,913)
                                 -------            -------            -------
Ending Reserve Balance           $8,346             $8,418             $8,108
                                 ======             ======             ======

The Company has driver  recognition  programs  emphasizing safety to enhance the
Company's  overall safety record.  In addition to periodic  recognition for safe
operations, the Company has implemented safe driving bonus programs. These plans
generally  reward  drivers  on an  escalating  rate  per  mile  based  upon  the
claim-free miles driven. The Company utilizes a field safety  organization which
places a dedicated safety officer at most regional  centers.  These  individuals
work towards improving safety by analyzing claims,  identifying opportunities to
reduce claims costs,  implementing preventative programs to reduce the number of
incidents,  and promoting the exchange of  information  to educate  others.  The
Company has a Director of Safety and D.O.T.  Compliance and six (6) field safety
managers.

Interstate makes available  physical damage insurance coverage for the Company's
independent owner-operators. Interstate also writes performance surety bonds for
Morgan.  The Company may also utilize its wholly-owned  insurance  subsidiary to
secure business insurance for Morgan through re-insurance contracts.

Competition

All of the Company's  activities are highly  competitive.  In addition to fleets
operated by manufacturers,  the Company competes with numerous small regional or
local  carriers  and to a  lesser  extent  with  large  national  carriers.  The
Company's  principal  competitors in the  Manufactured  Housing and  Specialized
Outsourcing Services marketplaces are privately owned. No assurance can be given
that the  Company  will be able to  maintain  its  competitive  position  in the
future.

Competition among carriers is based on the rate charged for services, quality of
service, financial strength, and insurance coverage. The availability of tractor
equipment and the possession of appropriate  registration  approvals  permitting
shipments between points required by the customer may also be influential.

Regulation

The  Company's  interstate  operations  (Morgan  and  TDI)  are now  subject  to
regulation by the Federal Motor Carrier Safety Administration ("FMCSA") which is
an agency of the United States  Department of  Transportation  ("D.O.T.").  This
jurisdiction was transferred to the D.O.T.  with the enactment of the Interstate
Commerce  Commission  Termination Act.  Effective  January 1, 1995, the economic
regulation  of certain  intrastate  operations  by various  state  agencies  was
preempted by federal law. The states continue to have jurisdiction  primarily to
insure that  carriers  providing  intrastate  transportation  services  maintain
required  insurance  coverage,  comply with applicable safety  regulations,  and
conform to regulations governing size and weight of shipments on state highways.
Most  states have  adopted the Federal  Motor  Carrier  safety  regulations  and
actively enforce them in conjunction with D.O.T. personnel.

Motor carriers  normally are required to obtain approval  and/or  authority from
the FMCSA as well as various  state  agencies.  Morgan is approved  and/or holds
authority to provide interstate and intrastate transportation services from, to,
and between all points in the continental United States.

The Company provides  services to certain specific  customers under contract and
non-contract  services to the shipping  public  pursuant to governing  rates and
charges   maintained  at  its  corporate   and  various   dispatching   offices.
Transportation  services provided pursuant to a written contract are designed to
meet a customer's specific shipping needs.

Federal  regulations govern not only operating  authority and registration,  but
also such matters as the content of agreements with independent owner-operators,
required  procedures  for  processing  of cargo  loss  and  damage  claims,  and
financial reporting.  The Company believes that it is in substantial  compliance
with all material regulations applicable to its operations.

The D.O.T. regulates safety matters with respect to the interstate operations of
the  Company.  Among  other  things,  the  D.O.T.  regulates  commercial  driver
qualifications and licensing;  sets minimum levels of financial  responsibility;
requires  carriers  to  enforce   limitations  on  drivers'  hours  of  service;
prescribes parts,  accessories and maintenance  procedures for safe operation of
commercial/motor   vehicles;   establishes   health  and  safety  standards  for
commercial motor vehicle operators;  and utilizes audits,  roadside  inspections
and  other   enforcement   procedures  to  monitor   compliance  with  all  such
regulations.  The D.O.T.  has  established  regulations  which  mandate  random,
periodic,  pre-employment,  post-accident  and reasonable cause drug testing for
commercial  drivers and similar  regulations  for alcohol  testing.  The Company
believes  that  it  is  in  substantial  compliance  with  all  material  D.O.T.
requirements applicable to its operations.

In Canada,  provincial  agencies grant both  intraprovincial and extraprovincial
authority;  the latter  permits  transborder  operations  to and from the United
States. The Company has obtained from Canadian  provincial agencies all required
extraprovincial authority to provide transborder  transportation of manufactured
homes and motor homes throughout most of Canada.

Most manufactured  homes, when being transported by a toter,  exceed the maximum
dimensions  allowed on state  highways  without a special  permit.  The  Company
obtains these permits for its independent  contractor  owner-operators from each
state which allows the Company to transport  their  manufactured  homes on state
highways.  The states and  Canadian  provinces  have  special  requirements  for
over-dimensional  loads detailing  permitted routes,  timing required,  signage,
escorts, warning lights and similar matters.

Most states and provinces also require operators to pay fuel taxes,  comply with
a variety of other state tax and/or registration requirements, and keep evidence
of such compliance in their vehicles while in transit.  The Company  coordinates
compliance with these  requirements  by its drivers and  independent  contractor
owner-operators,  and  monitors  their  compliance  with all  applicable  safety
regulations.

Interstate,   the  Company's  insurance  subsidiary,  is  an  insurance  company
incorporated under Vermont law. It is required to report annually to the Vermont
Department of Banking, Insurance, Securities, & Health Care Administration,  and
must submit to an examination by this Department on a triennial  basis.  Vermont
regulations  require  Interstate  to be  audited  annually  and to have its loss
reserves certified by an approved actuary. The Company believes Interstate is in
substantial compliance with Vermont insurance regulations.

Finance,  the Company's finance  subsidiary,  is incorporated under Indiana law.
Finance is subject to Indiana's  Equal Credit  Opportunity  Laws and other state
and federal laws relating generally to fair financing practices.

<PAGE>

Item 2.  PROPERTIES

The Company owns  approximately  24 acres of land with  improvements in Elkhart,
Indiana.  The improvements  include a 23,000 square foot office building housing
the Company's  principal  office and Manufactured  Housing;  a 7,000 square foot
building housing Specialized  Outsourcing Services; a 9,000 square foot building
used for the  Company's  safety  and  driver  service  departments.  Most of the
Company's 74 locations  are situated on leased  property.  The Company also owns
and leases  property  for  storage at various  locations  throughout  the United
States,  usually in proximity to manufacturers of products moved by the Company.
The  property  leases  have term  commitments  of a minimum of thirty days and a
maximum of three  years,  at monthly  rentals  ranging  from $10 to $6,500.  The
following table summarizes the Company's owned real property.

         Property                           Property                 Approximate
         Location                          Description                 Acreage
         --------                          -----------                 -------
Elkhart, Indiana                    Corporate and
                                    Specialized Outsourcing Services     24
Wakarusa, Indiana                   Terminal and storage                  4
Middlebury, Indiana                 Terminal and storage                 13
Mocksville, North Carolina          Terminal and storage                  8
Edgerton, Ohio                      Terminal and storage                  2
Woodburn, Oregon                    Storage                               4
Woodburn, Oregon                    Region and storage                    1
Montevideo, Minnesota               Storage                               3

The following property is owned
   and is being held for sale:

Fort Worth, Texas                   Storage                               6

Item 3.    LEGAL PROCEEDINGS

The Company and its  subsidiaries are party to litigation in the ordinary course
of business,  generally  involving  liability  claims in connection with traffic
accidents  incidental to its transport  business.  From time to time the Company
may become party to litigation  arising outside the ordinary course of business.
The Company does not expect such pending suits to have a material adverse effect
on the Company or its results of operations.

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

Not applicable.
<PAGE>

PART II

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

The Company's  common stock is traded on the American  Stock  Exchange under the
symbol MG. As of March 20, 2001,  the  approximate  number of  shareholders'  of
record of the  Company's  Class A common  stock was 125.  This  figure  does not
include shareholders with shares held under beneficial ownership in nominee name
or within  clearinghouse  position  of  brokerage  firms and banks.  The Class B
common  stock  is held of  record  by  Brighton  Communications  Corporation,  a
subsidiary of Lynch  Interactive  Corporation.  The Company in the third quarter
2000  reduced the dividend  rate.  The Company did not declare a dividend in the
fourth  quarter of 2000.  The  Company's  ability to pay dividends is limited by
covenants with its senior lenders.

Market Price of Class A common stock:

                                       2000                     1999
Quarter Ended                  High        Low          High        Low
                               ----        ---          ----        ---

March 31                       $8.50      $5.38         $9.13      $6.63
June 30                         7.88       6.13          8.75       6.75
September 30                    7.25       5.25          9.88       7.00
December 31                     6.06       3.75          7.88       5.44


Dividends Declared:

                                  Class A                           Class B
                               Cash Dividends                    Cash Dividends
                               --------------                    --------------
Quarter Ended                  2000     1999                     2000     1999

March 31                       $0.02    $0.02                    $0.01    $0.01
June 30                         0.02     0.02                     0.01     0.01
September 30                    0.01     0.02                     0.005    0.01
December 31                     0.00     0.02                     0.00     0.01

<PAGE>

Item 6.  SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>

THE MORGAN GROUP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS

(Dollars in thousands, except share amounts)

                                                2000            1999           1998           1997          1996
                                                ----            ----           ----           ----          ----
Operations
<S>                                           <C>              <C>            <C>           <C>            <C>
  Operating Revenues                          $108,024         $145,629       $150,454      $146,154       $132,208
  Operating (Loss) Income  (1)                  (2,038)             550          2,007         1,015         (3,263)
  Pre-tax (Loss) Income  (1)                    (2,348)             212          1,462           296         (3,615)
  Net (Loss) Income  (1)                        (4,799)              19            903           196         (2,070)


Net (Loss) Income Per Share:
  Basic                                         ($1.96)           $0.01          $0.35         $0.07         ($0.77)
  Diluted                                       ($1.96)            0.01           0.35          0.07          (0.77)
  Cash Dividends Declared:
      Class A                                     0.05             0.08           0.08          0.08           0.08
      Class B                                    0.025             0.04           0.04          0.04           0.04

Financial Position
  Total Assets                                 $23,269          $32,264        $33,387       $33,135        $33,066
  Working Capital                                1,063            3,189          3,806         1,613          1,635
  Long-term Debt                                   288              965          1,480         2,513          4,206
  Shareholders' Equity                           7,201           12,092         13,221        12,724         13,104


Common Shares Outstanding at Year End
                                             2,448,157        2,448,157      2,554,085     2,637,910      2,685,520
Basic Weighted Average Shares
   Outstanding                               2,448,157        2,469,675      2,606,237     2,656,690      2,684,242

</TABLE>

(1)  Includes  pre-tax  special  charges of $624,000  ($412,000  after-tax)  and
     $3,500,000 ($2,100,000 after-tax) in 1997 and 1996, respectively.


<PAGE>

Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS ($ in thousands)

Year 2000 Compared with 1999

Consolidated Results

The year  2000 was  characterized  by the  continued  downturn  in  manufactured
housing  production,   which  began  in  1999.   Industrial  production  of  new
manufactured  homes  decreased  approximately  26% in 2000. The Company was also
affected by the decline in activity in other vehicle markets the Company serves,
namely recreational  vehicles and large trailers. As a result of these declines,
Morgan revenues decreased more than 25% from 1999 levels.

To  combat  this  severe  decline  in  revenues,  the  Company,  in March  2000,
instituted  significant  cost  reduction  initiatives  in all areas with primary
focus on staff reduction and  consolidation of facilities.  The effects of these
initiatives  were  savings of $1.8  million in 2000.  It is  estimated  that the
effects of these initiatives will continue and will approximate  savings of $3.2
million in 2001. In spite of these  significant  efforts,  operating  costs as a
percentage of revenue were 102% for the year ended  December 31, 2000,  compared
to 99% in the prior year, resulting in a loss from operations of $2.0 million.

Because of the existence of significant non-cash expenses,  such as depreciation
of fixed assets and amortization of intangible assets, the Company believes that
EBITDA contributes to a better understanding of the Company's ability to satisfy
its  obligations  and to utilize cash for other  purposes.  EBITDA should not be
considered in isolation from or as a substitute for operating income,  cash flow
from  operating  activities,  and  other  consolidated  income or cash flow data
prepared in  accordance  with  generally  accepted  accounting  principles.  The
operating loss before interest,  taxes,  depreciation  and amortization  (EBITDA
loss) was $971,000 in 2000, as compared to an EBITDA of $1.8 million in 1999.

In the fourth  quarter  2000,  the  Company  recorded  non-cash  charges of $3.2
million  relating to the  valuation of deferred tax assets.  Because the Company
has a cumulative loss in its three most recent fiscal years and is in default on
its Credit  Facility (see  "Liquidity  and Capital  Resources" and Note 3 of the
Notes to Consolidated  Financial  Statement),  Management believes that with the
technical  provisions of Statement of Financial  Accounting Standard No. 109, it
would be inconsistent to rely on future taxable income to support realization of
the deferred tax assets. For additional information concerning the provision for
income taxes as well as information  regarding differences between effective tax
rates and statutory  rates,  see Note 5 of the Notes to  Consolidated  Financial
Statements.

The net loss for 2000 was $4.8  million  compared  to net  income of  $19,000 in
1999.

Segment Results

The Company  conducts its  operations  in four  principal  segments as discussed
below. The following discussion sets forth certain information about the segment
results.

Manufactured Housing

Manufactured   Housing   operating   revenues  are  generated   from   providing
transportation and logistical  services to manufacturers of manufactured  homes.
Manufactured Housing operating revenues decreased 29% from 1999 to $70.6 million
in 2000.

The Manufactured  Housing industry as a whole continued to decline in 2000, with
industry shipments down by 26%. Management believes that demand for Manufactured
Housing  in the near  term  will  continue  to be slow.  The  Company  is highly
dependent upon the manufactured  housing industry generally and on certain major
customers within that industry.  Some of the Company's customers are financially
stressed by continued weakness in the industry. The Company's unit deliveries in
Manufactured Housing declined by 31% in 2000,  indicating a loss of market share
due primarily to competitive pricing pressures.

EBITDA  decreased  $4.5 million to $5.8 million due to the decrease in business.
The  decrease in  business  was  partially  offset by the  Company's  ability to
contain its cost.  The Company  closed some  terminals due to plant closures and
consolidated  terminals  in  other  areas to serve  the  needs of more  than one
customer from a single location.

The Company in Manufactured Housing is focusing on large national contracts. The
Company in 2001 has obtained significant additional contracts with Fleetwood and
Clayton Homes, Inc. Management will continue to pursue these efforts.

Driver Outsourcing

Driver Outsourcing  provides  outsourcing  transportation  services primarily to
manufacturers of recreational vehicles,  commercial trucks and other specialized
vehicles.  Driver Outsourcing  operating revenues decreased 10% in 2000 to $20.9
million.  The decrease was primarily the result of softness in the  recreational
vehicle market.  However,  Driver  Outsourcing EBITDA increased $900,000 to $1.3
million  from  improved   operating   efficiencies,   consolidations  and  other
reductions in overhead costs.

Specialized Outsourcing Services

Specialized  Outsourcing Services consists of delivering large trailers,  travel
and other small  trailers.  The Company  discontinued  a  specialized  transport
service  ("Decking") in 2000.  Operating revenues decreased 28% to $15.3 million
in 2000. This decrease was primarily caused by a reduction in available  drivers
and  discontinuing  the Decking  deliveries.  Specialized  Outsourcing  Services
incurred an EBITDA loss of $140,000 in 2000 compared to an EBITDA of $469,000 in
1999.  This loss was caused  primarily by the reduction in the delivery of large
trailers and Decking  partially  offset by improved  operating  efficiencies and
overhead cost reductions.

Insurance/Finance

The  Company's   Insurance/Finance  segment  provides  insurance  and  financing
services to the Company's drivers and independent owner-operators.  This segment
also acts as a cost center whereby all bodily injury,  property damage and cargo
loss costs are captured.

Insurance/Finance  operating  revenues decreased $1.0 million to $2.9 million in
2000 reflecting a decrease in owner-operator  insurance premiums relating to the
decline in the manufactured housing industry. However,  Insurance/Finance EBITDA
loss  decreased  $2.2  million to $6.8  million due to improved  bodily  injury,
property  damage and cargo loss claims  experience.  The deductible for personal
injury and property damage is $250,000 per occurrence.  The cargo  deductible is
$1,000,000,  accordingly,  the  Company is  essentially  self-insured  for cargo
losses.

As a part of  continuing  efforts  to contain  claims  expense,  the  Company is
expanding its safety  awareness as well as formal safety training  efforts among
both  owner-operators  and  terminal  personnel.  Cargo  claims as a percent  of
operating revenue decreased from 2.3% in 1999 to 1.9% in 2000. Similarly, bodily
injury and  property  damage  claims  decreased  from 3.6% to 3.3% of  operating
revenue.  Management  believes  that the  Company's  focus on  driver  safety is
having, and may continue to have, a favorable impact.

During  2001,  the  Company's  insurance  programs  are to be renewed.  Based on
current insurance market conditions,  the Company expects significant  increases
in premium  expense.  The Company  plans to pass  increased  premium  expense to
customers through increased rates.

Year 1999 Compared with 1998

Consolidated Results

During 1999,  the Company  experienced a decrease in the number of  Manufactured
Housing  shipments and a continued  increase in insurance and claims costs.  The
Company also experienced a reduction in operating  revenues and profitability in
the Specialized Outsourcing Services segment.

Industrial  shipment of new  manufactured  homes decreased  approximately  4% in
1999. Morgan was more severely  impacted as our largest customer  experienced an
approximate 21% decline in retail sales of new homes.  As a result,  the Company
sustained an 8% decrease in shipments of new homes in 1999.

Total  operating  revenues in 1999 decreased $4.9 million to $145.6 million from
$150.5 million in 1998.  Operating income before interest,  taxes,  depreciation
and amortization (EBITDA) decreased from $3.2 million in 1998 to $1.8 million in
1999.

Net interest  expense  decreased  from $545,000 in 1998 to $338,000 in 1999 as a
result of improved cash  management  which reduced the amount of borrowings from
the credit facility.

For information concerning the provision for income taxes as well as information
regarding  differences between effective tax rates and statutory rates, see Note
5 of the Notes to Consolidated Financial Statements.

Accordingly, net income for 1999 was $19,000 compared to $903,000 in 1998.

Segment Results

Manufactured Housing

Manufactured  Housing operating revenues began decreasing in the second quarter;
and ended the year at $99.5  million,  or a 6% reduction  from 1998. In spite of
this reduction, EBITDA for 1999 ended at $10.3 million compared to $10.8 million
for 1998  because of cost  reduction  measures  instituted  by  Management  that
largely mitigated the revenue decline.

Driver Outsourcing

The Driver Outsourcing segment of the business demonstrated good growth in 1999.
Operating revenues increased 18% to $23.4 million in 1999 while EBITDA increased
by $301,000.  However, high driver recruiting and other overhead costs continued
to depress the profitability of this segment in 1999.

Specialized Outsourcing Services

Specialized  Outsourcing  Services  operating  revenues  decreased  8% to  $21.2
million  in 1999.  This  decrease  was  primarily  the  result of changes in the
customer  base and a reduction in  available  drivers.  Specialized  Outsourcing
Services EBITDA decreased  $542,000  primarily on the lower volume and increased
overhead costs associated with large trailer delivery.

Insurance/Finance

Insurance/Finance   operating   revenues   decreased   less  than  3%  in  1999,
particularly  in the  latter  months  of  the  year  reflecting  a  decrease  in
owner-operator  insurance premiums relating to the slow-down in the manufactured
housing industry.

The Company in 1999 continued to be penalized by increasing claims costs.  Claim
costs in 1999, as a percent of operating  revenue increased to 5.9% from 5.1% in
1998.  Effective  April 1, 1999, the deductible for personal injury and property
damage increased to $250,000 per occurrence.  Additionally,  the cargo stop-loss
insurance  policy  provision  terminated  and the  deductible  was  increased to
$1,000,000.  Accordingly,  the  Company is  essentially  self-insured  for cargo
losses.

Liquidity and Capital Resources

Operating  activities  used  $0.9  million  of cash in 2000  compared  to a $4.9
million cash  generation  in 1999.  The 2000 net loss and  reductions in working
capital  liabilities was partially  offset by the deferred tax assets  valuation
reserve and by reductions in trade accounts receivable and other working capital
assets.  The Company has  recorded  an income tax  receivable  of $499,000 as of
December  31,  2000 as it  intends to file for tax  refunds  based on prior year
payments.  Trade accounts receivable decreased $2.4 million primarily due to the
decline in operating  revenue.  Day's sales outstanding  ("DSO") increased to 33
days at December 31, 2000 as compared to 28 days at December 31, 1999.

The  investment  in property and  equipment  decreased in 2000 to $106,000  with
expenditures for an optical  scanning system and other new information  systems.
The 2001 capital  expenditure plan  approximates  $650,000 but is dependent upon
the Company achieving a higher operating revenue level.

At December 31, 2000, the Company had a $7.7 million  revolving  credit facility
("Credit Facility"), with a $6.7 million letter of credit sub-limit. At December
31, 2000, the Company had no  outstanding  debt under its Credit  Facility,  and
$6.6 million of letters of credit were  outstanding  under the Credit  Facility.
Letters of credit are required for  self-insurance  retention reserves and other
corporate needs.

The Credit  Facility  matured on January 28, 2001, at which time the Company had
no outstanding debt and $6.6 million  outstanding letters of credit. As a result
of the Credit Facility not being renewed,  the Company has a payment default and
the  financial  institution  has the  right to demand  cash to meet  outstanding
obligations  under the letters of credit.  The bank has discretion as to whether
to make any loans or issue additional letters of credit for the Company.

The financial  statements  have been prepared on a going  concern  basis,  which
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal  course of  business.  The  Company is actively  seeking  alternative
financial  institutions  to replace  the  existing  Credit  Facility  as well as
seeking  additional capital  resources.  Currently,  negotiations are being held
with  several  financial  institutions  regarding  a  replacement  facility.  In
connection  with  these  potential  replacement   facilities,   the  Company  is
anticipating  raising equity capital up to $3.0 million. The Company has engaged
in discussions  with its principal  shareholder,  Lynch  Interactive,  regarding
these matters. Based on preliminary discussions, Lynch Interactive has expressed
interest in providing a portion of the capital support the Company will require,
but no terms have been agreed  upon.  The  Company  expects to seek to raise the
equity capital it will require from Lynch Interactive,  other stockholders,  or,
if necessary, privately from other sources. The Company's ability to continue as
a going  concern is  dependent  upon its ability to  successfully  maintain  its
financing arrangements and to comply with the terms thereof.  However,  although
no assurances can be given,  management  remains confident that the Company will
be able to continue operating as a going concern.

The Company's  excess and primary  insurance  arrangements  are to be renewed in
2001. While  Management  expects such  arrangements to be renewed,  the terms of
such  renewed  arrangements  are  difficult  to  predict  and  may  result  in a
significant  increase in premium expense or the assumption of additional  risks.
The annual premium for the excess insurance arrangements is expected to increase
by $500,000 to $600,000.  Such renewed arrangements may also require the Company
to increase  letters of credit in respect to its first loss exposure  under such
arrangements.  The terms of the present credit facility may not be sufficient to
provide for such  additional  letters of credit,  and depending on the Company's
performance,  the lender may not agree to expand the  facility  to provide  such
letters of credit. In that event, it is Management's current expectation that it
would negotiate with its carriers to accept lower letter of credit  requirements
in  exchange  for  higher  premiums.  Management  plans to seek to pass  through
additional  premium  costs to  customers.  To the  extent it is unable to do so,
additional  premium costs will increase working capital  requirements and reduce
profitability.

Subject to the forgoing  discussion,  assuming the Company receives  anticipated
equity as described above,  Management believes that internally  generated funds
together with such  additional  equity and resources  available under the credit
facility will be  sufficient to provide for the Company's  capital and liquidity
requirements during 2001.

The Company in 2000  declared  Class A  dividends  of $.05 per share and Class B
dividends of $.025 per share through the first three quarters. No dividends were
declared in the fourth quarter. Payment of dividends is within the discretion of
the board of  directors.  Payment of future  dividends  will be dependent  upon,
among other  things,  earnings,  debt  covenants,  future  growth  plans,  legal
restrictions, and the financial condition of the Company.

The Company had minimal  exposure to interest  rates as of December 31, 2000, as
substantially  all of its  outstanding  long-term  debt bears fixed  rates.  The
Credit Facility  mentioned above bears variable interest rates based on either a
Federal Funds rate or the Eurodollar  rate.  Accordingly,  borrowings  under the
Credit Facility have exposure to changes in interest rates.

Under its current  policies,  the Company does not use interest rate  derivative
instruments  to manage  exposure to interest  rate changes.  Also,  the Company,
currently, is not using any fuel hedging instruments.

Inflation

Most of the  Company's  expenses  are  affected by  inflation,  which  generally
results  in  increased  costs.  During  2000,  the  effect of  inflation  on the
Company's results of operation was minimal.

The transportation industry is dependent upon the availability and cost of fuel.
Although fuel costs are paid by the Company's owner-operators, increases in fuel
prices may have  significant  adverse  effects on the Company's  operations  for
various reasons. Since fuel costs vary between regions,  drivers may become more
selective  as to  regions  in which  they  will  transport  goods  resulting  in
diminished  driver  availability.  Also,  the Company would  experience  adverse
effects  during the time period from when fuel costs begin to increase until the
time when scheduled  rate increases to customers are enacted.  Increases in fuel
prices may also affect the sale of recreational  vehicles by making the purchase
less attractive to consumers.  A decrease in the sale of  recreational  vehicles
would  be  accompanied  by a  decrease  in the  transportation  of  recreational
vehicles and a decrease in the need for Driver Outsourcing services.



Impact of Seasonality

Shipments of  manufactured  homes tend to decline in the winter  months in areas
where poor weather conditions inhibit transport.  This usually reduces operating
revenues in the first and fourth  quarters of the year. The Company's  operating
revenues, therefore, tend to be stronger in the second and third quarters.

Forward-Looking Information

Forward-looking  statements  in  this  report,  including,  without  limitation,
statements relating to future events or the future financial  performance of the
Company  appear  in  the  preceding  Management's  Discussion  and  Analysis  of
Financial  Condition  and Results of  Operations  and in other  written and oral
statements made by or on behalf of the Company,  including,  without limitation,
statements   relating  to  the  Company's   goals,   strategies,   expectations,
competitive  environment,   regulation  and  availability  of  resources.   Such
forward-looking  statements  are made pursuant to the safe harbor  provisions of
the Private  Securities  Litigation Reform Act of 1995.  Investors are cautioned
that such forward-looking  statements involve risks and uncertainties that could
cause actual events and results to be materially  different from those expressed
or implied herein,  including, but not limited to, the following: (1) dependence
on  the  Manufactured  Housing  industry;  (2)  costs  of  accident  claims  and
insurance;  (3) customer  contracts and  concentration;  (4) the competition for
qualified drivers;  (5) independent  contractors and labor matters; (6) risks of
acquisitions;  (7) seasonality and general economic conditions; (8) availability
and  sufficiency  of  credit  facilities;   (9)  potential  inability  to  raise
sufficient equity capital; and (10) other risks and uncertainties indicated from
time  to  time  in the  Company's  filings  with  the  Securities  and  Exchange
Commission. See Item 1. Business - Forward-Looking Discussion.



Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

The  information  required  by Item 7A of Form  10-K  appears  in Item 7 of this
report under the heading  "Liquidity and Capital  Resources" and is incorporated
herein by this reference.

<PAGE>

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                     The Morgan Group, Inc. and Subsidiaries
                           Consolidated Balance Sheets
                  (Dollars in thousands, except share amounts)

                                                            December 31
                                                       2000             1999
                                                       ----             ----
ASSETS
Current assets:
   Cash and cash equivalents                         $ 2,092           $ 3,847
   Trade accounts receivable, less allowances
      of $248 in 2000 and $313 in 1999                 7,748            10,130
   Accounts receivable, other                            133               313
   Refundable taxes                                      499                --
   Prepaid expenses and other current assets           1,147             1,960
   Deferred income taxes                                 319             1,475
                                                     -------           -------
Total current assets                                  11,938            17,725
                                                     -------           -------

Property and equipment, net                            3,688             4,309
Intangible assets, net                                 6,727             7,361
Deferred income taxes                                    282             2,172
Other assets                                             634               697
                                                     -------           -------
Total assets                                         $23,269           $32,264
                                                     =======           =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Trade accounts payable                            $ 2,373           $ 3,907
   Accrued liabilities                                 3,704             4,852
   Income taxes payable                                   --               278
   Accrued claims payable                              3,224             3,071
   Refundable deposits                                 1,357             1,752
   Current portion of long-term debt and capital
     lease obligations                                   217              676
                                                     -------           -------
Total current liabilities                             10,875            14,536
                                                     -------           -------

Long-term debt and capital lease obligations, less
  current portion                                         71               289
Long-term accrued claims payable                       5,122             5,347
Commitments and contingencies                             --                --

Shareholders' equity:
   Common stock, $.015 par value:
      Class A: Authorized shares - 7,500,000
      Issued shares - 1,607,303                           23                23

      Class B: Authorized shares - 2,500,000
      Issued and outstanding shares - 1,200,000           18                18
   Additional paid-in capital                         12,459            12,459
   Retained (deficit) earnings                        (2,116)            2,775
                                                     -------           -------
Total capital and retained earnings                   10,384            15,275

Less - treasury stock at cost (359,146 Class A
  Shares in 2000 and 1999)                            (3,183)           (3,183)
                                                     -------           -------
Total shareholders' equity                             7,201            12,092
                                                     -------           -------
Total liabilities and shareholders' equity           $23,269           $32,264
                                                     =======           =======
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>

                     The Morgan Group, Inc. and Subsidiaries
                      Consolidated Statements of Operations
                  (Dollars in thousands, except share amounts)


                                                             For the year ended December 31
                                                           2000             1999              1998
                                                           ----             ----              ----

<S>                                                     <C>               <C>              <C>
Operating revenues                                      $ 108,024         $ 145,629        $ 150,454

Costs and expenses:
   Operating costs                                         99,552           133,774          136,963
   Selling, general and administration                      9,443            10,090           10,254
   Depreciation and amortization                            1,067             1,215            1,230
                                                        ---------         ---------        ---------
                                                          110,062           145,079          148,447
                                                        ---------         ---------        ---------

Operating (loss) income                                    (2,038)              550            2,007
Interest expense, net                                         310               338              545
                                                        ---------         ---------        ---------
(Loss) income before income taxes                          (2,348)              212            1,462

Income tax expense                                          2,451               193              559
                                                        ----------        ---------        ---------
Net (loss) income                                         ($4,799)        $      19        $     903
                                                        ==========        =========        =========

Net (loss) income per basic and diluted share              ($1.96)        $    0.01        $    0.35
                                                        ==========        =========        =========


Basic weighted average shares outstanding               2,448,157         2,469,675        2,606,237
                                                        =========         =========        =========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>

                     The Morgan Group, Inc. and Subsidiaries
           Consolidated Statements of Changes in Shareholders' Equity
                (Dollars in thousands, except per share amounts)


                                             Class A      Class B    Additional                              Retained
                                             Common       Common       Paid-in      Officer    Treasury      (Deficit)
                                              Stock        Stock       Capital       Loan        Stock       Earnings      Total
                                              -----        -----       -------       ----        -----       --------      -----

<S>                                            <C>         <C>         <C>          <C>        <C>           <C>          <C>
Balance at December 31, 1997                   $23         $ 18        $ 12,453     $ (504)    $ (1,426)     $ 2,160      $ 12,724
   Net income                                   --           --              --         --           --          903           903
   Purchase of treasury stock                   --           --              --        504         (813)          --          (309)
   Common stock dividends:
      Class A ($.08 per share)                  --           --              --         --           --         (117)         (117)
      Class B ($.04 per share)                  --           --              --         --           --          (48)          (48)
   Options exercised                            --           --               6         --           62           --            68
                                              -----       ------       --------     ------     --------      -------      --------
Balance at December 31, 1998                   $23         $ 18        $ 12,459     $   --     $ (2,177)     $ 2,898      $ 13,221
   Net income                                   --           --              --         --           --           19            19
   Purchase of treasury stock                   --           --              --         --       (1,006)          --        (1,006)
   Common stock dividends:
      Class A ($.08 per share)                  --           --              --         --           --          (94)          (94)
      Class B ($.04 per share)                  --           --              --         --           --          (48)          (48)
                                              -----       ------       --------     ------     --------      -------      --------
Balance at December 31, 1999                   $23         $ 18        $ 12,459     $   --     $ (3,183)     $ 2,775      $ 12,092
   Net loss                                     --           --              --         --           --       (4,799)       (4,799)
   Common stock dividends:
      Class A ($.05 per share)                  --           --              --         --           --          (62)          (62)
      Class B ($.025 per share)                 --           --              --         --           --          (30)          (30)
                                              -----       ------       --------     ------     --------      -------      --------
Balance at December 31, 2000                   $23         $ 18        $ 12,459     $   --     $ (3,183)     $(2,116)     $  7,201
                                              =====       ======       ========     ======     ========      =======      ========
</TABLE>
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
                     The Morgan Group, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)
                                                                                      For the year ended December 31
                                                                                  2000             1999              1998
                                                                                  ----             ----              ----
Operating activities:
<S>                                                                             <C>                <C>              <C>
Net (loss) income                                                               $(4,799)           $  19            $   903
Adjustments to reconcile net (loss) income to net cash (used in) provided
by operating activities:
        Depreciation and amortization                                             1,067            1,215              1,246
        Deferred income taxes                                                     3,046             (420)              (713)
        Loss on disposal of property and equipment                                  292              101                 20

Changes in operating assets and liabilities:
        Trade accounts receivable                                                 2,382             2,058             1,174
        Other accounts receivable                                                   180              901             (1,088)
        Refundable taxes                                                           (499)              --                 --
        Prepaid expenses and other current assets                                   813              507                139
        Other assets                                                                 63              (43)               810
        Trade accounts payable                                                   (1,534)            (397)               207
        Accrued liabilities                                                      (1,148)           1,286               (612)
        Income taxes payable                                                       (278)            (600)               489
        Accrued claims payable                                                      (72)             310              2,785
        Refundable deposits                                                        (395)             (78)               164
                                                                                --------          -------            -------
        Net cash (used in) provided by operating activities                        (882)           4,859              5,524

Investing activities:
        Purchases of property and equipment                                        (106)            (811)              (585)
        Proceeds from sale of property and equipment                                  2                7                 88
        Business acquisitions                                                        --              (35)              (228)
                                                                                --------          -------            -------
Net cash used in investing activities                                              (104)            (839)              (725)

Financing activities:
        Principle payments on long-term debt                                       (677)            (664)            (3,418)
        Proceeds from long-term debt                                                 --              149                135
        Purchase of treasury stock, net of officer loan of $504                      --           (1,006)              (309)
        in 1998
        Proceeds from exercise of stock options                                      --               --                 68
        Common stock dividends paid                                                 (92)            (142)              (165)
                                                                                --------          -------            -------
        Net cash used in financing activities                                      (769)          (1,663)            (3,689)
                                                                                --------          -------            -------

Net (decrease) increase in cash and cash equivalents                             (1,755)           2,357              1,110

Cash and cash equivalents at beginning of period                                  3,847            1,490                380
                                                                                --------          -------            -------

Cash and cash equivalents at end of period                                      $ 2,092           $3,847            $ 1,490
                                                                                ========          =======           ========
</TABLE>
Cash payments for interest were $379,000 in 2000, $406,000 in 1999 and $566,000
in 1998.

See accompanying notes.
<PAGE>

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

The Morgan  Group,  Inc.  ("Company"),  through its wholly  owned  subsidiaries,
Morgan Drive Away, Inc.  ("Morgan") and TDI, Inc. ("TDI"),  provides  outsourced
transportation  and  logistical   services  to  the  manufactured   housing  and
recreational  vehicle  industries and is a leading provider of delivery services
to the  commercial  truck and trailer  industries  in the United  States.  Lynch
Interactive  Corporation and its wholly owned subsidiaries ("Lynch Interactive")
owns all of the  1,200,000  shares  of the  Company's  Class B common  stock and
161,100  shares of the Company's  Class A common  stock,  which in the aggregate
represents  70% of the  combined  voting  power of the  combined  classes of the
Company's common stock.

The  Company's  other  significant  wholly  owned  subsidiaries  are  Interstate
Indemnity Company  ("Interstate") and Morgan Finance,  Inc.  ("Finance"),  which
provide insurance and financial services to its owner-operators.

Principles of Consolidation

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

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  Management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could materially differ from those estimates.

Operating Revenues and Expense Recognition

Operating  revenues and related driver pay are  recognized  when movement of the
product is completed. Other operating expenses are recognized when incurred.

Cash Equivalents

All  highly  liquid  investments  with  maturity  of three  months  or less when
purchased are considered to be cash equivalents.

Credit Risk

Financial  instruments that potentially subject the Company to concentrations of
credit risk consist principally of customer receivables. As discussed in Note 9,
two customers represent 33% of total customer receivables.  The remaining credit
risk is generally diversified due to the large number of entities comprising the
Company's  remaining  customer base and their  dispersion  across many different
industries and geographic regions. As noted on the consolidated  balance sheets,
the Company  maintains an allowance  for  doubtful  accounts to cover  estimated
credit losses.

Property and Equipment

Property and equipment is stated at cost.  Major additions and  improvements are
capitalized,  while  maintenance  and repairs  that do not improve or extend the
lives of the respective assets are charged to expense as incurred.  Depreciation
is computed using the straight-line  method over the following  estimated useful
lives:

                    Buildings                                 25 years
                    Transportation Equipment                  3 to 5 years
                    Office and Service Equipment              3 to 8 years

Intangible Assets

Intangible  assets are comprised  primarily of goodwill,  which is stated at the
excess  of  purchase  price  over  net  asset   acquired,   net  of  accumulated
amortization  of  $4,181,000  and  $3,547,000  at  December  31,  2000 and 1999,
respectively.  Intangible assets are being amortized by the straight-line method
over their estimated useful lives, which range from three to forty years.

Impairment of Assets

The Company  periodically  assesses the net  realizable  value of its long-lived
assets, including intangibles, and evaluates such assets for impairment whenever
events or changes in circumstances  indicate the carrying amount of an asset may
not be recoverable.  For assets to be held and used, impairment is determined to
exist if  estimated  undiscounted  future cash flows are less than the  carrying
amount.  For assets to be disposed of,  impairment is determined to exist if the
estimated net realizable value is less than the carrying amount.

Insurance and Claim Reserves

Claims and insurance  accruals  reflect the  estimated  ultimate cost of claims,
including  amounts  for claims  incurred  but not  reported,  for cargo loss and
damage,  bodily injury and property  damage,  workers'  compensation,  long-term
disability and group health not covered by insurance. These costs are charged to
operating costs.

Stock-Based Compensation

Stock based compensation expense for the Company's employee stock option plan is
recognized  under the provisions of Accounting  Principles Board Opinion No. 25,
Accounting   for  Stock   Issued  to   Employees   ("APB   25"),   and   related
interpretations.  Consistent  with APB 25, the exercise  price of the  Company's
employee stock options  equals the market price of the  underlying  stock on the
date of grant; therefore, no compensation expense is recognized.

Net Income (Loss) Per Common Share

Net income  (loss) per common  share  ("EPS")  is  computed  using the  weighted
average number of common shares outstanding during the period.  Since each share
of Class B common stock is freely  convertible  into one share of Class A common
stock,  the total of the  weighted  average  number of  common  shares  for both
classes of common stock is considered in the  computation  of EPS.

Fair Values of Financial Instruments

At December 31, 2000 and 1999, the carrying value of financial  instruments such
as cash and cash equivalents,  trade and other  receivables,  trade payables and
long-term debt approximate their fair values.  Fair value is determined based on
expected  future cash flows,  discounted  at market  interest  rates,  and other
appropriate valuation methodologies.

Comprehensive Income

There were no items of comprehensive income for the years presented,  as defined
under SFAS No. 130, "Reporting Comprehensive Income". Accordingly, comprehensive
income is equal to net income.

Recent Accounting Pronouncements

In June 1998,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting  Standards  (SFAS) No.  133,  "Accounting  for  Derivative
Instruments and Hedging  Activities,"  which is required to be adopted in fiscal
years beginning after June 15, 2000.  Under the statement,  all derivatives will
be required to be  recognized  on the balance  sheet at fair value.  Derivatives
that are not hedges  must be  adjusted  to fair  value  through  income.  If the
derivative is a hedge, depending on the nature of the hedge, changes in the fair
value of  derivatives  will either be offset against the change in fair value of
the  hedged  assets,  liabilities,  or  firm  commitments  through  earnings  or
recognized in other comprehensive  income until the hedged item is recognized in
earnings.  Under the statement, any ineffective portion of a derivative's change
in fair value must be  immediately  recognized  in  earnings.  The  Company  has
evaluated  the effect of SFAS No. 133 and  determined  that the adoption of SFAS
No.  133 will have no effect  on the  earnings  and  financial  position  of the
Company.

2.  PROPERTY AND EQUIPMENT

The components of property and equipment are as follows (in thousands):

                                                         December 31
                                                       2000         1999
                                                       ----         ----

Land                                                  $  873       $  873
Buildings                                              2,186        2,241
Transportation equipment                                 146          419
Office and service equipment                           2,288        3,491
                                                       -----        -----
                                                       5,493        7,024
Less accumulated depreciation                          1,805        2,715
                                                       -----        -----
Property and equipment, net                           $3,688       $4,309
                                                      ======       ======

Depreciation expense was $433,000, $511,000 and $581,000 for 2000, 1999 and
1998, respectively.

3.  INDEBTEDNESS

At December 31, 2000, the Company had a $7.7 million  revolving  credit facility
("Credit Facility"),  with a $6.7 million letter of credit sub-limit. The Credit
Facility  bears  interest  at the  Company's  option,  on either the  applicable
Eurodollar  Rate Margin or the  applicable  Base Rate  Margin,  all of which are
adjusted over the term of the Credit Facility.  Total borrowings and outstanding
letters of credit are limited to qualified trade accounts receivable,  qualified
in-transit  amounts,  contractor  loans, and qualified  investments.  The Credit
Facility contains financial covenants,  the most restrictive of which are a cash
flow coverage ratio, interest expense coverage ratio, and minimum net income. At
December  31,  2000,  the  Company  had no  outstanding  debt  under its  Credit
Facility,  and $6.6  million  of letters of credit  were  outstanding  under the
Credit  Facility.  Letters of credit are required for  self-insurance  retention
reserves and other corporate needs.

The Credit  Facility  matured on January 28, 2001, at which time the Company had
no outstanding debt and $6.6 million  outstanding letters of credit. The Company
was in default of the  financial  covenants,  resulting  in the bank  failing to
renew the Credit Facility. As a result of the Credit Facility not being renewed,
the Company has a payment default and the financial institution has the right to
demand cash to meet  outstanding  obligations  under the letters of credit.  The
bank has discretion as to whether to make any loans or issue additional  letters
of credit for the Company.

The financial  statements  have been prepared on a going  concern  basis,  which
contemplates  the  realization of assets and the  satisfaction of liabilities in
the normal  course of  business.  The  Company is actively  seeking  alternative
financial  institutions  to replace  the  existing  Credit  Facility  as well as
seeking  additional capital  resources.  Currently,  negotiations are being held
with  several  financial  institutions  regarding  a  replacement  facility.  In
connection  with  these  potential  replacement   facilities,   the  Company  is
anticipating  raising equity capital up to $3.0 million. The Company has engaged
in discussions  with its principal  shareholder,  Lynch  Interactive,  regarding
these matters. Based on preliminary discussions, Lynch Interactive has expressed
interest in providing a portion of the capital support the Company will require,
but no terms have been agreed  upon.  The  Company  expects to seek to raise the
equity capital it will require from Lynch Interactive,  other stockholders,  or,
if necessary, privately from other sources. The Company's ability to continue as
a going  concern is  dependent  upon its ability to  successfully  maintain  its
financing arrangements and to comply with the terms thereof.  However,  although
no assurances can be given,  management  remains confident that the Company will
be able to continue operating as a going concern.
<PAGE>
<TABLE>
<CAPTION>

Long-term debt and capital lease obligations consisted of the following (in
thousands):
                                                                                       December 31
                                                                                   2000          1999
                                                                                   ----          ----
<S>                                                                                <C>           <C>
Promissory notes with imputed interest rates from 6.31% to 10.0%, principal
   and interest payments due from monthly to annually, through June 30, 2002       $242          $837
Term note and capital leases with imputed interest rates of 8.25% to 11.04%
   with principal and interest payments due monthly through April 26, 2002           46           128
                                                                                   ----           ---
                                                                                    288           965
Less current portion                                                                217           676
                                                                                    ---           ---
Long-term debt and capital lease obligations, net                                  $ 71          $289
                                                                                   ====          ====
</TABLE>

Maturities on long-term debt are $217,000 in 2001 and $71,000 in 2002.

4.   LEASES

Future minimum annual operating lease payments as of December 31, 2000, are as
follows (in thousands):

                                                 Operating
                                                  Leases
                                                  ------
      2001                                       $  641
      2002                                          173
      2003                                           60
      2004                                           11
      2005                                            1
                                                 ------
      Total minimum lease payments               $  886
                                                 ======

Aggregate expense under operating leases  approximated  $1,672,000,  $2,115,000,
and $2,578,000 for 2000, 1999 and 1998, respectively.

5.   INCOME TAXES

Deferred tax assets and liabilities are determined based on differences  between
financial  reporting  and tax bases of assets and  liabilities  and are measured
using the enacted tax rates and laws that will be in effect when the differences
are expected to reverse.

The income tax provisions (benefits) are summarized as follows (in thousands):
                                           For the Year Ended December 31
                                          2000           1999            1998
                                          ----           ----            ----
     Current:
        State                            $    -           $ 98          $  201
        Federal                            (595)           515           1,071
                                         -------         -----          ------
                                           (595)           613           1,272
     Deferred:
        State                               488            (67)           (203)
        Federal                           2,558           (353)           (510)
                                         -------         ------         -------
                                          3,046           (420)           (713)
                                         -------         ------         -------
                                         $2,451          $ 193          $  559
                                         =======         ======         =======
<PAGE>

Deferred tax assets (liabilities) are comprised of the following (in thousands):

                                                           December 31
                                                        2000          1999
                                                        ----          ----
Deferred tax assets:
   Accrued insurance claims                            $3,323        $3,232
   Special charges and accrued expenses                   367           487
   Depreciation                                           199           163
   Other                                                  84            125
                                                       ------        ------
                                                        3,973         4,007
Deferred tax liabilities:
   Prepaid expenses                                      (184)         (360)
                                                       -------       -------
                                                         (184)         (360)
                                                       -------       -------
                                                       $3,789        $3,647

Valuation allowance for deferred tax assets           ($3,188)           --
                                                       ------        ------
                                                       $  601        $3,647
                                                       ======        ======


A  reconciliation  of the income tax  provisions  and the  amounts  computed  by
applying the  statutory  federal  income tax rate to income  before income taxes
follows (in thousands):

                                                  For the Year Ended December 31
                                                 2000         1999         1998
                                                 ----         ----         ----
Income tax provision (benefits) at
   federal statutory rate                       $(772)        $ 72         $497
State income tax (benefit), net of
   federal tax benefit                            (44)          20           48
Changes in estimated
   state tax rates on
   beginning temporary differences                 --           --          (70)
Change in Valuation Allowance                   3,188           --           --
Permanent differences                              79          101           84
                                               -------        ----           --
                                               $2,451         $193         $559
                                               =======        ====         ====

Net cash  payments for income taxes were  $181,000,  $1,205,000  and $810,000 in
2000, 1999 and 1998, respectively.

In  assessing  the  realization  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 period in
which the temporary  differences  become  deductible.  A valuation  allowance of
$3,188,000  was recorded in 2000 to reduce the deferred tax asset as the Company
has  experienced  cumulative  losses for financial  reporting for the last three
years.  Management  considered,  in  reaching  the  conclusion  on the  required
valuation  allowance,  given the  cumulative  losses,  combined with the current
default on its Credit  Facility,  that it would be inconsistent  with applicable
accounting rules to rely on future taxable income to support full realization of
the  deferred  tax assets.  Accordingly,  the  remaining  deferred tax assets of
$601,000 relate to federal income tax carrybacks available to the Company.


6.   SHAREHOLDERS' EQUITY

The Company has two classes of common  stock  outstanding,  Class A and Class B.
Under the bylaws of the  Company:  (i) each share of Class A is  entitled to one
vote  and  each  share  of  Class  B is  entitled  to two  votes;  (ii)  Class A
shareholders  are  entitled  to a  dividend  ranging  from one to two  times the
dividend declared on Class B stock; (iii) any stock  distributions will maintain
the same  relative  percentages  outstanding  of Class A and  Class B;  (iv) any
liquidation  of the  Company  will  be  ratably  made  to  Class  A and  Class B
shareholders  after  satisfaction  of the Company's other  obligations;  and (v)
Class B stock is convertible into Class A stock at the discretion of the holder;
Class A stock is not convertible into Class B stock.

The  Company's  Board of  Directors  has  approved the purchase of up to 250,000
shares of Class A Common  Stock for its  Treasury  at  various  dates and market
prices.  During the year ended December 31, 2000, the Company did not repurchase
any shares under this plan.  As of December 31,  2000,  186,618  shares had been
repurchased  at  prices  between  $6.875  and  $11.375  per share for a total of
$1,561,000 under this plan.

In March 1999,  the  Company  repurchased  102,528  shares of Class A stock in a
Dutch  Auction  for  $985,000,  which  includes  $62,000  of fees  and  expenses
associated with the transaction.

In July 1998, the Company purchased 70,000 shares of Class A stock from a former
officer for $637,000  under a special  stock  purchase  approved by the Board of
Directors.

7.  STOCK OPTION PLAN AND BENEFIT PLAN

The Company has an incentive  stock option plan which  provides for the granting
of incentive or non-qualified  stock options to purchase up to 200,000 shares of
Class A common stock to directors, officers, and other key employees. No options
may be granted under this plan for less than the fair market value of the common
stock at the date of the grant.  Although the exercise period is determined when
options are actually  granted,  an option shall not be exercised  later than ten
years and one day after it is granted.  Stock options  granted will terminate if
the  grantee's  employment  terminates  prior to exercise for reasons other than
retirement,  death,  or disability.  Stock options vest over a four-year  period
pursuant  to the  terms of the  plan,  except  for stock  options  granted  to a
non-employee director,  which are immediately vested. Employees and non-employee
directors have been granted  non-qualified  stock options to purchase 96,375 and
32,000 shares,  respectively,  of Class A common stock, net of cancellations and
shares exercised. There are 63,250 options reserved for future issuance.

In January  2000,  the  President  and Chief  Executive  Officer  entered into a
special stock option plan and agreement  with the Company which provides for the
granting of options to purchase  120,000 shares of Class A Common Stock in three
separate installments. The first installment is for 40,000 shares at an exercise
price of $5.625, exercisable 6 months from the date of the agreement. The second
installment is for 40,000 shares at an exercise price of $7.625,  exercisable 18
months  after the date of the  agreement.  The third  installment  is for 40,000
shares at an exercise  price of $9.625,  exercisable 30 months after the date of
the  agreement.  The options  granted under this stock option plan and agreement
are not granted pursuant to the Incentive Stock Option Plan described above; but
they are subject to the same general terms and conditions of the Incentive Stock
Option Plan.

A summary  of the  Company's  stock  option  activity  and  related  information
follows:
<TABLE>
<CAPTION>

                                                                        Year Ended December 31

                                              2000                               1999                               1998
                                              ----                               ----                               ----
                                                 Weighted                            Weighted                           Weighted
                                                 Average                             Average                            Average
                                    Options      Exercise              Options       Exercise             Options       Exercise
                                    (000)        Price                 (000)         Price                (000)         Price
                                    -----        -----                 -----         -----                -----         -----

<S>                                 <C>          <C>                   <C>           <C>                  <C>           <C>
Outstanding at beginning of year    181          $8.23                 170           $8.28                167           $8.32
Granted                             120           7.63                  11            7.52                 23            8.11
Exercised                            --             --                  --              --                 (7)           8.25
Canceled                            (53)          7.79                  --              --                (13)           8.59
                                    ----         -----                 ---           -----                ----           ----



Outstanding at end of year          128          $8.42                 181           $8.23                170           $8.28
                                    ===          =====                 ===           -----                ===           =====

Exercisable at end of year          124          $8.41                 149           $8.31                124           $8.42
                                    ===          =====                 ===           =====                ===           =====
</TABLE>
Exercise  prices for options  outstanding  as of December 31, 2000,  ranged from
$6.80  to  $10.19.  The  weighted-average  remaining  contractual  life of those
options is 4.6 years. The weighted-average  fair value of options granted during
each year was immaterial.

The following pro forma  information  regarding net income (loss) and net income
(loss)  per  share  is  required  when APB 25  accounting  is  elected,  and was
determined as if the Company had accounted for its employee  stock options under
the  fair  value   method  of  SFAS  No.  123,   "Accounting   for   Stock-Based
Compensation."  The fair values for these options were  estimated at the date of
grant using a Black-Scholes option pricing model with the following assumptions:
dividend yield of 0.1%;  expected life of 10 years;  expected volatility of .596
in 2000 and .316 in 1999 and .250 in 1998, and a risk-free interest rate of 6.5%
in  2000  and  5.0%  in 1999  and  6.0%  in  1998.  For  purposes  of pro  forma
disclosures,  the estimated  fair values of the options are amortized to expense
over  the  option's   vesting  periods  (in  thousands   except  for  per  share
information):
                                        2000            1999           1998
                                        ----            ----           ----
Net (loss) income:
  As reported                          ($4,799)        $  19          $ 903
  Pro forma                            ($5,024)          (24)           861

Diluted (loss) earnings per share:
  As reported                           ($1.96)        $0.01          $0.35
  Pro forma                             ($2.05)        (0.01)          0.33


During the initial phase-in  period,  as required by SFAS No. 123, the pro forma
amounts were  determined  based on stock  options  granted after the 1995 fiscal
year only.  Therefore,  the pro forma amounts for  compensation  cost may not be
indicative  of the  effects on pro forma net income and pro forma net income per
share for future years.

The Company has a 401(k)  Savings Plan  covering  substantially  all  employees,
which matches 25% of the employee  contributions up to a designated  amount. The
Company's  contributions  to the Plan for  2000,  1999  and 1998  were  $18,000,
$23,000 and $29,000, respectively.

8.  TRANSACTIONS WITH LYNCH INTERACTIVE CORPORATION

The Company has paid Lynch  Interactive  Corporation  ("Lynch  Interactive")  an
annual  service  fee  of  $100,000  for  executive,  financial  and  accounting,
planning,  budgeting,  tax, legal, and insurance services.  Additionally,  Lynch
Interactive   charges  the  Company  for  officers'  and  directors'   liability
insurance, which totaled $20,000 in 2000, and $16,000 in 1999 and 1998.

The  Company's  Class A and Class B common stock owned by Lynch  Interactive  is
pledged to secure a Lynch Interactive line of credit.

9.  SEGMENT REPORTING

Description of Services by Segment

The Company operates in four business  segments:  manufactured  housing,  driver
outsourcing,  specialized  outsourcing services,  and insurance and finance. The
manufactured  housing segment primarily provides  specialized  transportation to
companies  which  produce new  manufactured  homes and modular  homes  through a
network of terminals  located in  twenty-eight  states.  The driver  outsourcing
segment  provides  outsourcing  transportation  primarily  to  manufacturers  of
recreational vehicles, commercial trucks, and other specialized vehicles through
a network of service centers in six states. The specialized outsourcing services
segment  consists of a large  trailer,  travel and small  trailer  delivery  and
another Specialized Service "Decking"  (discontinued in 2000). The last segment,
insurance and finance, provides insurance and financing to the Company's drivers
and independent owner-operators. This segment also acts as a cost center whereby
all  property  damage  and  bodily  injury  and cargo  costs are  captured.  The
Company's  segments are strategic  business units that offer different  services
and are managed separately based on the differences in these services.

The driver  outsourcing  segment and the specialized  outsourcing  services were
reported as one segment titled "SOS" in 1998. The year of 1998 has been restated
to show corresponding segment information.


Measurement of Segment (Loss) and Segment Assets

The Company  evaluates  performance  and  allocates  resources  based on several
factors,  of which the primary  financial  measure is business segment operating
income,   defined  as  earnings  before   interest,   taxes,   depreciation  and
amortization  (EBITDA).  The accounting policies of the segments are the same as
those described in the summary of significant  accounting policies (See Note 1).
There are no significant intersegment revenues.
<TABLE>
<CAPTION>
The  following  table  presents  the  financial  information  for the  Company's
reportable segments for the years ended December 31 (in thousands):
                                                       2000              1999             1998
                                                       ----              ----             ----
<S>                                                  <C>               <C>              <C>
    Operating revenues
         Manufactured Housing                        $ 70,631          $ 99,491         $ 106,145
         Driver Outsourcing                            20,939            23,351            19,710
         Specialized Outsourcing Services              15,260            21,172            23,064
         Insurance and Finance                          2,933             3,958             4,072
         All Other                                         (3)              148                48
                                                     --------          --------         ---------
                                                      109,760           148,120           153,039
    Total intersegment insurance revenues              (1,736)           (2,491)           (2,585)
                                                     --------          --------         ---------
    Total operating revenues                         $108,024          $145,629         $ 150,454
                                                     ========          ========         =========

    Segment (loss) profit - EBITDA
         Manufactured Housing                         $ 5,784          $ 10,265         $  10,836
         Driver Outsourcing                             1,324               416               115
         Specialized Outsourcing Services                (140)              469             1,011
         Insurance and Finance                         (6,765)           (9,058)           (8,358)
         All Other                                     (1,174)             (327)             (367)
                                                     --------          --------         ---------
                                                         (971)            1,765             3,237
    Depreciation and amortization                      (1,067)           (1,215)           (1,230)
    Interest expense                                     (310)             (338)             (545)
                                                     --------          --------         ---------
    (Loss) income before taxes                       $( 2,348)         $    212         $   1,462
                                                     ========          ========         =========
    Identifiable assets
         Manufactured Housing                        $ 11,255          $ 16,956         $  18,764
         Driver Outsourcing                             4,561             5,438             6,055
         Specialized Outsourcing Services               2,078             2,724             3,015
         Insurance and Finance                          1,433             1,801             1,864
         All Other                                      3,942             5,345             3,689
                                                     --------          --------         ---------
         Total                                       $ 23,269          $ 32,264         $  33,387
                                                     ========          ========         =========
</TABLE>

A majority of the Company's  accounts  receivable  are due from companies in the
manufactured  housing,  recreational  vehicle,  and commercial truck and trailer
industries  located  throughout the United States.  Services provided to Oakwood
Homes Corporation  accounted for approximately $22.5 million,  $28.8 million and
$31.8 million of revenues in 2000,  1999 and 1998,  respectively.  The Company's
gross accounts receivables from Oakwood were 23% and 16% of total receivables at
December 31, 2000 and 1999,  respectively.  In addition,  Fleetwood Enterprises,
Inc.,  accounted  for  approximately  $16.9  million,  $23.9  million  and $26.0
million, of revenues in 2000, 1999 and 1998,  respectively.  The Company's gross
accounts  receivables  from Fleetwood  were 10% and 17% of total  receivables at
December 31, 2000 and 1999, respectively.
<PAGE>

10.  OPERATING COSTS AND EXPENSES (in thousands)
                                            2000          1999          1998
                                            ----          ----          ----
Purchased transportation costs           $75,411       $ 101,046      $103,820
Operating supplies and expenses           10,826          13,559        14,092
Claims                                     5,658           8,633         7,698
Insurance                                  2,733           3,178         3,375
Operating taxes and licenses               4,924           7,358         7,978
                                         -------       ---------      --------
                                         $99,552       $ 133,774      $136,963
                                         =======       =========      ========

11.  COMMITMENTS AND CONTINGENCIES

The Company is involved in various legal proceedings and claims that have arisen
in the normal  course of  business  for which the  Company  maintains  liability
insurance covering amounts in excess of its self-insured  retention.  Management
believes that adequate reserves have been established on its self-insured claims
and that their ultimate  resolution  will not have a material  adverse effect on
the consolidated  financial  position,  liquidity,  or operating  results of the
Company.

The  Company  leases  certain  land,  buildings,  computer  equipment,  computer
software, and motor equipment under non-cancelable  operating leases that expire
in various years through 2005.  Several land and building leases contain monthly
renewal options.

12.  QUARTERLY RESULTS OF OPERATIONS (Unaudited)

The following is a summary of unaudited  quarterly results of operations for the
years ended December 31, 2000 and 1999 (in thousands, except share data):
<TABLE>
<CAPTION>
                                                                             Three Months Ended
                                                        March 31       June 30       Sept. 30       Dec. 31
                                                        --------       -------       --------       -------
2000
----
<S>                                                      <C>           <C>            <C>           <C>
Operating revenues                                       $27,867       $29,961        $28,164       $ 22,032
Operating income (loss)                                     (898)          113            178         (1,431)
Net income (loss)                                           (616)           17             75         (4,275)
Net income (loss) per basic and diluted share            ($ 0.25)      $  0.01        $  0.03         ($1.75)

1999
----
Operating revenues                                       $35,325       $40,270        $37,312       $ 32,722
Operating income (loss)                                      325           436            208           (419)
Net income (loss)                                            118           169             34           (302)
Net income (loss) per basic and diluted share            $  0.05       $  0.07        $  0.01       ($  0.12)
</TABLE>
<PAGE>



                         Report of Independent Auditors

The Board of Directors and Shareholders
The Morgan Group, Inc.

We have  audited  the  accompanying  consolidated  balance  sheets of The Morgan
Group,  Inc. and  subsidiaries as of December 31, 2000 and 1999, and the related
consolidated statements of operations, changes in shareholders' equity, and cash
flows for each of the three years in the period ended  December  31,  2000.  Our
audits also included the financial  statement schedule of The Morgan Group, Inc.
and subsidiaries  listed in Item 14(a). These financial  statements and schedule
are the  responsibility of the Company's  management.  Our  responsibility is to
express an opinion  on these  financial  statements  and  schedule  based on our
audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the consolidated financial position of The Morgan Group,
Inc. and  subsidiaries  as of December 31, 2000 and 1999,  and the  consolidated
results of their  operations and their cash flows for each of the three years in
the period ended  December 31, 2000, in conformity  with  accounting  principles
generally  accepted in the United  States.  Also, in our opinion,  the financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company will continue as a going concern. As more fully described in Note 3, the
Company,  incurred operating losses during the year ended December 31, 2000, and
was not in  compliance  with its credit  facility,  which expired on January 28,
2001. Under the terms of the expired credit facility,  the bank has the right to
demand cash to meet  outstanding  obligations  of the letters of credits.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going concern.  Management's plans in regard to these matters, including raising
additional  equity and replacing  the expired  credit  facility,  are more fully
described in Note 3. The financial  statements do not include any adjustments to
reflect the possible future effects on the  recoverability and classification of
assets or the amounts and classification of liabilities that may result from the
outcome of this uncertainty.

                                                           /s/ Ernst & Young LLP
Greensboro, North Carolina
February 9, 2001
<PAGE>



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

None.


PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The  information  required  by this item is  incorporated  by  reference  to the
section  entitled  "Proposal One - Election of Directors" of the Company's Proxy
Statement for its 2001 Annual Meeting of Stockholders  expected to be filed with
the Commission on or about May 12, 2001 (the "2001 Proxy Statement").

Item 11.  EXECUTIVE COMPENSATION

The information required by this item with respect to executive  compensation is
incorporated by reference to the section entitled  "Management  Remuneration" of
the 2001 Proxy Statement.


Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT

The  information  required  by this item is  incorporated  by  reference  to the
sections entitled "Voting Securities and Principal Holders Thereof" and entitled
"Proposal One - Election of Directors" of the 2001 Proxy Statement.


Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The  information  required  by this item is  incorporated  by  reference  to the
section entitled  "Certain  Transactions with Related Persons" of the 2001 Proxy
Statement.


<PAGE>

PART IV

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

(a)(1)   Financial Statements

               The following  consolidated  financial statements are included in
               Item 8:

               Consolidated Balance Sheets

               Consolidated Statements of Operations

               Consolidated Statements of Changes in Shareholders' Equity

               Consolidated Statements of Cash Flows

               Notes to Consolidated Financial Statements

               Report of Independent Auditors

(a)(2)   Financial  Statement Schedules Schedule  II - Valuation  and Qualifying
         Accounts

               All other schedules for which provision is made in the applicable
               accounting  regulations of the Securities and Exchange Commission
               are not required under the instructions or are inapplicable  and,
               therefore, have been omitted.

(a)(3)   Exhibits Filed.

               The exhibits filed herewith or incorporated  by reference  herein
               are set forth on the Exhibit  Index.  Included in those  exhibits
               are Management  contracts and compensatory plans and arrangements
               which are identified as Exhibits 10.1 through 10.10.

(b)      Reports on Form 8-K

               Registrant filed no reports on Form 8-K during the quarter ending
               December 31, 2000.

(c)      The exhibits filed  herewith or  incorporated  by reference  herein are
         set forth on the Exhibit Index.


<PAGE>
<TABLE>
<CAPTION>

                                   Schedule II

                     The Morgan Group Inc. and Subsidiaries
                        Valuation and Qualifying Accounts


                                                       Allowance for Doubtful Accounts
                                                       -------------------------------
                                                      Additions                Amounts
                                      Beginning    Charged to Costs           Written Off            Ending
       Description                     Balance       and Expenses          Net of Recoveries         Balance
       -----------                     -------       ------------          -----------------         -------
<S>                                   <C>              <C>                      <C>                 <C>
Year ended December 31, 2000          $313,000         $249,000                 $314,000            $248,000

Year ended December 31, 1999          $208,000         $415,000                 $310,000            $313,000

Year ended December 31, 1998          $183,000         $301,000                 $276,000            $208,000




                                                             Morgan Finance, Inc.
                                                        Allowance for Loans Receivable
                                                        ------------------------------
Year ended December 31, 2000          $ 50,000         $211,000                 $ 96,000            $165,000

Year ended December 31, 1999          $ 40,000         $ 60,000                 $ 50,000            $ 50,000

Year ended December 31, 1998          $ 80,000         $156,000                 $196,000            $ 40,000




                                              Allowance for Receivable from Independent Contractors
                                              -----------------------------------------------------

Year ended December 31, 2000          $ 81,000         $246,000                 $250,000            $ 77,000

Year ended December 31, 1999          $ 82,000         $300,000                 $301,000            $ 81,000

Year ended December 31, 1998          $ 41,000         $341,000                 $300,000            $ 82,000
</TABLE>

<PAGE>




                                  EXHIBIT INDEX

Exhibit No.                                  Description                    Page
-----------                                  -----------                    ----

3.1            Registrant's  Restated  Certificate  of  Incorporation,   as
               amended,  is incorporated by reference to Exhibit 3.1 to the
               Registrant's  Quarterly  Report on Form 10-Q for the  period
               ended June 30, 1999, filed on August 13, 1999.

3.2            Registrant's  Code of By-Laws,  as restated and amended,  is
               incorporated by reference to Exhibit 3.2 of the Registrant's
               Registration  Statement  on Form  S-1,  File No.  33-641-22,
               effective July 22, 1993.

4.1            Form  of  Class  A  Stock  Certificate  is  incorporated  by
               reference  to Exhibit 3.3 of the  Registrant's  Registration
               Statement on Form S-1, File No.  33-641-22,  effective  July
               22, 1993.

4.2            Fourth  Article  -  "Common   Stock"  of  the   Registrant's
               Certificate of  Incorporation,  is incorporated by reference
               to  the  Registrant's   Certificate  of  Incorporation,   as
               amended,  filed as Exhibit 3.1 to the Registrant's Quarterly
               Report  on Form 10-Q for the  period  ended  June 30,  1999,
               filed on August 13, 1999.

4.3            Article  II  -  "Meeting  of  Stockholders,"  Article  VI  -
               "Certificate   for   Shares"  and  Article  VII  -  "General
               Provisions"   of   the   Registrant's   Code   of   By-Laws,
               incorporated  by  reference  to  the  Registrant's  Code  of
               By-Laws,   as   amended,   filed  as  Exhibit   3.2  to  the
               Registrant's  Registration  Statement on Form S-1,  File No.
               33-641-22, effective July 22, 1993.

4.4            Revolving Credit and Term Loan Agreement,  dated January 28,
               1999, among the Registrant and Subsidiaries and Bank Boston,
               N.A.,  is  incorporated  by reference to Exhibit 4(1) to the
               Registrant's  Current  Report on Form 8-K filed February 12,
               1999.

4.5            Guaranty,  dated January 28, 1999,  among the Registrant and
               Subsidiaries   and  BankBoston,   N.A.  is  incorporated  by
               reference to Exhibit 4(2) to the Registrant's Current Report
               on Form 8-K filed February 12, 1999.

4.6            Security  Agreement,  dated  January  28,  1999,  among  the
               Registrant  and   Subsidiaries   and  BankBoston,   N.A.  is
               incorporated   by   reference   to   Exhibit   4(3)  to  the
               Registrant's  Current  Report on Form 8-K filed February 12,
               1999.

4.7            Stock Pledge  Agreement,  dated January 28, 1999,  among the
               Registrant  and   Subsidiaries   and  BankBoston,   N.A.  is
               incorporated   by   reference   to   Exhibit   4(4)  to  the
               Registrant's  Current  Report on Form 8-K filed February 12,
               1999.

4.8            Revolving  Credit Note,  dated  January 28, 1999,  among the
               Registrant  and   Subsidiaries   and  BankBoston,   N.A.  is
               incorporated   by   reference   to   Exhibit   4(5)  to  the
               Registrant's  Current  Report on Form 8-K filed February 12,
               1999.

4.9            Amendment  Agreement No. 1 to that Certain  Revolving Credit
               Agreement and Term Loan  Agreement  among the Registrant and
               its  Subsidiaries and BankBoston  dated as of March 31, 2000
               is filed herewith.

4.10           Amendment  Agreement No. 2 to that Certain  Revolving Credit
               Agreement and Term Loan  Agreement  among the Registrant and
               its  Subsidiaries  and  BankBoston  dated as of November 10,
               2000 is filed herewith.

10.1           The Morgan Group, Inc.  Incentive Stock Plan is incorporated
               by   reference   to   Exhibit   10.1  to  the   Registrant's
               Registration  Statement  on Form  S-1,  File No.  33-641-22,
               effective July 22, 1993.

10.2           First  Amendment to the Morgan Group,  Inc.  Incentive Stock
               Plan is  incorporated  by  reference  to Exhibit 10.1 to the
               Registrant's  Quarterly  Report on Form 10-Q for the  period
               ended September 30, 1997, filed November 14, 1997.

10.3           Memorandum  to  Charles  Baum and  Philip  Ringo  from Lynch
               Corporation,  dated December 8, 1992, respecting Bonus Pool,
               is   incorporated  by  reference  to  Exhibit  10.2  to  the
               Registrant's  Registration  Statement on Form S-1,  File No.
               33-641-22, effective July 22, 1993.

10.4           Term Life Policy  from  Northwestern  Mutual Life  Insurance
               Company insuring Paul D.  Borghesani,  dated August 1, 1991,
               is   incorporated  by  reference  to  Exhibit  10.4  to  the
               Registrant's  Registration  Statement on Form S-1,  File No.
               33-641-22, effective July 22, 1993.

10.5           Long Term  Disability  Insurance  Policy  from  Northwestern
               Mutual  Life  Insurance  Company,  dated  March 1, 1990,  is
               incorporated by reference to the  Registrant's  Registration
               Statement on Form S-1, File No.  33-641-22,  effective  July
               22, 1993.

10.6           Long Term  Disability  Insurance  Policy from CNA  Insurance
               Companies,  effective  January  1, 1998 is  incorporated  by
               reference to Exhibit 10.6 to the Registrant's  Annual Report
               on Form 10-K for the year ended  December  31,  1997,  filed
               March 31, 1998.

10.7           The Morgan Group,  Inc.  Employee  Stock  Purchase  Plan, as
               amended,  is  incorporated  by reference to Exhibit 10.16 to
               the  Registrant's  Annual  Report  on Form 10-K for the year
               ended December 31, 1994, filed on March 30, 1995.

10.8           Consulting  Agreement  between  Morgan Drive Away,  Inc. and
               Paul D.  Borghesani,  effective  as of  April  1,  1996,  is
               incorporated by reference to Exhibit 10.19 the  Registrant's
               Annual  Report on Form 10-K for the year ended  December 31,
               1995, filed on April 1, 1996.

10.9           Employment   Agreement,   dated  January  12,  2000  between
               Registrant  and Anthony T. Castor,  III is  incorporated  by
               reference to Exhibit 10.9 to the Registrant's  Annual Report
               on Form 10-K for the year ended December 31, 1999.

10.10          Non-Qualified Stock Option Plan and Agreement, dated January
               11, 2000,  between  Registrant and Anthony T. Castor, III is
               incorporated   by   reference   to  Exhibit   10.10  to  the
               Registrant's  Annual  Report on Form 10-K for the year ended
               December 31, 1999.

10.11          Management Agreement between Skandia  International and Risk
               Management (Vermont), Inc. and Interstate Indemnity Company,
               dated  December 15, 1992,  is  incorporated  by reference to
               Exhibit 10.12 to the Registrant's  Registration Statement on
               Form S-1, File No. 33-641-22, effective July 22, 1993.

10.12          Agreement for the Allocation of Income Tax Liability between
               Lynch   Corporation  and  its   Consolidated   Subsidiaries,
               including   the   Registrant    (formerly   Lynch   Services
               Corporation),  dated  December  13,  1988,  as  amended,  is
               incorporated by reference to Exhibit 10.13 the  Registrant's
               Registration  Statement  on Form  S-1,  File No.  33-641-22,
               effective July 22, 1993.

10.13          Certain Services  Agreement,  dated January 1, 1995, between
               Lynch  Corporation  and the  Registrant is  incorporated  by
               reference to Exhibit 10.18 to the Registrant's Annual Report
               on Form 10-K for the year ended December 31, 1994,  filed on
               March 30, 1995.

21             Subsidiaries  of the Registrant is incorporated by reference
               to Exhibit 21 to the Registrant Form 10-K for the year ended
               December 31, 1998

23             Consent of Ernst & Young LLP

<PAGE>

                                   SIGNATURES


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

                                        THE MORGAN GROUP, INC.

Date: April 2, 2001                     By: /s/  Anthony T. Castor, III
                                           -------------------------------------
                                           Anthony T. Castor, III
                                           President and Chief Executive Officer

     Pursuant to the  requirements  of the  Securities  Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant  and in the capacities  indicated on this 2nd day of April,
2001.


1)         Director, President and Chief Executive Officer:

           By:        /s/ Anthony T. Castor, III
                      --------------------------
                      Anthony T. Castor, III

2)         Chief Financial Officer and
           Chief Accounting Officer

           By:        /s/ Dennis R.  Duerksen
                      -----------------------
                      Dennis R.  Duerksen


3)      A Majority of the Board of Directors:

                      /s/ Charles C.  Baum                              Director
                      --------------------
                      Charles C.  Baum


                      /s/ Richard B. Black                              Director
                      --------------------
                      Richard B.  Black


                      /s/ Richard L. Haydon                             Director
                      ---------------------
                      Richard L. Haydon


                      /s/ Robert S.  Prather, Jr.                       Director
                      ---------------------------
                      Robert S.  Prather, Jr.