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, 2001

                             THE MORGAN GROUP, INC.

                              2746 Old U.S. 20 West
                             Elkhart, Indiana 46514
                                 (574) 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 par value $0.15

           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 February 28, 2002 was $1,556,235. 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 February 28, 2002, was 1,248,157 shares, and 2,200,000 shares,
respectively.

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Proxy Statement for the 2002 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 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.
("MDA"),  has been  operating  since  1936.  The  Company  was formed in 1988 to
acquire  MDA and  Interstate  Indemnity  Company  ("Interstate"  or  "IIC"),  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") and MDA. The Company  also  provides  certain  insurance
services to its employee and independent  owner-operators  through its insurance
subsidiaries, Interstate and Transport Insurance Services Agency ("TISA").

The Company primarily  provides  outsourcing  transportation  services through a
national network of 687 independent owner-operators and 1,042 other drivers. The
Company  dispatches  its drivers from 54 locations in 22 states.  For 2001,  the
Company's  largest  customers  included  Oakwood  Homes  Corporation,  Fleetwood
Enterprises,  Inc.,  Winnebago  Industries,  Inc., Cavalier Homes, Inc., Clayton
Homes, Inc., Thor Industries,  Inc., Keystone RV Company,  Four Seasons Housing,
Inc., Champion Enterprises, Inc. and Holiday Rambler.

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 and TISA.

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,  the Company  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 395 independent owner-operators driving
          specially modified  semi-tractors  referred to as "toters",  which are
          used to reduce combined vehicle length. 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 such offices are
          substantially dedicated to serving such facilities.  Most manufactured
          housing units 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 2001,  for the third  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  20% to 342,000 in 2001 from 426,000 and 574,000 in 2000
          and  1999,   respectively,   according  to  data  from  the  MHI.  The
          manufactured  housing  industry  continues to suffer from the combined
          impact of weak consumer demand,  tightened  consumer credit standards,
          increased  industry  repossessions and excess  inventory.  The Company
          believes that manufactured housing should continue to recover from the
          current  two-year  slump.  There  is  no  assurance,   however,   that
          manufactured housing shipments will increase.

     o    Driver Outsourcing  Segment.  The Driver Outsourcing  segment provides
          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 1,042  drivers who are  outsourced  to  customers  to
          deliver the vehicles.  In 2001,  Driver  Outsourcing  delivered 27,100
          units through the use of these drivers.

     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 11,450 large trailers in 2001 compared to 8,250 large
          trailers  in  2000.   Towaway  has  contracts  with  approximately  80
          independent owner-operators who drive semi-tractors.  Travel and other
          small  trailers  are  delivered  by  212  independent  owner-operators
          utilizing pick-up trucks.

     o    Insurance  and Finance  Segment.  The  Insurance  and Finance  segment
          provides   insurance  and  financing  to  the  Company's  drivers  and
          independent  owner-operators.   Interstate  and  TISA,  the  Company's
          insurance  subsidiaries,  offer  work  accident,  passenger  accident,
          bobtail liability and property damage insurance programs.


<PAGE>

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 the last five years.

<TABLE>
<CAPTION>


                                                                      Years Ended December 31,
Manufactured Housing
  Operating Information:                           2001          2000           1999           1998           1997
                                                   ----          ----           ----           ----           ----

<S>                                              <C>          <C>            <C>            <C>            <C>
New home shipments                               72,028       102,463        148,019        161,543        154,389
Other shipments                                  26,736        13,031         11,871         17,330         24,144
                                               --------      --------       --------       --------       --------
Total shipments                                  98,764       115,494        159,890        178,873        178,533

Linehaul revenues (in thousands)  (1)           $40,143       $62,526        $88,396        $94,158        $93,092

  Industry Participation:

Industry production (2)                         342,174       425,919        573,629        601,678        558,435
New home shipments                               72,028       102,463        148,019        161,543        154,389
Share of units produced                           21.1%         24.1%          25.8%          26.8%          27.6%

Driver Outsourcing
  Operating Information:

Shipments                                        27,136        36,883         49,892         44,177         45,447
Linehaul revenues (in thousands)                $17,722       $21,336        $23,748        $19,979        $19,706

Specialized Outsourcing Services
  Operating Information:

Shipments                                        29,916        29,215         32,967         38,167         34,867
Linehaul revenues (in thousands)                $20,718       $15,304        $21,115        $23,015        $19,630

</TABLE>
(1)  Multiplying  the  miles of a given  shipment  by the  stated  mileage  rate
     derives Linehaul revenue.

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

According to MHI, new home shipments decreased 29% during 2001 as compared to an
overall industry production reduction of 20%.

Additional  financial  information  about the  business  segments is included in
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations and in Note 12 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  grow  its  market   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
          recreational and commercial vehicles. The Company is looking to expand
          its growth in the  delivery  of  commercial  vehicles,  such as buses,
          commercial  trucks,  delivery  vans  and  construction  equipment.  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  market.  The future growth
          rate  of  the  Company's   outsourcing   business  is  dependent  upon
          continuing to add major vehicle  delivery  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.  Additionally,  the Company
          continues  to  develop  other  market  opportunities  for the  Pick-up
          portion of this segment,  including  recreational  travel trailers and
          other small towables.

     o    Acquisitions/Joint  Ventures. The Company is continuously  considering
          acquisition opportunities. The Company may consider acquiring regional
          or  national  firms  that  operate in the  specialized  transportation
          services   markets.   There  can  be  no  assurance  that  any  future
          transactions will be effected.

Forward-Looking Discussion

In 2002, the Company could benefit from further  reduction of overhead costs and
a  continued  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:

     o    Dependence on Manufactured Housing.  Shipments of manufactured housing
          have historically  accounted for a majority of the Company's operating
          revenues.  Therefore,  the Company's prospects are dependent upon this
          industry, which is subject to broad production cycles.

     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 market.

     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.

     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
in  2001  included  Oakwood  Homes  Corporation,  Fleetwood  Enterprises,  Inc.,
Champion  Enterprises,  Inc.,  Cavalier Homes,  Inc.,  Clayton Homes, Inc., Four
Seasons  Housing,  Inc.,  GE Capital  Modular,  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.

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, labor,  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 2001,  2000, and 1999
were 61%, 69%, and 71% of total linehaul revenues, respectively.

The Company's ten largest customers all have been served for at least four years
and accounted  for  approximately  59%, 67% and 68% of its linehaul  revenues in
2001,  2000 and  1999,  respectively.  Linehaul  revenues  under  contract  with
Fleetwood   Enterprises,   Inc.  ("Fleetwood")  and  Oakwood  Homes  Corporation
("Oakwood"),  accounted  for  28%  of  linehaul  revenues  in  2001,  with  each
contributing  14%. The  Fleetwood  manufactured  housing  contract is continuous
except that it may be terminated  upon thirty day (30) 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 Company has been servicing Fleetwood for over 25
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.

Effective  October 1, 2001,  the  Company is no longer the  primary  carrier for
Oakwood Homes Corporation  (NYSE: OH). In past years,  Oakwood was the Company's
largest customer, generating revenues in excess of $25 million for the Company's
manufactured  housing  division.  A weakened market for  manufactured  homes and
reductions  in capacity at Oakwood had reduced the Company's  revenue  stream in
2001 from  Oakwood to $11  million in 2001.  The Company  has  continued  as the
primary backup carrier for Oakwood.  Manufactured housing revenues for the third
and fourth  quarter  2001 were  negatively  impacted  by a loss of drivers  that
primarily hauled Oakwood homes.

Management is currently  implementing  marketing and sales programs  directed at
successfully replacing the Oakwood revenue. The Company has obtained significant
new contracts with New Flyer  Industries,  Monaco Coach,  Union Pacific,  Wabash
Trailers,  Skyline RV, Thor  Industries,  Inc.,  Dutchmen,  a subsidiary of Thor
Industries,   Inc.,  Lowes  Companies,   Inc.,  Wal-Mart,   Jayco  Incorporated,
Timberline  Homes,  S&S Housing and others that in the aggregate are expected to
generate annual revenue offsetting the Oakwood decline.

The  Company is  focusing  on  obtaining  large  national  contracts,  including
significant  new or revised  contracts with  Fleetwood  Homes,  Cavalier  Homes,
Winnebago and Clayton Homes.

The Company  markets and sells its  services  through 54 locations in 22 states,
concentrated where customer facilities are located.  Marketing support personnel
are located both at the Company's Elkhart, Indiana headquarters and regionally.

The Company's  dispatching agents and local personnel 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.

Independent Owner-Operators

The shipment of products 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.

Either party can cancel the contract between the Company and each owner-operator
upon ten days' notice.  The weighted  average length of service of the Company's
current  independent  owner-operators is approximately 3.7 years in 2001 and 4.0
years in 2000. At December 31, 2001, 687 independent  owner-operators were under
contract  to  the  Company,   including  395  operating   toters,  80  operating
semi-tractors, and 212 operating pick-up trucks.

In Manufactured Housing,  independent  owner-operators utilizing toter equipment
tends  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 5.2 years in 2001 compared to 4.7
years in 2000.

In Specialized Outsourcing Services,  Morgan is competing with national carriers
for  the  recruitment  and  retention  of  independent  owner-operators  who own
semi-tractors  and pick ups.  The  average  length of service  of the  Company's
independent  owner-operators is approximately 1.9 years in 2001, compared to 2.1
years in 2000.

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 coverage's.
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  driver's  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 Driver
Outsourcing  operations.  The  Company  out  sources  its  1,042  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  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 70 terminal  managers and  assistant  terminal  managers who are
involved  directly with the  management  of equipment and drivers.  The terminal
personnel  are  responsible  for the  Company's  terminal  operations  including
safety, customer relations and equipment assignment. In addition to the terminal
personnel, the Company employs 105 other full-time employees.

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 auto liability  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  maintains
cargo damage  insurance  with a deductible of  $1,000,000.  This  deductible was
$150,000 from April 1, 1998 to March 31, 1999,  and $250,000 for prior  periods.
The Company  believes that its current  insurance  coverage is adequate to cover
its liability risks.

The  frequency  and  severity  of claims  affects the cost and  potentially  the
availability  of such  insurance.  Acquisition  of  liability  insurance  in the
trucking industry has become  increasingly more difficult and expensive over the
past year.  Effective  July 1, 2001, the Company  renewed its primary  liability
insurance, workers compensation,  cargo, and property insurance at significantly
higher premium levels. These increased insurance premiums had a material adverse
effect on its net income for 2001.  Insurance premiums for its primary liability
insurance,  workers  compensation,  cargo, and property  insurance coverage were
$5,220,000  and  $2,445,000  for policy  years'  ended  June 30,  2002 and 2001,
respectively. The Company attempted to pass these increased costs through to its
customers;  however, due to unfavorable marketplace conditions (i.e. competitive
environment,  supply/demand,  etc.),  the planned  insurance  surcharge  was not
readily  absorbed by our customer base, and the Company was able to recover only
a portion of the premium  increase  from  customers  in the form of  apportioned
insurance  charges (AIC). The net impact on the Company's  operating results for
the next 12 months cannot be determined at this time.

In 2001, the Company  utilized a third party to finance its insurance  premiums.
In conjunction with this financing arrangement,  the Company borrowed $2,210,201
and prepaid its annual premiums to its insurance  underwriter.  The terms of the
financing  allow for the lender to have a first lien hold interest in the return
of any  prepaid  premiums.  The  financing  was for a  nine-month  period  at an
interest  rate of 5.84% with the final payment due on April 2, 2002. At December
31, 2001, the net  transaction  is recorded as prepaid  insurance in the current
assets section of the balance sheet as follows:

                 Unused Prepaid Premiums             $1,784,362
                 Amount due under financing
                   arrangements                        (894,581)
                                                   ------------
                 Net Prepaid                        $   889,781

In addition,  should the Company  incur  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.


<PAGE>

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, 2001, 2000, and 1999, respectively.

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

                                       2001             2000             1999
                                       ----             ----             ----

Beginning Reserve Balance              $8,346           $8,418           $8,108
Provision for Claims                    2,496            6,028            8,633
Payments, net                          (3,736)          (6,100)          (8,323)
                                       ------           ------           ------
Ending Reserve Balance                 $7,106           $8,346           $8,418
                                       ======           ======           ======


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.

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 claim expense as a percent of
operating  revenue  was  1.5% in both  2000 and  2001.  Personal  liability  and
property  damage claims  decreased  from 2.5% to 1.9% of operating  revenue from
2000 to 2001,  respectively.  Management believes these results are attributable
to the Company's focus on driver safety.

Interstate  makes  available  bobtail  liability and 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.

TISA is licensed to sell insurance  products within the State of Indiana to both
Company  and  non-Company  drivers.  TISA  offers work  accident  and  passenger
insurance coverage. TISA losses are underwritten by an independent,  third party
insurance carrier.

Competition

All of the Company's  activities are highly  competitive.  In addition to fleets
operated by manufacturers,  the Company competes with numerous regional or local
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.  Driver's equipment and
transportation permits are required to compete.

Regulation

The Company's  interstate  operations (MDA and TDI) are 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, federal law preempted the
economic regulation of certain intrastate  operations by various state agencies.
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  that  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 intra-provincial and extra provincial
authority;  the latter  permits  transborder  operations  to and from the United
States. The Company has obtained from Canadian  provincial agencies all required
extra provincial authority to provide transborder transportation of manufactured
homes and motor homes throughout most of Canada.

Most manufactured  homes exceed the maximum dimensions allowed on state highways
without a special  permit.  The Company  obtains  these permits from each state,
which allows the Company to transport  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.

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 54 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 offices                   24
Wakarusa, Indiana                 Terminal and storage                 4
Middlebury, Indiana               Storage                             13
Mocksville, North Carolina        Terminal and storage                 8
Edgerton, Ohio                    Storage                              2
Woodburn, Oregon                  Storage                              4
Woodburn, Oregon                  Terminal and storage                 1
Montevideo, Minnesota             Storage                              3
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.

On September  26,  2001,  the Company  filed suit in a federal  court in Georgia
against  one of its former  senior  officers,  a  competitor  and certain of its
affiliates,  alleging that the parties had secretly  conspired to misappropriate
drivers, employees,  customers and trade secrets of the Company through unlawful
means at a time  when the  senior  officer  was  still a senior  officer  of the
Company.  The lawsuit further alleges that, while on the Company's payroll,  the
senior officer and some of her  subordinates  worked with the competitor,  using
false information,  to convince drivers under contract with the Company to leave
and work for the competitor  instead. It is also alleged that the senior officer
and  others  working  on  behalf  of the  competitor  sent  more  than 20  faxes
(including  some from the Company's own facilities)  encouraging  retail dealers
under false pretenses to instruct  manufacturers  to have their homes shipped by
the competitor rather than the Company in interference with those manufacturers'
written agreements with the Company. The lawsuit further alleges that the senior
officer and others  acting for the  competitor  improperly  removed trade secret
information  and files from two offices of the Company,  including  confidential
pricing data that the competitor allegedly is using to unfairly compete with the
Company's price structure.

At a hearing on September 28, 2001, the competitor and the senior officer denied
many of the allegations and any wrongdoing.  Despite their denials,  the federal
court issued a  preliminary  injunction  against the  competitor  and the senior
officer,  under which the court invalidated contracts between the competitor and
the drivers the competitor  had recruited  from the Company.  Those drivers were
freed from their contracts with the competitor and given 10 days to choose among
the Company,  the  competitor  and another  carrier based on full  disclosure of
information.  The court also  invalidated  the letters  from  retail  dealers to
manufacturers  that the competitor and the senior officer allegedly  instigated,
and confirmed  that retail  dealers  should not be improperly  induced to use an
alternate  carrier.  The  competitor  and the  senior  officer  also  have  been
prohibited by the court from keeping or using any  confidential  information and
files allegedly taken from the Company.

In addition to the preliminary  injunction  issued by the court on September 28,
2001, the Company is also seeking  monetary  damages from the competitor and the
senior officer, as well as a permanent injunction against unfair competition and
unlawful  interference  with the  Company's  contracts.  Over  the  competitor's
objection,  the court ruled on September  28, 2001,  that the parties could take
immediate discovery in the case on these remaining issues.

The  competitor  and former  senior  officer  have filed  certain  counterclaims
against the Company, which the Company plans to defend vigorously.

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 February 28, 2002, there were 125 shareholders of record of the
Company's Class A common stock.  This figure does not include  shareholders with
shares held under beneficial  ownership in nominee name or within  clearinghouse
position of brokerage  firms and banks. At December 31, 2001, the Class B common
stock was held by a subsidiary of Lynch Interactive Corporation (AMEX: LIC).

Market Price of Class A common stock:

                                    2001                       2000
                            -----------------           ----------------
Quarter Ended               High          Low           High         Low
                            ----          ---           ----         ---

March 31                    $4.38        $3.90         $8.50        $5.38
June 30                      4.10         3.65          7.88         6.13
September 30                 3.85         3.50          7.25         5.25
December 31                  3.50         2.50          6.06         3.75
Dividends Declared:
                               Class A                           Class B
                            Cash Dividends                    Cash Dividends
                            ---------------                   ---------------
Quarter Ended               2001       2000                   2001       2000
                            ----       ----                   ----       ----

March 31                    $0.00     $0.02                  $0.00      $0.010
June 30                      0.00      0.02                   0.00       0.010
September 30                 0.00      0.01                   0.00       0.005
December 31                  0.00      0.00                   0.00       0.000

The Company's  ability to pay dividends is limited by covenants  with its senior
lenders.

On January 24, 2002,  Lynch  Interactive  Corporation,  the  Company's  majority
stockholder,  completed a transaction to spin off its investment in the Company,
which was held through its wholly  owned  subsidiary  Morgan  Group  Holding Co.
Stockholders of record of Lynch Interactive Corporation as of December 18, 2001,
received  one share of Morgan  Group  Holding  Co. for each share owned of Lynch
Interactive Corporation.



<PAGE>
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA

THE MORGAN GROUP, INC. AND SUBSIDIARIES FINANCIAL HIGHLIGHTS
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>


                                                  2001          2000          1999          1998           1997
                                                  ----          ----          ----          ----           ----
Operations
<S>                                             <C>           <C>           <C>           <C>           <C>
  Operating Revenues (1)                        $101,168      $128,367      $172,491      $178,044      $171,390
  Operating Income (Loss) (2)                     (1,882)       (2,038)          550         2,007         1,015
  Net Income (Loss) (2) (3)                       (1,989)       (4,799)           19           903           196


Net Income (Loss) Per Share:
  Basic & Diluted                                 $(0.68)       $(1.96)        $0.01         $0.35         $0.07
  Cash Dividends Declared:
      Class A                                       0.00          0.05          0.08          0.08          0.08
      Class B                                       0.00         0.025          0.04          0.04          0.04

Financial Position
  Total Assets                                  $ 22,530      $ 23,269      $ 32,264      $ 33,387      $ 33,135
  Working Capital                                  1,300         1,063         3,189         3,806         1,613
  Long-term Debt                                     182           288           965         1,480         2,513
  Shareholders' Equity                             6,982         7,201        12,092        13,221        12,724


Common Shares Outstanding at Year
   End (in 000's)                                  3,448         2,448         2,448         2,554         2,638
Basic Weighted Average Shares
   Outstanding (in 000's)                          2,922         2,448         2,470         2,606         2,657
</TABLE>


(1)  Reclassification  of  Operating  Revenue.   Gross  operating  revenues  and
     operating expenses for 2000 and prior years were reclassified to conform to
     the current year presentation.  This consisted of reclassifying  escort and
     insurance  billings to operating  revenue that were previously  recorded as
     offsets against operating costs. The  reclassification  increased operating
     revenues and  operating  expenses  proportionately.  There was no impact on
     operating income or net income from this reclassification.

(2)  Includes pre-tax special charges of $624,000 ($412,000 after-tax) in 1997.

(3)  Includes  deferred  tax  expense  relating  to  changes  in  the  valuation
     allowance of $601,000 and $3,188,000 in 2001 and 2000, respectively.


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

Year 2001 Compared with 2000

Consolidated Results

Revenues decreased by 21% to $101.2 million in 2001 from $128.4 million in 2000.
The largest decline was in the manufactured housing division where revenues were
down 33% to $60.2  million  from  $89.2  million in the prior  year.  The driver
outsourcing division declined 16% to $17.6 million while specialized outsourcing
increased 37% to $21.0 million.

The  manufactured  housing  market  continued  a slump  that began in late 1999.
Industry shipments of manufactured homes, Morgan's largest division, declined by
24% in 2001  compared  to  2000,  following  a  similar  decline  of 26% in 2000
compared to 1999. In the Company's second largest division,  industry  shipments
of recreational vehicles declined by 19% in 2001 from the prior year.

Revenues for September  through  December 2001 were negatively  impacted for all
four divisions by the September 11, 2001 terrorist attacks. Shippers experienced
work slowdowns and demand fell as customers cancelled orders.

Although  revenues declined by $27.2 million in 2001, the Company was successful
in implementing  cost-cutting  programs  designed to match expenses with reduced
revenue levels. In the Company's business model, 85% of expenses are variable on
a load-by-load  basis, 11% of expenses are variable within a 60-day period,  and
only 4% are fixed in the long term.

The Company has  continued to  eliminate  or reduce costs to maximize  operating
profit on overall lower revenues.  As a result, the EBITDA loss (earnings before
interest, taxes, depreciation and amortization) was comparable to the prior year
at $994,000 compared to $971,000 in 2000.

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.

On April 1, 2001, the Company renewed  insurance  policies for excess  insurance
above its primary $3 million coverage layer. On July 1, 2001 the Company renewed
its primary  liability  insurance  program as well as workers  compensation  and
property  insurance.  The market for liability  insurance for trucking companies
became  significantly  more  expensive  in 2001 and as a result,  the  Company's
insurance  rates  increased  markedly on the renewal  dates.  Insurance  premium
expense increased significantly in 2001 compared to 2000.

The Company  attempted to pass these  increased  costs through to its customers;
however,   due  to  unfavorable   marketplace   conditions   (i.e.   competitive
environment,  with weakened  demand),  the planned  insurance  surcharge was not
readily  absorbed by our customer  base.  The Company was able to recover 25% of
the premiums from customers in the form of apportioned  insurance  charges (AIC)
in 2001.  The net  impact on the  Company's  operating  results  for the next 12
months cannot be determined at this time. As marketplace awareness develops, the
Company  expects  conditions to become more conducive to customer  absorption of
insurance surcharges.

The Company has implemented  major new safety  initiatives in the past two years
in an effort to reduce claim costs and improve  customer  service.  As a result,
claim expense net of salvage and  subrogation  decreased by $1.7 million in 2001
compared to the prior year.

The Company  recorded  non-cash charges of $0.6 million and $3.2 million in 2001
and 2000,  respectively;  to write down the value of deferred  tax  assets.  The
Company  has a  cumulative  loss in its  three  most  recent  fiscal  years  and
Management  believes  that  under  the  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.

In August 2001 the Company received an income tax refund of $664,000 from filing
a federal  net  operating  loss  carry-back  return  for the 2000 tax year.  The
Company recorded an additional income tax benefit in 2001 of $513,000 related to
income tax refunds due to the Company for the 2001 tax year.

For additional  information concerning the provision for income taxes as well as
information  regarding  differences  between  effective  tax rates and statutory
rates, see Note 8 of the Notes to Consolidated Financial Statements.

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

The  Company  is  the  largest  provider  of  transportation   services  to  the
manufactured  housing  industry.  From 1995 to 1999,  the  industry  shipped  an
average of 356,000  manufactured  homes per year  according to a report from the
Manufactured  Housing Institute.  Late in 1999, consumer credit for manufactured
home buyers became constricted, causing demand for homes to fall and inventories
to build. The industry shipped 349,000,  251,000 and 193,000 homes in 1999, 2000
and 2001, respectively.

Shipments of new manufactured  homes reached a ten-year low in December 2000 and
year-over-year shipments have improved slowly and steadily through 2001.

Effective  October 1, 2001,  the  Company is no longer the  primary  carrier for
Oakwood Homes Corporation (NYSE: OH). In 2001, Oakwood was the Company's largest
customer, generating revenues of $10.9 million. The Company will continue as the
primary backup carrier for Oakwood.  Revenues from September to December 2001 in
manufactured  housing  were also  negatively  impacted by a loss of drivers that
primarily hauled Oakwood homes.

Management is currently  implementing  marketing and sales programs  directed at
successfully replacing the Oakwood revenue. The Company has obtained significant
new contracts  both in  manufactured  housing and other  segments with New Flyer
Industries,  Monaco Coach,  Union  Pacific,  Wabash  Trailers,  Skyline RV, Thor
Industries,  Inc.,  Dutchmen,  a  subsidiary  of Thor  Industries,  Inc.,  Lowes
Companies, Inc., Wal-Mart, Jayco Incorporated, Timberline Homes, S&S Housing and
others that in the aggregate are expected to generate annual revenue  offsetting
the Oakwood decline.

In  manufactured  housing,  the Company is focusing on obtaining  large national
contracts,  including  significant  new  or  revised  contracts  with  Fleetwood
Enterprises, Cavalier Homes and Clayton Homes.

In September the Company filed a lawsuit  alleging that one of its former senior
officers  had  conspired  with a  competitor  to  misappropriate  the  Company's
drivers,  employees,  customers  and trade  secrets  both during that  officer's
employment  with the Company and after she left the Company.  The court issued a
preliminary  injunction  in favor of the  Company  on  September  28,  2001.  In
addition  the  Company  is  seeking  monetary  damages  as well  as a  permanent
injunction  against  unfair  competition  and  unlawful  interference  with  the
Company's contracts. See Part I; Item 3 "Legal Proceedings."

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 16% in 2001 to $17.6
million.  The decrease was primarily the result of softness in the  recreational
vehicle market.

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 increased 37% to $21.0 million
in 2001.


<PAGE>
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 $0.5 million to $2.4 million in
2001 reflecting a decrease in owner-operator  insurance premiums relating to the
decline in the manufactured housing industry. However,  Insurance/Finance EBITDA
loss  decreased  $1.5  million to $5.3  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  Company  is
essentially self-insured for cargo losses with a deductible of $1,000,000.

As a part of continuing efforts to contain claims expense, the Company continues
to emphasize its safety  awareness and formal safety training efforts among both
owner-operators and terminal  personnel.  Cargo claims as a percent of operating
revenue was at 1.5% in both 2000 and 2001.  Bodily  injury and  property  damage
claims  decreased  from  2.5% to 1.9% of  operating  revenue  from 2000 to 2001,
respectively.   Management  believes  these  results  are  attributable  to  the
Company's focus on driver safety.

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. In spite of these  significant
efforts,  operating  costs and expenses 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 5 of the
Notes to Consolidated Financial  Statements),  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 8 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 28% from 1999 to $89.2 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 is focusing on large national contracts. The Company in 2001 renewed
and expanded its contracts with Fleetwood and Clayton Homes, Inc.

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.

Cargo  claims  as a  percent  of  operating  revenue  decreased  to 1.5% in 2000
compared to 2.3% in 1999.  Bodily injury and property damage claims as a percent
of operating revenue decreased to 2.5% in 2000 compared to 3.3% in 1999.

Liquidity and Capital Resources

2001 Key Events Impacting Liquidity

On July 12, 2001, the Company  completed a $2 million capital  infusion from its
majority  stockholder Lynch Interactive  Corporation.  Morgan issued one million
new  Class B  shares  of  common  stock  in  exchange  for a $2.0  million  cash
investment,  thereby  increasing  Lynch's ownership position in the Company from
55.6% to 68.5%. The proceeds from the transaction are invested in U.S.  Treasury
backed  instruments and are pledged as collateral for the Credit Facility.  (See
Spin off  Transaction in Note 16 to financial  statements)On  July 27, 2001, the
Company  obtained a new  three-year  $12.5 million Credit  Facility.  The Credit
Facility replaces the Company's previous credit line that had expired on January
28, 2001.

The  Credit  Facility  will be used for  working  capital  purposes  and to post
letters of credit for insurance contracts.  As of December 31, 2001, the Company
had outstanding  borrowings of $80,000 and $7.0 million  outstanding  letters of
credit. Borrowings bear interest at a rate per annum equal to either Bank of New
York  Alternate  Base Rate  ("ABR") plus  one-half  percent or, at the option of
Company, absent an event of default, the one month London Interbank Offered Rate
("LIBOR") as published in The Wall Street Journal,  averaged monthly, plus three
percent.  Borrowings  and posted  letters of credit on the Credit  Facility  are
limited  to  a  borrowing  base   calculation  that  includes  85%  of  eligible
receivables  and  95% of  eligible  investments,  and  are  subject  to  certain
financial covenants  including minimum tangible net worth,  maximum funded debt,
minimum fixed interest coverage and maximum capital  expenditures.  The facility
is secured by accounts receivable, investments, inventory, equipment and general
intangibles.  The facility may be prepaid anytime with prepayment  being subject
to a 3%, .75% and .25% prepayment penalty during year 1, 2 and 3, respectively.

The prior Credit Facility matured on January 28, 2001, at which time the Company
had no outstanding debt and $6.6 million of outstanding  letters of credit.  The
Company was in default of the financial covenants. The bank decided not to renew
the prior Credit Facility; and, as a result, the Company had a payment default.

On July 31, 2001, the Company closed on a real estate mortgage for $500,000 that
is secured by the  Company's  land and buildings in Elkhart,  Indiana.  The loan
proceeds are invested in U.S.  Treasury  backed  instruments  and are pledged as
collateral  for $600,000 in letters of credit  issued by the Bank.  The mortgage
bears  interest  at prime  rate plus  0.75%,  and is for a  six-month  term with
outstanding  principal,  which  matured on February  1, 2002.  The Company has a
payment default on this scheduled  principal  payment and is currently seeking a
replacement  lender.  The loan is  subject to the same  covenants  as the Credit
Facility.

Acquisition  of  liability   insurance  in  the  trucking  industry  has  become
increasingly more difficult and expensive over the past year.  Effective July 1,
2001, the Company renewed its primary liability insurance, workers compensation,
cargo, and property  insurance at an increase of 97% over its prior year premium
cost. These increased insurance premiums had material adverse effects on its net
income for 2001. The Company  attempted to pass these increased costs through to
its  customers;   however,  due  to  unfavorable  marketplace  conditions  (i.e.
competitive environment,  with weakened demand), the planned insurance surcharge
was not readily absorbed by our customer base. The Company was able to recover a
portion of the  premiums  from  customers in the form of  apportioned  insurance
charges (AIC) in 2001. The net impact on the Company's operating results for the
next 12 months  cannot be  determined  at this time.  As  marketplace  awareness
develops,  the Company  expects  conditions to become more conducive to customer
absorption of insurance surcharges.

At December 31, 2001, in conjunction with the insurance renewal, the Company has
posted $7.5 million letters of credit to the insurance  carriers  through credit
facilities as collateral for the payment of claim reimbursements.

In August 2001 the Company received an income tax refund of $664,000 from filing
a federal  net  operating  loss  carry-back  return  for the 2000 tax year.  The
Company recorded an additional income tax benefit in 2001 of $513,000 related to
income tax refunds due to the Company for the 2001 tax year.

On December 12, 2001, the Company issued  non-transferable  warrants to purchase
shares of common  stock to the holders of our Class A and Class B common  stock.
Each  warrant  entitles  the holder to purchase one share of their same class of
common stock at an exercise price of $9.00 per share through the expiration date
of December 12, 2006. The Class A warrants  provide that the exercise price will
be  reduced  to $6.00 per share  during a  Reduction  Period of at least 30 days
during the five-year exercise period. See Note 16 to the financial statements.


<PAGE>
2002 Key Events Impacting Liquidity

On February 7, 2002,  the  Company  obtained a temporary  increase in its credit
availability  on the Credit  Facility of $1 million.  The Company  provided  the
lender a second  mortgage  on real estate in Elkhart,  Indiana.  The  $1,000,000
increase will be eliminated on May 31, 2002.

On February 19, 2002,  the Board of Directors  agreed to set the exercise  price
reduction  period on the Class A warrants to begin on  February  26, 2002 and to
extend for 63 days,  expiring on April 30, 2002 (the  "Reduction  Period").  The
Board of Directors  agreed to reduce the exercise price of the warrants to $2.25
per share, instead of $6.00 per share, during the Reduction Period. The Board of
Directors  reduced  the  exercise  price to $2.25 to give  warrant  holders  the
opportunity to purchase  shares at a price in the range of recent trading prices
of the Class A common stock, with a view to generating proceeds, if warrants are
exercised, to assist the Company in addressing near term liquidity requirements.
There is no  assurance  that any  warrants  will be  exercised.  All other terms
regarding the warrants,  including the expiration  date of the warrants,  remain
the same.

Working Capital Requirements

Company accounts  receivable provides much of the collateral base for the credit
facility,  which supports  outstanding  letters of credit and provides borrowing
capacity  for working  capital.  The impact of  decreased  revenues and accounts
receivable  have,  therefore,  reduced the  borrowing  capacity and liquidity to
minimal levels.  Management is aggressively  pursuing financing options to allow
the Company to meet its liquidity  requirements  during this slow period through
the first quarter,  2002, until accounts  receivable recover to stronger levels.
Management is working with its lenders to obtain  additional  financing,  and to
obtain   modification  or  waivers  with  respect  to  certain  credit  facility
covenants.

The Company  expects to file for a federal  income tax refund from  carryback of
net operating losses for tax year 2001. A refund of  approximately  $1.5 million
is expected.

Additional  financing  options  the  Company  is  pursuing  include  negotiating
reductions  of  the  $7  million  collateral   requirements  for  its  liability
insurance. Additionally, the reduction in the exercise price for warrants issued
December  12,  2001,  may induce  warrant  holders to exercise  their  warrants,
generating  cash  proceeds.  Two  of  our  principal  stockholders  have  orally
indicated  an interest in  exercising  warrants  at the reduced  exercise  price
which, if exercised during the Reduction Period, would provide for approximately
$500,000 in proceeds. We can give no assurance,  however, that any warrants will
be exercised.  At this time,  the Company's  ability to  successfully  cover its
financial obligations during this slow season is uncertain.

The  financial   statements  are  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'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,  and to marshal its capital
resources to timely meet all obligations.

Inflation

Most of the  Company's  expenses  are  affected by  inflation,  which  generally
results  in  increased  costs.  During  2001,  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 the Company's  owner-operators pay fuel costs, 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 become  effective.  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.

Critical Accounting Policies and Estimates

Management's  discussion and analysis of the Company's  financial  condition and
results  of  operations  are based  upon the  Company's  consolidated  financial
statements,  which have been prepared in accordance with  accounting  principles
generally  accepted in the United  States.  The Company  reviews its  accounting
policies  used in  reporting  its  financial  results  on a regular  basis.  The
preparation of these financial statements requires the Company to make estimates
and judgments that affect the reported amounts of assets, liabilities,  revenues
and expenses and related disclosure of contingent assets and liabilities.  On an
ongoing basis, the Company evaluates estimates,  including among possible others
those  related  to  revenue   recognition;   allowance  for  doubtful  accounts;
intangible   assets;   deferred  income  taxes;   auto  liability  and  workers'
compensation  claims;  contingencies  and litigation.  The Company  prepares its
estimates based upon historical experience and on various other assumptions that
are believed to be reasonable under the circumstances, the results of which form
the  basis  for  making  judgments  about  the  carrying  value  of  assets  and
liabilities  that are not readily  apparent  from other  sources.  Results  will
differ from these estimates due to actual outcomes being different from those on
which we based our  assumptions.  These  estimates and judgments are reviewed by
management on an ongoing  basis,  and by the Audit  Committee at the end of each
quarter prior to the public release of our financial results.

Management  believes  the  following  critical  accounting  policies  affect the
Company's more  significant  judgments and estimates used in the  preparation of
its consolidated financial statements.

Revenue Recognition

Net revenue consists of three major components:  linehaul revenues,  assessorial
revenue and driver insurance revenue.

Linehaul revenue represents total loaded miles of a shipment times a contractual
rate per mile;  accessorial  revenue  represents  customer billings for escorts,
permits,  labor,  fuel surcharges,  insurance  surcharges and  reimbursement for
other incidental costs incurred  related to linehaul  revenue.  Driver insurance
revenue  represents  billings to drivers for  insurance  products  sold  through
Company subsidiary entities, Interstate and TISA.

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.

Revenues are recorded in the period the services are rendered as  determined  by
the acceptance of delivery by the customer or consignee.

The Company  records its estimated  reductions to revenue for customer  discount
programs and incentive  offerings including special pricing agreements and other
volume-based incentives as the incentives are contractually earned.

Accounts Receivable and Allowance for Doubtful Accounts

The Company  generates a significant  portion of its revenues and  corresponding
accounts receivable from the transportation industry.

The Company  maintains an allowance for doubtful  accounts for estimated  losses
resulting  from the inability of our customers to make  required  payments.  The
allowance for doubtful accounts is determined based upon indicators of potential
collectibility  concerns such as historical payment patterns,  aging of accounts
receivable  and actual  write-off  history.  If the  financial  condition of the
Company's  customers  were to  deteriorate  resulting in an  impairment of their
ability to make payments, additional allowances may be required.

Goodwill  Impairment  and Other  Identifiable  Intangibles--  Recent  Accounting
Pronouncements

The  Company  assesses  the  impairment  of  goodwill  and  other   identifiable
intangibles  whenever  events or  changes  in  circumstances  indicate  that the
carrying value may not be recoverable.  Some factors considered  important which
could trigger an impairment review include the following:

     o    Significant   underperformance  relative  to  expected  historical  or
          projected future operating results;

     o    Significant changes in the manner of our use of the acquired assets or
          the strategy for our overall business;

     o    Significant negative industry or economic trends;

     o    Company market capitalization relative to net book value.

In July 2001,  the Financial  Accounting  Standards  Board issued  Statements of
Financial Accounting  Standards,  No. 141, Business Combinations (SFAS No. 141),
and No.  142,  Goodwill  and  Other  Intangible  Assets  (SFAS No.  142).  These
Statements  change the  accounting  for  business  combinations,  goodwill,  and
intangible assets. SFAS 142 requires a discounted cash flow approach to estimate
potential impairment of intangible assets.

In 2002,  SFAS No.  142  became  effective  and as a  result,  we will  cease to
amortize   approximately   $6.0  million  of  net  goodwill.   We  had  recorded
approximately $0.4 million of goodwill  amortization  during 2001 and would have
recorded approximately $0.4 million of amortization during 2002.

Under SFAS No. 142,  goodwill  and  indefinite  lived  intangible  assets are no
longer amortized but are reviewed for impairment  annually or more frequently if
impairment indicators arise. Separable intangible assets that are deemed to have
definite  lives will  continue to be  amortized  over their  useful  lives.  The
amortization  provisions of SFAS No. 142 apply to both  goodwill and  intangible
assets acquired after June 30, 2001.

The  Company  adopted  SFAS No. 141 and 142 in the third  quarter of 2001 except
with  respect  to the  provisions  of SFAS No.  142  relating  to  goodwill  and
intangibles  acquired  prior to July 1, 2001.  Those  provisions of SFAS No. 142
will be adopted January 1, 2002.

In 2001, significant negative indicators existed for the Company, including, but
not limited to, significant  revenue declines as well as operating and cash flow
losses and the loss of a  significant  customer on October 1, 2001. As a result,
management  deemed it  appropriate  to obtain an  independent  valuation  of the
Company's  intangible  assets to determine if impairment  existed in 2001.  This
valuation  was  performed  under  the  current   accounting   pronouncement   on
impairment, SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived  Assets to be Disposed Of that utilizes an undiscounted cash flow
approach to estimate any potential impairment.

The independent  valuation based upon the Company's  estimated  future cash flow
concluded  that there is no impairment  of the  Company's  assets under SFAS No.
121.  However,   there  was  a  projected  impairment  under  SFAS  No.  142  of
approximately $325,000 to $600,000,  which was disclosed, in the Company's third
quarter  Form 10-Q.  The Company is  currently  in the  process of updating  the
valuation  analysis under SFAS No. 142 in anticipation of adoption on January 1,
2002. Any impairment  charges resulting from this analysis will be recognized in
the first quarter of 2002.

Income Taxes and Deferred Taxes

The Company  accounts for deferred income taxes based upon  differences  between
the financial reporting and income tax bases of its assets and liabilities.  The
measurement  of deferred  tax assets is adjusted  by a valuation  allowance,  if
necessary,  to recognize  the extent to which,  more likely than not, the future
tax benefits will not be recognized.  The Company bases the valuation  allowance
upon levels of taxable income historically  generated by the Company, as well as
projections of future taxable income.

Insurance and Claims Reserves

The risk of losses  arising  from  accidents  is inherent in any  transportation
business.  The nature of the  Company's  business  is such that it is subject to
product  damage and  liability  lawsuits  stemming from highway  accidents.  The
Company has risk for primarily two types of claims,  liability and cargo,  which
vary in the amount of time to settle.  The cargo  claims are  typically  smaller
claims  related to damage  during  transportation  of a unit.  These  claims are
generally settled within a one to two-year  timeframe.  The liability claims are
typically  larger in size and are related to property damage and personal injury
accidents.  These claims are complex and  sometimes  may take up to ten years to
settle.

To  mitigate  a portion  of this  risk,  the  Company  maintains  insurance  for
liability claims with a deductible of $250,000 per occurrence with a $25 million
total limit. For the cargo claims, the Company is self-insured.

Liability  lawsuits are routinely  reviewed by the Company's  insurance carrier,
managing  agent and  management  for  purposes  of  establishing  ultimate  loss
estimates.  Provisions  for estimated  losses in excess of insurance  limits are
provided at the time such  determinations are made. The Company utilizes standby
letter  of  credits  to  post  for  the  benefit  of the  insurance  carrier  to
collateralize  their  exposure.  These letters of credit are secured by accounts
receivable and investments.  The Company's  insurance limits have generally been
adequate to cover losses experienced by the Company.

The  Company  maintains  a ledger  of all  claims in  process  and  computes  an
estimated liability for these claims. When a claim is incurred and reported,  an
estimated  liability and expense is computed based upon the nature of the claim.
The Company  estimated portion of the claim liability is recorded as a liability
with a corresponding  amount  recorded as claim expense.  As the claim develops,
the accrued  liability is adjusted  upward or downward  based upon the facts and
circumstances  derived during the settlement process. This liability is recorded
in the  current  and  long-term  section  of the  balance  sheet  based upon its
expected time frame for settlement.

When the claim is settled and all parties have reached  agreement,  payments are
made to fully  satisfy  the claim.  The  difference,  if any,  between the final
estimated  settlement  versus  actual  settlement  expense  is  recorded  as  an
adjustment to claims expense.

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 financial and other
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 and shares in thousands, except per share amounts)

                                                              December 31
                                                         2001             2000
                                                         ----             ----
ASSETS
Current assets:
   Cash and cash equivalents                          $ 1,017          $ 2,092
   Investments - restricted                             2,624                -
   Accounts receivable, less allowances
      of $439 in 2001 and $248 in 2000                  6,322            7,881
   Refundable taxes                                       591              499
   Prepaid insurance                                      890               96
   Other current assets                                 1,313            1,051
   Deferred income taxes                                    -              319
                                                      -------          -------
Total current assets                                   12,757           11,938
                                                      -------          -------

Property and equipment, net                             3,385            3,688
Goodwill and other intangibles, net                     6,256            6,727
Deferred income taxes                                       -              282
Other assets                                              132              634
                                                      -------          -------
Total assets                                          $22,530          $23,269
                                                      =======          =======

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Notes payable, banks                               $   580          $     -
   Trade accounts payable                               4,505            2,373
   Accrued liabilities                                  2,500            3,704
   Accrued claims payable                               3,028            3,224
   Refundable deposits                                    675            1,357
   Current portion of long-term debt                      169              217
                                                      -------          -------
Total current liabilities                              11,457           10,875

Long-term debt, less current portion                       13               71
Long-term accrued claims payable                        4,078            5,122
Commitments and contingencies                               -                -

Shareholders' equity:
   Common stock, $.015 par value:
      Class A: Authorized shares - 7,500
         Issued shares - 1,607                             23               23
      Class B: Authorized shares -
           4,400 in 2001 and 2,500 in 2000
         Issued and outstanding shares -
           2,200 in 2001 and 1,200 in 2000                 33               18
   Additional paid-in capital                          14,214           12,459
   Retained deficit                                    (4,105)          (2,116)
Less - treasury stock at cost
   (359 Class A shares)                                (3,183)          (3,183)
                                                      -------          -------
Total shareholders' equity                              6,982            7,201
                                                      -------          -------
Total liabilities and shareholders' equity            $22,530          $23,269
                                                      =======          =======

See accompanying notes.


<PAGE>

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

<TABLE>
<CAPTION>


                                                         For the year ended December 31
                                                    2001             2000              1999
                                                    ----             ----              ----

<S>                                             <C>              <C>               <C>
Operating revenues                              $101,168         $128,367          $172,491

Costs and expenses:
   Operating costs                                93,933          119,895           160,636
   Selling, general and administration             8,229                             10,090
                                                                    9,443
   Depreciation and amortization                     888            1,067             1,215
                                                --------          -------            ------
                                                 103,050          130,405           171,941
                                                --------          -------            ------

Operating income (loss)                           (1,882)          (2,038)              550
Interest expense                                     273              310               338
                                                --------          -------            ------
Income (loss) before income taxes                 (2,155)          (2,348)              212

Income tax expense (benefit)                        (166)           2,451               193
                                                --------          -------            ------

Net income (loss)                               $ (1,989)         $(4,799)           $   19
                                                ========          =======            ======
Net income (loss) per common share:
  Basic and diluted                             $  (0.68)         $ (1.96)           $ 0.01

Weighted average shares outstanding                2,922            2,448             2,470

Cash dividends declared per common share:
  Class A                                              -           $0.050            $0.080
  Class B                                              -            0.025             0.040

</TABLE>

See accompanying notes.


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


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

<S>                                                  <C>          <C>       <C>          <C>           <C>          <C>
Balance at December 31, 1998                         $23          $18       $12,459      $(2,177)      $2,898       $13,221
   Net income                                          -            -             -            -           19            19
   Purchase of treasury stock                          -            -             -       (1,006)           -        (1,006)
   Common stock dividends:
      Class A ($.080 per share)                        -            -             -            -          (94)          (94)
      Class B ($.040 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 ($.050 per share)                        -            -             -            -          (62)          (62)
      Class B ($.025 per share)                        -            -             -            -          (30)          (30)
                                                     ---          ---       -------      -------      -------       -------

Balance at December 31, 2000                         $23          $18       $12,459      $(3,183)     $(2,116)       $7,201

   Net loss                                            -            -             -            -       (1,989)       (1,989)
   Issuance of common stock                            -           15         1,755                         -         1,770
                                                     ---          ---       -------      -------      -------       -------

Balance at December 31, 2001                         $23          $33       $14,214      $(3,183)     $(4,105)      $ 6,982
                                                     ===          ===       =======      =======      =======       =======


</TABLE>

See accompanying notes.


<PAGE>

                     The Morgan Group, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)
<TABLE>
<CAPTION>

                                                                                           For the year ended December 31
                                                                                       2001              2000              1999
                                                                                       ----              ----              ----
Operating activities:
<S>                                                                                 <C>              <C>                  <C>
        Net income (loss)                                                           $ (1,989)        $ (4,799)            $   19
        Adjustments to reconcile net income (loss) to net cash
        provided by (used in) operating activities:
        Depreciation and amortization                                                    888            1,067              1,215
        Deferred income taxes                                                            601            3,046               (420)
        Loss on disposal of property and equipment                                        15              292                101
Changes in operating assets and liabilities:
        Accounts receivable                                                            1,559            2,562              2,959
        Refundable taxes                                                                 (92)            (499)                 -
        Prepaid insurance and other current assets                                    (1,056)             813                507
        Other assets                                                                     502               63                (43)
        Trade accounts payable                                                         2,132           (1,534)              (397)
        Accrued liabilities                                                           (1,204)          (1,148)             1,286
        Income taxes payable                                                               -             (278)              (600)
        Accrued claims payable                                                        (1,240)             (72)               310
        Refundable deposits                                                             (682)            (395)               (78)
                                                                                    --------         --------             ------
        Net cash provided by (used in) operating activities                             (566)            (882)             4,859
Investing activities:
        Purchases of restricted investments                                           (2,624)               -                  -
        Purchases of property and equipment                                              (99)            (106)              (811)
        Proceeds from sale of property and equipment                                      15                2                  7
        Non-compete agreements                                                           (45)               -                  -
        Other                                                                              -                -                (35)
                                                                                    --------         --------             ------
        Net cash provided by (used in) investing activities                           (2,753)            (104)              (839)
Financing activities:
        Principal payments on long-term debt                                            (106)            (677)              (664)
        Net proceeds from credit facility                                                 80                -                149
        Proceeds from mortgage note                                                      500                -                  -
        Net proceeds from issuance of common stock                                     1,770                -                  -
        Purchase of treasury stock                                                         -                -             (1,006)
        Common stock dividends paid                                                        -              (92)              (142)
                                                                                     -------         --------             ------
        Net cash provided by (used in) financing activities                            2,244             (769)            (1,663)
                                                                                    --------         --------             ------

Net increase (decrease) in cash and cash equivalents                                  (1,075)          (1,755)             2,357

Cash and cash equivalents at beginning of year                                         2,092            3,847              1,490
                                                                                    --------         --------             ------

Cash and cash equivalents at end of year                                              $1,017           $2,092             $3,847
                                                                                    ========         ========             ======

Cash payments for interest                                                              $434             $379               $406
                                                                                        ====             ====               ====
</TABLE>

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.  ("MDA") and TDI, Inc.  ("TDI"),  provides  specialized
transportation services to the manufactured housing,  recreational vehicle, bus,
van,  commercial  truck and trailer  industries.  At December  31,  2001,  Lynch
Interactive  Corporation and its wholly owned subsidiaries ("Lynch Interactive")
owned  all of the  2,200,000  shares  of the  Company  Class B common  stock and
161,100  shares  of the  Company's  Class A common  stock,  which  in  aggregate
represented  81% of the combined  voting  power of the  combined  classes of the
Company's common stock.  Subsequent to December 31, 2001, Lynch Interactive spun
off its investment in the Company via a newly formed entity. See Note 16.

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 drivers and 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,  including  accessorial  charges and related driver pay are
recognized when movement of the product is completed.  Other operating  expenses
are recognized when incurred.

Revenue and Expense Reclassifications

Gross  operating  revenues and operating  expenses for 2000 and prior years were
reclassified  to conform to the current  year  presentation.  This  consisted of
reclassifying  escort and  insurance  billings to  operating  revenue  that were
previously  recorded  as offsets  against  escort and  insurance  expense in the
operating costs section. The  reclassification  increased operating revenues and
operating  expenses  proportionately.  There was no impact on operating  results
from this reclassification.

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 7,
two customers  represented  21% of total  customer  receivables  at December 31,
2001. 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

Goodwill and Other Intangibles

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  $4,697,000  and  $4,181,000  at  December  31,  2001 and 2000,
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  weighted  average
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
weighted average common shares for both classes of common stock is considered in
the computation of EPS.

Fair Values of Financial Instruments

At December 31, 2001 and 2000, the carrying value of financial  instruments such
as cash and cash equivalents,  accounts receivable, trade payables and long-term
debt approximates 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  Statements  of  Financial   Accounting   Standards  No.  130,  "Reporting
Comprehensive Income". Accordingly,  comprehensive income (loss) is equal to net
income (loss).

Impairment of Goodwill and other Intangible Long-Lived Assets

In July 2001, the Financial  Accounting Standards Board (FASB) issued Statements
of Financial  Accounting  Standards,  No. 141, Business  Combinations  (SFAS No.
141), and No. 142,  Goodwill and Other  Intangible  Assets (SFAS No. 142). These
Statements  change the  accounting  for  business  combinations,  goodwill,  and
intangible  assets.  SFAS No. 142  requires a discounted  cash flow  approach to
estimate potential impairment of intangible assets.

Under SFAS No. 142,  goodwill  and  indefinite  lived  intangible  assets are no
longer amortized but are reviewed for impairment  annually or more frequently if
impairment indicators arise. Separable intangible assets that are deemed to have
definite  lives will  continue to be  amortized  over their  useful  lives.  The
amortization  provisions of SFAS No. 142 apply to both  goodwill and  intangible
assets acquired after June 30, 2001.

The  Company  adopted  SFAS No. 141 and 142 in the third  quarter of 2001 except
with  respect  to the  provisions  of SFAS No.  142  relating  to  goodwill  and
intangibles  acquired  prior to July 1, 2001.  Those  provisions of SFAS No. 142
will be adopted January 1, 2002.

In 2001, significant negative indicators existed for the Company, including, but
not limited to, significant  revenue declines as well as operating and cash flow
losses and the loss of a  significant  customer on October 1, 2001. As a result,
management  deemed it  appropriate  to obtain an  independent  valuation  of the
Company's  intangible  assets to determine if impairment  existed in 2001.  This
valuation  was  performed  under  the  current   accounting   pronouncement   on
impairment, SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived  Assets to be Disposed Of that utilizes an undiscounted cash flow
approach to estimate any potential impairment.

The independent  valuation based upon the Company's  estimated  future cash flow
concluded that there was no impairment of the Company's  intangible assets under
SFAS No. 121.  However,  there was a projected  impairment under SFAS No. 142 of
approximately $325,000 to $600,000,  which was disclosed, in the Company's third
quarter  Form 10-Q.  The Company is  currently  in the  process of updating  the
valuation  analysis under SFAS No. 142 in anticipation of adoption on January 1,
2002.  Any impairment  charge  resulted from this analysis will be recognized in
the first quarter of 2002.

Recent Accounting Pronouncements

On October 3, 2001, the FASB issued SFAS No. 144,  Accounting for the Impairment
and or Disposal of Long-Lived  Assets.  This  statement  addresses the financial
accounting and reporting for the  impairment and disposal of long-lived  assets.
It supercedes and addresses significant issues relating to the implementation of
SFAS No.  121,  Accounting  for the  Impairment  of  Long-Lived  Assets  and for
Long-Lived  Assets  to Be  Disposed  Of.  SFAS  No.  144  retains  many  of  the
fundamental  provisions  of SFAS No.  121 and  establishes  a single  accounting
model, based on the framework established in SFAS No. 121, for long-lived assets
to be disposed of by sale,  whether  previously held and used or newly acquired.
The  Company  will adopt  this  standard  on  January  1, 2002 and is  currently
evaluating the impact of SFAS No. 144 on the Company's results of operations and
financial position.

2.  LIQUIDITY

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  incurred  operating  losses and
negative  operating  cash flows  during  the past two years,  and was in payment
default  on  its real estate  mortgage at February 1,  2002.  In  addition,  the
Company's lender waived the financial  covenant  defaults on the Credit Facility
(see Note 5) for only the fiscal  period ended  December  31,  2001.  Without an
additional  waiver or amendment to the Credit Facility,  the Company will likely
be in default of its  financial  covenants  for the period ended March 31, 2002.
These conditions raise substantial doubt about the Company's ability to continue
as a going concern.  The Company is actively seeking  amendments to the existing
Credit  Facility as well as seeking  additional  capital  resources.  Currently,
negotiations  are being held with  several  financial  institutions  regarding a
replacement mortgage.

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 as a going concern.

3. PROPERTY AND EQUIPMENT

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


                                                         December 31
                                                      2001          2000
                                                      ----          ----

        Land                                           $873          $873
        Buildings                                     2,250         2,186
        Transportation equipment                        124           146
        Office and computer equipment                 2,267         2,288
                                                      -----         -----
                                                      5,514         5,493
        Less accumulated depreciation                (2,129)       (1,805)
                                                    -------       -------
        Property and equipment, net                  $3,385        $3,688
                                                     ======        ======


Depreciation  expense was  $373,000,  $433,000 and  $511,000 for 2001,  2000 and
1999, respectively.

4.  GOODWILL AND OTHER INTANGIBLES

The  components  of  goodwill  and other  intangibles,  net are as  follows  (in
thousands):


<TABLE>
<CAPTION>

December 31, 2001
                                             Useful                              Accumulated             Net Book
                                              Life              Cost            Amortization              Value
                                            ---------         ---------         ------------            --------
<S>                                         <C>               <C>                 <C>                     <C>
     Goodwill                               40 Years          $ 1,660             $  560                  $1,100
     Goodwill                               20 Years            6,734              1,905                   4,829
     Goodwill                               3-5 Years             345                318                      27
     Non-Compete agreements                 3-20 Years          2,214              1,914                     300
                                                              -------             ------                  ------
                                                              $10,953             $4,697                  $6,256
                                                              =======             ======                  ======

December 31, 2000
                                             Useful                             Accumulated              Net Book
                                              Life              Cost            Amortization               Value
                                            ---------         ---------         ------------             --------
     Goodwill                               40 Years          $ 1,660             $  518                 $1,142
     Goodwill                               20 Years            6,734              1,567                  5,167
     Goodwill                               3-5 Years             335                273                     62
     Non-Compete agreements                 3-20 Years          2,179              1,823                    356
                                                              -------             ------                 ------
                                                              $10,908             $4,181                 $6,727
                                                              =======             ======                 ======

</TABLE>

<PAGE>




5. INDEBTEDNESS

Credit Facility

On July 27, 2001, the Company obtained a new $12.5 million Credit Facility.  The
Credit  Facility is used for working  capital  purposes  and to post  letters of
credit for  insurance  contracts.  As of  December  31,  2001,  the  Company had
outstanding  borrowings of $80,000 for working capital purposes and $7.0 million
outstanding  letters of credit.  Borrowings  bear  interest  at a rate per annum
equal to either the Bank of New York  Alternate  Base Rate ("ABR") plus one-half
percent or, at the option of Company,  absent an event of default, the one month
London Interbank Offered Rate ("LIBOR") as published in The Wall Street Journal,
averaged monthly, plus three percent. Borrowings and posted letters of credit on
the Credit  Facility are limited to a borrowing base  calculation  that includes
85% of eligible receivables and 95% of eligible investments. The Credit Facility
is subject to certain financial  covenants including minimum tangible net worth,
maximum  funded debt to EBITDA,  minimum  fixed  interest  coverage  and maximum
capital  expenditures  as well as restriction  on the payment of dividends.  The
Company was in violation of certain of these covenants at December 31, 2001 (see
waiver  discussion  in Note 2). The facility is secured by accounts  receivable,
investments,  inventory,  equipment and general intangibles. The facility may be
prepaid anytime with prepayment  being subject to a 3%, .75% and .25% prepayment
penalty during year 1, 2 and 3, respectively.

The prior 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 its  financial  covenants  at  maturity  and the bank
decided not to renew the prior credit facility.

Real Estate Loan



On July 31, 2001, the Company closed on a real estate mortgage for $500,000 that
is secured by the  Company's  land and buildings in Elkhart,  Indiana.  The loan
proceeds are invested in U.S.  Treasury  backed  instruments  and are pledged as
collateral  for $600,000 in letters of credit  issued by the Bank.  The mortgage
bears  interest  at prime  rate plus  0.75%,  and is for a  six-month  term with
outstanding  principal,  which  matured on February  1, 2002.  The Company has a
payment default on this scheduled  principal  payment and is currently seeking a
replacement  lender.  The loan is  subject to the same  covenants  as the Credit
Facility.

Long Term Debt

Long-term debt consisted of the following (in thousands):


                                                             December 31
                                                           2001       2000
                                                           ----       ----
Promissory notes with imputed  interest rates
   from 6.31% to 10.0%,  principal and interest
   payments due from monthly to annually,
   through March 31, 2004                                  $178       $242
Term notes with  imputed  interest  rates of
   8.25% to 11.04% with  principal  and interest
   payments due monthly through April 26, 2002                4         46
                                                           ----       ----
                                                            182        288
Less current portion                                        169        217
                                                           ----       ----
Long-term debt, net of current portion                     $ 13       $ 71
                                                           ====       ====

Insurance Premium Financing

In 2001, the Company  utilized a third party to finance its insurance  premiums.
In conjunction with this financing arrangement,  the Company borrowed $2,210,000
and prepaid its annual premiums to its insurance underwriter. The terms


<PAGE>

of the financing allow for the financier to have a first security interest in
unearned premiums. The financing was for a nine-month period at an interest rate
of 5.84% with the final payment due on April 2, 2002. At December 31, 2001, the
net transaction is recorded as prepaid insurance in the current assets section
of the balance sheet as follows (in thousands):

           Unamortized prepaid premiums                $1,784
           Amount due under financing
             arrangement                                 (894)
                                                       ------
           Net prepaid insurance                       $  890
                                                       ======

6.   LEASES

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

Future minimum annual  operating  lease payments as of December 31, 2001, are as
follows (in thousands):

                   2002                                              $228
                   2003                                               139
                   2004                                                11
                   2005                                                 1
                                                                     ----
                   Total minimum lease payments                      $379
                                                                     ====

Aggregate expense under operating leases approximated $888,000,  $1,672,000, and
$2,115,000 for 2001, 2000 and 1999.

7.  CREDIT RISK

A majority of the Company's  accounts  receivable  are due from companies in the
manufactured  housing,  recreational  vehicle, bus, van and commercial truck and
trailer industries located throughout the United States.  Fleetwood Enterprises,
Inc., accounted for approximately $10.9 million, $16.9 million and $23.9 million
of revenues in 2001, 2000 and 1999,  respectively.  The Company's gross accounts
receivables  from  Fleetwood  Enterprises,  Inc.  were  19%  and  10%  of  total
receivables at December 31, 2001 and 2000, respectively.

Effective October 1, 2001, the Company was no longer the primary carrier for its
largest customer, Oakwood Homes Corporation.  Services provided to Oakwood Homes
Corporation  accounted for approximately $10.9 million,  $22.5 million and $28.8
million of revenues in 2001,  2000 and 1999,  respectively.  The Company's gross
accounts  receivables  from Oakwood Homes  Corporation  were 2% and 23% of total
receivables at December 31, 2001 and 2000, respectively.

As of December 31, 2001, 46% of the open trade accounts receivable was with five
customers of which over 91% was within 60 days of invoice.  In total, 91% of the
open trade receivables are also within 60 days of invoice.

8. INCOME TAXES

Deferred tax assets and liabilities are determined based on differences  between
financial  reporting  and tax basis 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.


<PAGE>

The income tax  expense  (benefit)  provisions  are  summarized  as follows  (in
thousands):

                          For the Year Ended December 31
                      2001             2000              1999
                      ----             ----              ----
Current:
   State             $ (95)           $   -              $ 98
   Federal            (672)            (595)              515
                    ------           ------              ----
                      (767)            (595)              613
                    ------           ------              ----
Deferred:
   State                96              488               (67)
   Federal             505            2,558              (353)
                    ------           ------              ----
                       601            3,046              (420)
                    ------           ------              ----
                    $ (166)          $2,451              $193
                    ======           ======              ====


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

                                                              December 31
                                                            2001          2000
                                                            ----          ----
Deferred tax assets:
   Accrued insurance claims                               $2,510        $3,323
   Net operating losses                                    1,596             -
   Accrued expenses                                          148           367
   Depreciation                                              285           199
   Other                                                     342            84
                                                          ------        ------
                                                           4,881         3,973
Deferred tax liabilities:
   Prepaid expenses                                         (886)         (184)
                                                          ------        ------
Net deferred tax assets                                    3,995         3,789
Valuation allowance for net deferred tax assets           (3,995)       (3,188)
                                                          ------        ------
Deferred tax assets                                       $    -        $  601
                                                          ======        ======

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

                                               For the Year Ended December 31
                                           2001           2000            1999
                                           ----           ----            ----
Income tax expense (benefit) at
   federal statutory rate                $(733)        $ (772)           $ 72
State income tax (benefit), net of
   federal tax benefit                     (82)           (44)             20
Change in valuation allowance              601          3,188               -
Permanent differences                       48             79             101
                                         -----         ------            ----
Income tax expense (benefit)             $(166)        $2,451            $193
                                         =====         ======            ====

Net cash  payments  (refunds)  for income  taxes were  ($677,000),  $181,000 and
$1,205,000 in 2001, 2000 and 1999, 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
had  experienced  a loss.  As financial  results have not improved in 2001,  the
valuation  allowance was increased to the full amount of net deferred tax assets
at December 31, 2001. Management  considered,  in reaching the conclusion on the
required  valuation  allowance,  given the  cumulative  losses  that it would be
inconsistent  with applicable  accounting rules to rely on future taxable income
to support realization of any of the net deferred tax assets.

At  December  31,  2001,  the  Company had unused  federal  net  operating  loss
carryforwards of approximately $3,989,000 that expire in 2021.

9. 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, 2001, the Company did not repurchase
any shares under this plan.  As of December 31,  2001,  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.

Capital Infusion

On July 12, 2001, the Company  received a $2 million  capital  infusion from its
majority  stockholder  Lynch  Interactive  Corporation.  The Company  issued one
million  new Class B shares of common  stock in exchange  for a $2 million  cash
investment,  thereby  increasing  Lynch's ownership position in the Company from
55.6% to 68.5%.  Proceeds  from the  transaction  are invested in U.S.  Treasury
backed  instruments and are restricted as they are pledged as collateral for the
Credit Facility.

Issuance of Non-transferable Warrants

On December 12, 2001, the Company issued  non-transferable  warrants to purchase
shares of common  stock to the holders of our Class A and Class B common  stock.
Each  warrant  entitles  the holder to purchase one share of their same class of
common stock at an exercise price of $9.00 per share through the expiration date
of December 12, 2006. The Class A warrants  provide that the exercise price will
be  reduced  to $6.00 per share  during a  Reduction  Period of at least 30 days
during the five year exercise period. See Note 16.

10. 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 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. 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 76,375 and 24,000 shares,  respectively,
of Class A common stock, net of cancellations  and shares  exercised.  There are
91,250 options reserved for future issuance.

The Company has entered into separate non-qualified stock option agreements with
certain  members of  management.  Options to purchase  220,000 shares of Class A
Common  Stock have been  authorized  and  granted  under the  agreements.  These
options 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
                                                   2001                      2000                        1999
                                                   ----                      ----                        ----
                                                       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             248        $8.04          181          $8.23          170          $8.28
Granted                                      120         4.61          120           7.63           11           7.52
Canceled                                     (49)        8.14          (53)          7.79            -              -
                                            ----         ----          ---          -----          ---          -----
Outstanding at end of year                   319        $4.40          248          $8.04          181          $8.23
                                             ===        =====          ===          =====          ===          -----

Exercisable at end of year                   280        $5.98          164          $7.73          149          $8.31
                                             ===        =====          ===          =====          ===          =====
</TABLE>

Exercise  prices for options  outstanding  as of December 31, 2001,  ranged from
$3.20  to  $10.19.  The  weighted-average  remaining  contractual  life of those
options is 8.4 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 volatilities of 0.338, 0.596,
and 0.316 in 2001, 2000, and 1999, respectively, and risk-free interest rates of


<PAGE>



6.0%, 6.5%, and 5.0% in 2001, 2000, and 1999, respectively.  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):


                                           2001           2000            1999
                                           ----           ----            ----
Net income (loss):
  As reported                           $(1,989)        $(4,799)         $  19
  Pro forma                              (2,098)         (5,024)           (24)

Diluted earnings (loss) per share:
  As reported                            $(0.68)         $(1.96)         $0.01
  Pro forma                               (0.72)          (2.05)         (0.01)

The pro forma amounts for  compensation  cost above may not be indicative of the
effects on pro forma net income (loss) and pro forma net income (loss) 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  2001,  2000  and 1999  were  $12,000,
$18,000 and $23,000, respectively.

11. TRANSACTIONS WITH LYNCH INTERACTIVE CORPORATION

At  December  31,  2001,  Lynch  Interactive  Corporation  and its wholly  owned
subsidiaries  ("Lynch  Interactive")  owned all of the  2,200,000  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 represented 68.5% of the outstanding common
shares  and 81% of the  combined  voting  power of the  combined  classes of the
Company's common stock.

During  2001,  Lynch  Interactive  earned 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 2001 and
2000, and $16,000 in 1999.

12. 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 23 states.  The  Driver  Outsourcing  segment
provides outsourcing  transportation  primarily to manufacturers of recreational
vehicles, buses, vans, commercial trucks, and other specialized vehicles through
a network of service centers in 5 states. The Specialized  Outsourcing  Services
segment consists of a large trailer, travel and small trailer delivery. 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,  bodily  injury,  and cargo claims 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.

Measurement of Segment Profit 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 inter-segment revenues.


The  following  table  presents  the  financial  information  for the  Company's
reportable segments for the years ended December 31 (in thousands):

<TABLE>
<CAPTION>

                                                    2001             2000             1999
                                                    ----             ----             ----
Operating revenues
<S>                                              <C>               <C>             <C>
     Manufactured Housing                        $ 60,169          $ 89,238        $ 123,862
     Driver Outsourcing                            17,581            20,939           23,351
     Specialized Outsourcing Services              20,999            15,260           21,172
     Insurance and Finance                          2,419             2,933            3,958
     All Other                                          -                (3)             148
                                                 --------          --------          -------
Total operating revenues                         $101,168          $128,367         $172,491
                                                 ========          ========         ========

Segment profit (loss) - EBITDA
     Manufactured Housing                          $2,964            $5,784         $ 10,265
     Driver Outsourcing                             1,316             1,324              416
     Specialized Outsourcing Services                 925              (140)             469
     Insurance and Finance                         (5,296)           (6,765)          (9,058)
     All Other (1)                                   (903)           (1,174)            (327)
                                                ---------          --------         --------
                                                     (994)             (971)           1,765
Depreciation and amortization                        (888)           (1,067)          (1,215)
Interest expense                                     (273)             (310)            (338)
                                                ---------          --------         --------
Income (loss) before taxes                      $ ( 2,155)         $ (2,348)        $    212
                                                =========          ========         ========

Identifiable assets
     Manufactured Housing                         $10,689          $ 11,255         $ 16,956

     Driver Outsourcing                             4,662             4,561            5,438
     Specialized Outsourcing Services               2,084             2,078            2,724
     Insurance and Finance                            960             1,433            1,801
     All Other (1)                                  4,135             3,942            5,345
                                                ---------          --------         --------
     Total                                        $22,530          $ 23,269         $ 32,264
                                                  =======          ========         ========
</TABLE>


(1)  All other  segment loss  primarily  represents  general and  administrative
     expenses not allocated to operating segments. All other identifiable assets
     primarily  include  corporate  assets  comprised of cash,  fixed assets and
     goodwill.



<PAGE>

13. OPERATING COSTS AND ACCRUALS

Components of operating costs are as follows (in thousands):

                                             2001           2000          1999
                                             ----           ----          ----
Purchased transportation costs            $74,461        $95,754      $127,908
Operating supplies and expenses             8,862         10,826        13,559
Claims                                      2,496          5,658         8,633
Insurance                                   4,552          2,733         3,178
Operating taxes and licenses                3,562          4,924         7,358
                                          -------       --------      --------
                                          $93,933       $119,895      $160,636
                                          =======       ========      ========

Significant Accruals

Material components of accrued liabilities are as follows (in thousands):

                                                      December 31
                                                2001              2000
                                                ----              ----
Government fees                               $  283            $  759
Workers' compensation                            405               839
Customer incentives                              150               588
Other accrued liabilities                      1,662             1,518
                                              ------            ------
                                              $2,500            $3,704
                                              ======            ======

Government  fees  represent  amounts due for fuel  taxes,  permits and use taxes
related to linehaul transportation costs.

Workers'  compensation  represents  estimated  amounts due claimants  related to
unsettled claims for injuries incurred by Company employee-drivers.  These claim
amounts due are established by the Company's  insurance  carrier and reviewed by
management on a monthly basis.

Customer incentives represent volume discounts earned by certain customers.  The
customer incentives earned are computed and recorded monthly based upon linehaul
revenue  for  each  respective  customer.  The  incentives  are  generally  paid
quarterly  and are  recorded  as a  contra-revenue  account in the  Consolidated
Statements of Operations.

Other  accrued  liabilities   consists  of  various  accruals  for  professional
services,  group health insurance,  payroll and payroll taxes, real estate taxes
and  other  items,  which  individually  are  less  than  5%  of  total  current
liabilities.



14. 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.


15. QUARTERLY RESULTS OF OPERATIONS (Unaudited)

The following is a summary of unaudited quarterly results of operations for the
years ended December 31, 2001 and 2000 (in thousands, except share data):

<TABLE>
<CAPTION>

                                                                         Three Months Ended
                                                         Mar 31         Jun 30        Sep 30         Dec 31
                                                         ------         ------        ------         ------
2001
----

<S>                                                      <C>           <C>            <C>           <C>
Operating revenues                                       $23,701       $29,309        $28,701       $ 19,457
Operating income (loss)                                     (475)          398           (169)        (1,636)
Net income (loss)                                           (541)          626           (259)        (1,815)
Net income (loss) per basic and diluted share            $( 0.22)      $  0.26        $ (0.08)      $  (0.53)

2000
----
Operating revenues                                       $32,831       $35,736        $33,590       $ 26,210
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)
</TABLE>

16. SUBSEQUENT EVENTS

Expansion of Credit Facility

On February 7, 2002, the Company obtained an increase in its availability  under
the Credit  Facility of $1 million.  The  Company  provided  the lender a second
mortgage  on the  Company's  real  estate in Elkhart,  Indiana.  The  $1,000,000
increase will be eliminated on May 31, 2002.

Spin off Transaction

On January 24, 2002,  Lynch  Interactive  Corporation,  the  Company's  majority
stockholder,  completed a transaction to spin off its investment in the Company,
which was held through its wholly  owned  subsidiary  Morgan  Group  Holding Co.
Stockholders of record of Lynch Interactive Corporation as of December 18, 2001,
received  one share of Morgan  Group  Holding  Co. for each share owned of Lynch
Interactive Corporation.

Reduction of Warrant Exercise Price

On February 19, 2002, the Board of Directors agreed to reduce the exercise price
of the Class A warrants  outstanding  to $2.25 per share,  from the stated $9.00
per share,  during a  specified  period of time as  permitted  under the warrant
certificates.  This period  began on  February  26, 2002 and is to extend for 63
days,  expiring on April 30,  2002.  All other  terms  regarding  the  warrants,
including the expiration date of the warrants, will remain the same.



<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, 2001 and 2000, 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,  2001.  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, 2001 and 2000,  and the  consolidated
results of their  operations and their cash flows for each of the three years in
the period ended  December 31, 2001, 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 2, the
Company incurred  operating losses and negative  operating cash flows during the
past two  years and was in  payment  default  on its real  estate  mortgage.  In
addition,  the  Company's  ability  to meet  its  quarterly  financial  covenant
requirements  contained  in its  debt  agreements  in 2002 is  uncertain.  These
conditions raise  substantial doubt about the Company's ability to continue as a
going  concern.  Management's  plans in regard to these  matters  are more fully
described in Note 2. 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

Indianapolis, Indiana
February 22, 2002
except for Note 2, as
to which the date is
March 29, 2002

<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 2002 Annual Meeting of Stockholders  expected to be filed with
the Commission on or about May 15, 2002 (the "2002 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 2002 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 2002 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 2002 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.

(b)       Reports on Form 8-K

               Registrant filed no reports on Form 8-K during the quarter ending
               December 31, 2001.

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




<PAGE>

                                   Schedule II

                     The Morgan Group Inc. and Subsidiaries
                        Valuation and Qualifying Accounts

<TABLE>
<CAPTION>

                                                       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, 2001                 $248,000        $447,000              $256,000        $439,000

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



                                                                 Morgan Finance, Inc.
                                                            Allowance for Loans Receivable
                                                            ------------------------------

Year ended December 31, 2001                 $165,000        $200,000              $271,000        $ 94,000

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



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

Year ended December 31, 2001                 $ 77,000        $139,000              $145,000        $ 71,000

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

</TABLE>

<PAGE>

                                  EXHIBIT INDEX

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

3.1       Registrant's  Restated  Certificate of Incorporation,  as amended, was
          previously filed as Exhibit 3.1 of Amendment No. 1 to the Registrant's
          Registration  Statement on Form S-2, File No. 333-63188,  filed August
          15, 2001.

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   Restated
          Certificate of Incorporation,  contained in the Registrant's  Restated
          Certificate  of  Incorporation,  as  amended,  filed as Exhibit 3.1 to
          Amendment  No. 1 to the  Registrant's  Registration  Statement on Form
          S-2, File No. 333-63188, filed August 15, 2001.

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 Bank Boston,  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 Bank Boston,  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 Bank Boston, 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 Bank Boston, 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 incorporated by reference to
          Exhibit  4.9 to the  Registrant's  Annual  Report on Form 10-K for the
          year ended December 31, 2000.

4.10      Amendment  Agreement No. 2 to that Certain  Revolving Credit Agreement
          and Term Loan Agreement among the Registrant and its  Subsidiaries and
          Bank  Boston  dated  as of  November  10,  2000,  is  incorporated  by
          reference to Exhibit 4.10 to the  Registrant=s  Annual  Report on Form
          10-K for the year ended December 31, 2000.


4.11      Form of Class A Warrant  Certificate  was previously  filed as Exhibit
          4.11 of Amendment No. 1 to the Registrant's  Registration Statement on
          Form S-2, File No. 333-63188, filed August 15, 2001.

4.12      Form of Warrant Services Agreement between the Registrant and American
          Stock Transfer and Trust Company was previously  filed as Exhibit 4.12
          of Amendment No. 1 to the Registrant's  Registration Statement on Form
          S-2, File No. 333-63188, filed August 15, 2001.

4.13      Revolving  Credit and Security  Agreement,  dated July 27, 2001, among
          GMAC Commercial  Credit LLC, Morgan Drive Away, Inc. and TDI, Inc., is
          incorporated by reference to Exhibit 4.1 to the Registrant's Quarterly
          Report on Form 10-Q for the period ended June 30,  2001,  filed August
          14, 2001.

4.14      Guaranty,  dated July 27, 2001, between Registrant and GMAC Commercial
          Credit  LLC,  is  incorporated  by  reference  to  Exhibit  4.2 to the
          Registrant's  Quarterly  Report on Form 10-Q for the period ended June
          30, 2001, filed August 14, 2001.

4.15      Amendment No. 1 to Revolving Credit and Security  Agreement for Credit
          Facility dated as of November 8, 2001, is incorporated by reference to
          Exhibit 4.1 to the Registrant's  Quarterly Report on Form 10-Q for the
          period ended September 30, 2001, filed November 13, 2001.

4.16      Letter of Credit Financing  Supplement to Revolving Credit  Agreement,
          dated July 27, 2001,  is  incorporated  by reference to Exhibit 4.2 to
          the  Registrant's  Quarterly  Report on Form 10-Q for the period ended
          September 30, 2001, filed November 13, 2001.

4.17      Letter Agreement  amending Revolving Credit and Security Agreement for
          Credit Facility dated as of February 7, 2002.*

4.18      Mortgage, dated July 31, 2001, between Morgan Drive Away, Inc. and Old
          Kent  Bank,  is  incorporated  by  reference  to  Exhibit  4.3  to the
          Registrant's  Quarterly  Report on Form 10-Q for the period ended June
          30, 2001, filed August 14, 2001.

4.19      Guaranty,  dated July 31, 2001,  between Registrant and Old Kent Bank,
          is  incorporated  by  reference  to  Exhibit  4.4 to the  Registrant's
          Quarterly  Report on Form 10-Q for the  period  ended  June 30,  2001,
          filed August 14, 2001.

10.1      he  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, 2000.

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.

10.14     Separation and Distribution  Agreement by and among Lynch  Interactive
          Corporation,  Brighton Communications  Corporation,  The Morgan Group,
          Inc.,  and Morgan Group Holding Co.,  effective as of January 18, 2002
          is incorporated by reference to Exhibit 10.1 to Amendment No. 1 to the
          Form S-1  Registration  Statement of Morgan Group  Holding Co.,  filed
          December 31, 2001 (File No. 333-73996).

21        Subsidiaries of the Registrant.*

23        Consent of Ernst & Young LLP.*


--------------------------
*  Included herein.

<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 1, 2002                 By: /s/ Anthony T. Castor III
                                          -----------------------------
                                          Anthony T. Castor III
                                          President & 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 1st day of April, 2002.


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/ Gary J. Klusman
      -------------------------
      Gary J. Klusman


3) A Majority of the Board of Directors:

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



      /s/ Robert E. Dolan                    Director
      --------------------------
      Robert E. Dolan


      /s/ John Fikre                         Director
      --------------------------
      John Fikre


      /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.