U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB
                 [x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934
                   For the fiscal year ended December 31, 1997
                                       OR
[ ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d)OF THE SECURITIES EXCHANGE ACT
OF 1934 Commission file number: 33-30123-A

                               TRANSIT GROUP, INC.
                 (Name of small business issuer in its charter)

        State of Florida                            59-2576629
(State or other jurisdiction                  (I.R.S. Employer
  of incorporation or organization)             Identification No.)

              2859 Paces Ferry Road, Suite 1740, Atlanta, GA 30339
              ---------------------------------------------- -----
               (Address of principal executive offices) (Zip Code)

          Issuer's telephone number including area code: (770) 444-0240

Securities registered pursuant to Section 12(g) of the Act:
Title of Each Class                   Name of Exchange on which registered
----------------------               --------------------------------------
Common Stock                                      NASDAQ
Warrants (two warrants entitle                    NASDAQ
 the holder to purchase at a price
 of $7.50 per share, one share of
 common stock)


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

Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part IIIof this Form
10-KSB or any amendment to this form 10-KSB.[ ]

Issuer's revenues for the year ended December 31, 1997: $34,011,649

The aggregate market value of the voting common stock held by the
non-affiliates of the registrant was $55,872,475 based on the closing sale
price reported on March 27, 1998.

There were 20,574,626 shares of the Company's common stock outstanding as of
March 27, 1998.

Transitional Small Business Disclosure Format (Check one):Yes No X

Documents Incorporated by Reference: Portions of the Proxy Statement for the
Registrant's 1998 Annual Meeting of Shareholders are incorporated by reference
into Part III.
<PAGE>
PART I

Item 1. BUSINESS

Introduction

Transit Group, Inc. ("TGI" or the "Company"), formerly known as General Parcel
Service, Inc., is a holding company concentrating on the acquisition,
consolidation, and operation of short and long haul trucking companies. The
Company changed its name from General Parcel Service, Inc. to "Transit Group,
Inc." effective June 30, 1997 in connection with its decision to discontinue
the small package delivery and courier businesses previously operated by GPS
and to focus, as a holding company, on the acquisition of short and long haul 
trucking companies. The trucking business is a highly fragmented industry with
over 300,000 companies. The Company believes that many of these smaller
companies would benefit from an affiliation with a larger organization such as 
TGI in order to realize certain operating efficiencies as well as realize the
full value of their company.

The Company seeks to identify for acquisition, trucking companies with annual
revenues in excess of $5 million, possessing strong market positions, sound
management and a commitment to a high level of quality and service. The
Company's expansion plans are dependent upon, the availability of among other
things, suitable acquisition candidates, adequate financing, qualified
personnel, and TGI's future operations and financial condition.

History and Development

Transit Group, Inc. was incorporated on August 28, 1985 as "General Parcel
Service, Inc.", a Florida corporation engaged in the parcel delivery business.
The Company began operations out of a 2,000 square foot terminal located in
Jacksonville, Florida and a single panel truck. Further expansion of the
Company continued into Georgia, North Carolina and South Carolina increasing
the number of trucks and employees to meet demand. The purchase of Transit 
Express of Charlotte, Inc. occurred in February 1995, and provided scheduled
courier and package delivery services. Due to unprofitable operations in North
and South Carolina, the Company decided to cease parcel delivery in both of 
these states as of March 31, 1997.

In January 1997 the Company appointed Mr. Philip A. Belyew as President and
CEO of TGI and the Company's business plan changed dramatically. TGI was
reorganized into a holding company structure and began the acquisition of
mid-size short and long haul trucking companies.

The first trucking company acquired by Transit Group, Inc. was Carolina
Pacific Distributors, Inc. ("Carolina Pacific") on July 11, 1997. The
transaction was valued at approximately $8.5 million and included a cash
payment of approximately $3.7 million, the issuance of 1,733,000 shares
of TGI common stock, and the assumption of $.6 million in debt. Carolina 
Pacific, with annual revenues of approximately $13 million, was a privately
held truckload carrier located in High Point, North Carolina and has been in
business for over 20 years. Carolina Pacific provides dry van and refrigerated
transportation services between major markets in the Carolinas and the 
West Coast.

In August 1997, the Company acquired Capitol Warehouse, Inc. ("Capitol
Warehouse"), based in Louisville, Kentucky, and Service Express, Inc. ("Service
Express"), based in Tuscaloosa, Alabama. Capitol Warehouse and Service Express
have annual revenues of approximately $16 million and $5 million, respectively.
Under the terms of the acquisitions, the Company issued 1,544,509 million new
shares of common stock at an approximate value of $6.3 million. In connection
with the acquisitions of Capitol Warehouse and Service Express, the Company
granted the selling shareholders the right, through August 15, 1998, to require
the Company to redeem $2.1 million of the shares which they received. Through
March 31, 1998, the Company has received notification that shareholders have
exercised their redemption rights with respect to $0.4 million and of this
amount $0.1 million has been purchased by third parties. Service Express
transports a variety of commodities, including products for the paper industry,
and Capitol Warehouse transports a variety of items related to the liquor
industry.
                                       1
<PAGE>
     The fourth acquisition, Carroll Fulmer Group, Inc. ("Carroll Fulmer")
headquartered in Groveland, Florida, was completed in September 1997. The
Company issued 4,166,666 shares of common stock, valued at approximately $12.7
million. In connection with the acquisition of Carroll Fulmer, the Company
granted the selling shareholders the right to require either the Company redeem
or a major shareholder of the Company acquire up to $6.0 million of stock at a
price of $3.60 per share. Of this $6.0 million, redemption rights in the amount
of $2.5 million are exercisable before August 29, 1998 when an additional $3.5
million become exercisable. All redemption rights expire August 29, 2003.

Through March 31, 1998, the company has received notification that shareholders
have exercised their redemption rights with respect to approximately $2.5
million. Of this amount, approximately $800,000 of stock has been purchased by
third parties and $75,000 has been redeemed by the Company thereby reducing the
Company's obligation. The remaining $1.625 million will be either sold to third
parties, redeemed by the Company or acquired by a major shareholder. Carroll
Fulmer is a general commodities hauler with operations in 48 states and annual
revenues of approximately $70 million.

On December 30, 1997 TGI acquired Rainbow Trucking ("Rainbow"). Based in
Louisville, Kentucky, Rainbow is a full load, long haul trucking company with
annualized revenues of approximately $12.8 million. The Company made loans to
the selling shareholders in the amount of $675,000. Such loans are due on June
30, 1999. If the average closing price per share of the Company's common stock
for the period June 25, 1999 through June 29, 1999 is less than $6.625 per
share, the notes shall be non-recourse to such extent and the debtor shall not
be personally liable for such deficiency, but the Company shall be entitled to
a return of a proportionate amount of the Company's stock. The Company issued
679,000 new shares of common stock, or an aggregate of $3.5 million in 
connection with this acquisition.

In January 1998 the Company acquired Transportation Resources and Management,
Inc. ("TRM"), a privately held trucking company based in Fort Wayne, Indiana.
Approximately 366,000 shares of common stock and $.2 million of cash were
issued, representing a total value of approximately $1.57 million. A $0.2
million recourse loan, due April 30, 1999, was made to a selling shareholder.
TRM is a dry van carrier operating in the Midwest region of the country with
annual revenues of approximately $6 million.

During May 1997, the Company agreed to a debt-for-equity conversion that
reduced long-term debt. T. Wayne Davis, Chairman of the Board, and his
affiliates assumed approximately $4.7 million of the Company's debt in
exchange for 2.7 million shares of new common stock. The Company also
received a capital infusion of approximately $1.2 million from Davis and
Belyew in exchange for the issuance of restricted common stock.

In December 1997, the Company entered into a $20 million bank revolving term
credit facility. This credit facility, secured by accounts receivable, provides
LIBOR or prime rate interest options, expires in May 1999 and may be converted
to term debt at that time. A portion of the proceeds of the new credit facility
were used to retire approximately $5 million in outstanding indebtedness under
a line of credit outstanding at one of the Company's subsidiaries.

During December 1997, the Company sold the parcel delivery business to a
corporation controlled by affiliates of the Company's chairman. In this
transaction, the buyer assumed liabilities of approximately $4.0 million in
excess of assets. To compensate for the excess liabilities assumed by the
buyer, the Company issued 877,000 million shares to the buyer.

TGI currently has approximately 20.6 million common shares outstanding and has
extended the expiration date of 690,000 common stock warrants until November 
16,2000.

Competition

The trucking industry is highly competitive and, in addition, is subject to
pressures from major business cycles. Management believes that competition in
the trucking industry is based primarily on service and efficiency, and to a
lesser extent, prices.

The shipping requirements of "just-in-time" inventory systems have demanded
geographically diverse trucking companies with well-developed tracking and
dispatching information systems. The Company anticipates that the trucking
industry will continue to consolidate and remain extremely competitive as to
customers and qualified personnel. Management believes that its current size 
and anticipated growth allow it to participate in the consolidating trucking
industry. However, there is significant disparity in the revenues and financial
resources of the largest trucking companies compared with those of TGI and 
there is no assurance that the Company can continue to maintain its growth.

                                       2
<PAGE>

Potential Liability

Potential liability associated with accidents in the trucking industry is 
severe and occurrences are unpredictable. The industry is also subject to 
substantial workers' compensation expense. A material increase in the frequency
or severity of accidents or workers' compensation claims or the unfavorable 
development of existing claims can be expected to adversely affect the 
Company's operating income.

Marketing

The Company markets its services through its own sales force and a developed
network of brokers and agents operating throughout the United States.

Regulation

Prior to 1995, the Company was regulated by the Interstate Commerce Commission
("ICC"). Effective January 1, 1995, the ICC was eliminated and substantially
all of their key functions were transferred to the Department of Transportation
("DOT"). The DOT governs such activities as drug and alcohol testing, hours of
service, rates, insurance, reporting and accounting systems.

The Company is also subject to the regulations promulgated by the Environmental
Protection Agency and similar state regulatory agencies regarding environmental
laws and regulations. These agencies address such matters as the management of
hazardous wastes, other discharge pollutants into the air, surface, and
underground waters, and the disposal of certain substances. Violation of 
certain applicable laws and regulations could result in clean up costs, 
property damage, and other fines or penalties. Management believes that its 
operations are in material compliance with current laws and regulations.

Operations

The Company's business operations are divided between the corporate office
located at 2859 Paces Ferry Road, Suite 1740, Atlanta, Georgia and its
decentralized subsidiaries. The corporate office is responsible for the overall
direction of the Company in the area of finance, banking, human resources, and
financial reporting. Each of the subsidiaries is managed by their own operating
personnel and follow the strategic direction of the corporate office.

Carolina Pacific Distributors - Founded in 1977 and headquartered in High
Point, North Carolina, Carolina Pacific operates a fleet of 65 tractors and 72
trailers. Carolina Pacific's heaviest traffic area is North Carolina, South
Carolina, Florida, California, Arizona, and Washington. Carolina Pacific
transports a variety of general commodities, including textiles, tobacco, and
produce and serves as a primary carrier for the produce industry.

Service Express - Founded in 1963 and headquartered in Tuscaloosa, Alabama,
Service Express operates a fleet of 52 tractors and 109 trailers. Service
Express operates primarily in the Southeastern United States and transports a
variety of general commodities, including paper, resins, magnetic tapes, and
chemicals. Service Express is a primary carrier in the paper industry.

Capitol Warehouse - Founded in 1980 and based in Louisville, Kentucky, Capitol
Warehouse operates a fleet of 138 tractors and 411 trailers. Additionally, the
Company operates approximately 470,000 square feet of storage facilities.
Capitol Warehouse transports a wide variety of commodities and warehouse goods
devoted primarily to the liquor and packaging industry. Management intends to
consolidate the Capitol Warehouse operations with those of Rainbow Trucking.

Carroll Fulmer - Founded in 1983 and headquartered in Groveland, Florida,
Carroll Fulmer operates a fleet of 85 tractors and 400 trailers, and contracts 
with 260 owner operators. Carroll Fulmer works primarily with 19 agent offices
in operating its truckload operations. Operations span the United States and
Canada. Carroll Fulmer transports general commodities, such as household goods,
and is a primary carrier for the foodstuff industry.

Rainbow Trucking - Rainbow Trucking founded in 1982 and headquartered in
Louisville, Kentucky operates a fleet of 97 tractors and 114 trailers. The
operations of the company cover the United States and they transport a wide
range of general commodities, including plastics, paper, and glass.

Transportation Resources and Management - Founded in 1979 and headquartered in 
Fort Wayne, Indiana, TRM operates a fleet of 54 tractors and 89 trailers. TRM
operates primarily in the Midwest (Northern Indiana, Ohio, Illinois, Michigan)
and transports a variety of general commodities, including copper wire and
carpet padding.

                                       3
<PAGE>
Employees

The Company employs approximately 790 employees of which 550 are drivers, 20
work in various garage facilities, 50 are employed in agent offices and 170 
work in administrative capacities at the subsidiary locations and in the 
corporate office. TGI employees are not covered by collective bargaining 
agreements and the Company believes that its relationships with its employees
are satisfactory.

Item 2. PROPERTIES
<TABLE>
<CAPTION>
The Company has operations at the following locations:
                                       Square                  Lease/
         Location                       Feet                    Own
===========================       ================          =============
<S>                                   <C>                      <C>
High Point, North Carolina             80,000                  Lease
Louisville, Kentucky                   12,000                  Lease
Louisville, Kentucky                  470,000(1)               Lease
Tuscaloosa, Alabama                     9,000                  Lease
Groveland, Florida                     28,000                  Own
Fort Wayne, Indiana                     4,000                  Lease
</TABLE>

The Groveland complex is comprised of 5 buildings aggregating 28,000 square
feet located on 26 acres. The Company also leases or owns 9 branches in seven
states. The Company  believes  that its  facilities  are adequate and suitable
for their respective uses.

(1) Includes third party warehouses.

Item 3. Legal Proceedings

The Company is a party to routine  legal  proceedings  incidental  to its 
normal activities.  The  Company is not aware of any legal  matters  which
would have a material adverse effect on the Company's consolidated financial
position.

Item 4. Submission of Matters to a Vote of Security Holders

None

                                       4
<PAGE>

                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters

The  Company's  common  stock is traded on the NASDAQ  System  under the 
trading symbol  "TRGP".  The  Company's  warrants are also traded on the NASDAQ
System, under  the  trading  symbol  "TRGPW".  As of  March  27,  1998,  there
were 337 shareholders of record of the common stock and 13 warrant holders of
record, not including  individuals  and entities  holding shares in street 
name. The closing sale price for the Company's  common stock on March 27, 1998,
was $6.25, and the closing price of the Company's warrants was $1.75.

The quarterly  high and low closing bid prices of the Company's  common stock
are shown below:
<TABLE>
<CAPTION>

                   Market Price of common stock - TRGP

                           1997                         1996
                   -------------------          --------------------
 Quarter              High    Low                   High    Low
<S>                   <C>    <C>                    <C>    <C>
First                 5.000  2.750                  3.938  2.500
Second                5.250  1.625                  3.250  2.250
Third                 7.625  5.000                  2.375  1.875
Fourth                7.500  6.000                  3.000  1.625
</TABLE>

The  quarterly  high and low closing bid prices of the  Company's warrants are
shown below:
<TABLE>
<CAPTION>
                   Market Price of warrants - TRGPW
                           1997                         1996
                   -------------------          --------------------
 Quarter              High    Low                   High    Low
<S>                   <C>    <C>                    <C>    <C>
First                 1.125   .750                  .250   .250 
Second                1.375   .813                  .250   .250
Third                 1.875  1.375                  .250   .250
Fourth                2.125  1.875                  .313   .188
</TABLE>

The  Company  has not  declared  any  dividends.  The  Company's  Board  of
Directors currently anticipates retaining earnings to provide funds for the
operation and expansion of the Company's  business and the Company does not
expect to pay cash dividends in the  foreseeable  future.  Future  dividend
policy will be determined by the Company's  Board of Directors based on the
conditions  then  existing,  including the Company's  financial  condition,
capital  requirements,  cash flow,  profitably,  business outlook,  general
economic conditions, and other factors. 

Item 6. Management's Discussion and Analysis of Financial  Condition  and 
Results of  Operations
  
The following discussion  should be read in conjunction with the  Consolidated
Financial Statements  including the footnotes and is qualified in its entirety
by the foregoing and other more detailed financial information appearing 
elsewhere herein.  Historical results of operations and the percentage 
relationships  among any amounts included in the  Consolidated  Statements of
Operations,and any trends which may appear to be inferable therefrom,  should
not be taken as being  necessarily  indicative  of  trends in  operations  or
results of operations for any future periods.

Comments in this Management's  Discussion and Analysis of Financial Condition
and Results of  Operations  regarding the  Company's  business  which are not
historical  facts are  forward  looking  statements  that  involve  risks and
uncertainties.  Among these risks are the Company is in a highly  competitive
business,  has a history of operating losses, and is pursuing a strategy that
relies in part on the completion of acquisitions of companies in the trucking
industry.  There can be no assurance that in its highly competitive  business
environment,   the  Company   will   successfully   improve   its   operating
profitability or consummate such acquisitions.

                                       5
<PAGE>
The following discussion and analysis reflect the Company's financial
position, results of operations, and cash flows as restated to reflect the
disposal of the parcel delivery and courier operations in accordance with
APB No. 30.

Liquidity and Capital Resources - The Company had incurred substantial
operating losses and cash flow deficits since inception. From September 1985
through December 31, 1997 the Company has accumulated deficits of
approximately $31.4 million. As of December 31, 1997, the Company has raised
approximately $58 million from (i) private placements of preferred stock
(which has been converted to common stock), (ii) its initial public offering
of November 2, 1989, (iii) the sale of restricted and unrestricted common
shares and (iv) stock issued in connection with the acquisition of five
truckload carriers. As a result of equity placements, dividends on preferred
stock, and cumulative losses, the stockholders' equity as of December 31,
1997, was approximately $18.7 million, and the value of common stock issued
subject to mandatory redemption rights was approximately $7.5 million.

Redemption Rights for Selling Shareholders in Acquisitions - In connection
with the acquisitions of Capitol Warehouse, Service Express, and Carroll
Fulmer, the Company granted the selling shareholders the right to require the
Company to redeem a portion of the shares which they received in exchange for
selling their businesses to the Company. The dollar amount of stock subject
to mandatory redemption by the Company aggregates approximately $8.1 million.
Of this $8.1 million, options in the amount of $4.6 million are exercisable
before August 29, 1998 when an additional $3.5 million become exercisable.
The redemption rights expire in the amounts of $2.1 million at August 15,
1998 and $6.0 million at August 29, 2003.

Holders of redemption rights with respect to $6.0 million of stock may
require either the Company to redeem the stock or a major shareholder of the
Company to acquire the stock at a price of $3.60 per share. Holders of
redemption rights with respect to $1.8 million of stock at $3.875 per share
and $0.3 million at $6.75 per share have the right to require the Company to
redeem their shares, with the guarantee from a major shareholder.

                                       6
<PAGE>
Through March 31, 1998, the Company has received notification that
shareholders have exercised their redemption rights with respect to
approximately $2.9 million. Of this amount, approximately $900,000 of stock
has been purchased by third parties and $75,000 has been redeemed by the
Company, thereby reducing the Company's obligation. To the extent such
redemption rights are exercised, the Company will be required to fund the
cash required to meet its obligations under the redemption rights, by
drawing on bank lines which may be available to its subsidiaries, or to call
upon a major shareholder to purchase the stock under such shareholder's
obligations and guarantees associated with the acquisition contracts.

Management  believes,  but can  offer  no  assurances,  that  it can  improve
performance and cash flows through the following measures:

Eliminating Parcel Delivery and Courier Operations - Management has sold its
unprofitable parcel delivery and courier operations to a company controlled
by its Chairman. 

Acquiring Profitable Trucking Operations - The Company has reorganized into
a "holding company" format based in Atlanta, Georgia. This new corporate
structure is intended to increase the Company's flexibility to pursue the
acquisition and operation of profitable truckload motor carriers. The
Company's intent is to continue to identify and acquire additional mid-size
trucking companies, primarily with annual revenues between $5 million and
$100 million, that possess strong market positions, sound management, and a
commitment to a high level of service and quality. The Company completed the
acquisition of five companies at December 31, 1997 and completed its sixth
acquisition in the first quarter of 1998.

Relying on Equity Sales to or Loans from Major  Shareholders  - In July 1997,
an  affiliate  of the  Company's  Chairman  loaned the  Company $4 million to
consummate the  acquisition of Carolina  Pacific  Distributors,  Inc.  During
August,  September,  and October of 1997, the affiliate loaned the Company an
additional  $2.6  million  to fund the  continuing  operations  of the parcel
delivery and courier operations and fund certain expenses associated with the
acquisition  of the  truckload  companies.  Of the $6.6  million  the Company
borrowed,  $2.6 million was assumed by the  purchaser of the parcel  delivery
operations leaving a balance of $4 million at December 31, 1997.

Obtaining  Bank  Financing  -Management  has  negotiated  new  lines  of bank
financing to provide working capital financing and financing for acquisitions
of additional  truckload motor  carriers.  The Company has entered into a $20
million  revolving  credit  facility from a bank to make available to Capitol
Warehouse,  Carroll Fulmer,  Service Express,  Rainbow Trucking, and Carolina
Pacific an asset based line of credit secured by accounts receivable.

Financial Condiditon - As of June 30, 1998, the company treated its parcel 
delivery operations and courier operations as discontinued operations.  The 
Company's outstanding vehicle and equipment indebtedness, $2.6 million of 
indebtedness to an affiliate of the Company's Chairman and certain operating
leases were assumed by the companies purchasing the operations. 
The Company remains contingently liable on certain leases.

Results of Operations - The Company discontinued its general parcel and
courier business effective June 30, 1997. Accordingly, the Company had no
revenues from continuing operations until July 11, 1997 with the purchase of
Carolina Pacific and such revenues continued to increase with the
acquisitions of four additional companies by year-end.

The following table sets forth items in the Consolidated Statement of
Operations for the year ended December 31, 1997 as a percentage of operating
revenue. Because all truckload operations were acquired during 1997, the
table is not comparative to an earlier period.
<TABLE>
<CAPTION>
                                                 Percentage of
                                              Operating Revenues
<S>                                                <C>
Freight and transportation revenues                100.00%
Other income                                         2.24
                                                   -------

Total revenues                                     102.24
                                                   -------

Operating expenses 
Purchased  transportation                           27.15 
Salaries, wages and benefits                        23.04  
Fuel                                                 7.76  
Operating  supplies  and  expenses                  29.01
Insurance                                            2.56 
Depreciation and amortization  expense               4.84 
General and administrative expense                   3.74
                                                   -------  
Total  operating  expense                           98.10 
                                                   -------
  Operating  income                                  4.14
Interest expense                                     3.14
                                                   ------- 
  Earnings from continuing operations
    before income taxes                              1.00 
Income taxes attributable to continuing
     operations                                       .21
                                                   -------
Income from continuing operations                     .79%
                                                   =======
</TABLE>

The Company incurred corporate administration expenses for the year ended
December 31, 1997 of approximately $1.2 million as compared to approximately
$359,000 for the year ended December 31, 1996. These increases are
attributable to the administrative costs of reorganizing into a holding
company structure, the opening of a new corporate office in Atlanta, and the
increased costs associated with its acquisition activities.

Revenues attributable to the discontinued businesses were $14.7 million and
$23.4 million for the years ended December 31, 1997 and 1996, respectively.
Terminals in North and South Carolina were closed during 1997, resulting in
nine months revenue in 1997 compared to twelve months of revenue for 1996.

                                       7
<PAGE>
Year 2000 - The company operates two primary software applications: its
accounting and financial reporting system and its integrated dispatch and
billing system. The accounting and financial reporting systems were acquired
from a third party vendor in 1996 and were compliant with year 2000 issues
at acquisition. The Company's integrated dispatch and billing systems were
originally acquired from a software vendor in 1989. The vendor has advised
the Company that all year 2000 software modifications will be completed by
the third quarter of 1998. The cost of these modifications will be covered
by the Company's existing software maintenance agreement. Accordingly, the
Company does not anticipate incurring any material incremental costs in
complying with year 2000 issues that will adversely affect its results of
operations or financial condition.

Item 7. Financial Statements

Financial Statements are submitted in Item 13 (a) of this Form 10-K.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

On February 17, 1997, General Parcel Service, Inc. dismissed Grenadier,
Collins, Mencke & Howard, LLP and engaged Price Waterhouse LLP to succeed as
its Independent Accountants. The change in Independent Accountants resulted
from the Registrant's announced plans to form an Atlanta based holding
company and seek to acquire other trucking companies. The auditor's reports
for the last two fiscal years did not contain adverse opinions or
disclaimers of opinion, nor were they modified as to uncertainty, audit
scope, or accounting principles. The decision to change accountants has been
approved by the Board of Directors. There were no disagreements with
Grenadier, Collins, Mencke & Howard, LLP on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope
or procedure. The Company has previously filed a Form 8-K with respect to
this matter.

                                       8
<PAGE>
                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act

The information regarding directors contained under the caption "Election of
Directors - Nominees" in the Company's Proxy Statement for the 1998 Annual
Meeting of Shareholders is incorporated herein by reference.

The information regarding executive officers contained under the caption:
"Election of Officers - Executive Officers" in the Company's Proxy Statement
for the 1998 Annual Meeting of Shareholders is incorporated herein by
reference.

Item 10. Executive Compensation

The information contained under the caption "Election of Directors -
Executive Compensation" in the Company's Proxy Statement for the 1998 Annual
Meeting of Shareholders is incorporated herein by reference.

Item 11. Security Ownership of Certain Beneficial Owners and Management

The information contained under the caption "Voting Securities and Principal
Holders Thereof - Security Ownership of Certain Beneficial Owners" in the
Company's Proxy Statement for the 1998 Annual Meeting of Shareholders is
incorporated herein by reference.

Item 12. Certain Relationships and Related Transactions

The information contained under the caption "Election of Directors - Certain
Transactions" in the Company's Proxy Statement for the 1998 Annual Meeting
of Shareholders is incorporated herein by reference.

                                    PART IV

Item 13. Exhibits List and Reports on Form 8-K

(a)   Financial Statements
                                                                 Pages
              (1)  Report of Independent Accountants               14
              (2)  Financial Statements                           15/18
              (3)  Notes to Financial Statements                  19/29

(b) Exhibits required by Item 601, Regulation S-B

The following documents heretofore filed by the Company with the Commission
are hereby incorporated by reference herein.

3.   Articles of Incorporation and By-Laws

3.1 Articles of Incorporation, as amended, (incorporated by reference from
Exhibit 3.1 to the Registrant's Form S-18, Registration No. 33-30123A).

3.2 By Laws, as amended and restated, (incorporated by reference from
Exhibit 3.2 to Registrant's Form S-18, Registration No. 33-30123A).

3.3 Certificate of Amendment to the Articles of Incorporation of General
Parcel Service, Inc., dated May 14, 1992, (incorporated by reference from
Exhibit F to Registrant's 1992 Form 10-KSB, Registration No. 33-30123A).

3.4 Certificate of Amendment to the Articles of Incorporation of General
Parcel Service, Inc., dated December 29, 1993, (incorporated by reference
from Exhibit C to Registrant's 1992 Form 10-KSB, Registration No.
33-30123A).

3.5 Certificate of Amendment to the Articles of Incorporation of General
Parcel Service, Inc., dated March 5, 1996, (incorporated by reference from
Exhibit A to Registrant's Form 8-K, dated March 5, 1996).

                                      9
<PAGE>
3.6 Certificate of Amendment to the Articles of Incorporation of General
Parcel Service, Inc., dated September 30, 1996, (incorporated by reference
from Exhibit A to Registrant's Form 8-K, dated September 18, 1996).

3.7 Certificate of Amendment to the Articles of Incorporation of General
Parcel Service, Inc., dated December 20, 1996, (incorporated by reference
from Exhibit A to Registrant's Form 8-K, dated December 20, 1996).


4. Instruments defining the Rights of Security holders

4.1 Specimen Stock Certificate (incorporated by reference from Exhibit 4.1 to
Registrant's Form S-18, Registration No. 33-30123A).

4.2 Warrant granting stock purchase warrants to J. Ray Gatlin (incorporated
by reference from Exhibit 4.2 to the Registrant's Form S-18, Registration
No. 33-30123A).

4.3 Warrant granting stock purchase rights to T. Wayne Davis (incorporated
by reference from Exhibit 4.3 to Registrant's Form S-18, Registration No.
33-30123A).

4.4 Warrant granting stock purchase rights to T. Wayne Davis (incorporated
by reference from Exhibit 4.4 to Registrant's Form S-18, Registration No.
33-30123A).

4.5 Warrant granting stock purchase rights to Drue B. Linton (incorporated
by reference from Exhibit 4.5 to Registrant's Form S-18, Registration No.
33-30123A).

4.6 Warrant granting stock purchase rights to Steven C. Koegler
(incorporated by reference from Exhibit 4.7 to Registrant's Form S-18,
Registration No. 33-30123A).

4.7 Warrant granting stock purchase rights to J. Ray Gatlin (incorporated by
reference from Exhibit 4.8 to Registrant's Form S-18, Registration No.
33-30123A).

4.8 Form of Warrant issued (incorporated by reference from Exhibit 4.9 to
Registrant's Form S-18, Registration No. 33-30123A).
4.9 Form of Warrant between the Company and American Transtech, Inc., as
Warrant Agent (incorporated by reference from Exhibit 4.10 to Registrant's
Form S-18, Registration No. 33-30123A).

4.10 Preferred Stock Purchase Agreement and specimen stock certificate
between the Company and T. Wayne Davis (incorporated by reference from
Exhibit Z to Registrant's 1993 From 8-K. Registration No. 33-30123A).

10.  Material Contracts

10.1 Incentive Stock Option Plan (incorporated by reference from Exhibit

10.2 to Registrant's From S-18, Registration No. 33-30123A).

10.2 Lease Agreements governing the Company's terminal in Columbia, South
Carolina and dated May 31, 1996 between the Company and Angoria Columbia
Enterprises (incorporated by reference from Exhibit 10.1 to Registrant's
June 30, 1996 10-QSB, Registration No. 33-30123A).

10.3 Assignment of Lease Agreement governing the Company's terminal in
Greensboro, North Carolina dated June 13, 1996 between the Company, ABF
Freight System, Inc., Bob G. Gibson and Defco Company (incorporated by
reference from Exhibit 10.2 to Registrant's June 30, 1996 10-QSB,
Registration No. 33-30123A).

10.4 Lease Agreement governing the Company's terminal in Charlotte, North
Carolina dated July 30, 1996 between the Company and Lincoln National Life
Insurance Company (incorporated by reference from Exhibit 10.7 to
Registrant's June 30, 1996 10-QSB, Registration No. 33-30123A).

                                       10
<PAGE>
10.5 Lease Agreement governing the company's terminal in Charleston, South
Carolina dated July 9,1996 between the Company and J.P. Gaillard, ET AL
(incorporated by reference from Exhibit 10.8 to Registrant's June 30, 1996
10-QSB, Registration No. 33-30123A).

10.6 Lease Agreement governing the Company's terminal in Tampa, Florida
dated November 30, 1994 and amended on January 26, 1996 and February 19,1996
between the Company and Scott Steel, Inc. (incorporated by reference from
Exhibit 10.1 to Registrant's September 30, 1996 10-QSB, Registration No.
33-30123A).

10.7 Purchase Agreement governing purchase by GPS Acquisition Corp. from
transit Express of Charlotte, Inc. of certain assets, dated February 6, 1995
(incorporated by reference from Exhibit 10.5 to Registrant's 1995 10-KSB,
Registration No. 33-30123A).

10.8 Resignation Agreement dated December 20, 1996 between the Company, E.
Hoke Smith, Jr., and T. Wayne Davis as guarantor (incorporated by reference
from Exhibit 10.31 to Registrant's 1996 10-KSB, Registration No. 33-30123A).

10.9 Purchase Agreement governing purchase by Transit of the stock of
Carolina Pacific (incorporated by reference from Exhibit 2.1 to Registrant's
Form 8-K dated July 11, 1997).

10.10 Purchase Agreement governing purchase by Transit of the stock of
Service Express (incorporated by reference from Exhibit 2.1 to Registrant's
Form 8-K dated August 15, 1997).

10.11 Purchase Agreement governing purchase by Transit of the stock of
Capitol Warehouse (incorporated by reference from Exhibit 2.2 to
Registrant's Form 8-K dated August 15, 1997).

10.12 Agreement and Plan of reorganization under which Carroll Fulmer was
merged with and into Transit Group Sub., Inc., a wholly owned Florida
subsidiary of Transit Group (incorporated by reference from Exhibit 2.1 to
Registrant's Form 8-K dated August 29, 1997).

10.13 Purchase Agreement governing purchase by Transit of the stock of
Rainbow Trucking (incorporated by reference from Exhibit 2.1 to Registrant's
Form 8-K dated December 30, 1997).

10.14 Purchase Agreement governing purchase by Transit of the stock of
Transportation Resource Management (incorporated by reference from Exhibit
2.1 to Registrant's Form 8-K dated January 31, 1998).

10.15 Loan Agreement dated December 18, 1997 between the Company and AmSouth
Bank (incorporated by reference from Exhibit 2.1 to Registrant's Form 8-K
dated December 18, 1997).

11.    Statement re: Computation of Per Share Earnings       Page xx

21.    Subsidiaries of the Registrant                        Page xx

27.    Financial Data Schedules                     (for SEC purposes only)

(c)   Reports filed on Form 8-K

1.The  Company  filed  a Form  8-K  dated  December 30, 1997 to report the
acquisition of Rainbow Trucking Services, Inc.

2.The Company filed a Form 8-K dated December 18, 1997 to report the placement
of the Company's $20 million Advised Revolving Credit Facility.

                                       11
<PAGE>

SIGNATURES

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

                                     TRANSIT GROUP, INC.

                                     BY:/s/  Philip A. Belyew
                                        ----------------------
                                        Philip A. Belyew, President,
                                        Chief Executive Officer, and
                                        Director

                                     Date:   March 30, 1998
<TABLE>
<CAPTION>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
in the capabilities and on the date indicated.
<S>                        <C>                                 <C>
    Signature                      Title                            Date

/s/ T. Wayne Davis         Chairman of the Board               March 30, 1998
---------------------      of Directors
T. Wayne Davis              

/s/ Philip A. Belyew       Director, President, and            March 30, 1998
---------------------      Chief Executive Officer
Philip A. Belyew           

/s/ Carroll L. Fulmer      Director                            March 30, 1998
---------------------
Carroll L. Fulmer

/s/ Derek E. Dewan         Director                            March 30, 1998
---------------------
Derek E. Dewan

/s/ Ford G. Pearson        Director                            March 30, 1998
---------------------
Ford G. Pearson

/s/ Wayne N. Nellums       Chief Financial Officer             March 30, 1998
---------------------
Wayne N. Nellums

/s/ Scott J. Tsanos        Chief Accounting                    March 30, 1998
---------------------      Officer
Scott J. Tsanos             

</TABLE>

                                       12
<PAGE>



                               TRANSIT GROUP, INC.

                     1997 CONSOLIDATED FINANCIAL STATEMENTS

                                    CONTENTS


                                                                        Pages
                                                                        -----
Report of Independent Accountants ....................................    14

Consolidated Financial Statements

     Consolidated Balance Sheets as of December 31, 1997 and 1996 ....    15

     Consolidated Statements of Operations for the years ended .......    16
           December 31, 1997 and 1996

     Consolidated Statements of Changes Non Redeemable Preferreed
           Stock, Common Stock and other Stockholders' Equity 
          (Deficit) for the years ended December 31, 1997 and 1996....    17

     Consolidated Statements of Cash Flows for the years ended .......    18
           December 31, 1997 and 1996

Notes to Consolidated Financial Statements ...........................   19/29

















                                       13
<PAGE>


                        Report of Independent Accountants


To the Board of Directors and Stockholders of
Transit Group, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations,of changes in total nonredeemable
preferred stock, common stock and other stockholders' equity (deficit) and
of cash flows present fairly, in all material respects, the financial
position of Transit Group, Inc. and its subsidiaries at December 31, 1997
and 1996, and the results of their operations and their cash flows for the
years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting
principles used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for the opinion expressed above.


/s/PRICE WATERHOUSE LLP
Atlanta, Georgia
March 24, 1998





















                                       14
<PAGE>
<TABLE>
<CAPTION>
                              TRANSIT GROUP, INC.
                          CONSOLIDATED BALANCE SHEETS
                                                       December 31,
                                                1997                 1996
             ASSETS
<S>                                       <C>                    <C>
Current Assets:
  Cash                                    $    789,791           $     6,455
  Accounts receivable
   (net of allowance of $173,000)           11,314,417                  -
  Other current assets                       1,429,181                27,231
                                          -------------          ------------
      Total current assets                  13,533,389                33,686
                                          -------------          ------------
Noncurrent assets:
  Equipment, at net book value              30,045,866                 4,828
  Goodwill                                  30,706,028                 -
  Other assets                                 769,522             5,781,602
                                          -------------          ------------
      Total noncurrent assets               61,521,416             5,786,430
                                          -------------          ------------
      Total assets                        $ 75,054,805           $ 5,820,116
                                          =============          ============

Liabilities and Stockholders Equity

Current liabilities:
  Current obligations
   under capital leases                   $  2,993,935           $     -
  Current maturities
   of long-term debt                         5,183,040                 -
  Accounts payable                           4,063,736                 -
  Accrued expenses and
   other current liabilities                 5,487,791                 -
  Current portion of deferred taxes            582,548                 -
  Net current liabilities
   of discontinued operations                  565,886             3,807,445
                                          -------------          ------------
      Total current liabilities             18,876,936             3,807,445
                                          -------------          ------------

Noncurrent liabilities:
  Long-term obligations
   under capital leases                      8,026,808                 -
  Long-term debt                            15,624,955                 -
  Note payable to affiliate of Chairman      4,000,000                 -
  Deferred taxes                             2,357,425                 -
                                          -------------          ------------
     Total noncurrent liabilities           30,009,188                 -
                                          -------------          ------------
     Total liabilities                      48,886,124             3,807,445
                                          -------------          ------------
Commitments and contingencies (Note 14)

Redeemable common stock                       7,452,007                -
                                          -------------          ------------
Non redeemable preferred stock,
 common stock and other stockholders'
 equity:
  Preferred stock, $.01 par value,
   800,000 shares authorized,
   420,000 issued and outstanding
   at December 31, 1996,
   liquidation preference $10.5 million          -                    4,200
  Note receivable secured by stock            (675,000)               -
  Common Stock, $.01 par value,
   30,000,000 shares authorized,
   20,574,626 and 3,758,671 shares
   issued and outstanding                      185,770               37,586
  Additional paid-in capital                50,650,534            21,386,455
  Accumulated deficit                      (31,444,630)          (19,415,570)
                                          -------------          ------------
      Total non redeemable preferred
      stock, common stock and other
      stockholders' equity                  18,716,674             2,012,671
                                          -------------          ------------
      Total liabilities and
       stockholders' equity               $ 75,054,805           $ 5,820,116
                                          =============          ============
</TABLE>
      See accompanying notes to consolidated financial statements.
                                       15
<PAGE>
<TABLE>
<CAPTION>
                           TRANSIT GROUP, INC.
                 CONSOLIDATED STATEMENTS OF OPERATIONS

                                                Years ended December 31,
                                              1997                    1996
<S>                                       <C>                     <C>
Revenues and other income:
  Freight and transportation revenue      $ 33,266,454            $    -
  Other income                                 745,195                 -
                                          -------------          ------------
      Total revenues and other income       34,011,649                 -
                                          -------------          ------------
Operating expenses:
  Purchased transportation                   9,030,480                 -
  Salaries, wages and benefits               7,664,754                 -
  Fuel                                       2,580,590                 -
  Operating supplies and expenses            9,651,227                 -
  Insurance                                    852,858                 -
  Depreciation and amortization expense      1,610,172                 -
  General and administrative expense         1,243,097               359,095
                                          -------------          ------------
      Total operating expenses              32,633,178               359,095
                                          -------------          ------------
      Operating income (loss)                1,378,471              (359,095)
Interest expense                             1,045,312                 -
                                          -------------          ------------
Continuing operations:
  Earnings (loss) from continuing
   operations before income taxes              333,159              (359,095)
  Income taxes attributable
   to continuing operations                     70,665                  -
                                          -------------          ------------
      Income (loss) from
       continuing operations                   262,494              (359,095)

Discontinued operations:
  Loss from discontinued operations         (6,114,408)           (4,790,262)
  Loss on disposal including provision
   for operating losses through
   disposal date                            (5,792,146)                 -
                                          -------------          ------------
      Net loss                             (11,644,060)           (5,149,357)
Preferred stock dividend requirement          (385,000)             (428,806)
                                          -------------          ------------
Loss to common shareholders              $ (12,029,060)          $(5,578,163)
                                         ==============          ============

Loss per basic and diluted common share:
  Continuing operations                  $       (0.01)          $     (0.21)
    Loss from discontinued operations            (0.55)                (1.27)
    Loss on disposal                             (0.52)               -
                                          -------------          ------------
      Net loss per basic and
       diluted common share              $       (1.08)          $     (1.48)
                                         ==============          ============
Weighted average number
  of basic and diluted
  common shares outstanding                 11,098,632             3,758,671
                                         ==============          ============
</TABLE>




      See accompanying notes to consolidated financial statements.

                                       16
<PAGE>
<TABLE>
<CAPTION>

                          TRANSIT GROUP, INC.
    CONSOLIDATED STATEMENTS OF CHANGES IN TOTAL NON REDEEMABLE PREFERRED STOCK,
              COMMON STOCK AND OTHER STOCKHOLDERS' EQUITY (DEFICIT)

                                                                                                                       Total
                                      Preferred     Common     Note receivable     Additional       Accumulated      stockholders'
                                        stock       stock      secured by stock  paid-in capital      deficit       equity (deficit)
<S>                                      <C>        <C>            <C>            <C>              <C>                <C>



Balance at December 31, 1995             $ 1,000   $  37,586        $   -         $  13,389,655     $ (13,662,409)     $   (234,168)
Issuance of preferred stock                3,200       -                -             7,996,800             -             8,000,000
Dividends on preferred stock               -           -                -                  -             (603,804)         (603,804)
Net Loss                                   -           -                -                  -           (5,149,357)       (5,149,357)
Balance December 31, 1996                  4,200      37,586            -            21,386,455       (19,415,570)        2,012,671
Dividends on preferred stock                                                                             (385,000)         (385,000)
Conversion of preferred stock             (4,200)     43,239            -               345,961             -               385,000
Sale of common stock                       -           6,966            -             1,212,034             -             1,219,000
Stock issued in satisfaction of debt       -          26,906            -             4,681,672             -             4,708,578
Stock issued for acquisitions              -          82,033            -            26,370,743             -            26,402,776
Stock issued in connection with
  sale of GPS                              -           8,766            -             4,023,450             -             4,032,216
Stock subject to redemption                -         (19,976)           -            (7,432,031)            -            (7,452,007)
Note secured by stock                      -           -             (675,000)            -                 -              (675,000)
Exercise of common stock options           -             250            -                62,250             -                62,500
Net Loss                                   -           -                -                 -           (11,644,060)      (11,644,060)
                                         =======   ==========       ==========    ==============    ==============     =============
Balance December 31, 1997                $ -       $ 185,770        $(675,000)    $  50,650,534     $ (31,444,630)     $ 18,716,674
                                         =======   ==========       ==========    ==============    ==============     =============
</TABLE>

      See accompanying notes to consolidated financial statements.









                                       17
<PAGE>
<TABLE>
<CAPTION>
                              TRANSIT GROUP, INC.
                       CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                      Years ended December 31,
                                                      1997                1996
<S>                                            <C>                 <C>
Cash Flows from operating activities:
  Income (loss) from continuing operations     $   262,494         $  (359,095)
                                               ------------        ------------
  Adjustments to reconcile net income
   (loss) to cash provided (used) in
   operating activities:
     Depreciation and amortization               1,610,172               -
     Changes in assets and liabilities:
       Decrease in accounts receivable           2,061,893               -
       Decrease in other current assets            258,056               -
       Increase in accounts payable                282,969               -
       Decrease in accrued expenses                (42,182)              -
       Increase in other long-term liabilities     208,361               -
       Other                                        83,916               -
                                               ------------        ------------
         Total adjustments                       4,463,185               -
                                               ------------        ------------
         Net cash provided (used) by
          continuing operations                  4,725,679            (359,095)
         Net cash used by discontinued   
          operations                            (4,584,102)         (1,201,082)
                                               ------------        ------------
         Net cash provided (used)
          by operations                            141,577          (1,560,177)
                                               ------------        ------------
Cash flows from investing activities:
  Business combinations                         (4,188,573)              -
  Proceeds from disposal of equipment              313,667              47,967
  Collection of mortgage receivables               619,180               -
  Purchase of equipment                           (145,788)           (790,792)
                                               ------------        ------------
         Net cash used by
          investing activities                  (3,401,514)           (742,805)
                                               ------------        ------------
Cash flows from financing activities:
  Proceeds from issuance of stock                1,281,500           8,000,000
  Dividends paid on preferred stock               (281,750)           (603,804)
  Increase in short-term borrowings              1,937,900           4,834,100
  Repayment of short-term borrowings                 -              (5,120,000)
  Increase in long-term debt                     7,614,475               -
  Repayment of long-term debt and
   capital lease obligations                    (5,193,886)         (4,421,236)
  Decrease in bank overdraft                    (1,314,966)           (386,362)
                                               ------------        ------------
         Net cash provided by
          financing activities                   4,043,273           2,302,698
                                               ------------        ------------

Increase (decrease) in cash                        783,336                (284)
Cash beginning of period                             6,455               6,739
                                               ------------        ------------
Cash end of period                             $   789,791         $     6,455
                                               ============        ============
Supplemental cash flow data:
    Cash paid for interest                     $   841,393         $     -
                                               ============        ============

  Fair value of assets acquired                $ 80,703,000        $     -
  Fair value of liabilities assumed             (50,100,000)             -
  Common stock issued                           (26,414,000)             -
                                               =============       ============
    Net cash payments                          $  4,189,000        $     -
                                               =============       ============
</TABLE>

          See accompanying notes to consolidated financial statements.
                                       18
<PAGE>
TRANSIT GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: Organization and Basis of Presentation

Transit Group, Inc. (the "Company") is a Florida corporation engaged,
through subsidiaries, in the long haul transportation services business. The
Company formerly known as General Parcel Service, Inc. ("GPS") changed its
name effective June 30, 1997.

In conjunction with the name change, the Company approved a plan to dispose
of all operations previously performed by GPS. The Company has accounted for
this disposal as a discontinued operation (See Note 3 to the Consolidated
Financial Statements).

NOTE 2: Summary of Significant Accounting Policies

Principles of Consolidation - The accompanying consolidated financial
statements include accounts of the Company and its wholly owned
subsidiaries. All material inter-company accounts and balances have been
eliminated.

Estimates - The process of preparing financial statements requires the use
of estimates and assumptions regarding certain types of assets, liabilities,
revenues and expenses. Such estimates primarily relate to unsettled
transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated
amounts.

Revenue Recognition - Revenues and related expenses are recognized under a
method which approximates when freight is shipped. The Company believes that
alternative methods of revenue recognition would not result in a material
difference in annual revenues or earnings per share.

Cash - The Company considers all highly liquid investments purchased with
original maturities of three months or less to be cash equivalents. The
Company's cash management program utilizes zero balance accounts.
Accordingly, all bank overdraft balances have been reclassified to 
accounts payable.

Concentrations of Credit Risk - Financial instruments which potentially
subject the company to concentrations of credit risk consist primarily of
trade accounts receivable. No single customer accounted for a significant
amount of the Company's sales, and there were no significant accounts
receivable from a single customer. The Company reviews a customer's credit
history before extending credit and generally does not require collateral.
The Company establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of specific customers, historical
trends, and other information. The Company's historical experience in
collection of accounts receivable falls within the recorded allowances. Due
to these factors, no additional credit risk beyond amounts provided for
collection losses is believed inherent in the Company's trade accounts
receivable.

Equipment - Equipment is stated at historical cost except for equipment
obtained in connection with the Company's business acquisitions which is
stated at fair market value on the date of acquisition, net of
accumulated depreciation and amortization. Except for life extending repair
costs (such as engine overhauls), all equipment maintenance and repair costs
are charged to operating expense as incurred. Depreciation is provided using
the straight-line method over the estimated useful life of the asset. Leased
equipment is amortized over varying periods not in excess of the estimated
useful life of the asset or lease term depending on the type of capital
lease. Gain or loss upon retirement or disposal of equipment is recorded as
income or expense. The ranges of depreciable lives used for financial
statement purposes are:
                                                               Years
         Autos, trucks and life extending repairs             2 to 10
         Office equipment and furniture                       3 to 10
         Terminal equipment                                   3 to 10

                                       19
<PAGE>
Goodwill - Goodwill representing the excess of cost over fair value of net
assets acquired in business combinations accounted by the purchase method,
is amortized by the straight-line method over 40 years. The Company
periodically reviews the value of its goodwill to determine if an impairment
has occurred. The Company measures the potential impairment of recorded
goodwill by the undiscounted value of expected future operating cash flows
in relation to its net capital investment in the acquired business. Based on
its review, the Company does not believe that an impairment of its goodwill
has occurred. Accumulated amortization was approximately $271,000 at December
31, 1997.

Income Taxes - The Company applies Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"). Under SFAS
109, the deferred tax liability or asset is determined based on the
difference between the financial statement and tax bases of assets and
liabilities as measured by the enacted tax rates which will be in effect
when these differences reverse. The measurement of deferred taxes is
reduced, if necessary, by the amount of any tax benefits that, based on
available evidence, are not expected to be realized (i.e. valuation
allowance).

NOTE 3: Business Combinations and Discontinued Operations

In July 1997, the Company acquired Carolina Pacific, Inc., a privately held
North Carolina corporation, and the business and related assets operated by
the owners of Carolina Pacific. Carolina Pacific is a truckload carrier
based in High Point, North Carolina. Pursuant to the Stock Purchase
Agreement executed at closing, the Company purchased all of the outstanding
capital stock of Carolina Pacific and the business and related assets
operated and owned by the shareholders of Carolina Pacific for $3.7 million
in cash, the issuance of 1,733,000 shares of common stock of the Company to
the shareholders of Carolina Pacific and the assumption of approximately
$0.6 million in debt.

In August 1997, the Company acquired Service Express, Inc., an Alabama
corporation with operations based in Tuscaloosa, Alabama. Pursuant to the
Agreement and Plan of Reorganization executed at closing, a wholly owned
Alabama subsidiary of Transit Group was merged with and into Service Express
in a reverse triangular merger, with Service Express remaining as the
surviving corporation of the merger. Upon consummation of the merger, all of
the outstanding common stock of Service Express was converted into 903,226
shares of Transit Group common stock.

In connection with the acquisition of Service Express, the Company granted
the selling shareholders the right through August 15, 1998 to require the
Company to redeem up to $1.8 million of shares of the Company at $3.875 per
share. Through March 30, 1998, selling shareholders had sold $100,000 of
stock to third parties, thereby reducing the redemption rights to $1.7 
million of shares.

Also in August 1997, the Company acquired Capitol Warehouse, Inc., a
Kentucky corporation with operations based in Louisville, Kentucky. Pursuant
to the Agreement and Plan of Reorganization executed at closing, a wholly
owned Kentucky subsidiary of Transit group was merged with and into Capitol
Warehouse in a reverse triangular merger, with Capitol Warehouse remaining
as the surviving corporation of the merger. Upon consummation of the merger,
all of the outstanding common stock of Capitol Warehouse was converted into
641,283 shares of Transit Group common stock.

In connection with the acquisition of Capitol Warehouse, the Company granted
the selling shareholder the right to require the Company to redeem up to
$300,000 of the Company's stock at $6.75 per share. The selling shareholder
has notified the Company that he intends to exercise his redemption rights.

In August 1997, the Company consummated the acquisition of Carroll Fulmer,
Inc., a Florida corporation with operations based in Groveland, Florida.
Pursuant to the Agreement and Plan of Reorganization executed at closing,
Carroll Fulmer merged with and into Transit Group Sub., Inc. a wholly owned
Florida subsidiary of Transit Group (the "Subsidiary"), in a forward
triangular merger, with the Subsidiary remaining as the surviving
corporation of the merger. Upon consummation of the merger, all of the
outstanding common stock of Carroll Fulmer was converted into 4,166,666
shares of Transit Group common stock, and the Subsidiary's name was changed
to Carroll Fulmer Group, Inc.

                                       20
<PAGE>
In connection with the acquisition of Carroll Fulmer, the Company granted
the selling shareholders the right to require either the Company redeem or a
major shareholder of the Company acquire up to $6.0 million of stock at a
price of $3.60 per share. Of this $6.0 million, redemption rights in the
amount of $2.5 million are exercisable before August 29, 1998 when an
additional $3.5 million become exercisable. All redemption rights expire
August 29, 2003.

Through March 31, 1998, the company has received notification that
shareholders have exercised their redemption rights with respect to
approximately $2.5 million. Of this amount, approximately $800,000 of stock
has been purchased by third parties and $75,000 has been redeemed by the
Company thereby reducing the Company's obligation. The remaining $1.625
million will be either sold to third parties, redeemed by the Company or
acquired by a major shareholder.

In December 1997 the Company acquired the net assets of Rainbow Trucking,
Inc., a Kentucky corporation engaged in the full load, long-haul trucking
business. Upon consummation of this acquisition all of the common stock of
Rainbow Trucking (and two affiliate companies) was converted into 679,246
shares of Transit Group common stock.

The Company made loans to the selling shareholders in the amount of
$675,000. Such loans are due on June 30, 1999. If the average closing price
per share of common stock of the Company for the period June 25, 1999
through June 29, 1999 is less than $6.625 per share, the notes shall be
non-recourse to such extent and the debtor shall not be personally liable
for such deficiency, but the Company shall be entitled to a return of a
proportionate amount of the Company's stock.

During the second quarter of 1997, the Company approved a plan to dispose of
its parcel delivery and courier operations. After negotiations with a third
party failed, the Company executed a contract for the sale of the parcel
delivery business to a company controlled by Transit Group's Chairman. The
sale contract became effective on September 30, 1997. Under the contract,
the buyer assumed the net liabilities related to the parcel delivery
operations and received shares of the Company's common stock in exchange.

Revenues attributable to the discontinued business were $14.7 million and 
$23.4 million for the years ended December 31, 1997 and 1996, respectively.

The loss from discontinued operations has been reflected in accordance with
APB No. 30 as a disposal of a segment. The December 31, 1997 and 1996
consolidated balance sheets, and the consolidated statements of operations
the consolidated statements of cash flows for the years then ended have been
restated to separately reflect the financial position, results of operations
and cash flows of the discontinued parcel delivery and courier businesses.

Net assets and liabilities of discontinued operations are as follows:

                                       21
<PAGE>
<TABLE>
<CAPTION>

                                                      December 31,
                                                 1997            1996
                                              ----------    --------------
<S>                                           <C>           <C>
Other assets:
  Equipment at book value                     $    -        $   7,498,406
  Goodwill                                         -              945,104
  Other assets                                     -              214,657
  Long term obligations under capital leases       -           (1,686,878)
  Long term debt                                   -             (600,358)
  Convertible debentures                           -             (300,000)
  Other long term liabilities                      -             (289,329)
                                              ----------    --------------
    Total other assets of
     discontinued operations                  $    -        $   5,781,602
                                              ===========   ==============

Net current liabilities of
 discontinued operations:

  Cash                                        $    -        $      29,504
  Accounts receivable                              -            2,370,834
  Other current assets                             -              373,339
  Short term borrowings                            -           (1,313,100)
  Current obligations under capital leases         -             (982,360)
  Current maturities of long term debt             -             (298,561)
  Accounts payable                                 -           (2,669,936)
  Accrued expenses and other
   current liabilities                          (565,886)      (1,317,165)
                                              -----------   --------------
    Net current liabilities of
     discontinued operations:                 $ (565,886)   $  (3,807,445)
                                              ===========   ==============
</TABLE>

All of the business combinations described above have been accounted for
under the purchase method of accounting. Accordingly, the operating results
of the acquired companies have been included in the Company's consolidated
financial statements since their respective dates of acquisition. Assets
acquired and liabilities assumed were recorded at fair market value. The
purchase price of the respective companies exceeded the fair value of net
assets acquired by approximately $31 million, which is being amortized on a
straight-line basis over 40 years. The following unaudited pro forma
consolidated results of operations of the Company for the years ended
December 31, 1997 and 1996 account for the five 1997 acquisitions and the
disposal of the Company's parcel delivery and courier operations as if they had
occurred on January 1, 1997 and 1996, respectively. The pro forma results
give effect to the amortization of goodwill, the effects of additional
interest expense, and certain adjustments.
<TABLE>
<CAPTION>

              UNAUDITED PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
                        FOR THE YEARS ENDED DECEMBER 31

                                               1997                1996
                                         ----------------    ----------------
<S>                                        <C>                 <C>
    Revenues                             $   111,809,000     $   117,603,000
                                         ================    ================
    Income (loss)from continuing
    operations available to
     common shareholders                 $       368,000     $      (184,806)
                                         ================    ================
    Income per basic common share        $          0.02     $         (0.02)
                                         ================    ================
    Income per diluted common share      $          0.02     $         (0.02)
                                         ================    ================
    Weighted average number of basic
     common shares outstanding                16,434,279          11,961,948
                                         ================    ================
    Weighted average number of diluted
     common shares outstanding                17,652,501          11,961,948
                                         ================    ================
</TABLE>

The above pro forma statements do not necessarily purport to be indicative
of the results of operations which would have occurred had the acquisitions
been made on January 1, 1997 or 1996, nor are they indicative of future
results.
                                       22
<PAGE>
NOTE 4: Stock

The Articles of Incorporation prior to 1996 provided for 200,000 shares of
Class A, Series 1 cumulative convertible preferred stock. In 1994, 100,000
shares were sold for a total purchase price of $2,500,000. The preferred
shares are nonvoting and generally provide for a conversion into common
stock at a rate of $3.00 per share and a cumulative dividend of $1.75 per
year per share.

During 1996, the Board of Directors amended the Articles of Incorporation to
provide for 300,000 shares of Class A, Series 2 Cumulative Preferred Stock
("Series 2 Preferred"). In the first quarter of 1996, 120,000 shares were
sold for a total price of $3,000,000 to an affiliate of the Company's
Chairman. Proceeds from the sale were used to retire $3,000,000 of bank
debt. In the second quarter, 60,000 shares were sold at a total price of
$1,500,000 to the same affiliate of the Company's Chairman. Proceeds from
this sale were used to fund working capital requirements. The Series 2
Preferred shares are nonvoting, provided for a conversion into common stock
at a rate of $2.50 per share, and provided for a cumulative dividend of
$1.75 per annum, paid quarterly.

Subsequently, the Board of Directors amended the Articles of Incorporation
to provide for 300,000 shares of Class A, Series 3 Cumulative Preferred
Stock ("Series 3 Preferred"). In September 1996, 60,000 shares were sold for
a total price of $1,500,000 to an affiliate of the Company's Chairman.
Proceeds from the September sale were used to fund working capital
requirements. The Series 3 Preferred shares are nonvoting and generally
provide for a conversion into common stock at a rate of $2.50 per share, and
provide for a cumulative dividend of $2.00 per annum, paid quarterly.

In December 1996, the Board of Directors approved an amendment to the
Company's Articles of Incorporation, to provide for 300,000 shares of Class
A Series 4 Preferred Stock ("Series 4 Preferred"). The Series 4 Preferred is
identical to the Company's Series 3 Preferred except that the price at which
the Preferred Stock can be converted into common shares is $2.00 per share
rather than $2.50. The Company issued 80,000 shares of newly authorized
Series 4 Preferred to an affiliate of the Company's Chairman for the total
purchase price of $2,000,000 or $25.00 per share on December 30, 1996.
At December 31, 1996, the Company had accrued preferred stock dividends 
included in accounts payable of $281,750.

In the second quarter of 1997 the holders of the Company's outstanding
preferred stock elected to convert their preferred stock and accrued
dividends of $385,000 to common stock. The Company issued 4,323,922 shares
of common stock upon the conversion.

NOTE 5: Income Taxes

The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
                                          Years ended December 31,
                                           1997              1996
  <S>                                  <C>               <C>
  Current:
   Federal                             $   -             $   -
   State                                  43,174             -
                                       ----------        ----------

   Total current                          43,174             -
                                       ----------        ----------

  Deferred:
  Federal                                  -                 -
  State                                   27,491             -
                                       ----------        ----------
  Total deferred                          27,491             -
                                       ----------        ----------

  Provision for income taxes           $  70,665         $   -
                                       ==========        ==========
</TABLE>

                                       23
<PAGE>
The components of the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
                                          Years ended December 31,
                                           1997              1996
<S>                                   <C>               <C>
 Depreciation                         $   3,762,133     $     625,129
 Net operating loss                     (12,903,391)       (7,550,378)
 Estimated expenses deductible in
  future tax periods                       (601,929)            -
 Other                                     (220,231)           (4,250)
                                      --------------    --------------
Net deferred tax asset                   (9,963,418)       (6,929,499)
Valuation allowance                      12,903,391         6,929,499
                                      --------------    --------------

Net deferred income tax liability     $   2,939,973     $       -
                                      ==============    ==============
</TABLE>

The difference between the provision for income taxes attributable to
continuing operations and the amounts that would be expected using the
Federal statutory income tax rate of 34% is explained below.

<TABLE>
<CAPTION>
                                              Years ended December 31,
                                             1997                  1996
<S>                                    <C>                   <C>
Tax at federal statutory rate
 Continuing operations                 $     113,274         $    (122,092)
 Discontinued operations                  (4,048,228)           (1,628,689)
Change in deferred tax asset
 valuation allowance                       3,710,431             1,939,352
Nondeductible expenses                       226,217                 -
State taxes net                               46,639              (202,314)
Other                                         22,332                13,743
                                       --------------        --------------

Net provision for income taxes         $      70,665         $       -
                                       ==============        ==============
</TABLE>

At December 31, 1997, the Company has $31,384,347 of net operating loss
carryforwards potentially available to offset taxable income which expire
during the years 2000 to 2012. The Company has not given recognition to tax
benefits of net operating loss carryforwards in the financial statements
because management believes the Company's history of operating losses
diminishes the Company's immediate ability to demonstrate that more likely
than not, that the future benefits will be realized. Additionally, these net
operating loss carryforwards are subject to limitation in any given year in
the event of significant changes in ownership as set forth in the Internal
Revenue Code and related Treasury Regulations. Consequently, a determination
has not been made as to the amount, if any, of the reduction in the net
operating loss carryforwards available against potential future taxable
income. The valuation allowance increased by $5,973,892 during 1997 of which
a portion is related to preacquisition losses. Tax loss carryforwards at
December 31, 1997 expire as follows:
<TABLE>
<CAPTION>

  Year of Expiration                Federal                      State
  ------------------          ----------------          ----------------
  <S>                         <C>                       <C>
  2000                        $        40,427           $        40,427
  2001                                 33,823                    33,823
  2002                                630,478                   630,478
  2003                                651,378                   651,378
  2004                                481,704                   481,704
  2005                              2,712,465                 2,696,980
  2006                              2,138,152                 2,125,475
  2007                              1,574,149                 1,562,086
  2008                              1,250,395                 1,069,463
  2009                              1,537,193                 1,119,038
  2010                              3,463,084                 2,796,533
  2011                              7,005,527                 4,895,973
  2012                              9,865,572                 6,905,900
                              ----------------          ----------------

                              $    31,384,347           $    25,009,258
                              ================          ================
</TABLE>

                                       24
<PAGE>
NOTE 6: Property and Equipment

Property and equipment consisted of the following at December 31:
<TABLE>
<CAPTION>

                                                  1997                1996
                                         -------------------    --------------
<S>                                      <C>                    <C>
Land                                     $           477,264    $       -
Building                                           2,786,376            -
Revenue equipment                                 27,895,207            -
Other                                              2,261,990            6,372
                                         --------------------   --------------
                                                  33,420,837            6,372
Less accumulated depreciation                      3,374,971            1,544
                                         --------------------   --------------
                                         $        30,045,866    $       4,828
                                         ====================   ==============
</TABLE>

NOTE 7: Long-term Debt

Long-term debt is due in installments through 2015, bears interest at rates
ranging from 5.7% - 12.0% and is collateralized by land, buildings and
equipment. Long-term debt maturing during each of the following years is as
follows:
<TABLE>
<CAPTION>

       Years Ended                                        Long-term
       December 31,                                         Debt
       ------------                                  -------------------
<S>    <C>                                           <C>
       1998                                          $        5,183,040
       1999                                                   9,655,982
       2000                                                   2,505,396
       2001                                                   1,615,650
       2002                                                     764,895
       Thereafter                                             1,083,032
                                                     -------------------
       Total long-term debt                                  20,807,995
       Less current portion                                   5,183,040
                                                     -------------------
       Long-term portion of long-term debt                 $ 15,624,955
                                                     ===================
</TABLE>

In the fourth quarter of 1997 the Company entered into a $20 million
revolving line of credit secured by accounts receivable. The facility bears
interest at the rate of 2.50% over LIBOR. At December 31, 1997 $5.4 million
was outstanding under this facility. The loan matures May 1, 1999 at which
time it may be converted to a term credit facility. The revolving credit
facility contains covenants which require, among other things net worth,
leverage, and interest coverage ratios within specified levels and contain
other provisions and covenants customary in lending transactions of these
types. The Company is in compliance with all covenants required by this
facility.

In July 1997, an affiliate of the Company's Chairman loaned the Company $4
million. The note bears interest at the rate of 9% and is payable in four
equal annual installments commencing April 1999.

NOTE 8: Capitalized Leases

The Company has entered into certain lease agreements, which have been
accounted for as capitalized leases. Substantially all of the capitalized
leases are for vehicles. The minimum future lease payments and the present
value of such commitments for the capitalized leases are as follows:
<TABLE>
<CAPTION>

                                                    Capitalized
                                                       Lease
       Years Ended December 31,                     Obligations
       ------------------------                   --------------
<S>    <C>                                        <C>
               1998                               $   3,764,479
               1999                                   3,198,137
               2000                                   2,634,688
               2001                                   2,615,497
               2002                                     647,135
                                                  -------------
       Total minimum obligations                     12,859,936
       Less amount representing interest              1,839,193
                                                  --------------
       Present value of net minimum obligations     11,020,743
       Less current portion                          2,993,935
                                                  --------------
       Long-term capitalized lease obligations    $  8,026,808
                                                  ==============
</TABLE>

                                       25
<PAGE>
The present values of minimum future obligations shown above are calculated
based on an interest rate of 8% which was determined in connection with the
acquisition of the respective companies and approximates the Company's
incremental borrowing rate. Interest expense on obligations outstanding
under capitalized leases was approximately $335,000 and nil for the years
ended December 31, 1997 and 1996, respectively.

NOTE 9: Operating Leases

The Company leases terminal and office facilities under noncancellable
operating lease agreements. Lease terms range from one to five years and
provide that the Company will pay real estate taxes, maintenance, insurance
and certain other expenses. At December 31, 1997 future minimum payments
under non-cancelable operating leases having an initial or remaining term of
more than one year were:

<TABLE>
<CAPTION>

                                       Operating
       Years Ended                       Lease
       December 31,                    Obligations
       ------------                  ----------------
<S>       <C>                        <C>
          1998                       $       794,160
          1999                               697,426
          2000                               663,250
          2001                               645,750
          2002                               410,130
                                     ----------------

              Total                  $     3,210,716
                                     ================
</TABLE>

Total rent expense under all operating leases was $215,000 and nil for the
years ended December 31, 1997 and 1996, respectively. Substantially all of
the lease obligations reflected above are for building leases. The Company
believes that upon expiration of these leases it will be able to negotiate
new leases on acceptable terms although lease costs may increase.

NOTE 10: Fair Values of Financial Instruments

Disclosure of fair value information about certain financial instruments,
whether or not recognized in the balance sheet for which it is practicable
to estimate that value, is required by Statement of Financial Accounting
Standards (SFAS) 107, Disclosure about Fair Value of Financial Instruments.
Substantially all of the Company's assets and liabilities were obtained as a
result of the five trucking companies acquired during the last six months of
fiscal 1997. In connection with accounting for those acquisitions, the
assets acquired and liabilities assumed were recorded at fair market value.
The Company believes that the fair market value of the assets and
liabilities has not changed since the date of acquisition.

NOTE 11: Stock Options and Warrants

The Company has granted options and warrants to acquire its common stock at
various times under various plans, contracts and employment agreements that
approximated or exceeded fair market value at the date of issue. Options and
warrants may be exercised over periods ranging up to ten years and generally
expire in five to ten years.

                                       26
<PAGE>

A summary of outstanding options and warrants is as follows:
<TABLE>
<CAPTION>

                                  1997                         1996
                       -------------------------- -----------------------------
                                   Weighted-Avg.                 Weighted-Avg.
                           Shares  Exercise Price     Shares     Exercise Price
                       ----------- -------------- -------------  --------------
<S>                      <C>          <C>             <C>              <C>
Outstanding beginning
  of Year                1,290,225    $ 3.14          1,282,725        $ 3.14
Granted during
 the year                1,488,933      3.22              7,500          2.16
Exercised or
 canceled during year      (25,000)     2.50              -              -
                       ------------                -------------
Outstanding              2,754,158    $ 3.19          1,290,225        $ 3.14
  end of year          ============                =============
</TABLE>

Options and warrants  outstanding at December 31, 1997 were  exercisable  at
prices ranging from $1.43 to $6.00.  All stock options and warrants are
noncompensatory.

Additionally, in conjunction with the initial public offering, the Company
issued 690,000 warrants. Two warrants entitle the holder thereof to purchase
at a price of $7.50 per share, one share of common stock at any time until
November 16, 2000. The warrants are subject to redemption by the Company at
$.05 per warrant at any time on 30 days' written notice, provided that the
average closing bid price of the common stock on NASDAQ is at least $8.50
for ten consecutive trading days ending five days prior to the date of the
notice of redemption.

The Company has adopted SFAS No. 123, "Accounting for Stock-Based
Compensation". In accordance with the provisions of SFAS 123, the Company
applies Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related Interpretations in accounting for its
stock option and warrant grants. If the Company had elected to recognize
compensation expense based upon the fair value at the grant dates for awards
under this plan consistent with the methodology prescribed by SFAS 123, the
Company's net loss per share would be increased to the unaudited pro forma
amounts indicated below.
<TABLE>
<CAPTION>

                                             1997                   1996
                                    --------------------    ------------------
  <S>                  <C>          <C>                     <C>
  Net loss             As reported  $       (11,644,060)    $      (5,149,357)
                       Pro forma            (12,984,054)           (5,161,747)
  Net loss per share   As reported  $             (1.08)    $           (1.48)
                       Pro forma                  (1.17)                (1.48)
</TABLE>

The fair value of each option and warrant is estimated on the date of grant
using the Black-Scholes option pricing model with the following
weighted-average assumptions used for grants in 1997 and 1996, respectively;
expected volatility of 1.22% and 97% and risk-free interest rates of 5.48%
and 6.49%. An expected option term of 5 years for both periods was developed
based on historical grant information.

Because the Company's stock options and warrants have characteristics
significantly different from those of traded options and warrants, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of its
employee stock options and warrants.

                                       27
<PAGE>
NOTE 12: Subsequent Events

In January 1998, the Company acquired Transportation Resources and
Management, Inc. ("TRM") a privately held trucking company based in Fort
Wayne, Indiana. TGI issued approximately 366,000 shares of its common stock
in addition to a cash payment of $200,000 for all of the common stock of
TRM.

In March 1998, the Company announced that it had executed a letter of intent
to acquire Certified Transport, Inc., an Indianapolis based short and
medium-haul carrier. As part of the transaction, TGI will also acquire an
affiliate of Certified Transport - Venture Logistics, Inc.

The business combinations described above will be accounted for under the
purchase method of accounting. Accordingly, the operating results of the
acquired companies have been included in the Company's consolidated
financial statements since their respective dates of acquisition. Assets
acquired and liabilities assumed were recorded at fair market value. The
purchase price of the respective companies exceeded their fair value of net
assets acquired by approximately $36 million, which is being amortized on a
straight-line basis over 40 years. The following unaudited pro forma
consolidated results of operations of the Company for the years ended
December 31, 1997 and 1996 account for the Company's five 1997 acquisitions,
the acquisition of TRM, the proposed acquisition of Certified Transport and
the disposal of the Company's parcel delivery and courier operations as if 
they had occurred on January 1, 1997 and 1996, respectively. The pro forma
results give effect to the amortization of goodwill, the effects of additional
interest expense, and certain adjustments.


<TABLE>
<CAPTION>

              UNAUDITED PRO FORMA CONSOLIDATED RESULTS OF OPERATIONS
                        FOR THE YEARS ENDED DECEMBER 31

                                               1997                1996
                                         ----------------    ----------------
<S>                                        <C>                 <C>
    Revenues                             $   140,699,000    $   141,651,000
                                         ================    ================
    Income (loss)from continuing
     operations available to
     common shareholders                 $     1,220,000     $       (86,806)
                                         ================    ================
    Income per basic common share        $          0.07     $         (0.01)
                                         ================    ================
    Income per diluted common share      $          0.06     $         (0.01)
                                         ================    ================
    Weighted average number of basic
     common shares outstanding                17,900,279          13,427,948
                                         ================    ================
    Weighted average number of diluted
     common shares outstanding                19,118,501          13,427,948
                                         ================    ================
</TABLE>

The above pro forma statements do not necessarily purport to be indicative
of the results of operations which would have occurred had the acquisitions
been made on January 1, 1997 or 1996, nor are they indicative of future
results.

NOTE 13: Related Party Transactions

The Company leases certain facilities from several of the former owners of
the businesses acquired. During 1997, rental payments under operating leases
to related parties aggregated $194,000. Payments to related parties under
capitalized leases totaled $785,000 in 1997, including $158,000 charged to
interest expense.

The terms of the leases with related parties is, in the opinion of the
Company, no less favorable to the Company than could be obtained from
unrelated third parties.

                                       28
<PAGE>
NOTE 14: Commitments and Contingencies

In connection with the acquisitions of Capitol Warehouse, Service Express,
and Carroll Fulmer, the Company granted the selling shareholders the right
to require the Company to redeem a portion of the shares which they received
in exchange for selling their businesses to the Company. The dollar amount
of stock subject to mandatory redemption by the Company aggregates
approximately $8.1 million. Of this $8.1 million, options in the amount of
$4.6 million are exercisable before August 29, 1998 when an additional $3.5
million become exercisable. The redemption rights expire in the amounts of
$2.1 million at August 15, 1998 and $6.0 million at August 29, 2003.

Holders of redemption rights with respect to $6.0 million of stock may
require either the Company to redeem the stock or a major shareholder of the
Company to acquire the stock at a price of $3.60 per share. Holders of
redemption rights with respect to $1.8 million of stock at $3.875 per share
and $0.3 million at $6.75 per share have the right to require the Company to
redeem their shares, with the guarantee from a major shareholder.

Through March 31, 1998, the Company has received notification that
shareholders have exercised their redemption rights with respect to
approximately $2.9 million. Of this amount, approximately $900,000 has been
purchased by third parties and $75,000 has been redeemed by the Company,
thereby reducing the Company's obligation. To the extent such redemption
rights are exercised, the Company will be required to fund the cash required
to meet its obligations under the redemption rights, by drawing
on bank lines which may be available to its subsidiaries, or to call
upon a major shareholder to purchase the stock under such shareholder's
obligations and guarantees associated with the acquisition contracts.

In connection with the sale of the Company's parcel delivery and courier
operations, the Company issued certain warranties regarding the value of
certain assets and liabilities transferred to the purchasers of the
businesses and remains contingently liable on certain real and personal
property leases. To provide for possible liabilities, which would arise
under the warranties on lease agreements, the Company has recorded a
liability of approximately $566,000. To the extent this liability is not
required, it will result in income in future periods.

                                       29