U. S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D. C. 20549

                                   FORM 10-KSB

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECU-RI-TIES EX-CHANGE ACT OF 1934 [Fee Required]
                   For the fiscal year ended December 31, 1997

                                       OR

          [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
               SECURITIES EX-CHANGE ACT OF 1934 [No Fee Required]
                        For the transition period from to

                          Commission file number 0-2882

                             ESCO TRANSPORTATION CO.
                             -----------------------
                 (Name of small business issuer in its charter)

         Delaware                                            55-0257510
         --------                                           -------------
State or other jurisdiction of                            (I.R.S. Employ-er
  incorporation or organization)                         Identifi-cation No.)

          6505  Homestead  Road
          Houston,  Texas  77028
-------------------------------------------
(Address  of  principal  executive  offices)

               Registrants telephone number         (713) 644-0265
                                            ----------------------

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

                                      NONE

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

                    Common Stock, $.0001 par value per share
                                (Title  of class)

Check  whether  the issuer (1) filed all reports required to be filed by Section
13  or  15(d) of the Exchange Act during the past 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  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 defin-itive proxy or information statements
incorporated  by  reference  in Part III of this Form 10-KSB or any amendment to
this  Form  10-KSB.  [X]

State  issuer's  revenues  for  its  most  recent  fiscal  year.  $22,741,988
                                                                  -----------
The  aggregate  market  value  of the voting stock held by non-affiliates of the
registrant was $[4,104,836] as of July 2, 1998.  Such aggregate market value was
computed  by  reference to the average bid and asked prices of the common stock,
as  of  July  2,  1998.

The  number  of  shares outstanding of the Common Stock, $.0001 par value, as of
December  31,  1997  was  12,176,760.

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

<PAGE>

                                    PART  I

ITEM  1.     DESCRIPTION  OF  BUSINESS

(A)     BUSINESS  DEVELOPMENT

     ESCO  Transportation Co., a Delaware corporation ("ESCO" or the "Company"),
is  a short haul contractor of freight for major shipping companies as well as a
national  freight  hauling and freight brokering company.  The Company also owns
certain  oil and gas prop-er-ties, which constitute an immaterial portion of the
Company's assets and generate an immaterial por-tion of the Company's reve-nues.

     The  Company  was incorporated in 1916 under the laws of the West Virginia.
Effective  May  20,  1992,  the  Company  was  rein-corpo-rated  as  a  Delaware
corporation.  Until  December  1993,  the  Company was engaged primari-ly in the
busi-ness  of explo-ration for, produc-tion of and sale of crude oil and natural
gas.  On October 11, 1994, the Company changed its name from "Power Oil Company"
to  "ESCO  Transportation,  Co."  Unless otherwise indicated, the information in
this  Annual  Report  is  adjusted  to  reflect the one-for-four and one-for-ten
reverse  stock  split  of  the  outstanding shares of the Company's common stock
effected  on  November  01,  1994.

(B)  BUSINESS  OF  ISSUER

     The  principal  business  of the Company is providing contract transporting
services  to major shipping companies, primarily inter-connecting short hauls of
container  shipments.  Most of this business consists of rail to rail or rail to
port  ship-ments.  In  performing  its  services,  the Company leases trucks and
trailers,  with the individual truck owners providing the drivers.  The owner of
the  truck  generally receives 75% of the revenue generated from the shipment as
compensation  for  providing the truck and the driver.  The Company operates out
of  facilities  located  in  Houston, Texas, Dallas, Texas, Ontario, California,
Memphis,  Tennessee  and  Springdale, Arkansas.  The Company's executive offices
are  located  in Houston Texas.  Company's freight brokerage operations pursue a
cost plus strategy in dispatching loads for various shippers in the southeastern
United  States.

     The  Company  is  competing  in  an  industry  that is highly com-petitive.
The  Company  currently  competes directly and indirectly with a large number of
contract  carriers.  Many  of  the  Company's  competitors  are  larger and have
significantly  greater  resources than the Company.  The Company competes on the
basis  of  price  and  service.

     Freight  activity  is typically somewhat stronger in the second half of the
year,  with  peak  months  in  August,  September and October.  In addition, bad
weather  and  holidays  generally  affect  business activity.  The fact that the
Company's business is concentrated in temperate regions of the country, however,
its  operations  have  not  been  historically  seasonal to any material degree.

     The Company believes that its current business operations are in compliance
with all applicable federal, state and local regulations governing its business.

     The Company employs approximately 110 employees, all of whom are full time.
In  addition,  the  Company employs as independent contractors approximately 190
owner/operators  of  the  trucks  used  in  the  Company's  operations.

                                       2
<PAGE>

ITEM  2.     DESCRIPTION  OF  PROPERTIES

     The Company leases the land and building now being used in the Houston shop
facilities  and  the  executive offices.  The facility consists of approximately
5,000  square feet of office space and eight acres of paved truck parking space.
The  Company  also  leases  the  land  and  building  now  being used in Memphis
Tennessee.  The  property  consists of approximately 3,000 square feet of office
space  and  fifteen  acres  or  truck  parking and container storage space.  The
Company  also  leases  approximately  2,000  square  feet  for  its  California
operations.  The  Company  leases approximately 5000 square feet of office space
and  8  acres  of  truck  parking  in  its  Springdale,  Arkansas  location.

The  company  has a note payable on approximately 5 acres of undeveloped land in
Springdale, Arkansas.  The company also has a note payable on approximately 4000
square  feet of office space and 2 acres of truck parking in Memphis, Tennessee.

                                       3
<PAGE>

     The  Company  also  owns producing and non-pro-ducing oil and gas leases in
the  United  States,  which  are  located  in  Louisi-ana, New Mexico, Texas and
Wyoming.


ITEM  3.     LEGAL  PROCEEDINGS

     The  Company  is  a party to routine litigation incidental to its business,
primarily involving claims for personal injuries and property damage incurred in
the  transportation  of  freight.  The Company maintains insurance coverage that
covers the liability resulting from such claims.  Adverse results in one or more
of  these  cases  would  not  have  a  material  adverse effect on the financial
position  of  the  Company.

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

     There  were  no  matters submitted to a vote of the security holders of the
Company  through  the  solicitation  of  proxies  or otherwise during the fourth
quarter  of  the  fiscal  year  ending  December  31,  1997.


                                       4
<PAGE>

                                    PART  II

ITEM  5.     MARKET  FOR  COMMON  EQUITY  AND  RELATED  STOCKHOLDER  MATTERS

     The Company's common stock is traded on the NASDAQ Bulletin Board under the
symbol "ETCO". The following table sets forth the high and low bid prices on for
the  common  stock  for  the  periods  indicated,  as  quoted  by  NASDAQ:

<TABLE>
<CAPTION>
FISCAL YEAR ENDED DECEMBER 31, 1996:                  HIGH    LOW
<S>                                                  <C>   <C>
    First Quarter   $                                 .10  $ 0625
    Second Quarter                                    .10    .075
    Third Quarter                                    .075   .0688
    Fourth Quarter                                    .40   .0688


FISCAL YEAR ENDED DECEMBER 31, 1997:
    First Quarter   $                                3.00  $.3125
    Second Quarter                                   2.75    1.50
    Third Quarter                                    1.75   .5625
    Fourth Quarter                                   1.18    .375
</TABLE>

     The  listed  quotations reflect interdealer prices, without retail mark-up,
mark-down or commissions, and may not necessarily represent actual transactions.

     As  of December 31, 1997, there were 183 holders of record of the Company's
common  stock.

     The Company has not paid dividends on its common stock during the last four
years.  The  Company  presently  intends  to  retain  earnings  to  finance  the
expansion  of  its  business  and,  therefore,  does  not expect to pay any cash
dividends  in  the  foreseeable  future.  Any determination as to the payment of
cash  dividends  will  depend  upon  the  Company's  earnings, general financial
condition,  capital  needs  and  other  factors deemed pertinent by the Board of
Directors,  as  well  as  any  limitations  imposed  by  lenders  under  credit
facilities.


                                       5
<PAGE>

ITEM  6.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF  OPERA-TION

OVERVIEW
--------

ESCO Transportation has operated profitably in an extremely competitive industry
since  from 1977 through 1996.  While the company would certainly have preferred
to have shown a profit in 1997, the company had expected that the costs involved
in  securing  the  assets  necessary  to  facilitate  the  expansion  that  ESCO
Transportation  has  pursued  were  unavoidable.

During  the  last  few  months  of  1996  through  the  middle  of  1997,  ESCO
Transportation  purchased  over  70 1997 Kenworth T600 tractors and purchased or
leased  over  150 fifty three foot air ride trailers.  Many of the trailers were
modified to accommodate several types of freight that ESCO desired to transport.
Just  the  down  payments  paid out during this period totaled over four hundred
thousand  dollars.  Coupled  with  the fact that all new equipment experiences a
certain  amount of downtime immediately after acquisition as lanes are developed
and  drivers  are  hired, it is easy to understand how the company's revenue and
cash  flows  can  be  depressed  during  the  acquisition  period.

Since  1993 ESCO's revenues have grown from a little over three million annually
to  over 22 million in 1997.  Company's that experience this level of growth are
usually  considered to be riskier than those whose revenues remain constant over
many  years.  As  such  the financing arrangements that ESCO had in place during
1997 were not particularly attractive.  The costs associated with this financing
as well as the limitations placed on the company by the lender further worked to
reduce  profits  and  hinder  the  company's  ability  to  manage  cash  flows.

STRATEGY  FOR  1998
-------------------

In  early  1998  ESCO  pursued an aggressive strategy to increase profitability.
This  strategy  was  as  follows:

Collections  -  ESCO aggressively pursued collections activity on all delinquent
accounts.  As  a  result the company reduced invoices in excess of 120 days from
450  thousand  dollars  to  less  than  200  thousand dollars.  The company does
recognize  that  this  amount  is  still not optimal and is continuously working
towards  reducing  this  amount  further.

Restructuring  Financing  -  In  February  1998  ESCO  entered  into a factoring
arrangement  with  Compass  Bank.  This  arrangement  allows  ESCO  to  secure
receivables  financing electronically thus accelerating cash flows.  The cost of
funds  in  this  arrangement  is  also  lower  than  with the company's previous
financing  source  and  the  administrative  costs  are  also  reduced.

By the ends of the first quarter of 1998, as a result of this strategy, ESCO was
able  to bring all accounts payable current as well as increase cash reserves by
almost  200,000  dollars.

OTHER  MAJOR  DEVELOPMENTS
--------------------------

In  April  1998  ESCO  entered into an agreement with Andy Freidel, President of
Intermodal  Logistics Company Inc., in Memphis, Tennessee.  Under this agreement
ESCO paid to Andy Freidel 100,000 dollars in cash, 200,000 shares of section 144
common  stock  and  approximately  121,000  dollars  in  cash paid to Intermodal
Logistics'  various  vendors  and  contractors  for  an agreement not to compete
within  either  the  Intermodal  Trucking  industry  or  the  Container  Storage
industry.  ESCO was also assigned rights to certain leases including 15 acres of
property  in  Memphis,  an office building, sixty chassis and a loaded container
lift.  ESCO  then moved its current Memphis operation into the former Intermodal
Logistics  facility.  This move will increase ESCO revenues by approximately six
million  dollars  annually  as well as position ESCO as the largest full service
depot  in  the  Memphis  region.


FUTURE  PLANS
-------------

ESCO  Transportation fully intends to return to profitability in 1998.  Although
the  company  intends  to  continue  to  expand its revenue, the level of growth
sought  by  the  company in 1998 will not affect the company's ability to show a
profit.


                                       6
<PAGE>

The  company's  current  growth  plans  include  entering  new  markets with its
Intermodal Division since establishing operations in new geographical regions in
the  Intermodal  Industry is typically a low cost proposition. The Over the Road
Division's  operations can be made more profitable by reducing maintenance costs
on equipment and improving driver retention.  To these ends ESCO has leased a 16
bay  shop  in  Springdale,  Arkansas  and  has  also  restructured the corporate
personnel  department  to  allow  corporate  management  to  oversee  the driver
selection  and control processes.  ESCO has also instituted an aggressive safety
program  which  will ultimately lead to lower freight claims and lower liability
and  cargo  insurance  premiums.

Management  is  attempting  to sell nonperforming assets, specifcally the vacant
location  formerly  used  for  Houston operations and Memphis operations. It has
also  restructured  its  administrative  staffing  needs by centralizing certain
administrative  duties  eliminating  a number of administrative positions at its
satellite  offices.

To  improve  ESCO's  balance  sheet  statistics  the company intends to increase
equity  by  placing  a portion of the five million shares of treasury stock that
the  company  assumed  control  of in 1998.  The company is also in negotiations
with  several  major  financial institutions exploring methods for restructuring
the  debt  on  most  of  the  company's  equipment.  Together  with  a return to
profitability  the company's equity should increase substantially thus improving
most  ratios.

SUMMATION
---------

ESCO  Transportation Co. is very serious in its efforts to improve the company's
financial  positioning.  The company did expect a great deal of what occurred in
1998  and  so management considers that the company is definitely on course with
the company's previously stated objectives.  The company fully intends to become
a  very large force within the Intermodal Transportation industry as well as the
Trucking  Industry  as  a  whole.


                                       7
<PAGE>

ITEM  7.     FINANCIAL  STATEMENTS

     The  Company's  financial  statements  and  supplementary  disclosures  are
included  herein  on  pages  F-1  through  F-10.

ITEM  8.     CHANGES  IN  AND  DISAGREEMENTS  WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL  DISCLOSURE

     In 1995 the Company filed form 8K with the SEC to become non-reporting.  In
1998  the  company  returned  to reporting status when it hired Null-Lairson PC,
(formerly  Lairson,  Stephens  and Reimer, PC) to perform audits of the 1995 and
1996  financial  statements.


                                       8
<PAGE>

                                    PART  III

ITEM  9.     DIRECTORS,  EXECUTIVE  OFFICERS,  PROMOTERS  AND  CONTROL  PERSONS;
COMPLIANCE  WITH  SECTION  16(A)  OF  THE  EXCHANGE  ACT

                                        Position  with
         Name                              Registrant
----------------------     ---------------------------------------

Edwis  L.  Selph           President  &  Chief  Executive  Officer

Edwis  L.  Selph,  Jr.     Vice  Presi-dent,  and  Director


     Each  director  shall  hold  office until his/her successor shall have been
elected  and qualified or until resignation or removal by the Board of Directors
in  accordance  with  the  By-laws  of  the  Company.

     The  officers of the Registrant are elected by the Board of Directors.  The
term of each officer is until voluntary resignation or replacement.  There is no
arrangement  or  understanding  between  any  directors  pursuant  to selection.

     Edwis  L.  Selph  has  served  as a Director of the Company since April 29,
     ----------------
1986.  He served as Chairman of the Board, President and Chief Executive Officer
from  February  27, 1987 until February 1, 1990 when he resigned these positions
and  was  elected  Vice-Chairman.  He  was  reinstated as Chairman of the Board,
Presi-dent  and  Chief  Executive Officer on December 31, 1990.  Mr. Selph is an
investor-business person.  His investments include numerous real estate holdings
and small business interests.  Mr. Selph owned ESCO Transportation Inc. prior to
its  acquisition  by  the  Company  on  December  14,  1993.

     Edwis  L.  Selph, Jr. has served as Secretary/Treasurer and Director of the
     ---------------------
Company  since  September  21,  1994.  Mr.  Selph  has worked for the Company in
various  capacities  since graduating from high school in 1991.  Edwis L. Selph,
Jr.  is  the  son  of Edwis L. Selph, Chairman of the Board, President and Chief
Executive  Officer  of  the  Company.  Mr. Selph was appointed Vice-President in
1995  with  unanimous consent of the board after the resignations of Mr. Cox and
Mr.  Bible  during  that  same  year.


                                       9
<PAGE>

ITEM  10.  EXECUTIVE  COMPENSATION

     The  following  table  sets  forth  for the fiscal years ended December 31,
1997,  1996 and 1995 the compensation paid by the Company to its Chief Executive
Officer:

     SUMMARY  COMPENSATION  TABLE

<TABLE>
<CAPTION>
      NAME                                    OTHER
      AND                                     ANNUAL             ALL OTHER
   PRINCIPAL                                  COMPEN-             COMPEN-
   POSITION         YEAR     SALARY   BONUS   SATION   OPTIONS    SATION
---------------  ---------  -------  ------  --------  --------  --------
<S>              <C>        <C>       <C>      <C>     <C>       <C>
Edwis L. Selph,       1997  $250,000  $     0  $    0  $      0  $      0
CEO                   1996  $150,000  $     0  $    0  $      0  $      0
                      1995  $150,000  $     0  $    0  $      0  $      0
</TABLE>

     The  Company  has no long-term incentive programs and no defined benefit or
actuarial  plan.

     Directors of the Company currently serve without any compensation for their
service  as  directors.


                                       10
<PAGE>

ITEM  11.     SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL OWNERS AND MANAGEMENT

     The  following table sets forth certain information regarding the ownership
of  Common  Stock  as  of  December  31, 1996 by (i) each director and executive
officer  of  the  Company,  (ii)  all directors and officers of the Company as a
group,  and  (iii)  each  other person known by the Company to be the beneficial
owner  of  more than 5% of the outstanding Common Stock as of December 31, 1996.

<TABLE>
<CAPTION>
                                      # of Shares and Nature of  Percent of Outstanding Shares
Name and Address of Beneficial Owner      Beneficial Owner
------------------------------------  -------------------------  ------------------------------
<S>                                   <C>                        <C>
Edwis L. Selph                                        4,750,000                          36.03%
6505 Homestead Rd
Houston, Texas 77028
Edwis L. Selph, Jr.                                           0                              * 
6505 Homestead Rd
Houston, Texas 77028
</TABLE>

ITEM  12.  CERTAIN  RELATIONSHIPS  AND  RELATED  TRANSACTIONS

     Edwis  L.  Selph,  Chairman  of  the  Board,  President and Chief Executive
Officer of the Company, owned 100% of the stock of  ESCO Transportation Inc. and
received  875,000  shares  of the Company's common stock in exchange for 100% of
the  common stock of ESCO Transportation Inc.  Prior to ESCO Transportation Inc.
becoming a wholly-owned subsidiary of the Company, Mr. Selph owned approximately
15.67%  of  the  Company's  outstanding  common  stock.  Immediately  after  the
transaction,  Mr.  Selph  owned  approximately  86.18%  of  the  Registrant's
outstanding  common  stock.  On  May 11, 1998, 4,000,000 shares of the Company's
common  stock  were  purchased  by the Company for $1,198,000 or 29.95 cents per
share, from a related party.  This amount, including interest, will be paid over
eight  (8)  years.  As of May 14, 1998, the Company has paid a total of $113,000
toward  this  debt,  bringing  the  balance  to  $1,085,000.


                                       11
<PAGE>

                                   SIGNATURES

     In accordance with Section 13 or 15(d) of the Ex-change Act, the registrant
has  duly  caused  this  report  to  be signed on its behalf by the undersigned,
there-unto  duly  autho-rized.


                                                ESCO  TRANSPORTATION,  CO.


                                                ----------------------------
                                                Edwis  L.  Selph,  President

Date:  June  18,  1998
       ---------------

     In  accordance  with  the Ex-change Act, this report has been signed by the
following  persons  on behalf of the registrant and in the capacities and on the
dates  indicated.


                                                          Date:  June  18,  1998
                                                                 ---------------

---------------------------
Edwis  L.  Selph,  President
(Chief  Executive  Officer)


                                                          Date:  June  18,  1998
                                                               -----------------

---------------------------
Edwis  L.  Selph,  Jr.,
Secretary/Treasurer
(Chief  Financial  Officer)


                                       12
<PAGE>

<TABLE>
<CAPTION>

                               INDEX TO FINANCIALS

CONTENTS
<S>                                            <C>
                                               PAGE
                                               ----

Independent Auditors' Report                     13

Balance Sheets                                   15

Statements of Income                             16

Statements of Changes in Stockholders' Equity    17

Statements of Cash Flows                         18

Notes to Financial Statements                    19
</TABLE>


                                       13
<PAGE>

INDEPENDENT  AUDITORS'  REPORT


Board  of  Directors
ESCO  Transportation  Co.
Houston,  Texas


We  have  audited  the accompanying balance sheets of ESCO Transportation Co., a
Delaware  Corporation  (the Company), as of  December 31, 1997 and 1996, and the
related  statements  of  income, changes in stockholders' equity, and cash flows
for  each  of  the  three  years  in  the  period ended December 31,1997.  These
financial  statements  are  the  responsibility  of  the  management  of  ESCO
Transportation  Co.  Our  responsibility  is  to  express  an  opinion  on these
financial  statements  based  on  our  audit.

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

In  our opinion the financial statements referred to above present fairly in all
material  respects,  the  financial  position  of  ESCO Transportation Co. as of
December  31, 1997 and 1996 and the results of its operations and its cash flows
for the three years then ended, in conformity with generally accepted accounting
principles.

The  accompanying  financial  statements  have  been  prepared assuming that the
Company  will  continue  as  a  going  concern.  As  discussed in Note 11 to the
financial  statements,  the  Company's  significant  operating  loss  raises
substantial  doubt  about  its  ability  to  continue  as  a going concern.  The
financial  statements  do not include any adjustments that might result from the
outcome  of  this  uncertainty.


NULL  LAIRSON,  P.C.

Houston,  Texas
May  15,  1998


                                       14
<PAGE>

ESCO  TRANSPORTATION  CO.

BALANCE  SHEETS

DECEMBER  31,  1997  AND  1996

<TABLE>
<CAPTION>
                                                                           1997         1996
                                                                       ------------  -----------
ASSETS
---------------------------------------------------------------------                     
CURRENT ASSETS
<S>                                                                    <C>           <C>

  Cash and cash equivalents                                            $    22,678   $   20,450 
  Accounts receivable, net                                               1,020,799    1,181,377 
  Notes receivable                                                                       25,015 
  Current portion of prepaid expenses                                       36,597       36,711 

  Other current assets                                                     224,460 
                                                                       ------------  -----------
TOTAL CURRENT ASSETS                                                     1,304,534    1,263,553 
                                                                       ------------  -----------

PROPERTY AND EQUIPMENT, net                                              9,100,489    5,049,147 
                                                                       ------------  -----------
OIL AND GAS PROPERTIES , net                                                34,692       40,676 
                                                                       ------------  -----------

PREPAID EXPENSES - net of current portion                                  101,097       93,128 
                                                                       ------------  -----------
TOTAL ASSETS                                                           $10,540,812   $6,446,504 
---------------------------------------------------------------------  ============  ===========


LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES

  Notes payable to stockholders                                        $    70,319   $  191,202 
  Accounts payable  - trade                                                375,213      449,061 
  Bank overdrafts                                                          280,715      261,470 
  Accrued liabilities                                                      382,962       36,255 
  Employee savings payable                                                  39,916 
  Federal income tax payable                                                             54,806 
  Current portion of long-term debt                                      1,807,738      926,911 
                                                                       ------------  -----------

TOTAL CURRENT LIABILITIES                                                2,956,863    1,919,705 

LONG-TERM DEBT - net of  current portion                                 6,645,188    3,818,498 
DEFERRED INCOME TAXES                                                                    41,435 
COMMITMENTS, (NOTE 6)

STOCKHOLDERS' EQUITY

  Common stock, $.0001 par value in 1997; 20,000,000 shares
   authorized in 1997 and 2,000,000 in 1996; issued and outstanding -
   12,176,760 in 1997 and 1,092,676 in 1996                                  1,218        1,093 
  Paid-in capital                                                          863,818      363,943 
  Retained earnings                                                         77,725      305,830 
                                                                       ------------  -----------
                                                                           942,761      670,866 
  Less treasury stock, at cost                                              (4,000)      (4,000)
---------------------------------------------------------------------  ------------  -----------
                                                                           938,761      666,866 

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                             $10,540,812   $6,446,504 
---------------------------------------------------------------------  ============  ===========
</TABLE>

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


                                       15
<PAGE>

ESCO  TRANSPORTATION  CO.

STATEMENTS  OF  INCOME

YEARS  ENDED  DECEMBER  31,  1997,  1996  AND  1995

<TABLE>
<CAPTION>
<S>                                             <C>           <C>           <C>
                                                       1997          1996         1995 
                                                ------------  ------------  -----------
REVENUE
  Freight revenue                               $22,733,933   $17,835,418   $8,340,571 
  Oil and gas revenue                                 8,055        15,125        9,737 
                                                ------------  ------------  -----------

TOTAL REVENUE                                    22,741,988    17,850,543    8,350,308 
                                                ------------  ------------  -----------

EXPENSES
  Cost of freight revenue                        15,916,496    12,804,457    5,666,679 
  Related party cost of freight revenue                         3,990,666      424,153 
  General administrative expenses                 5,146,071     4,058,928    2,117,823 
  Depreciation and depletion                      1,064,098       382,872       86,385 
                                                ------------  ------------  -----------
TOTAL EXPENSES                                   22,126,665    17,246,257    8,295,040 
----------------------------------------------  ------------  ------------  -----------
  OPERATING INCOME                                  615,323       604,286       55,268 

OTHER INCOME (EXPENSE)
  Interest income                                     1,713         5,745        6,840 
  Other income                                       16,303         1,720        3,986 
  Interest expense                                 (938,961)     (341,061)     (51,878)
                                                ------------  ------------  -----------
    Less on sale of assets                          (18,724)

                                                   (939,669)     (333,596)     (41,052)
                                                ------------  ------------  -----------
NET INCOME (LOSS) BEFORE INCOME TAXES              (324,346)      270,690       14,216 
----------------------------------------------                                         

Provision for income tax benefit(expense):
  Deferred                                                        (41,435)
  Current                                            96,241       (54,806)

NET INCOME (LOSS)                               $  (228,105)  $   174,449   $   14,216 
----------------------------------------------  ============  ============  ===========

NET INCOME (LOSS) PER COMMON SHARE              $     (0.02)  $      0.16   $     0.01 
----------------------------------------------  ============  ============  ===========

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING    11,938,736     1,092,676    1,091,373 
----------------------------------------------                                         
</TABLE>

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


                                       16
<PAGE>

ESCO  TRANSPORTATION  CO.

STATEMENTS  OF  CHANGES  IN  STOCKHOLDERS'  EQUITY

YEARS  ENDED  DECEMBER  31,  1997,  1996  AND  1995

<TABLE>
<CAPTION>
                                                               ADDITIONAL
                                          COMMON STOCK           PAID-IN   RETAINED   TREASURY
                                   ---------------------------                                      
                                      SHARES         AMOUNT      CAPITAL   EARNINGS    STOCK     TOTAL
                                   -------------  ------------  ---------  ---------  --------  ---------
<S>                                <C>            <C>           <C>        <C>        <C>       <C>

Balance at January 1, 1995            1,089,176   $     1,089   $353,947   $ 117,165  $(4,000)  $468,201
                                   -------------  ------------  ---------  ---------  --------  ---------

Issuance of common stock                  3,500             4      9,996                          10,000
  (3,500 shares)
Net income                                                                    14,216              14,216
                                   -------------  ------------  ---------  ---------  --------  ---------
BALANCE AT                            1,092,676         1,093    363,943     131,381   (4,000)   492,417
 DECEMBER 31, 1995
Net income                                                                   174,449             174,449
                                   -------------  ------------  ---------  ---------  --------  ---------
BALANCE AT                            1,092,676         1,093    363,943     305,830   (4,000)   666,866
 DECEMBER 31, 1996
Ten (10) for one (1) stock split      9,834,084 
Issuance of common stock              1,250,000           125    499,875                         500,000
Net income                                                      (228,105)                       (228,105)
                                   -------------  ------------  ---------  ---------  --------  ---------
BALANCE AT                           12,176,760   $     1,218   $ 863,818  $  77,725  $(4,000)  $938,761
 DECEMBER 31, 1997
                                   =============  ============  =========  =========  ========  =========
</TABLE>

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

                                       17
<PAGE>

<TABLE>
<CAPTION>
ESCO  TRANSPORTATION  CO.

STATEMENTS  OF  CASH  FLOWS

YEARS  ENDED  DECEMBER  31,  1997,  1996  AND  1995

                                                                           1997         1996         1995
                                                                        -----------  -----------  ----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S>                                                                     <C>          <C>          <C>
Net income (loss)                                                       $ (228,105)  $  174,449   $  14,216 
Adjustment to reconcile net income to net cash provided by
operating activities
Depreciation and depletion                                               1,064,098      382,872      86,385 
Allowance for bad debt expense                                             324,100      115,789      27,736 
            (Gain) loss  on sale of equipment                               18,724         (425)
            Deferred income taxes                                                        41,435 
Changes in operating assets and liabilities
(Increase) decrease in accounts receivable                                (163,523)    (541,097)   (284,778)
Decrease (increase) in prepaid expenses                                     (7,855)    (129,839)     11,800 
Decrease (increase) in other assets                                       (224,460)
(Decrease) increase in accounts payable and accrued expenses               272,859       84,330     203,391 
      (Decrease) increase in employee savings payable                       39,916 
Increase (decrease) in federal income tax payable                          (54,806)      54,806     (12,516)
      Increase (decrease) in deferred income taxes payable                 (41,435)
                                                                        -----------  -----------  ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES                                  999,513      182,320      46,234 

CASH FLOWS FROM INVESTING ACTIVITIES

Loans made to contract haulers (notes receivable)                                                   (96,178)
Purchases of property and equipment                                        255,829     (108,490)   (153,945)
Payments received on notes receivable                                       25,015       36,912      34,251 
      Sale of assets                                                        59,802        7,935 

NET CASH USED BY INVESTING ACTIVITIES                                     (171,010)     (63,643)   (215,872)
                                                                        -----------  -----------  ----------

CASH FLOWS FROM FINANCING ACTIVITIES

Financing of operations from bank overdraft                                 19,245      261,470 
Proceeds from long-term debt and notes payable to stockholder                           251,847     500,000 
Payments on long-term debt and notes payable to stockholders             1,345,520     (649,812)   (395,195)
Issuance of common stock                                                   500,000                   10,000 
                                                                        -----------  -----------  ----------

NET CASH FLOWS PROVIDED (USED)                                            (826,275)    (136,495)    114,805 
 BY FINANCING ACTIVITIES

NET INCREASE (DECREASE) IN                                                   2,228      (17,818)    (54,833)
CASH AND CASH EQUIVALENTS

Cash and cash equivalents balance at beginning of year                      20,450       38,268      93,101 
                                                                        -----------  -----------  ----------

CASH AND CASH EQUIVALENTS                                               $   22,678   $   20,450   $  38,268 
BALANCE AT END OF PERIOD

Supplemental schedule of non-cash investing and financing activities:
Debt incurred to purchase property and equipment                        $4,932,154   $4,365,431   $ 480,233 
----------------------------------------------------------------------  ===========  ===========  ==========
</TABLE>

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


                                       18
<PAGE>
ESCO  TRANSPORTATION  CO.

NOTES  TO  FINANCIAL  STATEMENTS

DECEMBER  31,  1997  AND  1996

1.     ORGANIZATION

ESCO  Transportation  Co.,  (the  "Company")  was incorporated under the name of
Power  Oil  Company  in  1916  in  West  Virginia.  In  1992,  the  Company  was
reincorporated  as  a  Delaware  corporation.  The Company changed its name from
"Power  Oil  Company"  to  "ESCO  Transportation  Co."  in  1994

ESCO  Transportation, Inc. a wholly-owned subsidiary of ESCO Transportation Co.,
was  incorporated  on  May 26, 1993 and acquired certain assets, liabilities and
transportation  contracts  from ESCO Transportation (a Proprietorship) as of May
31,  1993.

On  November 17, 1993, the Company's Board of Directors authorized a one-for-ten
reverse stock split for all outstanding shares of its common stock.  On December
14,  1993,  Power  Oil  Company  acquired  all of the outstanding shares of ESCO
Transportation,  Inc.  (ESCO)  in exchange for the issuance of 875,000 shares of
common  stock.  The stock of ESCO Transportation, Inc. was acquired as described
in  the  plan and agreement of reorganization dated October 20, 1993 and is held
as  a  wholly-owned subsidiary.  For accounting purposes, ESCO was the acquiror.
Accordingly,  the  merger  was accounted for as a reverse acquisition on the "as
if"  pooling  of  interest  basis.  On  November 14, 1994 the Company's Board of
Directors  voted to (1) change the name of the company from Power Oil Company to
ESCO  Transportation Co. and (2) institute a one-for-four reverse stock split on
the  Company's  common  stock.

The  principal  business  of  the Company is hauling freight on inter-connecting
short  hauls of containers shipments.  The Company operates out of facilities in
Houston,  Texas;  Ontario,  California;  Memphis,  Tennessee  and  Springdale,
Arkansas,  with  Houston  being  the  home  office.

2.     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES

Basis  of  Accounting
---------------------

Income  and  expenses  are  recorded  on  the  accrual  method of accounting for
financial  and  federal  income  tax  reporting  purposes.

Use  of  Estimates
------------------

The  preparation  of  financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect  reported  amounts  and  related disclosures. Actual results could differ
from  these  estimates.  Management  believes that the estimates are reasonable.

Revenue  Recognition
--------------------

Revenue  and  direct  costs  are  recognized  when  the  shipment  is completed.


                                       19
<PAGE>
2.     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (continued)

Cash  and  cash  equivalents
----------------------------

For  purposes of the statements of cash flows, the Company considers all cash on
hand,  cash  in bank (demand deposits), savings accounts, cash held in brokerage
accounts  and  highly liquid debt instruments purchased with a maturity of three
months  or  less  to  be  cash  and  cash  equivalents.

Property  and  Equipment
------------------------

Property,  plant and equipment, are carried at cost.  Depreciation for financial
reporting  purposes  has  been  computed  on  the  straight-line method over the
estimated  useful  lives  of  the assets which range from three to twenty years.

Accelerated  methods  of  depreciation  are used for computation of depreciation
expense  for  income  tax  reporting  purposes.

Oil  and  Gas  Properties
-------------------------

The  Company accounts for its oil and gas exploration and development activities
using  the  successful  efforts  method.  Under  this  method  of  accounting,
exploratory  drilling costs which result in the discovery of proved reserves are
capitalized.  All  other exploratory costs, including geological and geophysical
costs,  are  expensed when incurred.  Developmental costs, including development
of  dry  holes,  are  capitalized  when  incurred.

Depletion  of  capitalized  costs  on  producing  properties  is  computed  on a
property-by-property  basis  utilizing the unit-of-production method.  Depletion
expense  was  $5,984  for  1997,  $25,524  for  1996  and  $16,549  for  1995.

Lease  acquisition costs are capitalized when incurred.  Leasehold impairment is
recognized  through  a  charge  to operations if the lease expires or management
decides  to  abandon  the  Company's  interest.

When  assets  are retired, abandoned or otherwise disposed of, the related costs
and  accumulated depreciation are removed from the accounts, and gain or loss is
included  in  income.

Income  Taxes
-------------

The Company uses the liability method of accounting for income taxes under which
deferred  tax  assets  and  liabilities  are recognized for deductible temporary
differences.  Temporary  differences  are  the  differences between the reported
amounts  of assets and liabilities and their tax bases.  Deferred tax assets are
reduced  by a valuation allowance when, in the opinion of management, it is more
likely  than not that some portion or all of the deferred tax assets will not be
realized.  Deferred  tax  assets and liabilities are adjusted for the effects of
changes  in  tax  laws  and  rates  on  the  date  of  enactment.


                                       20
<PAGE>

2.     SUMMARY  OF  SIGNIFICANT  ACCOUNTING  POLICIES  (continued)

Net  Income  Per  Share
-----------------------

Net  income  per  common share is based on the weighted average number of shares
outstanding during the year.  The Company declared a one-for-four  reverse stock
split  in  1994.  All  share and per share amounts have been adjusted to reflect
the  stock  splits.

Concentrations  of  Credit  Risk
--------------------------------

Financial  instruments that potentially subject the Company to concentrations of
credit  risk  consist  principally  of trade accounts receivable.  In the normal
course  of  business  the Company grants credit without collateral to customers.
Consequently, the Company's ability to collect the amounts due from customers is
affected  by  economic  conditions.

Fair  Value  of  Financial  Instruments
---------------------------------------

The  Company  has  a number of financial instruments, none of which are held for
trading  purposes.  The  Company  estimates that the fair value of all financial
instruments  at December 31, 1996, does not differ materially from the aggregate
carrying  values  of  its  financial  instruments  recorded  in the accompanying
balance  sheet.  The  estimated  fair  value amounts have been determined by the
Company  using  available  market  information  and  appropriate  valuation
methodologies.  Considerable  judgement  is necessarily required in interpreting
market  data  to  develop  the  estimates  of  fair value, and, accordingly, the
estimates  are  not necessarily indicative of the amounts that the Company could
realize  in  a  current  market  exchange.

3.     ACCOUNTS  AND  NOTES  RECEIVABLE

Accounts  receivable  are  comprised  of  the  following:

<TABLE>
<CAPTION>
                                       December 31,
                                       ------------
                                     1997         1996
                                  -----------  -----------
<S>                               <C>          <C>
Receivables assigned to factor    $1,473,656   $1,496,572 
Less advances from factor          1,262,094    1,289,413 
                                  -----------  -----------
Due from Factor                      211,562      207,163 
Unfactored accounts receivable     1,063,617      797,332 
Accrued unbilled revenue             226,128      318,729 
Employee advances                                  18,719 
Allowances for doubtful accounts    (481,108)    (160,514)
                                  -----------  -----------
                                  $1,020,199   $1,181,377 
                                  ===========  ===========
</TABLE>


                                       21
<PAGE>

3.     ACCOUNTS  AND  NOTES  RECEIVABLE  (continued)

Pursuant  to  a  factoring  agreement, the Company's factoring agent acts as its
factor for the majority of its receivables, which are assigned on a pre-approved
basis  subject to recourse.   Interest is charged at the prime lending rate plus
5%  per  annum.

4.     PROPERTY  AND  EQUIPMENT

Property,  plant  and  equipment  consisted  of  the  following:

<TABLE>
<CAPTION>
                                       December 31,
                                       ------------
                                   1997         1996
                               ------------  -----------
<S>                            <C>           <C>

Land                           $   385,019   $  217,500 
Buildings                          323,228      323,228 
Office equipment                   210,338      162,983 
Communications equipment           353,281       49,200 
Furniture and fixtures              29,483       20,355 
Trucks, tractors and trailers    9,310,188    4,787,608 
-----------------------------  ------------  -----------
                                10,611,537    5,560,874 
Less accumulated depreciation   (1,511,048)    (511,727)

                               $ 9,100,489   $5,049,147 
                               ============  ===========
</TABLE>

Depreciation  expense  for  the years ended December 31, 1997, 1996 and 1995 was
$1,058,114,  $352,341  and  $69,836  respectively.


                                       22
<PAGE>

5.     LONG-TERM  DEBT

The  Company's  long-term  debt was acquired to purchase property and equipment.
The  Company's  long-term     debt  consists  of  the  following  major classes:

Stockholder  Notes  Payables
----------------------------

Loans  from  stockholders  were  obtained to meet short-term needs.  At present,
these  notes  are  non-interest  bearing  and  unsecured.

Notes  Payables
---------------

Loans  from  banks and finance companies for the purchase of equipment.  Most of
these  notes  bear  interest  rates between 9.5% to 11.5% and are secured by the
equipment  purchased  with  them.

Capital  Leases  Payable
------------------------

The  Company  has  entered  into  several lease agreements for equipment.  These
leases  are  classified  as capital leases and the equipment is recognized under
property  and  equipment  and  depreciated by the Company in accordance with its
depreciation  policy.  The  interest  rate  under these leases are between 7% to
12.3%.  The  leases  are  secured  by  the  equipment  acquired  by  them.

Mortgages  Payable
------------------

The  Company  has  acquired  three (3) pieces of property in Memphis, Tennessee;
Springdale,  Arkansas;  and  Houston,  Texas.  The  mortgage  to  two  of  these
properties  are  held  by  banks  and  the  third by a limited partnership.  The
interest  rates for these properties are between 8.0% to 9.5%.  Each mortgage is
secured  by  the  property.

     The  following  schedule  summarizes  the  Company's  long-term  debt:

<TABLE>
<CAPTION>
<S>                                         <C>
Stockholder notes payable                   $   70,319
Notes payable                                7,320,290
Capital leases payable (net present value)     639,664
Mortgages payable                              492,972
------------------------------------------  ----------
                                            $8,523,245
                                            ==========
</TABLE>


                                       23
<PAGE>

5.     LONG-TERM  DEBT  (continued)

Maturities  of  long  term  debt  are  as  follows:

<TABLE>
<CAPTION>
<S>         <C>
1998        $1,878,057
1999         1,858,342
2000         2,078,726
2001         1,910,508
2002           645,014
Thereafter     182,598
            ----------
            $8,523,245
            ==========
</TABLE>

6.     CONTRACTS  AND  COMMITMENTS

The  Company  leases  equipment  under  noncancelable  operating  leases.  The
Company's minimum rental commitments under this noncancelable operating lease as
of  December  31,  1997,  were  as  follows:

<TABLE>
<CAPTION>
<S>   <C>
1998  $ 86,532
1999    65,141
2000    65,141
2001    65,141
      $281,955
      ========
</TABLE>

7.     FEDERAL  INCOME  TAXES

At  December 31, 1997 and 1996, the Company had net operating loss carryforwards
for federal income tax purposes of approximately $201,000, which expire in years
2000 through 2009.  The Company believes that as a result of previous changes in
stock  ownership,  it underwent an ownership change as defined in Section 382 of
the  Internal  Revenue  Code,  as amended.  The net operating loss carryforwards
were  generated  in  the  years  prior  to the ownership change.  Therefore, the
Company  believes  the  net  operating  loss  carryforwards  available to offset
taxable  income  of  the Company each year following the change will be limited,
but  will  not  be  lost.  The  amount  of  such  a limitation is expected to be
approximately  $35,000  each  year. However, because of uncertainties concerning
allowableness of the loss carryforwards, a valuation allowance has been provided
for  the  full  amount of the deferred tax asset arising from such net operating
loss  carryforwards.  The  effective  income  tax rate varies from the statutory
federal  income  tax  rate  due  to  certain  expenses  which  primarily are not
deductible  for  tax  purposes.


                                       24
<PAGE>

8.     MAJOR  CUSTOMERS

Sales  to  major  customers  were  as  follows:
<TABLE>
<CAPTION>


<S>       <C>    <C>    <C>
CUSTOMER  1997   1996   1995 
--------  -----  -----  -----
A           17%    17%    31%
B           12%     8%    14%
C            9%     7%     0%
D           17%     6%     0%
E            2%     3%    10%
F            6%     5%     8%
          -----  -----  -----
 TOTAL      63%    46%    63%
--------  =====  =====  =====
</TABLE>

9.     SUPPLEMENTAL  DISCLOSURES  OF  CASH  FLOW  INFORMATION

Supplemental  cash  flow  information:

<TABLE>
<CAPTION>
                             December 31,
                --------------------------------
                         1997      1996     1995
                -------------  --------  -------
<S>             <C>            <C>       <C>
 Interest Paid  $     870,836  $341,061  $51,878
--------------  =============  ========  =======
</TABLE>

10.     CONTINGENT  LIABILITIES

Due  to  the  nature  of  the  Company's  business,  it  is defendant in various
lawsuits.  As of December 31, 1996 the Company had only one case pending against
it.  This  matter  involved  personal injury to a driver.  Though the outcome of
this case could not be determined by the Company's attorneys, it is their belief
that  the  Company could sustain losses in excess of $10,000 should the judgment
favor  the  plaintiff.

11.     GOING  CONCERN

As  shown  in  the accompanying financial statements, the Company has incurred a
loss  from  operations,  and  has  deficits  in working capital, combined with a
significant  increase  in  debt  associated  with asset purchases. These factors
raise  substantial  doubt  about  the  Company's  ability to continue as a going
concern.

As discussed in Note 12, management has replaced its factoring company on terms
more favorable to the Company. In addition, management has negotiated reductions
in  its  operating  expenses  during  the  first  quarter  of  1998,  including
significant reductions in insurance costs. Management is also attempting to sell
nonperforming  assets,  it has restructured its administrative staffing needs by
centralizing  certain  administrative  duties  eliminating  a  number  of
administrative  positions  at its satellite offices, and it anticipates positive
cash  flow  performance from its acquisition of Intermodal Logistics Corporation
(as  discussed in Note 12). Management believes that each of these changes which
have  been  implemented,  or  are  planning  to be implemented, will provide for
operating  profits  in  the  coming  year and provide additional working capital
allowing  for  it  to  continue  as  a  going  concern.


                                       25
<PAGE>

12.     SUBSEQUENT  EVENTS

The  following  subsequent  events  have  occurred  since  December  31,  1997:

On  April  22,  1998  the Company assumed the operations of Intermodal Logistics
Corporation  ("ILC").  ILC  was  an intermodal carrier in the Memphis area.  ILC
also operated a container storage yard in Memphis.  At the time of the takeover,
ILC  was  generating  approximately  $6,000,000  per  year  in  revenue.

Some  of  the  terms  of  the  agreement  were  as  follows:

     The  company  assumed  ownership  of  a  container  lift  as  well  as  the
     corresponding  debt of  $96,000,  both the title to the lift as well as the
     note were reassigned to the Company.  Other than the railroad,  the Company
     now owns the only container  lift capable of lifting  loaded  containers in
     Memphis.

     In exchange for a non-compete  agreement from the owner of ILC, the Company
     paid $100,000 and 200,000 shares in the Company's Section 144 stock.

     The Company covered ILC's bank overdraft of approximately $71,000.

     The Company assumed certain property leases previously held by ILC.

     The Company assumed ownership of a mobile office structure,  as well as the
     corresponding note payable.

In  late  January, 1998, the Company opened a Dallas, Texas office.  The Company
is  leasing  a  lot,  and  office  space.

On  March 5, 1998 the Company changed its accounts receivable factoring agent to
achieve  more  favorable  terms.

Other  than  the  assets related to the assumption of ILC's operations, no major
equipment  purchases  have  taken  place  in  1998.

Effective  January  1,  1998,  115,000 shares of Section 144 stock was issued to
employees  of  the  Company.


                                       26
<PAGE>

On  May  11, 1998, 4,000,000 shares of the Company's common stock were purchased
by  the  Company  for $1,198,000 or 29.95 cents per share, from a related party.
This  amount,  including interest, will be paid over eight (8) years.  As of May
14,  1998,  the  Company has paid a total of $113,000 toward this debt, bringing
the  balance  to  $1,085,000.

The  Company  has  leased,  for  its over the road operation, a new facility in
Springdale,  Arkansas.  The facility includes 3,500 square feet of office space,
a  20,000  square foot shop with twelve (12) bays and a truck wash, and five (5)
acres  of  truck  and trailer parking.  The lease is for a term of six (6) years
with  an  option  to  buy  at  any  time.

                                       27
<PAGE>