U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                   FORM 10-QSB



[X]  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934 For the quarterly period ended March 31, 1998

[ ] TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE
     ACT OF 1934 For the transition period ended to



                       Commission File Number: 33-30123-A



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



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



              2859  Paces Ferry, Suite 1740, Atlanta, Georgia 30039
                    (Address of principal executive offices)


                                 (770) 444-0240
                           (Issuer's telephone number)


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

There were 20,940,583  shares of the Company's  common stock  outstanding as of
April 30, 1998.

Transitional Small Business Disclosure Format (Check One) Yes    No X

<PAGE>







                               TRANSIT GROUP, INC.

                                   FORM 10-QSB

                                      INDEX

PART I.FINANCIAL INFORMATION                                        Page Number

        Item 1
        Financial Statements

        Consolidated Balance Sheets
         as of March 31, 1998 and December 31, 1997                         2

        Consolidated Statements of Operations for the three
         months ended March 31, 1998 and 1997                               3

        Consolidated Statement of Changes in Total Non Redeemable
         Preferred Stock, Common Stock and other Shareholder's Equity       4

        Consolidated Statements of Cash Flows for the three
         months ended March 31, 1998 and 1997                               5

        Notes to Consolidated Financial Statements                          6

        Item 2
        Management's Discussion and Analysis or Plan of Operation           9

PART II. OTHER INFORMATION                                                 12

         Item 1
         Legal Proceedings

         Item 2
         Changes in Securities and Use of Proceeds

         Item 3
         Defaults Upon Senior Securities

         Item 4
         Submission of Matters to a Vote of Security Holders

         Item 5
         Other Information

         Item 6
         Exhibits and Reports on Form 8-K
<PAGE>

<TABLE>
<CAPTION>


                              TRANSIT GROUP, INC.

                          CONSOLIDATED BALANCE SHEETS


                                     ASSETS

                                                                                 March 31, December 31,

                                                                              1998                    1997
                                                                           -----------             -----------
<S>                                                                       <C>                    <C>  
                                                                           (Unaudited)


Current assets:

  Cash                                                                    $    1,039,139         $      789,791
  Accounts receivable (net of allowance of $159,000 and $173,000)             12,019,343             11,314,417
  Other current assets                                                         1,980,753              1,429,181
                                                                          ---------------        ----------------
      Total current assets                                                    15,039,235             13,533,389
                                                                          ---------------        ----------------


Noncurrent assets:

  Equipment, at net book value                                                31,432,180             30,045,866
  Goodwill                                                                    31,525,523             30,706,028
  Other assets                                                                   774,381                769,522
                                                                          ---------------        ----------------
      Total noncurrent assets                                                 63,732,084             61,521,416
                                                                          ---------------        ----------------

      Total assets                                                        $   78,771,319         $   75,054,805

          LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:

  Current portion of long-term debt and capital leases                    $    9,178,119         $    8,176,975
  Accounts payable and accrued expenses                                        9,166,417              9,551,527
  Current portion of deferred taxes                                              582,548                582,548
  Net current liabilities of discontinued operations                             510,727                565,886
                                                                          --------------         ---------------
      Total current liabilities                                               19,437,811             18,876,936
                                                                          --------------         ---------------
Noncurrent liabilities:

  Long-term obligations under capital leases                                   8,512,532              8,026,808
  Long-term debt                                                              16,260,943             15,624,955
  Note payable to affiliate of Chairman                                        4,000,000              4,000,000
  Deferred taxes                                                               2,357,425              2,357,425
                                                                          --------------         ---------------
     Total noncurrent liabilities                                             31,130,900             30,009,188
                                                                          --------------         ---------------

     Total liabilities                                                        50,568,711             48,886,124
                                                                          --------------         ---------------
Redeemable common stock                                                        7,127,007              7,452,007
                                                                          --------------         ---------------
Non redeemable preferred stock, common stock
 and other shareholders' equity:
  Preferred stock, $.01 par value, 800,000 shares authorized                       -----                  -----
  Common Stock, $.01 par value, 30,000,000 shares
  authorized, 20,940,583 and 20,574,626 shares issued and outstanding            190,263                185,770
  Treasury stock                                                                 (75,000)                 -----
  Additional paid-in capital                                                  52,453,894             50,650,534
  Note receivable secured by stock                                              (891,167)              (675,000)
  Accumulated deficit                                                        (30,602,389)           (31,444,630)
                                                                          --------------         ---------------
      Total non redeemable preferred stock, common stock
       and other shareholders' equity                                         21,075,601             18,716,674

                                                                          ===============         ==============
      Total liabilities and shareholders' equity                          $   78,771,319          $  75,054,805
                                                                          ===============         ==============
</TABLE>


      See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>


                                              TRANSIT GROUP, INC.
                                     CONSOLIDATED STATEMENTS OF OPERATIONS
                                                  (Unaudited)



                                                                         Three Months Ended March 31,
                                                                    ---------------------------------------
                                                                                         
                                                                           1998                  1997

                                                                     ------------------   ------------------
<S>                                                                 <C>                  <C>   

Revenues and other income:
Freight and transportation revenue                                  $      25,932,740    $           -----
Other income                                                                  497,744                -----
                                                                 
                                                                    ------------------   ------------------
   Total revenues and other income                                         26,430,484                -----
                                                                    ------------------   ------------------

Operating Expenses:
Purchased transportation                                                    5,700,732                -----
Salaries, wages and benefits                                                5,598,544                -----
Fuel                                                                        2,019,748                -----
Operating supplies and expenses                                             8,778,156                -----
Insurance                                                                     525,946                -----
Depreciation and amortization expense                                       1,349,117                -----
General and administrative expense                                            711,084               93,408
                                                                   
                                                                    ------------------   ------------------
     Total operating expenses                                              24,683,327               93,408
                                                                    ------------------   ------------------

     Operating income (loss)                                                1,747,157              (93,408)
Interest expense                                                              804,659                -----
                                                                    ------------------   ------------------

Income (loss) from continuing operations
   before income taxes                                                        942,498              (93,408)
Income taxes attributable to continuing operations                            100,257                -----
                                                                    ------------------   ------------------
Income (loss) from continuing operations                                      842,241              (93,408)

  Loss from discontinued operations                                             -----           (2,435,422)
                                                                    ------------------   ------------------

  Net income (loss)                                                           842,241           (2,528,830)
Preferred stock dividend requirement                                            -----             (192,500)
                                                                    ------------------   ------------------

Income (loss) to common shareholders                                $         842,241    $      (2,721,330)
                                                                    ==================   ==================

Income (loss) per common share -- basic and diluted
  Continuing operations                                             $            0.04    $           (0.07)
  Loss from discontinued operations                                              0.00                (0.65)
                                                                    ------------------   ------------------

        Net income (loss) per basic and diluted common share        $            0.04    $           (0.72)
                                                                    ==================   ==================

Weighted average number of common shares
  outstanding - basic                                                      20,822,664            3,758,671
                                                                    ==================   ==================

Weighted average number of common shares
  outstanding - diluted                                                    22,061,261            3,758,671
                                                                    ==================   ==================
</TABLE>


         See accompanying notes to consolidated financial statements.

<PAGE>
<TABLE>
<CAPTION>

                                                 TRANSIT GROUP, INC.
                                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                     (Unaudited)
                                                                                    Three Months Ended March 31,
                                                                         ----------------------------------------------
                                                                                                  
                                                                                  1998                     1997
                                                                         ---------------------    ---------------------
<S>                                                                      <C>                      <C>  

Cash flows from operating activities:
  Income (loss) from continuing operations                               $            842,241     $            (93,408)
                                                                         ---------------------    ---------------------
    Adjustments  to  reconcile  income  (loss)  to cash  provided  by (used in)
      operating activities:
      Depreciation and amortization                                                 1,349,117                    -----
      Gain on sale of equipment                                                      (142,282)                   -----
    Changes in assets and liabilities:
      Increase in accounts receivable                                                (620,875)                   -----
      Increase in other assets                                                       (400,566)                 (93,527)
      (Decrease) increase in accounts payable and accrued expenses                   (907,785)                  48,166
      Other                                                                           (67,131)                   -----
                                                                         ---------------------    ---------------------
                                                                         
          Total adjustments                                                          (789,522)                 (45,361)
                                                                         ---------------------    ---------------------

          Net cash provided by (used in) continuing operations                         52,719                 (138,769)
          Net cash used in discontinued operations                                    (55,159)                (698,864)
                                                                         ---------------------    ---------------------

              Net cash provided by (used in) operating activities                      (2,440)                (837,633)
                                                                         ---------------------    ---------------------

Cash flows from investing activities:
  Business combinations                                                              (210,196)                   -----
  Proceeds from disposal of equipment                                                 843,510                    -----
  Purchase of equipment                                                              (188,606)                 (56,636)
                                                                         ---------------------    ---------------------

               Net cash provided by (used in) investing activities                    444,708                  (56,636)
                                                                         ---------------------    ---------------------

Cash flows from financing activities:
  Purchase of treasury stock                                                          (75,000)                   -----
  Repayment of capital lease obligations and long-term debt                        (3,237,851)                (567,864)
  Increase in borrowings                                                            3,119,931                2,086,900
  Decrease in bank overdraft                                                            -----                 (683,337)
                                                                         ---------------------    ---------------------

               Net cash (used in) provided by financing activities                   (192,920)                 835,699
                                                                         ---------------------    ---------------------

Increase in cash                                                                      249,348                  (58,570)
Cash, beginning of period                                                             789,791                    6,455
                                                                         ---------------------    ---------------------
Cash, end of period                                                      $          1,039,139     $              6,458
                                                                         =====================    =====================

Supplemental cash flow data
   Cash paid for interest                                                $            910,279     $              -----
                                                                         =====================    =====================

Business combinations
  Fair value of assets acquired                                          $          4,550,000     $              -----
  Fair Value of liabilities assumed                                                (2,800,000)                   -----
  Common stock issued                                                              (1,540,000)                   -----
                                                                         ---------------------    ---------------------
               Net cash payments                                         $            210,000     $              -----
                                                                         =====================    =====================
</TABLE>

             See accompanying  notes to consolidated  financial statements.

<PAGE>

<TABLE>
<CAPTION>


                              TRANSIT GROUP, INC.

                   CONSOLIDATED STATEMENT OF CHANGES IN TOTAL

                  NON REDEEMABLE PREFERRED STOCK, COMMON STOCK

                         AND OTHER SHAREHOLDERS' EQUITY

                                                                                                                        Total

                                     Common      Treasury       Additional     Note receivable     Accumulated      shareholders'

                                     stock         stock      paid-in capital  secured by stock      deficit            equity
                                    ---------    -----------  ---------------  ----------------    --------------   ---------------
<S>                                <C>         <C>            <C>              <C>               <C>               <C>

Balance at December 31, 1997       $  185,770  $       -----  $    50,650,534  $       (675,000) $    (31,444,630) $     18,716,674

Stock issued for acquisitions           3,660          -----        1,479,193             -----             -----         1,482,853

Stock subject to redemption               833        (75,000)         324,167             -----             -----           250,000

Accrued interest                        -----          -----            -----           (16,167)            -----           (16,167)

Note secured by stock                   -----          -----            -----          (200,000)            -----          (200,000)

Net income                              -----          -----            -----             -----           842,241           842,241

                                   =========== ============== ================ ================= ================= =================
Balance March 31, 1998             $  190,263  $     (75,000) $    52,453,894  $       (891,167) $    (30,602,389) $     21,075,601
                                   =========== ============== ================ ================= ================= =================
</TABLE>

        See accompanying notes to consolidated financial statements.

<PAGE>


                      TRANSIT GROUP, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


The information presented herein as of March 31, 1998, and for the three months
ended March 31, 1998 and 1997 is unaudited. The December 31, 1997 balance sheet
was  derived  from  audited  financial  statements,  but does not  include  all
disclosures required by generally accepted accounting principles.

1.  Basis of Presentation
The consolidated  balance sheet of Transit Group, Inc.  ("Transit Group" or the
"Company") as of March 31, 1998,  it's  consolidated  statements of operations,
and its consolidated statements of cash flows for the three month periods ended
March 31, 1998 and 1997 reflect the disposal of the parcel delivery and courier
operations and the acquisition of six truckload carriers (see Note 3).

These  financial  statements  include  the  consolidated  balance  sheets  of
the  Company  and it's  six  acquired subsidiaries,  Carolina  Pacific 
Distributors,  Inc.  ("Carolina  Pacific"),  Capitol  Warehouse,  Inc. 
("Capitol Warehouse"),  Service Express,  Inc. ("Service  Express"),  Carroll
Fulmer Group, Inc. ("Carroll Fulmer"),  Rainbow Trucking  ("Rainbow"),  and 
Transportation  Resource  Management  ("TRM")  at March 31,  1998 and the 
results  of operations and cash flows for the periods since acquisition:

Company                                           Date Acquired
------------------------                          -------------
Carolina Pacific                                  July 12, 1997
Capitol Warehouse                                 August 16, 1997
Service Express                                   August 16, 1997
Carroll Fulmer                                    August 30, 1997
Rainbow                                           December 30, 1997
TRM                                               January 30, 1998

The Company's  consolidated  statement of operations for the three month period
ended  March 31,  1997 and it's  consolidated  statement  of cash flows for the
three  month  period  ended  March 31,  1997 have been  restated to reflect the
disposal of the company's parcel delivery and courier operations.

2.  Summary of Significant Accounting Policies

Management's Representation

The accompanying interim  consolidated  financial statements have been prepared
by the Company in accordance and consistent with the accounting policies stated
in the  Company's  1997  Annual  Report on Form  10-KSB  and  should be read in
conjunction with the consolidated  financial  statements  appearing therein. In
the opinion of management, all adjustments necessary for a fair presentation of
such  consolidated  financial  statements are reflected in the interim  periods
presented.  The  consolidated  financial  statements for the three months ended
March 31, 1997 have been restated in accordance  with APB No. 30 to reflect the
Company's  decision to dispose of the courier and package delivery  operations.
Interim results are not necessarily indicative of results for a full year.

The consolidated  financial  statements and notes are presented as permitted by
Form  10-QSB and do not  contain  certain  information  included  in the annual
consolidated financial statements and notes of Transit Group.

3.  Business Combinations

The Company  acquired  five  truckload  carriers in 1997 and one company in the
first quarter of 1998. On January 30, 1998 the company  acquired TRM a regional
truckload carrier located in Fort Wayne, Indiana. TRM operates approximately 50
tractors  and 90 trailers  with the bulk of their  business  concentrated  in a
seven state area surrounding Indiana.

In connection with this  acquisition,  the Company paid $.2 million in cash and
issued  approximately  366,000 shares of common stock.  The TRM  acquisition as
well as the  previous  five  acquisitions  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.  The purchase price has
been  preliminarily  allocated to the assets acquired and  liabilities  assumed
based on their  estimated  fair market  value at the date of  acquisition.  The
purchase  price of the  respective  companies  exceeded  the fair  value of net
assets acquired by approximately  $32.0 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 three month periods
ended March 31, 1998 and 1997 account for the six acquisitions and the disposal
of the Company's parcel delivery and courier operations as if they had occurred
on January 1, 1998 and 1997, respectively. The pro forma results give effect to
the  amortization of goodwill,  the effects of additional  interest expense and
certain other adjustments.
<TABLE>
<CAPTION>

                                 Unaudited Pro Forma Combined Results of Operations
                                         For the Three Months Ended March 31

                                                                              1998                        1997
                                                                              ----                        ----
<S>                                                                   <C>                       <C>  

      Revenues                                                        $      26,843,000         $      29,948,000
                                                                      =====================     ======================

      Income from continuing operations
      available to common shareholders                                $         842,000         $          83,000
                                                                      =====================     ======================

      Income per basic common share                                   $             .04         $             .01
                                                                      =====================     ======================

      Income per diluted common share                                 $             .04         $             .01
                                                                      =====================     ======================

      Weighted average number of basic common
      shares outstanding                                                     20,940,583                13,204,474
                                                                      =====================     ======================

      Weighted average number of diluted  common
      shares outstanding                                                     22,179,180                14,049,416
                                                                      =====================     ======================
</TABLE>
<PAGE>

The above pro forma  statements do not necessarily  purport to be indicative of
the results of operations  which would have occurred had the  acquisition  been
made on January 1, 1998 or 1997, nor are they indicative of future results.

4.  Income Taxes

At March 31, 1998, the Company has approximately $30.1 million 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,
except for those net operating loss  carryforwards  which can be offset against
current income,  because management believes the Company's history of operating
losses  diminishes the Company's  immediate  ability to  demonstrate  that more
likely than not, the future benefits will be realized. Accordingly, the Company
has provided a valuation allowance of $12.2 million against those net operating
loss  carryforwards.  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.

The  difference   between  the  provision  for  income  taxes  attributable  to
continuing  operations  and the amount that would be expected using the Federal
statutory  income  tax of 34% is  related  to the  reduction  in the  valuation
allowance due to the generation of taxable income in the current period as well
as certain nondeductible expenses.

5.  Subsequent Events

In May 1998,  the  Company  acquired  Certified  Transport,  Inc.  and  Venture
Logistics  ("Certified")  a privately held short to medium haul dry van carrier
based in Indianapolis,  Indiana. TGI issued  approximately  1,072,000 shares of
its common  stock in addition to a cash  payment of  $1,500,000  for all of the
common stock of Certified.

Also in May 1998, the Company announced that it had executed a letter of intent
to acquire Network Transport,  Inc., a privately held trucking company based in
Toronto, Canada.
<PAGE>
The  business  combinations  described  above will be  accounted  for under the
purchase method of accounting.  Assets acquired and liabilities assumed will be
recorded at fair market value.  The purchase price of the respective  companies
is expected to exceed their fair value of net assets acquired by  approximately
$2 million, which will be amortized on a straight-line basis over 40 years. The
following unaudited pro forma consolidated results of operations of the Company
for the three  month  periods  ended  March 31,  1998 and 1997  account for the
Company's five 1997  acquisitions,  the  acquisition of TRM, the acquisition of
Certified, the proposed acquisition of Network Transport, Inc. and the disposal
of the Company's parcel delivery and courier operations as if they had occurred
on January 1, 1998 and 1997, 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 Combined Results of Operations
                                        For the Three Months Ended March 31,

                                                                              1998                        1997
      <S>                                                             <C>                       <C>  
                                                                               ----                        ----

      Revenues                                                        $      33,762,000         $      36,633,000
                                                                      =====================     ======================

      Income from continuing operations
      available to common shareholders                                $       1,219,000         $         384,000
                                                                      =====================     ======================

      Income per basic common share                                   $             .05         $             .03
                                                                      =====================     ======================

      Income per diluted common share                                 $             .05         $             .03
                                                                      =====================     ======================

      Weighted average number of basic common
      shares outstanding                                                     22,203,749                14,467,639
                                                                      =====================     ======================

      Weighted average number of diluted  common
      shares outstanding                                                     23,442,346                15,312,581
                                                                      =====================     ======================
</TABLE>

The above pro forma  statements do not necessarily  purport to be indicative of
the results of operations  which would have occurred had the  acquisition  been
made on January 1, 1998 or 1997, nor are they indicative of future results.

<PAGE>


                      TRANSIT GROUP, INC. AND SUBSIDIARIES
                Item 2. Management's Discussion and Analysis or
                               Plan of Operation

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 or Plan of  Operation
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 growth 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.

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 has incurred  substantial  operating  losses and cash flow deficits
since  inception.  From  September 1985 through March 31, 1998, the Company had
accumulated  a deficit  from  operating  losses of $29.3  million  and has paid
dividends  on its  preferred  stock  of  approximately  $1.3  million  and  has
purchased treasury stock of $.1 million.  As of March 31, 1998, the Company had
raised $59.8 million, net of notes receivable secured by stock in the amount of
$.9 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 the six truckload  carriers.
As a result of equity  placements,  dividends on preferred stock and cumulative
losses,  shareholders'  equity as of March 31,  1998,  was $21.1  million,  and
common stock issued subject to put arrangements was $7.1 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 aggregated  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  $.9 million of stock was purchased by
third  parties and $75,000 was  redeemed by the Company,  thereby  reducing the
Company's obligation to $7.1 million. In April 1998 an additional $1.45 million
of stock was purchased by third parties thereby  reducing the obligation  under
redemption  rights to $5.67 million.  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 operating
performance and cash flows through the following measures:

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

Acquiring  Profitable Trucking  Operations.  The Company has reorganized into a
"holding company" 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 has completed the acquisition of six
companies  at March 31,  1998 and  acquired  a seventh  company  in the  second
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 borrowed, $2.6 million was assumed by
the purchaser of the parcel delivery and courier operations,  leaving a balance
of $4 million at March 31, 1998.

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, Carolina Pacific, and TRM an
asset based line of credit secured by accounts receivable.
<PAGE>

Financial Condition

As of June 30,  1997,  the  Company  treated  its parcel  delivery  and courier
business 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 - Three months ended March 31, 1998

The Company  discontinued  its parcel delivery 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 five  additional
companies.

The  following  table  sets  forth  items  in  the  Consolidated  Statement  of
Operations  for the three  months  ended  March  31,  1998 as a  percentage  of
operating  revenue.  Because all truckload  operations were acquired during the
second  half of 1997  and in the  first  quarter  of  1998,  the  table  is not
comparative to an earlier period.


                                                   Percentage of
                                                 Operating Revenues
 Revenues and other income                              100.0%
                                                      ----------

 Operating expenses
  Purchased transportation                               21.6
  Salaries, wages and benefits                           21.2
  Fuel                                                    7.6
  Operating supplies and expenses                        33.2
  Insurance                                               2.0
  Depreciation and amortization expense                   5.1
  General and administrative expense                      2.7
                                                       ----------
     Total operating expenses                            93.4
                                                       ----------

     Operating income                                     6.6
 Interest expense                                         3.0
                                                       ----------

     Income from continuing operations
      Before income taxes                                 3.6
 Income taxes attributable to continuing
  Operations                                              0.4
                                                       ----------

 Income from continuing operations                        3.2%
                                                       ==========
<PAGE>
The Company  incurred  corporate  administration  expenses for the three months
ended March 31, 1998 of approximately $0.7 million as compared to approximately
$93,000  for the  three  months  ended  March 31,  1997.  These  increases  are
attributable to  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 $5.1 million for the
three months ended March 31, 1997.


Year 2000

The Company  operates two primary  software  applications:  its  accounting and
financial  reporting  systems and its integrated  dispatch and billing systems.
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
vendors of the Company's  integrated  dispatch and billing systems have 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  agreements.  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.
<PAGE>
                      TRANSIT GROUP, INC. AND SUBSIDIARIES
                          Part II - Other Information

Item 1 - Legal Proceedings

         Not applicable

Item 2 - Changes in Securities and Use of Proceeds

         Not applicable

Item 3 - Defaults on Senior Securities

         Not applicable

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

         Not applicable

Item 5 - Other Information

         Not applicable

Item 6 - Exhibits and Reports on Form 8-K

   (a)   Exhibits

           Exhibit 3 - Articles of Incorporation and Bylaws

          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).

          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).
<PAGE>

          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).

          Exhibit 4 - Instruments defining the Rights of Security Holders

          4.1        Specimen Stock Certificate (incorporated by reference from
                     Exhibit 4.1 to the 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 Agreement 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  Form  8-K,   Registration   No.
                     33-30123A).

          Exhibit 10 - Material Contracts

          10.1       Incentive Stock Option Plan (incorporated by referencefrom
                     Exhibit 10.2 to Registrant's Form S-18, Registration No. 
                     33-30123A).

          10.2       Lease Agreement governing the Company's terminal in
                     Columbia, South Carolina 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).

          10.5       Lease Agreement governing the Company's terminal in 
                     Charleston, South Carolina dated July 9, 1996 between th
                     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       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).

          10.8       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).

          10.9       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).

          10.10      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).
<PAGE>

          10.11      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.

          10.12      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).

          10.13      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).

          10.14      Advised Revolving Line of Credit Agreement dated as
                     of December  18,  1997,  as amended by Amendment to
                     Advised Revolving Line of Credit Agreement dated as
                     of January  14,  1998,  by and among the  Lender, 
                     the Co-Borrowers  and the Registrant (incorporated 
                     by reference  from Exhibit 99.1 to  Registrant's 
                     Form 8-K dated March 16, 1998).

          10.15      Revolving Credit Note dated as of December 18,1997,
                     by  and  among  the  Lender  and  the  Co-Borrowers
                     (incorporated  by  reference  from  Exhibit 99.2 to
                     Registrant's Form 8-K dated March 16, 1998).

          10.16      Security Agreement dated as of December 18, 1997, by and
                     among the Lender and the Co-Borrowers (incorporated by
                     reference from Exhibit 99.3 to Registrant's Form 8-K dated
                     March 16, 1998).

          10.17      Joinder to Advised Revolving Line of Credit Agreement and 
                     Joinder to Security Agreement dated as of January 14, 1998
                     by Rainbow Trucking Services, Inc. (incorporated by 
                     reference from Exhibit 99.4 to Registrant's Form 8-K dated
                     March 16, 1998).

<PAGE>

          11.1       Statement Regarding Computation of Earnings per Share.

  (b) The Company  filed the following  Current  Reports on Form 8-K during the 
      first quarter of 1998:

         (i)      A report on Form 8-K dated December 30, 1997, filed on 
                  January 13, 1998 reporting the closing of the acquisition of
                  Rainbow Trucking Services, Inc., the acquisition of Hawks 
                  Enterprises, Inc. and the acquisition of T.W. Transport, Inc.;

         (ii)     A report  on Form  8-K  dated  December  18,  1997,  filed on
                  February 10, 1998  reporting  that the Company and certain of
                  its  subsidiaries  entered into an Advised  Revolving Line of
                  Credit Agreement with the AmSouth for a revolver/term  credit
                  facility of up to $20 million; and

         (iii)    A report on Form 8-K/A  dated  December  31,  1997,  filed on
                  March 16, 1998,  reporting that the Company's  management has
                  determined  that the acquisition of Rainbow  Trucking,  Hawks
                  Enterprises  and  T.W.   Transport  were  not  material  and,
                  therefore,  certain financial statements were not required to
                  be filed.
Signature

Pursuant  to the  requirements  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.

Date: May 14, 1998

                                           By:   /s/Wayne N. Nellums
                                                 -------------------
                                                    Wayne N. Nellums
                                                    Vice President,
                                                    Chief Financial Officer
                                                    and Secretary