<PAGE>

                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K
                                   ---------



   (x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
       ACT OF 1934

                    For the fiscal year ended June 30, 2000

   ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       EXCHANGE ACT OF 1934

            For the transition period from __________ to __________

                          Commission File No.: 0-5206

                        EMONS TRANSPORTATION GROUP, INC.
             (Exact name of registrant as specified in its charter)

     Delaware                                                  23-2441662
     --------------------------------------------------------------------
     (State of incorporation)     (I.R.S. employer identification number)

            96 South George Street, York, PA                 17401
            ------------------------------------------------------
            (Address of principal executive offices)    (Zip Code)


      Registrant's telephone number, including area code: (717) 771-1700

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

                                     None

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

                         Common Stock, $.01 Par Value
     $.14 Series A Cumulative Convertible Preferred Stock, $.01 Par Value

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (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 ___
                                   ---

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]

As of September 8, 2000, 7,145,342 shares of voting Common Stock were
outstanding including 1,924,902 shares held by an escrow agent. For information
regarding the escrow agent, see "Industries' Reorganization" below. The
aggregate market value of shares of voting Common Stock held by nonaffiliates of
the registrant as of September 8, 2000 was $10,453,303. For this purpose the
average of the closing bid and asked prices ($1.66 per share), as of September
8, 2000, has been used.

Portions of the definitive proxy statement for the annual meeting of
stockholders to be held on November 16, 2000 are incorporated by reference into
Part III of this Form 10-K.
<PAGE>

     This Form 10-K contains certain "forward-looking" statements regarding
future events and the future performance of Emons Transportation Group, Inc.
that involve risks and uncertainties that could cause actual results to differ
materially. Those risks and uncertainties include, but are not limited to,
economic conditions, customer demand, service of connecting Class I rail
carriers, increased competition in the relevant market, government regulation,
and other factors described herein and in other filings with the Securities and
Exchange Commission that could cause the Company's results to differ from its
current expectations.

                                    Part I

Item 1.  Business

     Emons Transportation Group, Inc. ("Emons Transportation Group"), a Delaware
corporation headquartered in York, Pennsylvania, is a rail freight
transportation and distribution services company serving the Mid-Atlantic and
Northeast regions of the United States and Quebec, Canada. The Company owns four
short line railroads, operates rail/truck transload facilities and a rail
intermodal terminal, and provides customers with logistics services for the
movement and storage of freight. Emons Transportation Group was organized in
December 1986, and is the owner of all of the outstanding capital stock of Emons
Industries, Inc. ("Industries"), Emons Finance Corp. ("EFC"), Emons Logistics
Services, Inc. ("ELS"), Maine Intermodal Transportation, Inc. ("MIT") and Emons
Railroad Group, Inc. ("ERG"), which owns all of the outstanding capital stock of
the St. Lawrence & Atlantic Railroad Company ("SLR"), the St. Lawrence &
Atlantic Railroad (Quebec) Inc. ("SLQ"), York Railway Company ("YRC"), and Penn
Eastern Rail Lines, Inc. ("PRL"). SLR owns all of the outstanding capital stock
of SLR Leasing Corp. ("SLRL"), and YRC owns all of the outstanding capital stock
of the Maryland and Pennsylvania Railroad, LLC ("MPA LLC") and Yorkrail, LLC
("YKR LLC"). Prior to the formation of Emons Transportation Group in December
1986, Industries, which was formed in 1955, was the parent company. For
information regarding the formation of Emons Transportation Group, see
"Industries' Reorganization" below.

     Unless the context otherwise requires, the terms "Emons" and the "Company"
when used herein shall refer to Emons Transportation Group, Inc. and its
consolidated subsidiaries. The Company's executive offices are located at 96
South George Street, York, Pennsylvania 17401 (Telephone 717-771-1700).

     Description of Operations

     The Company owns and operates four short line railroads which accounted for
96%, 94% and 91% of the Company's total operating revenues in fiscal 2000, 1999
and 1998, respectively. The Company operates a rail intermodal terminal in
Auburn, Maine which provides its customers in New England with access to the
global marketplace by transporting their freight by rail, for further transport
by steamship or truck. The Company's logistics services business in York,
Pennsylvania provides its customers with rail/truck transfer, warehousing and
other distribution services. The Company's intermodal and logistics operations
are intended to increase rail traffic by providing a wide variety of services to
businesses located both on and off the Company's rail lines.

     The Company operates in two geographic regions, New England/Quebec, which
accounted for approximately 76% of the Company's fiscal 2000 operating revenues,
and Pennsylvania, which accounted for the remaining 24% of the Company's fiscal
2000 operating revenues. New England/Quebec operations consist of SLR, which
extends from Portland, Maine, through New Hampshire to the international border
at Norton, Vermont, SLQ, which commenced operations on December 1, 1998 and
which connects with SLR at the international border and with the Canadian
National Railway ("CN") at Ste. Rosalie, Quebec, and MIT, which commenced rail
intermodal operations on SLR in Auburn, Maine in September 1994. Pennsylvania
operations consist of YRC, PRL and ELS, which are located in south-central and
southeastern Pennsylvania. Local management teams are responsible for the
operations in each region.

     The Company's three largest rail operations, SLR, SLQ, and YRC all have
connections, directly or indirectly, with multiple Class I Railroads, which are
classified by the U.S. Code of Federal Regulations as railroad carriers having
annual revenues of approximately $258.5 million (1999 dollars) or more ("Class I

                                       2
<PAGE>

Railroads"). The Company's right to interchange rail traffic with Class I
Railroads is based upon applicable federal regulations. Multiple Class I
connections make the Company's railroads ideal places for industry to locate and
build new facilities because of competitive service and pricing from the
competing Class I Railroad connecting carriers. In addition, as discussed
further below, the acquisition of the Illinois Central Railroad ("IC") by CN,
and the split-up of Consolidated Rail Corporation ("Conrail") by the Norfolk
Southern Railroad ("NS") and CSXT Corporation ("CSXT"), provide the Company's
railroad operations with additional long-term opportunities. The consolidation
of these railroads will open up new markets for the Company's customers as a
result of single-line rail service to more regions by these merged Class I
Railroads. Single line service is generally more efficient than service through
multiple carriers for two primary reasons. First, single-line access generally
provides for shorter transit times since railcars do not have to be interchanged
with other rail carriers. Second, single-line service is generally more cost
effective since only one railroad handles the traffic and receives revenues for
providing rail services.

     On July 1, 1999, CN completed the acquisition of IC. The merger provides CN
with a single "Y" shaped network connecting the Pacific and Atlantic coasts in
Canada, and the U.S. Gulf coast in New Orleans, with the joining of the
railroads in Chicago. The merger provides CN with access to five major ports,
including Halifax, Montreal, Vancouver, New Orleans, and Mobile. Prior to the
merger, SLR and SLQ could access most markets in the midwest and south only
through multiple carriers. In addition, in April 1998, CN entered into a 15-year
marketing agreement with the Kansas City Southern Railway ("KCSR") which
provides access to key southern and southwestern markets, and access to Mexico's
largest rail system through KCSR's affiliate, the Texas Mexican Railway. To
date, SLR and SLQ have generated new business as a result of opportunities
created by this merger. While the total impact of this merger on future traffic
patterns and the resultant effect on the Company's railroad operations are
uncertain, the Company believes that the merger of CN and IC, and the marketing
agreement with KCSR, will provide SLR and SLQ with single-line access to many
points in the midwest and south, and that the combination of single-line access
to KCSR (and its affiliates) and the marketing agreement between CN and KCSR
should provide SLR and SLQ with more cost competitive service and shorter
transit time access to Mexico which may open up commercial opportunities for SLR
and SLQ in Mexico.

     On June 1, 1999, the split-up of Conrail was completed and CSXT and NS
commenced operations of their respective portions of Conrail. All of the
Company's prior interchanges with Conrail were acquired by NS. As a result, YRC
maintained dual connections with Class I Railroads subsequent to the merger, and
also obtained commercial access to a third Class I Railroad, Canadian Pacific
Railway ("CP"), through a connection via NS from Harrisburg, Pennsylvania. In
addition, one of PRL's rail lines in Bristol, Pennsylvania, also obtained dual
access to NS and CSXT as a result of the merger, which it did not have
previously. The Company has experienced reductions in business levels as a
result of service disruptions caused by CSXT's and NS's implementation of the
merger. However, service on CSXT and NS has shown signs of improvement and the
Company hopes to regain lost business and take advantage of its access to CP.
While the Company cannot predict what the total impact of such service
disruptions may have on its results of operations, the Company believes that, on
a long-term basis, the merger will create additional rail business for its
Pennsylvania rail operations as a result of longer Class I single-line rail
service on competitive routes.

                              New England/Quebec
                              ------------------

     St. Lawrence & Atlantic Railroad Company - SLR owns and operates
     ----------------------------------------
approximately 165 miles of main line track and related properties between
Portland, Maine and Norton, Vermont. SLR serves approximately 50 customers,
including 32 customers located directly on line. SLR primarily serves customers
in the paper, construction, agricultural, energy, warehousing and distribution
industries. SLR's two largest customers, Pulp & Paper of America LLC and New
England Public Warehouse, accounted for approximately 17% and 16% of SLR's
operating revenues in fiscal 2000, respectively. SLR interchanges rail traffic
with its affiliate, SLQ, at Island Pond, Vermont, Guilford Rail Systems at
Danville Junction, Maine and the New Hampshire Central Railroad at North
Stratford, New Hampshire.

     In November 1997, SLR entered into agreements to lease and operate all of
the track and property owned by the Berlin Mills Railway Company ("BMS"), which
is owned by Pulp & Paper of America LLC, and on November 4, 1997 commenced
operations. BMS consists of approximately 11 miles of track

                                       3
<PAGE>

connecting to SLR, and serves two pulp and paper mills in Berlin and Gorham, New
Hampshire. The lease agreement includes an initial lease term of ten years and a
five-year renewal option.

     On December 29, 1997, SLR acquired approximately one mile of track from the
New Hampshire and Vermont Railroad Company in Groveton, New Hampshire, and
commenced operations on this section of track on December 30, 1997. The one mile
of track connects with SLR's existing rail operations in Groveton and provides
SLR with strategic direct access to two customers.

     St. Lawrence & Atlantic Railroad (Quebec) Inc. - On December 21, 1998, SLQ
     ----------------------------------------------
acquired, in an Asset Purchase Agreement, a 94-mile rail line in Quebec, Canada
(the "Sherbrooke Line") from CN. The Sherbrooke Line connects with CN's Halifax-
to-Montreal main line at Ste. Rosalie, Quebec, and SLR at the Quebec/Vermont
international border. SLQ commenced operations on December 1, 1998 under an
interim operating agreement. In addition to delivering overhead traffic between
CN and SLR, SLQ serves 17 customers, including 9 customers located directly on
line. SLQ primarily serves customers in the paper, construction, agricultural
and chemical industries. Services performed for CN accounted for 20% of SLQ's
operating revenues in fiscal 2000, while SLQ's largest customer, EKA Chemicals
North America, a chemical manufacturer, accounted for approximately 11% of SLQ's
operating revenues in fiscal 2000. SLQ interchanges rail traffic with CN at
Richmond, Quebec, SLR at Island Pond, Vermont, and the Canadian American
Railroad at Sherbrooke, Quebec.

     Maine Intermodal Transportation, Inc. - The MIT rail intermodal terminal
     -------------------------------------
located on SLR in Auburn, Maine commenced operations in September 1994. The 42-
acre terminal currently includes 16 developed acres, with the remainder
available for expansion, three double-ended working tracks for loading,
unloading and storage of intermodal railcars, lighted parking for trailers and
containers, a gate house, a truck scale, a trailer/container maintenance
facility and various other improvements. SLR and SLQ, in combination with CN,
offer the only hi-cube, double stack, cleared route in northern New England for
intermodal trains, and provide MIT with access to CN's Vancouver, Montreal,
Halifax, New Orleans and Mobile ports. Through coordinated train service among
CN, SLR and SLQ, MIT currently provides premium rail intermodal service which
includes third morning service between Auburn and Chicago. Service is also
provided to and from points in Canada by CN and throughout North America by
other connecting rail carriers at Chicago and Detroit. In October 1999, MIT
handled its first international steamship container and is continuing to
actively pursue this business. The Company believes that this operation will be
an important factor in the growth and development of SLR and SLQ by providing
additional business volume to its rail operations.

     MIT is currently in the process of expanding its terminal to 35 acres to
handle the growth of this business. The anticipated $1 million expansion is
expected to be funded 50% with a federal grant through the state of Maine and
the remaining 50% by the city of Auburn.

     The City of Auburn owns the terminal and leases it to MIT under a long-term
lease arrangement which includes an initial term of 20 years, three 10-year
renewal options, and a purchase option after the third renewal. MIT's terminal
operations are conducted by an independent contractor, In-Terminal Services (a
subsidiary of Mi-Jack Products), which currently operates intermodal terminals
throughout North America.

                                 Pennsylvania
                                 ------------

     York Railway Company - On December 1, 1999, the Company merged the
     --------------------
operations of its two railroad subsidiaries located in the York, Pennsylvania
area, the Maryland and Pennsylvania Railroad Company and Yorkrail, Inc. into a
new company, York Railway Company. YRC owns and operates 40 miles of main line
track and related properties. There are approximately 45 active customers that
utilize YRC's service for in-bound and/or out-bound shipments of freight,
including 32 customers located directly on line. YRC primarily serves customers
in the paper, agricultural, building products and distribution industries. YRC's
largest customer, P. H. Glatfelter Company, a paper manufacturer, accounted for
approximately 26% of YRC's operating revenues in fiscal 2000. YRC currently
interchanges rail traffic with NS at York and West York, Pennsylvania, and CSXT
at Porters Sidling and Hanover, Pennsylvania. In addition, CP negotiated
commercial access to YRC through a connection via NS from Harrisburg,
Pennsylvania in connection with the split-up of Conrail between NS and CSXT.

                                       4
<PAGE>

     Penn Eastern Rail Lines, Inc. - On December 30, 1997, PRL acquired
     -----------------------------
substantially all of the assets and leases of four railroad operations, eight
locomotives, and track equipment from an individual owner and operator (the
"Seller"), and commenced operations on December 31, 1997. The rail operations
consist of seven individual rail lines aggregating approximately 44 miles of
track located in various areas of southeastern Pennsylvania, including two lines
owned by the Seller and five leased lines. PRL serves 14 active customers which
are located directly on line. PRL serves customers in the printing, food grade,
agricultural, steel, energy, scrap and consumer products industries. PRL's
largest customer, Brown Printing, accounted for approximately 28% of PRL's
fiscal 2000 operating revenues. Each of PRL's seven rail lines currently
interchanges rail traffic with NS at various locations in southeastern
Pennsylvania. In addition, PRL's rail line in Bristol, Pennsylvania obtained
access to CSXT in connection with the split-up of Conrail between NS and CSXT.

     In August 1999, PRL received notice from the owner of four of the leased
lines of its intention to offer these lines for sale. On January 28, 2000, PRL
submitted a proposal to exercise its right of first refusal to purchase two of
the four leased lines and purchased these lines in August 2000 for an aggregate
consideration of $691,000. In addition, PRL submitted a bid and is currently
awaiting a response to purchase one additional line, and has elected not to
purchase the fourth line. The Company believes that the loss of business from
these remaining two leased lines, in the event of a sale to a third party, will
not have a material impact on its results of operations.

     Emons Logistics Services, Inc. - ELS offers logistics services, including
     ------------------------------
rail/truck transfer, storage and other services, for customers in the Mid-
Atlantic region at its facilities in York, Pennsylvania. ELS currently operates
two facilities located on YRC, a bulk terminal facility at Lincoln Yard in West
York, Pennsylvania and a 15,000 square foot rail/truck transfer and short-term
storage warehouse located in downtown York, Pennsylvania. These facilities allow
companies that are not located on a rail line, including manufacturers and users
of dry/liquid bulk commodities, lumber and other building products, canned goods
and packaged consumer products, to take advantage of favorable rail economics
for the long-haul shipment of their products combined with local truck delivery.
ELS provides short-term storage and various value-added services, such as
rail/truck transfer and truck brokering services for its customers. These
operations generate revenues for the Company both for the logistics services
performed and for the movement of freight by rail. The Company believes that
these operations are important to the growth of the railroad operations in
south-central Pennsylvania since they enable customers who are not located
directly on line to utilize rail transportation. ELS' largest customer,
Interstate Commodities, a grain and feed ingredient company, accounted for 26%
of ELS' fiscal 2000 operating revenues.

     The Company's most significant logistics operations are located at Lincoln
Yard, which consists of approximately 25 acres. During fiscal 2000, ELS had
essentially completed the construction of a new, state-of-the-art bulk transfer
facility on this property which cost approximately $1.26 million, including
$747,000 of which was funded by a grant from the state of Pennsylvania. This
facility includes approximately 70 railcar spots, paving, lighting, fencing, and
a 70 foot truck scale. The Company believes that its access to three Class I
Railroads in York will make this an attractive transload facility, and is
currently actively marketing the services offered at this terminal.

     Significant Customers

     One customer, New England Public Warehouse located on SLR, accounted for
approximately 10% of the Company's fiscal 2000 consolidated operating revenues.

     Employees

     At June 30, 2000, the Company employed a total of 174 persons, 118 of which
were represented by various labor organizations. The Company has labor
agreements with unions which represent certain YRC, SLR and SLQ non-management
employees. Currently, YRC unionized employees are covered by collective
bargaining agreements which expire in December 2000 and December 2004, and SLQ
unionized employees are covered by collective bargaining agreements which expire
in November and December 2002. All SLR collective bargaining agreements expired
in May 2000, and the Company is currently in negotiations with SLR union
representatives. Employees of the remainder of the Company's

                                       5
<PAGE>

operations are not represented by labor organizations. The Company has not
experienced any work stoppages and considers its employee relations to be
satisfactory.

     Regulation

     The Company's U.S. rail subsidiaries are subject to the regulatory
jurisdiction of the Surface Transportation Board ("STB"), a federal agency that
is the successor to the Interstate Commerce Commission.  The STB has
jurisdiction over, among other things, the rates charged, the issuance of
securities and the extension or abandonment of rail lines, routes or service by
common carriers, and the consolidation, merger and acquisition of control of and
by such carriers.  The Company's U.S. rail subsidiaries are also subject to
regulation by the Federal Railroad Administration as to safety requirements and
operating practices, and are subject to regulations by the governmental
authorities of Pennsylvania, Maine, Vermont and New Hampshire.

     The Company's Canadian rail subsidiary is subject to the regulatory
jurisdiction of the Canadian Transportation Agency ("CTA"), a Canadian federal
agency.  The CTA is responsible for the economic regulation of transportation
under federal jurisdiction and for the protection of consumers and carriers
through the administration of, among other things, rail certificates of fitness.
The Company's Canadian rail subsidiary is also subject to regulation by
Transport Canada as to safety requirements.

     The Company does not believe that compliance with U.S. or Canadian,
federal, state, provincial and local environmental regulations has or will have
a material effect upon capital expenditures, competitive position, or earnings
of the Company. The Company did not make any material investment in capital
expenditures for environmental control facilities during fiscal 2000 and does
not anticipate making any such expenditures in fiscal 2001.

     Competition

     For customers located directly on line, which constitute the majority of
the Company's freight business, the Company's railroads are the only rail
carriers directly serving their respective customers. The Company's rail
operations in New England and Quebec also include a significant portion of
overhead traffic which is subject to competition from alternative rail routes.
All of the Company's railroads experience significant competition from other
modes of freight transportation, particularly highway motor carriers. Factors
such as the nature of the commodity transported, freight rates, distance,
transit time, quality and reliability of service, and market conditions are
considered in determining the mode of transportation utilized. The Company's
ability to compete in these areas is, to a large extent, dependent upon the
performance of its connecting rail carriers.

     Capital Transactions

     On April 23, 1999, the Board of Directors of the Company voted to adopt a
Stockholder Rights Plan and declared a dividend distribution of one Right for
each outstanding share of Common Stock of the Company to stockholders of record
on May 10, 1999. Each Right entitles the registered holder to purchase one or
more shares of the Company's Common Stock in accordance with the terms of the
Rights Agreement. The Rights expire on May 10, 2009. Under the Stockholder
Rights Plan, the Rights become exercisable only if a person or group acquires
15% or more of the Company's Common Stock, or commences a tender or exchange
offer which, if consummated, would result in that person or group owning at
least 15% of the Common Stock. If the Rights become exercisable, all holders of
Rights (other than the acquirer) will be entitled to purchase, by paying the
$10.00 per share exercise price, shares of the Company's Common Stock, or common
stock equivalents, at a 50% discount from the then current market price. If the
Company is subsequently acquired in a merger or other business combination
transaction, all holders of unexercised Rights (other than the acquirer) will
then be entitled to purchase common stock of the acquiring company on a similar
basis. In addition, at any time after a 15% position is acquired, the Board of
Directors may, at its option, require each outstanding Right (other than Rights
held by the acquiring person or group) to be exchanged for one share of the
Company's Common Stock, or one common stock equivalent. The Company may redeem
the Rights at $.001 per Right at any time prior to the time that a person or
group has acquired 15% or more of its Common Stock. The Rights do not have
voting or dividend rights and, until they become exercisable, have no dilutive
effect on the earnings of the Company.

                                       6
<PAGE>

     At a Special Meeting of the Stockholders of the Company held on June 29,
1999, the shareholders voted to approve the merger of ETG Merger Corporation
into Emons Transportation Group, Inc. (the "Merger"), resulting in the exchange
of each share of the Company's outstanding $0.14 Series A Cumulative Convertible
Preferred Stock into 1.1 shares of the Company's Common Stock. As a result of
the Merger, the Company converted 1,485,543 shares of its Convertible Preferred
Stock into 1,633,788 shares of Common Stock. This represents an inducement
premium of 296,799 shares of Common Stock in excess of the .9 conversion rate
offered under the original terms of the Convertible Preferred Stock. Dividends
in arrears that were eliminated as a result of the Merger aggregated
approximately $1,768,000 as of June 29, 1999.

     In addition, at the June 29, 1999 Special Meeting of the Stockholders, the
shareholders of the Company also voted to increase the number of shares of the
Company's authorized Common Stock from 15,000,000 shares to 30,000,000 shares,
and voted not to increase the number of shares of the Company's authorized
Preferred Stock from 3,000,000 shares to 10,000,000 shares.

     The Company's Board of Directors authorized a stock repurchase program for
the Company's Common Stock up to an aggregate price of $2 million. As of June
30, 2000, the Company had repurchased a total of 639,450 shares of its Common
Stock for $1,024,000, of which 610,450 shares were held in treasury and 29,000
shares were retired. In addition, in June 2000, the Company paid $20,000 to
retire warrants to purchase 50,000 shares of Common Stock at an exercise price
of $1.125 per share which were due to expire in July 2000. Between July 1, 2000
and August 31, 2000, the Company repurchased an additional 85,500 shares of
Common Stock for $136,000 and as of August 31, 2000 had approximately $820,000
authorized to repurchase additional shares of Common Stock.

     Industries' Reorganization

     Prior to 1986, the Company provided management, leasing and brokerage
services for rail transportation equipment. In response to a severe decline in
the boxcar leasing business, in March 1984 Emons Industries, Inc. ("Industries")
filed a petition for reorganization under Chapter 11 of the United States
Bankruptcy Code. In December 1986, the Bankruptcy Court for the Southern
District of New York (the "Bankruptcy Court") confirmed Industries'
Reorganization Plan (the "Plan") and Emons Transportation Group, Inc. became the
parent of Industries and the Maryland and Pennsylvania Railroad.

     Under the Plan, each unsecured creditor received an initial distribution of
cash, Common Stock and Senior Preferred Stock for its claim. Since numerous
disputed claims remained at the time of consummation of the Plan, an escrow
agent, appointed in connection with the Plan, was instructed to distribute
additional amounts of cash and securities to holders of allowed claims on a
quarterly basis in each quarter that disputed claims are reduced by litigation
or settlement. The Bankruptcy Court postponed the distribution of any cash and
securities in 1989 until it could determine whether certain other potential
unsecured claims should be included in the bankruptcy proceeding. In July and
August 1997, upon approval from the Bankruptcy Court for a partial distribution,
the escrow agent distributed 1,434,922 shares of the Company's Common Stock and
589,461 shares of the Company's $.14 Series A Cumulative Convertible Preferred
Stock. In November 1997, the Bankruptcy Court also approved a motion to allow
distributions to be made to new claimants. After the conversion of 572,199
shares of Convertible Preferred Stock into 629,418 shares of Common Stock in
conjunction with the Merger transaction approved at the Special Meeting of the
Stockholders held on June 29, 1999 referred to under "Capital Transactions"
above, the escrow agent currently holds 1,924,902 shares of Common Stock. The
escrow agent has the right to vote the shares held by it and has expressed its
intention generally to vote such shares proportionally in accordance with the
vote cast by unaffiliated stockholders.

                                       7
<PAGE>

Item 2.  Properties

     The following table sets forth material physical properties owned or leased
by the Company, the location of the property, the approximate square feet of
space, miles of railroad track or acreage, and use made of such facilities. All
properties are owned by the Company, except as otherwise noted, are in good
condition, adequately fulfill the Company's current requirements, and are being
used to the fullest extent necessary for the Company's current operations. The
Company's primary lender, LaSalle Bank N.A., has a security interest in all of
the property owned by the Company.

<TABLE>
<CAPTION>
                                   Approximate
                                      Square
          Address                 Feet of Space                              Use
---------------------------    ------------------     -----------------------------------------------
<S>                            <C>                    <C>
96 South George Street                  5,900         Executive and administrative offices and
York, PA (1)                                          Pennsylvania administrative offices

Princess Street                        15,000         Locomotive repair facility
York, PA

Queen and Hay Streets                  80,000         Rail/truck transfer and 15,000 square foot
York, PA                                              warehouse facility for canned goods and
                                                      various building products

East Princess Street                   70,000         Storage facility
York, PA

North George Street                    85,000         Agricultural bulk products transfer facility
York, PA (2)

Lewiston Junction Road                  4,000         New England administrative offices
Auburn, ME (1)

Lewiston Junction Road                106,700         Locomotive repair facility
Auburn, ME (3)

Island Pond, VT (2)                   295,000         Rail/truck transfer, storage and
                                                      distribution facility for lumber

Richmond, Quebec                        2,500         Operating headquarters
</TABLE>

________________________
(1)  Leased from a third party.
(2)  Leased to a third party.
(3)  Land portion leased from a third party.

                                       8
<PAGE>

<TABLE>
<CAPTION>
                                   Acreage or
                                  Approximate
         Address                    Distance                                   Use
---------------------------    ------------------     -----------------------------------------------
<S>                            <C>                    <C>
York, PA to Porters                    40 miles       Main line railroad track plus rail yards and
Sidling and Hanover, PA                               related facilities

Emmaus, PA to                        15.8 miles       Main line railroad track plus rail yards
East Greenville, PA

Boyertown, PA to                      8.5 miles       Main line railroad track plus rail yards
Pottstown, PA (1)

Kutztown, PA to                       4.4 miles       Main line railroad track
Topton, PA (1)

Manheim, PA                            .6 miles       Main line railroad track

Denver, PA to                          12 miles       Main line railroad track plus rail yards
Sinking Springs, PA

Bridgeport, PA                        2.1 miles       Main line railroad track

Bristol, PA (1)                         1 mile        Main line railroad track

Stanhope, Quebec to                    94 miles       Main line railroad track plus rail yards and
Ste. Rosalie, Quebec                                  related facilities

Lincoln Yard                           25 acres       Rail/truck transfer and storage facility for
West Market Street                                    bulk food grade products, chemicals and
West York, PA                                         non-food bulk products, and aggregates and
                                                      other products

Portland, ME to                       165 miles       Main line railroad track plus rail yards and
Norton, VT                                            related facilities

Norway to                              .5 miles       Branch railroad track
South Paris, ME (1)

Auburn, ME (1)                          4 miles       Branch railroad track

Berlin, NH (1)                         11 miles       Branch railroad track and customer sidings

Lewiston Junction Road                 42 acres       Rail intermodal terminal
Auburn, ME (1)
</TABLE>

________________________
(1)  Leased from a third party.
(2)  Leased to a third party.
(3)  Land portion leased from a third party.

                                       9
<PAGE>

Item 3.  Legal Proceedings

     Certain subsidiaries of the Company are currently subject to a number of
claims and legal actions that arise in the ordinary course of business,
including claims under the Federal Employers' Liability Act, a fault-based
system under which injuries to and deaths of railroad employees are settled by
negotiations or litigation based upon comparative negligence. The Company
believes that it has adequate insurance coverage and has provided adequate
reserves for any liabilities which may result from the ultimate outcome of these
claims, and that such claims will not have a material impact on the Company's
results of operations or financial position.

     Emons Industries, Inc. ("Industries"), a subsidiary of the Company, is
currently a defendant in numerous product liability actions. In addition, one of
the Company's railroads is in the process of remediating a fuel oil spill at its
locomotive maintenance facility in York, Pennsylvania.

     Product Liability Actions

     Prior to March 1971, under previous management, Industries (then known as
Amfre-Grant, Inc.) was engaged in the business of distributing (but not
manufacturing) various generic and prescription drugs. Industries sold and
discontinued these business activities in March 1971 and commenced its railcar
leasing and railroad operations in October 1971. One of the drugs which had been
distributed was diethylstilbestrol ("DES"), which was taken by women during
pregnancy to prevent miscarriage.

     As of June 30, 2000, Industries was one of numerous defendants (including
many of the largest pharmaceutical manufacturers) in 537 lawsuits in which the
plaintiffs allege that DES caused adenosis, infertility, cancer or birth defects
in the offspring or grandchildren of women who ingested DES during pregnancy. In
these actions, liability is premised on the defendant's participation in the
market for DES, and liability is several and limited to the defendant's share of
the market. Between June 30 and August 31, 2000, 231 cases were settled or
dismissed at no liability to Industries. Of the remaining 306 lawsuits as of
August 31, 2000, 301 were commenced after the confirmation by the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court")
of Industries' Reorganization Plan in December 1986 (the "Plan"), while the
remaining five lawsuits are claims which will be treated under the Plan. These
actions are currently in various stages of litigation.

     On April 16, 1998, the Bankruptcy Court granted Industries' motion for
summary judgment declaring that the post-confirmation lawsuits represent claims
which should be asserted against Industries' Chapter 11 estate and are not post-
reorganization liabilities. A formal judgment was entered by the court on May 6,
1998. In September 1998, one counsel representing multiple DES claimants
appealed the Bankruptcy Court's judgment to the United States District Court.
This appeal is currently pending. If the Bankruptcy Court's judgment is upheld
on appeal, amounts payable for settlements of or judgments on these post-
confirmation lawsuits will be paid from the escrow account established under the
Plan.

     Industries has product liability insurance and defense coverage for nearly
all the claims which fall within the policy period 1948 to 1970 up to varying
limits by individual and in the aggregate for each policy year. To date,
Industries has exhausted insurance coverage for the 1954 policy year, in which
25 cases remained pending as of August 31, 2000. Industries, and not its
insurer, will be required to pay the direct legal expenses in connection with
claims in policy years for which coverage has been exhausted. However, to the
extent that the Bankruptcy Court's judgment referred to above is upheld (with
the result that post-confirmation claims must be asserted against Industries'
Chapter 11 estate) Industries will not be required to pay any amounts for
settlements or judgments on such claims in excess of the amounts already set
aside in escrow under the Plan. During the period July 1, 1999 to June 30, 2000,
14 new actions were commenced in which Industries was named as a defendant and
46 lawsuits were settled or dismissed at no liability to Industries.

     Included in the 537 lawsuits as of June 30, 2000, there were 194 cases
pending in the state court in Ohio. On June 29, 1998, the Ohio Supreme Court
ruled that Ohio law would not permit DES cases in which the plaintiff could not
identify the manufacturer of DES allegedly ingested by mothers of DES
plaintiffs. As a result, all 194 Ohio DES cases against the Company were
dismissed by the trial and appellate courts with jurisdiction over them. In the
third quarter of fiscal 2000, the Ohio Supreme Court

                                       10
<PAGE>

granted plaintiff's application for leave to appeal these dismissals. In July
2000, the Ohio Supreme Court reversed its decision and, as a result, effectively
dismissed all 194 cases.

     The following table sets forth the states and courts in which DES cases
were pending, and the number of DES cases pending against the Company in each
jurisdiction as of August 31, 2000:


          State                 Court               Number of Cases
     ----------------     --------------------   ---------------------

     California            Los Angeles County             1
                           San Francisco County           4

     New York              New York County              288
                           Bronx County                   1

     Pennsylvania          Philadelphia County           11

     Texas                 Travis County                  1

     These cases seek, as relief, compensation for injuries that plaintiffs
allegedly have sustained as a result of in utero DES exposure, and punitive
damages. The amounts sought are not specified.

     Management intends to vigorously defend all of these actions. In the event
that the Bankruptcy Court's decision referred to above is reversed by the
appellate court, it is possible that Industries could ultimately have liability
in these actions in excess of its product liability insurance coverage described
above. However, based upon Industries' experience in prior DES litigation,
including the proceedings before the Bankruptcy Court, and its current knowledge
of pending cases, the Company believes that it is unlikely that Industries'
ultimate liability in the pending cases, if any, in excess of insurance coverage
and existing reserves, will be in an amount sufficient to have a material
adverse effect upon the Company's consolidated financial position or results of
operations.

     Environmental Liability

     During fiscal 1994, the Company's Maryland and Pennsylvania Railroad, which
was merged into York Railway Company ("YRC") on December 1, 1999, discovered a
diesel fuel oil spill at its locomotive maintenance facility in York,
Pennsylvania resulting from the fueling of its locomotives. YRC has been
performing additional testing and has been working with the Pennsylvania
Department of Environmental Protection ("PADEP") to investigate and, to the
extent necessary, remediate the contaminated area. In January 1997, as a result
of these testing activities, YRC discovered free product in some of its
monitoring wells. The Company estimates that the cost to remediate the free
product could potentially range from $130,000 to $225,000, although the final
costs have not yet been determined. The Company has provided sufficient reserves
for the anticipated remediation costs. PADEP could also potentially require
further investigation and, to the extent necessary, remediation of ground water
and/or soils at this facility at some point in the future. However, the Company
cannot determine at this time whether PADEP will require further investigation
and remediation, or what the ultimate costs of addressing this matter may be or
what effect, if any, they could have upon the Company's consolidated financial
position or results of operations.

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

          None.

                                       11
<PAGE>

                                    Part II

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

          Emons Transportation Group's Common Stock is listed on The Nasdaq
SmallCap Market(SM) under the symbol "EMON." The table below sets forth the high
and low bid for the Common Stock as reported on the SmallCap(SM) for the periods
indicated.


                                              COMMON STOCK PRICE RANGE
                                              ------------------------

               Fiscal Year    Fiscal Quarter    High Bid      Low Bid
               -----------    --------------    --------      -------
                  2000           First         $2.46875       $  1.75
                                 Second          2.1875         1.625
                                 Third          2.21875          1.75
                                 Fourth         2.21875          1.25

                  1999           First         $ 3.4375       $ 2.125
                                 Second          2.8125          2.25
                                 Third           2.5625        1.5625
                                 Fourth           2.375          2.00


          As of September 8, 2000, the Company had 7,145,342 shares of Common
Stock outstanding which were held by approximately 1,998 stockholders of record.
No cash dividends have been paid on the Common Stock and no cash dividends are
expected to be paid on the Common Stock in the foreseeable future. The Company's
Loan and Security Agreement with its primary lender prohibits the payment of
cash dividends and certain other distributions without the prior consent of the
lender.

                                       12
<PAGE>

Item 6.   Selected Financial Data


               EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES

                           Selected Financial Data
                    For the Five Years Ended June 30, 2000
           (Not Covered by Report of Independent Public Accountants)
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
                                    2000         1999        1998           1997            1996
----------------------------------------------------------------------------------------------------
  <S>                           <C>          <C>          <C>            <C>             <C>
  Operating revenues            $25,247,247  $22,950,085  $17,659,930    $16,058,252     $14,917,077
                                ===========  ===========  ===========    ===========     ============

  Income from operations        $ 3,849,190  $ 3,635,903  $ 2,411,963    $ 1,926,419     $ 1,627,339
                                ===========  ===========  ===========    ===========     ============

  Net income                    $ 1,693,989  $ 2,707,308  $ 4,917,622    $   773,793     $   469,501
                                ===========  ===========  ===========    ===========     ============
  Earnings per common share:

     Basic                      $      0.23  $      0.31  $      0.79    $      0.09     $      0.04
     Diluted                    $      0.22  $      0.26  $      0.63    $      0.09     $      0.04

  Total assets                  $34,642,045  $35,025,864  $28,673,277    $24,301,875     $22,789,914
                                ===========  ===========  ===========    ===========     ============

  Debt                          $13,874,675  $14,864,386  $12,342,175    $11,864,130     $11,086,009
                                ===========  ===========  ===========    ===========     ============
</TABLE>

                                       13
<PAGE>

Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

          Management's Discussion and Analysis of Financial Condition and
Results of Operations should be read in conjunction with the Company's
Consolidated Financial Statements and related notes thereto, and other financial
information included elsewhere in this Form 10-K.

          General

          On November 25, 1998, the Company's newly-created, wholly-owned
subsidiary, St. Lawrence & Atlantic Railroad (Quebec) Inc. ("SLQ"), entered into
an Asset Purchase Agreement to acquire a 94-mile rail line in Quebec, Canada
(the "Sherbrooke Line") from the Canadian National Railway ("CN"). The
acquisition was completed on December 21, 1998, and SLQ commenced operations on
December 1, 1998 under an interim operating arrangement. The Sherbrooke Line
connects with CN's Halifax-to-Montreal main line at Ste. Rosalie, Quebec, and
the Company's St. Lawrence & Atlantic Railroad ("SLR") at the Quebec/Vermont
international border.

          On June 1, 1999, the Norfolk Southern Railroad ("NS") and CSXT
Corporation ("CSXT") completed the split-up and acquisition of Consolidated Rail
Corporation ("Conrail") and commenced operations of their respective portions of
Conrail. NS's and CSXT's implementation of the merger has caused congestion, a
lack of car supply for customers and service disruptions, which has resulted in
a loss of business to trucking companies for all of the Company's rail
operations. While the Company cannot predict how long such problems will persist
or what the total impact of such problems may have on its results of operations,
the Company believes that, on a long-term basis, the merger will create
additional rail business for its Pennsylvania rail operations as a result of
longer Class I single-line rail service on competitive routes.

          On December 1, 1999, the Company merged the operations of its two
railroad subsidiaries located in the York, Pennsylvania area, the Maryland and
Pennsylvania Railroad Company ("MPA") and Yorkrail, Inc. ("YKR"), into a new
company, York Railway Company ("YRC"). MPA and YKR, which operate in the same
geographic area and actually meet or cross at several locations, were merged in
order to provide better service and more efficiently meet customers' needs.

          Liquidity and Capital Resources

          The Company's primary sources of liquidity include its cash and
accounts receivable, which aggregated $4,960,000 and $4,996,000 at June 30, 2000
and 1999, respectively, the balance available under the Company's $2 million
working capital facility, and the amount prepaid on the $7,775,000 seven-year
revolving term loan (the "Revolving Term Loan"), which is available for future
borrowings. As of June 30, 2000, the Company had no borrowings under the working
capital facility and had approximately $1.9 million available in accordance with
the facility's eligibility criteria. As of June 30, 2000, the Company prepaid
$1.2 million of its Revolving Term Loan, which is also available for future
borrowings. The Company believes that it will be able to generate sufficient
cash flow from operations to meet its current and future capital requirements
and debt obligations.

          The Company's Board of Directors authorized a stock repurchase program
for the Company's Common Stock up to an aggregate price of $2 million. As of
June 30, 2000, the Company had repurchased a total of 639,450 shares of its
Common Stock for $1,024,000, of which 610,450 shares were held in treasury and
29,000 shares were retired. In addition, in June 2000, the Company paid $20,000
to retire warrants to purchase 50,000 shares of Common Stock at an exercise
price of $1.125 per share which were due to expire in July 2000. As of June 30,
2000, the Company had approximately $956,000 authorized to repurchase additional
shares of Common Stock.

          The Company intends to utilize the $2 million working capital facility
and balance available under the Revolving Term Loan to help fund the Company's
internal growth activities, future acquisitions, and the Company's stock
repurchase program. The Company does not currently have any commitments nor is
the Company involved in substantive negotiations for any acquisitions.

                                       14
<PAGE>

          The Company's cash and cash equivalents increased $64,000 for the year
ended June 30, 2000. The net increase includes $4,688,000 of cash provided by
operations, $8,000 of proceeds from the sale of property and equipment, and a
$12,000 exchange rate impact relating to SLQ operations, partially offset by
$2,798,000 of capital investments, a $781,000 net reduction in long-term debt,
$1,044,000 utilized for the repurchase of 639,450 shares of the Company's Common
Stock and for the retirement of warrants to purchase 50,000 shares of the
Company's Common Stock, and $21,000 of additional costs incurred in conjunction
with the exchange of the Company's Convertible Preferred Stock into Common Stock
which took place in June 1999.

          The Company generated $4,688,000 of cash from operations for the year
ended June 30, 2000, as compared to $4,714,000 for the prior year. Excluding
changes in assets and liabilities, cash provided by operations increased
$464,000 from $3,964,000 for the year ended June 30, 1999 to $4,428,000 for the
year ended June 30, 2000, as a result of improved operating performance in the
current year. Cash provided by changes in assets and liabilities aggregated
$260,000 for the year ended June 30, 2000, primarily as a result of the
amortization of prepaid insurance premiums for multi-year insurance policies.

          The Company invested $2,798,000 in capital expenditures during fiscal
2000, including $1,879,000 of investments in railroad track structures (net of
$387,000 of government grants), a $512,000 investment in the construction of a
bulk transfer facility for the Company's logistics operations in York,
Pennsylvania (net of $747,000 of grants from the state of Pennsylvania),
$210,000 of investments in locomotive equipment and improvements, and $197,000
of other capital investments. Approximately $620,000 of the investment in
railroad track structures relates to improvements to SLQ's track infrastructure,
a large portion of which was contemplated in connection with the acquisition of
SLQ. As of June 30, 2000, the Company had approximately $400,000 of state
government grants and approximately $650,000 of Quebec government grants
available for future track rehabilitation and other track improvement projects,
and was awarded approximately $300,000 of additional state government grants in
August 2000.

          In August 1999, the Company received notice from the owner of four of
the lines leased by Penn Eastern Rail Lines ("PRL") of its intention to offer
these lines for sale. On January 28, 2000, PRL submitted a proposal to exercise
its right of first refusal to purchase two of the four leased lines and
purchased these lines in August 2000 for an aggregate consideration of $691,000.
In addition, PRL submitted a bid and is currently awaiting a response to
purchase one additional line, and has elected not to purchase the fourth line.
The Company believes that the loss of business from these remaining two leased
lines, in the event of a sale to a third party, will not have a material impact
on its results of operations. The Company has no other material commitments for
capital expenditures.

          The Company's net long-term debt obligations decreased $781,000 during
fiscal 2000, including $2,295,000 of required debt repayments, partially offset
by a $1,300,000 draw on the Revolving Term Loan and $214,000 of borrowings under
government no interest loan track rehabilitation programs.

          Fiscal 2000 as compared to Fiscal 1999

          Results for the year ended June 30, 2000 were impacted by, among other
things, the Company's merger of the operations of two of its subsidiaries, MPA
and YKR, on December 1, 1999.  For comparability, car count information included
in this section has been adjusted to eliminate bridge moves between MPA and YKR,
which were counted as two moves prior to the merger (once by MPA and once by
YKR) and are counted as one move subsequent to the merger.  Bridge moves
represent traffic that is received from one connecting rail carrier and
delivered to another connecting rail carrier, as opposed to being received from
or delivered to a customer located directly on line.

                             Results of Operations
                             ---------------------

          The Company generated net income of $1,694,000 for the year ended June
30, 2000, as compared to net income of $2,707,000 for the year ended June 30,
1999. Income from operations increased $213,000, or 6%, from $3,636,000 for
fiscal 1999 to $3,849,000 for fiscal 2000, and income before income taxes
increased $98,000, or 3.6%, from $2,698,000 to $2,796,000. Operating revenues
increased $2,297,000, operating expenses increased $2,084,000, interest income
increased $13,000, interest expense increased $78,000, and the provision for
income taxes increased $1,111,000 over the

                                       15
<PAGE>

prior year. Other non-operating expense increased $50,000 over the prior year
primarily due to foreign currency exchange losses in connection with the
Company's Canadian operations. Operating expenses for the prior year ended June
30, 1999 include $205,000 of start-up expenses associated with the acquisition
and first seven months of operations of SLQ, which commenced on December 1,
1998. Excluding these start-up expenses, income from operations increased $8,000
while income before income taxes decreased $107,000 for the year ended June 30,
2000, as compared to the year ended June 30, 1999.

                                   Revenues
                                   --------

          Operating revenues increased $2,297,000, or 10%, from $22,950,000 for
the year ended June 30, 1999 to $25,247,000 for the year ended June 30, 2000.
SLQ generated $5,467,000 of operating revenues in the year ended June 30, 2000
as compared to $3,085,000 for seven months of operations in fiscal 1999.
Excluding operating revenues generated by SLQ, the Company's operating revenues
decreased $85,000, consisting of a $278,000 increase in freight and haulage
revenues (excluding intermodal freight) and a $136,000 increase in intermodal
freight and handling revenues, offset by a $22,000 decrease in logistics
revenues and a $477,000 decrease in other operating revenues.

          Freight and haulage revenues (excluding intermodal freight) increased
$1,978,000, or 11%, consisting of a 19% increase in the number of carloads
handled, partially offset by a 6.6% decrease in average revenues per carload.
Total traffic handled increased approximately 10,800 carloads from 56,200 for
fiscal 1999 to 67,000 for fiscal 2000. Traffic for fiscal years 2000 and 1999
includes approximately 20,200 and 12,400 overhead carloads on SLQ, respectively,
that are delivered to SLR and counted as revenue carloads for both SLR and SLQ.
Excluding revenues generated by SLQ, which accounted for $3,984,000 of freight
and haulage revenues in fiscal 2000 as compared to $2,284,000 for seven months
of operations in fiscal 1999, the Company's freight and haulage revenues
increased $278,000, or 2%, while traffic decreased slightly by approximately 200
carloads. Freight and haulage revenues on SLR operations in New England
decreased $366,000 and traffic decreased approximately 1,200 carloads, while
freight and haulage revenues on Pennsylvania rail operations increased $644,000
and traffic increased 1,000 carloads.

          The 1,200 carload decrease in SLR traffic is attributable to a
decrease of approximately 285 paper-related carloads resulting from a variety of
reasons, including 360 less carloads as a result of the closing of a paper mill
(which was subsequently sold and reopened) and problems associated with NS's and
CSXT's implementation of the Conrail merger, approximately 1,600 carloads of
one-time shipments of pipe and cement last year that did not recur or did not
recur at the same volume levels this year, and a decrease of 530 fuel oil
carloads for a customer that converted from oil to natural gas. The congestion
and service disruptions caused by NS's and CSXT's implementation of the Conrail
merger adversely affected SLR's overall business as a result of service and car
supply problems. These decreases were partially offset by 500 additional salt
carloads, 400 additional carloads to an on-line liquid propane gas distributor,
and a variety of less significant increases in business.

          Freight and haulage revenues for Pennsylvania rail operations
increased $644,000 and traffic handled increased 1,000 carloads, despite being
adversely impacted by the congestion and service disruptions caused by NS's and
CSXT's implementation of the Conrail merger. The increase in freight and haulage
revenues is attributable to almost 2,000 additional agricultural carloads due to
local drought conditions last year, 200 carloads for a new customer, Goodyear
Tire & Rubber Company, which completed construction of an on-line regional
distribution center and commenced operations in June 1999, and other less
significant increases in business. These increases were partially offset by 300
less carloads to a corrugated paper facility which closed during fiscal 2000, a
200 carload reduction in coal business as a result of problems with the
customer's cogeneration facility, and a number of other decreases in business
primarily attributable to problems caused by the Conrail merger, including
business lost to truck during the current year.

          The 6.6% decrease in average revenues per carload is attributable to
SLQ, which has an average freight rate that is lower than the Company's other
rail operations since a large percentage of SLQ's business is overhead traffic
from CN to SLR, and since pricing for this business reflects the operating
synergies between SLR and SLQ. Excluding revenues generated by SLQ, average
revenues per carload increased 2.2% as a result of mix of business and price
adjustments.

                                       16
<PAGE>

          Intermodal freight and handling revenues generated by the Company's
rail intermodal terminal in Auburn, Maine, excluding SLQ, increased $136,000, or
16.5%, from $816,000 for the year ended June 30, 1999 to $952,000 for the year
ended June 30, 2000. Intermodal volume increased 16%, or 1,500 trailers and
containers, from 9,500 trailers and containers for fiscal 1999 to 11,000
trailers and containers for fiscal 2000. Intermodal freight revenues generated
by SLQ aggregated $346,000 for fiscal 2000 as compared to $150,000 for seven
months of operations in the prior year. In October 1999, the Company's
intermodal terminal handled its first international steamship container, and the
Company is cautiously optimistic that this business will continue to result in
an increase in future intermodal volume. SLR and SLQ, in conjunction with CN,
offer the only hi-cube, double stack, cleared route in northern New England for
intermodal trains, and provide the Company's intermodal terminal with access to
five CN served ports including Vancouver, Montreal, Halifax, New Orleans and
Mobile.

          Logistics revenues generated by the Company's operations in York,
Pennsylvania, decreased $22,000, or 4.5%, from $498,000 for the year ended June
30, 1999 to $476,000 for the year ended June 30, 2000, including a 15.5%
decrease in the number of carloads handled.  The decrease in business is
primarily attributable to the transfer of certain business that is not
compatible with our new bulk transfer facility to another rail direct facility
located on line, partially offset by an increase in truck brokering revenues
attributable to mix of business.

          Excluding other operating revenues generated by SLQ, the Company's
other operating revenues decreased $477,000 from the prior year, primarily as a
result of a $364,000 decrease in railcar storage and demurrage revenues,
$108,000 of one-time blocking revenues from CN in the prior year, and $132,000
of additional third-party track work revenues in the prior year, partially
offset by less significant increases in other operating revenues. The decrease
in demurrage revenues is partly attributable to demurrage associated with a one-
time pipe move for a gas line project in New England in the prior year, and
partly to a reduction in business for a printing customer in Pennsylvania which
normally generates substantial demurrage revenues. These decreases were
partially offset by $142,000 of one-time easement revenues. SLQ generated
$1,137,000 of other operating revenues in the current year, including blocking
fees and trackage rights revenues, as compared to $650,000 of other operating
revenues for seven months of operations in the prior year.

                                   Expenses
                                   --------

          Operating expenses increased $2,084,000, or 11%, from $19,314,000 for
the year ended June 30, 1999 to $21,398,000 for the year ended June 30, 2000.
The increase consists of $2,080,000 additional cost of operations and $4,000
additional selling and administrative expenses. Excluding operating expenses
incurred by SLQ, the Company's operating expenses increased $952,000, or 5.5%.
This $952,000 increase includes additional expenses incurred by SLR in
conjunction with the operations of SLQ as a result of the centralization of
operations management, dispatching and locomotive maintenance functions at SLR's
facilities in Auburn, Maine.

          Cost of operations increased $2,080,000, or 13.4%, from $15,489,000
for the year ended June 30, 1999 to $17,569,000 for the year ended June 30,
2000. Cost of operations for the current year includes $2,906,000 of SLQ
operating expenses as compared to $1,799,000 of operating expenses for seven
months of operations in the prior year. Excluding operating expenses incurred by
SLQ, the Company's cost of operations increased $973,000, including $899,000
additional railroad operating expenses, $3,000 additional intermodal operating
expenses and $71,000 additional logistics operating expenses.

          Railroad operating expenses increased $2,006,000 for the year ended
June 30, 2000 as compared to the prior year. Excluding SLQ, railroad operating
expenses increased $899,000, consisting of a $981,000 increase in SLR expenses
in New England partially offset by an $82,000 decrease in expenses for
Pennsylvania rail operations.

          The $981,000 net increase in railroad operating costs for SLR is
primarily attributable to additional expenses incurred by SLR in conjunction
with the operations of SLQ as a result of the centralization of operations
management, dispatching and locomotive maintenance functions at SLR's facilities
in Auburn, Maine, and the significant increase in fuel prices during fiscal
2000. Locomotive maintenance expenses,

                                       17
<PAGE>

which include a full year of SLQ operations in fiscal 2000 as compared to seven
months of operations in the prior year, increased as a result of the addition of
a chief mechanical officer and locomotive maintenance personnel in conjunction
with the 13 locomotives acquired or leased in connection with the acquisition of
SLQ. SLR's agency and dispatching costs also increased as a result of additional
personnel hired to perform these services on behalf of SLQ. Locomotive fuel
costs increased over $500,000 as a result of the significant increase in fuel
prices over the prior year. These increases in SLR's railroad operating costs
were partially offset by a decrease of over $250,000 in fuel oil transload fees
and railcar leasing costs as a result of the loss of a local oil move, a
reduction of costs to perform one-time blocking services for CN for the period
September through December 1998 for which SLR received blocking fees, and a
reduction in the provision for derailments and accidents as a result of more
favorable experience in the current year as compared to the prior year.

          The $82,000 net decrease in railroad operating costs for Pennsylvania
rail operations includes approximately $100,000 additional locomotive fuel costs
as a result of the significant increase in fuel prices in the current year,
additional maintenance of way expense as a result of a reduction in capitalized
track work performed in the current year as compared to the prior year, and
additional costs incurred in conjunction with filling two vacant
management/supervisory positions that were unfilled in the prior year. These
increases were offset by a reduction in car hire expense of approximately
$100,000 in conjunction with a corresponding decrease in demurrage revenues, and
a decrease in the provision for derailments and accidents as a result of more
favorable experience in the current year as compared to the prior year.

          Rail intermodal operating expenses increased $3,000, from $452,000 for
the prior year to $455,000 for the current year. The increase is attributable to
a 16% increase in the number of trailers and containers handled, partially
offset by the favorable settlement in the current year of a previously accrued
loss and damage claim.

          Logistics operating expenses increased $71,000, from $592,000 for the
year ended June 30, 1999 to $663,000 for the year ended June 30, 2000 despite a
15.5% decrease in the number of railcars handled. The increase is attributable
to additional truck brokering expenses associated with the increase in related
revenues as a result of mix of business and an increase in fuel prices.

          Selling and administrative expenses increased $4,000, from $3,825,000
for the year ended June 30, 1999 to $3,829,000 for the year ended June 30, 2000.
Excluding selling and administrative expenses incurred by SLQ, the Company's
selling and administrative expenses decreased $21,000, or .5%. Selling and
administrative expenses for the current year include approximately $180,000 of
additional professional fees incurred in conjunction with the pursuit of
strategic plan initiatives, including a significant project which did not
materialize, costs incurred to develop the Company's new web site which was
released in December 1999, and a general increase in a number of other expense
categories including higher salaries and wages as a result of additional
personnel and wage adjustments, and higher employee benefits as a result of
increased health benefit costs. These increases were offset by a reduction in
the provisions for commission, profit sharing and incentive compensation plans
as a result of the extraordinary fiscal 1999 operating results. SLQ selling and
administrative expenses aggregated $113,000 in the current year, including the
addition of a sales person at the beginning of the year, as compared to $88,000
for seven months of operations in the prior year, which includes $42,000 of
start-up expenses associated with the acquisition of SLQ.

          Interest expense increased $78,000 for the year ended June 30, 2000 as
compared to the prior year. The increase is attributable to additional
borrowings incurred in the prior year to finance the acquisition of SLQ and an
increase in interest rates on variable rate debt, partially offset by scheduled
principal payments.

          The Company recorded a provision for income taxes of $1,102,000 for
the year ended June 30, 2000 as compared to a tax benefit of $9,000 for the year
ended June 30, 1999. The provision for income taxes for fiscal 1999 includes a
fourth quarter $1.1 million reduction in the valuation allowance and recognition
of deferred tax benefits relating to the Company's federal net operating loss
carryforwards. In accordance with applicable accounting standards, the Company
continually reassesses the estimated amount of net operating loss carryforward
benefits that it believes it will be able to utilize in the future. Based upon
tax planning strategies implemented in connection with the acquisition of the
Sherbrooke Line from CN in December 1998, the Company reduced the valuation
allowance and recognized an additional $1.1 million of deferred tax benefits
relating to its federal net operating loss carryforwards in fiscal 1999.

                                       18
<PAGE>

The Company reduced the valuation allowance in fiscal 1999 because its
reassessment indicated that it was more likely than not that the benefits will
be realized. The recognition of deferred tax benefits relating to the Company's
federal net operating loss carryforwards in fiscal 1999 had the impact of
increasing basic earnings per share by $0.18 and diluted earnings per share by
$0.14.

          Excluding changes in the valuation allowance relating to the Company's
federal net operating loss carryforwards, the provision for income taxes
increased $16,000, from $1,086,000 in fiscal 1999 to $1,102,000 in fiscal 2000,
while the effective tax rate decreased from 40.3% in fiscal 1999 to 39.4% in
fiscal 2000.

          Fiscal 1999 as compared to Fiscal 1998

          Results for the years ended June 30, 1999 and 1998 are impacted by
several transactions completed by the Company during fiscal 1999 and 1998.

          On November 25, 1998, the Company's newly-created, wholly-owned
subsidiary, St. Lawrence & Atlantic Railroad (Quebec) Inc. ("SLQ"), entered into
an Asset Purchase Agreement to acquire a 94-mile rail line in Quebec, Canada
(the "Sherbrooke Line") from the Canadian National Railway ("CN") and commenced
operations on December 1, 1998. On December 21, 1998, the Company entered into
an Amended and Restated Loan and Security Agreement with its current lender
which provided an additional $4,469,000 seven-year term loan and a $2 million
three-year term loan to finance the acquisition of the Sherbrooke Line and
related expenditures. During fiscal 1998, the Company entered into agreements to
lease and operate one rail line and completed two rail acquisitions (the "1998
Acquired Operations"). In November 1997, SLR entered into an agreement to lease
all of the track and property owned by the Berlin Mills Railway Company ("BMS")
located in Berlin and Gorham, New Hampshire, and on November 4, 1997 commenced
operations. On December 29, 1997, the St. Lawrence & Atlantic Railroad ("SLR")
acquired approximately one mile of track from the New Hampshire and Vermont
Railroad Company ("NHVT") in Groveton, New Hampshire, and commenced operations
on this section of track on December 30, 1997. On December 30, 1997, Penn
Eastern Rail Lines, Inc. ("PRL") acquired substantially all of the assets and
leases of four railroad operations from an individual owner and operator, and
commenced operations on December 31, 1997. The SLQ acquisition and the 1998
Acquired Operations are collectively referred to herein as the "Acquired
Operations."

          On August 15, 1997, the Company entered into a Loan and Security
Agreement with a new lender which provided a $7,775,000 seven-year revolving
term loan and a revolving working capital facility of up to $2 million. The
proceeds of the $7,775,000 term loan were utilized to retire existing bank
indebtedness and fund refinancing costs.

          The Company renegotiated the Operating and Marketing Agreement between
SLR and CN which became effective October 1, 1997. The renegotiated agreement
amends the revenue structure for business transacted with CN, resulting in a
reduction of SLR's operating revenues from CN. In return, CN provided SLR with
additional car hire expense relief, agreed to forego interest on the $1.5
million promissory note due from SLR, and agreed to forgive repayment of the
$1.5 million promissory note over a seven-year period. The renegotiated
agreement impacts operating revenues, operating expenses and interest expense.

                             Results of Operations
                             ---------------------

          The Company generated net income of $2,707,000 for the year ended June
30, 1999, as compared to net income of $4,918,000 for the year ended June 30,
1998. Approximately $1.1 million of the Company's fiscal 1999 net income was
attributable to the recognition of deferred tax benefits associated with the
Company's federal net operating loss carryforwards, as compared to the
recognition of approximately $3.9 million of deferred tax benefits in the prior
year. Income before income taxes increased $1,210,000, or over 80%, from
$1,488,000 for the year ended June 30, 1998, to $2,698,000 for the year ended
June 30, 1999. Fiscal 1999 includes $205,000 of start-up expenses associated
with the acquisition and first seven months of operations of SLQ. Excluding
these start-up expenses, income before income taxes increased $1,415,000, or
95%. Operating revenues increased $5,290,000, while operating expenses increased
$4,066,000 over fiscal 1998. Interest and other non-operating income decreased
$5,000 and interest expense increased $9,000 over fiscal 1998.

                                       19
<PAGE>

                                   Revenues
                                   --------

          Operating revenues increased $5,290,000, or 30%, from $17,660,000 for
the year ended June 30, 1998 to $22,950,000 for the year ended June 30, 1999.
Acquired Operations accounted for $3,935,000 of this increase, including
$3,085,000 of operating revenues generated by SLQ and $850,000 additional
operating revenues generated by the 1998 Acquired Operations. Excluding Acquired
Operations, operating revenues increased $1,355,000, or 8%, consisting of a
$1,480,000 increase in freight and haulage revenues (excluding intermodal
freight) and a $349,000 increase in other operating revenues, partially offset
by a $260,000 decrease in logistics revenues and a $214,000 decrease in
intermodal freight and handling revenues.

          Freight and haulage revenues increased $4,121,000, or 31%, consisting
of a 48% increase in the number of carloads handled and a 12% decrease in
average revenues per carload. Total traffic handled increased approximately
20,325 carloads, from 42,050 for the year ended June 30, 1998 to 62,375 for the
year ended June 30, 1999. Traffic for fiscal 1999 includes approximately 12,400
overhead carloads on SLQ that are delivered to SLR and counted as revenue
carloads for both SLR and SLQ. Excluding Acquired Operations, which accounted
for $2,641,000 of the increase, freight and haulage revenues increased
$1,480,000, or 11%, and traffic increased approximately 3,050 carloads, or 7.5%.
This increase includes approximately 3,175 additional carloads on SLR operations
in New England, partially offset by a reduction of approximately 125 carloads on
Pennsylvania rail operations.

          The 3,175 carload net increase in traffic for SLR is primarily
attributable to new business added over the past year. Approximately 1,000
additional carloads were generated by a new on-line liquid propane gas
distributor that commenced operations in April 1998, 1,450 carloads were
generated by a new overhead move attributable to a special construction project
in New England, and 450 additional carloads were generated by a new local oil
move to an on-line paper customer that commenced operations in the fourth
quarter of fiscal 1998, which is similar to the oil move that was established
for another paper customer in fiscal 1997. This customer converted from oil to
natural gas in early fiscal 2000, and as a result, SLR will no longer handle
this move. These and other less significant increases were partially offset by
300 less salt carloads to an on-line customer as a result of fewer state
contract awards to this customer in fiscal 1999 as compared to fiscal 1998.

          The 125 carload net decrease in business for Pennsylvania rail
operations, excluding Acquired Operations, includes 325 additional carloads to a
new plastics customer, 250 additional carloads to a building products
distributor due to the addition of new product lines transported by rail, 300
additional carloads to an on-line warehouse distributor due to an increase in
paper business, and 600 additional low rated bridge carloads between the
Company's two railroads in York, Pennsylvania. Bridge moves represent traffic
that is received from one connecting rail carrier, moved a short distance and
delivered to another connecting rail carrier, as opposed to being received from
or delivered to a customer located directly on line. Revenues for such moves are
generally less (rated lower) than revenues received for traffic delivered to or
received from customers located on line since there is substantially less work
involved with such moves. These increases were offset by a reduction of
approximately 700 carloads to the Company's primary paper customer in
Pennsylvania due to a reduction in its business levels, a reduction of 500
agricultural carloads as a result of favorable local supply conditions, a
reduction of 400 carloads to the Company's logistics operations, discussed
further below, and a variety of other less significant decreases in traffic.
Pennsylvania rail operations for the month of June 1999 were adversely affected
by service disruptions caused by the implementation of the split-up of
Consolidated Rail Corporation between CSXT Corporation and the Norfolk Southern
Railroad which took place on June 1, 1999.

          The 12% decrease in average revenues per carload is attributable to
SLQ, which has an average freight rate that is lower than the Company's other
rail operations since a large percentage of SLQ's business is overhead traffic
from CN to SLR. Excluding Acquired Operations, average revenues per carload
increased 3.6% as a result of rate adjustments on Pennsylvania operations and
mix of business, which includes a greater percentage of higher rated SLR
traffic.

          Intermodal freight and handling revenues generated by the Company's
rail intermodal terminal in Auburn, Maine, excluding SLQ intermodal freight
revenues, decreased $214,000, or 21%, from $1,030,000 for the year ended June
30, 1998 to $816,000 for the year ended June 30, 1999. Intermodal

                                       20
<PAGE>

volume also decreased 21%, or approximately 2,500 trailers and containers, from
12,000 trailers and containers for fiscal 1998 to 9,500 trailers and containers
for fiscal 1999. The decrease in intermodal volume is attributable to
competition from a nearby intermodal terminal that opened in December 1996, the
conversion of certain intermodal business to rail boxcars, and CN's strategy to
balance inbound and outbound loads by increasing rates on, and thereby reducing
the number of, inbound shipments.

     Logistics revenues generated by the Company's operations in York,
Pennsylvania decreased $260,000, or 34%, from $758,000 for the year ended June
30, 1998 to $498,000 for the year ended June 30, 1999. The number of railcars
handled decreased 500 carloads, or 33%. The decrease in volume is attributable
to the elimination of bulk transfer business for an on-line feed broker, which
was handled directly by the customer in fiscal 1999, a decrease in paper
transload and storage business as a result of the Company's decision in the
second quarter of fiscal 1998 to exit paper warehousing operations and to direct
this business to an independent warehouse operator located on line, and a
variety of less significant decreases.

     Excluding Acquired Operations, other operating revenues increased $349,000
over fiscal 1998, including $325,000 of additional railcar storage and demurrage
revenues and less significant increases in a variety of other revenues. These
increases were partially offset by a $130,000 reduction in fees from CN in
connection with the renegotiation of the Operating and Marketing Agreement
between SLR and CN. SLQ generated $650,000 of other operating revenues,
including blocking fees and trackage rights revenues. The 1998 Acquired
Operations generated $494,000 additional other operating revenues, including
additional railcar storage and demurrage revenues and additional switching
service fees for operating BMS.

                                   Expenses
                                   --------

     Operating expenses increased $4,066,000, or 27%, from $15,248,000 for the
year ended June 30, 1998 to $19,314,000 for the year ended June 30, 1999. The
increase consists of $3,519,000 additional cost of operations and $547,000
additional selling and administrative expenses. Excluding Acquired Operations,
operating expenses increased $1,398,000, or 9.7%. This $1,398,000 increase
includes additional operating expenses incurred by SLR in conjunction with the
acquisition and operations of SLQ as a result of the centralization of
operations management, dispatching and locomotive maintenance functions at SLR's
facilities in Auburn, Maine.

     Cost of operations increased $3,519,000, or 29.5%, from $11,971,000 for the
year ended June 30, 1998 to $15,490,000 for the year ended June 30, 1999. Cost
of operations for fiscal 1999 includes $3,365,000 of railroad operating expenses
associated with the Acquired Operations as compared to $784,000 of such expenses
in fiscal 1998. Excluding Acquired Operations, cost of operations increased
$938,000, including $1,275,000 additional railroad operating expenses and
$35,000 additional other operating expenses, partially offset by a $289,000
decrease in logistics operating expenses and an $83,000 decrease in intermodal
operating expenses.

     Railroad operating expenses increased $3,856,000 for the year ended June
30, 1999 as compared to the year ended June 30, 1998. Excluding Acquired
Operations, railroad operating expenses increased $1,275,000, consisting of
$1,383,000 additional SLR expenses in New England, partially offset by a
$108,000 reduction in Pennsylvania expenses.

     The $1,383,000 increase in railroad operating costs for SLR, excluding
Acquired Operations, is comprised of $231,000 additional maintenance of way
expenses, $733,000 additional transportation expenses, $403,000 additional
locomotive maintenance expenses, and $16,000 additional other expenses. The
increase in maintenance of way expenses is attributable to a track surfacing
project in fiscal 1999 and track projects performed on the behalf of customers
for which SLR received revenues. The increase in transportation expenses is
attributable to a number of factors relating to the significant increase in
traffic. SLR added a local switching job in fiscal 1999, incurred approximately
$250,000 of additional transload fees and railcar lease expense in conjunction
with a new local oil move, and recorded approximately $160,000 additional
expenses in conjunction with derailments. SLR's agency and dispatching costs
also increased as a result of additional personnel hired to perform these
services on behalf of SLQ. These increases in transportation operating expenses
were partially offset by a $200,000 decrease in car hire expense in conjunction
with the renegotiation of the CN Operating and Marketing

                                       21
<PAGE>

Agreement and an $80,000 decrease in switching fees as a result of the
acquisition of one mile of track from NHVT in December 1997. The increase in
locomotive maintenance expenses is primarily attributable to additional repair
and maintenance expenses incurred due to the increase in business levels, and to
the addition of locomotive maintenance personnel and other expenses incurred
relating to the 11 locomotives acquired and two locomotives leased in
conjunction with the acquisition of SLQ.

     The net decrease in railroad operating costs for Pennsylvania rail
operations, excluding Acquired Operations, includes additional costs incurred in
connection with minor derailments and accidents, and severance provisions.
These increases were offset by reduced salaries and wages as a result of two
unfilled management/supervisory positions, lower locomotive fuel costs as a
result of lower fuel rates in fiscal 1999, and efforts to contain operating
expenses.

     Rail intermodal operating expenses decreased $83,000, from $535,000 for
fiscal 1998 to $452,000 for fiscal 1999, as a result of the 21% decrease in the
number of trailers and containers handled from the prior year.

     Logistics operating expenses decreased $289,000, from $881,000 in fiscal
1998 to $592,000 in fiscal 1999, including reductions in property rent and
brokered freight expenses as a result of the Company's decision to exit paper
warehousing operations, and a reduction in labor and benefits and other
operating expenses as a result of a 33% reduction in the number of railcars
handled and efforts to control costs.

     Selling and administrative expenses increased $547,000, or 17%, from
$3,277,000 for the year ended June 30, 1998 to $3,824,000 for the year ended
June 30, 1999. Excluding Acquired Operations, selling and administrative
expenses increased $460,000, or 14%. Approximately $350,000 of this increase is
attributable to additional payroll, benefits and related expenses as a result of
additional personnel and wage adjustments, and additional commissions, profit
sharing and incentive compensation as a result of the significant improvement in
operating results over fiscal 1998. The remainder of the increase includes
additional legal and other professional fees incurred in connection with a
number of projects, and additional travel expenses incurred in the pursuit of
business opportunities.

     Interest expense increased $9,000 for the year ended June 30, 1999 as
compared to the year ended June 30, 1998. The fiscal 1998 amount includes a
$108,000 charge incurred in connection with the refinancing of the Company's
bank debt in August 1997. Excluding this charge, interest expense increased
$117,000 as a result of additional borrowings incurred to finance the Acquired
Operations, partially offset by scheduled principal payments and prepayments of
the Company's revolving term loan.

     The Company recorded a $9,000 tax benefit for the year ended June 30, 1999
as compared to a $3,430,000 tax benefit for the year ended June 30, 1998. The
provision for income taxes for fiscal 1999 and 1998 includes reductions in the
valuation allowance and recognition of deferred tax benefits relating to the
Company's federal net operating loss carryforwards of $1.1 million and $3.9
million, respectively. In accordance with applicable accounting standards, the
Company continually reassesses the estimated amount of net operating loss
carryforward benefits that it believes it will be able to utilize in the future.
Based upon the sustained significant increase in taxable income, new business
added to the Company's railroad operations, and acquisitions completed during
fiscal 1998, the Company reduced the valuation allowance and recognized a
deferred tax benefit in the amount of $3.9 million relating to its federal net
operating loss carryforwards in fiscal 1998. Based upon tax planning strategies
implemented in connection with the acquisition of the Sherbrooke Line from CN in
December 1998, the Company further reduced the valuation allowance and
recognized an additional $1.1 million of deferred tax benefits relating to its
federal net operating loss carryforwards in the fourth quarter of fiscal 1999.
The Company reduced the valuation allowance in fiscal 1999 and 1998 because its
reassessments indicated that it was more likely than not that the benefits would
be realized. The recognition of deferred tax benefits relating to the Company's
federal net operating loss carryforwards in fiscal 1999 and 1998 had the impact
of increasing basic earnings per share by $0.18 and $0.66, respectively, and
diluted earnings per share by $0.14 and $0.50, respectively.

     Excluding changes in the valuation allowance relating to the Company's
federal net operating loss carryforwards, the provision for income taxes
increased $598,000, from $488,000 in fiscal 1998 to $1,086,000 in fiscal 1999,
primarily as a result of the $1,210,000 increase in income before income taxes
in fiscal 1999.

                                       22
<PAGE>

Item 8.   Financial Statements and Supplementary Data

          Financial Statements and the notes and schedules thereto are listed
under Item 14 hereof.


Item 9.   Change in and Disagreements with Accountants on Accounting and
           Financial Disclosure

          None.


                                   Part III

Item 10.  Directors and Executive Officers of Registrant

       Information concerning the directors and executive officers of the
Company shall be set forth in the definitive Proxy Statement to be provided to
stockholders and filed not later than 120 days after the close of the Company's
fiscal year (the "Proxy Statement") under the caption "Security Ownership of
Management" and each of the headings "Election of Directors" and "Executive
Officers," which information is incorporated herein by reference.


Item 11.  Executive Compensation

       Information concerning executive compensation shall be set forth in the
Proxy Statement under the heading "Executive Compensation," which information is
incorporated herein by reference.


Item 12.  Security Ownership of Certain Beneficial Owners and Management

       Information concerning security ownership of certain beneficial owners
and management shall be set forth in the Proxy Statement under the heading
"Security Ownership of Management," which information is incorporated herein by
reference.


Item 13.  Certain Relationships and Related Transactions

       None.

                                       23
<PAGE>

                                    Part IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

                (Index to Financial Statements and Schedules)
<TABLE>
<CAPTION>
                                                                                      Page
                                                                                      ----
<S>                                                                                   <C>
(a) (1) Financial Statements of Emons Transportation Group, Inc. and
          Subsidiaries:

          Report of Independent Public Accountants                                      25

          Consolidated Balance Sheets as of June 30, 2000 and 1999                      26

          Consolidated Statements of Operations for the years ended
            June 30, 2000, 1999 and 1998                                                27

          Consolidated Statements of Stockholders' Equity for the
            years ended June 30, 2000, 1999 and 1998                                    28

          Consolidated Statements of Cash Flows for the years
            ended June 30, 2000, 1999 and 1998                                          29

          Notes to Consolidated Financial Statements                                    30

    (2) Schedules Applicable to Consolidated Financial Statements:

    Schedule III - Financial Statements of Emons Transportation Group, Inc.
                     (Parent Company Only)

          Balance Sheets as of June 30, 2000 and 1999                                   45

          Statements of Operations for the years ended June 30, 2000, 1999 and 1998     46

          Statements of Cash Flows for the years ended June 30, 2000, 1999 and 1998     47
</TABLE>

    All other schedules are omitted as the required information is not
    applicable or information is presented in the financial statements or
    related notes.


(b) Reports on Form 8-K.

      No reports on Form 8-K were filed during the three-month period ended June
30, 2000.


(c) A list of exhibits can be found on pages 49 to 51 hereof.

                                       24
<PAGE>

                   REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


The Board of Directors
Emons Transportation Group, Inc.:

We have audited the accompanying consolidated balance sheets of Emons
Transportation Group, Inc. (a Delaware Corporation) and Subsidiaries as of June
30, 2000 and 1999, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended June 30, 2000. These financial statements and schedules referred to below
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on our
audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Emons Transportation Group,
Inc. and Subsidiaries as of June 30, 2000 and 1999, and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 2000 in conformity with accounting principles generally accepted in the
United States.

Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The balance sheet of Emons Transportation Group,
Inc. (Parent Company only) as of June 30, 2000 and 1999, and the related
statements of operations and cash flows for each of the three years in the
period ended June 30, 2000, are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in our audit of the basic financial statements and, in our
opinion, fairly states in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.

                                                             ARTHUR ANDERSEN LLP

Lancaster, PA
  August 29, 2000

                                       25
<PAGE>

               EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES

                          CONSOLIDATED BALANCE SHEETS
                         as of June 30, 2000 and 1999


<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------
                                                                                   2000                1999
---------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                 <C>
ASSETS
   Current Assets:
      Cash and cash equivalents                                             $     2,092,073     $     2,028,278
      Accounts receivable, less allowance of
         $218,619 in 2000 and $172,673 in 1999                                    2,868,319           2,967,742
      Materials and supplies                                                        273,598             149,815
      Prepaid expenses                                                              217,002             430,743
      Deferred income taxes (Note 8)                                                519,000             812,000
                                                                            ---------------     ---------------
         Total current assets                                                     5,969,992           6,388,578

   Property, plant and equipment, net (Note 1)                                   27,745,947          26,837,051

   Deferred expenses and other assets                                               316,106             557,235

   Deferred income taxes (Note 8)                                                   610,000           1,243,000
                                                                            ---------------     ---------------
TOTAL ASSETS                                                                $    34,642,045     $    35,025,864
                                                                            ===============     ===============

LIABILITIES AND STOCKHOLDERS' EQUITY
   Current Liabilities:
      Current portion of long-term debt                                     $       492,138     $       651,460
      Accounts payable                                                            1,610,843           1,089,133
      Accrued payroll and related expenses                                        1,651,517           2,060,311
      Income taxes payable                                                          182,984             228,779
      Other accrued expenses                                                      1,534,862           1,710,219
                                                                            ---------------     ---------------
         Total current liabilities                                                5,472,344           5,739,902

   Long-term debt (Note 5)                                                       13,382,537          14,212,926
   Other liabilities                                                                837,133             824,886
                                                                            ---------------     ---------------
         Total Liabilities                                                       19,692,014          20,777,714
                                                                            ---------------     ---------------

   Commitments and contingencies (Notes 6 and 10)                                         -                   -
   Stockholders' Equity:
      Preferred stock, authorized 3,000,000 shares
        $0.14 Series A Cumulative Convertible Preferred Stock,
        $0.01 par value, issued and outstanding -0- shares
        at June 30, 2000 and 1999                                                         -                   -

      Common stock, $0.01 par value, authorized 30,000,000
        shares, issued 7,852,274 and 7,860,274 shares at June 30, 2000
        and 1999, respectively                                                       78,523              78,603

      Additional paid-in capital                                                 23,536,693          23,625,471
      Deficit                                                                    (7,470,202)         (9,164,191)
                                                                            ---------------     ---------------
                                                                                 16,145,014          14,539,883
      Treasury stock, at cost (610,450 shares at June 30, 2000)                    (995,981)                  -
      Cumulative other comprehensive income                                          39,156              33,615
      Unearned compensation - restricted stock awards                              (238,158)           (325,348)
                                                                            ---------------     ---------------
         Total Stockholders' Equity                                              14,950,031          14,248,150
                                                                            ---------------     ---------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                  $    34,642,045     $    35,025,864
                                                                            ===============     ===============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       26
<PAGE>

               EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES

                     CONSOLIDATED STATEMENTS OF OPERATIONS
               for the years ended June 30, 2000, 1999 and 1998


<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                                    2000              1999              1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                            <C>               <C>               <C>
Operating revenues                                             $   25,247,247    $   22,950,085    $   17,659,930

Operating expenses:
    Cost of operations                                             17,569,504        15,489,586        11,970,552
    Selling and administrative                                      3,828,553         3,824,596         3,277,415
                                                               --------------    --------------    --------------
       Total operating expenses                                    21,398,057        19,314,182        15,247,967
                                                               --------------    --------------    --------------

Income from operations                                              3,849,190         3,635,903         2,411,963

Other income (expense):
    Interest income                                                   106,904            93,956           100,993
    Interest expense                                               (1,138,159)       (1,059,555)       (1,051,600)
    Other, net                                                        (21,946)           28,004            26,266
                                                               --------------    --------------    --------------
       Total other income (expense)                                (1,053,201)         (937,595)         (924,341)
                                                               --------------    --------------    --------------

Income before income taxes                                          2,795,989         2,698,308         1,487,622

Provision (benefit) for income taxes (Note 8)                       1,102,000            (9,000)       (3,430,000)
                                                               --------------    --------------    --------------

Net income                                                          1,693,989         2,707,308         4,917,622

Preferred dividend requirements (Note 7)                                    -           103,949           218,275
Preferred stock conversion premium (Note 7)                                 -           704,898                 -
                                                               --------------    --------------    --------------

Income applicable to common shareholders                       $    1,693,989    $    1,898,461    $    4,699,347
                                                               ==============    ==============    ==============

Weighted average number of common shares (Notes 1 and 4):

       Basic                                                        7,499,933         6,114,126         5,953,586
                                                               ==============    ==============    ==============
       Diluted                                                      7,750,350         7,836,218         7,829,379
                                                               ==============    ==============    ==============

Earnings per common share (Notes 1 and 4):

       Basic                                                   $         0.23    $         0.31    $         0.79
                                                               ==============    ==============    ==============
       Diluted                                                 $         0.22    $         0.26    $         0.63
                                                               ==============    ==============    ==============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       27
<PAGE>

               EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES

                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
               for the years ended June 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                   Cumulative
                                                   Convertible                                         Additional      Restricted
                                                 Preferred Stock                Common Stock             Paid-in        Earnings
                                           -------------------------     --------------------------
                                             Shares         Amount        Shares           Amount        Capital       (Deficit)
----------------------------------------------------------------------------------------------------------------------------------
<S>                                        <C>            <C>            <C>            <C>           <C>            <C>
Balance at June 30, 1997                    1,650,857     $  16,509      5,800,624      $   58,006    $ 23,503,442   $(16,789,121)

  Conversion of preferred stock              (122,626)       (1,227)       110,358           1,104             123              -

  Shares issued pursuant to
   1986 Stock Option Plan                           -             -        110,500           1,105         109,796              -

  Shares issued under restricted
   stock plan                                       -             -         25,000             250          79,277              -

  Shares issued in connection with
   acquisition of rail properties                   -             -         85,000             850         170,150              -

  Cancellation of restricted stock
   issued                                           -             -        (69,500)           (695)        (44,930)             -

  Restricted stock repurchased
   and retired                                      -             -        (22,171)           (222)        (84,304)             -

 Amortization of unearned compensation              -             -              -               -               -              -

   Net income                                       -             -              -               -               -      4,917,622
                                           ----------     ---------      ---------      ----------    ------------   ------------
Balance at June 30, 1998                    1,528,231        15,282      6,039,811          60,398      23,733,554    (11,871,499)

  Conversion of preferred stock at 0.9
   exchange rate                              (42,688)         (427)        38,418             384              43              -

  Conversion of preferred stock at 1.1
   exchange rate                           (1,485,543)      (14,855)     1,633,788          16,338        (331,397)             -

  Shares issued pursuant to
   1986 Stock Option Plan                           -             -          1,500              15           2,798              -

  Shares issued pursuant to
   1996 Stock Option Plan                           -             -          5,750              58           5,926              -

  Shares issued under restricted
   stock plan                                       -             -         57,000             570         142,285              -

  Shares issued in connection
   with exercise of warrants                        -             -        100,000           1,000          98,000              -

  Cancellation of restricted
   stock issued                                     -             -        (12,900)           (129)        (16,972)             -

  Restricted stock repurchased
   and retired                                      -             -         (3,093)            (31)         (8,766)             -

  Amortization of unearned compensation             -             -              -               -               -              -

  Comprehensive income:
   Net income                                       -             -              -               -               -      2,707,308
   Foreign currency translation                     -             -              -               -               -              -
                                           ----------     ---------      ---------      ----------    ------------   ------------
  Total comprehensive income                        -             -              -               -               -      2,707,308
                                           ----------     ---------      ---------      ----------    ------------   ------------
Balance at June 30, 1999                            -             -      7,860,274          78,603      23,625,471     (9,164,191)

  Conversion of preferred stock at
   1.1 exchange rate                                -             -              -               -         (21,486)             -

  Shares issued pursuant to
   1986 Stock Option Plan                           -             -         15,000             150          18,600              -

  Shares issued under restricted
   stock plan                                       -             -         40,000             400          77,624              -

  Cancellation of restricted
   stock issued                                     -             -        (34,000)           (340)        (96,681)             -

  Restricted stock repurchased
   and retired                                      -             -        (14,000)           (140)        (22,610)             -

  Common stock repurchased and retired              -             -        (15,000)           (150)        (24,225)             -

  Warrants retired                                  -             -              -               -         (20,000)             -

  Purchase of treasury stock                        -             -              -               -               -              -

  Amortization of unearned compensation             -             -              -               -               -              -

  Comprehensive income:
   Net income                                       -             -              -               -               -      1,693,989
   Foreign currency translation                     -             -              -               -               -              -
                                           ----------     ---------      ---------      ----------    ------------   ------------
  Total comprehensive income                        -             -              -               -               -      1,693,989
                                           ----------     ---------      ---------      ----------    ------------   ------------
Balance at June 30, 2000                            -     $       -      7,852,274      $   78,523    $ 23,536,693   $ (7,470,202)
                                           ==========     =========      =========      ==========    ============   ============

<CAPTION>
                                                                                         Cumulative
                                                                                           Other        Unearned
                                                             Treasury Stock,              Compre-      Compensation-
                                                                at Cost                   hensive       Restricted   Stockholders'
                                                      --------------------------
                                                         Stock           Amount           Income       Stock Awards     Equity
                                                      ----------------------------------------------------------------------------
<S>                                                   <C>             <C>                <C>           <C>           <C>
Balance at June 30, 1997                                    -         $        -           $      -    $ (349,665)   $  6,439,171

  Conversion of preferred stock                             -                  -                  -             -               -

  Shares issued pursuant to
   1986 Stock Option Plan                                   -                  -                  -             -         110,901

  Shares issued under restricted
   stock plan                                               -                  -                  -       (79,527)              -

  Shares issued in connection with
   acquisition of rail properties                           -                  -                  -             -         171,000

  Cancellation of restricted stock
   issued                                                   -                  -                  -        45,625               -

  Restricted stock repurchased
   and retired                                              -                  -                  -             -         (84,526)

 Amortization of unearned compensation                      -                  -                  -        79,792          79,792

   Net income                                               -                  -                  -             -       4,917,622
                                                      -------         ----------           --------    ----------    ------------
Balance at June 30, 1998                                    -                  -                  -      (303,775)     11,633,960

  Conversion of preferred stock at 0.9
   exchange rate                                            -                  -                  -             -               -

  Conversion of preferred stock at 1.1
   exchange rate                                            -                  -                  -             -        (329,914)

  Shares issued pursuant to
   1986 Stock Option Plan                                   -                  -                  -             -           2,813

  Shares issued pursuant to
   1996 Stock Option Plan                                   -                  -                  -             -           5,984

  Shares issued under restricted
   stock plan                                               -                  -                  -      (142,855)              -

  Shares issued in connection
   with exercise of warrants                                -                  -                  -             -          99,000

  Cancellation of restricted
   stock issued                                             -                  -                  -        17,101               -

  Restricted stock repurchased
   and retired                                              -                  -                  -             -          (8,797)

  Amortization of unearned compensation                     -                  -                  -       104,181         104,181

  Comprehensive income:
   Net income                                               -                  -                  -             -       2,707,308
   Foreign currency translation                             -                  -             33,615             -          33,615
                                                      -------         ----------           --------    ----------    ------------
  Total comprehensive income                                -                  -             33,615             -       2,740,923
                                                      -------         ----------           --------    ----------    ------------
Balance at June 30, 1999                                    -                  -             33,615      (325,348)     14,248,150

  Conversion of preferred stock at
   1.1 exchange rate                                        -                  -                  -             -         (21,486)

  Shares issued pursuant to
   1986 Stock Option Plan                                   -                  -                  -             -          18,750

  Shares issued under restricted
   stock plan                                               -                  -                  -       (78,024)              -

  Cancellation of restricted
   stock issued                                             -                  -                  -        97,021               -

  Restricted stock repurchased
   and retired                                              -                  -                  -             -         (22,750)

  Common stock repurchased and retired                      -                  -                  -             -         (24,375)

  Warrants retired                                          -                  -                  -             -         (20,000)

  Purchase of treasury stock                          610,450           (995,981)                 -             -        (995,981)

  Amortization of unearned compensation                     -                  -                  -        68,193          68,193

  Comprehensive income:
   Net income                                               -                  -                  -             -       1,693,989
   Foreign currency translation                             -                  -              5,541             -           5,541
                                                      -------         ----------           --------    ----------    ------------
  Total comprehensive income                                -                  -              5,541             -       1,699,530
                                                      -------         ----------           --------    ----------    ------------
Balance at June 30, 2000                              610,450         $ (995,981)          $ 39,156    $ (238,158)   $ 14,950,031
                                                      =======         ==========           ========    ==========    ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       28
<PAGE>

               EMONS TRANSPORTATION GROUP, INC. AND SUBSIDIARIES

                    CONSOLIDATED STATEMENTS OF CASH FLOWS
               for the years ended June 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------------
                                                                     2000               1999               1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                <C>                <C>
Cash flows from operating activities:
  Net income                                                     $ 1,693,989        $ 2,707,308        $ 4,917,622
   Adjustments to reconcile net income to net
     cash provided by operating activities:
      Depreciation                                                 1,853,998          1,474,099          1,257,847
      Amortization                                                   141,500            191,743            153,721
      Loss (gain) on sales of assets                                   2,629                  -            (26,266)
      Gain on forgiveness of debt                                   (189,545)          (174,855)          (121,820)
      Change in deferred income taxes                                926,000           (234,000)        (3,545,000)
      Changes in assets and liabilities:
        Accounts receivable, materials and
          supplies and prepaid expenses                              185,707           (756,864)            53,221
        Accounts payable and accrued expenses                       (105,436)         1,141,655            548,370
        Other assets and liabilities, net                            179,465            364,913           (139,851)
                                                                 -----------        -----------        -----------
Net cash provided by operating activities                          4,688,307          4,713,999          3,097,844
                                                                 -----------        -----------        -----------

Cash flows from investing activities:
  Proceeds from sales of assets                                        7,500             13,576            574,125
  Additions to property, plant and equipment                      (2,797,652)        (2,651,720)        (1,417,103)
  Investment in acquired rail properties                                   -         (4,822,588)          (927,644)
  Increase in deferred expenses                                            -                  -            (20,188)
                                                                 -----------        -----------        -----------
Net cash used in investing activities                             (2,790,152)        (7,460,732)        (1,790,810)
                                                                 -----------        -----------        -----------

Cash flows from financing activities:
  Proceeds from issuance of long-term debt                           214,455          6,389,039          8,476,696
  Borrowings from long-term debt                                   1,300,000                  -                  -
  Reduction in long-term debt                                     (2,294,985)        (3,859,325)        (8,433,831)
  Purchase of treasury stock                                        (995,981)                 -                  -
  Common stock purchased and retired                                 (48,375)                 -                  -
  Debt issuance costs                                                      -           (198,864)          (214,458)
  Proceeds from issuance of common stock                                   -             99,000             26,375
  Preferred stock conversion costs                                   (21,486)          (329,914)                 -
                                                                 -----------        -----------        -----------
Net cash provided by (used in) financing activities               (1,846,372)         2,099,936           (145,218)
                                                                 -----------        -----------        -----------
Effect of exchange rate changes on cash                               12,012             (1,929)                 -
                                                                 -----------        -----------        -----------
Net increase (decrease) in cash and cash equivalents                  63,795           (648,726)         1,161,816
Cash and cash equivalents at beginning of year                     2,028,278          2,677,004          1,515,188
                                                                 -----------        -----------        -----------
Cash and cash equivalents at end of year                         $ 2,092,073        $ 2,028,278        $ 2,677,004
                                                                 ===========        ===========        ===========
</TABLE>

See accompanying notes to consolidated financial statements.

                                       29
<PAGE>

Notes to Consolidated Financial Statements
For the Years Ended June 30, 2000, 1999 and 1998


Note 1.  The Company and Summary of Significant Accounting Policies

        a.  The Company and Operations
            --------------------------

        Emons Transportation Group, Inc. ("Emons Transportation Group") is a
rail freight transportation and distribution services company serving the Mid-
Atlantic and Northeast regions of the United States and Quebec, Canada. Emons
Transportation Group and its subsidiaries (collectively the "Company") own four
short line railroads, operate rail/truck transfer facilities and a rail
intermodal terminal, and provide customers with warehousing and logistics
services for the movement and storage of freight.

        b.  Principles of Consolidation
            ---------------------------

        The consolidated financial statements include the accounts of Emons
Transportation Group, Inc. and its wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in consolidation.

        c.  Use of Estimates
            ----------------

        The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

        d.  Revenue Recognition
            -------------------

        Freight revenues are recognized as rail shipments initially move onto
the Company's rail lines which, due to the relatively short length of haul,
approximates the recognition of revenues as shipments progress.

        e.  Cash and Cash Equivalents
            -------------------------

        Cash and cash equivalents include cash on hand and highly liquid short-
term investments, including bank repurchase agreements, with a maturity of three
months or less. Short-term instruments are carried at cost which approximates
market value.

        f.  Materials and Supplies
            ----------------------

        Materials and supplies used for the maintenance of railroad track
structures and equipment are stated at the lower of cost or market.

        g.  Properties
            ----------

        Property, plant and equipment are carried at cost less accumulated
depreciation. The initial cost or purchase price of railroad track structures is
depreciated over the estimated useful life of the track structures, and the cost
of replacing railroad track structures is capitalized and depreciated over the
estimated useful life of the replacements. Government grants received for track
rehabilitation programs relating to the replacement of railroad track structures
are accounted for as a reduction of the related capitalized cost of the track
structures.

        Depreciation expense is computed on a straight-line basis over the
estimated useful lives of the respective assets which range from 25 to 35 years
for railroad track structures and from 3 to 20 years for all other assets.

                                       30
<PAGE>

        Property, plant and equipment at June 30, 2000 and 1999 consists of the
following:

                                                        2000            1999
                                                     -----------     -----------

               Land and railroad track structures    $31,950,498     $29,702,748
               Equipment                               7,198,643       6,871,652
               Buildings                               2,372,087       2,350,656
               Other                                     276,904         276,904
                                                     -----------     -----------
                                                      41,798,132      39,201,960
               Less accumulated depreciation          14,052,185      12,364,909
                                                     -----------     -----------
                                                     $27,745,947     $26,837,051
                                                     ===========     ===========

        h.  Deferred Financing Costs
            ------------------------

        Deferred financing costs are amortized over the terms of the related
agreements using the straight-line method of amortization.

        i.  Earnings Per Share
            ------------------

        Basic earnings per common share is computed by dividing income
applicable to common shareholders by the weighted average number of common
shares outstanding during the period.  Diluted earnings per common share is
computed by dividing income applicable to common shareholders by the weighted
average number of common shares and dilutive potential common shares outstanding
during the period.

        j.  Foreign Currency Translation
            ----------------------------

        The financial statements of the St. Lawrence & Atlantic Railroad
(Quebec) Inc. ("SLQ"), the Company's Canadian subsidiary, are maintained in its
functional currency, Canadian dollars.  The assets and liabilities of SLQ have
been translated into U.S. dollars using the current exchange rate in effect as
of the balance sheet date, while results of operations have been translated into
U.S. dollars at the average exchange rate in effect during the applicable
period.  Foreign currency translation adjustments are recorded in Stockholders'
Equity, while gains and losses resulting from foreign currency transactions are
included currently in income.  The Company recognized a foreign currency loss of
approximately $19,000 in fiscal 2000 and a foreign currency gain of
approximately $28,000 in fiscal 1999.

        k.  Stock-Based Compensation
            ------------------------

        The Company accounts for stock options issued under its stock option
plans in accordance with Accounting Principles Board Opinion No. 25 and,
accordingly, no compensation expense has been recognized in the Company's
financial statements.  The Company has adopted the disclosure requirements of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("FAS 123") which are provided in Note 11, "Stock-Based
Compensation and Warrants."

        l.  New Accounting Pronouncement
            ----------------------------

        In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("FAS 133").  FAS 133 establishes accounting
and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities.  It
requires that companies recognize all derivatives as either assets or
liabilities in the statement of financial position and measure the derivatives
at fair value.  In June 1999, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 137, "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of FASB
Statement No. 133" ("FAS 137").  FAS 137 deferred the effective date of FAS 133
one year, to all fiscal quarters of all fiscal years beginning after June 15,
2000.  FAS 133 shall not be applied retroactively to financial statements of
prior periods.  The Company's two interest rate hedging transactions and fixed
locomotive fuel price contract constitute cash flow hedges under FAS 133.  The
Company does not expect the impact of adopting the provisions of FAS

                                       31
<PAGE>

133 to be material. However, FAS 133 could increase volatility in earnings
and/or other comprehensive income.

        m.  Reclassifications
            -----------------

        Certain prior period amounts have been reclassified to conform with the
current year presentation.


Note 2.  Acquisition and Lease of Railroad Operations

        On November 25, 1998, the Company's newly-created, wholly-owned
subsidiary, St. Lawrence & Atlantic Railroad (Quebec) Inc. ("SLQ"), entered into
an Asset Purchase Agreement to acquire a 94 mile rail line in Quebec, Canada
(the "Sherbrooke Line") from the Canadian National Railway Company ("CN") for
$4,575,000, plus $248,000 of capitalized acquisition costs. The acquisition was
completed on December 21, 1998. The Sherbrooke Line connects with CN's Halifax-
to-Montreal main line at Ste. Rosalie, Quebec, and the Company's St. Lawrence &
Atlantic Railroad ("SLR") at the Quebec/Vermont international border. SLQ
commenced operations on December 1, 1998 under an interim operating arrangement
provided for in the Asset Purchase Agreement. The Company also acquired 11
locomotives, maintenance of way and other equipment, and materials and supplies,
and leased two locomotives in conjunction with the acquisition.

        Effective November 1, 1997, SLR entered into agreements to lease and
operate all of the track, consisting of approximately 11 miles, and property
owned by the Berlin Mills Railway Company located in Berlin and Gorham, New
Hampshire, and commenced operations on November 4, 1997.

        On December 29, 1997, SLR acquired approximately one mile of track from
the New Hampshire and Vermont Railroad Company in Groveton, New Hampshire for
$280,000, and commenced operations on this section of track on December 30,
1997.

        On December 30, 1997, Penn Eastern Rail Lines, Inc. acquired
substantially all of the assets and leases of four railroad operations, eight
locomotives, and track equipment from an individual owner and operator for
$671,000, and commenced operations on December 31, 1997. The rail operations
consist of seven individual rail lines aggregating approximately 44 miles of
track located in various areas of southeastern Pennsylvania, including two owned
lines and five leased lines.


Note 3.  Supplemental Cash Disclosures

        a.  Cash Payments
            -------------

        The Company made the following cash payments for the fiscal years ended
June 30, 2000, 1999 and 1998:

                                      2000             1999          1998
                                   ----------        --------      --------
               Interest            $1,042,882        $951,604      $968,529
               Income Taxes           165,460          93,074       101,050

        b.  Non-cash Investing and Financing Activities
            -------------------------------------------

        During fiscal 1998, the Company issued 85,000 shares of Common Stock
valued at $171,000 in connection with the acquisition of Penn Eastern Rail
Lines, Inc.

        During fiscal 1998, the Company entered into sale-leaseback transactions
for ten locomotives in the amount of $557,000 in connection with the lease of
Berlin Mills Railway Company and the acquisition of Penn Eastern Rail Lines,
Inc.

                                       32
<PAGE>

        During fiscal 2000, 1999 and 1998, the Company repurchased and retired
11,539, 3,093 and 22,171 shares of restricted Common Stock, respectively, and
issued 15,000, 7,250 and 82,500 shares of Common Stock, respectively, pursuant
to the 1986 and 1996 Stock Option Plans.


Note 4.  Earnings Per Share

        Earnings per share amounts for the fiscal years ended June 30, 2000,
1999 and 1998 are computed as follows:

                                             For the Year Ended June 30, 2000
                                         ---------------------------------------
                                          Income            Shares         EPS
                                         ----------        ---------     -------
Basic EPS
   Income applicable to common
      shareholders                       $1,693,989        7,499,933       $0.23
                                                                           =====

Effect of Dilutive Securities
   Stock options and warrants                     -          250,417
                                         ----------        ---------

Diluted EPS
   Income applicable to common
        shareholders plus assumed
        conversions                      $1,693,989        7,750,350       $0.22
                                         ==========        =========       =====


                                             For the Year Ended June 30, 1999
                                         ---------------------------------------
                                          Income             Shares        EPS
                                         ----------        ---------     -------
Net Income                               $2,707,308
   Less:
      Preferred dividend requirements       103,949
      Preferred stock conversion
        premium                             704,898
                                         ----------

Basic EPS
   Income applicable to common
      shareholders                       $1,898,461        6,114,126       $0.31
                                                                           =====

Effect of Dilutive Securities
   Stock options and warrants                     -          385,606
   Convertible preferred stock              103,949        1,336,486
                                         ----------        ---------

Diluted EPS
   Income applicable to common
        shareholders plus assumed
        conversions                      $2,002,410        7,836,218       $0.26
                                         ==========        =========       =====

                                       33
<PAGE>

                                             For the Year Ended June 30, 1998
                                         ---------------------------------------
                                          Income             Shares        EPS
                                         ----------        ---------     -------

Net Income                               $4,917,622
   Less: Preferred dividend
        requirements                        218,275
                                         ----------

Basic EPS
   Income applicable to common
        shareholders                     $4,699,347        5,953,586       $0.79
                                                                          ======

Effect of Dilutive Securities
   Stock options and warrants                     -          472,599
   Convertible preferred stock              218,275        1,403,194
                                         ----------        ---------

Diluted EPS
   Income applicable to common
        shareholders plus assumed
        conversions                      $4,917,622        7,829,379       $0.63
                                         ==========        =========       =====


Note 5.  Long-Term Debt

  Long-term debt at June 30, 2000 and 1999 consists of the following:

<TABLE>
<CAPTION>
                                                                        2000                1999
                                                                     -----------        -----------
<S>                                                                  <C>                <C>
A Term Loan Facility                                                 $ 4,546,956        $ 4,496,956
B Term Loan Facility                                                   1,441,000          2,000,000
Canadian Term Loan Facility                                            4,449,814          4,469,450
SLR $1,500,000 Promissory Note                                         1,013,126          1,203,324
SLR 1994 Track Rehabilitation Assistance Loan
   from the State of Maine                                               474,344            517,466
SLR 1995 Track Rehabilitation Assistance Loan
   from the State of Maine                                               298,329            130,190
SLR 1995 Track Rehabilitation Assistance Loan
   from the State of New Hampshire                                     1,103,417          1,142,212
Capital Lease Obligations - Locomotives, interest at 7.5%                441,920            484,440
Multi-year Insurance Policies Financing, interest at 8.16%                99,445            360,594
Equipment and Other Loans, interest ranging
   from 8.14% to 10.75%                                                    6,324             59,754
                                                                     -----------        -----------
                                                                      13,874,675         14,864,386
Less current portion                                                     492,138            651,460
                                                                     -----------        -----------
                                                                     $13,382,537        $14,212,926
                                                                     ===========        ===========
</TABLE>


        At June 30, 2000, the prime rate was 9.5%, the one- and three-month
eurodollar rates were 6.64% and 6.77%, respectively, and the one- and three-
month Canadian Dollars bankers' acceptance ("CDOR") rates were 5.84% and 5.89%,
respectively.

        On August 15, 1997, the Company entered into a Loan and Security
Agreement (the "Original Loan Agreement") which provided a $7,775,000 seven-year
revolving term loan (the "A Term Loan") and a $2 million Working Capital
Facility. Interest on both the A Term Loan and Working Capital Facility
borrowings outstanding is based upon the bank's prime rate or the eurodollar
rate, plus an applicable margin, at the option of the Company. The applicable
margin ranges from 0.0% to 0.5% for prime based borrowings, and from 1.75% to 3%
for eurodollar based borrowings, depending upon the Company's financial
performance.

                                       34
<PAGE>

        On December 21, 1998, the Company entered into an Amended and Restated
Loan and Security Agreement (the "Amended Loan Agreement") with its lender which
provided an additional $4,469,450 seven-year term loan (the "Canadian Term
Loan") and a $2 million three-year term loan (the "B Term Loan") to finance the
acquisition of the Sherbrooke Line and related expenditures, including
acquisition costs, the purchase of locomotives and other equipment, working
capital, and financing costs. Interest on the Canadian Term Loan is based upon
the bank's prime rate or CDOR rate, plus an applicable margin, at the option of
the Company. The applicable margin ranges from 1.75% to 3%, depending upon the
Company's financial performance. Interest on the B Term Loan is based upon the
bank's prime rate plus 0.5% or the eurodollar rate plus 3%, at the option of the
Company. In addition, the Company is required to pay an additional loan fee
every six months that increases from .25% for the six months ending June 30,
1999 to 1% for the six months ending December 31, 2001 on the B Term Loan
balance outstanding.

        The term of the Working Capital Facility extends through December 31,
2000, and borrowings under this facility are limited based upon eligible
accounts receivable as defined in the Amended Loan Agreement. As of June 30,
2000, the Company had no borrowings and had approximately $1.9 million available
in accordance with the facility's eligibility criteria. The non-use fee on the
Working Capital Facility ranges from 0.25% to 0.5%, based upon the Company's
financial performance, and was 0.375% at June 30, 2000.

        Under the Amended Loan Agreement, the payment terms of the A Term Loan
were modified. The payment terms for each of the Term Loans under the Amended
Loan Agreement are as follows:


                                                  Quarterly Payment
                                                  -----------------
                                                      Canadian
                                           A Term       Term          B Term
        Quarter Ending                      Loan        Loan           Loan
        --------------                    ---------   ---------     -----------
December 31, 1998 - June 30, 1999         $ 150,000   $       -     $         -
September 30, 1999 - June 30, 2000          275,000           -               -
September 30, 2000 - June 30, 2001          300,000           -               -
September 30, 2001                          387,500           -               -
December 31, 2001                           387,500           -       1,441,000
March 31, 2002 - June 30, 2002              387,500           -               -
September 30, 2002 - June 30, 2003          425,000           -               -
September 30, 2003 - December 31, 2003      475,000           -               -
March 31, 2004                              346,956      91,598               -
June 30, 2004                                     -     494,424               -
September 30, 2004 - June 30, 2005                -     634,164               -
September 30, 2005 - December 31, 2005            -     663,568               -


        The Company is required to make additional principal payments equal to
50% of "Excess Cash Flow," as defined in the Amended Loan Agreement within 120
days after the end of each fiscal year, 50% of the net cash proceeds from the
sale of the Company's capital stock in excess of $3 million, and the net cash
proceeds from the sale of property of the Company in excess of a minimum amount.
The Company does not anticipate that any Excess Cash Flow payment will be
required based upon the Company's operating results for the year ended June 30,
2000.

        All borrowings under the Term Loans and Working Capital Facility are
secured by all of the assets of the Company, and the Amended Loan Agreement
includes certain restrictive covenants, the more significant of which require
that the Company meet prescribed financial ratios and maintain specified levels
of insurance, and which also restrict additional borrowings, capital
expenditures, lease commitments, and the payment of dividends. As of June 30,
2000, the Company is in compliance with its covenants.

        The Original Loan Agreement required the Company to enter into an
interest rate contract with respect to a principal amount of at least one-half
of the available A Term Loan balance. Accordingly, on September 23, 1997, the
Company entered into a five-year interest rate swap agreement under which the
Company fixed its LIBOR interest rate at 6.28% on one-half of the scheduled
available term loan balance

                                       35
<PAGE>

outstanding per the Original Loan Agreement. In addition, the Amended Loan
Agreement required the Company to enter into an interest rate contract with
respect to the principal amount of at least one-half of the Canadian Term Loan
balance. On January 21, 1999, the Company entered into a five-year interest rate
swap agreement under which the Company fixed its CDOR interest rate at 5.33% on
one-half of the Canadian term loan balance. The fair value of the LIBOR and CDOR
interest rate swap agreements at June 30, 2000 aggregated approximately
$101,000.

     The SLR $1,500,000 Promissory Note is subordinated to the Term Loans and
Working Capital Facility.  In conjunction with the refinancing of the Company's
debt in August 1997, the Company renegotiated the terms of the SLR Operating and
Marketing Agreement with CN including the terms of the $1,500,000 Promissory
Note.  In accordance with the revised agreement, the $1,500,000 Promissory Note
is being amortized on a quarterly basis over a seven-year period commencing
October 1, 1997, at an assumed interest rate of 8.5%, without any principal or
interest payment requirements provided that the Company continues to own and
operate SLR.  Principal payments amortized in fiscal 2000, 1999 and 1998 totaled
$189,545, $174,855 and $121,820, respectively, and interest forgiven in fiscal
2000, 1999 and 1998 totaled $96,979, $111,669 and $93,073, respectively.

     In fiscal 1994, the state of Maine awarded SLR a $646,832 non-interest
bearing term loan in connection with the state's track rehabilitation assistance
program. The term loan is payable in semiannual installments of $21,561 through
June 30, 2011.  In September 1995, the state of Maine awarded SLR an additional
$463,158 non-interest bearing term loan under the state's track rehabilitation
assistance program.  This additional term loan is payable in semiannual
installments of $23,158.  In fiscal 1995, the state of New Hampshire awarded SLR
a $1,150,000, 4.95% track rehabilitation assistance term loan.  This term loan
is payable in quarterly installments of $23,656, including principal and
interest, through December 2017.

     Maturities of debt over the next five years are as follows:

                       Fiscal Year           Amount Due
                       -----------           ----------

                          2001               $  492,138
                          2002                3,401,384
                          2003                2,136,386
                          2004                2,347,525
                          2005                2,966,577

     The carrying value of debt obligations outstanding approximates market
value.

Note 6.  Lease Commitments

     a.  Capital Leases
         --------------

     In December 1997, the Company entered into sale-leaseback transactions for
the sale of ten locomotives in the amount of $557,000, which have been accounted
for as capital leases. The locomotives are leased for a period of seven years,
and the lease includes a buyout for approximately 35% of the sales value at the
end of the seventh year.

     b.  Operating Leases
         ----------------

     The Company leases land, rail facilities, its rail intermodal terminal,
locomotives and other equipment, automobiles and office space under non-
cancelable operating lease arrangements.

     The Company leases its rail intermodal terminal from the City of Auburn,
Maine. The lease agreement dated July 19, 1994, includes an initial term of 20
years, three optional ten-year renewal periods, and a purchase option after the
third renewal.

     SLR leases all of the track, consisting of approximately 11 miles, and
property owned by the Berlin Mills Railway Company. SLR is required to make
monthly lease payments of $8,333, adjusted annually by

                                       36
<PAGE>

an escalation provision based upon a specified railroad inflation index. The
lease agreement, which commenced on November 1, 1997, includes an initial term
of ten years and a five-year renewal option.

     Penn Eastern Rail Lines ("PRL") currently leases one rail line that
includes an initial five-year lease term that expires in December 2002 and three
successive five-year renewal options, and which provides PRL with a right of
first refusal in the event of sale. PRL also leased four rail lines, which
included five-year lease terms that expired in June 2000 and provided PRL with a
right of first refusal in the event of sale. During fiscal 2000, PRL received
notice from the owner of its intention to offer these lines for sale. PRL
exercised its right of first refusal with respect to two of the four lines and
purchased these lines in August 2000 for $691,000. In addition, PRL submitted a
bid and is currently awaiting a response to purchase one additional line, and
has elected not to purchase the fourth line. The lease terms for these lines was
extended through December 31, 2000 pending their disposition.

     c.  Future Minimum Lease Payments
         -----------------------------

     Future minimum lease commitments under non-cancelable leases as of June 30,
2000 are as follows:

<TABLE>
<CAPTION>
                                                          Operating            Capital
                      Fiscal Year                          Leases              Leases
       -------------------------------------             ----------          ----------
       <S>                                               <C>                 <C>
                        2001                             $  743,808          $  80,595
                        2002                                665,103             80,595
                        2003                                620,936             80,595
                        2004                                567,431             80,595
                        2005                                388,334            228,534
                        2006 and thereafter               2,305,519                ---
                                                         ----------          ---------
       Total future minimum lease payments               $5,291,131            550,914
                                                         ==========
       Less - amount representing interest,
        at 7.5%                                                               (108,994)
                                                                             ---------
       Present value of future minimum lease
        payments                                                             $ 441,920
                                                                             =========
</TABLE>

     Rent expense totaled $1,221,287, $1,269,331 and $1,073,610 for the fiscal
years ended June 30, 2000, 1999 and 1998, respectively.

Note 7.  Stockholders' Equity

     a.  Stockholder Rights Plan
         -----------------------

     On April 23, 1999, the Board of Directors of the Company voted to adopt a
Stockholder Rights Plan and declared a dividend distribution of one Right for
each outstanding share of Common Stock of the Company to stockholders of record
on May 10, 1999.  Each Right entitles the registered holder to purchase one or
more shares of the Company's Common Stock in accordance with the terms of the
Rights Agreement.  The Rights expire on May 10, 2009.

     b.  Preferred Stock
         ---------------

     At a Special Meeting of the Stockholders of the Company held on June 29,
1999, the shareholders voted to approve the merger of ETG Merger Corporation
into Emons Transportation Group, Inc. (the "Merger"), resulting in the exchange
of each share of the Company's outstanding $0.14 Series A Cumulative Convertible
Preferred Stock into 1.1 shares of the Company's Common Stock. As a result of
the Merger, the Company converted 1,485,543 shares of its Convertible Preferred
Stock into 1,633,788 shares of Common Stock. This represents an inducement
premium of 296,799 shares of Common Stock in excess of the .9 conversion rate
offered under the original terms of the Convertible Preferred Stock. The
estimated fair market value of the conversion premium in the amount of $704,898,
based upon the average closing bid and ask price of the Company's Common Stock
of $2.375 on the date of the Merger, has been charged to income applicable to
common shareholders for fiscal 1999 in the accompanying

                                       37
<PAGE>

Consolidated Statement of Operations. The conversion premium charged to income
applicable to common shareholders reduced fiscal 1999 basic and diluted earnings
per share by $0.12 and $0.09, respectively. Dividends in arrears that were
eliminated as a result of the Merger aggregated $1,767,796 as of June 29, 1999.

     c.  Stock Repurchase Program
         ------------------------

     On March 8, 2000, the Company repurchased 310,450 shares of its Common
Stock for $506,000. On March 20, 2000, the Company's Board of Directors, with
the approval of the Company's lender, authorized a stock repurchase program for
the Company's Common Stock up to an aggregate price of $2 million, including the
previously acquired 310,450 shares. As of June 30, 2000, the Company had
repurchased 639,450 shares of its Common Stock for $1,024,356, of which 610,450
shares were held in treasury and 29,000 shares were retired. In addition, the
Company paid $20,000 to retire warrants to purchase 50,000 shares of Common
Stock at an exercise price of $1.125 per share which were due to expire in July
2000.

Note 8.  Income Taxes

     The provision for income taxes for the years ended June 30, 2000, 1999 and
1998 is comprised of the following:

                              2000              1999              1998
                          -----------       -----------      -------------
        Current:
           Federal        $    55,000       $   60,000       $     45,000
           State              115,000           90,000             70,000
           Foreign              6,000           75,000                ---
                          -----------       ----------       ------------
        Total current         176,000          225,000            115,000
                          -----------       ----------       ------------
        Deferred:
           Federal            911,000         (179,000)        (3,420,000)
           State               15,000          (55,000)          (125,000)
                          -----------       ----------       ------------
        Total deferred        926,000         (234,000)        (3,545,000)
                          -----------       ----------       ------------

        Total             $ 1,102,000       $   (9,000)      $ (3,430,000)
                          ===========       ==========       ============

     The Company utilized approximately $2.75 million of federal and $850,000 of
state net operating loss carryforwards in computing the fiscal 2000 current
provision for income taxes. At June 30, 2000, the Company had approximately $34
million of federal net operating loss carryforwards available that expire in
various years from fiscal 2001 through fiscal 2008, a significant portion of
which expire in fiscal 2002.

     Deferred tax assets and liabilities are comprised of the following at June
30, 2000 and 1999:

                                                         2000           1999
                                                     ------------   ------------
        Deferred tax assets:
           Accrued expenses                          $ 1,111,000    $ 1,246,000
           Net operating loss carryforwards           11,688,000     12,756,000
                                                     -----------    -----------
                                                      12,799,000     14,002,000
           Valuation allowance                        (9,395,000)    (9,620,000)
                                                     -----------    -----------
                                                       3,404,000      4,382,000
        Deferred tax liabilities:
           Property, plant and equipment              (2,275,000)    (2,327,000)
                                                     -----------    -----------

        Net deferred tax asset                       $ 1,129,000    $ 2,055,000
                                                     ===========    ===========

     The valuation allowance has been provided to reduce the deferred tax
assets, which relate principally to the Company's net operating loss
carryforwards, to the estimated recoverable amount based upon the estimated
utilization of the deferred tax assets. The Company continually reassesses the

                                       38
<PAGE>

estimated amount of deferred tax assets that it believes it will be able to
utilize in the future. In fiscal 1998, based upon the sustained significant
increase in taxable income, new business added to the Company's railroad
operations, and acquisitions completed during the year, the Company reduced the
valuation allowance and recognized a deferred tax benefit in the amount of $3.9
million relating to its federal net operating loss carryforwards. In fiscal
1999, based upon tax planning strategies implemented in connection with the
acquisition of the Sherbrooke Line from CN in December 1998, the Company further
reduced the valuation allowance and recognized an additional $1.1 million of
deferred tax benefits relating to its federal net operating loss carryforwards.
The Company reduced the valuation allowance in fiscal 1999 and 1998 because its
reassessments indicated that it was more likely than not that the benefits would
be realized. The recognition of deferred tax benefits relating to the Company's
federal net operating loss carryforwards in fiscal 1999 and 1998 had the impact
of increasing basic earnings per share by $0.18 and $0.66, respectively, and
diluted earnings per share by $0.14 and $0.50, respectively.

     A reconciliation of the difference between the United States statutory
federal income tax rate and the Company's effective income tax rate for the
years ended June 30, 2000, 1999 and 1998 is as follows:

                                               2000         1999         1998
                                               -----       ------      --------
        United States statutory tax rate       34.0%        34.0%         34.0%
        State income taxes, net of
           federal income taxes                 3.1          0.9          (2.4)
        Foreign income taxes                    3.1          4.8           ---
        Reduction of prior valuation
           allowance against net
           operating loss carryforwards        (1.8)       (40.6)       (263.4)
        Other, net                              1.0          0.6           1.2
                                               ----        -----       -------

        Effective tax rate                     39.4%        (0.3)%      (230.6)%
                                               ====        =====       =======

Note 9.  Customer Concentrations

     The majority of the Company's revenues are generated from freight
transportation services provided to customers in the Northeast and Mid-Atlantic
regions of the United States, and Quebec, Canada, many of whom are involved in
the pulp and paper industry.

     One customer accounted for approximately 10% of the Company's fiscal 2000
total operating revenues, one customer accounted for approximately 10% of the
Company's fiscal 1999 total operating revenues and two customers each accounted
for approximately 10% of the Company's fiscal 1998 total operating revenues.

Note 10.  Contingencies

     Certain subsidiaries of the Company are currently subject to a number of
claims and legal actions that arise in the ordinary course of business,
including claims under the Federal Employers' Liability Act, a fault-based
system under which injuries to and deaths of railroad employees are settled by
negotiations or litigation based upon comparative negligence.  The Company
believes that it has adequate insurance coverage and has provided adequate
reserves for any liabilities which may result from the ultimate outcome of these
claims, and that such claims will not have a material impact on the Company's
results of operations or financial position.

     a.  Product Liability Actions
         -------------------------

     Prior to March 1971, under previous management, Emons Industries, Inc.
("Industries") (then known as Amfre-Grant, Inc.) was engaged in the business of
distributing (but not manufacturing) various generic and prescription drugs.
Industries sold and discontinued these business activities in March 1971 and
commenced its railcar leasing and railroad operations in October 1971.  One of
the drugs which had been distributed was diethylstilbestrol ("DES"), which was
taken by women during pregnancy to prevent miscarriage.

                                       39
<PAGE>

     As of June 30, 2000, Industries was one of numerous defendants (including
many of the largest pharmaceutical manufacturers) in 537 lawsuits in which the
plaintiffs allege that DES caused adenosis, infertility, cancer or birth defects
in the offspring or grandchildren of women who ingested DES during pregnancy. In
these actions, liability is premised on the defendant's participation in the
market for DES, and liability is several and limited to the defendant's share of
the market. Between June 30 and August 31, 2000, 231 cases were settled or
dismissed at no liability to Industries. Of the remaining 306 lawsuits as of
August 31, 2000, 301 were commenced after the confirmation by the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court")
of Industries' Reorganization Plan in December 1986 (the "Plan"), while the
remaining five lawsuits are claims which will be treated under the Plan. These
actions are currently in various stages of litigation.

     On April 16, 1998, the Bankruptcy Court granted Industries' motion for
summary judgment declaring that the post-confirmation lawsuits represent claims
which should be asserted against Industries' Chapter 11 estate and are not post-
reorganization liabilities. A formal judgment was entered by the court on May 6,
1998. In September 1998, one counsel representing multiple DES claimants
appealed the Bankruptcy Court's judgment to the United States District Court.
This appeal is currently pending. If the Bankruptcy Court's judgment is upheld
on appeal, amounts payable for settlements of or judgments on these post-
confirmation lawsuits will be paid from the escrow account established under the
Plan.

     Industries has product liability insurance and defense coverage for nearly
all the claims which fall within the policy period 1948 to 1970 up to varying
limits by individual and in the aggregate for each policy year. To date,
Industries has exhausted insurance coverage for the 1954 policy year, in which
25 cases remained pending as of August 31, 2000. Industries, and not its
insurer, will be required to pay the direct legal expenses in connection with
claims in policy years for which coverage has been exhausted. However, to the
extent that the Bankruptcy Court's judgment referred to above is upheld (with
the result that post-confirmation claims must be asserted against Industries'
Chapter 11 estate) Industries will not be required to pay any amounts for
settlements or judgments on such claims in excess of the amounts already set
aside in escrow under the Plan. During the period July 1, 1999 to June 30, 2000,
14 new actions were commenced in which Industries was named as a defendant and
46 lawsuits were settled or dismissed at no liability to Industries.

     Included in the 537 lawsuits as of June 30, 2000, there were 194 cases
pending in the state court in Ohio. On June 29, 1998, the Ohio Supreme Court
ruled that Ohio law would not permit DES cases in which the plaintiff could not
identify the manufacturer of DES allegedly ingested by mothers of DES
plaintiffs. As a result, all 194 Ohio DES cases against the Company were
dismissed by the trial and appellate courts with jurisdiction over them. In the
third quarter of fiscal 2000, the Ohio Supreme Court granted plaintiff's
application for leave to appeal these dismissals. In July 2000, the Ohio Supreme
Court reversed its decision and, as a result, effectively dismissed all 194
cases.

     Management intends to vigorously defend all of these actions. In the event
that the Bankruptcy Court's decision referred to above is reversed by the
appellate court, it is possible that Industries could ultimately have liability
in these actions in excess of its product liability insurance coverage described
above. However, based upon Industries' experience in prior DES litigation,
including the proceedings before the Bankruptcy Court, and its current knowledge
of pending cases, the Company believes that it is unlikely that Industries'
ultimate liability in the pending cases, if any, in excess of insurance coverage
and existing reserves, will be in an amount sufficient to have a material
adverse effect upon the Company's consolidated financial position or results of
operations.

     b.  Environmental Liability
         -----------------------

     During fiscal 1994, the Company's Maryland and Pennsylvania Railroad, which
was merged into York Railway Company ("YRC") on December 1, 1999, discovered a
diesel fuel oil spill at its locomotive maintenance facility in York,
Pennsylvania resulting from the fueling of its locomotives.  YRC has been
performing additional testing and has been working with the Pennsylvania
Department of Environmental Protection ("PADEP") to investigate and, to the
extent necessary, remediate the contaminated area.  In January 1997, as a result
of these testing activities, YRC discovered free product in some of its
monitoring wells.  The Company estimates that the cost to remediate the free
product could potentially range from $130,000 to $225,000, although the final
costs have not yet been determined.  The Company has provided sufficient
reserves for the anticipated remediation costs.  PADEP could also potentially
require

                                       40
<PAGE>

further investigation and, to the extent necessary, remediation of ground water
and/or soils at this facility at some point in the future. However, the Company
cannot determine at this time whether PADEP will require further investigation
and remediation, or what the ultimate costs of addressing this matter may be or
what effect, if any, they could have upon the Company's consolidated financial
position or results of operations.

Note 11.  Stock-Based Compensation and Warrants

     a.  Stock Option Plans
         ------------------

     In November 1996, the Board of Directors and shareholders adopted the 1996
Stock Option Plan (the "Plan"), which replaced the Company's expiring 1986 Stock
Option Plan.  The terms of the new Plan are substantially the same as the terms
of the 1986 Stock Option Plan.  The Plan provides for the issuance of a maximum
of 500,000 shares of the Company's Common Stock to key employees.  Under the
Plan, the Company may grant either non-qualified or incentive stock options at
an exercise price not less than 100% of the fair market value at the date of
grant.  Options may be exercised in accordance with time periods established by
the Compensation Committee of the Board of Directors, and expire ten years after
the date of grant.  During fiscal 2000, the Company issued options to purchase
58,500 shares of the Company's Common Stock under the Plan at prices ranging
from $1.719  to $2.1875, which vest over five years.  As of June 30, 2000,
22,500 options were available for issuance under the Plan.  On March 20, 2000,
the Compensation Committee of the Board of Directors accelerated to the date of
the meeting the exercise date of all currently unexercisable portions of
outstanding stock options granted to certain employees of the Company prior to
March 20, 1999, which resulted in the acceleration of 198,000 options.

     Separate from the above plans, the Company has granted stock options to its
non-employee directors on various dates from fiscal 1993 through fiscal 2000 to
purchase shares of the Company's Common Stock at exercise prices equal to the
fair market value of the stock on the date of grant.  The vesting period for
these options ranges from three to four years, and these options expire ten
years from the date of grant.  In addition, in March 2000, the Company issued
130,000 non-qualified stock options to certain employees at an exercise price
equal to the fair market value of the stock on the date of grant which vested
immediately.

     A summary of stock option activity under the Company's stock option plans
is as follows:

<TABLE>
<CAPTION>
                                                                  Option Price per Share
                                                            -------------------------------------
                                         Stock Options          Range            Weighted Average
                                         -------------      -------------        ----------------
    <S>                                  <C>                <C>                  <C>
    Balance at June 30, 1997                923,000         $0.81 - $3.25             $1.58
       Options granted                      256,000          1.88 -  3.91              2.76
       Options exercised                   (110,500)         0.81 -  1.06              1.00
       Options forfeited                   (144,500)         0.81 -  3.25              1.84
                                          ---------
    Balance at June 30, 1998                924,000          0.81 -  3.91              1.93
       Options granted                      143,000          2.09 -  2.72              2.49
       Options exercised                     (7,250)         1.00 -  1.88              1.21
       Options forfeited                    (10,750)         1.00 -  3.22              2.11
                                          ---------
    Balance at June 30, 1999              1,049,000          0.81 -  3.91              2.01
       Options granted                      238,500          1.72 -  2.19              2.01
       Options exercised                    (15,000)             1.25                  1.25
       Options forfeited                    (31,500)         2.09 -  3.91              3.05
                                          ---------
    Balance at June 30, 2000              1,241,000          0.81 -  3.91              2.00
                                          =========

<CAPTION>
                                          June 30, 2000    June 30, 1999      June 30, 1998
                                          -------------    -------------      -------------
     <S>                                  <C>              <C>                <C>
     Options exercisable                    1,036,666          612,666           425,599
     Weighted average exercise price            $1.94            $1.51             $1.26
</TABLE>

                                       41
<PAGE>

     A summary of stock option information regarding options outstanding at June
30, 2000 is as follows:

<TABLE>
<CAPTION>
                                   Weighted      Weighted        Stock       Weighted
    Range of      Unexercised      Average       Average        Options      Average
    Exercise         Stock        Remaining      Exercise      Currently     Exercise
     Prices         Options      Life (Years)     Price       Exercisable      Price
     ------         -------      -----------      -----       -----------      -----
 <S>              <C>            <C>             <C>          <C>            <C>
 $0.75 - $1.25       435,000        4.5           $1.03          435,000       $1.03
  1.26 -  2.25       346,000        8.8            1.94          214,000        1.91
  2.26 -  3.25       430,000        7.5            2.89          357,666        2.91
  3.26 -  4.00        30,000        8.7            3.91           30,000        3.91
                   ---------                                   ---------
      Total        1,241,000        6.8            2.00        1,036,666        1.94
                   =========                                   =========
</TABLE>

   The Company accounts for stock options issued under its stock option plans in
accordance with APB Opinion No. 25 and, accordingly, no compensation expense has
been recognized in the Company's financial statements.  The Company's pro forma
net income and earnings per share under the provisions of FAS 123 for the years
ended June 30, 2000, 1999 and 1998 would have been as follows:

                                             2000         1999          1998
                                          ----------   ----------    ----------
       Net income:
          As reported                     $1,693,989   $2,707,308    $4,917,622
          Pro forma                          997,661    2,465,490     4,759,774
       Basic earnings per share:
          As reported                     $     0.23   $     0.31    $     0.79
          Pro forma                             0.13         0.27          0.76
       Diluted earnings per share:
          As reported                     $     0.22   $     0.26    $     0.63
          Pro forma                             0.13         0.22          0.61
       Weighted average fair value
          of options granted              $     1.52   $     1.84    $     2.08

     The pro forma information provided above does not include the impact of
stock options granted prior to July 1, 1995.  As a result, compensation cost
under FAS 123 included in the determination of the pro forma information may not
be representative of what compensation cost would have been had the provisions
of FAS 123 been applied to prior years, and may not be indicative of
compensation cost under FAS 123 in future years.  The fair value of options
granted on the date of grant included in the pro forma information for the years
ended June 30, 2000, 1999, and 1998 was estimated using the Black-Scholes option
pricing model using the following assumptions:

                                             2000         1999           1998
                                           --------     --------       --------
          Weighted average:
              Risk free interest rate         7.21%        5.10%           6.0%
              Expected life                10 years     10 years       10 years
              Expected volatility             58.1%        60.1%          60.4%
              Expected dividend yield          0.0%         0.0%           0.0%

     b.  Restricted Stock Plan
         ---------------------

     The Company has a Restricted Stock Plan under which the Company can award
up to 800,000 shares of Common Stock to employees. Shares awarded under the
Restricted Stock Plan may not be sold or transferred until they vest. The
Management Compensation Committee of the Board of Directors determines the
vesting schedule for each of the recipients of the Restricted Stock Awards.
Compensation under the Restricted Stock Plan is charged to earnings over the
respective vesting periods ranging from five to ten years. At June 30, 2000,
1999 and 1998, 264,350, 270,350, and 314,450 shares were available

                                       42
<PAGE>

for issuance, respectively. A summary of activity under the Company's Restricted
Stock Plan is as follows:

                                             2000          1999        1998
                                           --------     ---------    --------
       Awards:
          Shares                             40,000        57,000      25,000
          Fair value at date of grant      $ 78,024     $ 142,855    $ 79,527

       Cancellations:
          Shares                             34,000        12,900      69,500
          Fair value at date of grant      $ 97,021     $  17,101    $ 45,625

       Compensation expense                $ 68,193     $ 104,181    $ 79,792

     c.  Common Stock Warrants
         ---------------------

     At June 30, 2000, the Company had warrants outstanding to purchase up to
60,000 shares of Common Stock at prices ranging from $2.625 to $2.75 per share.

Note 12.  Segment Information

     The Company identifies its reportable segments by the geographic region in
which each segment operates.  All of the Company's principal operating segments,
which involve the operation of short line railroads, have similar economic
characteristics.  As a result, all of the Company's reportable segments have
been aggregated into one segment for purposes of FAS 131.

     Financial information by geographic area is as follows:

                                                   Year Ended June 30,
                                    --------------------------------------------
                                        2000            1999            1998
                                    ------------    ------------    ------------

   Operating revenues
      United States                 $ 19,780,445    $ 19,864,916    $ 17,659,930
      Canada                           5,466,802       3,085,169             ---
                                    ------------    ------------    ------------
   Total operating revenues         $ 25,247,247    $ 22,950,085    $ 17,659,930
                                    ============    ============    ============

   Identifiable assets
      United States                 $ 27,884,230    $ 28,564,478    $ 28,673,277
      Canada                           6,757,815       6,461,386             ---
                                    ------------    ------------    ------------
   Total identifiable assets        $ 34,642,045    $ 35,025,864    $ 28,673,277
                                    ============    ============    ============

                                       43
<PAGE>

Note 13.  Quarterly Financial Data (Unaudited)

<TABLE>
<CAPTION>
                                                                        Three months ended
                                                 -------------------------------------------------------------------
                                                 September 30        December 31         March 31          June 30
                                                 ------------        -----------       -----------       -----------
<S>                                              <C>                 <C>               <C>               <C>
For the fiscal year ended June 30, 2000:
----------------------------------------
Operating revenues                                $ 6,184,935        $ 6,391,411       $ 6,245,268       $ 6,425,633
Income from operations                              1,135,599          1,072,305           585,374         1,055,912
Net income                                            511,025            448,519            77,170           657,275
Earnings per common share:
     Basic                                        $      0.07        $      0.06       $      0.01       $      0.09
     Diluted                                             0.06               0.06              0.01              0.09

For the fiscal year ended June 30, 1999:
----------------------------------------
Operating revenues                                $ 5,150,791        $ 5,248,606       $ 6,229,741       $ 6,320,947
Income from operations                                912,698            729,588           876,258         1,117,359
Net income                                            454,003            267,883           371,322         1,614,100
Earnings per common share:
     Basic                                        $      0.07        $      0.04       $      0.05       $      0.15
     Diluted                                             0.06               0.03              0.05              0.12
</TABLE>

                                       44
<PAGE>

                       EMONS TRANSPORTATION GROUP, INC.
                             (Parent Company Only)
                                Balance Sheets
                         as of June 30, 2000 and 1999

<TABLE>
<CAPTION>
                                                          2000         1999
                                                      ------------ ------------
<S>                                                   <C>          <C>
ASSETS

   Current assets:
      Cash and cash equivalents                       $ 1,812,552  $ 1,666,114
      Accounts receivable                                   3,908        3,004
      Prepaid expenses and other current assets           (36,750)        (974)
      Deferred income taxes                               395,000      676,000
                                                      -----------  -----------
         Total current assets                           2,174,710    2,344,144

   Investments in subsidiaries at equity               22,591,239   16,914,709
   Property and equipment, net of accumulated
      depreciation of $571,581 and $532,227
      as of June 30, 2000 and 1999, respectively           93,573      101,619
   Due from affiliates                                  1,142,975    1,142,975
   Deferred income taxes                                  984,000    1,625,000
   Deferred expenses and other assets                      36,239       87,831
                                                      -----------  -----------
TOTAL ASSETS                                          $27,022,736  $22,216,278
                                                      ===========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

   Current liabilities:
      Current portion of long-term debt               $    16,877  $    72,245
      Accounts payable                                    151,327      137,782
      Accrued payroll and related expenses                185,786      448,066
      Income taxes payable                              1,045,917      654,998
      Other accrued expenses                               97,181      162,484
      Due to affiliates                                 8,384,617    3,719,027
                                                      -----------  -----------
         Total current liabilities                      9,881,705    5,194,602

   Long-term debt                                       1,441,000    2,023,526
   Note payable to affiliate                              750,000      750,000
                                                      -----------  -----------
         Total Liabilities                             12,072,705    7,968,128
                                                      -----------  -----------

   Stockholders' Equity:

      Preferred stock, authorized 3,000,000 shares
         $0.14 Series A Cumulative Convertible
         Preferred Stock, $0.01 par value, issued
         and outstanding -0- shares at June 30,
         2000 and 1999                                          -            -

      Common stock, $0.01 par value,  authorized
         30,000,000 shares, issued 7,852,274 and
         7,860,274 shares at June 30, 2000
         and 1999, respectively                            78,523       78,603

      Additional paid-in capital                       23,536,693   23,625,471
      Deficit                                          (7,470,202)  (9,164,191)
                                                      -----------  -----------
                                                       16,145,014   14,539,883
      Treasury stock, at cost (610,450 shares
         at June 30, 2000)                               (995,981)           -
      Cumulative other comprehensive income                39,156       33,615
      Unearned compensation - restricted stock awards    (238,158)    (325,348)
                                                      -----------  -----------
         Total Stockholders' Equity                    14,950,031   14,248,150
                                                      -----------  -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY            $27,022,736  $22,216,278
                                                      ===========  ===========
</TABLE>

                                       45
<PAGE>

                       EMONS TRANSPORTATION GROUP, INC.
                             (Parent Company Only)
                           Statements of Operations
               for the years ended June 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                     2000           1999            1998
                                                 ------------   -------------  --------------
<S>                                              <C>            <C>            <C>
Operating revenues:
   Intercompany management fees                   $ 2,591,832    $ 2,455,880     $ 2,015,556
                                                 ------------   ------------   -------------

Operating expenses:
   General and administrative expenses              2,378,208      2,312,305       1,968,840
   Depreciation                                        39,354         31,008          28,347
                                                 ------------   ------------   -------------
      Total operating expenses                      2,417,562      2,343,313       1,997,187
                                                 ------------   ------------   -------------

Income from operations                                174,270        112,567          18,369

Other income (expense):
   Intercompany interest income                             -              -         577,428
   Interest and other income                           57,235         58,424          55,324
   Interest expense                                  (231,505)      (170,991)        (73,693)
                                                 ------------   ------------   -------------
      Total other income (expense)                   (174,270)      (112,567)        559,059
                                                 ------------   ------------   -------------

Income before income taxes and equity in
   undistributed net earnings of subsidiaries               -              -         577,428

Provision (benefit) for income taxes                  977,000       (110,000)     (3,331,537)
                                                 ------------   ------------   -------------


Income (loss) before equity in undistributed net
   earnings of subsidiaries                          (977,000)       110,000       3,908,965

Equity in undistributed net earnings of
   subsidiaries                                     2,670,989      2,597,308       1,008,657
                                                 ------------   ------------   -------------


Net income                                        $ 1,693,989    $ 2,707,308     $ 4,917,622
                                                  ===========   ============    ============
</TABLE>

                                       46
<PAGE>

                       EMONS TRANSPORTATION GROUP, INC.
                             (Parent Company Only)
                           Statements of Cash Flows
               for the years ended June 30, 2000, 1999 and 1998

<TABLE>
<CAPTION>
                                                               2000               1999              1998
                                                          ---------------   ----------------  ----------------
<S>                                                       <C>               <C>               <C>

   Cash flows from operating activities:
      Net income                                             $ 1,693,989        $ 2,707,308       $ 4,917,622
         Adjustments to reconcile net income to net cash
         provided by operating activities:
            Depreciation                                          39,354             31,008            28,347
            Amortization of deferred compensation                 68,193            104,181            79,792
            Amortization of deferred financing                     6,672              3,336                 -
            Equity in net earnings of subsidiaries            (2,670,989)        (2,597,308)       (1,008,657)
            Change in deferred income taxes                      922,000           (190,000)       (3,376,537)
            Changes in assets and liabilities:
               Accounts receivable, prepaid expenses and
                  other current assets                            34,872             47,438           (14,247)
               Accounts payable and accrued expenses              76,881            705,949           326,547
               Other assets                                       44,920             41,758           (92,410)
                                                          --------------    ---------------   ---------------
   Net cash provided by operating activities                     215,892            853,670           860,457
                                                          --------------    ---------------   ---------------

   Cash flows from investing activities:
      Additions to property and equipment                        (31,308)           (54,114)          (29,665)
      Investments in subsidiaries                             (3,000,000)        (2,000,000)       (9,739,006)
      Change in due to / from affiliates, net                  4,665,590         (1,169,164)       10,030,778
      Dividends received from subsidiaries                             -                  -           706,000
                                                          --------------    ---------------   ---------------
   Net cash provided by (used in) investing activities         1,634,282         (3,223,278)          968,107
                                                          --------------    ---------------   ---------------

   Cash flows from financing activities:
      Proceeds from issuance of long-term debt                         -          2,000,000           142,830
      Reduction in long-term debt                               (637,894)           (74,131)          (27,393)
      Purchase of treasury stock                                (995,981)                 -                 -
      Common stock purchased and retired                         (48,375)                 -                 -
      Debt issuance costs                                              -            (20,000)                -
      Proceeds from issuance of common stock                           -             99,000            26,375
      Preferred stock conversion costs                           (21,486)          (329,914)                -
                                                          --------------    ---------------   ---------------
   Net cash provided by (used in) financing activities        (1,703,736)         1,674,955           141,812
                                                          --------------    ---------------   ---------------

   Net increase (decrease) in cash and cash equivalents          146,438           (694,653)        1,970,376

   Cash and cash equivalents at beginning of year              1,666,114          2,360,767           390,391
                                                          --------------    ---------------   ---------------

   Cash and cash equivalents at end of year                  $ 1,812,552        $ 1,666,114       $ 2,360,767
                                                          ==============    ===============   ===============

</TABLE>

                                       47
<PAGE>

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

EMONS TRANSPORTATION GROUP, INC.

By: /s/ Robert Grossman                    Date: September 21, 2000
    ---------------------------------            ------------------
    Robert Grossman, Chairman of the
    Board of Directors, President and
    Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

/s/ Robert Grossman                        Date: September 21, 2000
---------------------------------------          ------------------
Robert Grossman, Chairman of the Board
of Directors, President and Chief
Executive Officer

/s/ Scott F. Ziegler                       Date: September 21, 2000
---------------------------------------          ------------------
Scott F. Ziegler, Senior Vice President
and Chief Financial Officer, Controller
and Secretary, signing on behalf of the
registrant as its principal financial
and accounting officer and as Director

/s/ Robert J. Smallacombe                  Date: September 21, 2000
---------------------------------------          ------------------
Robert J. Smallacombe, Director

/s/ Dean H. Wise                           Date: September 21, 2000
---------------------------------------          ------------------
Dean H. Wise, Director

/s/ Alfred P. Smith                        Date: September 21, 2000
---------------------------------------          ------------------
Alfred P. Smith, Director

/s/ Kimberly A. Madigan                    Date: September 21, 2000
---------------------------------------          ------------------
Kimberly A. Madigan, Director

/s/ Michael J. Blake                       Date: September 21, 2000
---------------------------------------          ------------------
Michael J. Blake, Director

                                       48
<PAGE>

EXHIBITS

     The following exhibits are filed as a part of this report.  For convenience
of reference, exhibits are listed according to numbers assigned in the Exhibit
Table of Item 601 of Regulation S-K under the Securities Exchange Act of 1934.

<TABLE>
<CAPTION>
                                                                                             Page in
                                                                                           Sequentially
 Exhibit                                                                                     Numbered
  Number                                      Exhibit                                          Copy
----------      ------------------------------------------------------------------         ------------
<S>             <C>                                                                        <C>
 3 (i) (a)      Certificate of Incorporation for Emons Holdings, Inc. dated
                December 19, 1986  (incorporated by reference from Emons Holdings,
                Inc. Report on Form 10-K for the year ended June 30, 1987, Exhibit               --
                Number 3 (a))

 3 (i) (b)      Certificate of Amendment of Certificate of Incorporation for Emons
                Holdings, Inc. dated September 26, 1989  (incorporated by
                reference from Emons Holdings, Inc. Report on Form 10-Q for the
                quarter ended September 30, 1989, Exhibit Number 3 (b))                          --

 3 (i) (c)      Certificate of Amendment of Certificate of Incorporation of Emons
                Holdings, Inc. dated November 18, 1993  (incorporated by reference
                from Emons Transportation Group, Inc. Report on Form 10-Q for the
                quarter ended December 31, 1993, Exhibit Number 3 (d))                           --

 3 (i) (d)      Certificate of Amendment of Certificate of Incorporation of Emons
                Transportation Group, Inc. dated June 29, 1999
                (incorporated by reference from Emons Transportation Group, Inc.
                Report on Form 10-K for the year ended June 30, 1999, Exhibit
                Number 3 (e))                                                                    --

 3 (ii)         Amended and Restated By-Laws for Emons Holdings, Inc.
                (incorporated by reference from Emons Holdings, Inc. Report on
                Form 10-Q for the quarter ended September 30, 1989, Exhibit Number
                3 (c))                                                                           --

 4              Rights Agreement dated as of April 23, 1999 between Emons
                Transportation Group, Inc. and American Stock Transfer & Trust
                Company, as Rights Agent  (incorporated by reference from Emons
                Transportation Group, Inc. Report on Form 8-K dated April 29,
                1999, Exhibit Number 1)                                                          --

10 (a)          Lease Agreement dated July 19, 1994 by and between the City of
                Auburn, Maine and Maine Intermodal Transportation, Inc.
                (incorporated by reference from Emons Transportation Group, Inc.
                Report on Form 10-K for the year ended June 30, 1995, Exhibit
                Number 10 (a))                                                                   --

10 (b)          Amended and Restated Employment Agreement with Robert Grossman
                dated December 31, 1989  (incorporated by reference from Emons
                Transportation Group, Inc. Report on Form 10-K for the year ended
                June 30, 1997, Exhibit Number 10 (b))                                            --
</TABLE>


                                       49
<PAGE>

<TABLE>
<CAPTION>
                                                                                             Page in
                                                                                           Sequentially
 Exhibit                                                                                     Numbered
  Number                                      Exhibit                                          Copy
---------       ------------------------------------------------------------------         ------------
<S>             <C>                                                                        <C>
 10 (c)         Amendment to the Amended and Restated Employment Agreement with
                Robert Grossman dated May 26, 1994  (incorporated by reference
                from Emons Transportation Group, Inc. Report on Form 10-K for the
                year ended June 30, 1997, Exhibit Number 10 (c))                                --



 10 (d)         Amendment to the Amended and Restated Employment Agreement with
                Robert Grossman dated June 17, 1998
                (incorporated by reference from Emons Transportation Group, Inc.
                Report on Form 10-K for the year ended June 30, 1998, Exhibit
                Number 10 (d))                                                                  --

 10 (e)         Amendment to the Amended and Restated Employment Agreement with
                Robert Grossman dated March 20, 2000                                            --

 10 (f)         Loan and Security Agreement dated August 15, 1997 among Emons
                Transportation Group, Inc., Emons Industries, Inc., Emons Finance
                Corp., Maryland and Pennsylvania Railroad, Emons Logistics
                Services, Inc., Maine Intermodal Transportation, Inc., Emons
                Railroad Group, Inc., Yorkrail, Inc., and St. Lawrence & Atlantic
                Railroad, as the Borrowers, and LaSalle National Bank, as the
                Lender  (incorporated by reference from Emons Transportation
                Group, Inc. Report on Form 10-K for the year ended June 30, 1997,
                Exhibit Number 10 (f))                                                          --

 10 (g)         Lease Agreement dated as of November 1, 1997 between St. Lawrence
                & Atlantic Railroad Company and Berlin Mills Railway, Inc.
                (incorporated by reference from Emons Transportation Group, Inc.
                Report on Form 10-Q for the quarter ended September 30, 1997,
                Exhibit Number 10 (b))                                                          --

 10 (h)         Asset Purchase Agreement between John C. Nolan, Lancaster Northern
                Railway, Inc., Chester Valley Railway, Inc., East Penn Railways,
                Inc., and Bristol Industrial Terminal Railway, Inc. and Penn
                Eastern Rail Lines, Inc. dated November 7, 1997  (incorporated by
                reference from Emons Transportation Group, Inc. Report on Form
                10-Q for the quarter ended December 31, 1997, Exhibit Number 10
                (c))                                                                            --

 10 (i)         Asset Purchase Agreement between New Hampshire and Vermont
                Railroad Company, Inc. and St. Lawrence & Atlantic Railroad
                Company dated December 12, 1997  (incorporated by reference from
                Emons Transportation Group, Inc. Report on Form 10-Q for the
                quarter ended December 31, 1997, Exhibit Number 10 (d))                         --

 10 (j)         Asset Purchase Agreement between St. Lawrence & Atlantic Railroad
                (Quebec) Inc. and Canadian National Railway Company dated November
                25, 1998  (incorporated by reference from Emons Transportation
                Group, Inc. Report on Form 8-K dated December 23, 1998, Exhibit
                Number 10 (a))                                                                  --
</TABLE>


                                       50
<PAGE>

<TABLE>
<CAPTION>
                                                                                             Page in
                                                                                           Sequentially
 Exhibit                                                                                     Numbered
  Number                                      Exhibit                                          Copy
---------       ------------------------------------------------------------------         ------------
<S>             <C>                                                                        <C>
 10 (k)         Amended and Restated Loan and Security Agreement dated as of
                December 21, 1998 among Emons Transportation Group, Inc., Emons
                Industries, Inc., Emons Finance Corp., Maryland and Pennsylvania
                Railroad Company, Emons Logistics Services, Inc., Maine Intermodal
                Transportation, Inc., Yorkrail, Inc., St. Lawrence & Atlantic
                Railroad Company, Penn Eastern Rail Lines, Inc., St. Lawrence &
                Atlantic Railroad (Quebec) Inc., and SLR Leasing Corp., as the
                Borrowers, and LaSalle National Bank, as the Lender  (incorporated
                by reference from Emons Transportation Group, Inc. Report on Form
                8-K dated December 23, 1998, Exhibit Number 10 (b))                             --

 10 (l)         Letter Agreement dated August 21, 1997 regarding renegotiation of
                the Canadian National Railway Promissory Note and Operating and
                Marketing Agreement  (incorporated by reference from Emons
                Transportation Group, Inc. Report on Form 10-Q for the quarter
                ended December 31, 1998, Exhibit Number 10 (f))                                 --

 10 (m)         Agreement of Merger dated as of April 25, 1999 between Emons
                Transportation Group, Inc. and NEWCO  (incorporated by reference
                from Emons Transportation Group, Inc. Report on Form 10-K for the
                year ended June 30, 1999, Exhibit Number 10 (l))                                --

   21           Listing of Subsidiaries                                                         --

   23           Consent of Arthur Andersen LLP                                                  --

   27           Financial Data Schedule                                                         --
</TABLE>

                                       51