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

                                    FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                           EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 1999
                                                        OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                             EXCHANGE ACT OF 1934
For the transition period from .................... to ....................

                         Commission file number 0-26954

                     CONSOLIDATED DELIVERY & LOGISTICS, INC.
             (Exact name of registrant as specified in its charter)

            Delaware                                              22-3350958
State or other jurisdiction of                                (I.R.S. Employer
Incorporation or organization                               Identification No.)

        80 Wesley Street
South Hackensack, New Jersey                                         07606
(Address of principal executive offices)                           (Zip Code)

Registrant's telephone number, including area code (201) 487-7740

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

       Title of each class             Name of each exchange on which registered
Common Stock, par value $.001 per share         American Stock Exchange

        Securities registered pursuant to section 12(g) of the Act: None

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

The  number  of  shares  of the  registrant's  Common  Stock,  $.001  par  value
outstanding was 7,353,458 and the aggregate market value of voting stock held by
nonaffiliates of the registrant was $21,741,558 as of March 10, 2000.

Documents Incorporated by Reference: The information required by Part III (other
than the required  information  regarding executive officers) is incorporated by
reference from the registrant's definitive proxy statement,  which will be filed
with the Commission not later than 120 days following December 31, 1999.


<PAGE>




                                     PART I

         Statements and information  presented within this Annual Report on Form
10-K for  Consolidated  Delivery & Logistics,  Inc. (the " Company",  "CDL",  or
"we")  include  certain  statements  that may be deemed  to be  "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933 (the
"Securities  Act") and Section 21E of the Exchange  Act.  These  forward-looking
statements  include,  but  are not  limited  to,  statements  about  our  plans,
objectives,  expectations and intentions and other statements  contained in this
report  that are not  historical  facts.  When  used in this  report,  the words
"expects,"   "anticipates,"   "intends,"   "plans,"   "believes,"   "seeks"  and
"estimates"  and  similar   expressions  are  generally   intended  to  identify
forward-looking  statements.  These statements are based on certain  assumptions
and analyses made by the Company in light of its  experience  and  perception of
historical trends,  current  conditions,  expected future developments and other
factors it believes are  appropriate in the  circumstances.  Such statements are
subject to a number of assumptions, risks and uncertainties,  including the risk
factors (Item 1 - Risk Factors)  discussed below,  general economic and business
conditions,  the business  opportunities (or lack thereof) that may be presented
to and pursued by the Company,  changes in law or regulations and other factors,
many of which are beyond the control of the Company.  Readers are cautioned that
any such  statements  are not guarantees of future  performance  and that actual
results or  developments  may differ  materially  from  those  projected  in the
forward-looking  statements.  All  subsequent  written  or oral  forward-looking
statements  attributable  to the  Company  or  persons  acting on its behalf are
expressly qualified by these factors.

Item 1 - BUSINESS DESCRIPTION

Overview

          We are one of the leading national full-service provider of customized
time-critical  ground and air delivery  services to a wide range of  commercial,
industrial,  retail and E-Commerce  based  customers.  Our services are provided
throughout the United States and to major cities around the world.

         In  conjunction  with our initial  public  offering in November 1995 we
acquired 11 time-critical ground and air delivery businesses that operated in 52
cities  across the United  States.  As of December 31, 1999,  we had acquired 13
additional time-critical ground and air delivery businesses.

          We offer the following ground delivery services through E-Commerce and
other traditional outlets:

          o   rush  delivery  service,  typically  consisting  of delivering
              time-sensitive  packages,  such as critical  machine  parts or
              emergency medical devices, from-point-to-point on an as needed
              basis;

          o   dedicated  contract   logistics,   providing  a  comprehensive
              solution  to  major   corporations   that  want  the  control,
              flexibility  and  image  of an  in-house  fleet  with  all the
              economic benefits of outsourcing;

          o   routed  services,  providing,  on a recurring  and often daily
              basis, deliveries from pharmaceutical suppliers to pharmacies,
              from   manufacturers   to  retailers,   and  the   interbranch
              distribution  of financial  documents in a commingled  system;
              and

          o   facilities  management,  including  providing and  supervising
              mailroom  personnel,   mail  and  package  sorting,   internal
              delivery and outside local messenger services.

          We offer the following air delivery  services  through  E-Commerce and
other traditional outlets:

          o   customized   heavy   freight,   typically   involving   moving
              heavyweight  and oversize  shipments from  businesses  such as
              printers  and  computer   distributors   that  require   extra
              handling,   late  cut-off  times  or  time-definite   delivery
              windows;

          o   next-flight-out,  providing  businesses  such  as  advertising
              agencies and entertainment  companies with the ability to ship
              their  products on the next  available  flight to be delivered
              directly to their customers; and

          o   international  shipments,  providing  companies the ability to
              have   additional   attention,   shorter   transit   time   or
              time-definite delivery windows anywhere in the world.

Our Industry

          The overall U.S. ground and air delivery  industry is composed largely
of companies that provide same-day,  next-day and two-day delivery services.  We
primarily service the same-day,  time-critical  delivery segment of that overall
market.  In  contrast,  the next-day and two-day  delivery  market  segments are
dominated by large  national  entities such as United  Parcel  Service and FedEx
Corp.

          We believe that the  same-day  delivery  industry,  which is currently
serviced by a fragmented  system of approximately  10,000 companies that include
only a small  number of large  regional or  national  operators,  is  undergoing
substantial growth and consolidation. We believe that several factors, including
the following, are driving that growth and consolidation:

     o    E-Commerce Opportunities.  The   significant  growth  in  business-to-
          business  and  business-to-consumer    customized   and  time-critical
          services   through    E-Commerce  presents    substantial    expansion
          opportunities.

     o    Outsourcing  and  Vendor  Consolidation.   Commercial  and  industrial
          businesses,  which are major consumers of same-day delivery  services,
          have  continued  to follow  the trend of  concentrating  on their core
          business  by  outsourcing  non-core  activities.  Businesses  also are
          increasingly  seeking  single-source  solutions for their regional and
          national  same-day  delivery  needs rather than  utilizing a number of
          smaller local delivery  companies.  At the same time,  larger national
          and   international   companies  are  looking   toward   decentralized
          distribution systems. We believe that significant  opportunities exist
          for larger  regional or national  carriers  that are able to provide a
          full range of services to such businesses.

     o    Heightened  Customer  Expectations.  Increasing  customer  demand  for
          specialized  services such as customized  billing,  enhanced tracking,
          storage,  inventory management and just-in-time  delivery capabilities
          favor  companies with greater  resources to devote to providing  those
          services.  The  use of  facsimile  technology  and the  Internet  have
          increased  the  speed at  which  the  processing  of  information  and
          transactions  occur such that the requirements for immediate  delivery
          of a wide  range  of  critical  items  has  become  commonplace.  This
          practice  increases  demand  for  same-day,   time-critical   delivery
          services.

          We  provide   our   customers   with  a  full  range  of   customized,
time-critical ground and air delivery service options.

Ground Delivery

Rush. In providing rush delivery services, or services on demand, our messengers
and drivers respond to customer  requests for the immediate pick up and delivery
of time-sensitive packages. We generally offer one-, two- and four-hour service,
on a 7-days-a-week, 24-hours-a-day basis. Our typical customers for rush service
include  commercial and industrial  companies,  hospitals and service  providers
such as  accountants,  lawyers,  advertising  and  travel  agencies  and  public
relations firms.

Scheduled. Our scheduled delivery services are provided on a recurring and often
daily basis. We typically pick up or receive large shipments of products,  which
are then sorted,  routed and delivered.  These deliveries are made in accordance
with a customer's specific schedule that generally provides for deliveries to be
made  at  particular   times.   Typical  routes  may  include   deliveries  from
pharmaceutical  suppliers to pharmacies,  from  manufacturers to retailers,  the
interbranch  distribution  of  financial  documents,   payroll  data  and  other
time-critical   documents  for  banks,   financial  institutions  and  insurance
companies.  We also provide these services to large retailers for home delivery,
including large cosmetic companies,  door-to-door retailers,  catalog marketers,
home health care distributors and other direct sales companies.

Facilities  Management.  We provide mailroom management services,  including the
provision  and  supervision  of mailroom  personnel,  mail and package  sorting,
internal  delivery and outside local messenger  services.  Typical customers for
our  facilities   management   services  include   commercial   enterprises  and
professional firms.

<PAGE>

Dedicated Contract  Logistics.  We offer efficient and cost-effective  dedicated
delivery  solutions,  such as fleet replacement  solutions,  dedicated  delivery
systems and transportation  systems management services.  These services provide
major  pharmaceutical  wholesalers,   office  product  companies  and  financial
institutions  with the control,  flexibility  and image of an in-house fleet and
with all of the economic benefits of outsourcing.

Air Services

          We provide  next-flight-out  and scheduled air courier and  airfreight
services  to our  customers,  both  domestically  and  internationally.  Our air
services include arranging for:

     o    the  transportation of a shipment from the customer's  location to the
          airport;

     o    air transportation; and

     o    the delivery of the shipment to its ultimate destination.

          In order  to meet the  needs  of our  customers,  we have  established
relationships with many major airlines and large airfreight companies from which
we purchase cargo space on an as-needed basis.

         We report  certain  information  about  our  operating  segments.  This
information  can be  found  in Note  12 to the  Company's  Financial  Statements
included in this report.

Our Internal Operations

          Our ground and air  divisions  are  currently  managed  and  evaluated
separately.  Those divisions have operations centers staffed by dispatchers,  as
well as order entry and other operations personnel. Our ground and air divisions
operate from 78 leased facilities in 23 states.

          In  February  2000  the  Company  announced  a  plan  to  depart  from
geographically  based  operations  to  three   product-driven   business  groups
operating  nationally.  These groups will be the Distribution Group, the Courier
Group and the E-Commerce  Group. The  Distribution  Group will focus on industry
specific  customer  lines  including  financial  institutions,  pharmaceuticals,
healthcare,  office products,  technology and retailing plus home delivery.  The
Courier Group will focus on  time-sensitive,  same-day product movement business
in similar  industry  focused  lines.  The  E-Commerce  Group will focus on time
critical business-to-business and business-to-consumer deliveries.

Ground Delivery Division

          We  accomplish  coordination  and  deployment  of our ground  delivery
personnel either through communications systems linked to our computers, through
pagers,  or by  radio or  telephone.  A  dispatcher  coordinates  shipments  for
delivery within a specific time frame. We route a shipment according to its type
and weight,  the geographic  distance between its origin and destination and the
time allotted for its delivery. In the case of scheduled  deliveries,  we design
routes  to  minimize  the unit  costs of the  deliveries  and to  enhance  route
density.  We continue to deploy new hardware and  software  systems  designed to
enhance the capture,  routing,  tracking and reporting of deliveries  throughout
our network.  To further improve customer service,  we plan to provide customers
the opportunity to access this information via the internet.

Air Delivery Division

          Our air courier and airfreight  service begins when a customer  places
an order,  which is then  dispatched for pick up. We assign a tracking number to
the shipment and enter it into our computer  system.  We then route the shipment
based on delivery  specifications,  destination  and timing  considerations.  We
collect proof of delivery at the  shipment's  final  destination to conclude and
confirm  the  delivery,  at which time we invoice the  customer.  During 1999 we
introduced  a new  integrated  Business  Information  System which will be fully
deployed  by the summer of 2000.  During 2000 we will be  launching  an Internet
based Shipment Management System which will allow our customers to enter orders,
track shipment  progress and monitor  on-time  performance of our service.  This
highly  customizable  system  will allow us to offer this  service to  companies
requiring a specialized distribution solution wherein we will be able to pick up
a shipment from our customer's  supplier or distributor and deliver  directly to
the end user.

<PAGE>

Sales and Marketing

          We  believe  that  a  direct  sales  force  most  effectively  reaches
customers for same-day,  time-critical delivery services and, accordingly, we do
not currently engage in mass media advertising. We market directly to individual
customers  by  designing  and  offering   customized   service   packages  after
determining  their  specific  delivery  and  distribution  requirements.  We are
implementing  a coordinated  major account  strategy by building on  established
relationships  with  regional and  national  customers.  We also employ  certain
direct response marketing techniques.

          Many  of the  services  we  provide,  such as  facilities  management,
dedicated contract logistics and routed delivery services, are determined on the
basis of  competitive  bids.  However,  we  believe  that  quality  and  service
capabilities are also important  competitive  factors. In certain instances,  we
have obtained  business by offering a superior level of service,  even though we
were not the low  bidder  for a  particular  contract.  We derive a  substantial
portion of our revenues from customers with whom we have entered into contracts.
Virtually  all of the  scheduled  dedicated  vehicle and  facilities  management
services that we provide are pursuant to contracts.  Most of these contracts may
be terminated by the customer on relatively short notice without penalty.

Competition

          The market for our delivery services is highly competitive. We believe
that the  principal  competitive  factors in the markets in which we compete are
reliability,  quality, breadth of service offerings and price. We compete on all
of those factors.  Most of our competitors in the  time-critical  ground and air
delivery  market are privately  held companies that operate in only one location
or within a limited service area.

          In addition to our  time-critical  delivery  services,  customers also
utilize next-day and second-day services. The market for next-day and second-day
services is dominated by nationwide network  providers,  which have built large,
capital-intensive distribution channels that allow them to process a high volume
of materials.  These  companies  typically have fixed  deadlines for next-day or
second-day  delivery  services.   By  contrast,   we  specialize  in  on-demand,
next-flight-out  deliveries or services which, by their nature, are not governed
by rigid time  schedules.  If one of our  customers  is unable to meet a network
provider's established deadline, we can pick up the shipment, put it on the next
available  flight and deliver it, in some cases,  before the network  provider's
scheduled   delivery   time.   Our   services  are   available   24-hours-a-day,
7-days-a-week.

          We obtain  space on  scheduled  airline  flights  to  provide  our air
services  and  accordingly  we do not have to acquire or maintain  an  expensive
fleet of airplanes.  As a result,  we can provide a more  flexible,  specialized
service to our  customers  without  incurring  the high fixed  overhead that the
larger network providers must incur.

Acquisitions and Sales of Businesses

          We were formed as a Delaware  corporation in June 1994. As of December
31,  1999,  we had  acquired  24  same-day  time-critical  delivery  businesses,
including the 11 companies that we acquired simultaneously with the commencement
of our operations in November 1995. We paid  approximately  $67.8 million ($29.6
million  in cash and  2,935,702  shares of our common  stock) to acquire  the 11
founding  companies.  In addition to the acquisition of the those companies,  we
acquired certain  additional  assets from two companies in transactions  that we
accounted for as purchases. Those acquired assets were not material.

          In 1996, we acquired five additional businesses that had approximately
$15.6 million in aggregate annual revenues.  We paid  approximately $3.3 million
to acquire those companies using a combination of cash, seller-financed debt and
shares of our common stock. Subsequently,  the aggregate purchase price paid for
those  companies  was  reduced  by  approximately  $616,000  because  the actual
revenues of some of the acquired  companies did not reach the revenues projected
by the sellers. We accounted for each of the 1996 acquisitions as purchases.

          In 1997,  we did not make any  acquisitions  and  instead  focused  on
internal growth.  Consistent with our change of strategic focus, in January 1997
we sold our contract  logistics  subsidiary  back to its founder in exchange for
137,239 shares of our common stock.  In connection with that sale, we recorded a
gain of  approximately  $816,000  before the effect of Federal and state  income
taxes.

<PAGE>

          During December 1997, we sold our direct mail business for $850,000 in
cash  and  notes.   In  connection  with  that  sale,  we  recorded  a  gain  of
approximately  $23,000 net of Federal and state  income  taxes of  approximately
$15,000.  Accordingly,  the direct  mail  business,  which  reflected  income of
$171,000 in 1996 and a loss of $1.2 million in 1997,  has been  reclassified  as
discontinued  operations in the accompanying  consolidated financial statements.
In 1999,  the  company to which we sold our  direct  mail  business  went out of
business  and  defaulted on their note and the Company  wrote off the  remaining
balance of the note of $661,868.

          In 1998, we acquired four same-day,  time-critical delivery businesses
which had aggregate  annual  revenues of  approximately  $25.1 million.  We paid
approximately  $14.5 million for the  businesses  consisting of a combination of
cash,  shares of our common stock,  and  seller-financed  debt. We accounted for
each of the 1998 acquisitions as purchases.

          In 1999, we acquired four same-day,  time critical delivery businesses
which had aggregate  annual  revenues of  approximately  $24.8 million.  We paid
approximately  $12.7 million for the  businesses  consisting of a combination of
cash, shares of our common stock and seller-financed debt. The acquisitions were
accounted  for as  purchase  transactions.  Under  the  terms  of  our  purchase
agreement  there is the potential for additional  payments of up to $1.2 million
to be  paid  upon  the  accomplishment  of  certain  financial  and  operational
objectives.

Regulation

          Our  delivery  operations  are  subject  to  various  state  and local
regulations  and, in many instances,  we require permits and licenses from state
authorities.  To a limited degree, state and local authorities have the power to
regulate  the  delivery of certain  types of  shipments  and  operations  within
certain geographic areas. Interstate and intrastate motor carrier operations are
also  subject  to  safety  requirements  prescribed  by the U.S.  Department  of
Transportation ("DOT") and by state departments of transportation. If we fail to
comply with applicable regulations,  we could face substantial fines or possible
revocation of one or more of our operating permits.

Safety

          We seek  to  ensure  that  all of our  employee  drivers  meet  safety
standards  established  by us and  our  insurance  carriers  as  well  as the US
Department of Transportation. In addition, where required by the DOT or state or
local authorities,  we require that our independent owner/operators meet certain
specified safety standards. We review prospective drivers in an effort to ensure
that they meet applicable requirements.

Employees and Independent Contractors

          As of December 31, 1999, we employed approximately 3,700 people, 2,600
as drivers or messengers,  700 in operations, 250 in clerical and administrative
positions,  70 in  sales  and  70 in  management.  We  are  not a  party  to any
collective  bargaining  agreements,  although we are subject to union organizing
activity  from time to time. We also had  agreements  with  approximately  1,700
independent  contractor drivers as of December 31, 1999. We have not experienced
any work  stoppages  and believe that our  relationship  with our  employees and
independent contractor drivers is good.

Risk Factors

          You should  carefully  consider the  following  factors as well as the
other  information  in this  report  before  deciding to invest in shares of our
common stock.


We may  have  difficulty  integrating  the  operations  of  businesses  that had
formerly been operated as independent entities.

         We  conducted  no  operations  and  generated  no revenue  prior to our
initial  public  offering  when we  acquired 11 same-day  courier  companies  in
November 1995. Since that time, we have acquired thirteen additional businesses.
All of the business  that we have acquired had  previously  operated as separate

<PAGE>

independent  entities.  We anticipate that we will acquire additional businesses
in the future. The process of integrating  acquired businesses with our existing
operations  often involves  unforeseen  difficulties,  may require a significant
amount of our financial and other  resources and may divert the attention of our
management.  We may experience delays,  complications and unanticipated expenses
in implementing, integrating and operating acquired businesses, which could have
a material  adverse effect on our business,  financial  condition and results of
operations.  We cannot assure you that we will be able to  successfully  convert
the computer,  accounting and other internal  systems of these businesses to our
existing  systems and integrate those  businesses  with our existing  operations
without substantial costs, delays or other operational or financial problems.

We may not be able to effectively manage growth.

          We expect to  expend  significant  time and  effort in  expanding  our
existing  businesses and  identifying,  acquiring and integrating  acquisitions.
This growth may place considerable  strain on our resources.  Our management and
financial  reporting  systems,  procedures  and  controls may not be adequate to
support  our  operations  as they  expand.  Any future  growth  also will impose
significant added responsibilities on our senior management,  including the need
to identify,  recruit and integrate additional management and employees.  We may
not be able to  identify  and retain  additional  management  and  employees  to
oversee  this  growth.  If we are unable to manage our  growth  efficiently  and
effectively,  or if we are unable to attract  and  retain  additional  qualified
personnel, our business,  financial condition and results of operations could be
materially adversely effected.

The same-day  delivery  industry is characterized by growth through  acquisition
and we may not be able to compete effectively for acquisition candidates.

          One of our  strategies is to increase our revenues and  profitability,
and expand our markets,  by  acquiring  other  same-day air and ground  delivery
businesses.  We may not be able  to  identify  or  acquire  additional  same-day
delivery  companies  which may  adversely  affect  our  ability  to  expand  our
operations and increase our revenues and earnings to the degree desired. Several
large,  national  publicly-traded  companies  compete  with  us for  acquisition
candidates in an effort to consolidate the delivery industry. We may not be able
to compete  effectively for  acquisition  candidates at all, or on terms that we
deem acceptable.

The price of our common  stock or our cash  reserves  may not be  sufficient  to
finance future acquisitions.

          We  cannot  readily  predict  the  timing,  size  and  success  of our
acquisition  efforts or the  capital we will need to  finance  acquisitions.  We
intend to finance  future  acquisitions  by using a combination of shares of our
common  stock,  notes and cash.  In the event  that our  common  stock  does not
maintain a sufficient  market value,  or potential  acquisition  candidates  are
unwilling to accept our common stock as part of or all of the  consideration  to
be paid  for  their  businesses,  we may be  required  to use our  limited  cash
resources to maintain our  acquisition  program.  If we have  insufficient  cash
resources to pursue acquisitions,  the growth of our operations could be limited
unless  we are  able  to  obtain  additional  capital  through  debt  or  equity
financing.  We may not be able to obtain that financing at all, or on terms that
we deem  acceptable.  The terms of our agreements with our lenders  restrict our
ability to acquire other businesses.

Acquisitions may divert the attention of our management and otherwise affect our
operations.

          Identifying   acquisition   candidates  and  negotiating   acquisition
agreements may divert our management's  attention away from the operation of our
existing business. In addition, acquisitions may:

     o    adversely  affect  our  operating  results,  or the  timing  of  those
          results;

     o    increase  our  dependence  on  retention,  hiring and  training of key
          personnel;

     o    subject us to unanticipated  problems or legal liabilities inherent in
          the acquired businesses; and

     o    fail to  achieve  the  anticipated  levels  of  revenue  and  earnings
          expected at the time of the purchase.

Some or all of  these  factors  could  have a  material  adverse  affect  on our
business, financial condition and results of operation, especially in the fiscal
quarters immediately following acquisition.

<PAGE>

As a same-day delivery company,  our ability to service our clients  effectively
is often dependent upon factors beyond our control.

          Our revenues and earnings are especially  sensitive to events that are
beyond  our  control  that  affect  the  same-day  delivery  services  industry,
including:

     o    extreme weather conditions;

     o    economic factors affecting our significant customers;

     o    fluctuations in fuel prices; and

     o    shortages of or disputes with labor, mainly drivers and messengers.

          Our 2000  financial  results to date are being  adversely  affected by
recent general labor shortages and gas price increases.  So long as such factors
continue to exist, it will put pressure on our profit margins.

          In addition, demand for our same-day delivery services may decrease as
a result of downturns in the level of general economic  activity and employment.
The  development and increased  popularity of facsimile  machines and electronic
mail has reduced the demand for certain  types of delivery  services,  including
our services.  As a result,  same-day  delivery  companies,  including CDL, have
changed focus to those delivery  services  involving items that are unable to be
delivered via alternative methods. Similar industry-wide developments may have a
material  adverse  effect on our  business,  financial  condition  or results of
operations.

Our reputation will be harmed,  and we could lose customers,  if the information
and telecommunications technologies on which we rely fail to adequately perform.

          Our  business  depends  upon a number  of  different  information  and
telecommunication  technologies  as well as the ability to develop and implement
new technology  enabling us to manage and process a high volume of  transactions
accurately and timely. Any impairment of our ability to process  transactions in
this way could result in the loss of customers and diminish our  reputation.  In
support of the recently  announced  business  reorganization  we will be further
consolidating our information systems.  The contemplated  consolidation of these
systems may not be successful or completed on a timely or cost effective basis.

Governmental  regulation  of  the  transportation  industry,  particularly  with
respect to our independent contractors, may substantially increase our operating
expenses.

          From time to time, federal and state authorities have sought to assert
that independent  contractors in the  transportation  industry,  including those
utilized by us, are employees  rather than independent  contractors.  We believe
that  the  independent  contractors  that we  utilize  are not  employees  under
existing  interpretations of federal and state laws. However,  federal and state
authorities have and may continue to challenge this position.  Further, laws and
regulations,  including  tax laws,  and the  interpretations  of those  laws and
regulations,  may  change.  If, as a result  of  changes  in laws,  regulations,
interpretations  or  enforcement  by  federal  or state  authorities,  we become
required to pay for and administer  added  benefits to independent  contractors,
our operating costs could substantially increase.

The  Internal  Revenue  Service is  examining  our payment of  employee  drivers
vehicle costs during 1996 and 1997.

          Certain of our  employees  own and operate  their own  vehicles in the
course of their employment. In certain cases, we pay for all or a portion of the
costs of operating  those  vehicles.  We believe that these  arrangements do not
represent  additional  compensation  to  those  employees.  However,  the IRS is
currently  examining  certain  payments made to employee drivers during 1996 and
1997 and may seek to recharacterize  some or all of those payments as additional
compensation.  If  those  amounts  are  recharacterized,  we  may  have  to  pay
additional  employment-related  taxes on those amounts,  which will increase our
operating costs.

Claims above our insurance  limits,  or  significant  increases in our insurance
premiums, may reduce our profitability.

<PAGE>

          We utilize the services of approximately  3,500 drivers.  From time to
time some of those  drivers are involved in automobile  accidents.  We currently
carry  liability  insurance of $1 million for each driver  accident,  subject to
applicable  deductibles  (generally  $250,000 per  occurrence),  carry  umbrella
coverage up to $25 million in the  aggregate  and require  that our  independent
contractors  maintain  liability  insurance  of at  least  the  minimum  amounts
required by state and federal  law.  However,  claims  against us may exceed the
amounts of our and our independent  contractors'  insurance coverage. If we were
to  experience a material  increase in the  frequency or severity of  accidents,
liability claims or workers' compensation claims, or unfavorable  resolutions of
claims, our operating results could be materially affected.

Shareholders  will  experience  dilution when we issue the additional  shares of
common  stock that we are  permitted  or  required  to issue  under  convertible
debentures, convertible notes, options and warrants.

          We are  permitted,  and in some cases  obligated,  to issue  shares of
common stock in addition to the common stock that is currently  outstanding.  If
and when we issue these shares,  the  percentage  of the common stock  currently
issued and outstanding will be diluted. The following is a summary of additional
shares of common stock that we have currently  reserved for issuance as of March
10, 2000:

     o    3,145,333  shares are  issuable  upon the exercise of options or other
          benefits under our employee stock option plan, consisting of:

     o    outstanding options to purchase 1,460,319 shares at a weighted average
          exercise price of $6.08 per share, of which options covering 1,099,297
          shares were exercisable as of December 31, 1999; and

     o    439,681 shares available for future awards after December 31, 1999;

     o    506,250 shares are issuable upon the exercise of outstanding  warrants
          at an exercise price of $.001 per share;

     o    145,750   shares  are  issuable  upon  the  exercise  of   outstanding
          convertible debentures at a conversion price of $5.00 per share; and

     o    593,333   shares  are  issuable  upon  the  exercise  of   outstanding
          convertible  notes at a weighted  average  exercise price of $6.59 per
          share.

          The  Board  of  Directors  has  authorized,   subject  to  shareholder
approval,  the Year 2000 Stock Incentive Plan (the "Plan")  pursuant to which up
to  1,350,000  shares of the  Company's  common  stock  may be  issued  upon the
exercise of incentive and non-qualified  options granted thereunder to employees
and others eligible to participate in the Plan.

Our  success  is  dependent  on the  continued  service  of our  key  management
personnel.

          Our future success depends,  in part, on the continued  service of our
key  management  personnel.  A number of  management  personnel  employed by the
Company entered into five year  employment  contracts at the time of our initial
public offering in November 1995.  Those contracts are due to expire in November
2000. If certain of these employees  including those  individuals  identified to
head- up the product-driven groups were unable or unwilling to continue in their
present  positions,  our business,  financial  condition,  operating results and
future prospects could be materially adversely affected.

If we fail to maintain our governmental permits and licenses,  we may be subject
to  substantial  fines and possible  revocation  of our authority to operate our
business in certain jurisdictions.

          Our  delivery  operations  are  subject  to various  state,  local and
federal  regulations that in many instances require permits and licenses.  If we
fail to maintain  required  permits or  licenses,  or to comply with  applicable
regulations,  we could be  subject  to  substantial  fines or our  authority  to
operate our business in certain jurisdictions could be revoked.

Intense price competition could reduce the demand for our service.

          We may not be able to compete  successfully in the same-day ground and
air delivery and logistics  market.  Many of our  competitors are larger than us
and have  substantially  greater financial  resources than we do. The market for
our services  has been  extremely  competitive  and is expected to be so for the
foreseeable  future.  Price  competition is often intense,  particularly  in the
market for basic delivery services where entry barriers are low.

We do not anticipate paying dividends on our common stock.

          We have never  declared or paid any dividends on our common stock.  We
do not  anticipate  paying any cash  dividends  in the  foreseeable  future.  We
currently  intend  to retain  future  earnings  to  finance  operations  and the
expansion of our business.  Any future  determination to pay cash dividends will
be at the  discretion  of the  board  of  directors  and  will  depend  upon our
financial condition,  operating results,  capital requirements and other factors
the board of  directors  deems  relevant.  In  addition,  our  credit  agreement
restricts  our ability to declare and pay  dividends  without the consent of our
lenders.

Our certificate of incorporation,  by-laws, shareholder rights plan and Delaware
law  contain   provisions   that  could   discourage  a  takeover  that  current
shareholders may consider favorable.

          Provisions  of our  certificate  of  incorporation,  by-laws  and  our
recently-adopted   shareholder  rights  plan,  as  well  as  Delaware  law,  may
discourage,  delay or  prevent a merger  or  acquisition  that you may  consider
favorable. These provisions of our certificate of incorporation and by-laws:

     o    establish a  classified  board of directors in which only a portion of
          the total number of directors will be elected at each annual meeting;

     o    authorize the board to issue preferred stock;

     o    prohibit cumulative voting in the election of directors;

     o    limit the persons who may call special meetings of stockholders;

     o    prohibit stockholder action by written consent; and

     o    establish advance notice requirements for nominations for the election
          of the board of directors or for  proposing  matters that can be acted
          on by stockholders at stockholder meetings.

          In addition, we have recently adopted a Stockholder  Protection Rights
Plan in order  to  protect  against  offers  to  acquire  us that  our  Board of
Directors believe to be inadequate or not otherwise in our best interests. There
are, however,  certain possible  disadvantages to having the Plan in place which
might  adversely  impact us. The existence of the Plan may limit our flexibility
in dealing  with  potential  acquirers  in certain  circumstances  and may deter
potential acquirers from approaching us.


<PAGE>


Executive Management

          Albert W. Van Ness, Jr. has served as the Chairman of the Board, Chief
Executive Officer and Director of CDL since February 1997. He remains a Managing
Partner of Club Quarters, LLC, a hotel development and management company, since
October 1992. From June 1990 until October 1992, Mr. Van Ness served as Director
of Managing People  Productivity,  a consulting firm.  Prior thereto,  from 1982
until June 1990,  Mr. Van Ness held various  executive  offices with Cunard Line
Limited,  a passenger  ship and luxury hotel company,  including  Executive Vice
President  and Chief  Operating  Officer  of the  Cunard  Leisure  Division  and
Managing  Director  and  President  of the Hotels and  Resorts  Division.  Prior
thereto,  Mr. Van Ness served as the President of Seatrain Intermodal  Services,
Inc., a cargo shipping company.

          William T.  Brannan has served as the  President  and Chief  Operating
Officer of CDL since  November  1994.  From January 1991 until October 1994, Mr.
Brannan served as President,  Americas  Region - US Operations,  for TNT Express
Worldwide,  a major  European-based  overnight  express  delivery  company.  Mr.
Brannan has 23 years of experience in the transportation and logistics industry.

          Russell J. Reardon was appointed Chief  Financial  Officer in November
1999. Mr. Reardon has been Vice President - Treasurer of CDL since January 1999.
Prior  thereto,  from  September  1998 until January 1999 Mr.  Reardon was Chief
Financial Officer, Secretary and Vice President - Finance of Able Energy, Inc. a
regional home heating oil supplier.  From April 1996 until June 1998 Mr. Reardon
was  Chief  Financial  Officer,  Secretary  and  Vice  President  -  Finance  of
Logimetrics, Inc. a manufacturer of broad-band wireless communication devices.

          John  Ovens was  appointed  Vice  President  in  September  1999 after
serving in a  consulting  capacity  to the  Company  since  June 1999.  Prior to
joining the Company Mr. Ovens served as President,  CEO and Director for Express
Messenger Systems, Inc., a time-critical delivery company located in the Western
United States from July 1994 until  relocating to the East Coast and joining the
Company.

          Joseph J. Leonhard was appointed Vice  President,  Finance - Treasurer
in November  1999.  Mr.  Leonhard has been the Controller of CDL since June 1995
and was appointed to the position of  Vice-President in May 1996. Prior thereto,
from June 1987  until June  1995,  Mr.  Leonhard  was the  Controller  and Chief
Financial Officer of Scientific Devices East, Inc.

          Mark Carlesimo has been General  Counsel of CDL since  September 1997.
From July 1983 until September 1997, Mr.  Carlesimo  served as Vice President of
Legal Affairs of Cunard Line Limited.

          Jeremy Weinstein was appointed Controller in November,  1999. Prior to
his  appointment,  Mr.  Weinstein  served  as  the  Company's  Northeast  Region
Controller  since March 1997 and before  that was  controller  of the  Company's
Manhattan operation.

          Robin Dennis was appointed Vice President - Information  Technology of
CDL in January 1999  Immediately  prior to his  appointment,  Mr.  Dennis was an
independent  consultant providing information  technology advice to a wide range
of companies.  Prior  thereto Mr. Dennis served as Vice  President - Information
Technology for Cunard Line Limited from October 1988 until February 1997.

          Michael  Brooks has served as Director of the Company  since  December
1995, as Southeast  Region  Manager since August 1996 and as President of Silver
Star Express,  Inc., a subsidiary of the Company,  since November 1995. Prior to
the  merger of Silver  Star  Express,  Inc.  into the  Company,  Mr.  Brooks was
President of Silver Star Express,  Inc.  since 1988.  Mr. Brooks has 24 years of
experience in the same-day ground and distribution industries.  In addition, Mr.
Brooks is currently a Director of the Express Carriers Association, an associate
member of the National Small Shipment Traffic Conference and an affiliate of the
American Transportation Association.

          Randy Catlin has served as Air Division  Manager of the Company and as
Chief Executive Officer of SureWay Worldwide, a subsidiary of the Company, since
March  1997.  From 1984 until  1997,  Mr.  Catlin was  Vice-Chairman  of SureWay
Worldwide,  formerly known as Sureway Air Traffic Corporation. Mr. Catlin has 31

<PAGE>

years of  experience  in the air courier  industry.  In addition,  Mr. Catlin is
currently  Chairman of the annual  conference  of the Air Courier  Conference of
America,   and  has  served   previously   as  President  and  Director  of  the
organization.

Item 2. Properties -

          As  of  December  31,  1999,  the  Company  operated  from  78  leased
facilities (not including 6 authorized sales agent locations).  These facilities
are principally used for operations,  general and  administrative  functions and
training.  In addition,  several  facilities  also contain storage and warehouse
space.  The  table  below  summarizes  the  location  of the  Company's  current
facilities.

State                                                     Number of Facilities
-----                                                     --------------------
New York..........................................                19
Florida...........................................                 9
California........................................                 9
New Jersey........................................                 6
North Carolina....................................                 6
Massachusetts.....................................                 3
Georgia...........................................                 3
Louisiana.........................................                 2
Ohio..............................................                 2
Indiana...........................................                 2
Maine.............................................                 2
Missouri..........................................                 2
South Carolina....................................                 2
Tennessee.........................................                 2
Illinois..........................................                 1
Alabama...........................................                 1
Arizona...........................................                 1
Connecticut.......................................                 1
Maryland..........................................                 1
New Hampshire.....................................                 1
Virginia..........................................                 1
Delaware..........................................                 1
Washington........................................                 1


          The Company's  corporate  headquarters is located at 80 Wesley Street,
Hackensack,  New Jersey.  The Company believes that its properties are generally
well  maintained,  in  good  condition  and  adequate  for  its  present  needs.
Furthermore,  the Company believes that suitable additional or replacement space
will be available when required.

          As of December 31,  1999,  the Company  owned or leased  approximately
1,100 trucks of various types,  which are primarily operated by drivers employed
by the Company.  In addition,  certain of the Company's  employee drivers own or
lease their own vehicles.  The Company also hires  independent  contractors  who
typically  provide  their own  vehicles  and are  required to carry at least the
minimum amount of insurance required by state law.

          The Company's aggregate rental expense for the year ended December 31,
1999 was approximately $13.8 million. See Note 13 to the Company's  Consolidated
Financial Statements.

Item 3.  Legal Proceedings

          In February 1996,  Liberty Mutual Insurance Company ("Liberty Mutual")
filed  an  action  against  Securities  Courier  Corporation  ("Securities"),  a
subsidiary  of the Company,  Mr.  Vincent Brana and certain other parties in the
United States  District  Court for the Southern  District of New York  alleging,
among other things, that Securities Courier had fraudulently obtained automobile

<PAGE>

liability  insurance  from  Liberty  Mutual in the late 1980s and early 1990s at
below  market  rates.  This suit,  which  claims  common  law fraud,  fraudulent
inducement,  unjust  enrichment  and  violations of the civil  provisions of the
Federal  RICO  statute,  among  other  things,  seeks an  unspecified  amount of
compensatory  and punitive  damages from the  defendants,  as well as attorneys'
fees and other  expenses.  Three  additional  defendants  were added by way of a
second amended  complaint on April 9, 1998.  Securities and Mr. Brana have filed
cross claims against each of these  additional  defendants and certain  original
defendants  who had acted as  insurance  brokers for certain of the  policies at
issue. Under the terms of its acquisition of Securities, the Company has certain
rights   to   indemnification   from  Mr.   Brana.   In   connection   with  the
indemnification,  Mr. Brana has entered into a Settlement Agreement and executed
a Promissory  Note in the amount of up to $500,000 or such greater amount as may
be due for any  defense  costs or award  arising  out of this  suit.  Mr.  Brana
originally  delivered  100,000  shares of CDL  common  stock to the  Company  as
collateral  for the note  which was due on  December  1,  2000.  Because  of the
increased costs in defending the suit Mr. Brana  delivered an additional  50,000
shares of CDL common  stock to the Company and the Company  agreed to extend the
due date until  December 1, 2002.  In April 1999 a motion for summary  judgement
was filed and denied by the Court in December 1999.  The plaintiff  subsequently
filed a Third Amended Complaint for breach of contract and additional claims for
quantum  meruit.  The  parties  are  presently  participating  in  court-ordered
non-binding mediation in an attempt to resolve this litigation which extends the
time  to  respond  to the  Third  Amended  Complaint  until  thirty  days  after
completion  of the final  mediation  session,  subject to the Court's  approval.
Mediation sessions are scheduled through March 2000. Due to the continuing legal
costs in defending this suit, Mr. Brana has agreed to deliver 200,000 additional
shares of CDL common stock to the Company on or before May 31, 2000. The Company
does not believe that an adverse  determination in this matter would result in a
material adverse effect on the on the consolidated financial position or results
of operations of the Company.

          The Company is, from time to time,  a party to  litigation  arising in
the normal course of its business,  most of which  involves  claims for personal
injury and property  damage  incurred in connection with its same-day ground and
air delivery  operations.  Management  believes  that none of these actions will
have a material adverse effect on the consolidated financial position or results
of operations of the Company.

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

          Not applicable.


<PAGE>


                                     PART II

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

         The  Company's  Common  Stock has been  trading on the  American  Stock
Exchange under the symbol "CDV" since February 23, 1999. Prior to that date, the
Company's  Common Stock was included for quotation on the Nasdaq National Market
under the symbol  "CDLI." The following  table sets forth the high and low sales
prices for the Common Stock for 1998 and 1999.

                               1998                     Low               High
First Quarter                                          $2.63             $5.00
Second Quarter                                         $4.25             $5.50
Third Quarter                                          $3.00             $5.50
Fourth Quarter                                         $2.75             $3.75

                               1999                     Low               High
First Quarter                                          $3.06             $4.44
Second Quarter                                         $2.88             $4.81
Third Quarter                                          $2.94             $4.25
Fourth Quarter                                         $2.75             $4.13

          On March 10, 2000,  the last  reported  sale price of the Common Stock
was  $3.375 per  share.  As of March 10,  2000,  there  were  approximately  264
shareholders of record of Common Stock and, based on security position listings,
the Company believes there were  approximately  1,355 beneficial  holders of the
Common Stock.

Recent Sales of Unregistered Securities

          The following  shares of the Company's  Common Stock have been sold or
issued without being  registered  under the Securities Act of 1933: o On January
31, 1999 the Company issued 506,250 common stock purchase warrants in connection
with the private  placement of 12% Senior  Subordinated  Notes in the  principal
amount of $15,000,000.

          No  underwriter  or placement  agent was used in  connection  with the
above referenced securities  transactions,  and no underwriting commissions were
paid. No means of general solicitation was used in offering the securities.  The
securities  in each  transaction  were  sold to a  limited  group of  accredited
investors in private  placement  transactions,  exempt from  registration  under
Section 4(2) of the Securities Act or Regulation D thereunder. All purchasers of
the  Company's   securities  were  sophisticated   investors  who  qualified  as
accredited investors within the meaning of Rule 501(a) of Regulation D under the
Securities Act.

Dividends

          The  Company  has not  declared  or paid any  dividends  on its Common
Stock.  The Company  currently  intends to retain earnings to support its growth
strategy and does not anticipate  paying  dividends in the  foreseeable  future.
Payment of future dividends,  if any, will be at the discretion of the Company's
Board of Directors  after taking into account  various  factors,  including  the
Company's financial  condition,  results of operations,  current and anticipated
cash needs and plans for expansion.  The Company's ability to pay cash dividends
on the  Common  Stock  is also  limited  by the  terms of its  Revolving  Credit
Facility.  See Item 1. Business - Risk Factors - No Future Dividends and Item 7.
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations - Liquidity and Capital Resources.


<PAGE>


Item 6.  Selected Financial Data

                             SELECTED FINANCIAL DATA
                    (In thousands, except per share amounts)

          Consolidated  Delivery & Logistics,  Inc.  ("CDL") was founded in June
1994.  In  November  1995,  simultaneously  with the  closing of the CDL initial
public  offering (the  "Offering")  separate  wholly owned  subsidiaries  of CDL
merged  (the  "Merger")  with  each of 11  acquired  businesses  (the  "Founding
Companies").  Consideration for the acquisition of these businesses consisted of
a combination of cash and common stock of CDL. The assets and liabilities of the
acquired  businesses  at  September  30,  1995  were  recorded  by CDL at  their
historical amounts.

          The statement of operations data shown below for the nine month period
ended September 30, 1995 is that of the Combined Founding Companies prior to the
Merger (the "Combined  Founding  Companies") on a historical  basis.  During the
periods presented, the Combined Founding Companies were not under common control
or management and some were not taxable  entities.  Therefore the data presented
may not be comparable to or indicative of post-Merger results.

          The selected  financial data with respect to  Consolidated  Delivery &
Logistics,  Inc.'s  consolidated  statement  of  operations  for the years ended
December 31, 1997,  1998 and 1999 and with  respect to  Consolidated  Delivery &
Logistics,  Inc.'s  consolidated  balance sheet as of December 31, 1998 and 1999
have been derived from Consolidated  Delivery & Logistics,  Inc.'s  consolidated
financial  statements that appear elsewhere herein.  The financial data provided
below  should  be read  in  conjunction  with  these  accompanying  consolidated
financial  statements  and  notes  thereto  as well  as  "Item  7.  Management's
Discussion and Analysis of Financial Condition and Results of Operations."


<PAGE>

<TABLE>
<CAPTION>

                       SELECTED FINANCIAL DATA (Continued)
                    (In thousands, except per share amounts)
                         Statement of Operations Data:

                          Combined
                          Founding             Consolidated Delivery & Logistics, Inc. and Subsidiaries
                          Companies
                            (4)
                        -------------    ---------------------------------------------------------------------

                           For The
                          Nine Months                     For the Pro
                             Ended       For The Year     Forma Period
                           September       Ended            Ended                           For The Years Ended
                             30,        December 31,       December 31,                           December 31,
                            1995          1995 (3)         1995 (1)(2)       1996        1997         1998          1999
                         ------------    ----------       -------------  -----------   ---------     --------   ------------
<S>                        <C>            <C>              <C>             <C>         <C>          <C>           <C>
Revenue                    $109,168       $37,322          $146,490        $163,090    $171,502     $185,739      $224,564
Gross profit                 33,162        11,337            44,499          41,010      41,654       43,677        53,387
Operating income (loss)       3,971           578             4,549          (1,468)      2,702        4,847         7,668
Income (loss) from
  continuing                  2,112           (26)            2,086            (854)      1,657        2,311         2,911
operations (5)
Net income (loss)            $2,182         ($195)           $1,987           ($683)       $459       $2,311        $2,911
Basic income (loss) per
  share:
  Continuing operations                     ($.02)             $.32           ($.13)       $.25         $.35          $.40
  -Net income (loss)                        ($.10)             $.30           ($.10)       $.07         $.35          $.40
                                          ==========    ============        ========   =========    =========     =========
Diluted   income  (loss)
per
  -Share
  -Continuing operations                    ($.02)             $.31           ($.13)        $.25         $.34          $.37
  -Net income (loss)                        ($.10)             $.29           ($.10)        $.07         $.34          $.37
                                          =========     ============        =========  ==========   ==========    =========

Balance Sheet Data:

</TABLE>

<TABLE>

                                                          Consolidated Delivery & Logistics, Inc. and Subsidiaries
                                              ---------------------------------------------------------------------------------
                                                                                December 31,
                                              ---------------------------------------------------------------------------------
                                                     1995             1996             1997             1998             1999
                                                    ----------------  ---------      ----------       --------        ----------

<S>                                                 <C>               <C>              <C>            <C>               <C>
Working capital (deficit)                           $7,948            $5,472           $2,519         ($4,196)          $5,989
Equipment and leasehold
   Improvements, net                                 3,582             3,857            5,667           6,630            6,624
Total assets                                        31,856            35,001           36,159          52,088           68,786
Long-term    debt,   net   of
current  maturities                                  3,027             3,415            2,240           6,383           22,885
Stockholders' equity                                 8,311             8,730            8,614          11,407           17,369
</TABLE>


(1)  Reflects the results of operations of the Combined  Founding  Companies for
     the  period  from  January  1 to  September  30,  1995 and the  results  of
     operations of Consolidated Delivery & Logistics,  Inc. and Subsidiaries for
     the year ended December 31, 1995.
(2)  The  computation  of pro forma basic  earnings per share for the year ended
     December  31, 1995 is based upon (i) 493,869  shares of Common Stock issued
     prior to the Mergers,  (ii) 2,935,700  shares issued to the stockholders of
     the Founding  Companies in connection  with the Mergers and (iii) 3,200,000
     shares sold in the Offering.  The computation of pro forma diluted earnings
     per share for the year ended  December 31, 1995 is based upon the preceding
     shares  and  the  dilution   attributable  to  the  debentures  which  were
     convertible  into 180,995  shares of Common  Stock.  The  conversion of the
     stock  options  outstanding  at December  31,  1995 is not  included in the
     computation as the effect would be antidilutive.
(3)  The Company  selected  October 1, 1995 as the effective date of the Merger.
     The assets and liabilities of the Founding  Companies at September 30, 1995
     were  recorded  by CD&L at  their  historical  amounts.  The  statement  of
     operations  includes the results of  operations  of the Founding  Companies
     from October 1, 1995 through  December 31, 1995.  The results of operations
     for  Consolidated  Delivery & Logistics,  Inc. prior to the Mergers are not
     significant.
(4)  Pro Forma income tax provisions  have been  provided  for certain  Founding
     Companies.

<PAGE>

(5)  During  1997,  the  Company  disposed  of its  fulfillment  and direct mail
     operation.  Accordingly,  the operating  results and gain on disposition of
     the  fulfillment  and  direct  mail  business  have  been  reclassified  as
     discontinued operations for the periods presented.


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

Disclosure Regarding Forward Looking Statements.

          The Company is provided a "safe harbor" for forward-looking statements
contained  in this report by the  Private  Securities  Litigation  Reform Act of
1995. The Company may discuss forward looking information in this Report such as
its  expectations  for future  performance,  growth and acquisition  strategies,
liquidity and capital  needs and its future  prospects.  Actual  results may not
necessarily  develop as the Company  anticipates due to many factors  including,
but not  limited  to the  timing of certain  transactions,  unexpected  expenses
encountered,  inability to conclude  acquisitions  on  satisfactory  terms,  the
effect of economic  and market  conditions,  the impact of  competition  and the
factors listed in Item 1 - Risk Factors.  Because of these and other reasons the
Company's  actual  results  may  vary  materially  from   management's   current
expectations.

Overview

          The  Consolidated  Financial  Statements of the Company  including all
related  notes  which  appear  elsewhere  in  this  report  should  be  read  in
conjunction with this discussion of the Company's  results of operations and its
liquidity  and  capital  resources.   During  1998  the  Company  refocused  its
acquisition  efforts and acquired four same-day ground delivery  businesses.  In
1999,  the Company  acquired four  additional  companies.  See  "Business-Recent
Acquisitions."  Each of these  acquisitions  has been  accounted  for  using the
purchase method of accounting.

Results of Operations 1999 Compared with 1998

          Revenue for the year ended December  31,1999  increased $38.9 million,
or 20.9%,  to $224.6 million from $185.7 million for the year ended December 31,
1998. The increase included $19.0 million contributed by the businesses acquired
in 1999 as well as increased sales from the Company's existing operations.

          Ground delivery revenue increased $28.3 million,  or 21.7%,  including
$5.8 million from companies  acquired in 1999. Air delivery revenue increased by
$10.6  million,  or 19.1%.  Revenue from two 1999 air delivery  acquisitions  of
$13.2  million  was  partially  offset by a $2.6  million  decline  in  existing
revenues.

          Cost of revenue consists primarily of payments to employee drivers and
independent  contractors,  agents,  airlines,  other direct pick-up and delivery
costs and the costs of dispatching drivers and messengers. These costs increased
$29.1 million,  or 20.5% from $142.1 million for 1998 to $171.2 million in 1999.
Stated as a percentage of revenue,  these costs decreased to 76.2% for 1999 from
76.5% for 1998.  This  decrease  reflects the companies  success in  controlling
costs and the impact of the  synergies  from  companies  acquired in 1999.  As a
result of the revenue increase  discussed above,  gross profit increased by $9.7
million or 22.2%, from $43.7 million in 1998 to $53.4 million in 1999.

          Selling general and  administration  expense  ("SG&A")  includes costs
incurred at the terminal level related to taking orders and administrative costs
related to such  functions.  Also  included  are costs to support the  Company's
marketing and sales effort and the expense of maintaining  information  systems,
human  resources,  financial,  legal and other  administrative  functions.  SG&A
increased by $5.6 million, or 15.7%, from $35.7 million in 1998 to $41.3 million
in 1999. As a percentage of revenue SG&A  decreased to 18.4% in 1999 compared to
19.2% of revenue in 1998.  The  improvement  primarily  reflects  the  synergies
realized with the 1999 acquisitions.  Depreciation and amortization increased by
$1.3 million, or 41.9%, from $3.1 million for 1998 to $4.4 million for 1999.


<PAGE>

          As a result of the above,  operating income increased $2.9 million, or
60.4%,  from $4.8  million for the year ended  December 31, 1998 to $7.7 million
for the year  ended  December  31,  1999.  Stated as a  percentage  of  revenue,
operating income increased from 2.6% for 1998 to 3.4% for 1999.

          Interest  expense  increased by $2.0 million from $1.2 million in 1998
to $3.2 million in 1999. The net increase is primarily  attributable to the debt
incurred in connection with the 1999 acquisitions.

          Certain  trends that began in late 1999 are expected to continue  into
2000 and will have an adverse effect on the Company's  operating  results in the
short term.  The  Company  recently  lost  certain  pharmaceutical  distribution
customers  and has not yet replaced that revenue with new  customers.  There has
been upward pressure on certain of our direct  operating  costs,  primarily fuel
and related labor. We have instituted certain cost containment measures and have
put  an   increased   emphasis  on  the   previously   announced   product-based
restructuring.  While we can't predict the long-term  fluctuation of either fuel
or labor costs, we expect  continued  pressure on our direct  operating costs in
the near term.

Results of Operations 1998 Compared with 1997

          Revenue for the year ended December  31,1998  increased $14.2 million,
or 8.3%, to $185.7  million from $171.5  million for the year ended December 31,
1997  including $7.3 million  contributed by the businesses  acquired in 1998 as
well as increased sales from the Company's existing operations.

          Ground delivery revenue increased $15.2 million, or 13.2%,  consisting
of the $7.3 million  from  acquired  businesses  previously  mentioned  with the
balance of the increase resulting from the addition of new contract distribution
routes  as well as the  expansion  of  existing  routes.  Air  delivery  revenue
decreased  by $1.0  million,  or 1.8%,  due to the  elimination  during  1998 of
certain unprofitable business.

          Cost of revenue consists of, among other things,  payments to employee
drivers and independent contractors,  agents, airlines, other direct pick-up and
delivery costs and the costs of dispatching drivers and messengers.  These costs
increased $12.3 million,  or 9.5% from $129.8 million for 1997 to $142.1 million
in 1998.  Stated as a percentage of revenue,  these costs increased to 76.5% for
1998 from 75.7% for 1997,  or 0.8% year over year.  This  increase  reflects the
generally lower gross profit associated with contract distribution  services. As
a result of the revenue increase discussed above, gross profit increased by $2.0
million or 4.8%, from $41.7 million in 1997 to $43.7 million in 1998.

          Selling general and  administration  expenses  ("SG&A") includes costs
incurred at the terminal level related to taking orders and administrative costs
related to such  functions.  Also  included  are costs to support the  Company's
marketing and sales effort and the expense of maintaining  information  systems,
human  resources,  financial,  legal and other  administrative  functions.  SG&A
decreased by $1.0 million,  or 2.7%, from $36.7 million in 1997 to $35.7 million
in 1998.  Primarily  due to the  Company's  investment  in computer  systems and
support,  depreciation and amortization  increased by $800,000,  or 34.8%,  from
$2.3 million for 1997 to $3.1 million for 1998.

          As a result of the above,  operating income increased $2.1 million, or
77.8%,  from $2.7  million for the year ended  December 31, 1997 to $4.8 million
for the year  ended  December  31,  1998.  Stated as a  percentage  of  revenue,
operating income increased from 1.6% for 1997 to 2.6% for 1998.

          Income  from  continuing   operations  included  a  gain  of  $816,000
resulting  from the  sale of the  Company's  contract  logistics  subsidiary  in
January,  1997 with no similar  gain for 1998.  Interest  expense  increased  by
$100,000,  or 9.1%,  from $1.1 million in 1997 to $1.2 million in 1998.  The net
increase  results from a reduction in the  Company's  line of credit  because of
positive cash flow offset by borrowings  necessary to acquire four businesses in
1998.

          Net income  increased by $1.8  million  from  $459,000 in 1997 to $2.3
million  in 1998.  A loss  from  discontinued  operations  of $1.2  million  was
included in net income in 1997.  If the effects of the  discontinued  operations
were not  considered,  income from  continuing  operations  would have increased
$600,000 or 35.3%,  from $1.7 million in 1997 to $2.3 million for the year ended
December 31, 1998.

Liquidity and Capital Resources

          The  Company's  working  capital  increased  by $10.2  million  from a
deficit  of $4.2  million as of  December  31,  1998 to working  capital of $6.0
million as of December  31, 1999.  The increase is a result of the  repayment of
the  Company's  short  term  borrowings  using the  proceeds  of the 12%  senior
subordinated notes.

<PAGE>

          Cash and cash equivalents increased slightly during 1999. Cash of $3.2
million  was  provided  from  operations  and $4.6  million  from net  financing
activities  while $7.8 million was used to acquire property and equipment and to
acquire four businesses during 1999.

          Capital expenditures  amounted to $2.4 million,  $2.2 million and $1.2
million for the years ended December 31, 1999, 1998 and 1997 respectively. These
expenditures   primarily  upgraded  and  expanded  computer  system  capability,
expanded and maintained  Company  facilities in the ordinary  course of business
and upgraded the Company fleet. The Company  incurred capital lease  obligations
of $549,000 in an agreement to lease 40 vehicles in 1999 and $2.5 million during
1997 in an agreement to lease 175 vehicles.

          Outstanding borrowings under our credit facility were $7.2 million and
we had $3.3 million  outstanding in Standby Letters of Credit as of December 31,
1999.  We also had $15.0 million in principal  outstanding  under our 12% Senior
Subordinated  Notes,  $13.9  million net of  unamortized  discount.  We also had
$729,000 of outstanding  debentures,  $1.5 million of capital lease  obligations
and various  equipment  notes and $9.2 million of seller  financed  debt. We had
$8.2 million  available  under our credit  facility  and $2.5 million  available
under our equipment acquisition term loan facility.

          Management believes that cash flows from operations, together with its
borrowing  capacity (see Note 9 of the  accompanying  notes to the  consolidated
financial  statements)  are  sufficient to support the Company's  operations and
general business and capital liquidity requirements for the foreseeable future.

          Our 2000  financial  results to date have been  impacted  adversely by
recent general labor shortages and gas price increases.  So long as such factors
continue,  the Company  expects to  experience  a negative  impact on its profit
margins.

Year 2000 Compliance

          The  Company  initiated  a program in 1997 to assess the risks of Year
2000 noncompliance, remediate all non-compliant systems, assess the readiness of
key third parties and develop  contingency  plans.  The critical  aspects of the
Year 2000  readiness  program were  completed in the third quarter of 1999.  The
Company has not experienced any significant  business disruptions related to the
transition  to the Year 2000;  however,  we  continue  to  actively  monitor our
systems  and  third  party  suppliers  throughout  most  of the  first  quarter.
Contingency  plans are in place to prevent the failure of critical  systems from
having a material  effect on the  Company  and  address  the risk of third party
noncompliance.  Total costs to address the Year 2000 issue were not  material to
the Company's financial position, results of operations or cash flows.

Inflation

          While inflation has not had a material impact on the Company's results
of operations for the last three years,  fluctuations  in fuel prices can and do
affect the Company's operating costs.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

          CDL's major "market risk" exposure is the effect of changing  interest
rates.  CDL manages its  interest  expense by using a  combination  of fixed and
variable  rate debt.  At December  31, 1999,  the  Company's  debt  consisted of
approximately  $25.4 million of fixed rate debt with a weighted average interest
rate of 10.3% and $7.2  million of  variable  rate debt with a weighted  average
interest rate of 9.8%.  The amount of variable rate debt  fluctuates  during the
year based on CD&L's cash requirements. Maximum borrowings of variable rate debt
at any quarter end were $7.2  million.  If interest  rates on such variable rate
debt were to increase by 85 basis points (approximately one-tenth of the rate at
December 31, 1999),  the net impact to the Company's  results of operations  and
cash flows would be a decrease of approximately $65,000.


<PAGE>


Item 8.  Financial Statements and Supplementary Data.





                          INDEX TO FINANCIAL STATEMENTS


                                                                       Page

Report of Independent Public Accountants ............................... 20

Consolidated Balance Sheets as of December 31, 1999 and 1998............ 21

Consolidated Statements of Operations For The Years Ended
    December 31, 1999, 1998, and 1997................................... 22

Consolidated Statements of Changes in Stockholders' Equity
    For The Years Ended December 31, 1999, 1998 and 1997................ 23

Consolidated Statements of Cash Flows For The Years Ended
    December 31, 1999, 1998 and 1997.................................... 24

Notes to Consolidated Financial Statements.............................. 25


<PAGE>




REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Consolidated Delivery & Logistics, Inc.:


We have audited the  accompanying  consolidated  balance sheets of  Consolidated
Delivery &  Logistics,  Inc. (a Delaware  corporation)  and  subsidiaries  as of
December  31,  1999  and  1998,  and  the  related  consolidated  statements  of
operations,  stockholders'  equity and cash flows for each of the three years in
the period ended December 31, 1999. These consolidated  financial statements and
the  schedule  referred  to  below  are  the  responsibility  of  the  Company's
management.  Our  responsibility is to express an opinion on these  consolidated
financial statements and schedule based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of  Consolidated
Delivery & Logistics,  Inc. and  subsidiaries  as of December 31, 1999 and 1998,
and the results of their  operations  and their cash flows for each of the three
years in the period ended  December  31, 1999,  in  conformity  with  accounting
principles generally accepted in the United States.

Our  audits  were  made for the  purpose  of  forming  an  opinion  on the basic
financial  statements  taken as a whole.  The  schedule  listed  in the index to
financial statement schedules is the responsibility of the Company's  management
and is  presented  for purposes of complying  with the  Securities  and Exchange
Commission's  rules  and is not part of the  basic  financial  statements.  This
schedule has been subjected to the auditing  procedures applied in the audits 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


Roseland, New Jersey
February 25, 2000



<PAGE>

<TABLE>
<CAPTION>

                           CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                                         CONSOLIDATED BALANCE SHEETS
                                         (in thousands except share data)


                                                       ASSETS
                                                                                             December 31,
                                                                                 -------------------------------------
                                                                                          1999                1998
                                                                                ------------------    ----------------
CURRENT ASSETS:
<S>                                                                                    <C>                  <C>
  Cash and cash equivalents, including $34 and $73 of restricted cash
     in 1999 and 1998, respectively (Note 2)                                               $339                $295
  Accounts receivable, less allowance for doubtful accounts of $1,939
     and $1,865 in 1999 and 1998, respectively (Note 9)                                  27,560              24,491
  Deferred income taxes (Notes 2 and 11)                                                    876               1,456
  Prepaid expenses and other current assets (Note 5)                                      3,445               1,104
                                                                                ------------------  ------------------

     Total current assets                                                                32,220              27,346

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net (Notes 2 and 6)
                                                                                          6,624               6,630
INTANGIBLE ASSETS, net (Notes 2, 3 and 7)                                                27,932              16,491
SECURITY DEPOSITS AND OTHER ASSETS (Note 17)                                              2,010               1,621
                                                                                ------------------  ------------------

           Total assets                                                                 $68,786             $52,088
                                                                                ==================  ==================




                                     LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term borrowings (Note 9)                                                         $7,188             $13,577
  Current maturities of long-term debt (Note 9)                                           2,513               3,181
  Accounts payable                                                                        8,394               6,281
  Accrued expenses and other current liabilities (Note 8)                                 8,136               7,271
  Income taxes payable (Notes 2 and 11)                                                       -               1,232
                                                                                ------------------  -------------------
     Total current liabilities                                                           26,231              31,542
                                                                                ------------------  -------------------
LONG-TERM DEBT, net of current maturities (Note 9)                                       22,885               6,383
                                                                                ------------------  -------------------
DEFERRED INCOME TAXES PAYABLE (Notes 2 and 11)                                            1,625               1,717
                                                                                ------------------  -------------------
OTHER LONG-TERM LIABILITIES                                                                 676               1,039
                                                                                ------------------  -------------------
COMMITMENTS AND CONTINGENCIES (Notes 13 and 14)

STOCKHOLDERS' EQUITY (Notes 13, 14, 15 and 16):
  Preferred stock, $.001 par value; 2,000,000 shares authorized; no
     shares issued and outstanding                                                            -                   -
  Common stock, $.001 par value; 30,000,000 shares authorized,
     7,353,458 and 6,843,702 shares issued and outstanding in
     1999 and 1998, respectively                                                              7                   7
  Additional paid-in capital                                                             12,721               9,670
  Treasury stock, 29,367 shares at cost                                                    (162)               (162)
  Retained earnings                                                                       4,803               1,892
                                                                                ------------------  -------------------

      Total stockholders' equity                                                         17,369              11,407
                                                                                ------------------  -------------------

            Total liabilities and stockholders' equity                                  $68,786             $52,088
                                                                                ==================  ===================


 The accompanying notes to consolidated financial statements are an integral part of these balance sheets.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                             CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                       (in thousands except per share data)



                                                                           For the Years Ended December 31,
                                                          -------------------------------------------------------------------
                                                                 1999                     1998                   1997
                                                          ---------------------    ---------------------  -------------------

<S>                <C>                                         <C>                      <C>                     <C>
     Revenue (Note 2)                                          $224,564                 $185,739                $171,502
     Cost of revenue                                            171,177                  142,062                 129,848
                                                          ---------------------    ----------------------  ------------------

       Gross profit                                              53,387                   43,677                  41,654

     Selling, general and administrative expenses                41,290                   35,709                  36,681
     Depreciation and amortization                                4,429                    3,121                   2,271
                                                          ---------------------    ----------------------  ---------------------

       Operating income                                           7,668                    4,847                   2,702

     Other (income) expense
       Gain on sale of subsidiary, net (Note 18)                     -                        -                     (816)
       Interest expense                                           3,216                    1,246                   1,144
       Other income, net                                           (354)                    (126)                   (171)
                                                              ---------------------    ----------------------  ---------------------
                                                              ---------------------    ----------------------  ---------------------
                                                                  2,862                    1,120                     157
                                                              ---------------------    ----------------------  ---------------------

     Income  from  continuing   operations  before  provision
       for  income taxes                                          4,806                    3,727                   2,545

     Provision for  income taxes
      (Notes 2 and 11)                                            1,895                    1,416                     888
                                                              ---------------------    ----------------------  ---------------------

     Income  from continuing operations                           2,911                    2,311                   1,657
                                                              ---------------------    ----------------------  ---------------------

     Discontinued operations (Note 4)                                -
       Income  (loss) from  discontinued  operations,  net of
       income taxes                                                  -                        -                   (1,221)
       Gain on  disposal  of  assets,  net of  provision  for        -
       income taxes                                                                           -                       23
                                                              ---------------------    ----------------------  ---------------------
     Income (loss) from discontinued operations                                               -                   (1,198)
                                                              ---------------------    ----------------------  ---------------------
        Net income                                               $2,911                   $2,311                  $  459
                                                              =====================    ======================  =====================

     Basic income (loss) per share:
       Continuing operations                                       $.40                     $.35                  $  .25
       Discontinued operations                                        -                        -                    (.18)
                                                              =====================    ======================  =====================
       Net income  per share                                       $.40                     $.35                    $.07
                                                              =====================    ======================  =====================

     Diluted income (loss) per share:
       Continuing operations                                       $.37                     $.34                    $.25
       Discontinued operations                                        -                        -                    (.18)
                                                              ---------------------    ----------------------  ---------------------
       Net income  per share                                       $.37                      $.34                   $.07
                                                              =====================    ======================  =====================
     Basic weighted average common
       shares outstanding                                          7,214                    6,662                  6,672
                                                              =====================    ======================  =====================
     Diluted weighted average common
       shares outstanding                                          7,868                    6,839                  6,675
                                                              =====================    ======================  =====================


 The accompanying notes to consolidated financial statements are an integral part of these statements.
</TABLE>


<PAGE>

<TABLE>
<CAPTION>

                             CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                            CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                               FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
                                         (in thousands except share data)

                                                                                               Retained
                                                                  Additional                   Earnings           Total
                                             Common Stock           Paid-in     Treasury     (Accumulated     Stockholders'
                                      ---------------------------
                                         Shares        Amount       Capital       Stock        Deficit)           Equity
                                      ----------------------------------------------------------------------------------------
<S>                                    <C>              <C>       <C>            <C>             <C>              <C>
BALANCE AT DECEMBER 31, 1996            6,795,790        $7        $9,601         $ -             ($878)           $8,730
Retirement of common stock
       pursuant  to saleof               (137,239)        -          (600)           -              -                (600)
     subsidiary
Shares issued in connection with
       acquisition of a business            8,333         -            25           -               -                  25
Net income                                    -           -             -           -               459               459
                                      ----------------------------------------------------------------------------------------
BALANCE AT
       DECEMBER 31,1997                 6,666,884         7         9,026           -              (419)            8,614
Treasury shares acquired in
        connection with adjustment
       of purchase price of a
       business acquired                  (29,367)        -             -         (162)             -                (162)
Shares issued in connection with
       acquisitions of businesses         206,185         -           644           -               -                 644
Net income                                    -           -             -           -             2,311             2,311
                                      ----------------------------------------------------------------------------------------
BALANCE AT
        DECEMBER 31, 1998               6,843,702         7         9,670         (162)           1,892            11,407
Discount for Warrants issued in
       connection with private
       placement                              -           -         1,265           -               -               1,265
Shares issued in connection with
       Employee Stock Purchase
       Plans                              73,172          -           251           -               -                 251
Shares issued in connection with
       executive compensation             47,051          -           150           -               -                 150
Shares issued in connection with
       acquisitions of businesses        389,533          -         1,385           -               -               1,385
Net income                                    -           -             -           -             2,911             2,911
                                      ----------------------------------------------------------------------------------------
BALANCE AT DECEMBER 31, 1999           7,353,458         $7       $12,721        $(162)          $4,803           $17,369
                                      ========================================================================================


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

</TABLE>


<PAGE>

<TABLE>
<CAPTION>



                                                 CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                      (in thousands)


                                                                                            For The Years Ended December 31,
                                                                                  --------------------------------------------------
   CASH FLOWS FROM OPERATING ACTIVITIES:                                                1999              1998             1997
                                                                                  ----------------- ---------------  ---------------
<S>                                                                                    <C>               <C>               <C>
     Net income                                                                        $2,911            $2,311            $459
     Adjustments to reconcile net income to net cash provided by
        Operating activities -
     Gain on disposal of equipment and leasehold improvements                            (135)              (21)            (22)
     Gain on sale of subsidiary                                                             -                 -            (816)
     Loss from discontinued operations                                                      -                 -           1,221
     Gain on disposal of assets of discontinued operations                                  -                 -             (23)
     Depreciation and amortization                                                      4,429             3,121           2,271
     Provision for doubtful accounts                                                      973             1,151           1,117
     Deferred income tax provision (benefit)                                              488               300             (35)
     Changes in operating assets and liabilities
        (Increase) decrease in -
          Accounts receivable                                                          (2,699)           (2,100)         (2,005)
          Prepaid expenses and other current assets                                    (2,230)              630            (415)
          Other assets                                                                   (415)             (298)           (303)
     Increase (decrease) in -
        Accounts payable, accrued liabilities and income taxes payable                    688               227           1,359
        Other long-term liabilities                                                      (790)             (343)           (236)
                                                                                  ----------------- ---------------  ---------------
           Net cash provided by operating activities of continuing
             Operations                                                                 3,220             4,978           2,572
                                                                                  ----------------- ---------------  ---------------

   CASH FLOWS FROM INVESTING ACTIVITIES:
     Additions to equipment and leasehold improvements                                 (2,423)           (2,245)         (1,191)
     Proceeds from sales of equipment and leasehold improvements                          397               144              112
     Proceeds from sale of assets of discontinued operations                                -                 -              125
     Purchases of businesses, net of cash acquired                                     (5,778)           (7,233)               -
                                                                                 ----------------- ---------------   ---------------
           Net cash used in investing activities                                       (7,804)           (9,334)            (954)
                                                                                 ----------------- ---------------  ---------------

   CASH FLOWS FROM FINANCING ACTIVITIES:
     Short-term borrowings (repayments), net                                           (6,389)            6,217              160
     Proceeds from long-term debt                                                      15,000               150                -
     Repayments of long-term debt                                                      (4,478)           (3,450)          (1,393)
     Issuance of warrants in connection with long-term financing                        1,265                 -                -
     Issuance of stock                                                                    401                 -                -
     Deferred financing costs                                                          (1,171)              (36)            (125)
                                                                                 ----------------- ---------------  ---------------
           Net cash provided by (used in) financing activities                          4,628             2,881           (1,358)
                                                                                 ----------------- ---------------  ---------------

     CASH USED BY DISCONTINUED OPERATIONS                                                  -                (42)            (205)
                                                                                 ================= ===============  ================
            Net increase (decrease) in cash and cash equivalents                           44            (1,517)              55
     CASH AND CASH EQUIVALENTS, beginning of year                                         295             1,812            1,757
                                                                                 ================= ===============  ===============
     CASH AND CASH EQUIVALENTS, end of year                                              $339              $295           $1,812
                                                                                 ================= ===============  ===============


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

</TABLE>



<PAGE>


            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 (1)     ORGANIZATION AND BUSINESS:

Consolidated  Delivery & Logistics,  Inc.  ("the  Company")  was founded in June
1994. In November 1995, simultaneously with the closing of the Company's initial
public  offering (the  "Offering")  separate  wholly owned  subsidiaries  of the
Company  merged  (the  "Merger")  with  each  of  eleven  acquired   businesses.
Consideration for the acquisition of these businesses consisted of a combination
of cash and common stock of the Company,  par value $0.001 per share. The assets
and  liabilities of the acquired  businesses at September 30, 1995 were recorded
by the Company at their historical amounts.

Consolidated  Delivery & Logistics,  Inc. and  Subsidiaries  ("CDL") provides an
extensive  network of same-day ground and air delivery  services to a wide range
of commercial,  industrial and retail customers.  CDL ground delivery operations
currently are concentrated on the East Coast, with a strategic  presence both in
the  Midwest and on the West  Coast.  CDL air  delivery  services  are  provided
throughout the United States and to major cities around the world.

 (2)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Principles of Consolidation -

The accompanying  consolidated  financial statements include the accounts of the
Company and its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated.

Use of Estimates in Preparation of the Financial Statements -

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  consolidated  financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents -

CDL considers all highly liquid  investments  with original  maturities of three
months or less to be cash  equivalents.  Cash  equivalents  are carried at cost,
which approximates  market value.  Included in cash and cash equivalents is cash
restricted  for a national  marketing  and  advertising  program for CDL's sales
agency agreements (see Note 13).

Equipment and Leasehold Improvements -

Equipment  and  leasehold  improvements  are recorded at cost.  Depreciation  is
computed using the  straight-line  method over the estimated useful lives of the
assets.  Leasehold  improvements  and  assets  subject  to  capital  leases  are
amortized over the shorter of the terms of the leases or lives of the assets.

Deferred Financing Costs -

The costs  incurred for  obtaining  financing,  including  all related legal and
accounting  fees are included in other assets in the  accompanying  consolidated
balance sheets and are amortized over the life of the related financing from 2 -
7 years.

Intangible Assets -

Intangible   assets  consist  of  goodwill,   customer  lists,  and  non-compete
agreements.  Goodwill  represents the excess of the purchase price over the fair
value of assets of businesses acquired and is amortized on a straight-line basis
over 25 years  to 40  years.  Customer  lists  and  non-compete  agreements  are
amortized  over the  estimated  period to be  benefited,  generally  from 3 to 5
years.

<PAGE>

Revenue Recognition -

Revenue is  recognized  when the  shipment is  completed,  or when  services are
rendered  to  customers,  and  expenses  are  recognized  as  incurred.  Certain
customers pay in advance, giving rise to deferred revenue.

Income Taxes -

CDL accounts for income taxes utilizing the liability approach.  Deferred income
taxes are provided for  differences in the recognition of assets and liabilities
for tax and financial reporting purposes. Temporary differences result primarily
from  accelerated  depreciation  and  amortization  for tax purposes and various
accruals and reserves being deductible for tax purposes in future periods.

Long-Lived Assets -

CDL reviews its long-lived assets and certain related intangibles for impairment
whenever changes in circumstances  indicate that the carrying amount of an asset
may not be  fully  recoverable.  The  measurement  of  impairment  losses  to be
recognized is based on the  difference  between the fair values and the carrying
amounts of the assets.  Impairment would be recognized in operating results if a
diminution in value occurred. The Company does not believe that any such changes
have occurred.

Fair Value of Financial Instruments -

Due to the  short  maturities  of CDL's  cash,  receivables  and  payables,  the
carrying value of these financial  instruments  approximates  their fair values.
The fair value of CDL's debt is estimated  based on the current rates offered to
CDL for debt with similar remaining  maturities.  CDL believes that the carrying
value of its debt estimates the fair value of such debt instruments.

Stock Based Compensation -

Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation"  ("SFAS 123")  requires that an entity  account for employee stock
compensation under a fair value based method.  However,  SFAS 123 also allows an
entity  to  continue  to  measure  compensation  cost for  employee  stock-based
compensation  plans  using  the  intrinsic  value  based  method  of  accounting
prescribed by APB Opinion No. 25,  "Accounting  for Stock Issued to  Employees,"
("Opinion 25"). CDL has elected to continue to account for employee  stock-based
compensation  under Opinion 25 and provide the required pro forma disclosures as
if the fair value based  method of  accounting  under SFAS 123 had been  applied
(see Note 14). Income (Loss) Per Share -

Basic  earnings per share  represents  net income (loss) divided by the weighted
average shares  outstanding.  Diluted  earnings per share  represents net income
(loss)  divided  by  weighted  average  shares  outstanding   adjusted  for  the
incremental dilution of common stock equivalents

A  reconciliation  of weighted  average  common shares  outstanding  to weighted
average common shares outstanding assuming dilution follows:

<TABLE>
<CAPTION>

                                                           1999                1998                 1997
                                                       --------------      -------------        -------------
                                                       --------------      -------------        -------------
<S>                                                      <C>                 <C>                  <C>
Basic weighted average common
  Shares outstanding                                      7,214,426          6,662,258            6,672,284
Effect of dilutive securities:
  Stock options and warrants                                648,952            175,249                2,656
  Employee stock purchase plan                                4,450              1,496                  -
                                                       --------------      -------------        -------------
Diluted weighted average common
  shares outstanding                                      7,867,829          6,839,003            6,674,940
                                                       ==============      =============        =============
</TABLE>

The following  common stock  equivalents  were excluded from the  computation of
diluted  Earnings Per Share because the exercise or conversion price was greater
than the average market price of common shares -

<TABLE>
<CAPTION>

                                                              1999                1998                 1997

<S>                                                          <C>                 <C>                  <C>
Stock options                                                522,546             573,684              685,038
Subordinated convertible debentures                          145,750             161,818              180,995
Seller financed convertible notes                            593,333             685,470                 -
                                                          ==============      =============        =============

</TABLE>

Reclassifications -

Certain  reclassifications  have  been  made to the  prior  years'  consolidated
financial statements in order to conform to the 1999 presentation.

(3)      BUSINESS COMBINATIONS:

On February  16,  1999,  CDL  entered  into and  consummated  an asset and stock
purchase  agreement  with  its  subsidiary,   Sureway  Air  Traffic  Corporation
("Sureway") and Victory Messenger  Service,  Inc., Richard Gold, Darobin Freight
Forwarding Co.,  Inc.,("Darobin") and The Trust Created Under Paragraph Third of
the Last Will and Testament of Charles Gold (the "Trust"),  (collectively  "Gold
Wings"),  whereby Sureway purchased all of the outstanding shares of the capital
stock of Darobin and certain of the assets and liabilities of the other sellers.
The purchase price was comprised of approximately $3.0 million in cash including
estimated direct  acquisition  costs,  $1,650,000 in a 7% subordinated note (the
"Note") and 200,000 shares of CDL common stock at $3.875 per share.  The Note is
due April 16, 2001 with interest payable quarterly commencing April 1, 1999. The
Note is subordinate to all existing or future senior debt of CDL. In addition, a
contingent  earn out in the aggregate  amount of up to $520,000 is payable based
on the  achievement  of  certain  financial  goals  during  the two year  period
following the closing. The earn out is payable 55% in cash and 45% in CDL common
stock.

On April 30, 1999, CDL entered into and consummated an asset purchase  agreement
with its subsidiary,  Silver Star Express, Inc. ("Silver Star") and Metro Parcel
Service,  Inc., Nathan Spaulding and Kelly M. Spaulding,  (collectively,  "Metro
Parcel"), whereby Silver Star purchased certain of the assets and liabilities of
Metro  Parcel.  The purchase  price was comprised of  approximately  $710,000 in
cash,  $202,734 in a 7%  subordinated  note (the "Metro Parcel Note") and 40,000
shares of CDL's  common  stock at $3.25 per share.  The Metro Parcel Note is due
April 30, 2001 with interest payable  quarterly  commencing  August 1, 1999. The
Metro Parcel Note is subordinate to all existing or future senior debt of CDL.

On April 30, 1999, CDL entered into and consummated an asset purchase  agreement
with its subsidiary, Clayton/National Courier Systems, Inc. ("Clayton/National")
and Westwind Express,  Inc., Logistics Delivery Systems,  Inc., Fastrak Delivery
Systems,   Inc.,  Sierra  Delivery   Services,   Inc.,  and  Steven  S.  Keihner
(collectively,  "Westwind"),  whereby Clayton/National  purchased certain of the
assets  and  liabilities  of  Westwind.  The  purchase  price was  comprised  of
approximately  $2,650,000 in cash,  $1,680,000 in various 7% subordinated  notes
(the  "Westwind  Notes") and 149,533  shares of CDL's  common stock at $3.21 per
share.  The Westwind  Notes are  comprised of two-year  notes due April 30, 2001
with a total principal  amount of $1,200,000 and three-year  notes due April 30,
2002 with a total principal  amount of $480,000.  Interest on the Westwind Notes
is  payable  quarterly   commencing  July  31,  1999.  The  Westwind  Notes  are
subordinate  to all  existing  or future  senior  debt of CDL.  In  addition,  a
contingent  earn out in the aggregate  amount of up to $700,000 is payable based
on the  achievement  of  certain  financial  goals  during  the two year  period
following  the closing.  The earn out is payable 60% in cash and 40% in one year
promissory notes bearing interest at a rate of 7% per annum having similar terms
as the Westwind Notes referred to above.

On May 10, 1999, CDL entered into and  consummated  an asset purchase  agreement
(the "Skycab Purchase Agreement") with its subsidiary,  Sureway and Skycab, Inc.
and Martin Shulman (collectively,  "Skycab"),  whereby Sureway purchased certain
assets of Skycab.  The purchase price was comprised of approximately  $78,100 in
cash. In addition, a contingent earn out is payable for

<PAGE>


sixteen  quarters  following  the closing  date.  The amount of the earn-out per
quarter is the greater of either  $6,250 or 15% of  collected  revenues  for the
three-month period then ended, as defined in the Skycab Purchase Agreement.

Any payments of the earnouts discussed above will increase the goodwill recorded
for  the  acquisition  of  the  applicable  company.  The  amortization  of  any
additional  goodwill and the conversion of any of the convertible  notes payable
into common  stock will  negatively  affect the  Company's  future  earnings per
share.

CDL financed each of the above  acquisitions  using  proceeds from its revolving
credit  facility  with  First  Union  Commercial  Corporation.  All of the above
transactions  have been  accounted for under the purchase  method of accounting.
Accordingly,  the allocation of the cost of the acquired  assets and liabilities
have been made on the basis of the estimated fair value. The aggregate amount of
goodwill  recorded for the Gold Wings,  Metro Parcel and Skycab  acquisitions is
$6.4  million to be  amortized  over 25 years.  The  goodwill  for the  Westwind
acquisition  is $5.1 million to be  amortized  over 40 years.  The  consolidated
financial  statements include the operating results of Gold Wings, Metro Parcel,
Westwind, and Skycab from their respective acquisition dates.

The following summarized unaudited pro forma financial  information was prepared
assuming  that the Gold Wings,  Metro Parcel,  Westwind and Skycab  acquisitions
occurred  on the  first  day of such  periods  and  include  certain  pro  forma
adjustments.  This information is not necessarily  indicative of the results the
Company would have obtained had these events actually  occurred on such dates or
of the  Company's  actual or future  results  (in  thousands,  except  per share
amounts).

<TABLE>
<CAPTION>


                                                               For the Year                  For the Year
                                                                  Ended                         Ended
                                                            December 31, 1999             December 31, 1998
                                                               (Unaudited)                   (Unaudited)
<S>                                                            <C>                           <C>
         Revenue                                                 $229,598                      $203,979
         Income from operations                                     7,889                         5,589
         Net income                                                $2,945                        $2,359

         Basic net income per share                                  $.41                          $.35
         Diluted net income per share                                $.37                          $.34

</TABLE>

During 1998, the Company acquired four businesses in transactions  accounted for
as purchases.  The total  consideration paid in these transactions is contingent
upon future activity and is estimated to aggregate $14.5 million, which consists
of $8.0  million  paid in cash and 206,185  shares of Common  Stock at $3.44 per
share.  Of this amount $13.9 million has been assigned to the excess of purchase
price over net assets of businesses  acquired  (goodwill)  and other  intangible
assets.  The purchase price was subsequently  reduced by approximately  $754,000
during 1999 due to actual revenue not reaching  projected  revenue as stipulated
in the purchase agreements.  Accordingly, goodwill and seller financed debt were
reduced by this amount to reflect the  reduction  in the purchase  price.  Final
determinations of the individual acquisition costs will be made by May 2003. The
results of the  acquired  businesses  have been  reflected  in the  accompanying
consolidated statements of operations since their respective acquisition dates.

(4)      DISCONTINUED OPERATIONS:

On December 31, 1997,  the Company  entered into an agreement  providing for the
sale of certain assets of its fulfillment and direct mail business.  The selling
price for the assets was  $850,000 and is comprised of $125,000 in cash with the
remainder in the form of a  promissory  note (the "Note  Receivable").  The Note
Receivable  bore  interest at the rate of 6% per annum,  with  interest  only in
monthly  installments  during  1998.   Commencing  February  1,  1999  the  Note
Receivable  was to be paid in equal monthly  installments  of $14,016  including
principal and interest through January 1, 2004. The Note Receivable was included
in prepaid  expenses in the amount of $117,000  and in security  deposits in the
amount of $608,000 at December 31, 1998 in the accompanying consolidated balance
sheets.  The purchaser has defaulted on the balance of the note and made or will
make no payments  since it ceased  business in July 1999.  The Company wrote off
the remaining balance of approximately $662,000 during 1999.

Accordingly,  the  financial  position,  operating  results  and the gain on the
disposition  of the  Company's  fulfillment  and direct mail  business have been
segregated  from  continuing  operations  and  reclassified  as  a  discontinued
operation in the accompanying consolidated financial statements.

<PAGE>

Results from the discontinued  fulfillment and direct mail business for the year
ended  December 31, 1997 included  $5,937 of Revenue,  a loss from  discontinued
operations  of $1,221  (net of an income tax  benefit of $811) and a gain on the
disposal of assets of $23 (net of an income tax provision of $15).

(5)      PREPAID EXPENSES AND OTHER CURRENT ASSETS:

Prepaid expenses and other current assets consist of the following
(in thousands) -

<TABLE>
<CAPTION>

                                                                                        December 31,
                                                                        ---------------------------------------------
                                                                               1999                      1998
                                                                        --------------------      -------------------
<S>                                                                             <C>                       <C>
  Other receivables                                                             $976                      $478
  Prepaid supplies and equipment deposits                                        538                       146
  Prepaid insurance                                                            1,220                       151
  Prepaid rent                                                                    66                       119
  Prepaid income taxes                                                           470                         -
  Other                                                                          176                       210
                                                                        --------------------      -------------------
                                                                              $3,445                    $1,104
                                                                        ====================      ===================

</TABLE>

(6)      EQUIPMENT AND LEASEHOLD IMPROVEMENTS:

Equipment and leasehold improvements consist of the following (in thousands) -
<TABLE>
<CAPTION>

                                                                                                       December 31,
                                                                                              --------------------------------
                                                                             Useful Lives            1999              1998
                                                                             ------------     ---------------   --------------
<S>                                                                            <C>                  <C>               <C>
           Transportation and warehouse equipment                              3-7 years            $8,314            $7,814
           Office equipment                                                    3-7 years             6,826             6,203
           Other equipment                                                     5-7 years               860             1,018
           Leasehold improvements                                             Lease period           1,498             1,516
                                                                                               ---------------   --------------
                                                                                                    17,498            16,551
           Less - accumulated depreciation and amortization                                        (10,874)           (9,921)
                                                                                               ---------------   --------------
                                                                                                    $6,624            $6,630
                                                                                               ===============   ==============

Leased equipment under capitalized leases (included above) consists of the following  (in thousands) -
</TABLE>

<TABLE>
<CAPTION>

                                                                                                   December 31,
                                                                                       --------------------------------
                                                                                             1999              1998
                                                                                       ----------------  --------------
<S>                                                                                         <C>               <C>
       Equipment                                                                            $3,839            $3,635
       Less - accumulated amortization                                                      (2,506)           (1,835)
                                                                                       ----------------  --------------

                                                                                            $1,333            $1,800
                                                                                       ================  ==============

The Company  incurred  capital  lease  obligations  of $564,000 in 1999 for vehicles and  warehouse  equipment  and
$114,000 during 1998 for office equipment.

</TABLE>

(7)      INTANGIBLE ASSETS:

Intangible assets (see Note 3) consist of the following (in thousands) -

<TABLE>
<CAPTION>

                                                                                                        December 31,
                                                                                             -------------------------------
                                                                                                    1999            1998
                                                                            Useful Lives     ---------------  --------------
<S>                                                                         <C>                  <C>              <C>
         Goodwill                                                            25 - 40 years       $27,911          $16,276
         Noncompete agreements                                                3 -  5 years           416              536
         Customer lists                                                       3 -  5 years           532              550
         Deferred financing costs and  other                                  3 -  7 years         1,332              161
                                                                                              ---------------  --------------
                                                                                                  30,191           17,523
                     Less - accumulated amortization                                             (2,259)           (1,032)
                                                                                              ---------------  --------------

                                                                                                $27,932           $16,491
                                                                                              ===============  ==============


</TABLE>



(8)   ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:

<TABLE>

Accrued expenses and other current liabilities consist of the following  (in thousands) -

                                                                                        December 31,
                                                                                -------------------------------
                                                                                   1999            1998
                                                                                ---------------  --------------
<S>                                                                              <C>              <C>
       Payroll and related expenses                                              $4,113           $3,822
       Third party delivery costs                                                 2,817            1,605
       Insurance                                                                     73              561
       Professional fees                                                            332              393
       Interest                                                                     240              175
       Marketing                                                                     31              101
       Rent                                                                          75               50
       Other                                                                        455              564
                                                                                ---------------  --------------
                                                                                 $8,136           $7,271
                                                                                ===============  ==============

</TABLE>



(9) SHORT-TERM BORROWINGS AND LONG-TERM DEBT:

Short-term borrowings -
At December 31, 1999 and 1998,  the Company had a line of credit  agreement  for
$22.5 million. The Company's short-term borrowings on its line of credit for the
years ended December 31 are as follows:
<TABLE>
<CAPTION>

                                                    1999                1998                1997
                                                    ----                ----                ----
<S>                                                <C>                <C>                  <C>
End of year balance                                $7,188             $13,577              $7,360
Maximum amount outstanding during the year         14,600              13,600              8,300
Average balance outstanding during the year         5,600               7,800              8,100
Weighted average borrowing cost during the year       9.8%                9.1%                9.4%

</TABLE>


In November 1998, CDL and First Union  Commercial  Corporation  ("First  Union")
modified an agreement entered into in July 1997, establishing a revolving credit
facility (the "First Union Agreement").  The First Union Agreement increased the
original credit facility from $15 million to $22.5 million, provided CDL with an
equipment  acquisition  term loan  facility of up to $2.5  million and  modified
other terms and conditions.  Credit availability is based on eligible amounts of
accounts receivable,  as defined, up to a maximum amount of $22.5 million and is
secured by  substantially  all of the assets,  including  certain cash balances,
accounts   receivable,   equipment  and  leasehold   improvements   and  general
intangibles  of the Company  and its  subsidiaries.  The First  Union  Agreement
provides for both fixed and variable  rate loans.  Interest  rates on fixed rate
borrowings are based on LIBOR (which was 6.00% at December 31, 1999),  plus 1.5%
to 2%.  Variable rate  borrowings  are based on First Union's prime lending rate
(which was 8.25% at  December  31,  1999),  minus  .25% to plus  .25%.  Based on
eligible  accounts  receivable at December 31, 1999,  $8.2 million of the credit
facility and $2.5 million of the  equipment  acquisition  term loan facility was
available for future borrowings.

Under the  terms of the First  Union  Agreement,  the  Company  is  required  to
maintain certain  financial  ratios and comply with other financial  conditions.
The First Union  Agreement  also  prohibits the Company from  incurring  certain
additional  indebtedness,  limits  certain  investments,  advances  or loans and
restricts  substantial asset sales, capital expenditures and cash dividends.  At
December  31,  1999 the  Company  was in  compliance  with  all loan  covenants.

Long-Term Debt -

         On January  29,  1999,  the Company  completed  a $15  million  private
placement  of  senior  subordinated  notes and  warrants  with  three  financial
institutions.  The notes bear interest at 12% per annum and are  subordinate  to

<PAGE>

all senior debt including the Company's credit facility with First Union.  Under
the terms of the notes,  the Company is required to maintain  certain  financial
ratios and comply with other  financial  conditions for which the Company was in
compliance as of December 31, 1999. The notes mature on January 29, 2006 and may
be prepaid by the Company under certain  circumstances.  The warrants  expire on
January 19, 2009 and are  exercisable at any time prior to expiration at a price
of $.001 per equivalent share of common stock for an aggregate of 506,250 shares
of the  Company's  stock,  subject to  additional  adjustments.  The Company has
recorded the fair value of the warrants of  $1,265,000 as a credit to additional
paid-in-capital  and a debt  discount  on the  senior  subordinated  notes.  The
Company  used the  proceeds to finance  acquisitions  and to reduce  outstanding
short-term borrowings.

Long-term debt consists of the following (in thousands) -


<TABLE>
<CAPTION>
                                                                                      December 31,
                                                                                -----------------------------
                                                                                    1999            1998
                                                                                --------------  -------------
<S>                                                                               <C>             <C>
12% Senior Subordinated Notes, net of unamortized discount of $1.1 million        $13,900         $    -
10% and 8% Subordinated Convertible Debentures (a)                                    729            890
Capital  lease  obligations  due through  August 2001 with interest at rates
   ranging from 5.3% to 15.2% and secured by the related property.                  1,174          1,802
Seller-financed debt on acquisitions,  payable in annual and quarterly
   installments through August,  2003.  Interest is payable at rates ranging
   between 6% and 7% and one of the notes  requires  monthly  payments based on
   collected  revenues  through May 2003 with  interest  imputed at the
   rate of 9%.                                                                      9,187          5,859
Various  equipment  and  vehicle  notes  payable  to banks  and  finance
   companies due through  March 2003 with  interest  ranging from 8% to
   12.5% and secured by various assets of certain subsidiaries.                       369            818
Debt due to former owners,  their  relatives,  and employees of businesses
   acquired with weekly and quarterly  principal and interest  payments  through
   September  2001  together  with interest at rates ranging from 8% to 10%.           39            195
                                                                                --------------  -------------
                                                                                   25,398          9,564
Less - Current maturities                                                          (2,523)        (3,181)
                                                                                --------------  -------------

                                                                                  $22,875         $6,383
                                                                                ==============  =============
</TABLE>


(a) In September 1995, the Company issued $2 million in the aggregate  principal
amount of its 8% Subordinated Convertible Debentures (the " 8% Debentures").  On
April  1,  1998 the  Company  converted  $740,000  of the $2  million  of the 8%
Debentures to 10% Subordinated Convertible Debentures (the "10% Debentures") and
issued  $150,000 of additional  10%  Debentures.  The  remaining 8%  Debentures,
totaling  $1.26 million were repaid in August 1998.  On August 1, 1999,  the 10%
Debentures were further  amended  extending the maturity date to August 21, 2001
and reducing the conversion price to $5.00 per share. An additional  $150,000 of
10%  Debentures  were issued at that time and  $311,250 of 10%  Debentures  were
repaid.  The  outstanding  $728,750 of 10% Debentures are  convertible  into the
Company's common stock at a conversion price of $5.00 per share, accrue interest
at 10% per annum  payable  quarterly  and  mature on August  21,  2001.  The 10%
Debentures are  redeemable,  in whole or in part,  without premium or penalty by
the Company at any time on or after August 18, 2000 or by the holder at any time
on or after August 21, 2000, and are classified as current.

<PAGE>


The  aggregate  annual  principal  maturities of debt  (excluding  capital lease
obligations) as of December 31, 1999 are as follows (in thousands) -


       2000                                                             $1,611
       2001                                                              4,991
       2002                                                              2,255
       2003                                                              1,467
       2004                                                             13,900
                                                                   -------------

      Total                                                            $24,224
                                                                   =============


The Company leases certain  transportation  and office  equipment  under capital
lease  agreements  that expire at various dates.  At December 31, 1999,  minimum
annual payments under capital  leases,  including  interest,  are as follows (in
thousands) -



       2000                                                               $906
       2001                                                                194
       2002                                                                 74
                                                                      ----------
         Total minimum payments                                          1,174
       Less - Amounts representing interest                                (61)
                                                                      ----------
         Net minimum payments                                            1,113
       Less - Current portion of obligations under capital leases         (912)
                                                                      ----------

         Long-term portion of obligations under capital leases            $201
                                                                      ==========


(10)     EMPLOYEE BENEFIT PLANS:

The Company  adopted a 401(k)  retirement plan during 1996 and merged all of the
existing  subsidiary  plans  into the  newly  adopted  plan.  Substantially  all
employees  are  eligible  to  participate  in the  plan  and  are  permitted  to
contribute  between 1% and 20% of their annual salary. The Company has the right
to make  discretionary  contributions  that will be allocated  to each  eligible
participant.  The Company did not make discretionary contributions for the years
ended December 31, 1999, 1998 and 1997.


(11)     INCOME TAXES:

Federal and state income tax  provision  (benefit)  for the years ended December
31,  1999,  1998 and 1997 are as follows (in thousands) -

<TABLE>
<CAPTION>


                                     1999                1998               1997
                                   --------            --------            -------
          Federal-
<S>                                 <C>                   <C>               <C>
            Current                 $1,106               $797              $723
            Deferred                   488                300               (35)
          State                        301                319               200
                                   -------             --------           -------
                                    $1,895             $1,416              $888
                                   =========           ========           =======

</TABLE>

The  differences in Federal income taxes provided and the amounts  determined by
applying the Federal  statutory tax rate (34%) to income (loss) from  continuing
operations  before income taxes for the years ended December 31, 1999,  1998 and
1997, result from the following (in thousands) -

<TABLE>
<CAPTION>

                                                                             1999                1998               1997
                                                                       ----------------    ----------------  ------------------
<S>                                                                         <C>                 <C>                 <C>
           Tax at statutory rate                                            $1,602              $1,267              $865
           Add (deduct) the effect of-
             State income taxes                                                199                 211               132
             Nondeductible expenses and other, net                              94                 (62)             (109)
                                                                       ----------------    ---------------    ----------------
             State income taxes                                             $1,895              $1,416              $888
                                                                       ================    ================  ==================
</TABLE>


The components of deferred income tax assets and liabilities, are as follows
(in thousands) -
<TABLE>
<CAPTION>

                                                                                            December 31,
                                                                                 -----------------------------------
                                                                                      1999                1998
                                                                                 ----------------    ---------------
        Deferred income tax assets -
<S>                                                                                   <C>                 <C>
           Allowance for doubtful accounts                                            $782                $753
           Reserves and other, net                                                      94                 903
                                                                                 ----------------    ---------------
               Total deferred income tax assets                                       $876              $1,656
                                                                                 ================    ===============

        Deferred income tax liabilities -
           Trade receivables discount                                                $(341)              $(507)
           Accumulated depreciation and amortization                                  (338)               (391)
           Cash to accrual differences                                                (216)               (288)
           Other                                                                      (730)               (731)
                                                                            ----------------    ---------------
                                                                            ----------------    ---------------
               Total deferred income tax liabilities                               $(1,625)            ($1,917)
                                                                            ================    ===============
                Net deferred tax (liability) asset                                   $(749)              $(261)
                                                                            ================    ===============
</TABLE>

(12)     REPORTABLE SEGMENTS:

CDL  presently  has two  reportable  segments:  Air and Ground.  The  accounting
policies  of the  segments  are the same as those  described  in the  summary of
significant accounting policies. Separate management of each segment is required
because each business unit is subject to different cost and delivery parameters.
The Company has  announced  plans to re-align  its  business  operations  and is
presently  evaluating the effect if any, this change will have on its reportable
segments.
<TABLE>
<CAPTION>

                                                                 Air            Ground           Total
             Revenue from external customers
<S>             <C>                                                 <C>            <C>             <C>
                1999                                                $66,056        $158,498        $224,564
                1998                                                 55,547         130,192         185,739
                1997                                                 56,545         114,957         171,502
             Intersegment revenue
                1999                                                    118           1,683           1,801
                1998                                                     71           1,568           1,639
                1997                                                    226           2,006           2,232
             Interest expense
                1999                                                    931           2,235           3,216
                1998                                                    373             873           1,246
                1997                                                    377             767           1,144
             Depreciation and amortization
                1999                                                    801           3,628           4,429
                1998                                                    556           2,565           3,121
                1997                                                    415           1,856           2,271
             Segment profit (loss)
                1999                                                    966           1,945           2,911
                1998                                                    497           1,814           2,311
                1997                                                     71           1,586           1,657
             Segment assets
                1999                                                 19,893          48,676          68,569
                1998                                                 11,489          40,599          52,088
                1997                                                 15,041          21,118          36,159
             Expenditures for segment assets
                1999                                                  1,120           1,303           2,423
                1998                                                    637           1,608           2,245
                1997                                                    281             910           1,191
</TABLE>


The CDL Air Division  derives its revenue from the provision of customized heavy
freight, next flight out and international shipments whereby package movement is
by air generally on scheduled airline flights.  CDL ground delivery services are
provided to customers by a CDL driver in a vehicle  either on a rush basis or on
a regularly  scheduled route basis. Air revenue is generally measured by package
while  ground  delivery  revenue is  generally  measured  by the number of stops
involved.

Intersegment  revenue  results  from the  provision  of ground  service  for the
pick-up or  delivery of packages  for  delivery to airports or from  airports to
customers.  The Air  division  also  provides  delivery by air of time  critical
material for ultimate distribution by ground based drivers. Management evaluates
the  performance  of each  segment  based  on its  overall  contribution  to the
Company's net income after factoring in the allocation of interest as well as an
intersegment   charge  of  2%  of  segment   revenue  for  overall  general  and
administrative expenses.

(13)     COMMITMENTS AND CONTINGENCIES:

 Operating Leases -

The Company  leases its office and  warehouse  facilities  under  noncancellable
operating  leases,  which expire at various  dates  through  January  2004.  The
approximate minimum rental commitments of the Company, under existing agreements
as of December 31, 1999, are as follows (in thousands) -

2000                                                                     $2,750
2001                                                                      2,377
2002                                                                      1,479
2003                                                                        651
2004                                                                        437

Rent  expense  related  to  operating  leases  amounted  to approximately  $13.8
million,  $12.7 million and $13.1 million for the years ended December 31, 1999,
1998 and 1997, respectively.

Litigation -

In February 1996,  Liberty Mutual Insurance Company ("Liberty  Mutual") filed an
action against Securities Courier  Corporation  ("Securities"),  a subsidiary of
the Company,  Mr.  Vincent  Brana and certain other parties in the United States
District  Court for the  Southern  District  of New York  alleging,  among other
things, that Securities Courier had fraudulently  obtained automobile  liability
insurance  from Liberty Mutual in the late 1980s and early 1990s at below market
rates. This suit, which claims common law fraud,  fraudulent inducement,  unjust
enrichment and  violations of the civil  provisions of the Federal RICO statute,
among other things,  seeks an unspecified  amount of  compensatory  and punitive
damages from the  defendants,  as well as  attorneys'  fees and other  expenses.

<PAGE>

Three additional  defendants were added by way of a second amended  complaint on
April 9, 1998.  Securities and Mr. Brana have filed cross claims against each of
these  additional  defendants and certain  original  defendants who had acted as
insurance  brokers for certain of the policies at issue.  Under the terms of its
acquisition  of Securities,  the Company has certain  rights to  indemnification
from Mr. Brana.  In connection with the  indemnification,  Mr. Brana has entered
into a Settlement  Agreement and executed a Promissory  Note in the amount of up
to $500,000 or such greater  amount as may be due for any defense costs or award
arising out of this suit. Mr. Brana originally  delivered  100,000 shares of CDL
common stock to the Company as collateral for the note which was due on December
1,  2000.  Because  of the  increased  costs in  defending  the  suit Mr.  Brana
delivered an additional 50,000 shares of CDL common stock to the Company and the
Company  agreed to extend the due date until  December 1, 2002.  In April 1999 a
motion for summary judgement was filed and denied by the Court in December 1999.
The  plaintiff  subsequently  filed a Third  Amended  Complaint  for  breach  of
contract and  additional  claims for quantum  meruit.  The parties are presently
participating  in court-ordered  non-binding  mediation in an attempt to resolve
this litigation which extends the time to respond to the Third Amended Complaint
until thirty days after  completion of the final mediation  session,  subject to
the Court's approval.  Mediation  sessions are scheduled through March 2000. Due
to the  continuing  legal costs in defending  this suit, Mr. Brana has agreed to
deliver  200,000  additional  shares of CDL  common  stock to the  Company on or
before May 31, 2000. The Company does not believe that an adverse  determination
in this matter would  result in a material  adverse  effect on the  consolidated
financial position or results of operations of the Company.

The Company and its  subsidiaries  are from time to time,  parties to litigation
arising in the normal course of their  business,  most of which involves  claims
for  personal  injury and  property  damage  incurred in  connection  with their
operations.  Management believes that none of these actions, including the above
action, will have a material adverse effect on the financial position or results
of operations of the Company and its subsidiaries.

Sales Agency Agreements -

The  Company  has  entered  into  sales  agency   agreements  with   independent
contractors  with  varying  terms to perform  courier  services on behalf of the
Company.  The independent  contractors  provide marketing and sales services and
the Company  provides the resources to perform courier  services.  In connection
with these  transactions the Company retains from the independent  contractors a
fee for services rendered of approximately 10% of revenues.  The profit on these
sales  net of the  Company's  fees for its  services  are  remitted  back to the
independent  contractors as payment for marketing and sales  services  rendered.
Sales  agency  charges  totaled $3.4  million,  $4.2 million and $4.7 million in
1999, 1998 and 1997, respectively.

Earn-Outs

Certain  of the  companies  acquired  by CDL are  eligible  to  earn  additional
amounts,  consisting of a combination of cash and notes payable,  as adjustments
to the purchase  prices paid for those  companies.  At December  31,  1999,  the
Company had  recorded  an accrual for the  estimated  earn-outs  for  Goldwings,
Westwind  and Skycab in the  amounts of  $520,000,  $700,000  and  $100,000,  in
connection  with  recording  their  respective  acquisitions.  Due to applicable
targets  not  being  met,  the  earnouts  for  Everready   Express  and  Manteca
Enterprises  were reduced by $242,000 and  $679,000,  respectively.  The Company
recorded an increase in purchase  price for a settlement  reached in  connection
with the acquisition of Metro Courier in the amount of $167,000.

(14)     Stock Option Plans:

         The  Company has two stock  option  plans  under  which  employees  and
independent  directors  may be  granted  options to  purchase  shares of Company
Common Stock at or above the fair market value at the date of grant.
Options generally vest in one to four years and expire in 10 years.

Employee Stock compensation Program -

         In September 1995, the Board of Directors adopted, and the stockholders
of the Company approved the Company's Employee Stock  Compensation  Program (the
"Employee Stock Compensation Program").  The Employee Stock Compensation Program
authorizes the granting of incentive stock options,  non-qualified supplementary
options, stock appreciation rights, performance shares and stock bonus awards to
key employees of the Company,  including those employees  serving as officers or
<PAGE>


directors of the Company.  The Company  initially  reserved  1,400,000 shares of
Common Stock for issuance in  connection  with the Employee  Stock  Compensation
Program. In June 1998 the Board of Directors adopted and the stockholders of the
Company  approved an additional  500,000  shares for issuance under the Employee
Stock  Compensation   Program.   The  Employee  Stock  Compensation  Program  is
administered  by a committee  of the Board of Directors  (the  "Administrators")
made up of directors who are disinterested  persons.  Options and awards granted
under the Employee Stock  Compensation  Program will have an exercise or payment
price as established by the  Administrators  provided that the exercise price of
incentive  stock  options  may not be less  than  the fair  market  value of the
underlying  shares  on the date of  grant.  Unless  otherwise  specified  by the
Administrators,  options and awards will vest in four equal  installments on the
first, second, third and fourth anniversaries of the date of grant.

1995 Stock Option Plan for Independent Directors -

         In September 1995, the Board of Directors adopted, and the stockholders
of the Company  approved,  the Company's 1995 Stock Option Plan for  Independent
Directors (the "Director  Plan").  The Director Plan  authorizes the granting of
non-qualified  stock  options to  non-employee  directors  of the  Company.  The
Company has reserved  100,000  shares of Common Stock for issuance in connection
with the Director Plan. The Director Plan is  administered by a committee of the
Board  of  Directors  (the  "Committee"),  none of  whom  will  be  eligible  to
participate  in the Director  Plan.  The Director  Plan  provided for an initial
grant of an option to purchase  1,500 shares of Common Stock upon  election as a
director of the  Company,  a second  option to purchase  1,000  shares of Common
Stock upon the one-year  anniversary of such director's  election and subsequent
annual options for 500 shares of Common Stock upon the  anniversary of each year
of  service  as a  director.  In June of 1998 the  stockholders  of the  Company
approved  amendments to the Director Plan.  The  amendments  replaced the annual
stock option grants of the original plan with  quarterly  grants of 1,250 shares
of stock options on the first trading day of each fiscal  quarter  commencing on
October 1, 1997. In August of 1998 and February of 1999, the Committee  approved
further  amendments to the Plan.  These  amendments  replaced the time period to
exercise vested options after a participating  director has served as a director
for a period of three  consecutive  years or more. The Director Plan was amended
to provide that in the event any holder,  who has served as a director for three
or more  consecutive  years,  shall  cease  to be a  director  for  any  reason,
including removal with or without cause or death or disability,  all options (to
the extent  exercisable  at the  termination  of the  director's  service) shall
remain   exercisable   by  the  holder  or  his  lawful   heirs,   executors  or
administrators  until the  expiration of the ten year period  following the date
such options were granted.

Information regarding the Company's stock option plans is summarized below:

<TABLE>
<CAPTION>

                                                                                               Weighted
                                                                        Number                 Average
                                                                          Of                   Exercise
                                                                        Shares                  Price
                                                                   ------------------      -----------------
<S>                                                                      <C>                    <C>
   Shares under option:
     Outstanding at  December 31, 1996                                    562,568              $11.36

       Granted                                                            444,928               $3.85
       Exercised                                                                -                 -
       Canceled                                                           (99,373)             $10.15
                                                                   ------------------

     Outstanding at  December 31, 1997                                    908,123              $ 7.80

       Granted                                                            302,203              $ 2.85
       Exercised                                                                -                 -
       Canceled                                                           (56,011)             $11.81
                                                                   ------------------

     Outstanding at December 31, 1998                                   1,154,315              $ 6.34

       Granted                                                            381,229              $ 3.15
       Exercised                                                                -                  -
       Canceled                                                           (75,225)             $ 8.92
                                                                   ------------------

     Outstanding at December 31, 1999                                   1,460,319               $5.33
                                                                   ==================
   Options exercisable at:
     December 31, 1997                                                    576,592               $7.33
                                                                   ==================      =================
     December 31, 1998                                                    915,378               $6.35
                                                                   ==================      =================
     December 31, 1999                                                  1,099,297               $6.08
                                                                   ==================      =================
</TABLE>
<PAGE>


At December  31, 1999,  options  available  for grant under the  Employee  Stock
Compensation Plan and the Director Plan total 479,681 and 60,000, respectively.

The  following  summarizes  information  about  option  groups  outstanding  and
exercisable at December 31, 1999:

<TABLE>
<CAPTION>

                                       Outstanding Options                                Exercisable Options
                      -------------------------------------------------------     ------------------------------------
                           Number                                                      Number
                         Outstanding           Weighted           Weighted           Exercisable           Weighted
    Range of                As of               Average           Average               as of              Average
    Exercise            December 31,           Remaining          Exercise          December 31,           Exercise
     Prices                 1999                 Life              Price                1999                Price
------------------    ------------------    ----------------    -------------     ------------------     -------------
<S>       <C>             <C>                    <C>                <C>               <C>                    <C>
  $2.31 - $4.75           1,020,381              8.20               $3.01             659,359                $2.99
  $4.88 - $7.88             150,000              7.30               $6.25             150,000                $6.25
     $13.00                 289,938              5.28              $13.00             289,938               $13.00
------------------    ------------------    ----------------    -------------     ------------------     -------------
</TABLE>

The  Company  adopted the  provisions  of SFAS 123 and has chosen to continue to
account  for  stock-based   compensation   using  the  intrinsic  value  method.
Accordingly,  no  compensation  expense has been  recognized for its stock-based
compensation  plans.  Pro forma  information  regarding  net  income  (loss) and
earnings (loss) per share is required, and has been determined as if the Company
had accounted for its stock options under the fair value method.  The fair value
for these  options was  estimated  at the date of grant using the  Black-Scholes
option pricing model with the following assumptions for 1999, 1998 and 1997.

<TABLE>
<CAPTION>

                                                                1999                1998                1997
                                                             -----------        ----------         ----------
<S>                                                            <C>                 <C>                <C>
Weighted average fair value                                    $2.33               $2.25              $1.50
Risk-free interest rate                                         6.00%               5.10%              5.60%
Volatility factor                                                 76%                 99%                55%
Expected life                                                  7 years            5.5 years           5 years
Dividend Yield                                                   None                None               None
                                                           -------------        -----------        -----------

</TABLE>

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded  options  that have no vesting  restrictions  and are fully
transferable.  In addition,  option valuation models require the input of highly
subjective  assumptions  including the expected stock price volatility.  Because
changes in the subjective input assumptions can materially affect the fair value
estimate,  in  management's  opinion,  the  existing  models do not  necessarily
provide a reliable single measure of the fair value of its stock options.

For purposes of pro forma  disclosures,  the estimated fair value of the options
is amortized to expense over the options'  vesting  period.  The  Company's  pro
forma net  income  (loss)  and  income  (loss)  per share  were as  follows  (in
thousands except per share data):

<TABLE>
<CAPTION>

                                                                1999                1998             1997
                                                           ---------------     ---------------   ------------
<S>                                                            <C>                 <C>               <C>
  Net income (loss) - as reported                              $2,911              $2,311            $459
  Net income (loss) - pro forma                                 2,494               1,812            (295)
  Basic income (loss) per share :
  - As reported                                                   .40                 .35             .07
  - Pro forma                                                     .35                 .27            (.04)
  Diluted income (loss) per share :
  - As reported                                                   .37                 .34             .07
  - Pro forma                                                     .32                 .26            (.04)

</TABLE>


(15)     EMPLOYEE STOCK PURCHASE PLAN

Effective  April 1, 1998,  CDL  adopted an  Employee  Stock  Purchase  Plan (the
"Employee  Purchase Plan") which was amended in 1999. The Employee Purchase Plan
permits  eligible  employees  to purchase CDL common stock at 85% of the closing
market  price  on the  last  day  prior  to the  commencement  or the end of the
purchase period.  The Employee  Purchase Plan provides for the purchase of up to
500,000 shares of common stock. During 1999, 73,172 shares were issued under the
Employee Purchase Plan.

(16)     SHAREHOLDER PROTECTION RIGHTS AGREEMENT

 On December 27,  1999,  the Board of  Directors  of the Company  announced  the
declaration of a dividend of one right (a "Right") for each outstanding share of
Common Stock,  of the Company held of record at the close of business on January
6, 2000, or issued  thereafter and prior to the time at which they separate from
the Common Stock and thereafter  pursuant to options and convertible  securities
outstanding  at the time they separate  from the Common  Stock.  The Rights were
issued  pursuant  to a  Stockholder  Protection  Rights  Agreement,  dated as of
December  27,  1999,  between the Company and  American  Stock  Transfer & Trust
Company,  as Rights Agent. Each Right entitles its registered holder to purchase
from the Company,  after the Separation  Time, one  one-hundredth  of a share of
Participating  Preferred  Stock,  par value  $0.01 per share,  for  $27.00  (the
"Exercise Price"), subject to adjustment.  The holders of Rights will, solely by
reason of their  ownership  of  Rights,  have no rights as  stockholders  of the
Company,  including,  without  limitation,  the  right  to  vote  or to  receive
dividends.

The Rights will separate  from the Common Stock if any person or group  (subject
to certain  exceptions)  becomes the beneficial owner of fifteen percent or more
of the Common Stock or any person or group (subject to certain exceptions) makes
a  tender  or  exchange  offer  that  would  result  in  that  person  or  group
beneficially owning fifteen percent or more of the Common Stock. Upon separation
of the Rights from the Common Stock, each Right (other than Rights  beneficially
owned by the  acquiring  person or group,  which  Rights shall become void) will
constitute  the right to  purchase  from the  Company  that  number of shares of
Common  Stock of the Company  having a market  price equal to twice the Exercise
Price for an amount equal to the  Exercise  Price.  In addition,  if a person or
group who has acquired  beneficial  ownership of fifteen  percent or more of the
Common  Stock  controls  the board of  directors  of the Company and the Company
engages in certain business combinations or asset sales, then the holders of the
Rights  (other  than the  acquiring  person  or  group)  will  have the right to
purchase  common stock of the acquiring  company  having a market value equal to
two times the Exercise Price.

In certain  circumstances,  the board of directors  may elect to exchange all of
the  then  outstanding  Rights  (other  than  Rights  beneficially  owned by the
acquiring person or group,  which Rights become void) for shares of Common Stock
at an  exchange  ratio of one share of Common  Stock  per  Right,  appropriately
adjusted to reflect  certain  changes in the capital  stock of the  Company.  In
addition, the board of directors may, prior to separation from the Common Stock,
redeem  all (but not less  than all) the then  outstanding  Rights at a price of
$.01 per Right.  Unless  redeemed,  exchanged or amended on an earlier date, the
Rights will expire on the tenth anniversary of the record date.

(17)     RELATED PARTY TRANSACTIONS:

Leasing Transactions -

Certain  subsidiaries of the Company paid approximately  $365,000,  $530,000 and
$905,000 for the years ended December 31, 1999, 1998 and 1997, respectively,  in
rent to certain  directors,  stockholders  or Companies  owned and controlled by
directors or  stockholders  of the Company.  Rent is paid for office,  warehouse
facilities and transportation equipment.

<PAGE>

Receivable from Shareholder

In  connection  with  his  indemnification  to CDL  under  the  terms  of  CDL's
acquisition of Securities Courier Corporation ("Securities"),  Mr. Vincent Brana
has entered into a settlement  agreement  and executed a promissory  note in the
amount of $500,000  or such  greater  amount as may be due under the  settlement
agreement.  The Company has agreed to advance  certain  legal fees and  expenses
related to certain  litigation  involving  Securities,  for which Mr.  Brana has
indemnified  CDL. At December 31, 1999 and 1998 the Company had a receivable due
from Mr. Brana totaling $1,315,000 and $599,000,  respectively which is included
in Other Assets in the  accompanying  Consolidated  Balance Sheet. Mr. Brana has
agreed  to repay the  Company  on  December  1,  2002,  together  with  interest
calculated  at a rate per annum  equal to the rate  charged  the  Company by its
senior lender.  The Company holds 150,000 shares of common stock as security for
the Note and Mr. Brana has pledged an additional  200,000 shares of common stock
to be delivered to the Company on, or before May 31, 2000.

Administrative Fees and Other -

In connection with the Merger discussed in Note 1,  stockholders of the acquired
businesses entered into five-year  covenants-not-to-compete  agreements with the
Company. Additionally, certain of the stockholders received employment contracts
which are all due to expire in November 2000.

The Company  incurred sales  commissions  and consulting fees of $1.4 million in
1999,  $1.9  million in 1998 and $1.3  million in 1997 to  companies  affiliated
through common  ownership with  directors or  stockholders  of the Company or to
former employees of the Company or its subsidiaries. As of December 31, 1999 and
1998,  accrued  expenses and other current  liabilities  included  approximately
$185,000 and $168,000, respectively of sales commissions due to related parties.
See also Note 18 for restructuring charges to related parties.

(18)     SALE OF SUBSIDIARY:

On  January  31,  1997 the  Company  sold the  stock of  Distribution  Solutions
International,  Inc.  (DSI),  a  subsidiary  that  provided  contract  logistics
services,  to its former owner and  president in exchange for 137,239  shares of
the Company's common stock, valued at approximately $4.38 per share (the closing
price of the Company's  common stock on the sale date.) In  connection  with the
sale, the Company  recorded a gain of approximately  $816,000 before  applicable
federal and state income taxes.

(19)   RESTRUCTURING CHARGE:

During the fourth quarter of 1996, the Company  recognized the impact of several
non-recurring  charges totaling $1.4 million . The restructuring charge included
salary and contract settlements, abandonment of operating leases and other costs
associated with management  headcount reduction and other consolidation  issues.
At December 31, 1999,  $68,750 was  included in other  liabilities  payable to a
former director and stockholder of the Company or its subsidiaries.  At December
31, 1998,  $275,000 was included in accrued expenses and $69,000 was included in
other liabilities payable to a former director and stockholder of the Company or
its subsidiaries.

(20)   SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for  interest and income  taxes for the years ended December 31, 1999,
1998 and 1997 was as follows (in thousands) -

                                       1999               1998            1997
                                     --------           -------          -------
  Interest                           $3,151              $1,246          $1,024
  Income taxes                       $2,752                 778             245
                                     --------           --------         -------


Supplemental schedule of noncash financing  activities for the years ended
December 31, 1999, 1998 and 1997 was as follows (in thousands) -

<TABLE>
<CAPTION>

                                                   1999              1998            1997

<S>                                                <C>               <C>           <C>
 Capital lease obligations incurred                $564              $114          $2,700
 Seller financed debt related to purchase
   of businesses                                  3,533             5,670              50
 Debt and capital leases assumed in
   connection with acquisitions                   1,779             1,699               -
 Issuance of common stock in connection
   with purchases of businesses                     401               644              25
 Adjustment of purchase price for businesses
   previously acquired                              660               259             357
 Note receivable issued in connection with disposal
   of assets of discontinued operations              -                 -              725

</TABLE>

(21)   SUBSEQUENT EVENTS:

Item 9.  Changes  in  and  Disagreements  with  Accountants  on  Accounting  and
         Financial Disclosures

         None.



<PAGE>


                                    PART III


Item 10.  Directors and Executive Officers of the Company

       The Company hereby  incorporates by reference the applicable  information
from its definitive proxy statement for its 1999 Annual Meeting of Stockholders,
except for certain  information  relating to the  Company's  executive  officers
which is provided below.

Executive Officers

         Information  with respect to the  Executive  Officers of the Company is
set forth under the caption "Executive  Management"  contained in Part 1, Item 1
of this report and are incorporated herein by reference.

Item 11.  Executive Compensation

       The Company hereby  incorporates by reference the applicable  information
from its definitive proxy statement for its 2000 Annual Meeting of Stockholders.

Item 12.  Security Ownership of Certain Beneficial Owners and Management

       The Company hereby  incorporates by reference the applicable  information
from its definitive proxy statement for its 2000 Annual Meeting of Stockholders.

Item 13.  Certain Relationships and Related Transactions

       The Company hereby  incorporates by reference the applicable  information
from its definitive proxy statement for its 2000 Annual Meeting of Stockholders.



<PAGE>



                                     PART IV

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


(a)(1)  Financial Statements

       See Item 8. Financial Statements and Supplementary Data.

(a)(2)  Financial Statement Schedules

                     INDEX TO FINANCIAL STATEMENT SCHEDULES

                                                                           Page
CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES:
   Schedule II - Consolidated Valuation and Qualifying Accounts -
    For the years ended December 31, 1999, 1998, and 1997...................S-1

         All other  schedules  called for by  Regulation  S-X are not  submitted
because  they  are not  applicable  or not  required  or  because  the  required
information is not material or is included in the financial  statements or notes
thereto.


(a)(3)  Exhibits

         The Exhibits listed in (c) below are filed herewith.

(b) Exhibits

       Exhibit                         Description
       Number

          3.1  Second  Restated  Certificate of  Incorporation  of  Consolidated
               Delivery & Logistics, Inc. (filed as Exhibit 3.1 to the Company's
               Registration  Statement  on Form  S-1  (File  No.  33-97008)  and
               incorporated herein by reference).

          3.2  Amended  and  Restated   By-laws  of   Consolidated   Delivery  &
               Logistics, Inc. amended through November 6, 1997

          4.1  Form of  certificate  evidencing  ownership  of  Common  Stock of
               Consolidated Delivery & Logistics,  Inc. (filed as Exhibit 4.1 to
               the  Company's  Registration  Statement  on Form  S-1  (File  No.
               33-97008) and incorporated herein by reference).

          4.2  Instruments  defining  the  rights of  holders  of the  Company's
               long-term  debt  (not  filed  pursuant  to  Regulation  S-K  Item
               601((b)(4)(iii); to be furnished to the Commission upon request).

          4.3  Consolidated  Delivery & Logistics,  Inc. Shareholder  Protection
               Rights  Agreement (filed as Exhibit 4.1 to the Company's Form 8-K
               dated December 27, 1999 and incorporated herein by reference)

          10.1 Consolidated   Delivery  &   Logistics,   Inc.   Employee   Stock
               Compensation  Program  (filed as  Exhibit  10.1 to the  Company's
               Registration  Statement  on Form  S-1  (File  No.  33-97008)  and
               incorporated herein by reference).

          10.2 Consolidated  Delivery & Logistics,  Inc.  1995 Stock Option Plan
               for Independent  Directors as amended and restated  through March
               31, 1999(filed as Exhibit A to the Company's 1999 Proxy Statement
               and incorporated herein by reference).

<PAGE>

          10.3 Loan and Security  Agreement,  dated July 14, 1997 By and Between
               First Union Commercial  Corporation and  Consolidated  Delivery &
               Logistics,  Inc. and  Subsidiaries  (filed as Exhibit 10.1 to the
               Company's  Quarterly  Report on Form 10-Q for the fiscal  quarter
               ended June 30, 1997 and incorporated herein by reference).

          10.4 Employment Agreement, dated as of September 8, 1995, with William
               T. Brannan  (filed as Exhibit 10.6 to the Company's  Registration
               Statement on Form S-1 (File No. 33-97008) and incorporated herein
               by reference).

          10.5 Amendment to Loan and Security  Agreement,  dated  September  30,
               1997  By and  Between  First  Union  Commercial  Corporation  and
               Consolidated  Delivery & Logistics,  Inc. and Subsidiaries (filed
               as Exhibit 10.1 to the  Company's  Quarterly  Report on Form 10-Q
               for the fiscal quarter ended September 30, 1997 and  incorporated
               herein by reference).

          10.6 Employment  Agreement,  dated  as of  September  15,  1995,  with
               Michael   Brooks   (filed  as  Exhibit  10.12  to  the  Company's
               Registration  Statement  on Form  S-1  (File  No.  33-97008)  and
               incorporated herein by reference).

          10.7 Employment Agreement, dated as of September 15, 1995, with Jeremy
               Weinstein  (filed as Exhibit 10.34 to the Company's  Registration
               Statement on Form S-1 (File No. 33-97008) and incorporated herein
               by reference).

          10.8 Employment Agreement,  dated as of September 15, 1995, with Randy
               Catlin  (filed as  Exhibit  10.15 to the  Company's  Registration
               Statement on Form S-1 (File No. 33-97008) and incorporated herein
               by reference).

          10.9 Senior  Subordinated  Loan Agreement dated as of January 29, 1999
               with Paribas Capital Funding,  LLC, Exeter Venture Lenders,  L.P.
               and Exeter Capital  Partners IV, L.P.,  (filed as Exhibit 99.3 to
               the  Company's  Current  Report on Form  8-K/A  and  incorporated
               herein by reference)

          10.10 Warrant  Agreement  dated as of  January  29,  1999 with Paribas
                Capital     Funding,  LLC,    Exeter Venture  Lenders,  L.P. and
                Exeter Capital Partners IV, L.P. (filed as Exhibit 99.4 to   the
                Company's Current  Report  on  Form  8-K/A  filed  on  July  23,
                1999  and incorporated herein by reference)

          10.11 Employment  Agreement dated as of January 5, 2000 with Albert W.
                Van Ness, Jr.

          11.1  Statement Regarding Computation of Net Income (Loss) Per Share.

          21.1  List of subsidiaries of Consolidated Delivery & Logistics, Inc.

          23.1  Consent of Independent Public Accountants

          25.1  Power of Attorney

          27.1  Financial Data Schedule (for electronic submission only)



<PAGE>


                                   SIGNATURES

          Pursuant to the  requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934,  the registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on March 24, 2000.

                                       CONSOLIDATED DELIVERY & LOGISTICS, INC.


                                         By:    /s/Russell J. Reardon
                                               Russell J. Reardon
                                               Chief Financial Officer

          Pursuant to the  requirements of the Securities  Exchange Act of 1934,
this report has been signed by the following persons on behalf of the registrant
and in the capacities indicated on March 24, 2000.

<TABLE>

            Signature                                             Capacity

<S>                                                  <C>
        /s/ Albert W. Van Ness, Jr.                  Chairman of the Board,  Chief  Executive  Officer  (Principal
            Albert W. Van Ness, Jr.                  Executive Officer) and Director

       /s/  William T. Brannan *                     President, Chief Operating Officer and Director
            William T. Brannan

       /s/  Russell J. Reardon *                     Vice President,  Chief Financial Officer (Principal Financial
            Russell J. Reardon                       and Accounting Officer)

       /s/  Michael Brooks *                         Director
            Michael Brooks

       /s/  Randall Catlin *                         Director
            Randall Catlin

       /s/  Jon F. Hanson *                          Director
            Jon F. Hanson

       /s/  John Simourian *                         Director
            John Simourian

       /s/  Marilu Marshall *                        Director
            Marilu Marshall

       /s/  Thomas E. Durkin *                       Director
            Thomas E. Durkin

       /s/  John S. Wehrle *                         Director
            John S. Wehrle

</TABLE>


*By: ___/s/ Albert W. Van Ness, Jr.
         Albert W. Van Ness, Jr.,
         Attorney-in-Fact


<PAGE>

<TABLE>
<CAPTION>

                                                                     Schedule II

            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                        VALUATION AND QUALIFYING ACCOUNTS
                                 (in thousands)



                                         Balance            Charged                                               Balance
                                            at             To Costs        Write-offs                              at End
                                        Beginning             And            Net of                                  of
          Description                   of Period          Expenses         Recoveries          Other (a)          Period

<S>                                      <C>                 <C>                <C>                                  <C>
For the year ended
   December 31, 1999 -
   Allowance for doubtful
   Accounts                              $1,865              $ 973              $(899)                -              $1,939
                                     ================    ==============    ================    ==============    ==============

For the year ended
   December 31, 1998 -
   Allowance for doubtful
   Accounts                              $1,433             $1,151              $(873)              $154             $1,865
                                     ================    ==============    ================    ==============    ==============

For the year ended
   December 31, 1997 -
   Allowance for doubtful
   Accounts                              $1,598             $1,117            ($1,282)               -               $1,433
                                     ================    ==============    ================    ==============    ==============


(a) Represents allowance for doubtful accounts of acquired companies.



 The accompanying notes to consolidated financial statements are an integral part of this schedule.

</TABLE>

<PAGE>


                                INDEX TO EXHIBITS

         Exhibits                                                          Page

          3.2       Amended and Restated  By-Laws of Consolidated
                    Delivery & Logistics,  Inc.  through November
                    6, 1997.                                                2

          10.11     Employment  Agreement  dated  January 5, 2000
                    with Albert W. Van Ness, Jr.                           16

          11.1      Statement Regarding Computation of Net Income
                    (Loss) Per Share                                       28

          21.1      List of Subsidiaries of Consolidated Delivery
                    & Logistics, Inc.                                      30

          23.1      Consent of Independent Public Accountants              31

          25.1      Power of Attorney                                      32

          27.1      Financial   Data  Schedule  (for   electronic
                    submission only)                                       33