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

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

                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the fiscal year ended December 31, 1997      Commission File No.:  0-26954

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

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

                                380 Allwood Road
                            Clifton, New Jersey 07012
                                 (973) 471-1005
(Address, including Zip Code, and telephone number, including area code, of
    principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:  None

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

                                      Common Stock, par value $.001 per share

     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  aggregate  market value of voting stock held by  nonaffiliates  of the
registrant was $22,516,456 as of March 13, 1998.

     Indicate  the  number of  shares  outstanding  of each of the  registrant's
classes of common stock, as of the latest practicable date:
                                      Outstanding as of March 13, 1998
Common Stock, $.001 par value                   6,666,884

     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, 1997.


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<PAGE>




                                     PART I


Item 1.  Business

         Consolidated Delivery & Logistics,  Inc. (the "Company") was founded in
June 1994 to create a national,  full service,  same-day ground and air delivery
and logistics  company.  The Company  provides an extensive  network of same-day
delivery  services  to  a  wide  range  of  commercial,  industrial  and  retail
customers. The Company's ground delivery operations are concentrated on the East
Coast,  with a strategic  presence  in the  Midwest  and on the West Coast.  The
Company's air delivery services are provided throughout the United States and to
major cities around the world.

         The Company's  same-day delivery services are generally divided between
rush and  scheduled  delivery.  Rush delivery  typically  consists of delivering
time-sensitive  packages,  such as critical  machine parts or emergency  medical
devices.  Scheduled delivery  services,  provided on a recurring and often daily
basis,  include  deliveries from  pharmaceutical  suppliers to pharmacies,  from
manufacturers  to  retailers,  and the  interbranch  distribution  of  financial
documents.

         The Company  offers its  customers a single  source for their  same-day
delivery  needs.  The  Company's  strategy  is to  achieve  increased  operating
efficiencies by consolidating operations, increasing the density of its delivery
routes and  improving  the  productivity  of existing  personnel,  equipment and
facilities.  During 1997, the Company  curtailed its  acquisition  activities to
focus on internal  growth,  strengthen its  management  structure and to improve
financial and operational  systems. In connection  therewith,  and in accordance
with the  Company's  previously  announced  plans,  the Company  disposed of its
contract logistics subsidiary and its fulfillment and direct mail operation.  In
1998,  the Company  intends to seek suitable  acquisition  candidates  where the
Company can improve its  existing  market  position or can  establish a stronger
market presence.

         In connection with the disposal of the Company's fulfillment and direct
mail business,  the revenue, cost and expenses,  assets and liabilities and cash
flows have been  reclassified  as  discontinued  operations in the  accompanying
consolidated financial statements.

Industry Overview

         The ground and air delivery  industry in the United  States is composed
largely of companies  providing  same-day,  next-day and two-day  services.  The
Company  primarily  services  the same-day  delivery  market.  In contrast,  the
next-day and two-day delivery markets are dominated by large national  entities,
such as United Parcel Service, Inc. ("UPS") and FedEx Corp. ("FedEx").

         The Company  believes  that the same-day  delivery  industry,  which is
currently serviced by a fragmented system of approximately 10,000 companies,  is
undergoing  substantial  growth and  consolidation.  The Company  believes  that
several   factors,   including  the  following,   are  driving  the  growth  and
consolidation of the industry:

         Outsourcing  and  Vendor   Consolidation.   Commercial  and  industrial
concerns,  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  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.  The  recent  strike  by UPS has led many  businesses  to
reconsider their choice of single-source  international  delivery  companies and
such businesses are adding  flexibility by including  regional delivery vendors.
As a result,  the Company  believes  that  significant  opportunities  exist for
regional  carriers  that are able to  provide a full range of  services  to such
businesses.

         Heightened  Customer   Expectations.   Increased  customer  demand  for
customized  billing,  enhanced  tracking,   storage,  inventory  management  and
just-in-time  delivery  capabilities  favor companies with greater  resources to
devote to providing such services.

         New Market Opportunities. The significant growth in catalog and at-home
shopping and in-home medical care present  substantial growth  opportunities for
companies capable of economically providing more customized reliable services.

Services

         The Company  provides a full range of same-day  ground and air delivery
service options.

Ground Delivery

         The Company offers  comprehensive  same-day  ground  delivery  products
including:

         Rush. In providing rush or service  on-demand,  Company foot messengers
and drivers respond to customer  requests for immediate  pick-up and delivery of
time-sensitive  packages.  The Company generally offers one-,  two-and four-hour
service,  seven days a week,  twenty-four hours a day. Typical customers include
commercial and  industrial  companies,  hospitals and service  providers such as
accountants,  lawyers,  advertising  and travel  agencies  and public  relations
firms.

         Scheduled.  The Company's scheduled delivery services are provided on a
recurring  and often daily  basis.  The Company  typically  picks up or receives
large shipments of products, which are then sorted, routed and delivered.  These
deliveries  are made in accordance  with a customer's  specific  schedule  which
generally provides for deliveries to be made at particular times. Typical routes
may  include  deliveries  from  pharmaceutical  suppliers  to  pharmacies,  from
manufactures to retailers,  the interbranch distribution of financial documents,
payroll  data and other  documents,  and the  delivery  of other  time-sensitive
materials for banks, financial institutions and insurance companies. The Company
also provides 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.   The  Company  provides  mailroom  management
services,  including the provision and supervision of mailroom  personnel,  mail
and package  sorting,  internal  delivery and outside local messenger  services.
Typical customers include commercial enterprises and professional firms.


Air Services

         The Company provides  next-flight-out  (rush) and scheduled air courier
and airfreight services to its customers, both domestically and internationally.
The services provided include arranging for (i) the transportation of a shipment
from the customer's location to the airport, (ii) air transportation,  and (iii)
the delivery of the shipment to its ultimate  destination.  In order to meet the
needs of its  customers,  the Company has  established  relationships  with many
major airlines and large airfreight  companies from which the Company  purchases
cargo space on an as-needed basis.



Operations

Ground Delivery

         The Company's  delivery  operations are currently managed on a regional
basis.  The regions have operations  centers staffed by dispatchers,  as well as
order entry and other  operations  personnel.  Coordination  and  deployment  of
delivery personnel is accomplished either through  communications systems linked
to the Company's computers,  through pagers, by radio or telephone. A dispatcher
coordinates  shipments for delivery within a specific time frame.  Shipments are
routed according to the type and weight of the shipment, the geographic distance
between the origin and  destination  and the time allotted for the delivery.  In
the case of scheduled deliveries, routes are designed to minimize the unit costs
of the  deliveries  and to enhance  route  density.  The  Company  is  currently
installing new hardware and software  systems designed to enhance and centralize
the reporting and tracking of shipments  through the ground system as well as to
simplify the process of designing and scheduling  delivery routes. See Year 2000
Compliance  in  Item  7.  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations.

Air Services

         The Company's air courier and airfreight service begins with a customer
placing  an order,  which is then  dispatched  for pickup by a local  driver.  A
tracking  number is assigned to the  shipment  and  entered  into the  Company's
computer  system.  The computer  system than  selects the optimal  route for the
shipment based on delivery,  destination and timing  considerations,  tracks the
shipment  as it  flows  through  the  delivery  stream  until  it is  ultimately
delivered to the recipient and prepares the appropriate  billing charges. At the
final destination, a "proof of delivery" is obtained to conclude and confirm the
delivery.  At any  point in the  process,  the  Company  is able to  inform  the
customer  as to the exact  location  of its  shipment  within  the  distribution
network.

Sales and Marketing

         The Company believes that a direct sales force most effectively reaches
its customers for same-day delivery services and, accordingly,  the Company does
not currently engage in mass media advertising.  The Company markets directly to
individual customers by designing and offering customized service packages after
determining a customer's  specific delivery and distribution  requirements.  The
Company is implementing a coordinated  "major  account"  strategy by building on
established relationships with regional and national customers. The Company also
employs certain direct response marketing techniques.

         Many of the  services  provided  by the  Company,  such  as  facilities
management,  distribution and scheduled services, are determined on the basis of
competitive  bids.  However,  the  Company  believes  that  quality  and service
capabilities are also important  competitive factors. In certain instances,  the
Company has  obtained  business by  offering a superior  level of service,  even
though it was not the low bidder for a particular contract.  The Company derives
a substantial  portion of its revenues from  customers  with whom it has entered
into  contracts.  Virtually  all  scheduled  dedicated  vehicle  and  facilities
management services are provided pursuant to contracts.  Most of these contracts
are terminable by the customer on relatively short notice without penalty.

Competition

         The market for the Company's  delivery  service is highly  competitive.
The Company  believes that the principal  competitive  factors in the markets in
which it competes are  reliability,  quality,  breadth of service and price. The
Company competes on all such factors.  Most of the Company's  competitors in the
same-day  ground and air  delivery  market are  privately  held  companies  that
operate in only one location or in a limited service area.  However,  there is a
growing trend toward  consolidation  in the  industry.  Certain of the Company's
competitors have recently consolidated, such as Corporate Express, Inc., Dynamex
Inc.  and Dispatch  Management  Services,  Inc. In addition,  UPS and FedEx have
begun to provide same-day air delivery services.

         In addition to the same-day  delivery services provided by the Company,
customers also utilize next-day and second-day services. The market for next-day
and second-day  services is dominated by nationwide network  providers,  such as
FedEx and UPS, which have built large,  capital-intensive  distribution channels
that allow them to process a high volume of materials.  In order to  effectively
operate their  networks,  these  companies  typically  have fixed  deadlines for
next-day or second-day delivery services.  In contrast,  the Company specializes
in on-demand, next-flight-out deliveries or services which, by their nature, are
not governed by rigid time schedules.  If a customer is unable to meet a network
provider's established deadline, the Company 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.  The  Company's  services  are  available
twenty-four hours a day, seven days a week.

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

Acquisitions and Divestitures

         In November 1995 the Company commenced  operations  simultaneously with
the acquisition of eleven companies  providing  same-day  delivery and logistics
services.  The  aggregate  consideration  paid by the Company was  approximately
$29.6 million in cash and 2,935,702  shares of Common Stock, par value $.001 per
share (the  "Common  Stock"),  for an  aggregate  value of  approximately  $67.8
million.

         In 1996, the Company acquired several additional businesses aggregating
approximately  $15.6 million in annual  revenues.  The aggregate  purchase price
paid by the  Company  for  these  businesses  was  approximately  $3.3  million,
consisting of a combination of cash,  seller  financed debt and shares of Common
Stock. The purchase price was subsequently reduced by approximately $357,000 due
to actual revenue not reaching  projected  revenue as stipulated in the purchase
agreements.  Each of the transactions has been accounted for as a purchase.  See
Item 7. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.

         In 1997, the Company curtailed its acquisition  activity and focused on
internal growth. Consistent with the change in strategic focus, in January 1997,
the Company sold its contract logistics  subsidiary to David Mathia, its founder
and president,  in exchange for 137,239 shares of the Company's common stock. In
connection with the sale, the Company recorded a gain of approximately  $816,000
before the effect of Federal and state income taxes.  During  October 1997,  the
Company announced its intention to exit the fulfillment and direct mail business
and in December 1997 sold its  fulfillment and direct mail business for $850,000
in cash and notes. In connection  with the sale, the Company  recorded a gain of
approximately  $23,000 net of Federal and state  income  taxes of  approximately
$15,000.  Accordingly,  these operations have been  reclassified as discontinued
operations in the accompanying consolidated financial statements.

         The Company intends to pursue  additional  acquisitions in 1998,  where
the Company can improve its  existing  market  position or establish a strategic
market  presence.  The  Company's  ability to make  additional  acquisitions  is
limited  under  the  terms  of its  Revolving  Credit  Facility  - See Item 7. -
Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations.

Regulation

         The  Company's  delivery  operations  are subject to various  state and
local  regulations  and, in many  instances,  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 United
States  Department of  Transportation  (the "DOT") and by State  Departments  of
Transportation.  The Company's failure to comply with the applicable regulations
could result in substantial  fines or possible  revocation of one or more of the
Company's operating permits.

Safety

         The  Company  seeks to ensure  that all  employee  drivers  meet safety
standards  established by the Company and its insurance  carriers as well as the
DOT. In addition,  where required by the DOT or state or local authorities,  the
Company  requires  independent  owner/operators  utilized by the Company to meet
certain specified safety standards.  The Company reviews  prospective drivers in
an effort to ensure that they meet applicable requirements.

Intellectual Property

         The  Company  filed  an   application  to  register  the  service  mark
"Consolidated Delivery & Logistics, Inc. The Total Package in Delivery" which is
currently  pending in the U.S. Patent and Trademark  Office. No assurance can be
given  that any such  registration  will be  granted  or that if  granted,  such
registration  will be effective to prevent others from (i) using this or similar
service mark  concurrently or (ii) preventing the Company from using the service
mark in certain  locations.  The Company is not aware of any other  entity using
the name  "Consolidated  Delivery &  Logistics,  Inc." or the service  mark "The
Total Package in Delivery."

Employees and Independent Contractors

         At December 31, 1997, the Company employed  approximately 2,900 people,
2,000  as  drivers  or  messengers,  400  in  operations,  300 in  clerical  and
administrative positions, 50 in sales and 150 in management.  The Company is not
a party to any collective bargaining agreements, although the Company is subject
to union organizing  activity from time to time. The Company has not experienced
any work  stoppages  and believes  that its  relationship  with its employees is
good.

         The Company also had contracts  with  approximately  1,000  independent
contractors  as of  December  31,  1997.  From time to time,  federal  and state
authorities  have  sought  to  assert  that   independent   contractors  in  the
transportation industry, including those utilized by the Company, are employees,
rather  than  independent  contractors.  In 1997,  a  subsidiary  of the Company
satisfactorily concluded an employment status examination.  The Company has been
informed that two  additional  examinations  will be conducted in 1998 regarding
employment status at certain other Company  subsidiaries.  The Company continues
to believe  that the  independent  contractors  utilized  by the Company are not
employees  under existing  interpretations  of federal and state laws.  However,
there can be no assurance that federal and state  authorities will not challenge
this  position,  or that  other  laws or  regulations,  including  tax laws,  or
interpretations  thereof,  will  not  change.  If,  as a  result  of  any of the
foregoing, the Company were required to pay for and administer added benefits to
independent  contractors,  the  Company's  operating  costs would  substantially
increase.   See  "Risk   Factors  -   Independent   Contractors   and   Employee
Owner/Operators."

Risk Factors

Limited Combined Operating History

The  Company  was  founded in June 1994 and  conducted  no  operations  prior to
consummating the acquisition of 11 same-day courier  companies in November 1995.
Since that time, the Company has acquired  several  additional  businesses.  The
businesses  acquired by the Company  since its  formation  have all  operated as
separate  independent  entities prior to their  acquisition by the Company.  The
process  of  integrating   acquired   businesses   often   involves   unforeseen
difficulties and may require a significant amount of the Company's financial and
other resources,  including  management time. The Company may experience delays,
complications  and  unanticipated  expenses  in  implementing,  integrating  and
operating the acquired  businesses,  any of which could have a material  adverse
effect on the Company's business, financial condition and results of operations.
See Item 1. Business.



Management of Growth

The  Company  expects to expend  significant  time and effort in  expanding  its
existing  businesses and  identifying,  acquiring and integrating  acquisitions.
There can be no assurance that the Company's  management and financial reporting
systems,  procedures  and  controls  will be adequate  to support the  Company's
operations as they expand.  Any future growth also will impose significant added
responsibilities  on  members  of  senior  management,  including  the  need  to
identify,  recruit and integrate additional management and employees.  There can
be no assurance that such additional management and employees will be identified
and retained by the Company.  To the extent that the Company is unable to manage
its growth  efficiently  and  effectively,  or is unable to  attract  and retain
additional qualified personnel, the Company's business,  financial condition and
results  of  operations  could be  materially  adversely  effected.  See Item 1.
Business--Acquisitions and Divestitures.

Risks Relating to the Company's Acquisition Strategy

In 1997 the Company  curtailed its  acquisition  activity,  however,  one of the
Company's   growth   strategies  for  1998  is  to  increase  its  revenues  and
profitability  and  expand the  markets it serves  through  the  acquisition  of
additional same-day air and ground delivery businesses.  Several large, national
publicly traded companies have begun to consolidate the delivery industry. There
can be no  assurance  that the Company will be able to compete  effectively  for
acquisition candidates on terms deemed acceptable to the Company. There also can
be no  assurance  that the  Company  will be able to  successfully  convert  the
systems of these businesses to the Company's existing systems and integrate such
businesses  into  the  Company  without   substantial  costs,  delays  or  other
operational  or  financial  problems.  Acquisitions  involve a number of special
risks, including possible adverse effects on the Company's operating results and
the timing of those results, diversion of management's attention,  dependence on
retention,   hiring  and  training  of  key  personnel,  risks  associated  with
unanticipated  problems or legal liabilities,  and the realization of intangible
assets,  some or all of  which  could  have a  material  adverse  effect  on the
Company's business, financial condition and results of operations,  particularly
in  the  fiscal  quarters   immediately   following  the  consummation  of  such
transactions.  To the extent  that the  Company is unable to acquire  additional
same-day  delivery  companies or integrate  such  businesses  successfully,  the
Company's  ability  to expand its  operations  and  increase  its  revenues  and
earnings to the degree desired could be reduced significantly.

The  Company  currently  intends  to  finance  future  acquisitions  by  using a
combination of shares of its Common Stock, notes and cash. In the event that the
Common  Stock of the Company does not maintain a  sufficient  market  value,  or
potential  acquisition  candidates are unwilling to accept the Company's  Common
Stock as part of or all of the consideration to be paid for their business,  the
Company may be required to utilize its cash resources, if available, to maintain
its  acquisition  program.  If the Company has  insufficient  cash  resources to
pursue  acquisitions,  its growth  could be limited  unless it is able to obtain
additional  capital through debt or equity financing.  There can be no assurance
that the Company will be able to obtain such  financing if and when it is needed
or that, if available, such financing can be obtained on terms the Company deems
acceptable.  The inability to obtain such financing could negatively  impact the
Company's acquisition program and could have a resulting material adverse effect
on the Company's business,  financial  condition and results of operations.  The
terms  of  the  Company's  existing  Revolving  Credit  Facility  restricts  the
Company's ability to make acquisitions.
See Item 1. Business--Acquisitions and Divestitures.



Risks Associated With the Same-Day Delivery Industry; General Economic
 Conditions

The  Company's  revenues and earnings  are  especially  sensitive to events that
affect the delivery services  industry,  including  extreme weather  conditions,
economic factors  affecting the Company's  significant  customers,  increases in
fuel prices and shortages of or disputes  with labor,  any of which could result
in the  Company's  inability  to service its clients  effectively.  In addition,
demand for the Company's services may be negatively impacted by downturns in the
level of general economic activity and employment. The development and increased
popularity  of  facsimile  machines  and  electronic  mail via the  Internet has
reduced  the demand for  certain  types of delivery  services,  including  those
offered by the Company. As a result, same-day delivery companies,  including the
Company,  have changed focus to those delivery services involving items that are
unable to be delivered via alternative  methods.  There can be no assurance that
similar  industry-wide  developments  will not have a material adverse effect on
the Company's business, financial condition or results of operations.

Dependence on Technology

The Company's  business is dependent upon a number of different  information and
telecommunication  technologies.  Any  impairment  of the  Company's  ability to
process transactions on an accurate and timely basis could result in the loss of
customers  and diminish the  reputation of the Company.  The Company  intends to
integrate  its  subsidiaries'  separate  operating  systems  to  an  integrated
Company-wide system. There can be no assurance that the contemplated integration
and  conversion  of these  systems will be  successful  or completed on a timely
basis or without  unexpected  costs.  Any of the foregoing could have a material
adverse  effect on the Company's  business,  financial  condition and results of
operations.  See Item 7.  Management's  Discussion  and  Analysis  of  Financial
Condition and Results of Operations.

Independent Contractors and Employee Owner/Operators

         From time to time,  federal and state authorities have sought to assert
that independent  contractors in the  transportation  industry,  including those
utilized by the Company,  are employees,  rather than  independent  contractors.
Similar  assertions  have been made  against a subsidiary  of the  Company.  The
Company  believes that the independent  contractors  utilized by the Company are
not employees under existing interpretations of federal and state laws. However,
there can be no assurance that federal and state  authorities will not challenge
this  position,  or that  other  laws or  regulations,  including  tax laws,  or
interpretations  thereof,  will  not  change.  If,  as a  result  of  any of the
foregoing, the Company were required to pay for and administer added benefits to
independent  contractors  the  Company's  operating  costs  could  substantially
increase. See Item 1. Business Employees and Independent Contractors.

         In addition,  certain of the Company's  employees own and operate their
own vehicles in the course of their  employment.  In certain cases,  the Company
pays  those  employees  for all or a  portion  of the costs of  operating  those
vehicles.  The  Company  believes  that  these  arrangements  do  not  represent
additional  compensation to those employees.  However, there can be no assurance
that federal and state taxing  authorities will not seek to recharacterize  some
or all of  such  payments  as  additional  compensation.  If such  amounts  were
recharacterized,  the Company  could have to pay  additional  employment-related
taxes on such amounts.

Claims Exposure

         The Company utilizes the services of approximately 2,000 drivers.  From
time to time such  drivers are  involved  in  accidents.  The Company  currently
carries  liability  insurance of $1 million for each such  accident  (subject to
applicable  deductibles),  carries  umbrella  coverage  up to $25 million in the
aggregate  and  requires  its  independent  contractors  to  maintain  liability
insurance  of at least the minimum  amounts  required by state and federal  law.
However,  there can be no  assurance  that claims  against the Company  will not
exceed the amount of  coverage.  If the Company  were to  experience  a material
increase in the frequency or severity of accidents, liability claims or workers'
compensation  claims,  or  unfavorable  resolutions  of  claims,  the  Company's
operating  results  could  be  materially  affected.  In  addition,  significant
increases in insurance costs could reduce the Company's profitability.

Shares Eligible for Future Sale

         The market price of the Common Stock could be adversely affected by the
sale of substantial  amounts of Common Stock in the public  market.  As of March
13,  1998,  6,666,884  shares of  Common  Stock  were  issued  and  outstanding,
3,250,312  of which were  registered  for  resale by the  holders  thereof.  The
remaining  shares  may  only  be  sold  in  transactions  registered  under  the
Securities  Act of 1933, as amended (the  "Securities  Act"),  or pursuant to an
exemption from registration, including the exemption contained in Rule 144 under
the Securities Act.

         In September 1995, the Company issued $2 million in aggregate principal
amount  of its 8%  Subordinated  Convertible  Debentures  due  August  2000 (the
"Debentures")  to certain  individuals.  The  Debentures  are  convertible  into
180,995  shares of Common Stock.  Pursuant to the terms of the  Debentures,  the
Company  has  agreed to  register  the  shares of Common  Stock  into  which the
Debentures are convertible. See Item 7 - Management's Discussion and Analysis of
Financial Condition and Results of Operations.

         As of March 13,  1998,  the  Company  had  outstanding  under its stock
option plans options to purchase an aggregate of 914,361 shares of Common Stock,
575,830 of which were  exercisable  as of that date.  The shares of Common Stock
issuable  upon the  exercise  of such  options  have been  registered  under the
Securities  Act and,  as a result,  will be  eligible  for  resale in the public
market, unless held by affiliates of the Company.

Reliance on Key Personnel

         The Company's  operations are dependent on the continued efforts of its
senior  management.  Furthermore,  the Company  will likely be  dependent on the
senior  management  of companies  that may be acquired in the future.  If any of
these people elect not to continue in their present roles,  or if the Company is
unable to attract and retain other skilled  employees,  the  Company's  business
could be adversely  affected.  See Item 10. Directors and Executive  Officers of
the Registrant and Item 1. Business - Strategy.

Permits and Licensing

         The Company's  delivery  operations are subject to various state, local
and federal  regulations  that in many instances  require  permits and licenses.
Failure by the Company to maintain  required  permits or licenses,  or to comply
with  applicable  regulations,  could  result in  substantial  fines or possible
revocation of the Company's authority to conduct certain of its operations.

No Future Dividends

         The Company does not anticipate  paying any cash dividends on shares of
the  Common  Stock in the  foreseeable  future  and  intends  to  retain  future
earnings, if any, for use in its business. In addition, the Company's ability to
pay cash  dividends on the Common Stock is limited by the terms of its Revolving
Credit Facility.  See Item 5. Market for Registrant's  Common Equity and Related
Stockholder Matters - Dividends and Item 7. Management's Discussion and Analysis
of  Financial  Condition  and  Results of  Operations  -  Liquidity  and Capital
Resources.

Effect of Certain Charter Provisions

         The Board of Directors  of the Company is empowered to issue  preferred
stock without stockholder action. The existence of this "blank-check"  preferred
stock could render more  difficult or discourage an attempt to obtain control of
the Company by means of a tender offer,  merger,  proxy contest or otherwise and
may  adversely  affect the  prevailing  market  price of the Common  Stock.  The
Company  currently has no plans to issue shares of preferred stock. In addition,
Section 203 of the Delaware  General  Corporation Law restricts  certain persons
from engaging in business combinations with the Company.


<PAGE>



Item 2. Properties -

         As of December 31, 1997, the Company operated from 53 leased facilities
(excluding  eight  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 (excluding the sales agent locations).


State                                                     Number of Facilities
-----                                                     --------------------
New York..........................................                16
Florida...........................................                 9
New Jersey........................................                 6
California........................................                 3
Massachusetts.....................................                 3
Illinois..........................................                 2
Louisiana.........................................                 2
Ohio..............................................                 2
Connecticut.......................................                 1
Georgia...........................................                 1
Indiana...........................................                 1
Maine.............................................                 1
Maryland..........................................                 1
Missouri..........................................                 1
North Carolina....................................                 1
Tennessee.........................................                 1
Virginia..........................................                 1
Washington........................................                 1


         The  Company's  corporate  headquarters  are  located in  Clifton,  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, 1997, the Company owned or leased  approximately 270
cars and 480 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, 1997 was  approximately  $3.5 million.  See Note 12 to the
Company's Consolidated Financial Statements.




<PAGE>


Item 3.  Legal Proceedings

         On March 19,  1997,  a  purported  class  action  complaint,  captioned
Gapszewicz v.  Consolidated  Delivery & Logistics,  Inc., et al. (97 Civ. 1939),
was filed in the United States  District Court for the Southern  District of New
York (the "Court")  against the Company,  certain of the  Company's  present and
former  executive  officers,  and the co-managing  underwriters of the Company's
initial public offering (the "Offering").  The gravamen of the complaint is that
the Company's  registration  statement for the Offering contained  misstatements
and omissions of material fact in violation of the federal  securities  laws and
that the Company's financial  statements included in the registration  statement
were  false  and  misleading  and did not  fairly  reflect  the  Company's  true
financial condition. The complaint seeks the certification of a class consisting
of  purchasers  of the  Company's  Common  Stock from  November 21, 1995 through
February  27,  1997,  rescission  of the  Offering,  attorneys'  fees and  other
damages. In April 1997, five other complaints  containing  allegations identical
to the  Gapszewicz  complaint  were filed in the same federal  court against the
Company.  On May 27, 1997, these six complaints were  consolidated into a single
action  entitled  "In re  Consolidated  Delivery &  Logistics,  Inc.  Securities
Litigation".  On July 16, 1997, the Company and the underwriter defendants filed
a motion to dismiss the complaint.  In response, the plaintiffs filed an amended
complaint  on October 20, 1997.  A motion to dismiss the amended  complaint  was
filed by the Company and the  underwriter  defendants  on December 15, 1997.  No
ruling on the  Company's  motion has been  rendered by the Court.  The Company
believes the allegations  contained in the amended  complaint are without merit
and intends to continue to vigorously defend the action.

         In February 1996,  Liberty Mutual Insurance Company ("Liberty  Mutual")
filed an action  against  Securities  Courier  Corporation,  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.
Under the terms of the acquisition of Securities Courier, the Company has
certain rights to indemnification from Mr. Brana.  Discovery is  currently
pending and as a result the Company is unable to make a determination  as to
the merits of the claim.  The Company does not believe that an adverse
determination  in this  matter  would  result in a material  adverse affect 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,  including
the  actions  described  above,  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 is 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 1996 and 1997.
<TABLE>
<CAPTION>

                                           1996                                         Low               High
           <S>                                                                         <C>              <C>
           First Quarter                                                               $5.75            $12.25
           Second Quarter                                                              $4.75             $9.25
           Third Quarter                                                               $4.25             $6.63
           Fourth Quarter                                                              $4.00             $5.88

                                           1997                                         Low               High
           First Quarter                                                               $1.88             $5.00
           Second Quarter                                                              $1.63             $4.00
           Third Quarter                                                               $2.13             $3.63
           Fourth Quarter                                                              $2.19             $4.00
</TABLE>

         On March 13, 1998, the last reported sale price of the Common Stock was
$4.63 per share. As of March 13, 1998, there were approximately 157 shareholders
of record of Common Stock and, based on security position listings,  the Company
believes there were approximately 1,747 beneficial holders of the Common Stock.

         On  October  2,  1997  the  Company  issued  8,333  shares  of stock in
connection  with the  acquisition  of certain  assets of Sureway  Air Express of
Miami, Inc. The issuance was exempt from registration  under Section 4(2) of 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.  ("CD&L") was founded in June
1994. In November 1995, simultaneously with the closing of CD&L's initial public
offering (the "Offering") separate wholly-owned subsidiaries of CD&L merged (the
"Merger")  with  each  of  the  eleven   acquired   businesses   (the  "Founding
Companies").  Consideration for the acquisition of these businesses consisted of
a combination of cash and common stock of CD&L, par value $0.001 per share.  The
assets and  liabilities of the acquired  businesses at September 30, 1995,  were
recorded by CD&L at their historical amounts.

         The  statement  of  operations  data  shown  below for the years  ended
December 31, 1993,  1994 and for the nine month period ended  September 30, 1995
and the  balance  sheet data as of  December  31,  1993 and 1994 are 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 to be  achieved  by the  Company  after the
Mergers.

         The selected  financial  data with respect to  Consolidated  Delivery &
Logistics,  Inc.'s  consolidated  statement  of  operations  for the years ended
December 31, 1995,  1996 and 1997 and with  respect to  Consolidated  Delivery &
Logistics,  Inc.'s  consolidated  balance sheet as of December 31, 1996 and 1997
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 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 Companies (4)
                          -----------------------------------------
                                                                   Consolidated
                                                                    Delivery &
                                                                    Logistics,
                                                                     Inc. and
                                                                   Subsidiaries   For the Pro    Consolidated Delivery &
                            For The Years Ended     For The Nine   For The Year  Forma Period      Logistics, Inc. and
                               December 31,         Months Ended       Ended         Ended             Subsidiaries
                                                                                                    For The Years Ended
                          ------------------------
                                                    September 30,   December 31,  December 31,  December 31,   December 31,
                             1993         1994          1995          1995 (3)     1995 (1)(2)      1996          1997
                          -----------  -----------  -------------   -------------  ------------ ------------- --------------
<S>                       <C>          <C>          <C>             <C>            <C>          <C>           <C>
Revenue                    $121,752     $136,555      $109,168        $37,322       $146,490     $163,090      $171,502
Gross profit                 37,715       41,925        32,827         11,286         44,113       40,559        40,925
Operating income (loss)       1,300        2,107         3,971            578          4,549       (1,468)        2,702
Income (loss) from
  continuing
  operations (5)                722          867         2,112            (26)         2,086         (854)        1,657
Net income (loss)              $722         $721        $2,182          ($195)        $1,987        ($683)         $459
Basic: (6)
Income (loss) per
  share from continuing
  operations                                                             ($.02)          $.32        ($.13)         $.25
Net income (loss) per
  share                                                                  ($.10)          $.30        ($.10)         $.07
                                                                    =============  ============ ============= ==============

Diluted: (6)
Income (loss) per
  share from
  continuing
  operations                                                             ($.02)          $.31        ($.13)         $.25
Net income (loss) per
  share                                                                  ($.10)          $.29        ($.10)         $.07
                                                                    =============  ============ ============= ==============

</TABLE>
<TABLE>
<CAPTION>

Balance Sheet Data:
                                 Combined Founding Companies         Consolidated Delivery & Logistics, Inc. and
                                                                                     Subsidiaries
                                        December 31,                                 December 31,
                              -----------------------------------------------------------------------------------------
                                    1993              1994              1995             1996               1997
                              ------------------ ---------------   ----------------  --------------    ---------------

<S>                               <C>                <C>                <C>               <C>               <C>
Working capital                   $3,211             $3,668             $7,948            $5,472            $2,519
Equipment and leasehold
   improvements, net               3,651              3,023              3,582             3,857             5,667
Total assets                      23,045             23,642             31,856            35,001            36,159
Long-term debt, net of
current  maturities                3,680              1,164              3,027             3,415             2,240
Stockholders' equity               5,212              5,568              8,311             8,730             8,614
</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  are
     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.
(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.
(6)  In the fourth quarter of 1997, the Company  adopted  Statement of Financial
     Accounting Standard No. 128 ("SFAS 128") which requires the presentation of
     both basic and diluted earnings per share. For the periods presented, basic
     and diluted earnings per share have been restated in accorandance  with the
     provisions of SFAS 128.



<PAGE>


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:  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
Company's   actual  results  varying   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.  On December 31, 1997, the Company entered into
an agreement to sell certain assets of its  fulfillment and direct mail business
and thereby executed its previously announced plan to discontinue providing such
services.  Accordingly,  the financial position,  results of operations and cash
flows  of  the  Company's   fulfillment  and  direct  mail  business  have  been
reclassified  as  discontinued  operations  in  the  accompanying   consolidated
financial statements. The Company's results in 1997 were impacted by the sale of
its contract  logistics  subsidiary  which accounted for $4.6 million in revenue
for 1996 and $400,000 to the date of its sale in January 1997.


Results of Operations 1997 compared with 1996

         Revenue increased $8.4 million, or 5.2%, from $163.1 million in 1996 to
$171.5  million  for the  year  ended  December  31,  1997.  Were it not for the
decrease  in  revenue  attributable  to  the  sale  of  the  contract  logistics
subsidiary,  revenue would have reflected an increase of $12.6 million, or 7.9%,
from $158.5  million in 1996 to $171.1  million for the year ended  December 31,
1997.

         Air courier revenue increased $4.7 million, or 9.1% and ground delivery
revenue  increased  $7.9 million,  or 7.4% for the year 1997 over the year 1996.
Air courier revenue benefited from the expansion and internal growth of existing
accounts  as well as the full  year  contribution  of  acquisitions  made by the
Company during 1996.  Ground delivery revenue increased by $3.9 million from the
addition  of time  service  and  facilities  management  revenue  as a result of
previously  disclosed  acquisitions  and the  addition of several  new  contract
distribution routes in the pharmaceutical, electronic repair and office products
industries. The increases in ground delivery revenue discussed above were offset
by a decrease of $1.7 million in the Company's banking division due to continued
industry  consolidation.  Two of the Company's largest banking customers merged,
decreasing their branch network and the number of stops required.

         The  Company  believes  this  upward  trend in ground and air  delivery
revenue will continue in the future as a result of internal growth and its focus
on selective  and  strategic  acquisitions  in 1998.  While  Company  management
restricted  its  acquisition  activity in 1997, the goal for 1998 is to focus on
selective  and  strategic  acquisitions  where the Company  can enhance  current
operations or expand into certain new market areas.


         Cost of revenue  includes,  among  other  things,  payment to  employee
drivers,  owner  operators  and  independent  contractors  as  well  as  agents,
airfreight carriers,  commercial airlines,  and pick-up and delivery fees. These
costs  increased by $8.1 million,  or 6.6% from $122.5 million for the year 1996
to $130.6  million for the year ended December 31, 1997. The increase in cost of
revenue is due to several  factors which include  significant  start-up costs in
connection  with new contracts added in the  pharmaceutical  and office products
distribution  industries as well as an increase in costs  necessary to support a
growing revenue base in ground delivery.  The Company was impacted early in 1997
by airline fuel surcharges as well as a change in the general business mix which
reduced certain consolidation opportunities in selected air freight shipments in
the Company's major markets.

         As a result of the above, gross profit increased by $366,000,  or 0.9%,
from $40.6  million for 1996 to $40.9  million for the year ended  December  31,
1997. Excluding the effect on gross profit of the contract logistics subsidiary,
gross profit would have increased by $1.0 million or 2.5% from $39.8 million for
1996 to $40.8 million for 1997.

         Selling,   general  and  administrative   expenses  ("S,G&A")  includes
salaries,  sales  commissions and travel to support the Company's  marketing and
sales  effort.  Also  included are the  expenses of  maintaining  the  Company's
information systems, human resources,  financial,  legal,  procurement and other
administrative  functions.  S,G&A decreased by $3.8 million,  or 9.0% from $42.0
million in 1996 to $38.2  million in 1997.  The sale of the  Company's  contract
logistics  subsidiary accounts for $1.4 million of that decrease.  In the fourth
quarter of 1996,  the Company  recorded a special  charge of $1.4 million  which
included  contract and salary  settlements,  abandonment of operating leases and
other  costs   associated   with  management   headcount   reduction  and  other
consolidation  issues. The 1996 restructuring  charge included in S,G&A resulted
in a net reduction of SG&A costs of approximately  $700,000 in 1997. The balance
of the reduction is principally the result of reduced  salaries at the operating
regions due to continued internal consolidation.

         As a result of the above, operating income increased for the year ended
December  31,  1997 by $4.2  million  from a loss of $1.5  million in 1996 to an
operating  profit of $2.7  million in 1997.  When  excluding  the results of the
Company's contract logistics  subsidiary which was sold in early 1997, operating
income would have increased $3.5 million.  The gain recognized by the Company on
the  aforementioned  sale of its contract  logistics  subsidiary in January 1997
amounted to $816,000 before applicable taxes.

         Interest  expense  increased by $339,000  from $805,000 in 1996 to $1.1
million for the year ended  December 31, 1997.  The increase is primarily due to
an overall  increase in the level of  borrowing  by the  Company  during 1997 as
compared to 1996. To a lesser  extent,  the Company was also subject to interest
rate increases  during the first quarter of 1997 with its previous lenders prior
to the establishment of its current Revolving Credit Facility (See Note 9 to the
accompanying consolidated financial statements).

Non-comparability of results of operations 1996 compared to 1995

     Because the acquired  companies operated as separate  independent  entities
prior to their acquisition,  comparisons between the consolidated results of the
Company  for the  year  ended  December  31,  1996  and the pro  forma  combined
historical  results of the acquired  companies  for the year ended  December 31,
1995, are difficult to make for numerous reasons, including the following:

1.   In 1996, the acquired companies were all subsumed within the common
     management of the Company.  This resulted among other things in a) each
     subsidiary being subjected to an administrative charge, b) reallocation of
     costs, such as, for instance, common insurance being acquired for the
     Company and its subsidiaries as a whole, and c) the subsidiaries being
     relieved of the necessity of performing various administrative functions
     for themselves.

2.   In 1996, the Company began the process of merging and rationalizing
     operations of the previously unrelated acquired Companies.

3.   The Company  incurred  approximately  $4.5 million in expenses  during 1996
     related  to  corporate  overhead  and the  costs of  operating  as a public
     company, compared to approximately $300,000 in 1995.

4.   Most of the acquired Companies were operated as Subchapter S corporations
     prior to their acquisition.

     The selected  financial data  presented in this report  includes the actual
financial results of the Company for the years ended December 31, 1997, 1996 and
1995. The pro forma combined  historical results reflect the combined operations
of the acquired  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. For all the reasons set forth
above and others, combined results are not indicative of results that would have
been achieved if the acquired  Companies had actually been combined during those
periods,  and may not be  comparable  to or  indicative  of future  performance.
Nonetheless,  the following section discusses consolidated 1996 results compared
to pro forma  combined  historical  1995  results  to  indicate  general  trends
affecting  operations.  The following  section should be read with the foregoing
caveats as to non-comparability in mind.

Results of Operations 1996 compared to 1995

         Consolidated  Delivery's  revenue increased 11.3 % to $163.1 million in
1996 from $146.5 million in 1995. In spite of the loss of significant revenue in
the Company's contract logistics subsidiary, the Company achieved revenue growth
in all other areas of its business. Revenue in ground delivery,  including rush,
scheduled and distribution increased 11.4 % from $91.4 million in 1995 to $101.8
million in 1996. Air courier produced a 22.1 % increase to $52.0 million in 1996
from $42.6 million in 1995. Revenue in the Company's logistics business declined
by 25.6% from $12.5 million in 1995 to $9.3 million in 1996.  Contract logistics
revenue contributed to the overall decline in logistics revenues by $3.5 million
due to the  cancellation  and/or  non-renewal of several  long-term  contractual
relationships.  The significant  decline in contract  logistics  revenues during
1996  contributed  to the  Company's  decision  to sell its  contract  logistics
subsidiary early in 1997.

         Ground  delivery  revenue  benefited  from  the  acquisition  of  three
companies in the  Northeast  during 1996.  In 1996,  internal  growth of the air
courier  business  was  augmented by the  acquisition  of two  companies,  which
solidified and expanded the New York to Los Angeles air route.

         The increase in cost of revenue during 1996 caused the Company's  gross
profit  percentage  to decline from 30.1% in 1995 to 24.9% in 1996.  Among other
factors  contributing to the increase in 1996 cost of revenue is a change in the
Company's  general  business  mix to lower  margin  business,  mobilization  and
start-up costs for several large  distribution  contracts and the effect of fuel
surcharges from several air carriers.

         S,G&A  increased by $2.4 million,  or 6.1%, from $39.6 million for 1995
to $42.0  million for the year ended  December 31,  1996.  The increase for 1996
included the addition of $4.2 million in expenses necessary to the establishment
and maintenance of the Company's corporate and administrative  infrastructure as
a public company.  During the fourth quarter of 1996, the Company recognized the
impact of several  non-recurring  charges  totaling  approximately  $1.4 million
which included salary and contract settlements,  abandonment of operating leases
and  other  costs  associated  with  management  headcount  reduction  and other
consolidation issues.

         For the reasons described above,  including the decline in gross profit
and the increase in selling,  general and administrative  expenses including the
impact of  non-recurring  charges,  operating  income  decreased  from operating
income of $4.5 million in 1995 to an operating loss of $1.5 million in 1996.


         Interest  expense  decreased by 8.7 % from  $882,000 for the year ended
December  31,  1995 to  $805,000  for the year ended  December  31,  1996.  This
decrease  results from  refinancing of the  pre-combination  debt of the
acquired companies  which  carried  higher  interest  rates  than  the
Company's  Credit Agreement (See Liquidity and Capital Resources).

         As a  result  of the  foregoing  the  Company  recorded  a net  loss of
$683,000 in 1996, compared to net income of $2.0 million in 1995.

         As a result  of the  losses in 1996,  the  Company  instituted  certain
actions including the sale of its contract logistics subsidiary,  elimination of
redundant  overhead and the design of more  effective  financial  and  operating
management  information  systems.  The Company  also  implemented  a  management
compensation system based on business unit results for 1997.

Liquidity and Capital Resources

         Working capital decreased by $3.0 million from $5.5 million at December
31, 1996 to $2.5 million at December 31, 1997.  The decrease  results  primarily
from  the   reclassification   of  the  Company's  $2  million  of   Convertible
Subordinated  Debt to  current  rather  than  long-term  because  the  debenture
contains an option for the holders to redeem  their  debentures  in August 1998.
Cash and cash equivalents  increased modestly by $55,000 and remained relatively
stable at  approximately  $1.8  million as of December 31, 1996 and December 31,
1997. Cash transactions  consisted primarily of the use of cash for additions to
equipment  and  leasehold  improvements  of $1.2  million and the  repayment  of
Company  debt of  $1.4  million,  offset  by net  cash  provided  by  continuing
operations of $2.6 million.

         The Company  announced on March 16, 1998 that  approximately 50% of its
current  debenture  holders have agreed to extend the term of their  convertible
subordinated  debt from August  1998 to August  1999 based on revised  terms and
conditions.  Accordingly,  the $2 million of convertible subordinated debentures
are  included  in  current  maturities  of  long-term  debt in the  accompanying
consolidated  financial  statements,  as the effective  date of the extension is
expected to be April 1, 1998. The effect of this  extension,  should it conclude
as expected, will be to increase availability under the Company's current credit
facility by $2 million and utilize $1 million of cash to  liquidiate  50% of the
current debentures not extended.

         The Company  incurred a capital lease obligation of $2.5 million during
1997 in  connection  with an agreement to acquire 175  delivery  vehicles.  This
transaction is excluded from the consolidated statement of cash flows in 1997 as
a noncash transaction.

         Capital  expenditures  amounted  to  $1.2  million,  $1.3  million  and
$353,000 for the years ended  December 31,  1997,  1996 and 1995,  respectively.
These expenditures were made primarily to upgrade and expand the capabilities of
computer  equipment,  and to  expand  and  maintain  Company  facilities  in the
ordinary course of business and in its ongoing consolidation efforts.

         The  Company  used $1.4  million in  financing  activities  during 1997
primarily to repay  long-term  debt.  The Company was provided $1.3 million from
financing  activities  in  1996  resulting  from an  increase  in  borrowings
of approximately $4.5 million reduced by amounts used to repay other long-term
debt of  approximately  $3.1  million.  At December  31,  1997,  the Company
had $3.9 million available under the Revolving Credit Facility for future
borrowings.

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


<PAGE>
Recently Issued Accounting Pronouncements

         In the fourth quarter of 1997, the Company adopted Financial Accounting
Standard No. 128 ("SFAS 128") which requires the  presentation of both basic and
diluted  earnings per share.  Basic and diluted earnings per share as calculated
in  accordance  with SFAS 128 does not differ from  earnings  per share  amounts
reported in prior periods.

         The  Financial  Accounting  Standards  Board has  issued  Statement  of
Financial  Accounting  Standards  No.  131,  "Disclosures  About  Segments of an
Enterprise  and Related  Information"  ("SFAS 131").  SFAS 131  introduces a new
model for segment  reporting,  called the "management  approach." The management
approach is based on the way that management organizes segments within a company
for making operating  decisions and assessing  performance.  Reportable segments
are based on products  and  services,  geography,  legal  structure,  management
structure  - any  manner  in  which  management  disaggregates  a  company.  The
management  approach replaces the notion of industry and geographic  segments in
current accounting  standards.  SFAS 131 is effective for fiscal years beginning
after December 15, 1997 and early adoption is encouraged. However, SFAS 131 need
not be applied to interim  statements in the initial year of  application.  SFAS
131 requires restatement of all prior period information  reported.  The Company
intends  to  adopt  this  standard  when  required  and  is in  the  process  of
determining  the  effect  of SFAS 131 on the  Company's  consolidated  financial
statements.

Year 2000 Compliance

         The Company is currently in the process of evaluating  its  information
technology  infrastructure  for the Year 2000  compliance.  The Company does not
expect that the cost to modify its information  technology  infrastructure to be
Year 2000  compliant  will be material to its  financial  position or results of
operations.  The Company  does not  anticipate  any material  disruption  in its
operations  as a result of any failure by the Company to be in  compliance.  The
Company is in the  process of  obtaining  information  concerning  the Year 2000
compliance  status of its suppliers and customers.  In the event that any of the
Company's  significant  suppliers or customers does not  successfully and timely
achieve Year 2000  compliance,  the Company's  business or  operations  could be
adversely affected.

Inflation

         Inflation  has not had a material  impact on the  Company's  results of
operations for the last three years.



<PAGE>


Item 8.  Financial Statements and Supplementary Data.




<TABLE>

                                           INDEX TO FINANCIAL STATEMENTS
<CAPTION>


                                                                                                               Page

<S>                                                                                                              <C>
Report of Independent Public Accountants........................................................................ 21

Consolidated Balance Sheets as of December 31, 1997 and 1996.................................................... 22

Consolidated Statements of Operations For The Years Ended December 31, 1997, 1996 and 1995...................... 23

Consolidated Statements of Changes in Stockholders' Equity For The Years Ended December 31, 1997, 1996 and 1995. 24

Consolidated Statements of Cash Flows For The Years Ended December 31, 1997, 1996 and 1995...................... 25

Notes to Consolidated Financial Statements...................................................................... 26
</TABLE>



<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,  1997  and  1996,  and  the  related  consolidated  statements  of
operations,  stockholders'  equity and cash flows for each of the three years in
the period ended December 31, 1997. 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  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our 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, 1997 and 1996,
and the results of their  operations  and their cash flows for each of the three
years in the period ended  December  31,  1997,  in  conformity  with  generally
accepted accounting principles.

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, 1998



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

<TABLE>
<CAPTION>

                                                       ASSETS
                                                                                            December 31,
                                                                                --------------------------------------
                                                                                      1997                1996
                                                                                ------------------  ------------------
CURRENT ASSETS:
<S>                                                                             <C>                 <C>
  Cash and cash equivalents, including $64 and $50 of restricted cash
     in 1997 and 1996, respectively (Note 2)                                             $1,812              $1,757
  Accounts receivable, less allowance for doubtful accounts of $1,433
     and $1,598 in 1997 and 1996, respectively (Note 9)                                  21,275              21,018
  Deferred income taxes (Notes 2 and 11)                                                  1,207               1,046
  Prepaid expenses and other current assets (Note 5)                                      1,785               1,284
  Net assets of discontinued operations (Note 4)                                              -               1,265
                                                                                ------------------  ------------------

     Total current assets                                                                26,079              26,370

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net (Notes 2 and 6)
                                                                                          5,667               3,857
INTANGIBLE ASSETS, net (Notes 2, 3 and 7)                                                 3,098               3,844
SECURITY DEPOSITS AND OTHER ASSETS (Note 4)                                               1,305                 394
NONCURRENT ASSETS OF DISCONTINUED OPERATIONS (Note 4)                                        10                 536
                                                                                ------------------  ------------------

           Total assets                                                                 $36,159             $35,001
                                                                                ==================  ==================




                      LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
  Short-term borrowings (Note 9)                                                         $7,360              $7,200
  Current maturities of long-term debt (Note 9)                                           3,280               1,152
  Accounts payable                                                                        6,364               6,295
  Accrued expenses and other current liabilities (Notes 8, 15 and 17)                     6,292               5,549
  Income taxes payable (Notes 2 and 11)                                                     141                 165
  Deferred revenue (Note 2)                                                                  71                 537
  Net liabilities of discontinued operations (Note 4)                                        52                   -
                                                                                ------------------  -------------------


     Total current liabilities                                                           23,560              20,898
                                                                                ------------------  -------------------


LONG-TERM DEBT, net of current maturities (Note 9)                                        2,240               3,415
                                                                                ------------------  -------------------


DEFERRED INCOME TAXES PAYABLE (Notes 2 and 11)                                            1,050               1,027
                                                                                ------------------  -------------------


OTHER LONG-TERM LIABILITIES (Note 17)                                                       695                 931
                                                                                ------------------  -------------------


COMMITMENTS AND CONTINGENCIES (Notes 12 and 14)

STOCKHOLDERS' EQUITY (Notes 13 and 14):
  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,
     6,666,884 and 6,795,790 shares issued and outstanding in
     1997 and 1996, respectively                                                              7                   7
  Additional paid-in capital                                                              9,026               9,601
  Accumulated deficit                                                                      (419)               (878)
                                                                                ------------------  -------------------


      Total stockholders' equity                                                          8,614               8,730
                                                                                ------------------  -------------------


            Total liabilities and stockholders' equity                                  $36,159             $35,001
                                                                                ==================  ===================
</TABLE>



     The accompanying notes to consolidated financial statements are an integral
part of these balance sheets.
<PAGE>
            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                        (in thousands except share data)
<TABLE>
<CAPTION>



                                                                              For the Years Ended December 31,
                                                             ------------------------------------------------------------------

                                                                     1997                 1996                    1995
                                                              ------------------- ----------------------  ----------------------

      <S>                                                     <C>                  <C>                     <C>
      Revenue (Note 2)                                               $171,502             $163,090                $37,322
      Cost of revenue                                                 130,577              122,531                 26,036
                                                              ------------------- ----------------------  ----------------------

        Gross profit                                                   40,925               40,559                 11,286

      Selling, general and administrative expenses                     38,223               42,027                 10,708
                                                              ------------------- ----------------------  ----------------------

        Operating income (loss)                                         2,702               (1,468)                   578

      Other (income) expense
        Gain on sale of subsidiary, net (Note 16)                        (816)                   -                      -
        Interest expense                                                1,144                  805                    274
        Other income, net                                                (171)                (461)                  (364)
                                                              ------------------- ----------------------  ----------------------

      Other (income) expense, net                                         157                  344                    (90)
                                                              ------------------- ----------------------  ----------------------

      Income (loss) from continuing operations before
        provision for (benefit from) income taxes                       2,545               (1,812)                   668

      Provision for (benefit from) income taxes
       (Notes 2 and 11)                                                   888                 (958)                   694
                                                              ------------------- ----------------------  ----------------------

      Income (loss) from continuing operations                          1,657                 (854)                   (26)
                                                              ------------------- ----------------------  ----------------------

      Discontinued operations (Note 4)
        Income (loss) from discontinued operations, net of
        income taxes                                                   (1,221)                 171                   (169)
        Gain on disposal of assets, net of provision for
        income taxes                                                       23                    -                      -
                                                              ------------------- ----------------------  ----------------------
      Income (loss) from discontinued operations                       (1,198)                 171                   (169)
                                                              ------------------- ----------------------  ----------------------

         Net income (loss)                                               $459                ($683)                 ($195)
                                                              =================== ======================  ======================


      Basic and diluted income (loss) per share (Note 2):
        Continuing operations                                            $.25                 ($.13)                ($.02)
        Discontinued operations                                          (.18)                  .03                  (.08)
                                                              =================== ======================  ======================
        Net income (loss) per share                                      $.07                 ($.10)                ($.10)
                                                              =================== ======================  ======================

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


<PAGE>


            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (NOTE 13)
              FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
                        (in thousands except share data)

<TABLE>
<CAPTION>



                                                 Common Stock              Additional                           Total
                                        ------------------------------      Paid-In          Accumulated     Stockholders'
                                           Shares          Amount           Capital           Deficit           Equity
                                        ---------------- -------------   --------------- ----------------  ---------------

   BALANCE AT
   <S>                                  <C>              <C>             <C>             <C>               <C>
      DECEMBER 31, 1994                     2,100,000        $ 2                $ -            $ -                $ 2
   Repurchase of shares pursuant
      to a termination agreement           (1,400,000)        (1)                 -              -                 (1)
   Reduction in ownership of
      shares pursuant to a
      management agreement                   (305,577)         -                  -              -                  -
   Issuance of common stock:
     Public offering, net of offering
      costs                                 3,200,000          3             33,148              -             33,151
     Acquisition of Founding
      Companies                             2,935,700          3                 (3)             -                  -
     Distributions to Founding
      Companies' Stockholders                       -          -            (29,604)             -            (29,604)
     Shares issued in connection
      with termination agreement               99,446          -                  -              -                  -
   Equity of Founding Companies                     -          -              5,972              -              5,972
   Distributions to stockholders                    -          -               (949)             -               (949)
   Charge to capital in an amount
      equal to the current income
      tax benefit of S Corporations                 -          -                (65)             -                (65)
   Net loss                                         -          -                  -           (195)              (195)
                                        ---------------- -------------   --------------- ----------------  ---------------
   BALANCE AT
      DECEMBER 31, 1995                     6,629,569          7              8,499           (195)             8,311
   Shares issued in connection with
      acquisitions of businesses              166,221          -              1,102              -              1,102
   Net loss                                         -          -                  -           (683)              (683)
                                        ---------------- -------------   --------------- ----------------  ---------------
   BALANCE AT
      DECEMBER 31, 1996                     6,795,790          7              9,601           (878)             8,730
   Retirement of common stock
      pursuant to sale of subsidiary         (137,239)         -               (600)             -               (600)
   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
                                        ================ =============   =============== ================  ===============


</TABLE>


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


<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:                                                1997              1996            1995
                                                                                -------------------  --------------  -------------
<S>                                                                             <C>                  <C>             <C>
   Net income (loss)                                                                  $459              ($683)          ($195)
   Adjustments to reconcile net income (loss) to net cash provided by (used
    in) operating activities -
   (Gain) Loss on disposal of equipment and leasehold improvements                     (22)                29              63
   Gain on sale of subsidiary                                                         (816)                 -               -
   (Income) loss from discontinued operations                                        1,221               (171)            169
   Gain on disposal of assets of discontinued operations                               (23)                 -               -
   Depreciation and amortization                                                     2,271              1,559             418
   Provision for doubtful accounts                                                   1,117              1,315             174
   Capital contribution equal to current income taxes of S Corporations                  -                  -             (65)
   Deferred income tax (expense) benefit                                               (35)              (752)             77
   Changes in operating assets and liabilities
     (Increase) decrease in -
        Accounts receivable                                                         (2,005)            (4,235)            993
        Prepaid expenses and other current assets                                     (415)              (477)          3,362
        Other assets                                                                  (303)               513             203
     Increase (decrease) in -
        Accounts payable, accrued liabilities and income taxes payable               1,359             (1,518)         (1,211)
        Other long-term liabilities                                                   (236)               736             (33)
                                                                                -------------------  --------------  -------------
           Net cash provided by (used in) operating activities of
               continuing operations                                                 2,572             (3,684)          3,955
                                                                                -------------------  --------------  -------------

 CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to equipment and leasehold improvements                                 (1,191)            (1,279)           (353)
  Proceeds from sales of equipment and leasehold improvements                          112                 66               -
  Proceeds from sale of assets of discontinued operations                              125                  -               -
  Purchases of businesses, net of cash acquired                                          -             (1,176)           (651)
  Other, net                                                                             -                  -             (26)
                                                                                -------------------  --------------  -------------

           Net cash used in investing activities                                      (954)            (2,389)         (1,030)
                                                                                -------------------  --------------  -------------

CASH FLOWS FROM FINANCING ACTIVITIES:
 Short-term borrowings, net                                                            160              4,397             550
 Proceeds from 8% Subordinated Convertible Debentures                                    -                  -           2,000
 Proceeds from long-term debt                                                            -                113             513
 Repayments of long-term debt                                                       (1,393)            (3,077)         (1,411)
 Issuance of Common Stock, net of offering costs                                         -                  -          33,151
 Cash acquired through acquisition of Founding Companies                                 -                  -           1,172
 Distributions to stockholders                                                           -                  -            (949)
 Distributions to Founding Companies' Stockholders                                       -                  -         (29,604)
 Deferred financing costs                                                             (125)              (152)              -
 Repurchase of Common Stock                                                              -                  -              (1)
                                                                                -------------------  --------------  -------------
           Net cash (used in) provided by financing activities                      (1,358)             1,281           5,421
                                                                                -------------------  --------------  -------------

CASH USED BY DISCONTINUED OPERATIONS                                                  (205)              (611)         (1,188)
                                                                                -------------------  --------------  -------------


           Net increase (decrease) in cash and cash equivalents                         55             (5,403)          7,158
CASH AND CASH EQUIVALENTS, beginning of year                                         1,757              7,160               2
                                                                                ===================  ==============  =============
CASH AND CASH EQUIVALENTS, end of year                                              $1,812             $1,757          $7,160
                                                                                ===================  ==============  =============
</TABLE>


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


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

 (1)     ORGANIZATION AND BUSINESS:

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

Consolidated  Delivery  &  Logistics,  Inc.  and  Subsidiaries  (the  "Company")
provides an extensive  network of same-day ground and air delivery services to a
wide range of commercial,  industrial and retail customers. The Company's ground
delivery  operations  currently  are  concentrated  on the  East  Coast,  with a
strategic  presence  in the Midwest and on the West  Coast.  The  Company's  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 -

The Company 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 the
Company's sales agency agreements (see Note 12).

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  (2
years).


Intangible Assets -

Intangible   assets  consist  of  goodwill,   customer  lists,   and  noncompete
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.  Customer lists and noncompete  agreements are amortized over the
estimated period to be benefited, generally from 3 to 5 years.

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 -

The Company 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,  various  accruals and reserves  being  deductible for tax purposes in
future periods and certain acquired  businesses  reporting on the cash basis for
income tax purposes prior to the Merger.

Long-Lived Assets -

The Company 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 the Company's cash, receivables and payables, the
carrying value of these financial  instruments  approximates  their fair values.
The fair value of the  Company's  debt is estimated  based on the current  rates
offered to the Company for debt with similar remaining  maturities.  The Company
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").  The Company  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).


Segment Reporting -

Statement of Financial Accounting Standards No. 131, "Disclosures About Segments
of an Enterprise and Related  Information"  ("SFAS 131")  introduces a new model
for segment reporting, called the "management approach." The management approach
is based on the way that  management  organizes  segments  within a company  for
making operating  decisions and assessing  performance.  Reportable segments are
based on products and services, geography, legal structure, management structure
- any  manner  in which  management  disaggregates  a  company.  The  management
approach  replaces  the notion of industry  and  geographic  segments in current
accounting  standards.  SFAS 131 is effective for fiscal years  beginning  after
December 15, 1997 and early adoption is encouraged.  However,  SFAS 131 need not
be applied to interim  statements in the initial year of  application.  SFAS 131
requires  restatement  of all prior  period  information  reported.  The Company
intends  to  adopt  this  standard  when  required  and  is in  the  process  of
determining the effect of SFAS 131 on the Company's financial statements.

Income (Loss) Per Share -

The Company has implemented Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), which establishes standards for the method of
computation,  presentation  and disclosure for earnings per share ("EPS").  SFAS
128 simplifies  the standards for computing EPS previously  found in APB Opinion
No. 15,  "Earnings Per Share," and makes them  comparable to  international  EPS
standards.  It requires the presentation of two EPS amounts,  basic and diluted,
on the face of the  income  statement  for all  entities  with  complex  capital
structures and the restatement of all prior period EPS  calculations  presented.
Previously  reported  EPS amounts  were not affected by the adoption of this new
standard.  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.  There were no  differences
between  basic and diluted EPS for 1997,  1996 and 1995 since the  conversion of
the  debentures  into 180,995 shares of common stock (see Note 9) and conversion
of the stock options (see Note 14) were  antidilutive  for 1996 and 1995 and the
dilutive amount of options for 1997 was not significant.

A  reconciliation  of weighted  average  common shares  outstanding  to weighted
average common shares outstanding assuming dilution follows:
<TABLE>
<CAPTION>

                                                          1997                1996                 1995
                                                      -------------       -------------        -------------

<S>                                                   <C>                 <C>                  <C>
Basic weighted average common
  shares oustanding                                     6,672,284           6,677,546            2,059,894
Effect of dilutive securities:
  Stock options                                             2,656                   -                    -
                                                      -------------       -------------        -------------

Diluted weighted average common
  shares outstanding                                    6,674,940           6,677,546            2,059,894
                                                      =============       =============        =============
</TABLE>



Options to purchase 579,795,  475,295 and 37,445 shares of common stock in 1997,
1996 and 1995,  respectively,  were not included in the  computation  of diluted
earnings  per share  because  the option  exercise  price was  greater  than the
average market price of the common shares.

Reclassifications -

Certain  reclassifications  have  been  made to the  prior  years'  consolidated
financial statements in order to conform to the 1997 presentation.



(3)      BUSINESS COMBINATIONS:

During 1996, the Company acquired certain  businesses in transactions  accounted
for as  purchases.  The  total  consideration  paid  in  these  transactions  is
contingent  upon future  activity and is estimated  to aggregate  $3.3  million,
which consists of $2.2 million in cash,  75,312 shares of Common Stock at $8 per
share and 90,909  shares of Common  Stock at $5.50 per share.  The Company  also
assumed  approximately  $185,000 of debt due to the former  owners of one of the
acquired  businesses and their  relatives.  Of this amount $3.1 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 $357,000 during 1997 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 April 2000.

In November 1995,  the Company  purchased  certain assets of two Companies.  The
total  consideration  paid  in  these  transactions   aggregated   approximately
$900,000.  The assets  acquired  include  accounts  receivable,  customer lists,
machinery  and  equipment  and  various  other  assets.  The  transactions  were
accounted for as purchases and resulted in excess of the purchase price over net
assets acquired  (goodwill) of $501,000.  One of the companies  acquired was 50%
owned by stockholders of the Company.

The results of the acquired  businesses have been reflected in the  accompanying
consolidated  statements of operations since their respective acquisition dates.
The results of operations of the acquired businesses prior to their acquisitions
are not material to the Company's consolidated statements of operations.

(4)      DISCONTINUED OPERATIONS:

In October 1997, the Company announced its intention to pursue a plan to dispose
of its fulfillment  and direct mail business.  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  purchase  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  will bear
interest at the rate of 6% per annum, with interest only in monthly installments
during 1998.  Commencing  February 1, 1999 the Note  Receivable  will be paid in
equal monthly  installments of $14,016 including  principal and interest through
January 1, 2004. The Note  Receivable  which totals  $725,000 and is included in
security  deposits and other  assets in the  accompanying  consolidated  balance
sheet as of December 31, 1997 and is  collateralized  by a security  interest in
the purchaser's  accounts  receivable,  equipment and general  intangibles.  The
security  interest is  subordinate to the interest of the  purchaser's  majority
shareholder.

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>


<TABLE>
<CAPTION>

Results from the discontinued fulfillment and direct mail business were as follows (in thousands) -

                                                                For the Years Ended December 31,
                                                         1997                 1996                1995
                                                      ------------        -------------        ------------

<S>                                                   <C>                 <C>                  <C>
Revenue                                                  $5,937               $7,959              $1,714
                                                      ============        =============        ============

Income (loss) from discontinued
  operations, net of income tax provision
  (benefit) of ($811), $114 and ($112) in
  1997, 1996 and 1995                                   ($1,221)                $171               ($169)
                                                      ============        =============        ============

Gain on disposal of assets, net of
  income tax provision of $15 in 1997                       $23               $    -               $   -
                                                      ============        =============        ============
</TABLE>
<TABLE>
<CAPTION>

The net assets (liabilities) of discontinued operations are comprised of the following (in thousands) -

                                                                         December 31,
                                                          --------------------------------------------

                                                                 1997                      1996
                                                          -------------------        -----------------

<S>                                                       <C>                        <C>
Current assets                                                     $3,829                   $4,124
Current liabilities                                                (3,881)                  (2,859)
                                                          -------------------        -----------------

  Net current assets (liabilities)                                    (52)                   1,265
Equipment and leasehold improvements                                   10                      459
Other non-current assets                                                -                       77
                                                          -------------------        -----------------

Net assets (liabilities) of discontinued
  operations                                                         ($42)                  $1,801
                                                          ===================        =================
</TABLE>




(5)      PREPAID EXPENSES AND OTHER CURRENT ASSETS:
<TABLE>
<CAPTION>

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

                                                                                      December 31,
                                                                      ---------------------------------------------
                                                                             1997                      1996
                                                                      --------------------       ------------------
<S>                                                                   <C>                        <C>
  Other receivables                                                           $580                       $326
  Prepaid supplies and equipment deposits                                      564                         78
  Prepaid insurance                                                            227                        282
  Prepaid shipping charges                                                      86                         96
  Other                                                                        328                        502
                                                                      --------------------       ------------------

                                                                            $1,785                     $1,284
                                                                      ====================       ==================
</TABLE>



<PAGE>



(6)      EQUIPMENT AND LEASEHOLD IMPROVEMENTS:

Equipment and leasehold improvements consist of the following (in thousands) -
<TABLE>
<CAPTION>
                                                                                              December 31,
                                                                                    --------------------------------
                                                                    Useful Lives          1997             1996
                                                                    ------------    ---------------   --------------
<S>                                                                 <C>             <C>               <C>
  Transportation and warehouse equipment                             3-7 years             $6,603            $4,995
  Office equipment                                                   3-7 years              4,443             5,107
  Other equipment                                                    5-7 years                811               729
  Leasehold improvements                                            Lease period            1,180             1,309
                                                                                    ---------------   --------------
                                                                                           13,037            12,140
  Less - accumulated depreciation and amortization                                         (7,370)           (8,283)
                                                                                    ---------------   --------------
                                                                                           $5,667            $3,857
                                                                                    ===============   ==============
</TABLE>
<TABLE>
<CAPTION>

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

                                                                                              December 31,
                                                                                    --------------------------------
                                                                                           1997             1996
                                                                                    ----------------  --------------
  <S>                                                                               <C>               <C>
  Equipment                                                                                $3,521              $952
  Less - accumulated amortization                                                            (909)             (347)
                                                                                    ----------------  --------------

                                                                                           $2,612              $605
                                                                                    ================  ==============
</TABLE>

The Company  incurred a capital  lease  obligation of $2.5 million  during 1997
in connection  with an agreement to lease 175 delivery vehicles.

(7)      INTANGIBLE ASSETS:

Intangible assets (see Note 3) consist of the following (in thousands) -
<TABLE>
                                                                                               December 31,
                                                                                     -------------------------------
                                                                                           1997            1996
                                                                                     ---------------  --------------
 <S>                                                                                 <C>              <C>
 Goodwill                                                                                  $2,992           $3,616
 Noncompete agreements                                                                        336              336
 Customer lists                                                                               242              167
 Other                                                                                        118              165
                                                                                      ---------------  --------------
                                                                                            3,688            4,284
 Less - accumulated amortization                                                             (590)            (440)
                                                                                      ---------------  --------------
                                                                                           $3,098           $3,844
                                                                                      ===============  ==============
</TABLE>

(8)   ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES:
<TABLE>
<CAPTION>

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

                                                                                                 December 31,
                                                                                      -------------------------------
                                                                                             1997            1996
                                                                                      ---------------  --------------
 <S>                                                                                  <C>              <C>
 Payroll and related expenses                                                               $3,088           $2,738
 Third party delivery costs                                                                  1,525              605
 Insurance                                                                                     274              816
 Professional fees                                                                             367              413
 Rent                                                                                          151              371
 Other                                                                                         887              606
                                                                                      ---------------  --------------

                                                                                            $6,292           $5,549
                                                                                      ===============  ==============

</TABLE>
<PAGE>


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

Short-term borrowings -

At December 31, 1997 and 1996, the Company had line of credit agreements for $15
million and $10 million,  respectively.  The Company's outstanding borrowings on
such lines of credit were  approximately  $7.4  million at December 31, 1997 and
$7.2 million at December 31, 1996.

In July 1997,  the Company  entered into a two-year  agreement  with First Union
Commercial  Corporation ("First Union") to establish a revolving credit facility
(the "First Union Agreement").  The proceeds of the credit facility were used to
repay  borrowings  under the credit  agreement  with Summit Bank and Mellon Bank
N.A. (See below).  Credit  availability is based on eligible amounts of accounts
receivable,  as defined, up to a maximum amount of $15 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 fixed rate
and variable rate loans.  Interest  rates on fixed rate  borrowings are based on
LIBOR,  which was 5.81% at December 31,  1997,  plus 1.5% to 2%.  Variable  rate
borrowings  are based on First Union's  prime  lending  rate,  which was 8.5% at
December  31,  1997,  minus  .25% to  plus  .25%.  Based  on  eligible  accounts
receivable at December 31, 1997,  $3.9 million of the facility was available for
future borrowing.

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,  1997 the  Company  was in  compliance  with  all loan  covenants.
Borrowings under the line of credit facility averaged approximately $7.7 million
with an average  interest  rate of 9.9% for the year ended  December  31,  1997.
Maximum borrowings were $9.6 million for the same period.

In May 1996, the Company entered into a credit agreement (the"Credit Agreement")
with  Summit Bank and Mellon Bank N.A.  (the  "Banks") to  establish a revolving
credit facility.  The line of credit was secured by substantially  all assets of
the Company and provided for fixed rate and variable rate loans.  Interest rates
on fixed rate borrowings were based on the London  Inter-bank  Offered Rate (the
"LIBOR")  and  variable  rate  borrowings  were based on margins over the Banks'
lending  rates.  The line of credit was repaid in July  1997.  In 1997,  average
borrowings  under this line of credit were  approximately  $8.1  million with an
average interest rate of 9.4%.  Maximum  borrowings for 1997 were  approximately
$8.3 million.  Borrowings under the line of credit averaged  approximately  $6.6
million with an average  interest rate of 8.23% for the year ended  December 31,
1996. Maximum borrowings were $7.3 million for the year ended December 31, 1996.

In 1996,  the Company  also had  several  available  lines of credit  which bore
interest at rates ranging from prime plus 0.75% to prime plus 1.5%.  These lines
of credit were collateralized by certain  subsidiaries'  accounts receivable and
guaranteed by certain  stockholders.  In 1996,  average  borrowings  under these
lines of credit were approximately $2.5 million with an average interest rate of
8.2%. Maximum  borrowings for 1996 were approximately $2.9 million.  These lines
of credit were repaid during 1996.



<PAGE>


Long-Term Debt -

Long-term debt consists of the following (in thousands) -
<TABLE>
<CAPTION>
                                                                                             December 31,
                                                                                     -------------------------
                                                                                         1997         1996
                                                                                     -----------  ------------
 <S>                                                                                 <C>          <C>
 8% Subordinated Convertible Debentures (a)                                              $2,000        $2,000
 Capital lease obligations due through October 2000 with interest at rates
   ranging from 5.3% to 15.2% and secured by the related property.                        2,631           476
 Seller-financed debt on acquisitions, payable in annual and quarterly
   installments through April 1998 and monthly payments based on collected
   revenues through September 2000 with interest imputed at the rate of 9%.                 611         1,348
 Various equipment and vehicle notes payable to banks and finance companies due
   through January 2000 with interest ranging from 8.0% to 12.5% and secured by
   various assets of certain subsidiaries.                                                  133           501
 Debt due to former owners, their relatives, and employees of a business
   acquired by the Company in 1996, with quarterly principal and interest
   payments through September 2001 together with interest at a rate of 8%.                  145           185
 Other                                                                                        -            57
                                                                                     -----------  ------------
                                                                                          5,520         4,567
 Less - Current maturities                                                                3,280         1,152
                                                                                     -----------  ------------
                                                                                         $2,240        $3,415
                                                                                     ===========  ============
</TABLE>


(a) In September 1995, the Company issued $2 million in the aggregate  principal
amount of its 8% Subordinated  Convertible  Debentures (the  "Debentures").  The
Debentures mature on August 21, 2000.  Interest on the Debentures accrues at the
rate of 8% per annum and is payable quarterly.  The Debentures are redeemable at
the option of the Company,  in whole or in part,  without  premium or penalty at
any time on or after  August 18,  1998,  at their face amount  plus  accrued and
unpaid  interest,  if  any,  to the  date  of  redemption.  The  Debentures  are
redeemable  at the  option  of the  holder,  in whole  but not in part,  without
premium or penalty, at any time after August 21, 1998. Accordingly,  the Company
has  included  the  Debentures  totaling  $2 million in  current  maturities  of
long-term debt at December 31, 1997. The Debentures are convertible into 180,995
shares of Common Stock at the option of the holder through August 20, 2000.

The  aggregate  annual  principal  maturities of debt  (excluding  capital lease
obligations) as of December 31, 1997 are as follows (in thousands) -
<TABLE>
<S>                                                                                           <C>

1998                                                                                                  $2,354
1999                                                                                                     258
2000                                                                                                     196
2001                                                                                                      81
                                                                                              -----------------

  Total                                                                                               $2,889
                                                                                              =================
</TABLE>






<PAGE>



The  Company  leases  certain  transportation   equipment  under  capital  lease
agreements  which expire at various dates. At December 31, 1997,  minimum annual
payments under capital leases, including interest, are as follows
(in thousands) -
<TABLE>
<S>                                                                                            <C>

1998                                                                                                 $1,096
1999                                                                                                  1,075
2000                                                                                                    733
                                                                                               ---------------

  Total minimum payments                                                                              2,904
Less - Amounts representing interest                                                                   (273)
                                                                                               ---------------
  Net minimum payments                                                                                2,631
Less - Current portion of obligations under capital leases                                             (926)
                                                                                               ---------------

  Long-term portion of obligations under capital leases                                              $1,705
                                                                                               ===============
</TABLE>


(10)     EMPLOYEE BENEFIT PLANS:

Several subsidiaries had defined contribution plans, which allowed for voluntary
pretax  contributions by the employees.  The  subsidiaries  paid all general and
administrative   expenses  of  the  plans  and  in  some  cases  made   matching
contributions  on  behalf  of  the  employees.  The  Company  adopted  a  401(k)
retirement  plan  during  1996 and merged all of the  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 which will
be  allocated  to  each   eligible   participant.   The  Company  did  not  make
discretionary contributions for the years ended December 31, 1997 and 1996.

(11)     INCOME TAXES:
<TABLE>
<CAPTION>

Federal and state income tax  provision  (benefit)  for the years ended  December  31,  1997,  1996 and 1995 are as
follows (in thousands) -

                                                                    1997                1996               1995
                                                              ---------------     ---------------   -----------------

Federal-
<S>                                                           <C>                 <C>               <C>
 Current                                                             $723               ($60)              $511
 Deferred                                                             (35)              (752)                77
State                                                                 200               (146)               106
                                                              ---------------     ---------------   -----------------

                                                                     $888              ($958)              $694
                                                              ===============     ===============   =================
</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, 1997,  1996 and
1995, result from the following (in thousands) -
<TABLE>
<CAPTION>

                                                                    1997                1996               1995
                                                              ----------------    ----------------  ------------------


<S>                                                           <C>                 <C>               <C>
Tax at statutory rate                                               $865               $(616)               $227
Add (deduct) the effect of-
 State income taxes                                                  132                 (96)                 70
 Nondeductible expenses and other, net                              (109)                 65                  27
 Provision for potential tax matters                                   -                   -                 400
 Reduction of estimated taxes provided in the prior
  year                                                                 -                (311)                  -
 Other                                                                 -                   -                 (30)
                                                             ----------------    ----------------  ------------------

                                                                    $888               ($958)               $694
                                                             ================    ================  ==================
</TABLE>

The  acquired  businesses  filed  "short-period"  Federal  tax  returns  through
November 30, 1995. In connection with such filings the Company provided $400,000
during 1995 to cover any potential  exposures related to the filings,  which was
subsequently reduced by $311,000 in 1996.
<TABLE>
<CAPTION>

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

                                                                          December 31,
                                                                 -----------------------------------
                                                                      1997                1996
                                                                 ----------------    ---------------
Current deferred income tax asset -
<S>                                                              <C>                 <C>
 Allowance for doubtful accounts                                          $633                $690
 Reserves and other, net                                                   574                 356
                                                                 ----------------    ---------------

   Total deferred income tax asset                                      $1,207              $1,046
                                                                 ================    ===============

Non-current deferred income tax liability -
 Cash to accrual differences, net                                        ($176)              ($369)
 Accumulated depreciation and amortization                                (320)               (161)
 Other                                                                    (554)               (497)
                                                                 ----------------    ---------------

   Total deferred income tax liability                                 ($1,050)            ($1,027)
                                                                 ================    ===============
</TABLE>



(12)     COMMITMENTS AND CONTINGENCIES:

 Operating Leases -

The Company  leases its office and  warehouse  facilities  under  noncancellable
operating  leases,  which expire at various  times  through  January  2007.  The
approximate minimum rental commitments of the Company, under existing agreements
as of December 31, 1997, are as follows (in thousands) -
<TABLE>

<C>                                                                                          <C>
1998                                                                                         $3,094
1999                                                                                          2,502
2000                                                                                          2,033
2001                                                                                          1,600
2002                                                                                            707
Thereafter                                                                                    2,019
</TABLE>

Rent expense related to operating leases amounted to approximately $3.5 million,
$3.8  million and $1.6 million for the years ended  December 31, 1997,  1996 and
1995, respectively.  In connection with the sale of the assets of Logistics (see
Note  5),  the  Company  guaranteed  the  warehouse  lease  obligation  covering
Logistic's  principal  place of  business  (the  "Facility  Lease") for one year
commencing January 1, 1998. The purchaser's  majority shareholder has personally
guaranteed the Facility Lease in favor of the Company for six months  commencing
January 1, 1998. The Company's  maximum  exposure as guarantor is  approximately
$396,000 at December 31, 1997.


<PAGE>



Litigation -

On March 19, 1997, a purported class action complaint,  captioned  Gapszewicz v.
Consolidated Delivery & Logistics, Inc., et al. (97 Civ. 1939), was filed in the
United States District Court for the Southern District of New York (the "Court")
against the  Company,  certain of the  Company's  present  and former  executive
officers,  and the  co-managing  underwriters  of the Company's  initial  public
offering (the  "Offering").  The gravamen of the complaint is that the Company's
registration statement for the Offering contained misstatements and omissions of
material fact in violation of the federal securities laws and that the Company's
financial  statements  included  in the  registration  statement  were false and
misleading and did not fairly  reflect the Company's  true financial  condition.
The complaint seeks the certification of a class consisting of purchasers of the
Company's  Common  Stock from  November  21, 1995  through  February  27,  1997,
rescission of the Offering,  attorneys'  fees and other damages.  In April 1997,
five  other  complaints  containing  allegations  identical  to  the  Gapszewicz
complaint  were filed in the same federal court against the Company.  On May 27,
1997, these six complaints were  consolidated  into a single action entitled "In
re Consolidated Delivery & Logistics,  Inc. Securities Litigation".  On July 16,
1997, the Company and the underwriter  defendants  filed a motion to dismiss the
complaint. In response, the plaintiffs filed an amended complaint on October 20,
1997. A motion to dismiss the amended complaint was filed by the Company and the
underwriter  defendants on December 15, 1997. No ruling on the Company's  motion
has been  rendered by the Court.  The Company  believes the allegations
contained in the amended complaint are without merit and intends to continue to
vigorously defend the action.

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 $4.7 million,  $3.8 million and $1 million in 1997,
1996 and 1995, respectively.


(13)     STOCKHOLDERS' EQUITY:

Pursuant to a Representation Agreement, dated November 15, 1994 (as amended, the
"Representation  Agreement"),  between the Company and CTA Group,  LLC  ("CTA"),
David T. Lardier  agreed to lend or  otherwise  advance to the Company all funds
necessary  to effect the Mergers and to provide CTA with all funds  necessary to
provide the services to be provided by CTA under the  Representation  Agreement,
including  but not  limited  to, the funds  necessary  to retain and pay certain
professional expenses incurred in connection therewith. In exchange, the Company
agreed upon  completion of the Mergers to reimburse Mr.  Lardier for the amounts
advanced.

At June 30, 1995, CTA had incurred expenses totaling  approximately $1.3 million
in connection with the Mergers  (consisting  primarily of professional  fees and
expenses) for which it had not been reimbursed by Mr.  Lardier.  Under the terms
of the  Representation  Agreement,  Messrs.  Mattei  and  Wojak had the right to
require the Company to repurchase  the 1,400,000  shares of common stock held by
Mr. Lardier at a price of $1,000 (his original purchase price) in the event that
Mr. Lardier did not advance funds needed to complete the Mergers.

Pursuant to Mr. Lardier's failure to perform under the Representation Agreement,
CTA  redeemed  his  shares  for  his  original  purchase  price.  Pursuant  to a
Termination Agreement,  dated August 14, 1995 (the "Termination  Agreement") the
Company agreed to permit Mr. Lardier to assign 99,446 shares of common stock and
his contingent right to repayment of funds advanced plus interest (fixed at $1.2
million) to certain of Mr. Lardier's creditors in exchange for their releases of
all claims against CTA and the Company. In addition, Mr. Lardier agreed that CTA
was not entitled to any fee upon the completion of the Mergers.  The Company has
also agreed to release Mr. Lardier from any obligation to fund the  unreimbursed
expenses incurred by CTA prior to the date of the Termination  Agreement and his
continuing obligation to fund future expenses.

Under a management  agreement in 1995,  certain officers reduced their ownership
of Common Stock by 305,577 shares to an aggregate of 394,423 shares.

(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
directors of the Company.  The Company has reserved  1,400,000  shares of Common
Stock for issuance in connection with 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.


<PAGE>



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 August  1997,  the Board of  Directors  approved
amendments to the Director Plan. The amendments  replace the annual stock option
grants of the original  plan with grants of 1,250 shares of stock options on the
first  trading day of each fiscal  quarter  commencing  on October 1, 1997.  The
amendments to the Director Plan are subject to shareholder  approval at the next
annual meeting and  accordingly  the 5,000 options granted during 1997 under the
amended plan will be void if shareholder approval is not obtained.

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 January 1, 1995                                           -

         Granted                                                          395,000                $13.00
         Exercised                                                              -                     -
         Canceled                                                               -                     -
                                                                   -----------------

       Outstanding at December 31, 1995                                   395,000                $13.00

         Granted                                                          219,706 (1)             $8.86
         Exercised                                                              -                     -
         Canceled                                                         (52,138)               $13.00
                                                                   -----------------

       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
                                                                   =================

     Options exercisable at:
       December 31, 1995                                                        -                    -
                                                                   =================       =================

       December 31, 1996                                                  131,037                $11.94
                                                                   =================       =================

       December 31, 1997                                                  576,592                 $7.33
                                                                   =================       =================
</TABLE>


(1)   Includes  100,179  grants  approved by the  Compensation  Committee of
      the Board of Directors in January 1996 that were priced effective as of
      the date of the Mergers (November 27, 1995).

At December  31, 1997,  options  available  for grant under the  Employee  Stock
Compensation Plan and the Director Plan total 501,877 and 90,000, respectively.

The  following  summarizes  information  about  option  groups  outstanding  and
exercisable at December 31, 1997:
<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                1997                 Life              Price                1997                Price
-----------------    ------------------    ----------------    -------------    -------------------    --------------
<S>                  <C>                   <C>                 <C>              <C>                    <C>

    $2.31 -
        $4.75                364,492              9.73               $3.03            225,712               $3.09
    $4.88 -
       $7.88                 160,161              9.25               $6.24            153,263               $6.25
  $13.00                     383,470              7.91              $13.00            197,617              $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 1997, 1996 and 1995.
<TABLE>
<CAPTION>

                                                          1997                1996               1995
                                                     ---------------     ---------------   -----------------

<S>                                                  <C>                 <C>               <C>
Weighted average fair value                                $1.50                $3.06             $6.39
Risk-free interest rate                                     5.60%                6.50%             6.50%
Volatility factor                                             55%                  37%               37%
Expected life                                            5 years              7 years          10 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 which 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>

                                                                  1997                1996               1995
                                                            ---------------     ---------------   -----------------

<S>                                                         <C>                 <C>               <C>
Net income (loss) - as reported                                     $459                 ($683)            ($195)
Net income (loss) - pro forma                                       (295)               (1,399)             (283)
Basic and Diluted:
 Income (loss) per share - as reported                               .07                 (.10)             (.10)
 Income (loss) per share - pro forma                                (.04)                (.21)             (.14)
                                                            ---------------     ---------------   -----------------

</TABLE>


<PAGE>


(15)     RELATED PARTY TRANSACTIONS:

Leasing Transactions -

Certain  subsidiaries of the Company paid approximately  $905,000,  $851,000 and
$217,000 for the years ended December 31, 1997, 1996 and 1995, 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.

Administrative Fees and Other -

The Company  incurred sales  commissions  and consulting fees of $1.3 million in
1997, $1.1 million in 1996 and $229,000 in 1995 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, 1997 and 1996,
accrued expenses and other current liabilities included  approximately  $274,000
and $191,000, respectively, of accrued sales commissions due to related parties.
See Note 17 for restructuring charges that pertain to related parties.

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.

(16)     SALE OF SUBSIDIARY:

On  January  31,  1997 the  Company  sold the  stock of  Distribution  Solutions
International,  Inc. (DSI), a subsidiary involved in contract logistics,  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. Revenue included in the accompanying  consolidated financial
statements from the operation were approximately $400,000, $4.6 million and $1.9
million for the month of January 1997 and the years ended  December 31, 1996 and
December 31, 1995,  respectively.  Operating losses were approximately  $20,000,
$650,000 and $157,000 for the month of January 1997 and the years ended December
31, 1996 and December 31, 1995, respectively.

(17)   RESTRUCTURING CHARGE:

During the fourth quarter of 1996, the Company  recognized the impact of several
non-recurring charges totaling $1.4 million ($0.12 per share). 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,  1997,  $339,000 was included in accrued
expenses and $344,000 was included in other  liabilities,  of which $275,000 and
$344,000, respectively, were payable to a former director and stockholder of the
Company or its  subsidiaries.  At December  31,  1996,  $602,000 was included in
accrued  expenses  and  $781,000  was  included in other  liabilities,  of which
$275,000  and  $619,000,  respectively,  were  payable to a former  director and
stockholder of the Company or its subsidiaries.


<PAGE>


SUPPLEMENTAL CASH FLOW INFORMATION:

Cash paid for  interest and income  taxes for the years ended  December 31,
1997,  1996 and 1995 was as follows (in thousands) -
<TABLE>
<CAPTION>
                                                                      1997              1996            1995
                                                              -----------------   --------------  --------------

<S>                                                           <C>                 <C>             <C>
Interest                                                             $1,024                $831            $177
Income taxes                                                            245                 878             383
                                                               ----------------   --------------  --------------
</TABLE>

Supplemental  schedule of noncash financing  activities for the years ended
December 31, 1997, 1996 and 1995 was as follows (in thousands) -
<TABLE>
<CAPTION>
                                                                      1997              1996            1995
                                                              -----------------   --------------  --------------

 <S>                                                          <C>                 <C>             <C>
 Capital lease obligations incurred                                  $2,700                $202            $238
 Seller financed debt related to purchase of businesses                  50               1,929              52
 Issuances of common stock in connection with purchases
  of businesses                                                          25               1,102               -
 Adjustment of purchase price for businesses
  previously acquired                                                   357                   -               -
 Note receivable issued in connection with disposal of
  assets of discontinued operations                                     725                   -               -
                                                               -----------------   --------------  --------------
</TABLE>



(19)   SUBSEQUENT EVENT:

During  February 1998, the Board of Directors  approved,  subject to shareholder
approval, the Employee Stock Purchase Plan ("Employee Purchase Plan"), effective
April 1, 1998. The Employee Purchase Plan permits eligible employees to purchase
Company  common stock at 85% of the closing market price on the last trading day
prior to the  commencement  of the  purchase  period.  It is  intended  to be an
"employee  stock  purchase  plan"  within the  meaning of Section  423(b) of the
Internal Revenue Code of 1986.


<PAGE>



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

         Not applicable.



<PAGE>


III-2


                                                     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 1998 Annual Meeting of Stockholders,
except for certain  information  relating to the  Company's  executive  officers
which is provided below.

Executive Officers

       The following table sets forth certain information as of February 5, 1998
concerning each of the Company's executive officers:



  Name                   Age                       Position

Albert W. Van Ness, Jr.   55     Chairman of the Board, Chief Executive Officer
                                   and Director
William T. Brannan        49     President, Chief Operating Officer and Director
Joseph G. Wojak           60     Executive Vice President, Chief Financial
                                   Officer, Treasurer and Secretary
Joseph J. Leonhard        46     Vice President - Controller
Mark Carlesimo            44     General Counsel
Michael Brooks            43     Southeast Region Manager
Randy Catlin              51     Air Division Manager
Robert Wyatt              39     Northeast Region Manager




 .........Albert  W. Van Ness, Jr. has served as the Chairman of the Board, Chief
Executive  Officer and Director of the Company 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 the Company  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.

 .........Joseph  G.  Wojak has served as the  Executive  Vice  President,  Chief
Financial Officer and Secretary since June 1994. Prior thereto, from May 1994 to
June 1994, Mr. Wojak served as a consultant to the Company.  From September 1990
until May 1994, Mr. Wojak was a financial and management consultant.


 .........Joseph  J.  Leonhard has been the  Controller of the Company 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 the Company since September
1997.  From  July  1983  until  September  1997,  Mr.  Carlesimo  served as Vice
President of Legal Affairs of Cunard Line Limited.

 .........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 Siver 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
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.

 .........Robert Wyatt has been the Northeast Region Manager since November 1997,
Manhattan  Region  Manager  since August 1996 and  President of Olympic  Courier
Systems, Inc. a subsidary of the Company since November 1995. From December 1995
until November 1997, Mr. Wyatt served as Director of the Company. Prior thereto,
Mr. Wyatt was  co-founder  and President of certain of the companies  comprising
Orbit/Lightspeed Courier Systems, Inc. ("Orbit/Lightspeed"), a former subsidiary
of the Company  which has been merged into  Olympic.  Mr.  Wyatt has 14 years of
experience in the same-day delivery  industry.  He currently serves on the Board
of Directors of the Messenger Courier Association of the Americas. Mr. Wyatt has
also  served  as the  President  of the New York  State  Messenger  and  Courier
Association.

Item 11.  Executive Compensation

       The Company hereby  incorporates by reference the applicable  information
from its definitive proxy statement for its 1998 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 1998 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 1998 Annual Meeting of Stockholders.



<PAGE>



IV-5


                                     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, 1997, 1996, and 1995.................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)  Reports on Form 8-K

         Report on Form 8-K filed on January 15, 1998  concerning  the Company's
         sale  of  certain  assets  of  Sureway   Logistics   Corporation,   its
         subisidiary, to Mimatar Corporation.


(c)  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. (filed as Exhibit 3.2 to the  Company's
                     Registration  Statement on Form S-1 (File No.  33-97008)
                     and  incorporated herein by reference).

        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).

        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 (filed  as  Exhibit
                     10. 2 to the  Company's  Registration  Statement  on Form
                     S-1  (File  No. 33-97008) and incorporated herein by
                     reference).

        10.3         Employment Agreement, dated as of February 5, 1997, with
                     Albert W. Van Ness, Jr.

        10.4         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).

        10.5         Amendment,  dated April 11, 1996, to Employment  Agreement,
                     with John Mattei  (filed as Exhibit  10.5 to the  Company's
                     Quarterly  Report on Form 10-Q for the fiscal quarter ended
                     March 31, 1996 (File No. 0-26954) and  incorporated  herein
                     by reference).

        10.6         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).

        10.7         Employment Agreement,  dated as of September 8,  1995,
                     with Joseph G.  Wojak (filed as Exhibit 10.7 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  William T.  Beaury  (filed as Exhibit  10.9 to the
                     Company's  Registration  Statement on Form S-1 (File No.
                     33-97008)  and incorporated herein by reference).

        10.9         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).

       10.10         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).

       10.11         Asset  Purchase  Agreement  dated  December 31, 1997 by and
                     among  Consolidated  Delivery &  Logistics,  Inc.,  Mimatar
                     Corporation  and Sureway  Logistics  Corporation  (filed as
                     Exhibit 10.1 to the  Company's  Report on Form 8-K filed on
                     January 15, 1998 and incorporated herein by reference).

       10.12         Promissory  Note dated  December  31,  1997 by and  between
                     Mimatar  Corporation  and  Sureway  Logistics   Corporation
                     (filed as Exhibit 10.2 to the Company's  Report on Form 8-K
                     filed on  January  15,  1998  and  incorporated  herein  by
                     reference).

       10.13         Consulting  Agreement,  dated July 27, 1997, by and between
                     Clayton/National Courier Systems, Inc., and Labe Leibowitz.

       10.14         Amendment, dated December 23, 1997, to Employment
                     Agreement, with Al Van Ness, Jr.

       10.15         Employment Agreement,  dated as of September 15, 1995, with
                     Robert  Wyatt  (filed  as  Exhibit  10.35 to the  Company's
                     Registration  Statement on Form S-1 (File No. 33-97008) and
                     incorporated herein by reference).

        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 27, 1998.

                     CONSOLIDATED DELIVERY & LOGISTICS, INC.



                      By:    /s/ Albert W. Van Ness, Jr.
                             Albert W. Van Ness, Jr.,
                             Chairman of the Board and Chief Executive 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 27, 1998.


      Signature                                   Capacity


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


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


 /s/ Joseph G. Wojak             Executive Vice President, Chief Financial
 Joseph G. Wojak                    Officer (Principal Financial and Accounting
                                    Officer), and Secretary


 /s/ William T. Beaury           Director
 William T. Beaury



/s/ Michael Brooks               Director
 Michael Brooks


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


/s/ Labe Leibowitz               Director
 Labe Leibowitz


/s/ Marilu Marshall              Director
 Marilu Marshall



/s/ Kenneth W. Tunnell           Director
 Kenneth W. Tunnell


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












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


<PAGE>

<TABLE>
<CAPTION>

                                                        S-1
                                                                                                        Schedule II

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



                                       Balance             Charged                                             Balance
                                          at              to Costs                                              at End
                                       Beginning             and           Write-offs          Other              of
         Description                   of Period          Expenses             (a)              (b)             Period
-----------------------------     ---------------     --------------    --------------    -------------   --------------
<S>                               <C>                 <C>               <C>               <C>             <C>
For the year ended
   December 31, 1997 -
   Allowance for doubtful
   accounts                             $1,598             $1,117           ($1,282)             $-             $1,433
                                    ===============     ==============    ==============    =============    =============

For the year ended
   December 31, 1996 -
   Allowance for doubtful
   accounts                             $1,249             $1,315            ($966)              $-             $1,598
                                    ===============     ==============    ==============    =============    =============

For the year ended
   December 31, 1995 -
   Allowance for doubtful
   accounts                               $-                $174              ($54)            $1,129           $1,249
                                    ===============     ==============    ==============    =============    =============
</TABLE>


(a)      Represents write-offs net of recoveries.
(b)      Represents the addition of the Founding Companies.


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


<PAGE>


1



                                                 INDEX TO EXHIBITS
<TABLE>
<CAPTION>

    Exhibits                                                                                              Page

     <C>                                                                                                     <C>
     10.13     Consulting  Agreement,  dated  July 27,  1997,  by and  between  Clayton/National  Courier
               Systems, Inc., and Labe Leibowitz.                                                            2

     10.14     Amendment, dated December 23, 1997, to Employment Agreement, with Al Van Ness, Jr.
                                                                                                             6

      11.1     Statement Regarding Computation of Net Income (Loss) Per Share                                7

      21.1     List of Subsidiaries of Consolidated Delivery & Logistics, Inc.                               8

      23.1     Consent of Independent Public Accountants                                                     9

      25.1     Power of Attorney                                                                             10

      27.1     Financial Data Schedule (for electronic submission only)                                      11
</TABLE>

<PAGE>
Exhibit 10.13

                       CONSULTING AGREEMENT

                  CONSULTING  AGREEMENT,  dated  as of  July  21,  1997,  by and
between  Clayton/National  Courier Systems,  Inc., a Missouri Corporation,  (the
"Company") and Labe Leibowitz (the "Consultant").

                              W I T N E S S E T H:

                  WHEREAS, Consolidated Delivery & Logistics, Inc. (the
"Parent") has acquired a network of courier and transportation companies (the
"Amalgamation"); and

                  WHEREAS the Company has been acquired by the Parent;  and

                  WHEREAS,   the  Consultant  has  performed  services  as  an
officer  to  the  Company  and  its predecessors in the past;

                  WHEREAS the  Consultant's  cooperation in connection  with the
effort to  streamline  and  rationalize  the  operations  of the  Parent and the
Company and to continue performing services for the Company is essential for the
Company's long-term success; and

                  WHEREAS, the Consultant is willing to serve as a consultant to
the Company and the Company desires to engage the Consultant in such capacity on
the terms and conditions herein set forth;

                  NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto hereby agree as follows:

                  Section 1. Engagement as Consultant. (a) The Company agrees to
engage the Consultant,  and the Consultant  agrees to be engaged by the Company,
upon the terms and conditions hereinafter provided, for a period of three years,
commencing  on  September  1, 1997 (the  "Commencement  Date")  and,  subject to
earlier termination pursuant to Section 5 hereof,  continuing until September 1,
2000 (the "Term").

                  (b) The Consultant  hereby represents and warrants that he has
the legal capacity to execute and perform this Agreement, that it is a valid and
binding agreement  enforceable  against him according to its terms, and that its
execution  and  performance  by him does not violate  the terms of any  existing
agreement  or  understanding  to  which  the  Consultant  is a  party.  Further,
Consultant  acknowledges and agrees that he has been represented by counsel with
respect to this Agreement.
                  Section 2.  Position  and  Duties.  (a)  During the Term,  the
Consultant  agrees to serve as a consultant to the Company and will perform such
services as are reasonably  requested of him from time to time by the Company or
the  Parent.  Consultant  shall not be required  to perform  work that  requires
travel  and shall be  permitted  to file any and all  reports as a result of his
consulting by written correspondence.

                           (b)      Consultant  shall be an independent
contractor  with respect to the consulting services to be rendered hereunder.
Consultant shall not be considered as having employee  status with the Company
or its affiliates and shall not be entitled to any benefit provided by the
Company or its affiliates to their respective agents and employees.

                  Section 3.        Compensation.  For all  services  rendered
by the  Consultant  during the Term, the Company  shall pay the  Consultant a
fixed fee at the rate of $4,166.66  per month ("Base  Fee").  The Base Fee
shall be payable on the fifteenth of the month.

                  Section  4.  Business  Expenses.  The  Company  shall  pay  or
reimburse the Consultant for all reasonable and necessary  expenses  incurred by
the Consultant in connection  with the performance of his duties and obligations
under this Agreement,  subject to the  Consultant's  presentation of appropriate
vouchers  in  accordance  with  such  expense  account   policies  and  approval
procedures  as the Company may from time to time  establish  (including  but not
limited  to  prior  approval  of  extraordinary  expense)  and to  preserve  any
deductions  for  Federal  income  taxation  purposes to which the Company may be
entitled.

                  Section 5.  Effect of  Termination.  (a) (i) In the event that
this  Agreement  terminates  due to a  Termination  for Cause or the  Consultant
terminates  this  Agreement  with the Company for reasons  other than  permanent
disability  or death,  all monthly Base Fee  installments  shall cease as of the
date of  termination  of this  Agreement.  No other  payments  shall be made, or
benefits  provided,  by the Company or the Parent under this Agreement.  (ii) In
the event the Company  terminates this Agreement for any other reason other than
a Termination  for Cause,  then the Company shall be entitled to pay the balance
of unpaid portion of the Base Fee due under the Term in a lump-sum payment.

                           (b) For  purposes of this  Agreement,  the  following
                  term  "Termination  for Cause"  means,  to the maximum  extent
                  permitted by applicable  law, a termination  of this Agreement
                  by the Company because the Consultant has (i) committed an act
                  of dishonesty in the  performance  of his duties  hereunder or
                  engaged in conduct  materially  detrimental to the business of
                  the Company, (ii) been convicted of a felony (iii) violated in
                  any respect the representations made in Section 1 above or the
                  provisions of Section 6 below.

                  Section 6. Confidentiality;  Covenant Against Competition. (a)
The   Consultant    acknowledges   and   agrees   that   the    confidentiality,
non-solicitation  and covenant against competition  pursuant to Section 6 of the
Employment  Agreement  between the parties dated September 15, 1995 shall remain
in effect and be  enforceable  against the Consultant  until  September 1, 2000.
However,  nothing  herein shall  preclude the  Consultant  from entering into an
archival or records storage business in the State of California.

                           (b)      The Consultant  acknowledges the
reasonableness  of the restrictions  contained in this Section 6. The Consultant
acknowledges that the Company, the Parent and their successors and assigns would
be irreparably  injured in a manner not adequately  compensated by money damages
by a breach or violation (or  threatened  breach or violation) of the provisions
of this Section 6 by the Consultant.  Therefore, in the event of any such breach
or  violation  (or  threatened  breach or  violation),  in addition to all other
rights and remedies which the Company may have, whether at law or in equity, the
Company and its successors and assigns shall be entitled to obtain injunctive or
other equitable  relief against the Consultant  without the need to post bond or
other security in connection therewith and the Consultant hereby consents to the
entry of an order for such injunctive or other equitable relief.

                           (c)      The  obligation  of the Company to make
payments, or provide for any benefits under this Agreement (except to the extent
vested or exercisable) shall cease upon a violation of the preceding  provisions
of this section. The Consultant's agreement as set forth in this Section 6 shall
survive  the  expiration  of the Term and the  Consultant's  termination  of his
engagement as a consultant of the Company.

                           (d)      If any court  determines  that the
provisions  of this  Section 6, or any part hereof,  is  unenforceable  because
of the duration or geographic  scope of such provisions,  such court shall have
the power to reduce the  duration or scope of such provisions, as the case may
be, so that, as so reduced, such provisions are then enforceable to the maximum
extent permitted by applicable law.

                  Section 7. Notices. All notices,  requests,  demands and other
communications  required or  permitted  hereunder  shall be given in writing and
shall be deemed to have been duly given if delivered or mailed, postage prepaid,
by same day or overnight mail as follows:

                           (a)      To the Company:
                                    General Counsel
                     Consolidated Delivery & Logistics, Inc.
                                    380 Allwood Road
                                    Clifton, New Jersey  07012

                           (b)      To the Consultant:
                                    Labe Leibowitz
                                    1650 Timberhill Road
                                    Santa Rosa, CA 95401

or to such other  address as either  party shall have  previously  specified  in
writing to the other.

                  Section 8. No Attachment.  Except as required by law, no right
to receive  payments  under  this  Agreement  shall be subject to  anticipation,
commutation,  alienation,  sale,  assignment,  encumbrance,  charge,  pledge, or
hypothecation  or  to  execution,   attachment,  levy,  or  similar  process  or
assignment by operation of law, and any attempt,  voluntary or  involuntary,  to
effect any such action shall be null, void and of no effect; provided,  however,
that nothing in this Section 8 shall  preclude the  assumption of such rights by
executors,  administrators or other legal  representatives  of the Consultant or
his estate and their  assigning  any rights  hereunder  to the person or persons
entitled thereto.
                  Section 9. Binding  Agreement;  No Assignment.  This Agreement
shall be binding upon, and shall inure to the benefit of, the Consultant and the
Company (and the Parent,  to the extent set forth  herein) and their  respective
permitted successors,  assigns, heirs,  beneficiaries and representatives.  This
Agreement is personal to the  Consultant  and may not be assigned by him without
the prior  written  consent of the Board,  as evidenced  by a resolution  of the
Board. Any attempted assignment in violation of this Section 9 shall be null and
void.

                  Section  10.  Governing  Law;  Consent  to  Jurisdiction.  The
validity,  interpretation,  performance, and enforcement of this Agreement shall
be governed by the laws of the State of California  without giving effect to its
choice of law  provisions.  All disputes  arising under this agreement  shall be
settled by arbitration in San Francisco, California in accordance with the rules
of the American Arbitration Association.

                  Section 11. Entire Agreement.  This Agreement shall constitute
the entire  agreement  among the parties  with  respect to the  matters  covered
hereby and shall supersede all previous written, oral or implied  understandings
among them with respect to such matters.

                  Section 13.       Amendments.  This  Agreement  may only be
amended or  otherwise  modified  by a writing executed by all of the parties
hereto.

                  Section 14.       Counterparts.  This  Agreement  may be
executed in any number of  counterparts, each of which when executed  shall be
deemed to be an original and all of which  together shall be deemed to be one
and the same instrument.

                  IN WITNESS  WHEREOF,  the Company has caused this Agreement to
be executed by its duly  authorized  officer and the  Consultant has signed this
Agreement, all as of the first date above written.

CLAYTON/NATIONAL COURIER SYSTEMS, INC.

By:________________________________                Date:______________________
     Joseph Wojak
Title:_______________________________

___________________________________                Date:_______________________
By:  Labe Leibowitz

<PAGE>

Exhibit 10.14

                     AMENDMENT TO EMPLOYMENT AGREEMENT

                            Dated: December 23, 1997



         This  Amendment  amends  the  Employment  dated  February  5,  1997
(the   "Agreement")  by  and  between Consolidated Delivery and Logistics,
Inc., (the "Company") and Albert W. Van Ness, Jr.  (the "Executive").

         WHEREAS,  the  Executive has served as Chairman and Chief  Executive
Officer of the Company from February 5, 1997 to date;  and

         WHEREAS,  the  employee  has  assumed  increased  responsibilities  and
devoted  considerably  more  time  then  was  originally   anticipated  for  the
performance of his position; and

         WHEREAS,  the  Compensation  Committee of the Board of Directors of the
Company has  recommended to the Board that the  compensation of the Employee for
1997 should be increased by additional grants of fully invested  incentive stock
options for 1997; and

         WHEREAS,  the  Compensation  Committee  ("Committee")  of the  Board of
Directors of Consolidated Delivery and Logistics,  Inc. have met at certain duly
convened meetings on November 12, 1997 and on December 12, 1997 and approved the
grant of  additional  fully vested  incentive  stock  options to the Employee in
consideration of his expanded responsibilities and increased time and effort.

         NOW,  THEREFORE in  consideration  of the mutual  promises herein to be
kept and other good and valuable  considerations  the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:


         1. Capitalized terms used herein but not defined herein shall have the
            meaning ascribed in the Agreement.

         2. Sub-paragraph (a) of  Section 3 of the Agreement is hereby deleted
            and replaced with the following as new subparagraphs (a), (b) and
            (c):

                  "(a)  The  Employee  shall  receive  as  compensation  two (2)
                  incentive  stock option  grants for a total of 100,000  shares
                  which shall vest in full as of
                     January 6, 1997 as follows:

                     Number of Shares                   Strike (Exercise) Price
                     1)     50,000                                        4-7/8
                     2)     50,000                                        7-7/8


                  The option  described in this subparagraph (a) shall expire at
                  5:00 PM on January 5, 2007."

                  "(b) The Employee shall receive as additional compensation the
                  following additional incentive stock option grants which shall
                  fully vest as of November 12, 1997:

                     Number of Shares                   Purchase Price

                            50,000                                        3 1/2
                            50,000                                        6

                  The options set forth in this subparagraph (b) shall expire at
                  5:00 PM on November 11, 2007."

                  "(c) The employee shall receive as additional compensation the
                  following  stock  option  grant which shall vest in full as of
                  December 12, 1997:

                     Number of Shares                   Strike (Exercise)

                           105,263                                        2 3/8

                  The options specified in this subparagraph (c) shall expire at
                  5:00 PM on December 11, 2007."

         3.  The following shall be added as a new Section 15 to the Agreement:

              "Section 15: The Company  warrants and  represents  that the stock
              option  grants set forth in Section 3 of the  Agreement  have been
              duly  approved  by the  Compensation  Committee  of the  Board  of
              Directors of the Company."

         4.   The parties agree that this Amendment may be executed by each
              party signing a facsimile  copy hereof and shall become
              effective  upon the Company 's receipt of one fully executed
              facsimile copy. Each fully executed  facsimile copy held by the
              parties shall be deemed a valid and enforceable original copy of
              this Amendment.

         5.  All terms and conditions of the Agreement not expressly amended
             hereby shall remain in full force and effect.







IN  WITNESS  WHEREOF,  the  Company  and the  Executive  each have  caused  this
Amendment to be executed by its duly authorized  officers and shall be deemed to
be effective upon signature below by both parties.


CONSOLIDATED DELIVERY                          The EXECUTIVE:
AND LOGISTICS, INC.

By:___________________________                 ______________________
     William T. Brannan                        Albert W. Van Ness, Jr.

     President


     December 23, 1997




<PAGE>

EXHIBIT 11.1
<TABLE>
<CAPTION>

                             CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                                            NET INCOME (LOSS) PER SHARE
                               FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

                                      (In Thousands Except Share Information)

SHARES CONSIDERED:                                                       1997               1996                1995
                                                                   ----------------    --------------      --------------


Weighted  average  portion of 2,100,000  common shares issued in
connection with the formation of CD&L adjusted to reflect
1,400,000  common shares redeemed and canceled in connection
with a termination  agreement and 305,577  common shares
<S>                                                                <C>                 <C>                 <C>
redeemed and canceled in connection with a management agreement           394,423           394,423           1,450,479

Weighted  average  portion  of  99,446  common  shares  issued in
connection with a termination agreement                                    99,446            99,446              37,871

Weighted  average  portion of 2,935,700  common  shares issued to
the stockholders of the Founding Companies                              2,935,700         2,935,700             273,462

Weighted  average portion of 3,200,000  common shares sold in the
Initial Public Offering                                                 3,200,000         3,200,000             298,082

Weighted  average  portion of  166,221  common  shares  issued in
connection with the acquisitions of businesses                            166,221            47,977                   -

Weighted   average  portion  of  137,239  common  shares  retired
pursuant to sale of subsidiary                                           (125,583)                -                   -

Weighted average portion of 8,333 common shares issued in
  connection with the acquisition of a business                             2,077                 -                   -
                                                                   ----------------    --------------      --------------

         Basic weighted average shares outstanding                      6,672,284         6,677,546           2,059,894

Incremental shares assumed issued in connection with stock
  options outstanding (a)                                                   2,656                 -                   -
                                                                   ----------------    --------------      --------------

         Diluted weighted average shares outstanding                    6,674,940         6,677,546           2,059,894
                                                                   ================    ==============      ==============


Income (loss) from continuing operations                                   $1,657             ($854)               ($26)
Income (loss) from discontinued operations                                 (1,198)              171                (169)
                                                                   ----------------    --------------      --------------

Net income (loss)                                                            $459             ($683)              ($195)
                                                                   ================    ==============      ==============


Basic and diluted income (loss) per share:
Continuing operations                                                        $.25             ($.13)              ($.02)
Discontinued operations                                                      (.18)              .03                (.08)
                                                                   ----------------    --------------      --------------

Net income (loss) per share                                                  $.07             ($.10)              ($.10)
                                                                   ================    ==============      ==============

</TABLE>


(a) The  conversion of the Company's  debentures  into 180,995  shares of common
stock is excluded from the  computations  as the effect would be antidilutive in
1997, 1996 and 1995.  Options to purchase 579,795,  475,295 and 37,445 shares of
common  stock in 1997,  1996 and 1995,  respectively,  were not  included in the
computation of diluted  earnings per share because the option exercise price was
greater than the average market price of the common shares.



<PAGE>

                                                               Exhibit 21.1

                              LIST OF SUBSIDIARIES


1.    American Courier, Inc.
2.    Clayton/National Courier Systems, Inc.
3.    Click Messenger Service, Inc.
4.    Click Messenger Service of N.Y., Inc.
5.    Court Courier Systems, Inc.
6.    National Express Company, Inc.
7.    Olympic Courier Systems, Inc.
8.    Securities Courier Corporation
9.    Silver Star Express, Inc.
10.   SureWay Air Traffic Corporation
11.   Liberty Transfer Acquisition Co., Inc.



<PAGE>


                                                               EXHIBIT 23.1




                    CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS





To Consolidated Delivery & Logistics, Inc.:


As independent public accountants, we hereby consent to the incorporation of our
reports  included  in this  Form  10-K,  into  the  Company's  previously  filed
Registration   Statements  on  Form  S-8  (File  Nos.  333-3321,   333-3323  and
333-47357).

                               ARTHUR ANDERSEN LLP


Roseland, New Jersey
March 27, 1998


<PAGE>


                                                            Exhibit 25.1

                                POWER OF ATTORNEY

                  WHEREAS, the undersigned officers and directors of
Consolidated  Delivery & Logistics,  Inc. (the "Company")  desire to  authorize
Albert W. Van Ness,  Jr.,  William T. Brannan and Joseph G. Wojak to act as
their attorneys-in-fact  and agents,  for the purpose of executing and filing
the  Company's  Annual Report on Form 10-K, including all amendments thereto;

                  NOW, THEREFORE,

                  KNOW  ALL  MEN BY  THESE  PRESENTS,  that  each  person  whose
signature  appears  below  constitutes  and  appoints  Albert W. Van Ness,  Jr.,
William T.  Brannan and Joseph G. Wojak,  and each of them,  his true and lawful
attorney-in-fact  and agent, with full power of substitution and resubstitution,
to execute  the  Company's  Annual  Report on Form 10-K,  including  any and all
amendments  and  supplements  thereto,  and to file the same,  with all exhibits
thereto,  and other documents in connection  therewith,  with the Securities and
Exchange Commission,  granting unto said  attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and  necessary to be done in and about the  premises,  as fully and to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said  attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes,  may lawfully do or cause to be done by virtue
hereof.

                  IN WITNESS  WHEREOF,  the undersigned have executed this power
of attorney in the following capacities as of the 25th day of February, 1998.

    SIGNATURE                                   TITLE

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

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

/s/ William T. Beaury          Director
William T. Beaury

/s/ Michael Brooks             Director
Michael Brooks

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

/s/ Labe Leibowitz             Director
Labe Leibowitz

/s/ Marilu Marshall            Director
Marilu Marshall

/s/ Kenneth W. Tunnell         Director
Kenneth W. Tunnell

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