UNITED STATES
                SECURITIES AND EXCHANGE COMMISSION
                      WASHINGTON D.C. 20549
                            FORM 10-Q


(Mark One)

 X               Quarterly report  pursuant  to  Section  13 or 15  (d)  of  the
                 Securities  Exchange  Act of 1934  For the  quarterly
                 period ended September 30, 1998 or

                 Transition report pursuant to Section 13 or 15 (d) of the
                 Securities Exchange Act of 1934
                 For the transition period from_______________to____________


Commission File Number:    0-26954


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


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



380 Allwood Road                       
Clifton, New Jersey                                      07012
(Address of principal executive offices)               (Zip Code)

(973) 471-1005
(Registrant's telephone number, including area code)

         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___

The  number of shares of common  stock of the  Registrant,  par value  $.001 per
share, outstanding as of November 3, 1998 was 6,637,517.


<PAGE>



                     CONSOLIDATED DELIVERY & LOGISTICS, INC.
               FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1998

                                      INDEX



                                                                           Page


Part I - Financial Information (unaudited)

         Item 1 - Financial Statements

         Consolidated Delivery & Logistics, Inc. and Subsidiaries
          Condensed Consolidated Balance Sheets as of September 30,
          1998 and December 31, 1997                                         3
         Condensed Consolidated Statements of Income for the Three
          and Nine Months Ended September 30, 1998 and 1997                  4
         Condensed Consolidated Statements of Cash Flows for the Nine
          Months Ended September 30, 1998 and 1997                           5
         Notes to Condensed Consolidated Financial Statements                6

         Item 2 - Management's Discussion and Analysis of Financial
          Condition and Results of Operations                               10

Part II - Other Information

         Item 1 - Legal Proceedings                                         14

         Item 6 - Exhibits and Reports on Form 8-K                          15

         Signature                                                          16



<PAGE>




            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                     (In thousands except share information)
<TABLE>
<CAPTION>
     <S>                                                            <C>                       <C>   

                                                                      September 30,               December 31, 
                                                                           1998                       1997
                                                                    -------------------       -------------------
                                                                       (Unaudited)                 (Note 1)

                                ASSETS

     CURRENT ASSETS
       Cash and cash equivalents                                               $823                   $1,812
       Accounts receivable, net                                              22,478                   21,275
       Prepaid expenses and other current assets                              3,301                    2,992
                                                                    -------------------       -------------------
         Total current assets                                                26,602                   26,079

     EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net                                6,795                    5,667
     OTHER ASSETS                                                            13,002                    4,403
     NONCURRENT ASSETS OF DISCONTINUED
       OPERATIONS                                                                 -                       10
                                                                    -------------------       -------------------
         Total assets                                                       $46,399                  $36,159
                                                                    ===================       ===================

                 LIABILITIES AND STOCKHOLDERS' EQUITY

     CURRENT LIABILITIES
       Short-term borrowings                                                 $9,822                   $7,360
       Current maturities of long-term debt                                   1,747                    3,280
       Accounts payable and accrued liabilities                              16,790                   12,868
       Net liabilities of discontinued operations                               100                       52
                                                                    -------------------       -------------------
         Total current liabilities                                           28,459                   23,560

     LONG-TERM DEBT                                                           6,616                    2,240
     OTHER LONG-TERM LIABILITIES                                              1,559                    1,745
                                                                    -------------------       -------------------
         Total liabilities                                                   36,634                   27,545
                                                                    -------------------       -------------------

     STOCKHOLDERS' EQUITY
      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; 6,637,517 and 6,666,884 shares issued
        and outstanding at September 30, 1998 and
        December 31, 1997, respectively                                           7                        7
      Additional paid-in capital                                              9,026                    9,026
      Treasury stock, 29,367 shares at cost at
         September 30, 1998                                                    (162)                       -
      Retained earnings (accumulated deficit)                                   894                     (419)
                                                                    -------------------       -------------------
         Total stockholders' equity                                           9,765                    8,614
                                                                    -------------------       -------------------
         Total Liabilities and stockholders' equity                         $46,399                  $36,159
                                                                    ===================       ===================
</TABLE>
       See accompanying notes to condensed consolidated financial
                               statements.

<PAGE>

            CONSOLIDATED DELIVERY & LOGISTICS, INC. AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF INCOME
                      (In thousands, except per share data)
                                   (Unaudited)
<TABLE>
<S>                                     <C>                   <C>                 <C>               <C>    

                                             For the Three Months Ended               For the Nine Months Ended
                                                   September 30,                            September 30,
                                        -------------------------------------     ----------------------------------
                                             1998                  1997               1998               1997
                                        ----------------      ---------------     --------------    ----------------

Revenue                                    $48,229               $44,259            $135,507          $126,368

Cost of revenue                             37,187                33,810             104,812            96,758
                                        ----------------      ---------------     --------------    ----------------

  Gross profit                              11,042                10,449              30,695            29,610

Selling, general, and
   administrative expenses                   9,770                 9,435              27,951            28,409
                                        ----------------      ---------------     --------------    ----------------

  Operating income                           1,272                 1,014               2,744             1,201

Other (income) expense:
  Gain on sale of subsidiary, net                -                     -                   -              (816)
  Other (income) expense, net                  (44)                    5                (215)             (209)
  Interest expense                             341                   318                 839               836
                                        ----------------      ---------------     --------------    ----------------

Income from continuing operations
   before income taxes                         975                   691               2,120             1,390

Provision for income taxes                     372                   277                 807               556
                                        ----------------      ---------------     --------------    ----------------

Income from continuing operations              603                   414               1,313               834

Loss from discontinued
  operations, net of tax benefit                 -                  (361)                  -              (452)
                                        ----------------      ---------------     --------------    ----------------
                                        
Net income                                    $603                   $53              $1,313              $382
                                        ================      ===============     ==============    ================

Basic income (loss) per share:
  Continuing operations                       $.09                  $.06                $.20              $.13
  Discontinued operations                       -                   (.05)                 -               (.07)
                                        ----------------      ---------------     --------------    ----------------
  Net income per share                        $.09                  $.01                $.20              $.06
                                        ================      ===============     ==============    ================

Diluted income (loss) per share:
  Continuing operations                       $.09                  $.06                $.19              $.13
  Discontinued operations                       -                   (.05)                 -               (.07)
                                        ----------------      ---------------     --------------    ----------------
  Net income per share                        $.09                  $.01                $.19              $.06
                                        ================      ===============     ==============    ================

Basic weighted average common
   shares outstanding                        6,638                 6,659               6,652             6,674
                                        ================      ===============     ==============    ================
Diluted weighted average common
   shares outstanding                        6,809                 6,659               6,820             6,674
                                        ================      ===============     ==============    ================
</TABLE>
        See accompanying notes to condensed consolidated financial
                                   statements.

<PAGE>

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

<TABLE>
<S>                                                                             <C>              <C>   


                                                                                     For the Nine Months
                                                                                     Ended September 30,
                                                                                -----------------------------
                                                                                   1998               1997
                                                                                -------------    ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income                                                                        $1,313               $382
Adjustments to reconcile net income to net cash provided by
       operating activities -
    Gain on disposal of equipment and leasehold improvements                         (11)               (14)
    Gain on sale of subsidiary                                                         -               (816)
    Depreciation and amortization                                                  2,146              1,550
    Changes in operating assets and liabilities
      (Increase) decrease in -
        Accounts receivable, net                                                     287             (1,961)
        Prepaid expenses and other current assets                                   (407)              (587)
        Other assets                                                                (188)              (249)
      Increase (decrease) in -
        Accounts payable and accrued liabilities                                   2,979              3,429
        Other long-term liabilities                                                 (189)                93
                                                                                -------------    ------------
          Net cash provided by operating activities                                5,930              1,827
                                                                                -------------    ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of businesses, net of cash acquired                                   (4,786)                 -
  Proceeds from sale of equipment and leasehold improvements                          16                 30
  Additions to equipment and leasehold improvements                               (1,882)              (808)
                                                                                -------------    ------------
          Net cash used in investing activities                                   (6,652)              (778)
                                                                                -------------    ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Short-term borrowings (repayments), net                                          2,462               (307)
  Proceeds from long-term debt                                                       150                  -
  Repayments of long-term debt                                                    (2,937)              (916)
  Deferred financing costs                                                             -               (125)
                                                                                -------------    ------------
          Net cash used in financing activities                                     (325)            (1,348)
                                                                                -------------    ------------
CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS                                    58               (188)
                                                                                -------------    ------------
          Net decrease in cash and cash equivalents                                 (989)              (487)
CASH AND CASH EQUIVALENTS, beginning of period                                     1,812              1,757
                                                                                -------------    ------------
CASH AND CASH EQUIVALENTS, end of period                                            $823             $1,270
                                                                                =============    ============
</TABLE>
       See accompanying notes to condensed consolidated financial
                          statements.


<PAGE>


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

(1)      BASIS OF PRESENTATION:

         The accompanying  unaudited condensed consolidated financial statements
         have been prepared in accordance  with  generally  accepted  accounting
         principles for interim financial  information and with the instructions
         to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not
         include all of the  information  and  footnotes  required by  generally
         accepted accounting principles for complete financial  statements.  The
         condensed  consolidated  balance  sheet at December 31, 1997,  has been
         derived  from the audited  financial  statements  at that date.  In the
         opinion of management,  all adjustments (consisting of normal recurring
         adjustments)  considered  necessary for a fair  presentation  have been
         included.  Operating  results  for the  three  and  nine  months  ended
         September 30, 1998 are not  necessarily  indicative of the results that
         may be  expected  for any other  interim  period or for the year ending
         December 31, 1998. For further  information,  refer to the consolidated
         financial  statements  and footnotes  thereto which are included in the
         Company's Form 10-K for the year ended December 31, 1997.


(2)      BUSINESS COMBINATIONS

         In July 1998,  the  Company  acquired  all of the  assets  and  certain
         liabilities of Metro Courier  Network,  Inc.  ("Metro"),  a provider of
         ground delivery services in Massachusetts, Maine and New Hampshire. The
         purchase  price was  approximately  $4.4  million,  consisting  of $2.6
         million in cash and a $1.8 million  convertible  note (the "Note") plus
         certain contingent payments. The excess purchase price over fair market
         value of the  underlying  assets  of $4.38  million  was  allocated  to
         goodwill and other  intangible  assets.  The Note bears interest at the
         rate of 7% per annum, with interest payable quarterly, is due July 2001
         and is  subordinate to all  indebtedness  due or that may become due to
         the Company's senior lender, First Union Commercial  Corporation or its
         affiliates.  The Note is  convertible  in its entirety at the option of
         the holder at any time  through  July 1, 2001 into fully paid shares of
         the Company's  common stock at a conversion  price of $7 per share. The
         Note is  convertible  in its entirety at the option of the Company when
         the average closing sales price of the Company's common stock equals or
         exceeds  $7 per  share  over a ninety  day  period.  In  addition,  the
         purchase  agreement  also  provides for a contingent  earn out of up to
         $1.5  million  which is payable to Metro  based on the  achievement  of
         certain  financial  goals by the newly formed  division  during the two
         year period following the closing.  Final determination of the purchase
         price will be made by October 2001.

         In August 1998, the Company  acquired all of the outstanding  shares of
         the capital stock of KBD Services,  Inc. ("KBD"),  a provider of ground
         delivery  services in North and South Carolina.  The purchase price was
         approximately  $4.1 million  consisting of $2.1 million in cash, a $1.5
         million  7%  subordinated  convertible  note  (the  "KBD  Note")  and a
         $500,000 7% contingent  subordinated  convertible note (the "Contingent
         Note").  The  excess  purchase  price  over  fair  market  value of the
         underlying  assets of $3.5 million was  allocated to goodwill.  The KBD
         Note is due August 5, 2003 with interest payable  quarterly  commencing
         October 1, 1998 and is convertible in its entirety at the option of the
         holder at any time  through  July 1, 2003 into fully paid shares of the
         Company's  common stock at a conversion  price of $6 per share. The KBD
         Note is  convertible  in part or in its  entirety  at the option of the
         Company when the average  closing sales price of the  Company's  common
         stock  equals or exceeds $6 per share  over a thirty  day  period.  The
         Contingent  Note is subject to reduction or discharge if KBD's earnings
         before  interest  and taxes is less than  $700,000  for the year ending
         July 31,  1999  and is due  with  interest  on the  finally  determined
         principal  on November  1, 1999.  The holder or the Company may convert
         the  Contingent  Note in its  entirety  into fully  paid  shares of the
         Company's  common stock at a conversion price of $6 after September 16,
         1999 and through October 20, 1999. The KBD Note and the Contingent Note
         are subordinate to all  indebtedness  due or that may become due to the
         Company's  senior  lender,  First Union  Commercial  Corporation or its
         affiliates.

         In September  1998,  the Company  acquired  certain  assets and assumed
         certain liabilities of Eveready Express Corp. ("Eveready"),  a provider
         of ground  delivery  services  in the New York City market  place.  The
         purchase  price for the assets and certain  non-competition  agreements
         was  $975,000,  with  $415,000  in  cash  and a  $560,000  subordinated
         contingent note (the "Eveready  Contingent  Note"). The entire purchase
         price was  allocated  to  goodwill  and other  intangible  assets.  The
         Eveready  Contingent  Note bears  interest at the rate of 6% per annum,
         with  semi-annual  principal  payments of $50,000 plus accrued interest
         commencing  March  1999 and the  remaining  balance  of  principal  and
         interest due September  2000. The final  determination  of the purchase
         price  and  the  Eveready  Contingent  Note  will  be  based  upon  the
         percentage of collected revenues earned by Eveready during the one-year
         period  following  the  closing.   The  Eveready   Contingent  Note  is
         subordinate  to all  indebtedness  due or that  may  become  due to the
         Company's  senior  lender,  First Union  Commercial  Corporation or its
         affiliates.

         The above  transactions  have  been  accounted  for under the  purchase
         method of  accounting.  Accordingly,  the allocation of the cost of the
         acquired  assets  and  liabilities  has been  made on the  basis of the
         estimated fair value. The consolidated financial statements include the
         operating results of each business from the date of acquisition.

         The  following  summarized  unaudited pro forma  financial  information
         assumes that the Metro and KBD acquisitions were consummated on January
         1,  respectively of 1998 and 1997. This  information is not necessarily
         indicative  of the results the Company  would have  obtained  had these
         events actually occurred or of the Company's actual or future results.

<TABLE>
         <S>                          <C>              <C>                   <C>                <C>    

                                              Three Months Ended                      Nine Months Ended
                                         September         September             September         September
                                         30, 1998          30, 1997              30, 1998           30, 1997
                                         Pro Forma         Pro Forma             Pro Forma         Pro Forma
                                         Combined          Combined              Combined           Combined
                                      ---------------- ------------------    ------------------ -----------------
                                      

           Revenue                        $48,847          $47,153                $142,823          $135,049
           Income from
            operations                      1,248              461                   3,192               974
           Net income                        $571             $100                  $1,334              $522

           Net income per
            share - basic                    $.09             $.02                    $.20              $.08
           Net income per
            share - dilued                   $.08             $.02                    $.20              $.08

</TABLE>
(3)      SHORT-TERM BORROWINGS:

         Under the terms of its July 14, 1997  Revolving  Credit  Facility  with
         First Union Commercial Corporation (the "Bank"), the Company was not in
         compliance with its tangible net worth and fixed charge coverage ratio,
         two of its loan  covenants  as of and for the three month  period ended
         September  30,  1998.  The Bank has issued a waiver to the Company with
         respect  to  such  non-compliance  for the  three  month  period  ended
         September 30, 1998. The Company is currently in negotiations concerning
         appropriate  changes  in  such  loan  covenant  and  other  substantive
         provisions of its revolving credit facility.


(4)      SUBORDINATED DEBENTURES:

         On April 1, 1998 the Company converted $740,000 of the $2 million of 8%
         Subordinated  Convertible  Debentures  (the  " 8%  Debentures")  to 10%
         Subordinated  Convertible  Debentures (the "10% Debentures") and issued
         $150,000  of  additional  10%   Debentures.   The  10%  Debentures  are
         convertible  into common stock of the Company at a conversion  price of
         $5.50 per  share,  accrue  interest  at 10% per annum  which is payable
         quarterly,  mature on August 21, 2000 and extend the initial  repayment
         date by one year from August 1998 to August  1999.  The 10%  Debentures
         are redeemable by the Company,  in whole or in part, without premium or
         penalty at any time on or after August 18,  1999,  at their face amount
         plus accrued and unpaid  interest,  if any, to the date of  redemption.
         The 10% 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, 1999.  As a result of the above  transaction,  the 10%  Debentures,
         totaling  $890,000,   have  been  classified  as  long-term  debt.  The
         remaining 8%  Debentures,  totaling  $1.3 million were repaid in August
         1998.


(5)      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  was 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 sought 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. The motion was denied on May 11, 1998. On October 7,
         1998  a  Stipulation  and  Agreement  of  Settlement  (the  "Settlement
         Agreement") was entered into by the parties  providing for a Settlement
         Fund of $1.5 million.  A preliminary  order  approving the terms of the
         settlement  was issued by the Court on  October  19,  1998.  Mailing of
         Notice  and  Proof of Claims  to class  members  under the terms of the
         Settlement  Agreement was completed by October 23, 1998.  Class members
         who wish to be  excluded  from the  class  must  request  exclusion  by
         December 4, 1998. A final  settlement  hearing  formally  approving the
         settlement is scheduled for December 18, 1998. The last date for filing
         Proof of Claims by any class  member is  February  20,  1999.  The full
         amount  of  the  settlement  is  covered  by the  Company's  applicable
         insurance.  Accordingly the settlement will not have a material adverse
         affect on the Company's financial condition or results of operations.

         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  will have a material  adverse  effect on the financial
         position or results of operations of the Company and its subsidiaries.

(6)      EARNINGS PER SHARE:

         The Company adopted the provisions of Statement of Financial Accounting
         Standards No. 128,  "Earnings  Per Share" ("SFAS 128"),  in the quarter
         ended December 31, 1997. SFAS 128 establishes  standards for the method
         of  computation,  presentation  and  disclosure  for earnings per share
         ("EPS")  and  requires  the  presentation  of basic  and  diluted  EPS.
         Previously  reported  EPS amounts  were not affected by the adoption of
         this new standard.  The conversion of the debentures  into common stock
         (see Note 4) were  antidilutive  for 1998 and 1997.  The  effect of the
         conversion of unexercised stock options were antidilutive for 1997.

         A  reconciliation  of weighted  average  common shares  outstanding  to
         weighted average common shares  outstanding  assuming  dilution follows
         (in thousands) -

<TABLE>
           <S>                                   <C>                <C>                <C>               <C>   

                                                     Three Months Ended                    Nine Months Ended
                                                          September 30,                        September 30,
                                                 --------------------------------      ------------------------------
                                                      1998              1997               1998             1997
                                                 ---------------    -------------      -------------     ------------
                                           
           Basic weighted average
            common shares oustanding                    6,638             6,659               6,652            6,674
           Effect of dilutive securities:
             Stock options                                171                 -                 168                -
                                                 ---------------    -------------      -------------     ------------
           Diluted weighted average
            common shares outstanding                   6,809             6,659               6,820            6,674
                                                 ===============    =============      =============     ============
</TABLE>


(7)      NEW ACCOUNTING PRONOUNCEMENTS:

         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.

         In March 1998,  the  Accounting  Standards  Executive  Committee of the
         American  Institute of Certified Public Accountants issued Statement of
         Position 98-1, "Accounting for the Costs of Computer Software Developed
         or Obtained for Internal  Use." The  statement is intended to eliminate
         the diversity in practice in accounting for internal-use software costs
         and improve financial reporting.  The statement is effective for fiscal
         years  beginning after December 15, 1998. The Company is in the process
         of   determining   the  effect  of  this  statement  on  the  Company's
         consolidated financial position and results of operations.










Item 2 - Management's Discussion and Analysis of Financial Condition and Results
             of Operations

Overview

The  following  discussion of the  Company's  results of  operations  and of its
liquidity and capital resources should be read in conjunction with the Condensed
Consolidated  Financial  Statements of the Company and the related Notes thereto
appearing elsewhere herein.

Disclosure Regarding Forward-Looking Statements

The Private  Securities  Litigation  Reform Act of 1995 provides a "safe harbor"
for forward looking statements.  Certain information contained in this Form 10-Q
includes information that is forward looking, such as the Company's expectations
for future performance,  its growth and acquisition strategies,  its anticipated
liquidity and capital needs,  the prospects for  settlement of  litigation,  the
ability to lower costs through increased route density, the effects of Year 2000
compliance  and its future  prospects.  The matters  referred to in such forward
looking  statements could be affected by the risks and uncertainties  related to
the  Company's  business.  Actual  results  may vary from these  forward-looking
statements  due  to  many  factors   including  but  not  limited  to:  lack  of
satisfactory acquisition candidates and/or an inability to conclude acquisitions
on satisfactory terms;  acquisition  limitations under the terms of the existing
credit  facility;  inability to obtain  acquisition  financing  on  satisfactory
terms, the effect of economic and market conditions,  the ability of the Company
to execute its  strategic  plan,  the impact of  competition  and the  Company's
reported  results varying  materially from  management's  current  expectations.
Investors are further  cautioned that the Company's  financial  results can vary
from quarter to quarter,  and the financial  results reported for the first nine
months may not necessarily be indicative of future results. For more information
about the Company,  please review the Company's most recent Form 10-K filed with
the Securities and Exchange Commission.

RESULTS OF OPERATIONS

Nine Months Ended September 30, 1998 Compared to Nine Months Ended
  September 30, 1997

Revenue  increased for the nine months ended  September 30, 1998 by $9.1 million
or 7.2%, to $135.5 million compared to revenue of $126.4 million for same period
in 1997.  The  Company's  ground  delivery  divisions  accounted for the revenue
increase as a result of newly added customers,  continued strong internal growth
of the Company's core businesses and partially due to revenue from acquisitions.
The revenue  contribution  from  acquisitions  of $2.8  million  offset one time
incremental  revenue generated in August, 1997 as a result of a strike at United
Parcel Service. The air division's revenue for nine months did not increase over
revenue generated for the same time period in 1997. Revenue increases  generated
as a result of newly added  customers  were offset due to a concerted  effort by
air division management to identify and eliminate low margin product lines.

Cost of revenue  increased  by $8.0  million or 8.3% from $96.8  million for the
first nine months of 1997 to $104.8 million for the nine months ended  September
30, 1998. The increase in costs stated as a percentage of revenue  represents an
increase  from  76.6% for the first  nine  months of 1997 to 77.3% for the first
nine months of 1998 or 0.7%.  The cost of revenue  increase has been isolated to
the  Southeast and  Midwest/West  ground  operations  where the majority of such
ground business is dedicated and/or route - scheduled  deliveries.  This product
line has  experienced  a lack of driver  availability  causing  payroll  cost to
increase resulting from the current low level of unemployment; coupled with some
initial  start-up  costs for new business  being  absorbed by the  operations at
these  regions.  Concurrently,  the Northeast  ground  operation  demonstrated a
reduction in costs as a result of an improved  delivery  route matrix and higher
distribution volume. The air division has also seen lower costs as they continue
to analyze profitability for each of their major accounts.

Selling,  general and  administrative  expense (SG&A) continues to decrease when
comparing period to period levels.  SG&A decreased $458,000 or 1.6% for the nine
months ended  September  30, 1998 compared to the same period in the prior year.
The nine months  ended  September  30, 1998 shows a reduction  of  approximately
$800,000  in  SG&A,  offset  somewhat  by  increased   depreciation  expense  of
approximately $300,000 as a result of an investment in technology.  SG&A for the
first nine months of 1998 was 20.6% stated as a percentage  of revenue  compared
to 22.5% for the first nine months of 1997, a decrease of 1.9%.

As a result of the matters  discussed above,  operating income increased by $1.5
million or 125% from $1.2 million for the nine months ended  September  30, 1997
to $2.7 million for the nine months ended September 30, 1998.  Operating  income
for the first nine  months of 1998 was 2.0%  stated as a  percentage  of revenue
versus 1.0% for the same period in 1997.

Income from continuing  operations before income taxes increased by $730,000, or
52.1%,  from $1.4  million for the first nine months of 1997 to $2.1 million for
the first nine months of 1998.

Three Months ended September 30, 1998 Compared to the Three Months Ended
  September 30, 1997

Revenue for the third  quarter of 1998  increased  by $4.0  million or 9.0% from
$44.2 million for the third quarter of 1997 to $48.2 million for the same period
in 1998. The increased  revenue resulted  primarily from a $4.7 million increase
in  the  Company's  ground   operations   offset  slightly  by  a  reduction  of
approximately $0.7 million in the Company's air division. Increased revenue from
acquisitions of  approximately  $2.8 generated in the third quarter of 1998 were
offset by an incremental  revenue  increase during the third quarter of 1997 due
to the positive impact of the short-lived United Parcel Service strike.

The cost of revenue  differential for the third quarter 1998 stated as a percent
of revenue  compared to the third quarter 1997 increased  slightly from 76.4% to
77.1% due to the lack of driver  availability and initial start-up costs for new
business added to the Southeast and Northeast regions of the Company.

Selling  general and  administrative  expenses stated as a percentage of revenue
declined by 1.0% from 21.3% for the third quarter of 1997 to 20.3% for the third
quarter of 1998.  SG&A  increased  $335,000 or 3.6% during the third  quarter of
1998 as  compared to the same period in 1997.  The primary  contribution  to the
dollar increase in SG&A is depreciation expense as a result of increased capital
expenditures in technology,  with the remaining increase in dollars attributable
to newly added salespersons.

As a result of the  matters  discussed  above,  operating  income for the third
quarter of 1998  improved  to $1.3 million compared to $1.0 million for the same
period in 1997.

Income from  continuing  operations  was 45.7% higher for the three months ended
September 30, 1998 compared to the same period in 1997, increasing from $414,000
or 0.9% of revenues  for the third  quarter 1997 to $603,000 or 1.3% of revenues
for the third quarter 1998.

The  Company is  presently  undergoing  an  employment  tax  examination  by the
Internal  Revenue Service (the "IRS"). The examination  covers certain  payments
made during the 1995,  1996 and 1997 tax years to employee  owner  operators for
all or a portion of the costs of operating their vehicles in the course of their
employment.  The  Company  believes  that these  arrangements  do not  represent
additional  compensation to those employees.  However, there can be no assurance
that the IRS will not seek to  recharacterize  some or all of such  payments  as
additional compensation. If such amounts were recharaterized,  the Company could
have to pay additional employment-related taxes on such amounts.

LIQUIDITY AND CAPITAL RESOURCES

Working  capital  decreased  by $4.4  million  to a deficit  of $1.9  million at
September  30,  1998 from $2.5  million  at  December  31,  1997.  The  decrease
represents  the  use of the  Company's  line  of  credit  to to  consummate  the
previously discussed  acquisitions.  Cash and cash equivalents decreased by $1.0
million  from $1.8  million at December  31, 1997 to $800,000 at  September  30,
1998.  The  Company  utilized  cash of $1.0  million and cash  generated  by its
operations of $5.9 million to purchase  three  businesses  for $4.8 million,  to
purchase  equipment and  leasehold  improvements  totaling $1.9 million,  and to
reduce its net borrowings by $325,000.

As of April 1,  1998 the  Company  converted  $740,000  of its $2.0  million  8%
Subordinated  Convertible Debentures to 10% Subordinated Convertible Debentures,
and  issued  an  additional   $150,000  of  the  10%  Subordinated   Convertible
Debentures.  In  August  1998,  the  Company  redeemed  $1.3  million  of its 8%
Subordinated   Convertible   Debentures.   These  transactions  did  not  affect
availability under the terms of the Company's credit facility.  At September 30,
1998 the Company had $4.3 million available under its credit facility.

The Company has engaged an exclusive  placement  agent for the proposed  sale of
$20 million of senior subordinated notes to provide additional financing to fund
the  Company's  anticipated   acquisitions  for  which  negotiations  are  being
currently conducted.

In addition,  the Company is also conducting current  negotiations to modify its
existing credit  facility to increase the maximum  available from $15 million to
$22.5 million and to provide for an equipment acquisition loan facility of up to
$2.5 million.

Management  believes  that  cash  flow from its  operations,  together  with its
existing and anticipated  borrowing capacity, as discussed above, are sufficient
to  support  the  Company's   operations  and  general  business  and  liquidity
requirements for the foreseeable future, including anticipated acquisitions.



Recently Issued Accounting Pronouncements

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.

In March,  1998, the Accounting  Standards  Executive  Committee of the American
Institute of Certified  Public  Accountants  issued  Statement of Position 98-1,
"Accounting  for the  Costs of  Computer  Software  Developed  or  Obtained  for
Internal  Use." The statement is intended to eliminate the diversity in practice
in accounting for internal-use  software costs and improve financial  reporting.
The statement is effective for fiscal years  beginning  after December 15, 1998.
The Company is in the process of determining the effect of this statement on the
Company's consolidated financial position and results of operations.

Year 2000 Compliance

The Company is aware of the issues  related to the approach of the Year 2000 and
continues  to address  the impact of these  issues on it business to ensure that
its critical  systems will function  appropriately  for the turn of the century.
These issues affect computer systems that have date-sensitive  programs that may
not properly  recognize the Year 2000,  as well as machines and  equipment  that
contain  imbedded  technology,  such as security  systems,  telephone  switches,
telephones and postal meters.

The Company's Year 2000 efforts are being carried out by the Company's Year 2000
team, under the leadership of the Director of Information  Technology.  The Year
2000 team has  formalized  a project  plan to focus on four areas:  (i) internal
business  and  financial   information   systems  including  computer  hardware,
application  software,  operating  systems  and  data  telecommunications;  (ii)
imbedded technology; (iii) third party interfaces with customers, vendors, banks
and others, where information is exchanged electronically;  and (iv) third party
compliance where the third party provides critical services to the Company, such
as telecommunication carriers, mobile network providers, insurance companies and
financial institutions.  The first phase in the Company's plan is data gathering
to determine  whether systems are Year 2000 compliant and to ascertain the costs
of bringing the systems and interfaces into  compliance.  This phase is underway
and is scheduled for completion by the end of 1998 for all of the aforementioned
areas  except  third party  compliance,  which is  anticipated  to be an ongoing
project as third party  progress is  monitored  against  such  parties Year 2000
compliance plans. The remaining phases of the Company's plan include  assessment
of  associated  risks  of   non-compliance,   prioritization   of  upgrades  and
replacements,  implementation  of the  development  program and development of a
contingency plan.

Based on a  preliminary  estimate,  the Company does not expect that the cost to
modify its information  technology  infrastructure  to be Year 2000 compliant to
exceed  $250,000.  The  estimate  of the cost to upgrade  or replace  systems is
subject to the completion of phase one as described above.

The Company is in the process of obtaining information  concerning the Year 2000
compliance  status  of its  suppliers  and  customers.  In the  event  that  the
Company's airline, utility or telecommunication  vendors do not successfully and
timely achieve Year 2000 compliance, the Company's operations could be adversely
affected by the absence of a means to communicate  with its customers,  vendors,
drivers and  others.  Since the  Company  has not yet fully  obtained  Year 2000
information from its suppliers and customers, the Company is not in a  position
to be able to  develop a  contingency  plan or fully  detail the  elements  of a
worst-case scenario.

The preceding discussion contains numerous forward-looking statements and should
be  read  in  conjunction   with  the  "Disclosure   Regarding   Forward-Looking
Statements" appearing at the beginning of "Management's  Discussion and Analysis
of Financial  Condition and Results of  Operations."  Expectations  about future
Year 2000  related  costs and the progress of the  Company's  Year 2000 plan are
subject to various  uncertainties  that could cause the actual results to differ
materially from the Company's  expectations,  including the Company  identifying
hardware, software and devices that are not Year 2000 compatible, the nature and
amount of related  labor and  consulting  costs and the success of the Company's
significant vendors and customers in addressing their Year 2000 issues.



Inflation

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


<PAGE>



                           Part II - OTHER INFORMATION

Item 1 - 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 was 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  sought 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.  The motion was denied on May 11,
1998.  On  October  7, 1998 a  Stipulation  and  Agreement  of  Settlement  (the
"Settlement  Agreement")  was  entered  into  by  the  parties  providing  for a
Settlement Fund of $1.5 million.  A preliminary order approving the terms of the
settlement  was issued by the Court on October 19,  1998.  Mailing of Notice and
Proofs of Claims to class  members under the terms of the  Settlement  Agreement
was  completed by October 23, 1998.  Class  members who wish to be excluded from
the class must request exclusion by December 4, 1998. A final settlement hearing
formally  approving the  settlement is scheduled for December 18, 1998. The last
date for filing Proof of Claims by any class  member is February  20, 1999.  The
full  amount of the  settlement  will be  covered  by the  Company's  applicable
insurance. Accordingly the settlement will not have a material adverse affect on
the Company's financial condition or results of operations.

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 its
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 effect on the consolidated  financial  position or
results of  operations of the Company.  A discovery  cutoff date has been set by
the court for December 4, 1998.

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



<PAGE>





Item 6 - Exhibits and Reports on Form 8-K

         (a)   Exhibits

                   3.2     Amended and Restated By-laws of Consolidated Delivery
                           & Logistics, Inc. (filed as Exhibit 3.2 to the
                           Company's Quarterly Report on Form 10-Q for the
                           fiscal quarter ended June 30, 1998 and incorporated
                           herein by reference).

                  10.1     Amendment to Employment Agreement, dated as of
                           January 5, 1998, with Albert W. Van Ness, Jr.

                  27.1     Financial Data Schedule (for electronic submission 
                           only)

         (b)   Report  on  Form  8-K  filed  on July  16,  1998  concerning  the
               Company's   acquisition   of  all  of  the  assets  and   certain
               liabilities of Metro Courier Network, Inc.

              Report on Form  8-K  filed  on  August  18,  1998  concerning  the
               Company's  acquisition  of  all  of  the  capital  stock  of  KBD
               Services, Inc.

              Report on Form  8-K  filed  on  August  19,  1998  concerning  the
               Company's  private placement for the proposed sale of $20 million
               of senior subordinated notes.

              Report on Form 8-K/A filed on September  15, 1998  concerning  the
               Company's   acquisition   of  all  of  the  assets  and   certain
               liabilities of Metro Courier Network, Inc.

              Report on Form 8-K filed on  September  28,  1998  concerning  the
               Company's  acquisition of certain assets and certain  liabilities
               of Eveready Express, Corp.

              Report on Form 8-K/A  filed on October  19,  1998  concerning  the
               Company's  acquisition  of  all  of  the  capital  stock  of  KBD
               Services, Inc.
<PAGE>

                                    SIGNATURE

         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Dated:   November 16, 1998        CONSOLIDATED DELIVERY & LOGISTICS, INC.




                                  By: /s/ Albert W. Van Ness, Jr.
                                      Albert W. Van Ness, Jr.
                                      Chairman of the Board, Chief Executive
                                      Officer and Chief Financial Officer
                                      (PRINCIPAL FINANCIAL AND
                                        ACCOUNTING OFFICER)
<PAGE>



                                  EXHIBIT INDEX


10.1     Amendment to Employment Agreement, dated as of January 5, 1998, with 
           Albert W. Van Ness, Jr.

27.1     Financial Data Schedule (for electronic submission only)


<PAGE>


Exhibit 10.1

                        AMENDMENT TO EMPLOYMENT AGREEMENT

                             Dated: January 5, 1998



         This Amendment  dated January 5, 1998 amends the  Employment  Agreement
dated  February 5, 1997 as amended by an Amendment  dated December 23, 1997 (the
"Agreement")  by and between  Consolidated  Delivery and Logistics,  Inc.,  (the
"Company") and Albert W. Van Ness, Jr. (the "Employee").

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

         WHEREAS,  the Board of  Directors  of the Company  desire to retain the
services of the Employee for an additional one year term  commencing  January 5,
1998 ("First Renewal Term")

         WHEREAS,  the  Compensation  Committee  ("Committee")  of the  Board of
Directors of Consolidated Delivery and Logistics,  Inc. have met at certain duly
convened  meetings and have  approved  the  extension  of the  Agreement  for an
additional one year term ("First Renewal Term"); and

         WHEREAS,  the  Employee  desires to continue  to serve as Chairman  and
Chief Executive Officer for such First Renewal Term.

         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.  The following shall be added as a new sub-paragraph (d) to
                      Section 3 of the Agreement:

         "(d) For all services rendered by the Employee during the First Renewal
         Term of the Agreement, the Employee shall be compensated as follows:

         (i) The Company shall pay the Employee a salary at the rate of $125,000
         per annum payable on a bi-weekly basis.

         (ii) Employee  shall receive as  additional  compensation  stock option
         grants for a total of  100,000  shares  which  shall vest in full as of
         January 5, 1998.  These  shares  shall have a strike  (exercise)  price
         equal to $2.625 per share.  The options  described  in this  subsection
         shall expire on 5:00 PM on January 4, 2008.  The Company  shall provide
         Employee  concurrent  with the signing of this  Agreement the following
         documents covering these grants:

         (a) One Incentive Stock Option  Agreement  covering 38,095 shares;  and
         (b) One non-qualified Stock Option Agreement covering 61,905 shares.

         (iii) As additional contingent  compensation the Employee shall receive
         one stock option grant covering up to 60,000 shares which shall vest in
         full as of  January  5, 1998 with a strike  (exercise)  price  equal to
         $2.625  per share and having an  expiration  date of 5:00 PM January 4,
         2008.  The actual  number of  options  to be granted  shall be based on
         achievement  of  performance  criteria  for 1998 to be agreed to by the
         Company and the Employee.

         (iv) As additional contingent  compensation,  if the share price of the
         Company  stock  increases at any time by $2.00 or more over the January
         5, 1998 share price of $2.625 (NASDAQ end of day) a non-qualified stock
         option  for  35,000  shares  shall  automatically  be  granted  to  the
         Employee.  These shares shall have a strike  (exercise)  price equal to
         $2.625 per  share.  These  options  shall vest in full as of January 5,
         1998 and shall expire at 5:00 PM on January 4, 2008.

         (v) As additional contingent compensation the Employee shall receive an
         additional  stock option grant covering  25,000 shares which shall vest
         in full as of  January  5, 1998 upon  achievement  of any of six of the
         company's nine corporate goals set out in the Company's "1998 Strategic
         Plan."  These  shares  shall have a strike  (exercise)  price  equal to
         $2.625 per  share.  These  options  shall vest in full as of January 5,
         1998 and shall expire at 5:00 PM on January 4, 2008.

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

                  "Section 15.   Change of Control.
                  In the event of a consolidation,  merger or transfer of all or
                  substantially  all of the  assets of the  Company  to  another
                  person or entity whereby  immediately  after such transaction,
                  50% or more of the voting  securities of the Company have been
                  transferred,  the  Company  shall  immediately  prior  to such
                  transfer  pay the  Employee  an  amount  in cash  equal to the
                  Employee's  salary for the remainder of the First Renewal Term
                  of this  Agreement.  In addition  any and all  conditions  set
                  forth  in  Section  3 (d)  (iii)  (b),  (iv)  and  (v)  of the
                  Agreement  with respect to  contingent  compensation  shall be
                  deemed to have been satisfied and all contingent stock options
                  shall be granted  to the  Employee  immediately  prior to such
                  transfer.

4. The last two sentences of Section 5 (b) of the  Agreement are hereby  deleted
and replaced with the following:  "For a period of four months commencing on the
effective date of the  termination of his  employment,  Employee  agrees that he
will not hire any  executive  of the Company or its  subsidiaries  or solicit or
induce any such executive to leave the employment of the Company."

                  5. The parties  agree that this  Amendment  maybe  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.

                  6.  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 Employee 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 EMPLOYEE:
AND LOGISTICS, INC.


By: /s/  William T. Brannan                   /s/  Albert W. Van Ness, Jr.
     William T. Brannan, President            Albert W. Van Ness, Jr.

Date:  January 5, 1998


<PAGE>