FORM 10-KSB

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

            [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                For   the   fiscal   year   ended December 31, 1998.
                                       OR
          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                           Commission File No. 1-8129.

                              US 1 INDUSTRIES, INC.
             (Exact name of registrant as specified in its charter)

       Indiana                                         95-3585609
----------------------                     ------------------------------
(State of Incorporation)                 (I.R.S. Employer Identification No.)




1000 Colfax, Gary, Indiana                                   46406
--------------------------                                   -----
(Address of principal executive offices)                  (Zip Code)



Registrant's telephone number, including area code: (219) 944-6116
                                                    ---------------
Securities registered pursuant to Section 12(b) of the Act:

                                             Name of each exchange
Title of each class                          on which registered
--------------------------                   ---------------------
Common Stock, no par value                    None

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

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes __ No _X_

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-KSB or any amendment to
this Form 10-KSB. [X]

On May 25, 1999, there were 10,618,224 shares of registrant's  common stock were
outstanding,  and the  aggregate  market  value of the voting stock held by none
affiliates of the registrant  was  approximately  $700,000.  For purposes of the
forgoing  statement,  directors and officers of the registrant have been assumed
to be affiliates.





                                       1
<PAGE>
                                     PART 1

Item 1.  Business.

     The registrant,  US 1 Industries,  Inc.  (hereinafter referred to, together
with its subsidiaries, as "US 1" or the "Company"),  through its subsidiaries is
an interstate trucking company operating in 48 states and in Ontario and Quebec,
Canada. The Company's  business consists of a truckload  operation for which the
Company obtains  substantially  all of its business  through  independent  sales
agents who then  contract with  independent  truckers to haul the freight to the
desired destination.

     US 1 was incorporated in California under the name Transcon Incorporated on
March 3, 1981. In March 1994,  the Company  changed its name to US 1 Industries,
Inc. In February  1995, the Company was merged with an Indiana  corporation  for
purposes of re-incorporation  under the laws of Indiana. The Company's principal
subsidiaries  consist of Blue and Grey Transport,  Inc., an Indiana  corporation
("BGT"), Blue and Grey Brokers,  Inc., an Indiana corporation ("BGB"),  Carolina
National  Logistics,  Inc., an Indiana  corporation  ("CNL"),  Carolina National
Transportation, Inc., an Indiana corporation ("CNT"), Gulf Line Brokerage, Inc.,
an Indiana  Corporation  ("GLB"),  Gulf Line  Transportation,  Inc.,  an Indiana
Corporation ("GLT"), Keystone Lines, a California corporation ("Keystone"),  and
TC Services,  Inc., a California  corporation ("TCS").  BGT, BGB, CNL, CNT, GLB,
GLT,  and  Keystone  operate  under  authority  granted  by  the  United  States
Department of Transportation (the "DOT"), and various state agencies.



Operations

     The Company  carries  virtually all forms of freight  transported by truck,
except  bulk  goods and  hazardous  materials,  including  specialized  trucking
services such as containerized, refrigerated, and flatbed transportation.

     The Company  contracts with independent  truckers and sales agents and pays
them a percentage  of the revenue  received  from  customers for the delivery of
goods.   The  expenses   related  to  the   operation  of  the  trucks  are  the
responsibility  of  the  independent   contractors.   Consequently,   short-term
fluctuations  in operating  activity have less of an impact on this component of
the   Company's   net  income  than  they  have  on  the  net  income  of  truck
transportation  companies that bear  substantially  all of the cost of employing
drivers and maintaining  equipment.  Like other truck transportation  companies,
however,  US 1's  revenues  are  affected  by  competition  and the state of the
economy.

     The Company's  principal  focus during 1998 was growing the Company through
expansion of Carolina National Transportation,  which began operating in January
of 1997.


Marketing and Customers

     The Company conducts its business  through  independent  sales agents.  The
sales agents have  facilities and personnel to monitor and coordinate  shipments
and to dispatch independent contractors who own and operate their own trucks for
freight   transportation.   The  Company  pays  sales  agents  and   contractors
commissions immediately upon delivery of shipments.

     Approximately  85% of the Company's  revenues from its trucking  operations
are allocated to the payment of independent contractors and sales agents.




                                       2
<PAGE>
     During 1998, the Company  utilized the services of  approximately  25 sales
agents. The largest agent accounted for 12% of the Company's total revenues.  No
other agent accounted for more than 10% of revenue.  The Company shipped freight
for  approximately  3,000  customers in 1998, no one of which accounted for more
than of 10% of the Company's total revenues.

     During 1997, the Company utilized the services of  approximately  100 sales
agents, one of which accounted for 14% of the Company's total revenue.  No other
agent accounted for more than 10% of revenue.

     The  independent  contractors  used by the Company must enter into standard
equipment  operating   agreements.   The  agreements  provide  that  independent
contractors  must  bear  many of the  costs of  operations,  including  drivers'
compensation,  maintenance costs, fuel costs, collision insurance, taxes related
to the  ownership  and  operation of the  vehicle,  licenses,  and permits.  The
Company  requires  independent   contractors  to  maintain  their  equipment  to
standards  established by the DOT, and the drivers are subject to  qualification
and training procedures  established by the DOT. The Company is also required to
have random drug  testing,  enforce hours of service  requirements,  and monitor
maintenance of vehicles.

Employees

     At December 31, 1998, the Company had approximately  thirty-five  full-time
employees.  The Company's  employees are not covered by a collective  bargaining
agreement.

Competition

     The  trucking  industry is highly  competitive.  The Company  competes  for
customers  primarily  with  other  nationwide  carriers,   some  of  which  have
company-owned  equipment  and company  drivers,  and many, if not most, of which
have greater  volume and  financial  resources.  The Company also  competes with
private carriage conducted by existing and potential customers. In addition, the
Company competes with other modes of transportation including rail.


     The Company also faces competition for the services of independent trucking
contractors and sales agents.  Sales agents  routinely do business with a number
of carriers on an ongoing  basis.  The Company has attempted to develop a strong
sales agent network by  maintaining a policy of prompt  payment upon delivery of
goods.


     Competition  is  based  on  several  factors;   principally   cost,  timely
availability of equipment and quality of service.



Insurance

     The Company insures the trucks with automobile liability insurance coverage
of up to $1 million per  occurrence  with a $5,000  deductible.  The Company has
cargo insurance coverage of $200,000 per occurrence  ($400,000 for catastrophes)
with a $10,000  deductible.  The Company  also  maintains a  commercial  general
liability policy with a limit of $1,000,000 per occurrence and no deductible.


                                       3
<PAGE>
Regulation

     The Company is a common and contract motor carrier regulated by the DOT and
various state  agencies.  Prior to 1980, the government  strictly  regulated the
trucking industry as to entry of new operators, rates charged, routes driven and
types of freight  hauled.  The Motor  Carrier Act of 1980  commenced a period of
deregulation that has continued to the present. The Act increased competition by
easing  barriers to entry into the  trucking  industry,  such as proof of public
convenience and necessity.  The Act also made rates more competitive and reduced
regulation of the industry.

     Like all interstate  motor  carriers,  the Company is subject to the safety
requirements prescribed by the DOT, including regulations effective in 1992 that
instituted  drug-testing procedures and a uniform commercial driver license. The
Company is in substantial compliance with these regulations.

     In 1990, the Company was granted  permission  from Canadian  authorities to
haul truckload freight between all points in the provinces of Ontario and Quebec
and the  United  States.  The  Company is  therefore  also  subject to  Canadian
regulation, which is not dissimilar to regulation in the United States.


Environmental Regulation


     The Company owns property in Phoenix,  Arizona that was formerly  leased to
Transcon  Lines  ("Lines")  as a terminal  facility,  where  soil  contamination
problems  existed  or  are  known  to  exist  currently.   State   environmental
authorities   notified  the  Company  of  potential  soil   contamination   from
underground  storage tanks,  and management has been working with the regulatory
authorities to implement  required  remediation.  The underground  storage tanks
were removed from the Phoenix  facility in February  1994.  Currently  the State
environmental  authorities  are not requiring any additional  remediation of the
property.  The Company  believes it is in substantial  compliance with state and
federal  environmental  regulations relative to the trucking business.  However,
the Company is working with  regulatory  officials  to eliminate  new sources of
contamination and determine extent of existing problems.  Estimates of the costs
to complete the future  remediation of approximately  $141,000 are considered in
the land valuation allowance at December 31, 1998 and 1997.


Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995

     The  statements  contained in Item 1  (Description  of Business) and Item 6
(Management  Discussion  and  Analysis  of  Financial  Condition  and Results of
Operation),   particularly  the  statements  under  "Future  Prospects"  contain
forward-looking   statements  that  are  subject  to  a  variety  of  risks  and
uncertainties.  The Company cautions readers that these risks and  uncertainties
could cause the Company's actual results in 1999 and beyond to differ materially
from  those  suggested  by  any  forward-looking  statements.  These  risks  and
uncertainties  include,  without limitation,  a lack of historic information for
new operations on which  expectations  regarding their future performance can be
based, general economic and business conditions affecting the trucking industry,
competition from, among others,  national and regional  trucking  companies that
have  greater   financial  and  marketing   resources  than  the  Company,   the
availability of sufficient  capital,  and the Company's  ability to successfully
attract and retain qualified owner operators and agents.



                                       4
<PAGE>
Item 2.  Properties

     The Company's administrative offices are at 1000 Colfax, Gary, Indiana. The
Company leases its  headquarters  on a month to month basis for $2,200 per month
from Mr. Michael E. Kibler, President, Chief Executive Officer and a director of
the Company, and Mr.
Harold Antonson, Chief Financial Officer of the Company.
     Carolina National leases 2400 sq. ft of office space in Mt. Pleasant, SC
for $2700 per month. The current lease is due to expire July, 1999.

Item 3.  Legal Proceedings

     The Company is involved in litigation in the normal course of its business.
Management  intends  to  vigorously  defend  these  cases.  In  the  opinion  of
management,  the litigation now pending will not have a material  adverse effect
on the financial position of the company.

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

     No matters were  submitted to a vote of the Company's  shareholders  during
the fourth quarter of 1998.

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

     Shares of Common Stock of the Company are listed and traded on the
"bulletin board market" under the symbol USOO.  During 1998
the Company was de-listed from the NYSE.

     The  following  table sets forth for the period  indicated the high and low
sales  prices per share of the Common  Stock as  reported  on the New York Stock
Exchange  Composite  Tape through  June 1998.  The prices since June 1998 are as
reported by Dreyfus Brokerage Services and reflect inter-dealer prices,  without
retail   mark-up,   mark-down  or  commission  and  may  not  represent   actual
transactions.

     Calendar Year                            High                        Low
-----------------------------------------------------------------------------
      1998
      ----
      First Quarter                           13/32                       7/32
      Second Quarter                           3/8                        1/4
      Third Quarter                            3/8                        3/32
      Fourth Quarter                           3/32                       1/16
      1997
      First Quarter                            9/16                       9/32
      Second Quarter                           3/8                        7/32
      Third Quarter                            1/2                        9/32
      Forth Quarter                           13/32                       3/16


     As of May 25, 1999, there were 3,293 holders of record of Common Stock.

     The Company has not paid any cash dividends on its Common Stock. Management
does not anticipate  paying any dividends on the Common Stock in the foreseeable
future,  and the Company's  current  credit  agreement  prohibits the payment of
dividends.


                                       5
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and Results
 of Operations.

Results of Operations

     The financial statements and related notes contained elsewhere in this Form
10-KSB are essential to an understanding of the comparisons and are incorporated
by reference into the discussion that follows.

1998 Compared to 1997

     The Company's  operating  revenues  increased from $25.4 million in 1997 to
$30.2  million  in  1998.  The  Company's   operating  revenues  were  generated
principally by independent sales agents who originate truckload shipments. These
shipments are then transported by independent  trucking  contractors using their
own equipment.  The increase in operating  revenues resulted  primarily from the
startup and growth of Carolina National Transportation,  offset by a decrease in
revenue of Keystone Lines caused by a loss of certain agent relationships.

     Total  operating  expenses  increased  from $25.8  million in 1997 to $30.0
million in 1998.  The largest  component  of  operating  expenses  is  purchased
transportation.  Purchased  transportation  generally  varies in  proportion  to
operating  revenues at approximately 77% of revenues.  Purchased  transportation
increased  from  $19.7  million in 1997 to $23.4  million  in 1998.  Commissions
increased  from $2.4 million in 1997 to $3.2 million in 1998, and similarly vary
in  proportion  to operating  revenues.  Insurance  and claims,  which were $0.9
million in 1997 remained  constant at $0.9 million in 1998.  The insurance  rate
was  reduced  during  1998  due to  favorable  loss  experience.  The  remaining
operating  expenses  decreased from $2.8 million in 1997 to $2.5 million in 1998
primarily as a result of better cost control.

     As a result of the factors  noted above,  the  company's  operating  income
improved from a loss of $0.4 million in 1997 to income of $0.2 million in 1998.

     Interest expense, the largest ongoing component of non operating income and
expense,  varies in  proportion to the  Company's  outstanding  interest-bearing
indebtedness.  Interest  expense  increased  from $0.4  million  in 1997 to $0.7
million in 1998,  primarily due to the increased debt used to finance additional
accounts receivable related to the company's expansion.

     During 1998,  the Company has written off $0.5  million in vendor  accounts
payable which are no longer  considered by  management  and the company's  legal
counsel to be valid obligations of the Company.  These payables relate to fiscal
years prior to 1994 and no claims have been made  against  these  amounts  since
September 1993.

     Other income  (expense),  net,  increased from $0.1 million to $0.2 million
due to a write off of net payables relating to revisions of estimates of amounts
due from or payable to drivers and agents.

     Overall,  the Company had net income of $0.2 million in 1998 as compared to
a net (loss) of ($0.2) million in 1997.

Future Prospects

     The Company has not yet been able to sustain  profitable  operations and is
in technical  noncompliance  with its revolving line of credit agreement.  These
factors raise  substantial doubt about the ability of the Company to continue as
a going  concern.  The  report of the  Company's  Independent  Certified  Public
Accountants  contains an  explanatory  paragraph  indicating  that these factors
express  substantial  doubt about the  Company's  ability to continue as a going
concern.


                                       6
<PAGE>
     The  Company's  ability  to  continue  as a  going  concern  is  ultimately
dependent  on its  ability  to  increase  sales to a level that will allow it to
operate profitably and sustain positive  operating cash flows. In addition,  the
Company  needs to reduce the level of  outstanding  indebtedness  which will, in
turn, reduce the amount of interest expense. Although the reduction of expenses,
including   interest,   can  contribute  to  future   profitability,   achieving
profitability  without an  increase in sales  would  require a greater  level of
expense  reductions and in all likelihood  could only be accomplished  through a
significant reduction and restructuring of the nature and scope of operations.

     Shareholders and potential  investors in the Company are cautioned that the
Company's  financial  condition  remains  precarious  and  that an  increase  in
operating performance is essential to its long term survival.

Liquidity and Capital Resources

     As of December 31, 1998, the Company's  financial  position  remained poor.
The  Company  had a net  deficiency  in  shareholders'  equity of $4.3  million.
Working  capital at  December  31, 1998 was ($0.8  million),  compared to ($1.4)
million at the end of 1997.

     Accounts receivable at the end of 1998 were $4 million,  down $1.1 million,
or 20%, from the previous year-end balance of $5.1 million. The decrease was due
primarily to increased collection efforts at Carolina National Transportation.

     Accounts  payable at the end of 1998 were $1.4  million,  compared  to $2.7
million  at the  end of  1997.  The  decrease  was due to the  write-off  of old
payables  from 1993 and prior and changes in estimates  associated  with amounts
due to drivers and agents for services provided.

     The bank overdraft and balance of the revolving line of credit has decrease
by $1.0  million from 1997 due to increased  cash flows from  operations  during
1998.

     The  Company's  principal  source of  liquidity is its $3.3 million line of
credit with FINOVA.  The  availability  of the line of credit is based on 80% of
Keystone's, Gulf Line's and Carolina National's eligible accounts receivable. At
December 31, 1998, the outstanding borrowings were $2.5 million.

     Related party loans from AIP and Messrs. Kibler and Antonson have increased
from $2,349,304 at December 31, 1997 to $2,701,042 at December 31, 1998.

     The Company is not a party to any Super-fund  litigation and otherwise does
not have any known  environmental  claims against it. However,  the Company does
have one  property  where soil  contamination  problems  existed or are known to
exist currently. The Company has preliminarily evaluated its potential liability
at this site and believes that it has reserved appropriately for its remediation
or that the fair market value of the  property  exceeds its net book value by an
amount in excess of any remediation  cost.  There can be no assurance,  however,
that the cost of remediation would not exceed the expected amounts.  The Company
has no current plans to remediate the property.

Inflation

     Changes  in freight  rates  charged by the  Company  to its  customers  are
generally reflected in the cost of purchased transportation and commissions paid
by the Company to independent contractors and agents,  respectively.  Therefore,
management  believes  that  future  operating  results  of the  Company  will be
affected primarily by changes in volume of business.  However, due to the highly
competitive nature of the truckload motor carrier industry,  it is possible that
future  freight  rates  and  cost of  purchased  transportation  may  fluctuate,
affecting the Company's profitability.

                                       7
<PAGE>
Year 2000 Issue

     Many existing computer systems and related software applications, and other
control devices, use only two digits to identify a year in a date field, without
considering  the impact of the  upcoming  change in the century.  Such  systems,
applications  and/or  devices  could  fail or create  erroneous  results  unless
corrected so that they can process  data  related to the Year 2000.  The company
relies on such  computer  systems,  applications  and devices in  operating  and
monitoring all major aspects of its business, including, but not limited to, its
financial  systems  (such as  general  ledger,  accounts  payable,  and  payroll
modules), customer services, internal networks and telecommunications equipment,
and end products.  The Company also relies,  directly,  and  indirectly,  on the
external  systems  of  various  independent  business  enterprises,  such as its
customers,  suppliers,  creditors, financial organizations,  and of governments,
both  domestically and  internationally,  for the accurate  exchange of data and
related information.

     The Company is currently in the process of evaluating the potential  impact
of the Year 2000  issue on its  business  and the  related  expenses  that would
foreseeably be incurred in attempting to remedy such impact  (including  testing
and  implementation of remedial action).  As of December 31 1998 the company has
spent  $10,000  re-writing  its  computer  programs to comply with the year 2000
needs  and  expects  to spend an  additional  $15,000  to  $30,000  during  1999
re-writing  and  purchasing  new  software  to  bring  itself  into  compliance.
Management's  current  estimate is that the costs  associated with the Year 2000
issue should not have a material  adverse affect on the results of operations or
financial  position  of the  Company in any given  year.  However,  despite  the
Company's  effort to address the Year 2000 impact on its internal  systems,  the
Company  is not sure that it has  fully  identified  such  impact or that it can
resolve it without disruption of its business and without incurring  significant
expenses.  In  addition,  even if the  internal  systems of the  Company are not
materially  affected by the Year 2000 issue,  the Company could be affected as a
result of any disruption in the operation of the various third-party enterprises
with  which the  Company  interacts.  The  Company  has not  developed  a formal
contingency  plan to handle any potential year 2000 failures.  The Company plans
to contact its significant vendors and customer to ascertain their level of year
2000 compliance.

Recently Issued Accounting Standards

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive  Income" (SFAS
No.  130)and No. 131,  "Disclosures  About Segments of an Enterprise and Related
Information"(SFAS  No. 131), and No. 132 "Employers'  Disclosures  About Pension
and Other Postretirement  Plans" (SFAS 132). SFAS 130 establishes  standards for
reporting and displaying  comprehensive  income,  its components and accumulated
balances.  SFAS 131  establishes  standards  for the way that  public  companies
report information about operating  segments in annual financial  statements and
requires  reporting of selected  information about operating segments in interim
financial  statements  issued to the public.  SFAS 132 enhances the  disclosures
related to pensions and other  postretirement  benefits.  SFAS 130, SFAS 131 and
SFAS 132 are  effective  for periods  beginning  after  December 15,  1997.  The
Company  adopted these new standards in 1998, and their adoption had no material
effect on the Company's financial statements and disclosures.

In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 133,  "Accounting for Derivative  Instruments and Hedging Activities," which
establishes  accounting and reporting  standards for derivative  instruments and
hedging  activities.  It requires that an entity  recognize all  derivatives  as
either assets or liabilities in the statement of financial  position and measure
those  instruments at fair value.  SFAS 133 effective for fiscal years beginning
after June 15, 1999.  The Company,  to date,  has not engaged in derivative  and
hedging activities.

                                       8
<PAGE>
Item 7.  Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors of
US1 Industries, Inc.
Gary, Indiana



We have audited the accompanying  consolidated balance sheet of US 1 Industries,
Inc.  and  Subsidiaries  as of December  31,  1998 and the related  consolidated
statements of operations,  shareholders' equity (deficiency), and cash flows for
the year then ended.  These financial  statements are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion of these
financial statements based on our audit.

We conducted our audit 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  estimated  made by
management,  as well as  evaluating  the overall  presentation  of the financial
statements.  We  believe  that our audit  provides  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 US 1 Industries,
Inc. and  Subsidiaries at December 31, 1998 and the results of their  operations
and their  cash  flows  for the year then  ended in  conformity  with  generally
accepted accounting principles.


The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has experienced operating losses and negative
cash flows in recent years and has a net capital  deficiency.  In addition,  the
Company is also in default under its revolving line of credit  agreement.  These
factors raise  substantial  doubt about the  Company's  ability to continue as a
going concern.  Management's plans in regard to these matters are also described
in Note 1. The  financial  statements do not include any  adjustment  that might
result from the outcome of this uncertainty.

BDO  Seidman, LLP

Chicago, Illinois
March 15, 1999




                                       9
<PAGE>
To the Shareholders and Board of Directors of US 1 Industries, Inc.

We have audited the accompanying  consolidated balance sheet of US 1 Industries,
Inc. and  subsidiaries  (the  "Company") as of December 31, 1997 and the related
consolidated  statements of operations,  shareholders' equity and cash flows for
the year then ended.  These financial  statements are the  responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audit.

We conducted our audit 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 the overall financial statement presentation.  We believe
our audit provides 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 US 1 Industries,
Inc. and  subsidiaries at December 31, 1997 and the results of their  operations
and their  cash  flows  for the year then  ended in  conformity  with  generally
accepted accounting principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in  Note 1 to the
financial statements,  the Company has experienced operating losses and negative
cash flows in recent years and has a net capital deficiency. These factors raise
substantial  doubt about the Company's  ability to continue as a going  concern.
Management's  plans in regard to these matters are also described in Note 1. The
financial  statements do not include any adjustments  that might result from the
outcome of this uncertainty.




PricewaterhouseCoopers LLP


March 27, 1998












                                       10
<PAGE>
                     US 1 INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997


ASSETS

                                                        1998           1997
                                                        ----           ----
CURRENT ASSETS:
   Cash                                           $              $   298,079
   Accounts receivable-trade, less allowance for
     doubtful accounts of $ 95,083 and $195,298     4,041,966      5,066,256
   Other receivables                                   59,654        336,919
   Deposits                                           132,429        154,068
   Prepaid expenses                                    27,798         83,731
                                                   ----------    -----------
      Total current assets                          4,261,847      5,939,053
                                                   ----------    -----------
FIXED ASSETS:
   Equipment                                          258,445         52,996
   Less accumulated depreciation and amortization     (75,316)       (12,682)
                                                   ----------    -----------
      Net fixed assets                                183,129         40,314
                                                  -----------    -----------
ASSETS HELD FOR SALE:
   Land                                               195,347        423,226
   Valuation allowance                               (141,347)      (141,347)
                                                  -----------    -----------
      Net assets held for sale                         54,000        281,879
                                                  -----------    -----------
TOTAL ASSETS                                      $ 4,498,976    $ 6,261,246
                                                  ===========    ===========




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





                                       11
<PAGE>

                     US 1 INDUSTRIES, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                           DECEMBER 31, 1998 AND 1997


LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)

                                                    1998              1997
                                                    ----              ----
CURRENT LIABILITIES:
   Accounts payable                            $ 1,445,889      $ 2,734,980
   Bank overdraft                                  260,404          530,133
   Accrued expenses                                183,400          137,454
   Short-term debt                               2,565,006        3,292,945
   Insurance and claims                            181,524          241,607
   Accrued compensation                             17,591           38,302
   Accrued interest                                392,883          140,824
   Fuel and other taxes payable                     75,695          273,901
                                                  ------------ ------------
      Total current liabilities                  5,122,392        7,390,146
                                                  ------------ ------------
LONG-TERM DEBT TO RELATED PARTIES                2,849,262        2,516,415

REDEEMABLE PREFERRED STOCK:
    authorized 5,000,000 shares; no par value,
    Series A shares outstanding:
    1998 - 1,094,224; 1997 - 1,094,224.
    Liquidation preference $0.3125 per share       825,254          753,254

SHAREHOLDERS' EQUITY (DEFICIENCY):
   Common stock, authorized 20,000,000 shares;
    no par value; shares outstanding:
    1998 and 1997 - 10,618,224                  40,844,296       40,844,296
   Accumulated deficit                         (45,142,228)     (45,242,865)
                                                -----------     ------------
   Total shareholders' equity (deficiency)      (4,297,932)      (4,398,569)
                                               -----------     ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
   (DEFICIENCY)                                $ 4,498,976      $ 6,261,246
                                              ============     ============



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



                                       12
<PAGE>

                     US 1 INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                     YEARS ENDED DECEMBER 31, 1998, AND 1997




                                                1998           1997
OPERATING REVENUES                         $ 30,176,818    $25,421,806

OPERATING EXPENSES:
   Purchased transportation                  23,416,624     19,676,213
   Insurance and claims                         938,044        941,700
   Salaries, wages, and other                 1,223,113      1,285,778
   Commissions                                3,177,908      2,360,989
   Other Operating expenses                   1,247,334      1,578,486
                                             ---------------------------
            Total operating expenses         30,003,023     25,843,166
OPERATING INCOME (LOSS)                         173,795       (421,360)
NON OPERATING INCOME (EXPENSE):
    Interest income                               7,702          2,430
    Interest expense                           (743,953)      (435,042)
    Write off of old payables                   530,674
    Other income (expense), net                 204,419         51,462
                                             -------------------------
      Total non operating income (expense)     (  1,158)      (381,150)
INCOME (LOSS)
     BEFORE EXTRAORDINARY GAIN                  172,637       (802,510)
EXTRAORDINARY GAIN:
     Forgiveness of debt                              0        610,318
                                             ---------------------------
NET INCOME (LOSS)                               172,637       (192,192)
DIVIDENDS ON PREFERRED SHARES                    72,000         61,712
                                             --------------------------
NET INCOME(LOSS)AVAILABLE TO COMMON SHARES     $100,637      ($253,904)
                                             --------------------------
INCOME (LOSS) PER COMMON SHARE:
    Income (Loss) from operations:
        Basic                                     $0.01         ($0.08)
        Diluted                                   $0.01         ($0.08)
    Extraordinary gain:
        Basic                                     $0.00          $0.06
        Diluted                                   $0.00          $0.06
    Net Income (Loss):
        Basic                                     $0.01         ($0.02)
        Diluted                                   $0.01         ($0.02)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
   BASIC AND DILUTED                          10,618,224    10,616,397

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












                                       13
<PAGE>

               US 1 INDUSTRIES, INC. AND SUBSIDIARIES
     CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
              YEARS ENDED DECEMBER 31, 1998, and 1997








                                     Common Stock     Accumulated
                          Shares         Amount       Deficit        Total
Balance at
  December 31, 1996       10,573,780   $40,824,296  ($44,988,961) ($4,164,665)
Issuance of Common Stock      44,444        20,000                     20,000
Dividends on Preferred Stock                             (61,712)     (61,712)
Net(loss)                                               (192,192)    (192,192)
Balance at                   ________________________________________________
  December 31, 1997       10,618,224   $40,844,296  ($45,242,865) ($4,398,569)
Dividends on Preferred Stock                             (72,000)     (72,000)
Net income                                               172,637      172,637
Balance at                __________   ___________   ___________   ___________
  December 31, 1998       10,618,224   $40,844,296  ($45,142,228) ($4,297,932)


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









                                       14
<PAGE>
                     US 1 INDUSTRIES, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                     YEARS ENDED DECEMBER 31, 1998, AND 1997

                                                        1998          1997
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                  $ 172,637     ($192,192)
  Adjustments to reconcile net income (loss) to net
  cash provided by (used in)operating activities:
    Depreciation and amortization                       74,963         9,533
    Provision on accounts receivable                         0       145,298
    Write off of old payables                         (530,674)            0
    Loss on disposal of equipment                       17,488         1,160
    Extraordinary gain - forgiveness of debt                        (610,318)
    Gain on Sale of Property                           (44,800)            0
    Changes in operating assets and liabilities:
      Accounts receivable-trade                      1,024,290    (3,709,607)
      Other receivables                                277,265      (200,271)
      Prepaid expenses                                  55,933        32,745
      Deposits                                          21,639          (176)
      Accounts payable                                (758,417)      720,143
      Accrued expenses                                 207,570       (14,644)
      Insurance and claims                             (60,083)      (10,546)
      Accrued interest                                 252,059       108,396
      Accrued compensation                             (20,711)       (8,578)
      Fuel and other taxes payable                    (198,206)       99,524
                                                      -----------------------
         Net cash provided by (used in) operating
          activities                                   490,953    (3,629,533)
                                                      -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
  Additions to property and equipment                   (2,566)      (41,496)
  Purchase of Land                                                  (227,879)
  Proceeds from sale of Land                            61,055             0
                                                      ------------------------
        Net cash provided by (used by) investing
         activities                                     58,489      (269,375)
                                                      -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Net borrowings (repayments) under line of credit    (741,720)    2,135,847
  Proceeds from issuance of common stock                              20,000
  Proceeds from short term loan on property                           50,000
  Repayment of long-term loans                        (123,308)      (10,000)
  Net proceeds from related party loans                287,236       926,608
  Increase (Decrease)in bank overdraft                (269,729)      348,991
  Proceeds from issuance of mortgages to
       related parties                                       0       500,000
Net cash provided by (used in)financing               ----------------------
         activities                                   (847,521)    3,971,446
                                                      ----------------------
NET INCREASE (DECREASE)IN CASH                        (298,079)       72,538

CASH, BEGINNING OF YEAR                                298,079       225,541
                                                      ----------------------
CASH, END OF YEAR                                     $      0      $298,079
                                                      ----------------------
-------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION--
  Cash paid during year for interest                  $491,894      $326,646

SUPPLIMENTAL SCHEDULE OF NONCASH INVESTING AND
  FINANCING ACTIVITIES
  Note payable incurred for purchase of equipment     $232,700

The  accompanying  notes  are an  integral  part of the  consolidated  financial
statements.
                                       15
<PAGE>
                     US 1 INDUSTRIES, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                     YEARS ENDED DECEMBER 31, 1998, AND 1997


1.       OPERATIONS

          The Company is primarily an  interstate  truckload  carrier of general
commodities,  which uses independent agents and contractor equipment to contract
for and haul  freight  for its  customers  in all 48 states  and  Canada  with a
concentration in the Southeastern  United States. One agent accounted for 12% of
the  Company's  revenue for the year ended  December  31,  1998.  The same agent
represented 14% of sales for the year ended December 31, 1997.

     Going Concern--The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As shown in
the accompanying  consolidated  financial  statements,  the Company  experienced
operating  losses and negative cash flows in recent  years.  The Company has not
yet been able to sustain profitable operations and is in technical noncompliance
with its revolving  line of credit  agreement.  These factors raise  substantial
doubt about the ability of the Company to continue as a going concern. Without a
resolution of the  technical  noncompliance  with its  revolving  line of credit
agreement,  the Company would not have sufficient  funds to pay its debts should
the lenders demand payment and would not be able to continue as a going concern.

The Company's ability to continue as a going concern is ultimately  dependent on
its  ability  to  increase  sales  to a level  that  will  allow  it to  operate
profitably and sustain positive  operating cash flows. In addition,  the Company
needs to reduce  the level of  outstanding  indebtedness  which  will,  in turn,
reduce the amount of interest  expense.  Although  the  reduction  of  expenses,
including   interest,   can  contribute  to  future   profitability,   achieving
profitability  without an  increase in sales  would  require a greater  level of
expense reductions which in all likelihood could only be accomplished  through a
significant  reduction and  restructuring of the nature and scope of operations.
The financial  statements do not include any adjustments  that might result from
the outcome of this uncertainty.


2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Principles of Consolidation--The  consolidated financial statements include
the accounts of US 1  Industries,  Inc. and its  subsidiaries.  All  significant
inter-company accounts and transactions have been eliminated.

     Revenue  Recognition--Revenue  for  freight in transit is  recognized  upon
delivery.   Amounts  payable  for  purchased  transportation,   commissions  and
insurance expense are accrued when the related revenue is recognized.

      Fixed  Assets--Fixed  assets are stated at cost and depreciated  using the
straight-line  method over the  estimated  useful  lives of the related  assets,
which range from three to eight years.

     Assets Held for Sale--Such  assets  comprise real estate,  not required for
the Company's  operations,  which is carried at the lower of historical  cost or
estimated net realizable value. See Note 12.

     Long-Lived Assets - The Company assesses the realizability of its lon-lived
assets in accordance  with statement of Financial  Accounting  Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be disposed of."












                                       16
<PAGE>
                     US 1 INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)


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

    Recently Issued Accounting Standards--In June 1997, the Financial Accounting
Standards  Board  issued  Statement of Financial  Accounting  Standards  No. 130
"Reporting  Comprehensive  income",  No. 131,  "Disclosures About Segments of an
Enterprise  and Related  Information"  (SFAS No. 131),  and No. 132  "Employers'
Disclosures About Pension and Other  Postretirement  Plans" (SFAS No. 132). SFAS
130 establishes standards for reporting and displaying comprehensive income, its
components and accumulated balances.  SFAS 131 establishes standards for the way
that public  companies  report  information  about operating  segments in annual
financial  statements  and  requires  reporting  of selected  information  about
operating  segments in interim financial  statements issued to the public.  SFAS
132  enhances  the  disclosures  related to  pensions  and other  postretirement
benefits.  SFAS 130, SFAS 131 and SFAS 132 are  effective for periods  beginning
after  December 15, 1997.  The Company  adopted these new standards in 1998, and
their adoption had no material effect on the Company's financial  statements and
disclosures.

In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 133,  "Accounting for Derivative  Instruments and Hedging Activities," which
establishes  accounting and reporting  standards for derivative  instruments and
hedging  activities.  It requires that an entity  recognize all  derivatives  as
either assets or liabilities in the statement of financial  position and measure
those  instruments  at fair  value.  SFAS  133 is  effective  for  fiscal  years
beginning  after  June 15,  1999.  The  Company,  to date,  has not  engaged  in
derivative and hedging activities.

     Income Taxes--Deferred income taxes are recognized for the tax consequences
of "temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. In addition, the amount of any
future tax  benefits  are  reduced by a valuation  allowance  to the extent such
benefits are not expected to be fully utilized.


     Earnings Per Common  Share--In  February  1997,  the  Financial  Accounting
Standards  Board issued  Statement  No. 128,  "Earnings per Share," which became
effective for both interim and annual financial  statement  periods ending after
December 15, 1997. As required by this  statement,  the Company  adopted the new
standards  for  computing  and  presenting  earnings per share ("EPS") for 1997.
Following are the  reconciliations  of the  numerators and  denominators  of the
basic and diluted EPS.


                                       17
<PAGE>
                     US 1 INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Numerator                                            1998             1997
      Income (Loss)Before Extraordinary Gain      $172,637        ($802,510)
      Extraordinary gain                                 0          610,318
                                                 ----------       ----------
               Net income (loss)                  $172,637        ($192,192)

      Dividends on preferred shares              ($ 72,000)       ($ 61,712)
                                                 ----------       ----------
      Net income (loss) available to common
         shareholders for basic and diluted EPS    100,637        ($253,904)

Denominator
      Weighted average common shares
         outstanding for basic and diluted EPS  10,618,224       10,616,397

Options  to  purchase  80,000  share  of  common  stock  at $25 per  share  were
outstanding  during 1998 and 1997 but were not  included in the  computation  of
diluted  EPS  because in 1997 the Company had a net loss and in 1998 the options
exercise price was greater than the average market price of the common shares.

Business Segments - Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" requires
public enterprises to report certain information about reporting segments in
financial statements.  The Company presents its operations in one busines
segment.

Reclassifications  - Certain items in the prior year financial  statements  have
been reclassified to conform with the current year presentation.

3.  EXTRAORDINARY GAIN

     During  the  fourth   quarter  of  1997,   the  bankruptcy  of  Trailblazer
Transportation  (a  subsidiary  of  Keystone  Lines,  Inc.) was  finalized  and,
accordingly,  the Company  recorded a gain of $610,318  ($0.06 per share - basic
and diluted) on the forgiveness of debt.

4.  REDEEMABLE PREFERRED STOCK

     The Series A preferred  shares are not convertible  into common stock,  are
non-voting,  and earn  dividends  at the rate of  $0.0375  per  share  per annum
(increasing by $0.0063 on each of January 1, 1995, 1996 and 1997, and by $0.0094
on January 1, 1998 and on each  January 1  thereafter  until  redeemed)  payable
quarterly on the first day of February,  May, August, and November. The Series A
preferred stock is redeemable at the option of the Company or the holders at any
time.

As of December 31, 1998,  series A cumulative  preferred  stock dividends are in
arrears by $278,141.  The Company's current line of credit prohibits the payment
of dividends.

5.  RELATED PARTY TRANSACTIONS

     One  of  the  Company's  subsidiaries  provides  safety,   management,  and
accounting services to companies controlled by the President and Chief Financial
Officer  of the  Company.  These  services  are  priced to cover the cost of the
employees  providing the services.  Revenues  related to those services  totaled
$70,607 and $149,422 in 1998 and 1997, respectively.

     One of the Company's insurance providers,  American Inter-Fidelity Exchange
(AIFE) is managed by a Director of the Company and the Company has an investment
in the Provider. In addition,  the Directors also manage an affiliated insurance
carrier , Indiana Truckers Exchange (ITE). For the years ended December 31, 1998
and  1997,  cash paid for  related  party  insurance  premiums  and  deductibles
amounted to $751,123 and $770,704,  respectively. The Company also has long term
notes payable to AIFE and ITE as described in Note 8.

                                       18
<PAGE>
   The Company has notes payable due to August Investment Partnership as
described in Note 8.  In addition, Enterprise Truck Line, Inc. (a company
controlled by Messrs. Kibler and Antonson) has advanced the Company
approximately $115,000 as of December 31, 1998.

6.  LEASES

     The  Company  leases  office  space  on  a  month-to-month  basis  for  its
headquarters in Gary, Indiana for $ 2,200 per month from the Company's President
and Chief Financial Officer.  No formal lease agreement with the Company existed
at December 31, 1998.  The Company  leases office space in Mt.  Pleasant,  South
Carolina for $ 2,700 per month. The lease agreement  expires in July, 1999. Rent
expense for the years ended December 31, 1998 and 1997 was approximately $59,000
and $80,000, respectively.

7. SHORT-TERM DEBT

     Short-term debt at December 31, 1998 and 1997 comprises:

                                             December 31,       December 31,
                                                 1998               1997
                                              ----------         ----------
Line of credit                                $2,446,861         $3,188,581
Current portion of long-term debt                118,145             54,364
Note on Kansas City Property                                         50,000
                                              ----------         ----------
         Total                                $2,565,006         $3,292,945
                                              ==========         ==========
     Under its revolving line of credit agreement the Company may borrow up to a
maximum  of  $3,300,000.  Borrowings  are  limited to 80% of  eligible  accounts
receivable  and bear interest at the prime rate (7.75% and 8.50% at December 31,
1998 and  1997,  respectively)  plus  2.75%.  Advances  under the line of credit
agreement are collateralized by the Company's accounts receivable,  property and
other  assets.  At December  31,  1998,  the  outstanding  borrowings  were $2.5
million. The line of credit expires in May 2002.

      The line of  credit is  subject  to  termination  upon  various  events of
default,  including  failure to remit  timely  payments  of  interest,  fees and
principal,  any adverse  change in the business of the Company or the insecurity
of the lender  concerning the ability of the Company to repay its obligations as
and when due or failure to meet certain financial covenants. Financial covenants
include:  minimum net worth  requirements,  total debt service  coverage  ratio,
capital  expenditure  limitations,  restrictions on  compensation  levels of key
officers,   and   prohibition   of   additional   indebtedness   without   prior
authorization.  As of December  31,  1998,  the Company was in  violation of the
covenants  relating to capital  expenditure  limitations  and total debt service
coverage  ratio.  On April 9, 1998,  the lender  issued a letter of default  for
these covenant violations.



                                       19
<PAGE>
                   US1 INDUSTRIES, INC. AND SUBSIDIARIES
                 NOTER TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

8. LONG-TERM DEBT

     Long-term debt at December 31, 1998 and 1997 comprises:

                                                     1998              1997
Note  payable  to  August  Investment
 Partnership  interest  at  prime + .75%,
 interest only payments required, principal
 balance due January  2000                         $  250,000     $  250,000

Mortgage note payable to  Antonson/Kibler
 collateralized  by land,  interest at prime
 + .75%, interest only payments required,
 principal balance due July  2003                     500,000        500,000

Mortgage note payable to ITE,  collateralized
 by land,  interest at 9%, monthly repayments
 of $5,000, including interest, remaining
 principal balance due March, 2002                     56,428        120,930

Note payable collateralized by equipment
 monthly payments of $ 5679 interest at 7.8%
 through February, 2001                               109,392

Mortgage note payable to ITE interest at 9%
 Monthly repayment of $2850 are to begin
 on August 15, 1999                                    57,289         57,289

Mortgage note payable to AIFE interest at 9%
 Monthly installments of $2150 are to begin
 on August 15, 1999                                    43,256         43,256

Mortgage  note  payable to August Investment
 Partnership,  interest at prime + .75%,
 interest only payments required, principal
 balance due January, 2001                            100,000        100,000

Note payable to Antonson/Kibler interest at
 prime + .75%, interest only payments required,
 principal balance due January, 2001                1,851,042      1,499,304
                                                   ----------       --------
     Total debt                                     2,967,407      2,570,779
Less current portion                                  118,145         54,364
                                                   ----------       --------
Total long-term debt                              $ 2,849,262     $2,516,415
                                                   ==========       ========

Interest expense on related party notes was approximately  $325,000 and $273,000
for the years ended December 31, 1998 and 1997, respectively.

Scheduled  maturities  of the  long-term  debt at  December  31, 1998 are due as
follows:
                  1999                     $  118,145
                  2000                         47,675
                  2001                      2,201,042
                  2002                        100,545
                  2003                        500,000
                  Beyond                            0
                                            ---------
                                           $2,967,407
                                           ==========
                                       20
<PAGE>
                  US 1 INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9.  STOCK OPTIONS

     The Company has a stock  option plan which allows the Board of Directors to
grant options to officers and certain key employees to purchase  common stock at
the fair market  value on the date of the grant.  At December 31, 1998 and 1997,
96,500  share were  available  for future  option  grants under the stock option
plan.  There  were no  options  outstanding  under the stock  option  plan as of
December 31, 1998 and 1997.

During 1997, the Board of Directors granted options to purchase 80,000 shares of
the Company's  common stock to an unaffiliated  investor at an exercise price of
$.25 per  share.  These  options  were  immediately  exercisable  and  expire on
December 31, 1999. As of December 31, 1998, no options under this grant had been
exercised.

10.  INCOME TAXES

     Deferred income taxes reflect the net tax effects of temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and income tax purposes. A valuation allowance for the net deferred tax
asset has been recognized due to the uncertainty of realizing the benefit of the
loss carry forwards and future deductible temporary differences.
The  components  of deferred  tax assets as of December 31, 1998 and 1997 are as
follows:
                                                1998            1997
                                        -------------   -------------
     Deferred tax assets:
       Accounts receivable and other     $     32,401    $     66,401
       Estimated fuel and other taxes          47,155          47,155
       Insurance and claims                    68,390          68,390
       Litigation reserves                     17,170          17,170
       Land valuation allowance                48,058          48,058
       Net operating loss carry forwards   19,937,987      19,962,684
                                         ------------   -------------
       Total deferred tax assets           20,151,161      20,209,858
       Less valuation allowance           (20,151,161)    (20,209,858)
                                         ------------   -------------
     Total net deferred tax asset       $      ---       $      ---
                                        =============   =============

     The Company has provided a valuation  allowance to write-down  deferred tax
assets due to  uncertainty  of its  ability to utilize  them in future  periods.
During 1998, the valuation  allowance was decreased by approximately  $59,000 to
reflect the utilization of net operating loss carryforwards.

     The Company had net  operating  loss carry  forwards of  approximately  $59
million at December 31, 1998 and 1997.  These  carry-forwards  are  available to
offset  taxable income in future years and will expire in the years 2003 through
2008.

11.  COMMITMENTS AND CONTINGENCIES

The Company is  involved in  litigation  in the normal  course of its  business.
Management  intends  to  vigorously  defend  these  cases.  In  the  opinion  of
management,  the litigation now pending will not have a material  adverse effect
on the financial position of the Company.

The Company  carries  insurance for public  liability and property  damage,  and
cargo  loss  and  damage  through  various  programs.  The  Company's  insurance
liabilities  are based upon the best  information  currently  available  and are
subject  to  revision  in  future  periods  as  additional  information  becomes
available. Management believes it has adequately provided for insurance claims.

                                       21
<PAGE>
                     US 1 INDUSTRIES, INC. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)



12.  ENVIRONMENTAL MATTERS

     The Company owns a property in Phoenix  where soil  contamination  problems
exist.  The Company has been working with regulatory  officials to eliminate new
contamination  sources and determine the extent of existing problems.  Estimates
of the cost to complete the future  remediation  of  approximately  $141,000 are
considered in the land valuation allowance at December 31, 1998 and 1997.


13.      OTHER MATTERS


a)    During  1998, the  Company  has  written  off  approximately  $531,000  in
vendor  accounts payable  which are no  longer considered  by management and the
Company's legal Counsel to be  valid obligations of the Company. These payables
relate to fiscal years prior to 1994 and no claims have been made against these
amounts since September 1993.

b)    Other income (expense), net, in  the  consolidated statement of operations
is comprised  primarily  of a write off net  payables from fiscal years 1996 and
1997  relating  to revisions  of  estimates of  amounts  due from  or payable to
drivers and agents.




Item 8. Changes in and Disagreements with Independent Auditors' on Accounting
        and Financial Disclosure.

     On August 31, 1998,  PricewaterhouseCoopers LLP (formerly Coopers & Lybrand
L.L.P, which became  PricewaterhouseCoopers LLP ("PwC") on July 1, 1998 resigned
as the independent accountants for US 1 Industries, Inc.

The reports of PwC on the financial  statements of the  Registrant  for the past
two fiscal years  contained no adverse opinion or disclaimer of opinion and were
not  qualified  or  modified  as  to  uncertainty,  audit  scope  or  accounting
principle,  except that the report of PwC on the  financial  statements  for the
past two fiscal years included an explanatory  paragraph expressing  substantial
doubt about the Registrant's ability to continue as a going concern.

In  connection  with its audits of the two most recent  fiscal years and through
August  31,  1998 there have been no  disagreements  with PwC on any  matters of
accounting principles or practices,  financial statement disclosure, or auditing
scope of procedure,  which  disagreements if not resolved to the satisfaction of
PwC would have  caused  them to make  reference  thereto in their  report on the
financial statements for such years.

     On October 29, 1998, the Company  appointed BDO Seidman,  LLP("BDO") as its
independent accountants.  Prior to appointment, the Company did not consult with
BDO on any matters.


                                       22
<PAGE>
                       PART III

Item 9.  Directors and Executive Officers of the Registrant.

DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The executive officers of the company as of May 25, 1999 were as follows

NAME                       AGE          POSITION
----                       ---          --------
Michael E. Kibler           58          President, Chief Executive
Officer,
                                        Director
Richard Courtney            57          Vice President, Treasure, and
                                        Assistant Secretary, and Director
Steven R. Green             40          Director
Lex Venditti                45          Director
Robert I. Scissors                      Director
Harold E. Antonson          59          Chief Financial Officer



Item 4A.  Executive Officers of the Registrant.

Name and Age                  Office and Experience
Michael E. Kibler, 57         Mr. Kibler is President and Chief Executive
                              Officer of the Company  and has  held these
                              positions since September 13, 1993.  He also has
                              been President of Enterprise Truck Lines, Inc.,
                              an interstate trucking company engaging in
                              operations similar to the Company's, since 1972.
                              Mr. Kibler is also a director of American
                              Inter-Fidelity Exchange, an insurance reciprocal
                              located in Indiana that is the subject of an
                              Order of Rehabilitation by the Indiana
                              department of Insurance.  Mr. Kibler has served
                              as a Director of the Company since 1993.


Harold E. Antonson, 59        Mr. Antonson is Chief Financial Officer of the
                              Company, a position he has held since March
                              1998. Mr. Antonson is a certified public
                              accountant.  Prior to joining the company,
                              he was Secretary Treasurer of American
                              Inter-fidelity Exchange.  Mr Antonson is also a
                              partner in August Investment Partnership.


Richard Courtney, 56          Mr. Courtney has served as Vice-President,
                              Secretary, and Controller of the Company since
                              September, 1993.  Since 1982, Mr. Courtney has
                              been the Controller of Eastern Refrigerated
                              Express, Inc.  Mr. Courtney has served as a
                              director of the Company since 1994.




                                       23
<PAGE>
Item 10.  Executive Compensation

The following  Summary  Compensation  Table sets forth  compensation paid by the
Company  during  the years  ended  December  31,1998,1997  and 1996 to its Chief
Executive Officer. No other officer earned in excess of $ 100,000.



                       Summary Compensation Table

                              Annual Compensation
Name and Position        Year          Salary       Bonus         Other
-----------------        ----          ------       -----         -----
Michael Kibler           1998          33,048          0             0
President                1997          33,048          0             0
                         1996          33,140          0             0



EMPLOYEE STOCK OPTIONS

The  company's  1987  Stock  Option  Plan  (Nonqualified)  (the  "Option  Plan")
authorizes  the Board of Directors or a committee  thereof to grant to officers,
including officers who are also directors,  and employees of the Company options
to purchase from the Company shares of Common Stock.  The Option Plan originally
covered an aggregate  of 570,000  shares of Common  Stock.  At December 31, 1998
there  were no options  outstanding  under the  Option  Plan and  96,500  shares
remained available for future grants of options thereunder.





                                       24
<PAGE>
Item 11.  Security Ownership of Certain Beneficial Owners and Management.

Security Ownership of Management

The  following  table sets forth the number and  percentage  of shares of Common
Stock  that as of May 12,  1999  are  deemed  to be  beneficially  owned by each
director of the company and director  nominee,  by each executive officer of the
Company and by all directors and executive officers of the company as a group


                              Number of Shares of
                              Common Stock
Name and position             Beneficially Owned        Percentage of Class
-----------------             ------------------        -------------------
Michael E Kibler                     3,489,507 (1,2,3)    33.0%
Director, President and
Chief Executive Officer

Richard Courtney                     3,434,507  (1)       32.5%
Director, Vice President,
Secretary, and Controller

Steven R. Green                              0               0
Director

Robert I. Scissors,                     36,770               0
Director

Lex L. Venditti                         20,000               0
Director

Harold E. Antonson                   3,489,507  (1,2,4)   33.0%
Chief Financial Officer


All Directors and Executive Officers 3,735,919            35.3%

(1)  As partners of AIP, Messrs. Kibler, Antonson, Courtney, and Lavery may be
     deemed to be beneficial owners of 3,067,840 shares of common stock owned
     by AIP

(2)  This figure includes 55,000 shares of Common Stock held by Enterprise Truck
     Lines Employment Plan of which Mr. Kibler is a trustee

(3)  As Director of Eastern Refrigerated Express Inc Messrs.  Kibler,  Antonson,
     and  Courtney  may be deemed to be  beneficial  owner of 366,667  Shares of
     Common Stock owned by Eastern.

(4)  Mr.  Antonson  disclaims  beneficial  ownership of 197,500 shares of Common
     Stock owned by American  Inter-Fidelity  Exchange,  of which Mr Antonson is
     Secretary, and Treasurer




                                       25
<PAGE>
Security Ownership of Certain Beneficial Owners

The  following  table sets forth the number and  percentage  of shares of Common
Stock  beneficially  owned as of May 12,  1999 by any person who is known to the
Company to be the beneficial  owner of more than five percent of the outstanding
shares of Common Stock:

                              Number of Shares of
Name and Address of           Common Stock                Percentage
Beneficial Owner              Beneficially Owned          of Class
----------------              ------------------          --------
Harold E. Antonson            3,489,507  (1,2,3,4)           33%
8400 Louisiana Street
Merrillville, IN 46410

August Investment Partnership 3,067,840                      29%
8400 Louisiana Street
Merrillville, IN 46410

Richard Courtney              3,434,507  (1,4)               32.5%
8400 Louisiana Street
Merrillville, IN 46410

Brad A. James                 3,067,840  (1)                 29.0%
8400 Louisiana Street
Merrillville, IN 46410

Michael Kibler                3,489,507  (1,3,4)             33.0%
8400 Louisiana Street
Merrillville, IN 46410

John K. Lavery                3,438,507  (1,4)               32.5%
8400 Louisiana Street
Merrillville, IN 46410

(1) As partners of AIP, Messrs.  Kibler,  Courtney,  Antonson, and Lavery may be
deemed to be beneficial owners of the shares of Common Stock owned by AIP.

(2) Mr.  Antonson  disclaims  beneficial  ownership of 197,500  shares of Common
Stock  owned by  American  Inter-Fidelity  Exchange,  of which Mr.  Antonson  is
Secretary and Treasurer.

(3) This figure includes 55,000 shares of Common Stock Held by Enterprise  Truck
Line Employment Plan of which Mr. Kibler and Mr. Antonson are trustees.

(4) As  directors  of  Eastern  Refrigerated  Express,  Inc.  Messrs.  Antonson,
Courtney,  Kibler and Lavery  may be deemed to be  beneficial  owners of 366,667
shares of Common Stock owned by Eastern.


                                       26
<PAGE>
Item 12.  Certain Relationships and Related Transactions.

The company  leases  office space for its  headquarters  in Gary,  Indiana,  for
$2,200 per month from  Michael E.  Kibler,  the  president  and Chief  Executive
Officer  and a  director  of the  Company,  and  Harold E.  Antonson,  the Chief
Financial  Officer of the company and beneficial owner of more than five percent
of the outstanding Common Stock. Messrs. Kibler and Antonson own the property as
joint tenants.

One of the Company's  subsidiaries provides safety,  management,  and accounting
services to companies controlled by the President and Chief Financial Officer of
the  Company.  These  services  are  priced to cover  the cost of the  employees
providing the services.  Revenues  related to those services totaled $70,607 and
$149,422 in 1998 and 1997, respectively.

     One of the Company's insurance providers,  American Inter-Fidelity Exchange
(AIFE) is managed by a Director of the Company and the Company has an investment
in the Provider. In addition,  the Directors also manage an affiliated insurance
carrier , Indiana Truckers Exchange (ITE). For the years ended December 31, 1998
and  1997,  cash paid for  related  party  insurance  premiums  and  deductibles
amounted to $751,123 and $770,704,  respectively. The Company also has long term
notes payable to AIFE and ITE as described in Note 8.

   The Company has notes payable due to August Investment Partnership as
described in Note 8.  In addition, Enterprise Truck Line, Inc. (a company
controlled by Messrs. Kibler and Antonson) has advanced the Company
approximately $115,000 as of December 31, 1998.



                                       27
<PAGE>
                          PART IV

Item 13.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a)(1)  List of Financial Statements

The following is a list of financial statements filed herewith:

                                                                   Page Number

Reports of Independent Certified Public Accountants                  11 and 12

Consolidated Balance Sheets as of December 31, 1998 and 1997         13

Consolidated Statements of Operations for the years ended            15
December 31, 1998 and 1997

Consolidated Statements of Shareholders' Equity (Deficiency)         16
for the years ended December 31, 1998  and 1997

Consolidated Statements of Cash Flows                                17
for the years ended December 31, 1998 and 1997

Notes to Consolidated Financial Statements                           18

(a)(2)     List of Financial Statement Schedules

     Schedules are not included  because of the absence of the conditions  under
which they are required or because the required  information  is included in the
consolidated financial statements or notes thereto.


                                       28
<PAGE>
(a)(3)   List of Exhibits

     The following exhibits,  numbered in accordance with Item 601 of Regulation
S-K, are filed as part of this report:


Exhibit 3.1       Articles of Incorporation of the Company.
            (incorporated herein by reference to the Company's Proxy Statement
             of November 9, 1993).

Exhibit 3.2       By-Laws of the Company.
            (incorporated  herein by reference to the Company's Annual Report on
             Form 10-K for the year ended December 31, 1994).

Exhibit 10.1  Loan and Security Agreement with FINOVA and Keystone Lines and
              L.R.S. Transportation, Inc.

Exhibit 10.2  Loan agreements with August Investment Partnership and US 1
              Industries.

Exhibit 10.3  Loan agreements with Michael Kibler/Harold Antonson and US 1
              Industries.

Exhibit 10.4 Loan agreements with AIFE/ITE and US 1 Industries.

Exhibit 10.5  First Amendment of Loan and Security Agreement with FINOVA and
              Keystone Lines and L.R.S. Transportation, Inc.

Exhibit 10.6  Second Amendment of Loan and Security Agreement with FINOVA and
              Keystone Lines and L.R.S. Transportation, Inc.

Exhibit       10.7  Mortgage  and Loan  agreements  with  Michael  Kibler/Harold
              Antonson and US 1 Industries, Inc.

Exhibit 21.1  Subsidiaries of Registrant

Exhibit 27.1  Financial Data Schedule


(b)      Reports on Form 8-K

NONE


                                    29
<PAGE>


                                                SIGNATURES

Pursuant to the requirements of Sections 13 and 15(d) of the Securities Exchange
Act of 1934,  the  registrant  has duly  caused  this report to be signed on its
behalf by the undersigned there unto duly authorized.
                                            US 1 INDUSTRIES, INC.

Date:_________________              By:  _________________________
                                         Michael E. Kibler
                                         President & Chief Executive Officer
                                        (Principal Executive Officer)


Date:_________________              By:  _________________________
                                         Richard Courtney
                                         Vice President & Secretary


Date:_________________              By:  _________________________
                                         Harold Antonson
                                         Chief Financial Officer

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


Date:_________________                   _________________________
                                         Richard Courtney, Director

Date:_________________                   _________________________
                                         Michael E. Kibler, Director

Date:_________________                   _________________________
                                         Robert I. Scissors, Director

Date:_________________                   _________________________
                                         Lex L. Vendetti, Director

Date:_________________                   _________________________
                                         Steve Green, Director



                                       30
<PAGE>