SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20540
                                    FORM 10-K

[X]  Annual report under Section 13 or 15(d) of the  Securities  Exchange Act of
     1934

                     For the fiscal year ended June 30, 1998

                           Commission File No. 0-23360

                      COUNTRY WIDE TRANSPORT SERVICES, INC.
                (Name of Registrant as specified in its charter)

Delaware                                                         95-4105996
(State or Other Jurisdiction                               (I.R.S. Employer
of Organization)                                           identification No.)

119 Despatch Drive, East Rochester, N.Y.                                  14445
(Address of Principal Executive Offices)                              (Zip Code)

Registrant's telephone number, including area code:               (716) 381-5470

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

     None

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

                                                           Name of Each Exchange
      Title of Each Class                                  on Which Registered
      -------------------                                  -------------------

      Common Stock, $.10                                   OTC Bulletin Board

     Indicate by check whether the registrant (1) filed all reports  required to
be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the preceding twelve (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 ninety (90) days. Yes X No __

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

     As of  September  23,  1998 there were  4,248,100  shares of the  Company's
Common Stock,  $.10 par value,  outstanding.  The aggregate  market value of the
voting stock held by  non-affiliates of the registrant on September 23, 1998 was
$1,170,225.

Documents incorporated by reference:
         
     None.

<PAGE>

                                     PART I

ITEM 1. BUSINESS

Introduction

     Country Wide Transport Services, Inc. (the "Company") is a non-asset based,
full  service  domestic  freight  forwarder.   Operating  entirely  through  its
wholly-owned  subsidiary,  Vertex Transportation,  Inc. ("Vertex"),  the Company
provides customers with a complete range of transportation  services,  including
truckload,  less-than-truckload (LTL), consolidation and distribution, logistics
management, intermodal, and international.

Forward Looking Information

     This Annual  Report on Form 10-K and the documents  incorporated  herein by
reference  contain certain  "forward-looking  statements"  within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act") and
within the meaning of Section 21E of the  Securities  Exchange  Act of 1934,  as
amended (the "Exchange  Act"),  which  represent the Company's  expectations  or
beliefs,   including,   but  not  limited  to,  statements  concerning  industry
performance, the Company's operations,  performance, financial condition, growth
and  acquisition  strategies,  margins  and  growth  in sales  of the  Company's
products.  For this purpose,  any statements  contained in this Annual Report on
Form  10-K  that are not  statements  of  historical  fact may be  deemed  to be
forward-looking  statements.  Without  limiting the generality of the foregoing,
words  such as  "may,"  "will,"  "expect,"  "believe,"  "anticipate,"  "intend,"
"could," "estimate" or "continue" or the negative or other variations thereof or
comparable  terminology  are  intended to identify  forward-looking  statements.
These statements by their nature involve  substantial  risks and  uncertainties,
certain of which are beyond the Company's control, and actual results may differ
materially  depending  on  a  variety  of  important  factors,  including  those
described under the "Risk Factors" section below in this Item 1 and elsewhere in
this  Annual  Report  on Form  10-K and the  documents  incorporated  herein  by
reference.

Business History, and Development

     In 1962, Country Wide Truck Service,  Inc. ("CW Truck") was incorporated in
the State of Delaware,  and  thereafter  it conducted a trucking  business  with
owned and leased trucks. The Company (Country Wide Transport Service,  Inc.) was
incorporated  in the State of Delaware in February 1987 and then  exchanged some
of its shares of common  stock for all the  outstanding  shares of CW Truck.  In
April 1987 the Company sold 150,000 shares of common stock in a public offering.
In 1992 the Company acquired all the outstanding stock of Nationwide Produce Co.
("Nationwide").  In July 1994 CW Truck  acquired  all the  outstanding  stock of
Vertex,  which had been  incorporated in New York in 1978,  operated as an agent
for CW Truck, and by 1994 was providing transportation brokerage and third party
transportation  services and logistics management to several large corporations.
Shortly  thereafter,  Vertex was merged  into CW Truck,  but was  operated  as a
separate division.

     The Nationwide  subsidiary  experienced ongoing losses. In September 1995 a
general  assignment  of its assets was made for the benefit of its creditors and
it was liquidated.  Similarly, CW Truck experienced  considerable losses, and in
June 1996 the  Vertex  business  operation  and  considerable  liabilities  were
separated 


                                       2
<PAGE>


from CW Truck and put into a separate corporation incorporated under the laws of
New York (this corporation now being the Vertex subsidiary). In December 1996 CW
Truck made a general  assignment  of its assets for the benefit of its creditors
and it was liquidated.  For further details see "Discontinued  Operations" below
and Notes 7 and 8 of the audited financial statements.

     As a  result  of the  foregoing,  Vertex  is the only  remaining  operating
subsidiary  of the  Company  and all  business  operations  of the  Company  are
conducted by that subsidiary.  During each of the years it has operated, whether
as a  separate  corporation  or as a  division  of CW  Truck,  Vertex  has  been
profitable.  The two founders and principal  officers of Vertex  (Timothy Lepper
and Wayne N. Parry) became two of the then eight members of the Company's  board
of directors in 1994 when Vertex was  acquired.  In 1995 Mr.  Lepper  became the
Company's Chief Executive  Officer and Mr. Parry became the President of Vertex.
During 1995 four of the eight directors  resigned,  leaving  Messrs.  Lepper and
Parry,  Mark T. Boyer,  and John  Russell as the four  remaining  members of the
Company's board of directors.  Mr. Russell subsequently  resigned in 1997. Prior
to Mr.  Lepper's  election as the Company's  CEO,  other persons  controlled the
Company. For information  concerning certain legal proceedings  involving former
officers and  directors of the Company,  see Item 3. Legal  Proceedings  in this
Annual Report on Form 10-K.

     In  1996,  the  Company's   principal   offices  were  moved  from  Corona,
California, to the Vertex offices in East Rochester, New York.

     For further details,  see  "Discontinued  Operations" below in this Item 1,
Item 3.  Legal  Proceedings,  and Notes 7, 8, and 9 to the  Company's  financial
statements for the fiscal year ended June 30, 1998, included pursuant to Item 14
of this Annual Report on Form 10-K.

Transportation Operations

     Vertex  was  founded  in 1978 by  Timothy  Lepper  (now  President  & Chief
Executive  Officer of the Company) and Wayne N. Parry (now President of Vertex).
It is a non-asset based full service  domestic freight  forwarder  providing its
customers  a complete  range of  transportation  services  including  truckload,
less-than-truckload (LTL), consolidation and distribution, logistics management,
intermodal,  and  international.  Vertex  maintains  a fully  staffed  sales and
operating terminal in East Rochester,  New York, with an additional sales office
in Buffalo, New York.

     From its primary location the Company conducts business nationwide, using a
computerized system for managing  operational  requirements of each shipment and
for completing all necessary  accounting,  administration,  and  information for
customer  use. That computer  system allows the Company's  customer  service and
logistics  personnel to conduct business  nationwide and provides customers with
updates  on the  location  and  status of each  shipment,  prompt  responses  to
inquiries,  and reliable  delivery  information  on  time-sensitive  loads.  The
Company is  constantly  seeking to improve its computer  system and to train its
personnel,  but it does not conduct or sponsor any other research or development
activities.  As part of providing responsive service, the Company rarely has any
significant backlog of customer orders.

     The Vertex computer maintains files on over 2,000 transportation providers.
The Company's customer service representatives maintain close communication with
those providers, first in order to seek among them the best price, delivery, and
other terms for each customer and then in order to keep track of the  customer's


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<PAGE>


shipment. The transportation  providers are critical to the success of any third
party logistics  operation.  Vertex provides  several benefits to these carriers
through  the  provision  of steady  freight,  which  reduces  the need for large
marketing  departments and can be particularly  beneficial for smaller carriers.
In addition,  Vertex  provides  access to  additional  customers  and  back-haul
opportunities, thereby improving the carrier's efficiency.

     During the fiscal year ended June 30, 1998, the Company  transported a wide
variety  of  commodities  including  retail  goods,  auto  parts,   photographic
material,  pharmaceuticals and printed material.  During that year the Company's
25, 10, and 5 largest customers accounted for approximately 73%, 67%, and 56% of
the Company's logistics operations revenue. The Company's two largest customers,
Eastman Kodak and Echlin  Corporation  accounted for 31% and 11% respectively of
the Company's total revenue.  The loss of either of these customers could have a
material  adverse effect on the Company.  No other  customer  accounted for more
than five percent (5%) of Company revenues during the fiscal year ended June 30,
1998.

     In the  transportation  industry,  generally shipping activity increases in
the late summer and fall  seasons  preceding  the holiday  period and  decreases
during the winter  season.  The Company  historically  has lower  margins in the
fall, as competition for the transportation providers' equipment increases.

     At September 25, 1998, the Company employed 47 persons.  Additionally,  the
Company  currently has two agreements with  independent  sales  representatives.
Employees  are not  represented  by any union and the Company  believes that its
employee relations are very good.

     The  Company  generally  does  not  encounter  costs  for  compliance  with
environmental  protection requirements and does not expect to incur any material
capital costs for such compliance.

Competition

     As a third  party  logistics  provider,  the  Company  competes  with other
similar providers, intermodal marketing companies, freight brokers, and trucking
companies (some of which are much larger and have substantial  capital, but none
of which,  and no small  group of which,  is  dominant  in the  industry).  This
extensive  competition  maintains  constant  pressure  on  freight  rates,  thus
resulting in thin margins. Thus, the transportation  services business is highly
competitive, with a great many alternatives available to the shipping public.

     The   majority  of  the  shippers   are   business   organizations.   Those
organizations have three alternatives for transportation services. They can have
their own vehicles or other shipping  equipment and handle their needs in-house.
Alternatively, companies choosing to outsource their shipping functions have two
basic  alternatives:  use a carrier  (which  is  asset-based,  namely  owning or
leasing the  necessary  vehicles or other  equipment)  or use a non-asset  based
freight  forwarder  or broker  (which will find and  negotiate  with one or more
carriers in order to procure  the needed  transportation).  A freight  forwarder
procures shipments from customers,  makes arrangements for transportation of the
cargo with a third-party carrier, and arranges both for pick-up from the shipper
to the  carrier  and for  delivery  of the  shipment  from  the  carrier  to the
recipient.

     The Company believes that the proportion of business organizations handling
their transportation needs in-house is decreasing, as part of the trend to focus
on their  core  businesses,  and  therefore  that the amount of  outsourcing  of
transportation services is increasing.

                                       4
<PAGE>


     Carriers have the strengths and  weaknesses of owning and/or  leasing their
own vehicles or other equipment.  They need to cover their high fixed costs, and
often do that by having regular delivery schedules and defined shipment weights,
sizes,  and types.  Customers that can work with such  limitations  often can do
well by working  directly  with a carrier,  especially if the carrier can itself
provide a total  transportation  solution,  including by  providing  pick-up and
delivery service, such as with the carrier's own trucks.

     Freight forwarders are non-asset based and generally provide a service when
there is no obvious carrier that can take care of the customer's needs.  Freight
forwarders  generally compete against carriers by offering greater  flexibility,
and  sometimes  at a lower cost than would be available  from a single  carrier.
They  generally  make  arrangements  for  shipments  of any size  and can  offer
customized shipping options. Freight forwarders often tailor the routing of each
shipment to meet the price and service requirements of the customer by selecting
from  various  transportation  options  and from  different  carriers in routing
customer shipment needs. When serving a customer, of course, a freight forwarder
is  negotiating  shipping  arrangements  with the  very  carriers  that  compete
generally  for the shipping  business  that the  forwarder is handling,  but the
forwarder provides benefits to the carriers, as noted above.

     The Company  believes it attracts and maintains  customers  through service
and the experience gained from twenty years in the business,  as well as through
superior information  technology provided by its computer system.  Additionally,
the wide range of services offered by the Company attracts and retains customers
that have diverse and specialized  needs.  In marketing the Company's  services,
the sales force emphasizes the Company's  commitment to customer service and its
expertise in service oriented shipments,  particularly time-sensitive deliveries
as well as solutions to complicated requirements.

Regulation and Intangible Property Rights

     The  Company   maintains   authority   with  the  Federal   Department   of
Transportation  as a  freight  forwarder  and as a broker  of  property.  Recent
deregulatory  actions by Congress and the elimination of the Interstate Commerce
Commission have resulted in a less regulated environment in transportation, with
the primary  concern of the Department of  Transportation  being safety related.
Routing and rating restrictions have largely been eliminated.

     Except  for the two  types of  authority  secured  from the  Department  of
Transportation,  there are no  patents,  trademarks,  licenses,  franchises,  or
concessions held by the Company.

Insurance

     The Company has the following types of insurance  coverage limits:  General
Liability  ($2,000,000),  Personal Injury ($1,000,000),  General Umbrella Policy
($2,000,000),  and Cargo Policy ($500,000).  The Company's  management  believes
that the  current  insurance  coverages  are  adequate in light of the scope and
nature of the Company's operations.

Discontinued Operations

     Through its former  subsidiary,  Nationwide Produce Co.  (Nationwide),  the
Company  operated a  full-service  marketing  firm in Los  Angeles,  California,
importing,   exporting,  and  distributing   conventional  and 

                                       5
<PAGE>

organic produce nationwide and overseas.  Having experienced  significant losses
in  certain  Nationwide  divisions,  and  after a  review,  two of  Nationwide's
divisions  (Salinas lettuce packing and the tomato  repackaging  divisions) were
closed in May 1995.  After continued  losses in the remaining  Nationwide  sales
groups  through June 30, 1995,  and with no prospects  for  improvement,  it was
determined  to  discontinue  Nationwide's  entire  business,  through an orderly
liquidation  process.  On September 18, 1995, a general assignment of all assets
of  Nationwide  was made  for the pro  rata  benefit  of all  creditors  of that
subsidiary. A general assignment under California state law is an alternative to
Chapter 7 bankruptcy liquidation.

     Following that general  assignment,  the Company was left with the CW Truck
and Vertex  divisions.  The damage to the Company's  balance sheet caused by the
significant  losses  incurred  by  Nationwide,  as well as the  loss of  produce
customers  who had  tendered a large  amount of  transportation  business  to CW
Truck, sent the Company into a downward business cycle which the Company was not
able  to  counteract.  A  program  of  further  downsizing  and  elimination  of
unprofitable  divisions  was begun in the early months of 1996. In June 1996 the
Vertex division business and substantial  Company debt were transferred to a new
subsidiary  corporation  formed  under  New York law  (which  now is the  Vertex
subsidiary).  Subsequent efforts to sell CW Truck were unsuccessful.  Faced with
significant  equipment  licensing  costs at CW Truck in  December of 1996 and in
light of continued significant losses, on December 31, 1996 a general assignment
was made for the benefit of creditors of CW Truck under California law.

     The  assignees  for the benefit of the  creditors of  Nationwide  and of CW
Truck started two legal proceedings against a former officer and director of the
Company  arising out of certain  transactions  he  conducted  in the name of the
Company. See Item 3. Legal Proceedings below in this Annual Report on Form 10-K.
No such legal proceedings have been brought against any of the Company's current
directors and officers or against the Company or its subsidiary, Vertex.

     Simultaneously  with the assignment of CW Truck's assets for the benefit of
creditors,  an asset sale of the  rolling  stock of CW Truck was made to Mid-Cal
Express Inc., a California  corporation  and a wholly owned  subsidiary of Prime
Companies, Inc. Mid-Cal Express, Inc. assumed certain equipment leases and notes
payable  related  to the  rolling  stock,  but as part of that  transaction  the
creditors  required  that the  Company's  guarantee of those leases and debts be
continued.  At June 30, 1998,  the remaining  balance on those  obligations  was
about $4,398,000.  Prime Companies, Inc. has had losses of $695,000 for the year
ended  December  31, 1997 and  $843,000  for the six months ended June 30, 1998.
While the Company's  management  believes  that Mid-Cal  Express will be able to
meet its  obligations on those notes and leases,  there can be no assurance that
it will be able to do so, nor can there be any  assurance  that the Company will
not  have  to pay  upon  its  guarantee.  See  Note 7 to the  Company's  audited
financial statements.

     For further details,  see  "Discontinued  Operations" above in this Item 1,
Item 3.  Legal  Proceedings,  and Notes 7, 8, and 9 to the  Company's  financial
statements for the fiscal year ended June 30, 1998, included pursuant to Item 14
of this Annual Report on Form 10-K.

Risk Factors

     Outstanding Company Guarantee. In connection with the general assignment of
the assets of CW Truck in  December  1996,  CW Truck sold its  rolling  stock to
Mid-Cal Express, Inc., a wholly owned subsidiary of Prime Companies, Inc., which
assumed certain  equipment leases and notes payable related to the rolling stock
assigned to it, but as part of that transaction the creditors  required that the
Company's  guarantee of those leases and debts be  continued.  At June 30, 1998,
the

                                       6
<PAGE>


remaining balance on these  obligations was about  $4,398,000.  Prime Companies,
Inc.  has had  losses of  $695,000  for the year  ended  December  31,  1997 and
$843,000 for the six months ended June 30, 1998. While the Company's  management
believes  that  Mid-Cal  Express will be able to meet its  obligations  on those
notes and leases,  there can be no assurance  that it will be able to do so, nor
can  there  be any  assurance  that  the  Company  will not have to pay upon its
guarantee. See Note 7 of the Company's audited financial statements.

     Substantial  Losses.  During the fiscal years ended June 30, 1995, 1996 and
1997, the Company  sustained  losses of $5,411,000,  $1,470,000 and  $3,698,000,
respectively,  and during the fiscal year ended June 30,  1998,  the Company had
net  income  of  $940,000.  While  management  believes  the  Company  has  made
sufficient changes to allow it to continue its recent  profitability,  there can
be no assurance that the Company will not incur losses in the future.

     Material  Dispositions of Assets.  From September 1995 through January 1997
all but one of the  Company's  subsidiaries  made  substantial  dispositions  of
assets, and those subsidiaries were liquidated.  While the remaining subsidiary,
Vertex  Transportation,  Inc., has been profitable during the fiscal years ended
1995, 1996, 1997 and 1998, there can be no assurance that the remaining business
of that  subsidiary  will  continue  to be  profitable  or that some  unforeseen
liability of the liquidated subsidiaries will not affect the Company's business,
assets, or liabilities in the future.

     Motor Carrier Industry. The business of the Company's remaining subsidiary,
Vertex   Transportation,   Inc.,   includes   negotiation   of   motor   carrier
transportation services on a short-term basis and thus is substantially affected
by the availability of such transportation  services,  as well as by the overall
pricing and other  competitive  considerations  of that  industry as compared to
those of alternative transportation industries.

     Government Regulation.  Motor Carriers are subject to regulation by various
federal and state governmental agencies,  including the United States Department
of  Transportation.  These regulatory  agencies have broad powers, and the motor
carrier  industry is subject to  regulatory  and  legislative  changes  that can
affect the  economics  of the  industry by  requiring  changes in the  operating
practices or influencing the demand for, and the costs of providing, services to
shippers.

     Effects of Fuel,  Insurance and Interest  Rates.  Fuel prices and insurance
premiums are expenses over which the Company has little or no control.  If these
costs are increased to the  Company's  transportation  providers,  the increases
will be passed on to the Company by increased  rates.  These increased rates, if
not offset, will reduce the Company's profitability.

     Absence of Dividends.  The Company  anticipates that all of its earnings in
the  foreseeable  future,  if any,  will be  retained  for the  development  and
expansion  of its  business,  and  accordingly,  has  no  current  plans  to pay
dividends.  Payment of dividends is within the discretion of the Company's Board
of Directors and will depend, among other factors,  upon the Company's earnings,
financial condition, and capital requirements.  The Company's subsidiary,  which
now conducts  substantially  all the  business  operations  of the Company,  has
line-of-credit  agreements which contain provisions  limiting the ability of the
subsidiary to pay dividends.

     Liquidity and Market Price.  The Company was de-listed  from trading on The
Nasdaq  SmallCap  Market on August 13, 1996 due to its  failure to maintain  the
necessary equity and other criteria of The Nasdaq Stock Market. The OTC Bulletin
Board on which the Company's shares are now quoted must be viewed as 

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<PAGE>


having very little liquidity, and any amount of purchasing or selling of Company
shares on that market could cause  significant  and abrupt price  changes in the
reported market prices for the shares.

     Competitive Industry.  The Company is participating in a highly competitive
industry and rates demanded by competitors  directly control the rates for which
the Company can render its services. In the event competitors rates are reduced,
any such  reduction  will have the effect of reducing  the rates the Company can
charge and thereby reducing the Company's opportunities to earn profits.

     Maintenance  of Capital.  In order for the Company to attract the necessary
transportation providers, it is necessary for the Company to maintain sufficient
capital to ensure  timely and current  payment of  transportation  fees to these
providers.  Any  reduction of capital  below that which is necessary to properly
attract these transportation providers will have a substantial adverse effect on
the profitability of the Company.

     General Economic Risk. The major risk  encountered by a logistics  services
company is that it will not  generate  sufficient  income to meet its  operating
expenses  and debt  service.  Its net  income  is  entirely  dependent  upon the
continuation  of the  service  to its  customers  as  well as the  existence  of
available  transportation  providers.  The  net  income  of the  Company  may be
affected by many factors including:  (a) bad debts, insolvency and bankruptcy of
customers;  (b)  adverse  changes in general  economic  conditions;  (c) adverse
changes in transportation laws; (d) unanticipated  increases in operating costs;
(e) increases in  transportation  and other taxes; and (f) increases in interest
rates on funds borrowed by the Company not offset by increased revenues.

     Dependence on  Significant  Customers.  The success of the Company  depends
heavily  on the  business  it  conducts  with a limited  number  of  significant
customers.  For the  Company's  fiscal year ending June 30, 1998,  approximately
31%,  and 11% of its net  sales  were  derived  from  sales  to its two  largest
customers.  The Company  has had  long-standing  relationships  with most of its
significant  customers;  however, it generally does not have long-term contracts
with them and they may  unilaterally  reduce or discontinue  the purchase of the
Company's  services  without  penalty.  The Company's loss of (or the failure to
retain a significant  amount of business with) any of its significant  customers
could have a material adverse effect on the Company.


                                       8
<PAGE>


ITEM 2. PROPERTIES

     At June  30,1998,  the Company  owned no rolling  stock,  but owned office,
computer and other equipment having a book value at approximately  $263,000. The
Company   leases  the   following   facilities   for  the  operation  of  Vertex
Transportation, Inc.

<TABLE>
<CAPTION>
Locations                           Type                          Size                     Annual Rental
---------                           ----                          ----                     -------------
<S>                                 <C>                          <C>                       <C>    
Victor, New York                    Warehouse                    13,000 Sq. Ft             $52,000

East Rochester                      Warehouse, Office            10,000 Sq. Ft             $90,000
New York
*(See item 13. Certain Relationships and Related Transactions)

Buffalo, New York                   Office                          400 Sq. Ft             $ 2,400
</TABLE>


ITEM 3. LEGAL PROCEEDINGS

     With the closing of the trucking and  transportation  operations the amount
of  litigation  in which the Company has been  involved  has been  substantially
reduced. The nature of the Company's business, however, results in litigation of
a derivative  nature due to property  damage or loss. The Company  believes that
all  pending  litigation  is  adequately  covered by  insurance  and any adverse
results in one or more of these matters will not have a material  adverse effect
on its financial position or operations.

     Effective September 18, 1995, the Company's subsidiary,  Nationwide Produce
Co.,  which  comprised the entire  product sales segment of the Company,  made a
general  assignment  of  all  its  assets  to  Credit  Managers  Association  of
California for the pro rata benefit of all its creditors.  On December 13, 1995,
in Los Angeles  Superior Court,  Credit Managers  Association of California,  on
behalf of all  creditors of  Nationwide  Produce Co. filed suit against a former
director  and officer of the Company to recover  $497,000 of funds which  Credit
Managers  Association of California  believes was  misappropriated by the former
officer. During the year end June 30, 1997 Credit Managers Association secured a
judgment in these  proceedings  against the former  director and officer for the
amount sought. The Company believes that any amount collected from that judgment
will be used for the benefit of Nationwide's creditors and that the Company will
not receive any amount as a result of the judgment.

     On February 27, 1996, Credit Managers Association of California,  on behalf
of all  creditors of  Nationwide  Produce  Co.,  filed suit to collect more than
$600,000 arising from the sale of a business division of Nationwide in 1994. The
debtor,  Oertley/Oasis Mountain,  cross complained against the Company,  Vertex,
and all of the officers and directors of the Company claiming that the directors
and the Company  were  negligent  in  allowing  the former CEO of the Company to
enter into fraudulent and misleading arrangements with the customer. The Company
has  directors  and  officers  insurance,  insuring  the officers of the Company
against  this claim for any sum in excess of $100,000  (which is the  deductible
under the policy and was paid by the  Company  during the fiscal year ended June
30, 1998).  The obligation of the Company is likewise  insured  pursuant to that
policy by virtue of the fact that it has agreed to  indemnify  the  officers and
directors of the Company. The total claim alleged by the customer is $2,400,000;
but management  believes that the Company's 

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<PAGE>


liability  with  respect  to this  claim is the  $100,000  already  paid for the
deductible  and the  remainder,  if any, will be paid by the  insurance  carrier
pursuant to the insurance coverage.  In addition,  the Company believes that the
claim  against the Company,  Vertex,  and the officers and  directors is without
merit and will be unsuccessful.

     During  the  month  of  September,   1995,  the  Company's   transportation
subsidiary,  CW Truck had a cargo loss that approximated  $650,000 filed against
it by one of its  customers,  Eastman  Kodak  Company.  The  insurance  carrier,
National Union Fire  Insurance,  citing certain  exceptions in the cargo policy,
declined to pay the claim and  referred the issue of coverage to  litigation  on
February 27, 1996, in New York State Supreme Court. The Company  initiated legal
action against the insurance  carrier and its agent.  The customer  additionally
filed a cross claim against the Company.  Management believes that the Company's
suit will be successful.  To preserve the  relationship  between the Company and
the customer,  the Company has paid to the customer a sum of $509,000 as of June
30, 1997, and an additional $150,000 during the fiscal year ended June 30, 1998,
thereby having paid the customer in full for its loss.  Those payments were made
out of the operating revenues of the Company. It is management's belief that the
suit against the  insurance  carrier will be successful  and will  reimburse the
Company for substantially all funds paid to the customer.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     On May 11, 1998 the  Company's  annual  meeting was held.  At the  meeting,
Wayne N. Parry was  elected to serve as a  director  for a three year term.  The
term of office as a director of Timothy Lepper  continues  until the 1999 annual
meeting,  and the term of Mark T. Boyer continues until the annual meeting to be
held in 2000.

     Also at the May 11, 1998 annual  meeting,  the  shareholders  ratified  the
selection  of  Hein  +  Associates  LLP as the  independent  accountants  of the
Company.

     A total of 3,556,375  shares of the Company's total  4,248,000  outstanding
shares of Common Stock were present in person or by proxy at the annual  meeting
held on May 11,  1998.  All of the shares  present at the meeting  were voted in
favor of the nominee for  director  (Wayne N.  Parry),  except  6,408 which were
withheld, and in favor of the ratification of the selection of Hein + Associates
LLP, except 10 shares voted against.


                                       10
<PAGE>


                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

                                     MARKET

     The Company's  common stock was traded on the NASDAQ Small Cap Market under
the  symbol  CWTS  until  August  1996.   Having  failed  to  meet  the  listing
requirements  of the NASDAQ Small Cap, the Company's  shares have been traded on
the OTC Bulletin Board since August 1996. The following  table presents high and
low prices for the Company's  common stock  published by the National  Quotation
Service,  Inc.,  as well as the range of  closing  high and low bid prices as so
reported. The quotations represent prices in the over-the-counter-market between
dealers in securities and do not include retail markup,  markdown or commissions
and do  not  necessarily  represent  actual  transactions.  As a  result  of the
Company's one for five reverse split, the Company's stock symbol under which the
Company's  shares are traded is CWTV.  This change was  effective  May 19, 1997.
Quarterly  market price  information for the Company's shares of common stock is
as follows:

Quarter Ending                 Bid Prices            Ask Prices
                                                
                                 High            Last Trade** Low
                                 ----            ----------------
                                                
September 30, 1996               .62                      .15
                                                
December 31, 1996                .50                      .15
                                                
March 31, 1997                   .28                      .12
                                                
June 30, 1997*                  1.47                      .12
                                            
                                 High        Low          High            Low
                                 ----        ---          ----            ---

September 30, 1997              1.125        .75          1.50           1.00

December 31, 1997               1.06         .53          1.375           .50

March 31 1998                   1.43         .90          1.56           1.125

June 30, 1998                   2.25        1.125         2.438          1.156



     *    Reverse split of stock one for five effective May 15 1997.

     **   With the  Company's  stock being traded on OTC  Bulletin  Board during
          quarter ended  September 30, 1996, the information  available  through
          National Quotation, Inc. consisted of last trade information.

                                       11
<PAGE>

                                  Shareholders

     As of June 30, 1998, the number of  shareholders of record of common stock,
excluding the number of beneficial  owners whose  securities  are held in street
name was approximately 186.

                                 Dividend Policy

     The  Company  plans  to  retain  future  earnings,  if any,  for use in its
business and,  accordingly,  the Company does not anticipate paying dividends in
the foreseeable  future.  Any earnings are expected to be used for the operation
and  expansion  of the  Company's  business.  Payment of dividends is within the
discretion  of the  Company's  Board of Directors  and will depend,  among other
factors  upon  the   Company's   earnings,   financial   condition  and  capital
requirements.  In addition,  as a holding company,  the Company's ability to pay
dividends  may be  dependent  upon  distributions  received  from its  operating
subsidiaries.  The Company's  subsidiary  has a line of credit  agreement  which
limits the ability of the subsidiaries to pay dividends.


                                       12

<PAGE>


ITEM 6. SELECTED FINANCIAL DATA

     Set forth below is selected  historical  financial  data of the Company and
should  be  read in  conjunction  with  the  respective  consolidated  financial
statements  and notes  thereto  and  "Management's  Discussion  and  Analysis of
Financial Condition and Results of Operations" included elsewhere herein.

<TABLE>
<CAPTION> 
                                                     Statement of Operations Data
                                                     ----------------------------
                                                (in thousands, except per share amount)
                                                           Year Ended June 30

                                          1998          1997         1996          1995          1994
                                          ----          ----         ----          ----          ----
<S>                                      <C>          <C>           <C>           <C>           <C>   
Operating revenue:

Transportation revenue                   $34,283      $34,035       $47,356       $54,744       $34,210

Operating expenses                        33,277       38,134        48,940        54,421        32,499
                                          ------       ------        ------        ------        ------

Operating income (loss)                    1,006       (4,099)       (1,584)          323         1,711
                                          ------       ------        ------        ------        ------
Net income (loss) from
 continuing operations before
 discontinued operations and
 extraordinary item                          940       (4,581)       (2,552)         (169)          677
                                          ------       ------        ------        ------        ------
Basic net income (loss) per
 common share from
 continuing operations before
 discontinued operations and
 extraordinary item                         0.22        (2.94)        (2.66)        (0.18)         0.88
                                          ------       ------        ------        ------        ------

Diluted net income (loss) per
 common share from
 continuing operations before
 discontinued operations and
 extraordinary item                         0.19        (2.94)        (2.66)        (0.18)         0.88
                                          ------       ------        ------        ------        ------


Weighted average shares outstanding        4,248        1,556           960           955           766
                                          ------       ------        ------        ------        ------
</TABLE>


                                       13
<PAGE>


<TABLE>
<CAPTION>
                                           Balance Sheet Data
                        
                                 (in thousands, except per share amount)
                        
                                           Year ending June 30

                             1998          1997             1996           1995             1994
                             ----          ----             ----           ----             ----
<S>                             <C>           <C>             <C>             <C>            <C>
Cash and
cash equivalents                6             10              37              57             910

Working capital
(deficit)                     479         (1,168)         (4,157)         (1,691)          3,199

Property and
equipment, net                263            110           3,580           4,069           5,752

Total assets                8,532          6,887          14,608          18,910          21,626

Long-term debt and
capital leases,
excluding current
portion                     2,514          1,748           2,616           1,579           5,730


Total liabilities           7,752          7,047          12,706          15,538          14,264

Total stockholders
equity (deficit)              780           (160)          1,902           3,372           7,372
</TABLE>


(See Item 7 below for  information  on  dispositions  of assets which affect the
year to year comparability of the information shown above.)


ITEM 7. MANAGEMENTS  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND RESULTS
        OF OPERATIONS

     The following discussion provides information and analysis of the Company's
financial condition and results of operations for the years ended June 30, 1998,
1997 and 1996. The discussion  should be read in conjunction  with the Company's
audited  financial  statements and notes thereto and "Selected  Financial  Data"
included elsewhere herein.


                                       14
<PAGE>

Introduction

     For the fiscal year ended June 30, 1998, the Company  derived  revenue from
its transportation logistics operation. For fiscal year ended June 30, 1997, the
Company derived revenue from its transportation  logistics  operation for twelve
months and from its  trucking  subsidiary  for six months  through  December 31,
1996, when it was discontinued. When practical, the Company realized the benefit
from  administrative   economics  of  scale  by  utilizing  centralized  credit,
personnel,  and accounting  functions for the benefit of the consolidated group.
The  following  analysis of the  Company's  financial  condition  and results of
operations for the fiscal year ended June 30, 1998,  1997,  and 1996,  should be
read in conjunction with the Consolidated  Financial  Statements,  related notes
thereto,  and other information  presented  elsewhere in this Form 10-K. Average
balances (including such balances used in calculating  financial and performance
ratios),  are generally a blend of month-end averages which management  believes
are representative of the operations of the Company.


                              RESULTS OF OPERATIONS

                          Financial Information For The
                       Years Ended June 30, 1998 and 1997

     The net income for the  Company  from  continuing  operations  for the year
ended June 30, 1998 was $940,000 as compared to a net loss of $4,581,000 for the
year  ended  June 30,  1997.  The  increase  in income  was due to an income tax
benefit of $51,000;  an increase in net  profits  from the  Company's  logistics
subsidiary,   Vertex  Transportation  and  the  discontinuance  of  unprofitable
subsidiaries  and operations in previous  years.  For fiscal year ended June 30,
1998  income from  continuing  operations  increased  76.5% to  $1,121,000  from
$635,000  for the period  ended June 30,  1997 for the  Vertex  subsidiary.  The
reason for this increase was the return of  management's  focus to the Company's
core logistics business.

     Operating  revenue  for the year  ended  June 30,  1998  increased  0.8% to
$34,283,000 from $34,035,000,  for the comparable 1997 period. This increase was
accomplished  through  additional  revenue generated by the Company's  logistics
division.  The revenue for fiscal 1997 included $7,590,000,  which was generated
by the  Company's  subsidiary  CW Truck  which was  liquidated  after the second
fiscal  quarter  of 1997,  which  ended  December  31,  1996.  Revenue  from the
Company's transportation  logistics subsidiary,  Vertex, increased by $5,918,000
to  $34,283,000  an  increase  of 20.9% for the year ended June 30,  1998,  from
$28,365,000 for the year ended June 30, 1997.

     Operating cost decreased  $4,349,000 to $33,277,000 for the year ended June
30, 1998 from $37,626,000 for the year ended June 30, 1997, a 11.6% decrease. As
a percentage  of sales,  operating  costs  decreased to 97.1% for the year ended
June 30, 1998 from 110.6% for the year ended June 30, 1997. The decrease was the
result of the discontinuance of CW Truck.

     Interest  expense  decreased  $238,000  for the year  ended  June 30,  1998
compared to the prior year period and is reflective  of the Company's  decreased
borrowing, due to the closing of CW Truck.

     Having experienced  significant losses in CW Truck throughout the first two
quarters of the fiscal year ended June 30, 1997,  management began to review the
trucking  operations  value to the Company.  After having  failed in attempts to
conduct mergers with other trucking entities it was the Company view that it was
in the  

                                       15
<PAGE>


Company's best interest to terminate the operations of CW Truck. On December 31,
1996, a General  Assignment  for the benefit of creditors was made for CW Truck.
Simultaneously  an asset sale of the rolling  stock was made to Mid Cal Express,
Inc., a California  Corporation and  subsequently the balance of the assets were
sold by the  Assignee.  The asset sales  resulted in a $508,000  loss,  which is
reflected in the financial  statements  of the Company as a loss on disposal.  A
General Assignment is an alternative to Chapter 7 bankruptcy liquidation. During
the year ended June 30, 1997, the Company's trucking operation  generated a loss
before  income tax  expenses of  approximately  $4,820,000.  This  reflects  the
continued  operating losses generated by CW Truck before the General  Assignment
for the benefit of creditors as well as a wind down of expenses  associated with
the General  Assignment.  The  trucking  operation  segment  also  generated  an
extraordinary  gain on the  forgiveness  of debt of $898,000  for the year ended
June 30, 1997.  Management believes that adequate reserves exists as of June 30,
1998 and 1997 for any future expenses associated with the General Assignment.

     During  the  fiscal  year  ended  June  30,  1997 the  Company  experienced
significant losses from operations.  These losses were primarily generated by CW
Truck  which had a pretax  loss of  $3,922,000.  An  approximate  $15.7  million
decrease  in revenue  was due to a soft  market for  trucking  services,  severe
winter  conditions,  eroding  customer  base,  and the  ultimate  closing of the
trucking  operations.  Additionally,  the Company was experiencing high interest
rates associated with its financing through its commercial lender.

     In May, 1997, the Company obtained new financing through a new bank lender.
This financing accommodation enabled the Company to repay all of its obligations
to its former bank. This financial  accommodation is written at an interest rate
of prime plus 2.5 percent and when  compared to the prior  interest rate charged
by the former bank is a reduction of 0.5 percent. Additionally, late charges and
other fees  charged  by the former  lender  have been  substantially  reduced or
eliminated.

     At June 30, 1998, the Company was not in compliance with certain covenants.
Subsequent to June 30, 1998,  the Company  received a waiver from the commercial
bank with regards to those items.

                          Financial Information For The
                       Years Ended June 30, 1997 and 1996

     The net loss from  continuing  operations  for the year ended June 30, 1997
for the Company  amounted to  $4,581,000 as compared to a net loss of $2,552,000
for the year  ended  June  30,  1996.  The  increase  in  losses  was  primarily
attributable  to the  continuing  losses  experienced  by CW Truck  created by a
continued  deterioration of the business levels and failure to consummate a sale
of this subsidiary. Additionally, the assignment for the benefit of creditors of
CW Truck as well the  liquidation  of the rolling  stock to Mid Cal has caused a
non-reoccurring loss to the Company of about $508,000.

     Operating  revenue  for the year ended  June 30,  1997  decreased  28.1% to
$34,035,000 from  $47,356,000 for the comparable 1996 period.  Revenues from the
Company's  transportation logistics division (Vertex) increased by $2,095,000 to
$26,485,000,  an  increase  of 8.5%  for the  year  ended  June  30,  1997  from
$24,390,000 for the year ended June 30, 1996.  Revenues of CW Truck decreased by
$15,727,000 to $7,590,000 for the year ended June 30, 1997 from  $23,317,000 for
the year ended June 30,  1996.  CW Truck was closed on December  31, 1996 and no
new revenues were generated from that division following that date. The decrease
was attributable to deteriorating business conditions prior to liquidation.


                                       16
<PAGE>


     Operating cost decreased $11,333,000 to $37,626,000 for the year ended June
30, 1997 from $48,959,000 for the year ended June 30, 1996, a 23.1% decrease. As
a percentage of sales,  operating  costs  increased to 110.6% for the year ended
June 30,  1997 from  103.4%  for the year ended June 30,  1996.  The  percentage
increase is primarily  attributable to the deteriorating  business conditions of
CW Truck prior to liquidation.

     Interest  expense  decreased  $306,000  for the year  ended  June 30,  1997
compared to the prior year period and is reflective  of the Company's  decreased
borrowing, due to the closing of CW Truck.

     Having experienced  significant losses in CW Truck throughout the first two
quarters of the fiscal year ended June 30, 1997,  management began to review the
trucking  operations  value to the Company.  After having  failed in attempts to
conduct  mergers with other trucking  entities it was the Company's view that it
was in the Company's best interest to terminate the  operations of CW Truck.  On
December 31, 1996, a General  Assignment  for the benefit of creditors  was made
for CW Truck.  Simultaneously an asset sale of the rolling stock was made to Mid
Cal Express,  Inc., a California Corporation and subsequently the balance of the
assets were sold by the Assignee.  The asset sales  resulted in a $508,000 loss,
which is  reflected  in the  financial  statements  of the  Company as a loss on
disposal.  A General  Assignment  is an  alternative  to  Chapter  7  bankruptcy
liquidation.  During  the year  ended  June 30,  1997,  the  Company's  trucking
operation   generated  a  loss  before  income  tax  expenses  of  approximately
$4,820,000.  This reflects the continued  operating losses generated by CW Truck
before the General  Assignment  for the benefit of  creditors  as well as a wind
down of expenses associated with the General Assignment.  The trucking operation
segment  also  generated an  extraordinary  gain on the  forgiveness  of debt of
$898,000 for the year ended June 30, 1997.  Management  believes  that  adequate
reserves exists as of June 30, 1997 for any future expenses  associated with the
General Assignment.

     During  the  fiscal  year  ended  June  30,  1997 the  Company  experienced
significant losses from operations.  These losses were primarily generated by CW
Truck  which had a pretax  loss of  $3,922,000.  An  approximate  $15.7  million
decrease  in revenue  was due to a soft  market for  trucking  services,  severe
winter  conditions,  eroding  customer  base,  and the  ultimate  closing of the
trucking  operations.  Additionally,  the Company was experiencing high interest
rates associated with its financing through its commercial lender.

     In May, 1997, the Company obtained new financing through a new bank lender.
This financing accommodation enabled the Company to repay all of its obligations
to its former bank. This financial  accommodation is written at an interest rate
of prime plus 2.5 percent and when  compared to the prior  interest rate charged
by the former bank is a reduction of 0.5 percent. Additionally, late charges and
other fees  charged  by the former  lender  have been  substantially  reduced or
eliminated.

     At June 30, 1998, the Company was not in compliance with certain covenants.
Subsequent to June 30, 1998,  the Company  received a waiver from the commercial
bank with regards to those items.



                                       17
<PAGE>


                              Results of Operations
                          Unusual or Infrequent Events

     In September, 1996, the Company announced a planned merger with Continental
American  Transportation,  Inc..  After  completion  of  due  diligence  it  was
determined  by the  Board of  Directors  that  this  merger  was not in the best
interests of shareholders and was abandoned.  The primary reason for this merger
was  placement of the money losing  subsidiary  Country Wide Truck  Service in a
changed  environment to enhance the  possibility of a turn around.  The Board of
Directors  determined in December 1996 that this  subsidiary  without  extensive
investment  of time and capital was not in a position to become  profitable  and
the best  course of  action  would be to  liquidate  this  subsidiary.  This was
accomplished  on  December  31,  1996,  by making a General  Assignment  for the
benefit of creditors,  which under  California  State law is an alternative to a
Chapter 7  bankruptcy  liquidation.  Simultaneously  there was a sale of rolling
stock to Mid-Cal Express, a California  Corporation,  which was agreed to by the
existing  equipment  lessors  conditional  to the  continuing  guarantee  of the
Company.

LIQUIDITY AND CAPITAL RESOURCES

     Pursuant to a loan agreement  with a commercial  bank dated the 30th day of
April,  1997 the Company utilizes a credit facility which provides for a maximum
outstanding  borrowing of $4 million.  The agreement  bears  interest at a banks
reference rate plus 2 1/2%. The credit  facility which expires on April 29, 2000
is  secured  by  substantially  all assets of the  Company,  including  accounts
receivable.  At June 30, 1998 the Company had unused credit  available under the
line of about $1,486,000.  This  accommodation  replaces the Company's  previous
primary commercial lender. The Company's product sales subsidiary formerly had a
credit facility with its primary lender with an outstanding  balance of $834,000
as  of  June  30,  1996.  This  credit  line  was  cross  guaranteed  and  cross
collateralized by the Company's  transportation  subsidiary,  CW Truck. With the
General  Assignment  for the benefit of  creditors  and sale of the assets of CW
Truck the  aforesaid  credit line was repaid with the proceeds of the new credit
facility identified above.

     The Company utilized  $282,000 of cash flow from continuing  operations and
utilized  $123,000  of cash flow from  discontinued  operations  during the year
ended June 30, 1998.  The General  Assignment  for the benefit of creditors  and
sale of the assets has reduced the Company's  outstanding  payable and leasehold
obligations  by  $6,009,000.  As of June 30,  1998 the Company had total debt of
$7,752,000. The Company's ratio of current assets to current liabilities and its
debt to equity  were  1.09:1 and 9.9:1  respectively  as  compared  to 0.7:1 and
(44):1 as of June 30, 1997.

     The  Company  ended the June 30,  1998  period with $6,000 of cash and cash
equivalents, and working capital of $479,000. Based upon expected cash flow from
operations and funds  available  under existing  credit  facilities,  management
believes  that  the  Company's  capital  resources  are  sufficient  to meet its
presently  anticipated  operating  needs and capital  expenditure  requirements.
However,  should these sources prove inadequate or unavailable,  the Company may
be required to seek additional financing through capital investment.

     In March  1997 the  Company  offered  common  stock  pursuant  to a private
placement  memorandum to several current  investors in the Company.  Pursuant to
that offering the Company  raised  approximately  $1.6 


                                       18
<PAGE>


million in cash in return for the sale of common shares at an offering  price of
$.10 per share out of an  original  offering  of $2  million.  This  infusion of
capital  enabled  the Company to make past due  payments  to its  transportation
providers and to maintain a current  accounts  payable  position,  as well as to
make a payment to one of the Company's customers who filed a property loss claim
against the Company.

            IMPACT OF RECENTLY ISSUED FINANCIAL ACCOUNTING STANDARDS

     The Financial  Accounting Standards Board has issued Statement of Financial
Accounting  Standards  130,  "Reporting  Comprehensive  Income" and Statement of
Financial  Accounting Standards 131 "Disclosures About Segments of an Enterprise
and Related Information."  Statement 130 establishes standards for reporting and
display of  comprehensive  income,  its  components  and  accumulated  balances.
Comprehensive  income is defined to include all changes in equity  except  those
resulting from investments by owners and  distributions  to owners.  Among other
disclosures,  Statement 130 requires that all components of comprehensive income
shall be classified based on their nature and shall be reported in the financial
statements  in the  period in which  they are  recognized.  A total  amount  for
comprehensive  income shall be displayed in the financial  statements  where the
components of other comprehensive income are reported.  Statement 131 supersedes
Statement of Financial Accounting Standards 14 "Financial Reporting for Segments
of a Business  Enterprise."  Statement 131 establishes standards on the way that
public companies report financial information about operating segments in annual
financial  statements  issued to the public.  It also establishes  standards for
disclosures  regarding  produces  and  services,   geographic  areas  and  major
customers.  Statement 131 defines operating  segments as components of a company
about which  separate  financial  information  is  available  that is  evaluated
regularly  by the chief  operating  decision  maker in deciding  how to allocate
resources and in assessing performance.

     Statements  130 and 131 are effective for financial  statements for periods
beginning  after  December  15, 1997 and  require  comparative  information  for
earlier years to be restated.  Results of operations and financial position will
be unaffected by implementation of these standards.

     SFAS  No.   132,   "Employers'   Disclosures   abut   Pensions   and  Other
Postretirement  Benefits," was issued in February 1998.  This statement  revises
the disclosure requirement for pensions and other postretirement  benefits. This
statement is effective for the Company's financial statements for the year ended
June 30,  1999 and the  adoption  of this  standard  is not  expected  to have a
material effect on the Company's financial statements.

     SFAS  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
Activities," was issued in June 1998. This statement establishes  accounting and
reporting standards for derivative  instruments and for 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.  This  statement  is  effective  for  the  Company's  financial
statements for the year ended June 30, 2001 and the adoption of this standard is
not expected to have a material effect on the Company's financial statements.

                              EFFECTS OF INFLATION

     Inflation  can be  expected  to have an impact on the  Company's  operating
costs. A prolonged  period of inflation  would cause interest  rates,  and other
costs to increase and would adversely affect the Company's results of operations
unless  freight  rates  could be  increased.  The effect of  inflation  has been
minimal over the past three years.

                                   SEASONALITY

     In the  transportation  industry  generally  shipping activity increases in
late summer and fall seasons  preceding  the holidays and  decreases  during the
winter  season.  The  Company  historically  has  lower  margins  in the fall as
competition for the transportation providers equipment increases.

                                Year 2000 Issues

     The Company  believes  that the general  nature of its business  operations
limits its risks with respect to Year 2000  issues,  with the state of readiness
of its own computer  system being the key  consideration.  Most of the Company's
business is conducted by telephone,  fax, e-mail, and mail  communications  with
customers  and  transportation  providers.  The  Company's  computer  system  is
independent of external  computers,  except for e-mail Internet  communications.
Generally  orders  are taken by phone,  and  shipping  arrangements  are made by
phone,  with  subsequent  written  confirmations.  The Company uses its internal
computer  system to keep  track of  orders  and  related  expenses  and  billing
information and eventually to provide  accounting for the business  transactions
and the Company's financial statements. All data used by the computer is entered
at the Company's offices by employees.

     The independent  developer of the Company's  customized software system has
advised the Company that the system,  including computer firmware,  is Year 2000
compliant.  In fall 1998 the Company will be administering testing scenarios. If
the  computer  system  needed  even major  overhaul in order to become Year 2000
compliant,  the  Company  believes  that  necessary  expense  and  time  will be
allocated to do it.

     The Company  believes  that Year 2000  problems  that its  customers  might
experience  are as likely to  increase  the  Company's  business  and results of
operations as they are to decrease  them. If any customers  whose shipping needs
are significantly managed by computers do in fact experience Year 2000 problems,
they  probably  would  need to use  freight  forwarders  more,  in order to find
available  carriers who can make timely  deliveries.  Even with that increase in
business,  of course,  problems  with finding,  negotiating,  and  managing  the
shipments and then billing and  collecting  for them could result in the Company
experiencing  higher costs and delayed receipts on billings,  thereby negatively
affecting margins on Company business.

     The  Company  believes  that Year  2000  problems  that the  transportation
providers  might   experience   could  generally   impair  the  availability  of
transportation  and the  efficiency  with  which  rolling  stock is  used.  This
problem,  too,  appears as likely to increase  Company  business  and results of
operations as to decrease  them,  with the carriers  becoming more  dependent on
freight  forwarders for finding and arranging ways to fill the rolling stock for
various  trips.  With such a less  efficient  system,  of course,  the Company's
overhead  probably  would  increase,  thereby  negatively  affecting  margins on
Company business.

     Lastly,  the  company  also  believes  that it does  not  have  significant
exposure to embedded  technology  problems,  except for possible  problems  that
could have  widespread  effects.  The  Company's  offices are in a  stand-alone,
single story building with basic utilities and HVAC and security  systems,  each
which could be replaced  without  material  expense to the  Company.  Thus,  the
Company's primary exposure to embedded  technology  problems appears to focus on
communications and utilities.  If electricity became unavailable or erratic,  or
if telephone,  fax, e-mail,  and/or mail systems became unusable or erratic, the
Company might have severe  difficulties in maintaining its business  operations.
The Company does not have a contingency  plan with respect to a possible loss of
electricity, telephone, or mail systems.

                           Forward Looking Information

     See Item 1. Business  above in this annual report on form 10K for important
comments about forward looking information contained in this annual report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

     Not applicable.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     See Item 14 (a).


                                       19
<PAGE>


ITEM 9.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  OR  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

     None.



                                       20
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  following  table  sets forth the names and ages of all  directors  and
executive  officers of the Company,  all  positions and offices with the Company
held by each  person,  each  person's  term of  office as a  Director  and their
business experience for each of the past five years.


Name                 Age     Position

Timothy Lepper       50      Chairman, Chief Executive Officer, and President -
                             of the Company

Wayne N. Parry       47      Director, Secretary of the Company
                                       President, Vertex Transportation, Inc.
                                       (subsidiary of the Company)

Mark T. Boyer        41      Director

     On May 11, 1998 the  Company's  annual  meeting was held.  At the  meeting,
Wayne N. Parry was  elected to serve as a  director  for a three year term.  The
term of office as director  of Timothy  Lepper  continues  until the 1999 annual
meeting,  and the term of Mark T. Boyer continues until the annual meeting to be
held in 2000.

     Set forth  below is certain  information  with  respect  to the  directors,
executive officers and key employees of the Company.

     Timothy Lepper - Chairman,  Chief Executive Officer and President - Country
Wide Transport  Service,  Inc.  graduated in 1973 from Brockport  State College.
From  1971-1974 he was employed as a salesman for REA Express and later promoted
to District  Sales  Manager,  Rochester and Buffalo,  NY. From  1974-1978 he was
employed by Time D.C. as Terminal Manager in Rochester and Buffalo, NY. In 1978,
Mr. Lepper was Terminal  Manager for Transcon Lines,  Rochester,  NY. In 1978 he
co-founded Vertex Transportation,  Inc. Mr. Lepper served as President of Vertex
from 1978 until its  acquisition by CW Truck on July 1, 1994.  Effective July 1,
1994 Mr.  Lepper was  appointed  to the post of  President of Country Wide Truck
Service,  Inc. until  September 1995 when he was appointed  President and CEO of
Country Wide Transport Services, Inc.

     Wayne N.  Parry -  Director  and  President  of  Vertex  Transportation  (a
subsidiary of the Company)  graduated in 1973 cum laude from Niagara  University
with a B.S. in Transportation. In 1973 he joined the management training program
at Red Star Express Lines,  Buffalo,  NY and became Customer Service Manager. In
1975  he  was  employed  with  Mobil  Chemical   Company,   Macedon,   NY  as  a
Transportation Manager and in 1977 was promoted to Customer Service/Distribution
Manager.  In 1978 he co-founded Vertex  Transportation  Inc. Mr. Parry served as
Vice  President  and Secretary of Vertex from 1978 until its  acquisition  by CW
Truck on July 1, 1994.  Since this date Mr.  Parry has  served as  President  of
Vertex.


                                       21
<PAGE>


     Mark Boyer - Director,  has spent the majority of his working career in the
investment  business.  Since July,  1992, Mr. Boyer has been the president and a
director of ROI Capital Management. During the preceding year, Mr. Boyer managed
his personal  securities  portfolio.  From  February  1988 to July 1991,  he was
general  partner  and  portfolio  manager  with Volpe,  Welty & Company,  in San
Francisco, California, and from May 1982 to February 1988, he was an analyst and
fund manager with Fidelity Management Research, Inc., in Boston,  Massachusetts.
Mr. Boyer received his BA degree, magna cum laude, in finance,  accounting,  and
computer sciences from American university in 1980 and his MBA degree in finance
and accounting from Columbia University in 1982.

Section 16(b) Beneficial Ownership Reporting Compliance

     The  company  believes  that Form 4 reports  should  have been  filed  with
respect to the following transactions and were not:

          (a) Sale of 1,300 shares of common stock on November 3, 1997 and 2,700
     shares on November 7, 1997 by Timothy Lepper,  President of the Company, at
     a sale price of $1.00 per share ans $0.687 per share respectively.

          (b) Sale of 1,300 shares of common stock on November 3, 1997 and 4,300
     shares on  November  7, 1997 by Wayne N.  Parry,  President  of Vertex (the
     Company's  subsidiary)  at a sale  price of $1.00 per share and  $0.687 per
     share respectively.

     Messrs. Lepper and Parry are filing those reports at or about the same time
as this  Annual  Report  of Form 10-K is being  filed  with the  Securities  and
Exchange Commission.

ITEM 11. EXECUTIVE COMPENSATION

     The  following  table  sets  forth  base  compensation  paid  to the  Chief
Executive Officer and the Executive Officers of the Company and its subsidiaries
for services rendered to the Company and its subsidiaries during the fiscal year
ended June 30, 1996, whose total cash compensation exceeded $100,000.

<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE

                                    Fiscal
Name and Principal Position         Year            Salary             Bonus     Compensation
---------------------------         ----            ------             -----     ------------
<S>                                 <C>             <C>                 <C>          <C>
Timothy Lepper(1)(2)                1996            $250,000            -            --
President CEO                       1997            $201,930            -            --
                                    1998            $156,697            -            --
                                                                                  
Wayne N. Parry(1)(2)                1996            $250,000            -            --
President - Vertex                  1997            $201,930            -            --
Transportation                      1998            $156,697                      
</TABLE>


(1)  Aggregate  value of perquisites  and other personal  benefits was less than
     10% of total salary and bonus.

(2)  As  discussed  under Item 13 of this  Annual  Report on Form 10-K,  Messrs.
     Lepper and Parry are the partners of the partnership  that is the Company's
     landlord at its offices at 119 Despatch Drive,  East  Rochester,  New York,
     for which a total rent of $90,000 was paid by the Company during the fiscal
     year ended June 30, 1998.

The officers  participate  in ordinary  employee  benefits made available to the
Company's other  employees.  Except for  participation  in the Company's  401(k)
retirement  savings plan, the Company does not have any  retirement  program for
officers  or other  employees.  




                                       22
<PAGE>

Director Compensation

     The Company's Board of Directors  presently consists of three members.  Two
directors  hold  salaried  positions  with the Company and receive no additional
compensation. Outside Directors receive $500.00 per meeting.

Stock Options

     During the fiscal  year ended June 30,  1998,  no options  were  granted to
officers or  directors  of the Company  and no options  held by any  director or
officer were exercised.

     The  following  table  sets  forth  information  with  respect to the named
executive  officers  concerning the unexercised  options held by them as of June
30, 1998. The value of the underlying  Common Stock was determined by taking the
mean  between the bid and asked  prices of the Common  Stock on the OTC Bulletin
Board (which was $1.86 pr share), minus the exercise price.

<TABLE>
<CAPTION>
                        Number of Shares                       Value of Unexercised
                        Underlying Unexercised                 In-the-Money Options
                        Options at June 30, 1998               At June 30, 1998 
                        -----------------------------          ------------------------------- 

Name                    Exercisable     Unexercisable          Exercisable       Unexercisable
----                    -----------     -------------          -----------       -------------
<S>                      <C>                 <C>                <C>                   <C>
Timothy Lepper           425,000             0                  $726,750              0
Wayne N. Parry           425,000             0                  $726,750              0
</TABLE>


Benefit Plans

     Effective April 1, 1993, the Company adopted a Deferred  Compensation  401K
Plan  (the  "Plan")   covering  all  full-time   employees  of  itself  and  its
subsidiaries.  To be eligible to  participate in the plan,  employees,  with the
exception  of  drivers,  must have been  employed  by the  Company  for 90 days;
drivers are eligible to  participate  following  one year of service.  Employees
involved  in the Plan may  contribute  up to 20% of  their  compensations,  on a
pre-tax basis,  subject to statutory and Internal  Revenue  Service  guidelines.
Contributions to the Plan are invested at the direction of the participant.


                                       23
<PAGE>


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding the beneficial
ownership  of the Common  Stock as of June 30, 1998 by (i) each  director of the
Company,  (ii) each person nominated to become a director of the Company,  (iii)
each of the executive  officers named in the Summary  Compensation  Table above,
(iv) all  directors and  executive  officers of the Company as a group,  and (v)
each person known by the Company to own beneficially more than five (5%) percent
of the Common  Stock.

<TABLE>
<CAPTION>
                                                                        Amount  and 
Title of Class                Name and  Address of                      Nature of
Percent of Class              Beneficial Ownership                      Beneficial                Ownership
----------------              --------------------                      ----------                ---------
<S>                             <C>                                     <C>                         <C> 
Common                          Timothy Lepper                           521,960(1)                 10.23%
                                18 Kilkenny Court
                                Fairport, NY 14450

Common                          Wayne N. Parry                           499,400(2)                  9.79%
                                27 Fall Meadow Dr. 
                                Pittsford, NY 14534

Common                          Mark Boyer                               665,500(3)                 13.25%
                                o/o ROI Partners
                                17 East Francis Drake, Suite 225
                                Larkspur, CA 94939

Common                          Special Situation Funds                1,593,000(4)                 31.25%
                                153 East 53rd Street
                                New York, NY 10022

Common                          Salcott Holding Limited                  570,000                    11.18%
                                o/o Arabella privatim Finance Ag
                                Waldmann Strasse 6
                                Zurich, Switzerland CH-8024

Common                          All Directors and Officers as a        1,686,860(1)(2)(3)           33.09%
                                group (3 individuals)
</TABLE>

(1)  Included  425,000 shares  purchasable  by Mr. Lepper  pursuant to an option
     described in Item 11 above. 

(2)  Included  425,000  shares  purchasable  by Mr. Parry  pursuant to an option
     described in Item 11 above.

(3)  578,000 of the shares  attributed  to Mr. Boyer are owned by ROI  Partners,
     ROI & Lane L.P. or accounts  controlled  by ROI  Partners.  Mr.  Boyer is a
     general partner of ROI Partners.

(4)  Stock owned by Special  Situation  Funds is held in three  specific  funds:
     Special Situations Cayman Fund L.P.
     Special Situations Private Equity Fund L.P.
     Special Situations Fund III, L.P.


                                       24
<PAGE>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  following is a brief  description  of each  transaction,  or series of
similar  transactions,  since the beginning of the  Company's  fiscal year ended
June 30,  1998,  or any  currently  proposed  transaction,  or series of similar
transactions, to which the Company or its subsidiary,  Vertex, was or is to be a
party,  in which the amount  involved  exceeds  $60,000  and in which any of the
following persons had, or will have, a direct or indirect material interest: any
director or  executive  officer of the  Company,  any nominee for  election as a
director,  any  security  holder who is known to the Company to own of record or
beneficially  more than 5% of the Company's  Common Stock, and any member of the
immediate family of any of the foregoing persons.

     As of July 1, 1994 CW Truck, a former subsidiary of the Company (see Item 1
of this  Annual  Report on Form 10-K)  entered  into a five year lease of office
space and warehouse  facilities  in East  Rochester,  NY with Vertex  Investment
Partners, a partnership whose partners are Timothy Lepper (now the President and
Chief Executive Officer of the Company) and Wayne N. Parry (now the President of
the Company's subsidiary, Vertex). The lease provides for annual rental payments
of $90,000. This lease has been extended and will expire as of June 30, 2000.

     During  the year ended  June 30,  1996 the  Company  incurred  expenses  to
various law firms in which a director  of the Company was a partner.  Such legal
expenses amounted to $53,000. No such expenses were incurred for the years ended
June 30, 1998 and 1997.

     During the year ended June 30, 1996 the Company paid rent to an officer and
employee of a Company subsidiary of $14,000.  No such expenses were incurred for
the years ended June 30, 1998 and 1997.

     During the years ended June 30, 1998,  1997 and 1996, the Company  received
management  fees from a company  controlled and 49% owned by two officers of the
Company totaling $57,000, $89,000 and $58,000, respectively.

     None of the  persons  covered  by this  Item 13 (and no trust or  estate in
which any of them has any  beneficial  interest  or serves as  trustee or in any
similar  capacity)  has been  indebted to the Company since the beginning of the
Company's  fiscal year ended June 30, 1998 other than for ordinary  advances for
travel or other expenses in the ordinary course of business.

ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K

     (a)  1. Financial Statements

          The financial statements listed on the accompanying Index to Financial
          Statements  and  Financial  Statement  Schedule  Covered  by Report of
          Independent Auditors are filed as part of this report.

     2.   Schedule

          The schedule listed on the accompanying Index to Financial  Statements
          and  Financial  Statement  Schedule  Covered by Report of  Independent
          Auditors are filed as part of this report.

     3.   Exhibits 

          None

     (b)  1. Reports on Form 8-K

          There were no form 8-K filings  during the last  quarter of the period
          covered by this report.
                                                                              
                                       25


<PAGE>

                      COUNTRY WIDE TRANSPORT SERVICES, INC.
                                AND SUBSIDIARIES

                        CONSOLIDATED FINANCIAL STATEMENTS
                               FOR THE YEARS ENDED
                          JUNE 30, 1998, 1997 AND 1996







<PAGE>


                          INDEX TO FINANCIAL STATEMENTS



<TABLE>
<CAPTION>
                                                                                                      PAGE

<S>                                                                                                    <C>
Independent Auditor's Report...........................................................................F-2

Consolidated Balance Sheets - June 30, 1998 and 1997...................................................F-3

Consolidated Statements of Operations - For the Years Ended June 30, 1998, 1997 and 1996...............F-4

Consolidated  Statement of Stockholders' Equity (Deficit) - For the Period from July 1, 1995 
      through June 30, 1998............................................................................F-6

Consolidated Statements of Cash Flows - For the Years Ended June 30, 1998, 1997 and 1996...............F-7

Notes to Financial Statements..........................................................................F-9
</TABLE>


                                       F-1

<PAGE>


                          INDEPENDENT AUDITOR'S REPORT




The Board of Directors and Stockholders
Country Wide Transport Services, Inc.
East Rochester, New York

We have  audited  the  consolidated  balance  sheets of Country  Wide  Transport
Services,  Inc. and  subsidiaries  as of June 30, 1998 and 1997, and the related
consolidated statements of operations,  stockholders' equity (deficit), and cash
flows for each of the years in the three year period ended June 30, 1998.  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 audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all  material  respects,  the  financial  position  of Country  Wide
Transport  Services,  Inc. and subsidiaries as of June 30, 1998 and 1997 and the
results  of their  operations  and their cash flows for each of the years in the
three year period  ended June 30, 1998 in  conformity  with  generally  accepted
accounting principles.

Our audits referred to above include audits of the financial  statement schedule
listed under Item 14(a)(2) of Form 10-K. In our opinion, the financial statement
schedule presents fairly, in all material respects, in relation to the financial
statements taken as a whole, the information required to be stated therein.



\s\HEIN + ASSOCIATES LLP

HEIN + ASSOCIATES LLP
Certified Public Accountants

Orange, California
August 14, 1998


                                       F-2

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                          JUNE 30,
                                                                 --------------------------
                                                                    1998             1997
                                                                 ----------      ----------

                                     ASSETS
<S>                                                              <C>             <C>       
CURRENT ASSETS:
     Cash                                                        $    6,000      $   10,000
     Accounts receivable, net                                     5,548,000       4,009,000
     Accounts receivable - officers and employees                     4,000          39,000
     Accounts receivable - other                                    108,000           8,000
     Carrier advances                                                13,000          16,000
     Prepaid expenses                                                38,000          49,000
                                                                 ----------      ----------
              Total current assets                                5,717,000       4,131,000

PROPERTY AND EQUIPMENT, net                                         263,000         110,000

OTHER ASSETS:
     Deposits                                                        34,000           8,000
     Excess of purchase price over fair value of net assets
         acquired, net                                            2,518,000       2,638,000
                                                                 ----------      ----------
              Total assets                                       $8,532,000      $6,887,000
                                                                 ==========      ==========


                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
     Notes payable and current portion of long-term debt        $      --       $   160,000
     Accounts payable and accrued liabilities                     5,088,000       4,612,000
     Liabilities in excess of assets of discontinued         
         subsidiary                                                 150,000         404,000
     Liabilities in excess of assets of discontinued         
         operations                                                    --           123,000
                                                                -----------     -----------
         Total current liabilities                                5,238,000       5,299,000
                                                             
LONG-TERM DEBT, LESS CURRENT PORTION                              2,514,000       1,748,000
                                                                -----------     -----------
                                                             
         Total liabilities                                        7,752,000       7,047,000
                                                                -----------     -----------
                                                             
COMMITMENTS AND CONTINGENCIES (Notes 6, 7, 8 and 9)          
                                                             
STOCKHOLDERS' EQUITY (DEFICIT):                              
     Preferred stock, $.01 par value, 5,000,000 share        
         authorized, issuable in series, none issued                   --              --
     Common stock, $.10 par value, 6,000,000                 
         shares authorized, 4,248,000 shares issued and      
         outstanding at June 30, 1998 and 1997                      425,000         425,000
     Additional paid-in capital                                   8,110,000       8,110,000
     Retained earnings (deficit)                                 (7,755,000)     (8,695,000)
                                                                -----------     -----------
              Total stockholders' equity (deficit)                  780,000        (160,000)
                                                                -----------     -----------
                                                             
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   
         (DEFICIT)                                              $ 8,532,000     $ 6,887,000
                                                                ===========     ===========
</TABLE>


          See accompanying notes to consolidated financial statements.


                                       F-3

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                        FOR THE YEARS ENDED JUNE 30,
                                                            --------------------------------------------------
                                                                1998               1997               1996
                                                            ------------       ------------       ------------
<S>                                                         <C>                <C>                <C>         
NET REVENUES:
    Transportation revenue                                  $ 34,283,000       $ 34,035,000       $ 47,356,000
                                                            ------------       ------------       ------------

OPERATING COSTS AND EXPENSES:
    Purchased transportation                                  30,068,000         26,521,000         33,044,000
    Salaries and related expenses                              1,984,000          3,579,000          5,653,000
    Operating expenses                                           208,000          2,695,000          4,786,000
    Revenue equipment rentals                                       --              819,000          1,884,000
    General supplies and expenses                                845,000          1,380,000          2,336,000
    Depreciation and amortization                                172,000          2,632,000          1,256,000
    (Gain) loss on disposition of assets                            --              508,000            (19,000)
                                                            ------------       ------------       ------------
         Total operating costs and expenses                   33,277,000         38,134,000         48,940,000
                                                            ------------       ------------       ------------

OPERATING INCOME (LOSS):                                       1,006,000         (4,099,000)        (1,584,000)
                                                            ------------       ------------       ------------

OTHER INCOME (EXPENSE):
    Interest expense                                            (197,000)          (435,000)          (741,000)
    Interest income                                                 --                1,000             33,000
    Other, net                                                    80,000             15,000            (36,000)
    Loss on sale of business division                               --                 --             (222,000)
                                                            ------------       ------------       ------------
         Total other income (expense)                           (117,000)          (419,000)          (966,000)
                                                            ------------       ------------       ------------

INCOME (LOSS) FROM CONTINUING OPERATIONS
    BEFORE PROVISION FOR INCOME TAXES,
    DISCONTINUED OPERATIONS AND
    EXTRAORDINARY ITEM:                                          889,000         (4,518,000)        (2,550,000)

PROVISION FOR INCOME TAX (EXPENSE)
    BENEFIT                                                       51,000            (63,000)            (2,000)
                                                            ------------       ------------       ------------
INCOME (LOSS) FROM CONTINUING OPERATIONS                         940,000         (4,581,000)        (2,552,000)
                                                            ------------       ------------       ------------

DISCONTINUED OPERATIONS:
    Loss from  discontinued  business  segments,  net
          of  applicable  income tax (expense) benefit
          of $0 and ($329,000) for the years ended
          June 30, 1997 and 1996, respectively                      --              (15,000)        (1,288,000)
                                                            ------------       ------------       ------------

INCOME (LOSS) BEFORE EXTRAORDINARY ITEM                          940,000         (4,596,000)         3,840,000

    Gain on forgiveness of debt of discontinued
         operations, net of applicable income tax
         expense of $1,630,000 (Note 8)                             --                 --            2,370,000
    Gain on forgiveness of debt of discontinued
         subsidiary, net of applicable income tax
         expense of $0 (Note 7)                                     --              898,000               --
                                                            ------------       ------------       ------------

NET INCOME (LOSS)                                           $    940,000       $ (3,698,000)      $ (1,470,000)
                                                            ============       ============       ============
</TABLE>



                                   (Continued)


                                       F-4

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Continued)


<TABLE>
<CAPTION>
                                                              FOR THE YEARS ENDED JUNE 30,
                                                       ---------------------------------------
                                                         1998           1997            1996
                                                       -------        --------        -------- 
<S>                                                    <C>            <C>             <C>      
BASIC INCOME (LOSS) PER COMMON SHARE:
    Continuing operations                              $  0.22        $  (2.94)       $  (2.66)
    Discontinued operations                                --            (0.01)          (1.34)
    Extraordinary item                                     --             0.57            2.47
                                                       -------        --------        -------- 

         Basic income (loss) per common share          $  0.22        $  (2.38)       $  (1.53)
                                                       =======        ========        ======== 

DILUTED INCOME (LOSS) PER COMMON SHARE:
    Continuing operations                              $  0.19        $  (2.94)       $  (2.66)
    Discounted operations                                 --             (0.01)          (1.34)
    Extraordinary item                                    --              0.57            2.47
                                                       -------        --------        -------- 

         Diluted income (loss) per common share        $  0.19        $  (2.38)       $  (1.53)
                                                       =======        ========        ======== 
</TABLE>





          See accompanying notes to consolidated financial statements.


                                       F-5

<PAGE>



             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                 CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY
             FOR THE PERIOD FROM JULY 1, 1995 THROUGH JUNE 30, 1998

<TABLE>
<CAPTION>
                                                 COMMON STOCK                                
                                          --------------------------                    ADDITIONAL      RETAINED         TOTAL
                                           NUMBER OF                                      PAID-IN       EARNINGS      STOCKHOLDERS'
                                            SHARES         AMOUNT        WARRANTS         CAPITAL       (DEFICIT)   EQUITY (DEFICIT)
                                          -----------    -----------    -----------     -----------    -----------   -------------- 

<S>                                        <C>           <C>            <C>             <C>            <C>             <C>        
BALANCES, July 1, 1995                        960,000    $    96,000    $    40,000     $ 6,763,000    $(3,527,000)    $ 3,372,000

      Net loss                                   --             --             --              --       (1,470,000)     (1,470,000)
                                          -----------    -----------    -----------     -----------    -----------     -----------

BALANCES, June 30, 1996                       960,000         96,000         40,000       6,763,000     (4,997,000)      1,902,000

      Stock issued in private placement,
        net of costs                        3,288,000        329,000           --         1,307,000           --         1,636,000
      Expiration of warrants                     --             --          (40,000)         40,000           --
      Net loss                                   --             --             --              --       (3,698,000)     (3,698,000)
                                          -----------    -----------    -----------     -----------    -----------     -----------

Balances, June 30, 1997                     4,248,000        425,000           --         8,110,000     (8,695,000)       (160,000)

      Net income                                 --             --             --              --          940,000         940,000
                                          -----------    -----------    -----------     -----------    -----------     -----------

Balances, June 30, 1998                     4,248,000    $   425,000    $      --       $ 8,110,000    $(7,755,000)    $   780,000
                                          ===========    ===========    ===========     ===========    ===========     ===========
</TABLE>



          See accompanying notes to consolidated financial statements.


                                       F-6

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>
                                                             FOR THE YEARS ENDED JUNE 30,
                                                     -------------------------------------------
                                                         1998           1997            1996
                                                     -----------     -----------     -----------
<S>                                                  <C>             <C>             <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net income (loss) from continuing
         operations                                  $   940,000     $(4,581,000)    $(2,552,000)
      Adjustments to reconcile net income (loss)
         to net cash provided by (used in)
         operating activities:
             Depreciation and amortization               173,000       2,632,000       1,256,000
             (Gain) loss on disposition of assets           --           508,000         (19,000)
             Loss on disposal of business
                divisions                                   --              --           222,000
             Provision for uncollectible accounts
                   receivable                               --             9,000         (76,000)
         (Increase) decrease in:
             Accounts receivable                      (1,540,000)        236,000       1,332,000
             Accounts receivable - officers and
                   employees                              35,000            --           (46,000)
             Accounts receivable - other                (100,000)           --              --
             Carrier advances                              3,000          54,000         204,000
             Inventories                                    --             7,000           2,000
             Prepaid expenses                             10,000         274,000          92,000
             Deposits                                    (25,000)        (63,000)        (58,000)
         Increase (decrease) in:
             Accounts payable and accrued
                liabilities                              476,000         239,000         757,000
             Liabilities in excess of assets of
                discontinued subsidiary                 (254,000)        404,000            --
                                                     -----------     -----------     -----------
         Net cash provided by (used in)
             operating activities from continuing
             operations                                 (282,000)       (281,000)      1,114,000
                                                     -----------     -----------     -----------

      Net loss from discontinued operations                 --           (15,000)     (1,288,000)
             Depreciation and amortization                  --              --             8,000
             Loss on disposition of assets                  --              --            14,000
             Changes in operating assets                (123,000)        (54,000)        274,000
                                                     -----------     -----------     -----------
         Net cash used in operating activities
             from discontinued operations               (123,000)        (69,000)       (992,000)
                                                     -----------     -----------     -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Additions to property and equipment               (206,000)       (130,000)       (408,000)
      Proceeds from disposal of property and
             equipment                                      --           175,000       3,028,000
      Proceeds from disposal of business division           --              --            70,000
                                                     -----------     -----------     -----------
         Net cash provided by (used in) investing
             activities                                 (206,000)         45,000       2,690,000
                                                     -----------     -----------     -----------
</TABLE>


                                   (continued)

                                       F-7

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (continued)

<TABLE>
<CAPTION>
                                                                For The Years Ended June 30,
                                                      ----------------------------------------------
                                                          1998              1997             1996
                                                      ------------     ------------     ------------
<S>                                                   <C>              <C>              <C>         
Cash Flows from Financing Activities:
      Principal payments on borrowings                 (33,096,000)     (45,619,000)     (58,954,000)
      Cash borrowings from line of credit               33,703,000       44,261,000       56,151,000
      Payments on notes payable                               --               --            (29,000)
      Sale of common stock, net                               --          1,636,000             --
                                                      ------------     ------------     ------------
         Net cash provided by (used in) financing
             activities                                    607,000          278,000       (2,832,000)
                                                      ------------     ------------     ------------

DECREASE IN CASH                                            (4,000)         (27,000)         (20,000)

CASH, at beginning of year                                  10,000           37,000           57,000
                                                      ------------     ------------     ------------

CASH, at end of year                                  $      6,000     $     10,000     $     37,000
                                                      ============     ============     ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
         INFORMATION:
      Cash paid for:
         Interest                                     $    288,000     $    451,000     $    719,000
                                                      ============     ============     ============
         Income taxes                                 $     38,000     $     45,000     $     47,000
                                                      ============     ============     ============

      Non-cash investing and financing
             transactions:
             Purchase of property and equipment
                with debt or reduction of
                receivable                            $       --       $       --       $  3,316,000
                                                      ============     ============     ============
             Property and equipment sold for the
                   assumption of notes payable        $       --       $  2,544,000     $       --
                                                      ============     ============     ============
             Net liabilities surrendered in
                   connection with disposal of
                   subsidiary                         $       --       $    943,000     $       --
                                                      ============     ============     ============
             Liabilities surrendered in connection
                with disposal of business division    $       --       $       --       $     43,835
                                                      ============     ============     ============
</TABLE>


       See accompanying notes to these consolidated financial statements.


                                       F-8

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

     Country Wide Transport  Services,  Inc.  ("CWTS") was  incorporated  in the
     State of Delaware  in 1987.  Through its  wholly-owned  subsidiary,  Vertex
     Transportation,  Inc.  ("Vertex"),  the Company  currently  operates a full
     service logistics  company which provides  truckload,  less-than  truckload
     (LTL), intermodal, and international  transportation services. Prior to the
     incorporation of Vertex on June 27, 1996,  Vertex operated as a division of
     Country Wide Truck Service, Inc., a wholly owned subsidiary of the Company.

     Through its wholly-owned subsidiary,  Country Wide Truck Service, Inc. ("CW
     Truck"),  an irregular- route,  truckload common and contract carrier,  the
     Company  transported a wide variety of  commodities  requiring  temperature
     control  throughout the  continental  United States and Canada.  During the
     fiscal year ended June 30, 1996,  CW Truck sold its CK Trucking and Freight
     Peddlers Divisions.  Effective December 31, 1996, the Company  discontinued
     CW Truck through an orderly  liquidation process as a result of significant
     losses within the subsidiary (See Note 8).

     Through its wholly-owned subsidiary, Nationwide Produce Co. ("Nationwide"),
     the Company operated a full service product sales marketing firm importing,
     exporting  and  distributing  conventional  and organic  produce as well as
     consumer food  products  nationwide  and  overseas.  During the fiscal year
     ended June 30, 1995,  the Company  discontinued  its product  sales segment
     operated  by  Nationwide  as a result  of  significant  losses  within  the
     subsidiary.

     Principles of Consolidation - The consolidated financial statements include
     the accounts of CWTS and  subsidiaries  ("the  Company").  All  significant
     intercompany   accounts   and   transactions   have  been   eliminated   in
     consolidation.

     Carrier  Advances - The  Company  periodically  advances  funds to carriers
     during the normal  course of  business.  Carriers  are  advanced  funds for
     expenses  incurred during trips. All such advances are offset against total
     amounts due upon settlement with the carriers.

     Property  and  Equipment  -  Property  and  equipment  are  stated at cost.
     Provision for  depreciation  and  amortization on property and equipment is
     calculated  using  the  straight-line  and  accelerated  methods  over  the
     estimated useful lives of the assets.  Leasehold improvements are amortized
     over the shorter of the useful life or term of the lease.

     When  assets are  retired or  otherwise  disposed  of, the cost and related
     accumulated  depreciation are removed from the accounts,  and any resulting
     gain  or  loss  is  recognized  in  income  for  the  period.  The  cost of
     maintenance   and  repairs  is  charged  to  income  as  incurred   whereas
     significant  renewals and  betterments  are  capitalized.  Maintenance  and
     repairs  expense  for the years  ended  June 30,  1998,  1997 and 1996 were
     $8,229, $229,000 and $518,000, respectively.

     Intangible  Assets - The excess of the  aggregate  purchase  price over the
     fair  value  of net  assets  of  businesses  acquired  is  included  in the
     accompanying  balance sheet as "Excess of purchase price over fair value of
     net assets  acquired"  ("Goodwill")  and is being  amortized  over 25 years
     using the  straight-line  method.  Goodwill  amounts  are  reported  net of
     accumulated  amortization  of  $480,000  and  $360,000 at June 30, 1998 and
     1997,  respectively.  The carrying  value of goodwill is evaluated at least
     annually.

                                       F-9

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The Company considers current facts and circumstances  related to purchased
     entities,  including expected future operating income, to determine whether
     it is probable that impairment has occurred.

     Impairment of Long-Lived Assets - In the event that facts and circumstances
     indicate that the costs of long-lived assets may be impaired, an evaluation
     of  recoverability  would be performed.  If an evaluation is required,  the
     estimated future undiscounted cash flows associated with the asset would be
     compared to the asset's  carrying  amount to determine  if a write-down  to
     market value or discounted cash flow value is required.

     Revenue  Recognition  -  Transportation  revenues and related  expenses are
     recognized  using a method which  approximates  recognition of both revenue
     and direct costs when shipment is completed.

     Income Taxes - The Company  accounts for income  taxes in  accordance  with
     Statement of Financial Accounting Standards No. 109, "Accounting for Income
     Taxes." Under the asset and liability method of Statement 109, deferred tax
     assets and  liabilities  are  recognized  for the  future tax  consequences
     attributable  to  differences  between  the  financial  statement  carrying
     amounts of existing assets and liabilities and their  respective tax bases.
     Deferred tax assets and  liabilities  are measured  using enacted tax rates
     expected to apply to taxable  income in the years in which those  temporary
     difference  are expected to be recovered or settled.  Under  Statement 109,
     the effect on deferred tax assets and  liabilities of a change in tax rates
     is recognized in income in the period that included the enactment date.

     Stock Based  Compensation  - The  Company has elected to follow  Accounting
     Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees"
     (APB25) and related  interpretations  in accounting  for its employee stock
     options.  In accordance  with FASB Statement No. 123 "Accounting for Stock-
     Based  Compensation"  (FASB123),  the Company  will  disclose the impact of
     adopting the fair value accounting of employee stock options.  Transactions
     in equity  instruments with  non-employees  for goods or services have been
     accounted for using the fair value method as prescribed by FASB123.

     Income (Loss) Per Common and Common  Equivalent  Shares - In February 1997,
     the Financial  Accounting  Standards  Board issued a new  statement  titled
     "Earnings per Share"  ("FASB128").  The new statement is effective for both
     interim and annual periods ending after December 15, 1997. FASB128 replaces
     the  presentation of primary and fully diluted  earnings per share with the
     presentation  of basic and diluted  earnings per share.  Basic earnings per
     share excludes  dilution and is calculated by dividing income  available to
     common  stockholders  by  the  weighted-average  number  of  common  shares
     outstanding  for the  period.  Diluted  earnings  per  share  reflects  the
     potential  dilution that could occur if  securities  or other  contracts to
     issue  common  stock were  exercised  or  converted  into  common  stock or
     resulted in the  issuance of common  stock that then shared in the earnings
     of the entity.  Common stock equivalents for the years ending June 30, 1997
     and  1996  were  anti-dilutive  and  excluded  in the  earnings  per  share
     computation.

     Statement of Cash Flows - For purposes of the statement of cash flows,  the
     Company  considers all highly  liquid debt  instruments  purchased  with an
     original maturity of three months or less to be cash equivalents.


                                      F-10

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     Use of Estimates - The preparation of the Company's  consolidated financial
     statements in conformity  with  generally  accepted  accounting  principles
     requires the Company's  management to make estimates and  assumptions  that
     affect the amounts reported in these financial  statements and accompanying
     notes. Actual results could differ from those estimates.

     The Company's  financial  statements are based upon a number of significant
     estimates,  including the allowance  for doubtful  accounts,  the estimated
     useful  lives for  property and  equipment,  realizability  of deferred tax
     assets and recoverability of goodwill. Due to the uncertainties inherent in
     the  estimation  process,  it is at least  reasonably  possible  that these
     estimates will be further revised in the near term and such revisions could
     be material.

     Concentrations  of Credit Risk - Credit Risk represents the accounting loss
     that would be  recognized at the reporting  date if  counterparties  failed
     completely to perform as contracted. Concentrations of credit risk (whether
     on or off balance  sheet) that arise from financial  instruments  exist for
     groups of  customers  or groups of  counterparties  when they have  similar
     economic characteristics that would cause their ability to meet contractual
     obligations  to be  similarly  effected  by  changes in  economic  or other
     conditions  described  below.  In accordance  with FASB  Statement No. 105,
     Disclosure   of    Information    about    Financial    Instruments    with
     Off-Balance-Sheet  Risk and Financial  Instruments with  Concentrations  of
     Credit  Risk,  the credit risk  amounts  shown do not take into account the
     value of any collateral or security.

     The Company  currently  operates  primarily in one  industry  segment and a
     geographic   concentration   exists  because  the  Company's  customer  are
     generally located in the United States.  Financial instruments that subject
     the Company to credit risk consist principally of accounts receivable.

     Fair  Value of  Financial  Instruments  - The  estimated  fair  values  for
     financial  instruments under SFAS No. 107,  Disclosures about Fair Value of
     Financial  Instruments,  are determined at discrete points in time based on
     relevant market  information.  These estimates  involve  uncertainties  and
     cannot be  determined  with  precision.  The  estimated  fair values of the
     Company's  financial   instruments,   which  includes  all  cash,  accounts
     receivables, accounts payable, long-term debt, and other debt, approximates
     the carrying  value in the  consolidated  financial  statements at June 30,
     1998 and 1997.

     Impact of Recently Issued  Standards - The Financial  Accounting  Standards
     Board  has  issued  Statement  of  Financial   Accounting   Standards  130,
     "Reporting  Comprehensive  Income" and  Statement of  Financial  Accounting
     Standards 131  "Disclosures  About  Segments of an  Enterprise  and Related
     Information." Statement 130 establishes standards for reporting and display
     of  comprehensive   income,   its  components  and  accumulated   balances.
     Comprehensive  income is defined to include  all  changes in equity  except
     those  resulting from  investments by owners and  distributions  to owners.
     Among other  disclosures,  Statement  130 requires  that all  components of
     comprehensive income shall be classified based on their nature and shall be
     reported  in the  financial  statements  in the  period  in which  they are
     recognized.  A total amount for comprehensive  income shall be displayed in
     the financial statements where the components of other comprehensive income
     are reported.  Statement 131 supersedes  Statement of Financial  Accounting
     Standards 14 "Financial  Reporting for Segments of a Business  Enterprise."
     Statement 131 establishes standards on the way that public companies report
     financial   information  about  operating   segments  in  annual  financial
     statements  issued  to  the  public.  It  also  establishes  standards  for
     disclosures  regarding  produces and services,  geographic  areas and major
     customers. Statement 131

                                      F-11

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     defines operating  segments as components of a company about which separate
     financial information is available that is evaluated regularly by the chief
     operating  decision  maker in  deciding  how to allocate  resources  and in
     assessing performance.

     Statements  130 and 131 are effective for financial  statements for periods
     beginning after December 15, 1997 and require  comparative  information for
     earlier years to be restated.  Results of operations and financial position
     will be unaffected by implementation of these standards.

     SFAS  No.  132,   "Employers'   Disclosures   about   Pensions   and  Other
     Postretirement  Benefits,"  was issued in  February  1998.  This  statement
     revises the disclosure  requirement  for pensions and other  postretirement
     benefits.   This  statement  is  effective  for  the  Company's   financial
     statements  for the year  ended  June 30,  1999  and the  adoption  of this
     standard  is not  expected  to  have a  material  effect  on the  Company's
     financial statements.

     SFAS  No.  133,   "Accounting   for  Derivative   Instruments  and  Hedging
     Activities," was issued in June 1998. This statement establishes accounting
     and  reporting  standards  for  derivative   instruments  and  for  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.  This  statement  is  effective  for the
     Company's  financial  statements  for the year ended June 30,  2001 and the
     adoption of this standard is not expected to have a material  effect on the
     Company's financial statements.

     Reclassification  - Certain  reclassifications  have been made to the prior
     years  consolidated  financial  statements  to  conform  with  the  current
     presentation. Such reclassifications had no effect on net income (loss).


2.   MERGERS, ACQUISITIONS, AND DIVESTITURES:

     Effective  April 1,  1993,  CW Truck  acquired  certain  assets of  Freight
     Peddlers,  Inc. for $100,000.  This transaction was accounted for using the
     purchase  method and  resulted  in $12,000 of  goodwill,  representing  the
     excess of the  purchase  price  over the fair  market  value of net  assets
     acquired.  In addition,  the Company paid the former owner  $100,000 in the
     form of notes  payable  and 5,000  shares of the  Company's  common  stock,
     valued at $81,000,  for a covenant  not to compete.  Freight  Peddlers  had
     insignificant  operations through the date of acquisition.  Effective March
     1, 1996, the Company sold certain assets of its Freight  Peddlers  division
     to a former  officer of the Company for $50,000  cash and a  fully-reserved
     $200,000  unsecured  promissory  note  receivable.  The note  receivable is
     payable  over time  through a  reduction  in  potential  future  commission
     expense  incurred by the Company and payable to the buyer.  The net loss on
     the sale was $222,000 which includes the fully-reserved, unsecured $200,000
     promissory  note  receivable.  Revenues for the division for the year ended
     June 30, 1996 were  $1,204,000  and the operating  loss for the same period
     was $319,000.

     On November  17, 1995,  the Company sold certain  assets of its CK Trucking
     division for $20,000 and the  assumption  of certain  liabilities  totaling
     approximately  $44,000. The net gain on the sale was approximately  $6,000.
     Revenue for the  division for the year ended June 30, 1996 was $588,000 and
     operating income (losses) for the same year was $(24,000).


                                      F-12

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     On  July  1,  1994,  the  Company   completed  the  acquisition  of  Vertex
     Transportation,  Inc.,  a  privately-held,   integrated  logistics  company
     located in East  Rochester,  New York for  $2,321,000  in cash and  100,000
     shares of the  Company's  common stock valued at $1,250,000 in exchange for
     all of the Vertex outstanding  shares. The acquisition was accounted for as
     a purchase.  Vertex  operated as a division of Country Wide Truck Services,
     Inc.  from  July 1, 1994  until  June 27,  1996 at which  time  Vertex  was
     incorporated  as a  wholly-owned  subsidiary  of the Company.  The purchase
     price  of  $3,571,000  was  allocated  to the net  assets  acquired,  which
     approximated their fair market value. The excess of purchase price over the
     recorded  book value has been  allocated to "Excess of purchase  price over
     fair value of net assets  acquired" which  originally  totaled  $2,776,000.
     Such amount are amortized to expense using the straight-line  method over a
     twenty-five year period.

     In  connection  with  the  purchase,  the two  prior  owners  entered  into
     three-year  covenants  not to compete and  five-year  employment  contracts
     which  provide for  minimum  salary  levels of $250,000  each per annum and
     incentive bonuses.  Additionally, the Company has agreed to rent a facility
     from the prior owners for a term of 5 years  commencing  July 1, 1994 at an
     amount of $90,000 per annum.


3.   ACCOUNTS RECEIVABLE:

     Accounts  receivable,  net of allowance for doubtful accounts,  amounted to
     $5,548,000 and $4,009,000,  at June 30, 1998, and 1997,  respectively.  The
     Company  performs  periodic credit  evaluation of its customers'  financial
     condition  and  generally  does not  require  collateral.  The  Company has
     recorded an allowance for doubtful accounts of $75,000 at June 30, 1998 and
     1997 which has been netted against the related accounts receivable.


4.   PROPERTY AND EQUIPMENT:

     Property and equipment consisted of the following:
   

                                             JUNE 30,               
                                     -----------------------        ESTIMATED  
                                        1998         1997         USEFUL LIVES
                                     ---------     ---------     --------------
Furniture and office equipment       $ 268,000     $ 144,000      4 to 5 years 
Leasehold improvements                 154,000        72,000      life of lease
                                     ---------     ---------       
                                       422,000       216,000
Less accumulated depreciation and
amortization                          (159,000)     (106,000)
                                     ---------     ---------
                                     $ 263,000     $ 110,000
                                     =========     =========


     During the years ended June 30, 1998,  1997 and 1996, the Company  recorded
     depreciation expense of $53,000, $446,000 and $1,040,000, respectively.



                                      F-13

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


5.   ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:

     Accounts payable and accrued liabilities consisted of the following:


                                                             JUNE 30,
                                                    ----------------------------
                                                       1998              1997
                                                    ----------        ----------
          Accounts payable                          $2,913,000        $2,331,000
          Accrued purchased transportation           1,948,000         1,448,000
          Other accrued expenses                       227,000           833,000
                                                    ----------        ----------
                                                    $5,088,000        $4,612,000
                                                    ==========        ==========


6.   NOTES PAYABLE AND LONG-TERM DEBT:

     Notes payable and long-term debt consisted of the following:

<TABLE>
<CAPTION>
                                                                                                JUNE 30,
                                                                                      -----------------------------
                                                                                          1998             1997
                                                                                      -----------       -----------
<S>                                                                                   <C>               <C>
          Note payable to bank under a revolving  credit
           agreement  due on April 30, 2000, bearing interest
           at the bank's prime rate plus 2 1/2% (11% at
           June 30, 1998), collateralized by substantially all 
           assets of Vertex Transportation                                            $ 2,514,000       $ 1,748,000
          Notes payable, due in aggregate monthly installments
           of $2,000 including interest ranging from 12.6% to
           28%, maturing at various dates through June 1997,
           collateralized by certain computer equipment                                      --             160,000
                                                                                      -----------       -----------
                                                                                        2,514,000         1,908,000
          Less current portion                                                               --            (160,000)
                                                                                      -----------       -----------

                                                                                      $ 2,514,000       $ 1,748,000
                                                                                      ===========       ===========
</TABLE>

     The $2,514,000 note at June 30, 1998 arises from a credit  agreement with a
     commercial   bank  for  Vertex  which  provides  for  maximum   outstanding
     borrowings  aggregating  $4 million  and  maturing on April 30,  2000.  The
     aggregate  amount of  advances  under the  revolving  credit  agreement  is
     limited  to  80%  of  the  eligible  accounts  receivable,   less  unbilled
     receivables  and any reserves the bank elects to  establish,  not to exceed
     the aggregate  principal  amount.  The  obligations are  collateralized  by
     substantially  all of the  assets  of the  company.  Under the terms of the
     agreement,  the borrower is restricted from paying dividends on any classes
     of its stock and the Company is required to maintain  certain ratios and be
     in compliance with other  covenants.  At June 30, 1998, the Company was not
     in compliance  with certain  covenants.  Subsequent  to June 30, 1998,  the
     Company  received a waiver from the  commercial  bank with regards to those
     items.


                                      F-14

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     Scheduled maturities of notes payable and long term debt are as follows:


                              YEAR ENDED
                               JUNE 30,       AMOUNT
                               --------       ------

                                 1999      $     --
                                 2000       2,514,000
                                           ----------
                           Total           $2,514,000
                                           ==========
     

7.   DISCONTINUED SUBSIDIARY:

     Having  experienced  significant  losses in CW Truck the Company's Board of
     Directors  decided  to  discontinue  the  subsidiary   through  an  orderly
     liquidation.  The Company closed the operations effective December 31, 1996
     and made a General  Assignment of all assets of its  subsidiary,  CW Truck,
     for the pro rata benefit of all creditors of the subsidiary. At the date of
     the assignment,  CW Truck had liabilities in excess of assets in the amount
     of $1,347,000.  Included in this balance is $404,000 which CWTS believes it
     will have to assume.  As a result  during  the  fiscal  year ended June 30,
     1997, the Company  realized a net gain to the extent of unpaid  liabilities
     (not  guaranteed  or  accrued by CWTS) in excess of assets in the amount of
     $898,000.

     In  conjunction  with the  discontinuance  of CW Truck,  the  Company  sold
     equipment  of CWTS and CW Truck to Mid-Cal  Express,  Inc.,  a wholly owned
     subsidiary  of Prime  Companies,  Inc.,  for the  assumption of the related
     notes payable and leases.  All such notes payable and leases are guaranteed
     by the  Company.  As of June  30,  1998,  the  remaining  balance  on these
     obligations is approximately  $4,398,000 and expire through April 30, 2001.
     Prime  Companies,  Inc. had net losses of $843,000 and $695,000 for the six
     months  ended  June  30,  1998  and  the  year  ended  December  31,  1997,
     respectively.  As of June 30, 1998,  Mid-Cal  Express,  Inc. was current in
     most of its  payments on the notes and  leases.  The  Company's  management
     believes that Mid-Cal  Express,  Inc., will be able to meet its obligations
     related to the notes payable and leases.

     Revenues  for CW Truck  for the  years  ended  June 30,  1997 and 1996 were
     $7,590,000 and $22,747,000,  respectively and operating losses for the same
     periods were $1,956,000 and $2,634,000, respectively.


8.   DISCONTINUED OPERATIONS:

     Having  experienced  significant  losses in the product sales segment,  the
     Company's  Board of Directors  decided on June 26, 1995 to discontinue  the
     entire segment through an orderly  liquidation process which they estimated
     would occur over the subsequent two month period.  Immediately  thereafter,
     the Company  commenced to close the  operations  and on September  18, 1995
     made a  General  Assignment  of all  assets of its  subsidiary,  Nationwide
     Produce Co., for the pro rata benefit of all  creditors of the  subsidiary.
     During the fiscal year ended June 30, 1996, the Company realized a net gain
     to the extent of unpaid  liabilities  (not guaranteed or assumed by CWTS or
     CW Truck) in excess of assets and operating losses

                                      F-15

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     from July 1, 1995 to date of  liquidation  related  to the  liquidation  of
     Nationwide.

     At June 30,  1996,  the  Company  has  established  a general  accrual  for
     potential future expenses related to the discontinued  segment amounting to
     $177,000.  At June 30, 1997, the Company established an additional $100,000
     accrual relating to potential future expenses.

     During the years ended June 30, 1998,  1997 and 1996 the Company's  product
     sales segment generated a net loss before income tax benefit of $0, $15,000
     and $959,000, respectively, as follows:

<TABLE>
<CAPTION>
                                                         FOR THE YEARS ENDED JUNE 30,
                                              -----------------------------------------------
                                                  1998             1997               1996
                                              ------------      -----------       -----------
<S>                                           <C>               <C>               <C>        
REVENUE                                       $       --        $      --         $ 4,307,000
                                              ------------      -----------       -----------
EXPENSES:
Cost of sales                                         --               --           3,977,000
Salaries and related expenses                         --               --             460,000
Operating expenses                                    --               --             134,000
General supplies and expenses                         --               --             116,000
Depreciation and amortization                         --               --               8,000
Interest, net                                         --               --             171,000
Other                                                 --             15,000           400,000
                                              ------------      -----------       -----------
        Total expenses                                --             15,000         5,266,000
                                              ------------      -----------       -----------

    Loss before income tax (expense)
        benefit                               $       --        $   (15,000)      $  (959,000)
                                              ============      ===========       ===========
</TABLE>


     Revenue   applicable  to  the   discontinued   product  sales  segment  was
     approximately  $4,307,000,  for the year ended June 30, 1996. There were no
     revenues for the years ended June 30, 1998 or 1997.



                                      F-16

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


9.   COMMITMENTS AND CONTINGENCIES:

     Lease Commitments - Minimum lease commitments under noncancelable operating
     lease agreements are as follows:


                                                      OPERATING
         YEAR ENDING JUNE 30,                           LEASES
         --------------------                         ----------
                 1999                                  $142,000
                 2000                                   142,000
                 2001                                    17,000
                 2002                                      --
                 2003                                      --
                 Thereafter                                --
                                                       --------

                 Total minimum lease payments          $301,000
                                                       ========

     Rental expense for all operating leases consisted of the following:


                                                  YEAR ENDED JUNE 30,
                                      ------------------------------------------
                                         1998            1997            1996
                                      ----------      ----------      ----------
          Revenue equipment rentals   $   37,000      $  833,000      $1,884,000
          Terminal, warehouse, and
                office rentals           104,000         215,000         204,000
          Other equipment rentals          9,000          21,000          13,000
                                      ----------      ----------      ----------
                                      $  150,000      $1,069,000      $2,101,000
                                      ==========      ==========      ==========


     Employment  Contract - The  Company and  certain of its  subsidiaries  have
     employment  contracts with various  officers with remaining terms up to one
     year.  Such  agreements  provide for minimum  salary  levels and  incentive
     bonuses,   as  well  as  severance   payments  upon   termination   or  the
     non-extension of employment.  The aggregate  commitment for future salaries
     at June 30, 1998, excluding bonuses, was approximately $500,000.

     Litigation  - The nature of the  Company's  business  routinely  results in
     litigation,  primarily  claims  for  personal  injury and  property  damage
     incurred in the  transportation  of freight.  The Company believes that all
     pending litigation of this type is adequately covered by insurance and that
     adverse  results in one or more of these  matters would not have a material
     adverse effect on its financial position or results of operations.

     During September 1995, the Company's transportation  subsidiary,  CW Truck,
     had a cargo claim that approximated $600,000 filed against it by one of its
     customers.  The insurance  carrier,  citing certain exceptions in the cargo
     policy,  declined to pay the claim and referred the issue to  litigation on
     February 27, 1996.  The customer  additionally  filed a cross claim against
     the Company. On February

                                      F-17

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     24,  1997,  the  Company  agreed to pay the  customer  and  entered  into a
     promissory note for $659,000. As of June 30, 1998, the Company had paid off
     the note.  The  Company is pursuing  legal  action  against  the  insurance
     carrier and its agent for the collection of the $659,000.

     On September 18, 1995,  Nationwide ceased operations and executed a General
     Assignment to CMAC. According to the books of Nationwide, it was owed a sum
     of approximately $600,000 represented by a promissory note executed jointly
     by Oasis  Organic  Citrus  and John and  Phillip  Oertly.  CMAC  instituted
     collection  action on the Note which  precipitated a  Cross-Complaint  from
     Oertly.  The Company  maintains an insurance  policy covering  officers and
     directors   and  the  Company  for  potential   claims   asserted  in  this
     cross-complaint.  It is anticipated that continued  efforts will be made to
     try to settle the matter, however, the Company maintains adequate insurance
     to cover any potential loss resulting from an adverse judgment. At June 30,
     1997, the Company had accrued  $100,000 which  represents the deductible on
     the insurance policy.


10.  STOCKHOLDER'S EQUITY:

     Effective  March 19, 1997,  the Company  increased the number of authorized
     common shares to 30,000,000 and immediately  thereafter  declared a 1 for 5
     reverse  stock  split.  All shares and  earnings per common share have been
     retroactively restated for all periods presented.

     During the fiscal year  ending June 30,  1997,  the Company  completed  the
     sale, in a private  offering,  of 3,288,000  shares of common stock for net
     proceeds of $1,636,000.

     In April and August 1993, the Company  granted to certain  officers and key
     employees  of the Company,  options for the  purchase of 10,000  shares and
     50,000 shares of the Company's common stock,  respectively,  at an exercise
     price of $20.00 per share,  which approximated the fair market value at the
     date of grant.  All  options  vest at a rate of 20% per year for five years
     beginning on the first  anniversary  date after the options  were  granted.
     Vesting of options are generally conditioned on the employee being employed
     by the Company on the vesting  dates.  All options  granted  expire between
     April 1998 and September 1998.

     During  the years  ended  June 30,  1997 and 1996,  options  for 23,900 and
     50,000 shares, respectively were canceled.

     On May 19, 1997,  the Company  granted  options for 850,000  shares with an
     exercise  price of $0.15  per share to two  officers  of the  Company.  All
     options were immediately  exercisable and expire on May 1, 2002. The excess
     of the fair market  value over option  price of $17,000 has been treated as
     compensation to the recipient in the  accompanying  consolidated  financial
     statements.

     No stock options were issued in 1998.


                                      F-18

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The following table summarizes all stock option activity:

<TABLE>
<CAPTION>
                                                                WEIGHTED
                                              NUMBER OF         AVERAGE
                                                SHARES       EXERCISE PRICE
                                                ------       --------------
<S>                                            <C>                <C> 
          Balance, July 1, 1995                 73,900          $17.50

          Granted                                   --              --
          Canceled                              50,000           18.10
                                               -------          ------

             Balance, June 30, 1996             23,900           16.25

          Granted                              850,000            0.15
          Canceled                              23,900           16.25
                                               -------          ------

             Balance, June 30, 1997            850,000            0.15

          Granted                                   --              --
          Canceled                                  --              --
                                               -------          ------

             Balance, June 30, 1998            850,000          $ 0.15
                                               =======          ======
</TABLE>


                              PRO FORMA INFORMATION

As stated in Note 2, the  Company  has not  adopted  the fair  value  accounting
prescribed  by FAS123 for  employees.  Had  compensation  cost for stock options
issued to employees  been  determined  based on the fair value at grant date for
awards in fiscal year ending June 30, 1997  consistent  with the  provisions  of
FAS123,  the  Company's net loss and net loss per share would have been adjusted
to the proforma amounts indicated below:

                                                                JUNE 30,
                                                                  1997
                                                             --------------

          Net loss                                           $  (3,842,000)
                                                             =============
          Loss per common share                              $       (2.47)
                                                             =============


During the fiscal years ending June 30, 1998 and 1996, the Company did not grant
options.  As a result,  there  would be no effect on the  Company's  net  income
(loss) or net income (loss) per share.

The fair  value of each  option  is  estimated  on the date of grant  using  the
Black-Scholes  option-pricing  model using the following  assumptions:  expected
volatility of 430%, an expected life of 2 years,  no dividends would be declared
during the expected term of the options,  a risk free interest rate of 6.2%. The
weighted  average  fair value of the  options  on the grant  dates was $0.17 per
share.

                                      F-19

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



11. EARNINGS PER SHARE:

     The following represents the calculation of earnings per share:

<TABLE>
<CAPTION>
                                                                                        FOR THE YEAR ENDING JUNE 30,
                                                                         ----------------------------------------------------------
                                                                             1998                  1997                    1996
                                                                         -----------            -----------             -----------
                 <S>                                                     <C>                    <C>                     <C>         
                 BASIC EARNINGS PER SHARE:
                       Income (loss) from continuing
                          operations                                     $   940,000            $(4,581,000)            $(2,552,000)
                       Less - preferred stock
                          dividends                                             --                     --                      --
                                                                         -----------            -----------             -----------
                          Income from continuing
                              operations applicable to
                              common shareholders                        $   940,000            $(4,581,000)            $(2,552,000)
                                                                         ===========            ===========             ===========
                       Weighted average number
                          of common shares                                 4,248,100              1,556,000                 960,000
                                                                         ===========            ===========             ===========
                 
                       Basic income (loss) per share
                          from continuing operations                     $      0.22            $     (2.94)            $     (2.66)
                                                                         ===========            ===========             ===========
                 DILUTED EARNINGS PER SHARE:
                       Income (loss) from  continuing
                          operations applicable to common
                          shareholders                                   $   940,000            $(4,581,000)            $(2,552,000)
                       Add:
                          Preferred stock divided                               --                     --                      --
                                                                         -----------            -----------             -----------
                          Income (loss) from continuing
                              operations for diluted earnings
                              per share                                  $   940,000            $(4,581,000)            $(2,552,000)
                                                                         ===========            ===========             ===========
                       Weighted average number of
                          shares used in calculating basic
                          earnings per common share                        4,248,100              1,556,000                 960,000
                 Add:
                       Common equivalent  shares
                          (determined  using the "treasury
                          stock" method) representing
                          shares issuable upon exercise of
                          options                                            750,917                   --                      --
                                                                         -----------            -----------             -----------
                       Weighted average number of
                          shares used in calculation of
                          diluted earnings per share                       4,999,017              1,556,000                 960,000
                                                                         ===========            ===========             ===========
                 
                       Diluted income (loss) per share
                          from continuing operations                     $      0.19            $     (2.94)            $     (2.66)
                                                                         ===========            ===========             ===========
</TABLE>


                                      F-20

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


12.  INCOME TAXES:

     Income tax benefit  (expense) for the years ended June 30, 1998,  1997, and
     1996 are comprised of the following:

<TABLE>
<CAPTION>

                                          CURRENT         DEFERRED            TOTAL
                                        -----------       -----------       -----------
        Year ended June 30, 1998        
<S>                                     <C>               <C>               <C>         
              Federal                   $    (2,000)      $      --         $    (2,000)
              State                          53,000              --              53,000
                                        -----------       -----------       -----------
                                        $    51,000       $      --         $    51,000
                                        ===========       ===========       ===========
                                        
        Year ended June 30, 1997        
              Federal                   $      --         $      --         $      --
              State                         (63,000)             --             (63,000)
                                        -----------       -----------       -----------
                                        $   (63,000)      $      --         $   (63,000)
                                        ===========       ===========       ===========
                                        
        Year ended June 30, 1996        
              Federal                   $    20,000       $(1,959,000)      $(1,939,000)
              State                         (22,000)             --             (22,000)
                                        -----------       -----------       -----------
                                        $    (2,000)      $(1,959,000)      $(1,961,000)
                                        ===========       ===========       ===========
</TABLE>


                                      F-21

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The actual income tax benefit  (expense)  differs from the  "expected"  tax
     benefit  (expense)  (computed by applying the U.S. Federal corporate income
     tax rate of 34% for each period) as follows:

<TABLE>
<CAPTION>
                                                    YEAR ENDED JUNE 30,
                         -----------------------------------------------------------------------
                                 1998                      1997                     1996
                         ---------------------    ---------------------    ---------------------
                            AMOUNT         %         AMOUNT         %        AMOUNT          %
                         -----------     -----    -----------     -----    -----------     -----
<S>                      <C>             <C>      <C>              <C>     <C>             <C>   
Computed
       "expected" tax
       benefit
       (expense)         $  (323,000)    (34.0)   $ 1,236,000      34.0    $  (167,000)    (34.0)
State income
       taxes, net of
       Federal income
       tax benefit            (6,000)      (.6)       (42,000)     (1.2)       (22,000)     (4.5)
Temporary
       differences
       utilized                 --        --             --        --           40,000       8.1
Refundable
       credits                  --        --           (3,000)      (.1)        20,000       4.1
Non-deductible
       expenses               (9,000)      (.9)      (730,000)    (20.0)       127,000      25.8
Realization of
       tax benefits             --        --             --        --       (1,959,000)    (398.7)
Effect of
      alternative
      minimum tax             (2,000)      (.2)          --        --             --        --
State tax refund              21,000       2.2           --        --             --        --
Change in
      valuation
      allowance due
      to liquidation
      of subsidiary             --        --         (524,000)    (14.4)          --        --
Effect of valuation
      allowance              370,000      38.9           --                       --        --
                         -----------     -----    -----------     -----    -----------     -----
                         $    51,000      (5.4)   $   (63,000)     (1.7)   $(1,961,000)    (399.2)
                         ===========     =====    ===========     =====    ===========     ======
</TABLE>


                                      F-22

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The components of the net deferred tax asset recognized as of June 30, 1998
     and 1997, are as follows:


                                                             JUNE 30
                                                   ----------------------------
                                                       1998             1997
                                                   -----------      ------------
Current Deferred Tax Assets (Liabilities)
      Insurance reserve                            $     2,000      $     2,000
      Vacation accrual reserve                           7,000            7,000
      Other                                              1,000            2,000
      Bad debt reserve                                  30,000           30,000
      Other reserves                                      --             84,000
      Accrued assessment and claims                     74,000          161,000
      Prepaid insurance                                 (3,000)         (11,000)
                                                   -----------      -----------
                                                       111,000          275,000
      Valuation allowance                             (111,000)        (275,000)
                                                   -----------      -----------
      Net current deferred tax asset               $      --        $      --
                                                   ===========      ===========

Long-term Deferred Tax Assets (Liabilities)
      Depreciation                                 $    11,000      $     5,000
      Amortization                                    (173,000)        (146,000)
      AMT tax credit carryforward                       27,000           23,000
      Net operating loss carryforward                4,408,000        2,538,000
                                                   -----------      -----------
                                                     4,273,000        2,420,000
      Valuation allowance                           (4,273,000)      (2,420,000)
                                                   -----------      -----------
      Net long-term deferred tax asset             $      --        $      --
                                                   ===========      ===========


     The   deferred  tax  asset   includes  the  future   benefit  of  the  CWTS
     pre-acquisition  net  operating  losses of  $843,000,  which has been fully
     reserved  through a  valuation  allowance.  During  the year ended June 30,
     1994,  goodwill was reduced by $423,000,  resulting from the utilization of
     the CWTS  pre-acquisition  net operation  losses that were previously fully
     reserved through a valuation allowance.

     Due to the  liquidation  of CW Truck through the General  Assignment of its
     assets effective December 31, 1996 (Note 7), the CWTS  pre-acquisition  net
     operating  losses  will be  available  for use by the parent  company.  Any
     portion of the  valuation  allowance  for this net  operating  loss will be
     recognized  as a tax  benefit  and will  affect  tax  expense  rather  than
     goodwill.

     During the year  ended June 30,  1996,  the  Company  was able to realize a
     portion of its net  operating  loss  against  the income it  recognized  in
     fiscal 1996 as a result of certain debt forgiveness (See Note 8).

     Deferred income taxes reflect the impact of temporary  differences  between
     the amount of assets and liabilities for financial  reporting  purposes and
     as  measured  by tax  laws  and  regulations,  principally  related  to net
     operating losses and expense accruals and reserves for financial  reporting
     purposes not

                                      F-23

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     deductible for tax purposes.

     As of  June  30,  1998,  the  Company  has  available  net  operating  loss
     carryforwards for federal and state purposes of $11,529,000 and $5,431,000,
     respectively.  The net operating losses begin to expire in 2005 for federal
     and 2012 for New York.  The benefit of the operating  loss to offset future
     taxable  income is subject to reduction or limitation of use as a result of
     certain  consolidated return filing regulations and additional  limitations
     relating to a 50% change in ownership which occurred during 1992.


13.  RELATED PARTY TRANSACTIONS:

     Transactions   with  related  parties  and  stockholders   consist  of  the
     following:

     During  the year ended  June 30,  1996 the  Company  incurred  expenses  to
     various law firms in which a director  of the  Company was a partner.  Such
     legal expenses amounted to $53,000.  No such expenses were incurred for the
     years ended June 30, 1998 and 1997.

     During the years ended June 30, 1998,  1997 and 1996, the Company paid rent
     to a company  controlled by two officers of the Company  totaling  $90,000,
     $95,000, and $93,000, respectively. The lease expires June 30, 2000.

     During the year ended June 30, 1996 the Company paid rent to an officer and
     employee of a Company subsidiary of $14,000. No such expenses were incurred
     for the years ended June 30, 1998 and 1997.

     During the years ended June 30, 1998,  1997 and 1996, the Company  received
     management fees from a company  controlled and 49% owned by two officers of
     the Company totaling $57,000, $89,000 and $58,000, respectively.


14.  EMPLOYEE DEFINED CONTRIBUTION PLAN AND TRUST:

     Effective April 1, 1993, the Company adopted a Deferred Compensation 401(k)
     Plan ("the  Plan")  covering  all  full-time  employees.  To be eligible to
     participate  in the Plan,  employees,  with the exception of drivers,  must
     have been  employed  by the Company  for 90 days;  drivers are  eligible to
     participate  following one year of service.  Employees involved in the Plan
     may contribute up to 20% of their compensation, on a pre-tax basis, subject
     to statutory and Internal Revenue Service guidelines.  Contributions to the
     Plan  are  invested,  at  the  direction  of  the  participant.  Under  one
     investment  option,  the Company makes matching  contributions to the Plan.
     Insignificant  contributions  were made by the  Company to this plan during
     the years ended June 30, 1998, 1997 and 1996.



                                      F-24

<PAGE>


             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


15.  MAJOR CUSTOMERS:

     The  Company  had  sales  to  unaffiliated  customers,  which  individually
     represented more than 10% of the Company's transportation sales as follows:


        CUSTOMER           1998              1997              1996
     --------------    -------------     --------------    --------------    
            A               31%               25%               19%
            B               11%               10%               --
            C               --                --                12%


     At June 30, 1998, approximately $2,700,000 or 49% of the Company's accounts
     receivable were due from two customers.

                                      F-25

<PAGE>

             COUNTRY WIDE TRANSPORT SERVICES, INC. AND SUBSIDIARIES

                        VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

                                                                                               Schedule II

                                                             ADDITIONS
                                           BALANCE AT        CHARGED TO                          BALANCE AT
                                           BEGINNING         COSTS AND                             END OF
CLASSIFICATION                             OF PERIOD         EXPENSES          DEDUCTIONS          PERIOD
--------------                             ---------         --------          ----------          ------
<S>                                        <C>               <C>               <C>               <C>       
For the year ended
         June 30, 1998:

         Accumulated amortization -
              Goodwill                     $  360,000        $  120,000        $     --          $  480,000
         Allowance for doubtful
                  accounts                     75,000              --                --              75,000

For  the year ended June 30, 1997:

         Accumulated amortization -
                  Goodwill                 $  599,000        $2,187,000        $2,426,000        $  360,000
         Allowance for doubtful
              accounts                        122,000            31,000            78,000            75,000

For the year ended June 30, 1996:

         Accumulated amortization -
              Goodwill                     $  392,000        $  207,000        $     --          $  599,000
         Accumulated amortization -
              Covenants                        39,000            14,000            53,000              --
         Allowance for doubtful
              accounts                        198,000           110,000           186,000           122,000
</TABLE>



                                       S-1


<PAGE>

                                   SIGNATURES

     Pursuant to the  Requirements  of Section 13 or 15(d) of the Securities Act
of 1934,  the  registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized on September 25, 1998.


                                  Country Wide Transport Services, Inc.

                             By:    /s/Timothy Lepper       
                                    Timothy Lepper, President
                                    Chief Executive Officer
                                    Chief Financial Officer
                                    and Principal Accounting Officer


<PAGE>


     Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has been  signed  below on behalf  of the  registrant  by the  following
persons  constituting a majority of the directors of the registrant on September
25, 1998.


SIGNATURES                       TITLE                    DATE
----------                       -----                    ----



/s/Timothy Lepper               Chairman, President       September 25, 1998
-------------------------       CEO, Director
Timothy Lepper 




/s/Mark Boyer                   Director                  September 25, 1998
-------------------------
Mark Boyer





/s/Wayne N. Parry               Secretary, Director       September 25, 1998
-------------------------
Wayne N. Parry