<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended: June 30, 2005

                        Commission file number: 000-28583

                       NEW YORK REGIONAL RAIL CORPORATION
        (Exact name of small business issuer as specified in its charter)

<TABLE>
<S>                                                          <C>
            DELAWARE                                             13-3081571
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)
</TABLE>

                    5266 Seneca Street, West Seneca, NY 14224
          (Address of principal executive offices, including zip code)

                                 (716) 675-6015
                           (Issuer's telephone number)

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

Check whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of "accelerated filer and
large accelerated filer" in Rule 12b-2 of the Exchange Act.

Large accelerated filer        Accelerated filer      Non-Accelerated filer  X

Check whether the registrant is a shell company (as defined by Rule 12b-2 of the
Exchange Act). Yes    No  X

There were 216,726,019 shares of the Registrant's Common Stock outstanding as of
May 11, 2006.

<PAGE>

                                      INDEX

<TABLE>
<CAPTION>
                                                                            Page
                                                                           -----
<S>                                                                        <C>
Part I: Financial Information
Item 1. Financial Statements:
Unaudited Consolidated Balance Sheet - as of June 30, 2005                   3
Unaudited Consolidated Statements of Operations, Six Months Ended
   June 30, 2005 and June 30, 2004                                           4
Unaudited Consolidated Statements of Cash Flows, Six Months Ended
   June 30, 2005 and June 30, 2004                                          5-6
Notes to Consolidated Financial Statements                                  7-13
Item 2. Management's Discussion and Analysis or Plan of Operation          13-22
Item 3. Controls and Procedures                                              22

Part II: Other Information                                                   22
Item 1. Legal Proceedings                                                  22-23
Item 2. Changes in Securities                                                23
Item 3. Defaults Upon Senior Securities                                      24
Item 4. Submission of matters to a vote of Security Holders                  24
Item 5. Other Information                                                    24
Item 6. Exhibits and Reports on Form 8-K                                     24
Signatures                                                                   25
</TABLE>


                                        2

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                  June 30, 2005
                                   (UNAUDITED)

<TABLE>
<S>                                                      <C>
                        ASSETS
Current assets
   Cash                                                  $    334,374
   Accounts receivable, net of allowance for doubtful
      accounts of $66,921                                     263,614
   Prepaid expenses and other current assets                   18,113
   Other current assets - discontinued operations             585,401
                                                         ------------
      Total current assets                                  1,201,502
Property and equipment, net                                 3,060,693
Other assets                                                   28,316
Other assets - discontinued operations                         58,082
                                                         ------------
                                                         $  4,348,593
                                                         ============

        LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
   Current maturities of long term debt                  $    411,135
   Convertible promissory notes:
      Others                                                  235,000
   Other short-term debt:
   Accounts payable                                           665,673
   Accrued expenses                                         3,364,995
   Payroll taxes payable                                    1,265,269
   Other current liabilities - discontinued operations        453,438
                                                         ------------
      Total current liabilities                             6,395,510
Deferred rent payable                                         219,412
Long term debt                                                461,566
Other liabilities - discontinued operations                   291,538
                                                         ------------
Total liabilities                                           7,368,026
Stockholders' deficit:
   Series D Convertible Preferred Stock, $0.001 par
      value, 2,500 shares authorized, issued and
      outstanding                                                   3
   Common stock, $.0001 par value, 280,000,000 shares
      Authorized; 216,284,468 shares issued; and
      216,129,258 outstanding                                  21,628
   Additional paid-in-capital                              17,388,688
   Accumulated deficit                                    (20,403,397)
   Treasury Stock, 155,210 shares at cost                     (26,355)
                                                         ------------
      Total stockholders' deficit                          (3,019,433)
                                                         ------------
                                                         $  4,348,593
                                                         ============
</TABLE>

                 See notes to consolidated financial statements.


                                        3
<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                               FOR THE SIX MONTHS ENDED     FOR THE THREE MONTHS ENDED
                                                       JUNE 30                       JUNE 30
                                             ---------------------------   ---------------------------
                                                 2005           2004           2005           2004
                                             ------------   ------------   ------------   ------------
<S>                                          <C>            <C>            <C>            <C>
Operating revenues                           $    999,480   $    543,972   $    543,973   $    312,321

Operating expenses                                318,882        159,218        159,219        133,827
                                             ------------   ------------   ------------   ------------
Gross Profit                                      680,598        384,754        384,754        178,494

Legal                                              90,019         71,757         70,449         57,228
Selling and administrative
   expenses                                     1,126,249        646,793        628,849        380,439
                                             ------------   ------------   ------------   ------------
Total Admin Exp.                                1,216,268        718,550        699,298        437,667
                                             ------------   ------------   ------------   ------------
Loss from operations                             (535,670)      (333,796)      (314,544)      (259,173)
Other income (expenses):
Forgiveness of debt income
   and gain/(loss) on disposal
   of fixed assets                                 19,250         19,250             --        (17,291)
Interest expense, net                            (100,279)       (26,955)       (26,955)       (35,671)
                                             ------------   ------------   ------------   ------------
Total other income(expense)                       (81,029)        (7,705)       (26,955)       (52,962)
                                             ------------   ------------   ------------   ------------
Net loss from continuing
   operations                                    (616,699)      (341,501)      (341,499)      (312,135)
Discontinued operations:
   Income (loss) from operations
      of discontinued operations
      (net of taxes)                              (16,649)       (97,948)      (612,357)        21,005
   Gain (loss) on disposal of
      Discontinued operations
      (net of taxes)                             (745,989)            --             --             --
                                             ------------   ------------   ------------   ------------
Loss before minority
   Interest                                    (1,379,337)      (439,449)      (953,856)      (291,130)
Minority interest in (income)
   Loss of subsidiary                                  --             --             --             --
                                             ------------   ------------   ------------   ------------
Net loss                                       (1,379,337)      (439,449)      (953,856)      (291,130)
Deemed preferred stock dividend                        --         22,000             --         11,000
                                             ------------   ------------   ------------   ------------
Loss applicable to common
   shareholders                              $ (1,379,337)  $   (461,449)  $   (953,856)  $   (302,130)
Loss per share - basic and                   ============   ============   ============   ============
   diluted:
   Loss from continuing
      operations                             $      (0.00)  $      (0.00)  $      (0.00)  $      (0.00)
   Loss from discontinued
      Operations                                    (0.00)         (0.00)         (0.00)         (0.00)
                                             ------------   ------------   ------------   ------------
   Loss per share                            $      (0.00)  $      (0.00)  $      (0.00)  $      (0.00)
                                             ============   ============   ============   ============
Weighted average common shares outstanding
   basic and diluted                          214,979,124    199,861,139    214,979,124    199,861,139
                                             ============   ============   ============   ============
</TABLE>

                 See notes to consolidated financial statements.


                                        4

<PAGE>

                NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
                            STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                               FOR THE SIX MONTHS ENDED JUNE 30
                                               ---------------------------------
                                                       2005         2004
                                                   -----------   ----------
<S>                                            <C>               <C>
Cash flows from operating activities:
   Net loss                                        $(1,379,337)  $ (439,449)
   Loss from discontinuing operations                 (762,638)     (97,948)
                                                   -----------   ----------
Net loss from continuing operations                   (616,699)    (341,501)
Adjustments to reconcile net loss to net
   cash provided by operating activities:
   Depreciation and amortization                       131,303      202,950
   Non-cash Compensation                                    --      100,000
   Gain on exchange of forgiveness of debt                  --      (28,871)
Changes in operating assets and liabilities:
   Accounts receivable                                (109,168)     (42,435)
   Other current assets                                 (1,023)      (3,294)
   Other assets                                          6,190           --
   Accounts payable                                     18,095      (97,277)
   Accrued expenses                                   (295,428)     353,979
   Payroll taxes payable                                36,868       40,453
   Deferred rent                                        43,554       43,554
   Treasury Stock                                           --        3,243
                                                   -----------   ----------
      Total adjustments                               (169,609)     572,302
                                                   -----------   ----------
Net cash used in continuing operations                (786,308)     230,801
Net cash (used in) provided by
   discontinued operations                             195,971     (692,214)
                                                   -----------   ----------
Net cash provided by operating activities             (590,337)    (461,413)
                                                   -----------   ----------
Cash flows from investing activities:
      Disposal of property and
         equipment - continuing operations             (83,461)    (498,610)
      Disposal of property and
         equipment - discontinued operations             8,022      (69,193)
                                                   -----------   ----------
Net cash used in investing activities                  (75,439)    (567,803)
                                                   -----------   ----------
Cash flows from financing activities:
      Payments of long term debt                       (16,458)          --
      Proceeds from other current
         debt - nonrelated party                            --     (210,000)
      Preferred Series "C" issued for cash
         net of costs                                       --      956,927
      Preferred Series "D" issued for cash
         net of costs                                  400,000           --
      Proceeds (payments) of current debt
         Related party                                 (42,500)          --
      Non-related party                                     --      261,212
                                                   -----------   ----------
Net cash provided by continuing operations             341,042    1,008,139

Net cash used in discontinued operations                    --      (53,069)
                                                   -----------   ----------
Net cash provided by financing activities              341,042      955,070
                                                   -----------   ----------
</TABLE>


                                        5

<PAGE>

                NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
                        STATEMENTS OF CASH FLOWS (Con't.)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                    FOR THE SIX MONTHS ENDED JUNE 30
                                                    --------------------------------
                                                             2005       2004
                                                          ---------   --------
<S>                                                 <C>               <C>
Net increase (decrease) in cash
   and cash equivalents                                    (324,734)   (74,146)

Cash at beginning of year                                   659,108    216,912
                                                          ---------   --------
Cash and cash equivalents at
   end of period                                          $ 334,374   $142,766
                                                          =========   ========

Supplemental Disclosure of Cash Flow Information:

Cash paid during the period for:
   Interest                                               $ 100,279   $ 26,955
                                                          =========   ========
   Income taxes                                           $      --   $     --
                                                          =========   ========

Non-cash investing and financing activities:
Preferred Series "C" stock converted
   to Common Stock                                        $ 440,000         --
</TABLE>

                  See notes to consolidated financial statements.


                                        6
<PAGE>

                       NEW YORK REGIONAL RAIL CORPORATION
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles for interim
financial statements and with the instructions to Form 10-QSB and Article 10 of
Regulation S-X. Accordingly, they do not include all the information and
disclosures required for annual financial statements.

In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of June 30, 2005 are included.

The results of operations for the six month period ended June 30, 2005 are not
necessarily indicative of the results to be expected for the full year.

2.   CAPITAL STOCK

In March 2004, the Company entered into an investor relations consulting
contract with Wildstein Advisory Services, Inc ("WASI"). The contract runs until
December 31, 2004. Under the terms of the contract WASI received warrants to
purchase 1,000,000 shares of common stock at an exercise price of $.0001 per
share. On the date of the execution of the agreement, the closing price for the
Company's common stock was $0.10. Accordingly, the Company recorded a charge to
consulting expense of $100,000.

In January 2004, the Company entered into an employment agreement with Joel
Marcus, the Company's chief financial officer. The agreement provides for
compensation of $1,500 per month and Mr. Marcus was issued an option to purchase
250,000 shares of common stock at an exercise price of $.0001 per share. On the
date of the grant the closing price for the Company's common stock was $0.625,
accordingly the Company recorded a $15,625 charge to compensation expense in
connection with the issuance of the option.

In February 2004, Mr. Marcus exercised the remaining 38,597 options granted in
accordance with the terms of his 2002 employment agreement. The exercise prices
ranged from $.0495 per share to $0.074 per share. Mr. Marcus exercised these
warrants using $2,384 of accrued consulting fees.

In January 2004, accrued dividends on 440,000 shares of Series C Preferred Stock
totaling $118,131 were converted into 2,050,887 shares of common stock. Upon
conversion the holder of the shares of Series C Preferred Stock received a
warrant to purchase an additional 2,828,968 shares of common stock at an
exercise price of $0.12 per share.


                                        7

<PAGE>

In February 2004, promissory notes and accrued interest in the amount of
$464,640 were converted into warrants to purchase 4,646,400 shares of common
stock at an exercise price of $.0001 per share. On such date the closing price
for the Company's common stock was $0.08.

In February 2004, promissory notes and accrued interest in the amount of
$225,060 held by John Marsala were converted into 2,250,600 shares of common
stock. On such date the closing price for the Company's common stock was $0.08.

In February 2004, notes payable to Ronald Bridges a related party totaling
$42,000 in principal plus accrued interest were converted into warrants to
purchase 420,000 shares of common stock at an exercise price of $.0001 per
share. On the date of the conversion the closing price for the Company's common
stock was $0.08.

In February 2004, the Company purchased the remaining 49% of the stock of JS
Transportation, Inc. in exchange for 1,420,408 shares of common stock and
warrants to purchase 2,579,592 shares of common stock at an exercise price of
$.001 per share and the return to treasury of 860,000 shares of the Company's
common stock. On the date of the acquisition the closing price for the Company's
common stock was $0.08.

On February 4, 2004, the Company entered into an employment agreement with
Donald Hutton. The agreement provides for annual compensation of $115,000 plus
other benefits. In addition, he is eligible for incentive bonuses.

In February 2004, Convertible Notes in the amount of $210,000 plus accrued
interest held by Dominic Massa were settled at a discount.

Series D Preferred Stock

In February 2004, the Board of Directors designated 2,500 shares of preferred
stock as Series D Preferred Stock. The shares of Series D Preferred Stock have
no annual dividend. Upon liquidation or dissolution, each share of Series D
Preferred Stock is entitled to a distribution of 110% of the face amount. Each
share of Series D Preferred Stock is entitled to 120,000 votes on any matter
submitted to a vote of the stockholders provided that at least 1,700 shares of
Series D Preferred Stock have been issued and there are no shares of Series C
Preferred Stock outstanding. The shares can convert into shares of common stock
under various terms. (See Note - M "Subsequent Events" and the Company's 8-K
filed February 19, 2004 for further details.) As of June 30, 2005, 2,500 shares
of Series D Preferred Stock have been issued.


                                        8

<PAGE>

Pursuant to an agreement dated February 4, 2004 Transit Rail, LLC purchased 750
shares of Series D Preferred Stock at a purchase price of $1,000 per share and
agreed to purchase up to 1,750 additional shares of Series D Preferred Stock. In
connection with the transaction Transit Rail LLC received a proxy from the
holder of the shares of Series C Preferred Stock granting it the right to vote
approximately 39.8% of the Company's voting securities. Upon the purchase of
1,700 shares of Series D Preferred Stock and the conversion of all of the
outstanding shares of Series C Preferred Stock each share of Series D Preferred
Stock shall be entitled to 120,000 votes, which would represent 50.5% of the
Company's voting securities based upon the number of shares of common stock
presently outstanding. Gordon Reger controls Transit Rail, LLC. Reger
Enterprises, LLC, an affiliate of Transit Rail LLC, holds an option to develop a
two and one-half acre site at the Company's Bush Terminal Facility which it may
exercise if the Company's lease dispute with the City of New York is settled and
the City of New York approves the contemplated use of the site. The use and
transportation fees payable to the Company, if the option is exercised, will be
established at fair market value and subject to approval of the majority of the
Company's disinterested directors.

Upon conclusion of the Series D Preferred Stock transaction as described above,
the Company converted the Series C Preferred Stock into 6,577,859 shares of
common stock.

See Form 8-K "Items 1, 5, and 7. CHANGES IN CONTROL OF REGISTRANT, OTHER EVENTS
AND REGULATION FD DISCLOSURE and FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS", respectively filed February 19, 2004, with date of
report February 4, 2004, incorporated by reference.

CRITICAL ACCOUNTING POLICIES

A summary of significant accounting policies is included in Note 2 to the
audited financial statements included in the Company's annual report on Form
10-KSB for the year ended December 31, 2004. Management believes the
applicationof these policies on a consistent basis enables the Company to
provide reliable and useful information about the Company's operating results
and financial conditions.

3.   DISCONTINUED OPERATIONS

In June 2005, the operations of the trucking subsidiary, JS Transportation, Inc.
was discontinued and substantially all of its assets were disposed. In
accordance with generally accepted accounting principles, the financial results
of the trucking segment are reported as "Discontinued Operations" and the
Company's financial results of prior periods have been restated. The restatement
has no effect on the net loss or shareholders' equity at June 30, 2005.
Condensed results of the discontinued operations are as follows:


                                        9

<PAGE>

<TABLE>
<CAPTION>
                                   For the six months ended
                                -----------------------------
                                June 30, 2005   June 30, 2004
                                -------------   -------------
<S>                             <C>             <C>
Net Sales                        $3,177,458      $4,507,156
Earnings/(loss) before income
   tax expense                   $  (16,649)     $  (97,948)
Income tax expense                       --              --
                                 ----------      ----------
Net earnings                     $  (16,649)     $  (97,948)
                                 ==========      ==========
Gain/(loss) on disposition
   of trucking operations        $ (745,989)             --
                                 ==========      ==========
</TABLE>

4.   LEGAL MATTERS AND OTHER CONTINGENCIES

Regulation S-B requires only updates of existing or new legal matters, which
occurred since the last report be contained in this report on Form 10 QSB.
Please see the Company's annual report on Form 10-KSB for year ended December
31, 2004 for further information on legal matters and other contingencies.

On July 21, 2005, New York Regional Rail Corporation ("NYRR") and its
subsidiaries, J.S. Transportation, Inc. and GM Trucking and Associates, Inc.
(together with NYRR, the "Company") filed a complaint (the "Complaint") in the
Superior Court of New Jersey against Ronald W. Bridges, Darryl S. Caplan, Esq.,
Todd Sage, Stacey Sage a/k/a Stacie Sage, Mary Sage, and John Taylor (the
"Individual Defendants"), Cureton Caplan, P.C. f/k/a Cureton Caplan, Hunt,
Scaramella & Clark, P.C. (the "Caplan Firm"), Consolidated Logistics and
Transportation, LLC a/k/a CLT, CME Services, LLC a/k/a CME, National
Transportation Services, LLC, 833 Rancocas Road, LLC, J.S. Transportation Truck
Repair, LLC, GM Trucking, Inc. and Blue Ribbon Group, Inc. (with the Individual
Defendants, the "Defendants").

The Company has asserted the following causes of action against the Defendants
in the Complaint: (i) breach of fiduciary duty against the Individual Defendants
and the Caplan Firm; (ii) breach of duty of loyalty and good faith against the
Individual Defendants; (iii) accounting against the Defendants; (iv) fraud and
deceit against the Individual Defendants; (v) competition with employer or
principal against the Individual Defendants except Darryl S. Caplan, Esq.; (vi)
conversion against the Defendants; (vii) unfair competition against the
Defendants except Darryl S. Caplan, Esq. and the Caplan Firm; and (viii) unjust
enrichment against the Defendants.

On December 2, 2005, John Marsala, Steven Hirsch and Joel Marcus commenced an
action against the Company claiming breach of fiduciary duties, mismanagement,
aiding and abetting those breaches, fraud and unjust enrichment related to
transactions described in Form 8K, filed November 5, 2005. The Company is
vigorously defending this action.

The outcome of the Company's legal matters as described above and in the annual
report on Form 10-KSB for the year ended December 31, 2004 can not be determined
and, accordingly, no related contingencies have be recorded.


                                       10

<PAGE>

5.   SEGMENT INFORMATION

The following information is presented in accordance with SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information", which was
adopted by the Company during 1999.

The following tables provide summarized information concerning the Company's
reportable segments.

<TABLE>
<CAPTION>
                                    Railroad    Trucking      Total
                                   ----------   --------   ----------
<S>                                <C>          <C>        <C>
As of June 30, 2005
Segment assets                     $3,705,108   $643,485   $4,348,593

Three months ended June 30, 2005
Operating revenues                 $  543,973      N/A     $  543,973
Gross profit                          384,754      N/A        384,754
Segment profit (loss)                (341,499)     N/A       (341,499)
Interest expense                       26,955      N/A         26,955
Depreciation and amortization          60,114      N/A         60,114

Three months ended June 30, 2004
Operating revenues                 $  312,321      N/A     $  312,321
Gross profit                          178,494      N/A        178,494
Segment profit (loss)                (312,135)     N/A       (312,135)
Interest expense                       35,671      N/A         35,671
Depreciation and amortization          62,681      N/A         62,681

Six months ended June 30, 2005
Operating revenues                 $  999,480      N/A     $  999,480
Gross profit                          680,598      N/A        680,598
Segment profit (loss)                (616,699)     N/A       (616,699)
Interest expense                      100,279      N/A        100,279
Depreciation and amortization         131,303      N/A        131,303

Six months ended June 30, 2004
Operating revenues                 $  543,972      N/A     $  543,972
Gross profit                          384,754      N/A        384,754
Segment profit (loss)                (341,501)     N/A       (341,501)
Interest expense                       26,955      N/A         26,955
Depreciation and amortization         202,950      N/A        202,950
</TABLE>


                                       11
<PAGE>

6. GOING CONCERN

The Company's financial statements have been presented on the basis that it is a
going concern, which contemplated the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company has reported
recurring negative cash flows from operations and recurring net losses, which
resulted in accumulated deficit of $20,403,397 at June 30, 2005. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern.

The Company's continued existence is dependent upon its ability to raise capital
or to successfully market and sell its services. The financial statements do not
include any adjustments that might be necessary should the Company be unable to
continue as a going concern.

7. STOCK BASED COMPENSATION

Statement of Financial Accounting Standard No. 123, "Accounting for Stock-Based
Compensation," ("SAFS 123"), encourages, but does not require, companies to
record compensation cost for stock-based employee compensation plans at fair
value. The Company has chosen to account for stock-based compensation using the
intrinsic value method prescribed by Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related Interpretations.
Accordingly, compensation cost for the Company's stock at the date of the grant
over the amount of an employee must pay to acquire the stock. The Company has
adopted the "disclosure only" alternative described in SFAS 123 and SFAS 148,
which require pro forma disclosures of net income and earning per share as if
the fair value method of accounting had been applied.

The fair value of the options granted was estimated at the grant using a
Blck-Scholes option pricing model with the following assumptions at June 30,
2004:

<TABLE>
<S>                               <C>
Average risk free interest rate        3
Expected lives (in days)             365
Dividend yield                         0
Expected volatility               100.47
</TABLE>

The following table presents the pro-forma net loss and net loss per share after
giving effect to FAS123, "Accounting for Stock Based Compensation."

<TABLE>
<CAPTION>
                                    June 30, 2005    June 30, 2004
                                    --------------   -------------
<S>                                 <C>              <C>
Net loss as reported                 ($1,379,337)      ($461,449)
Less: FAS123 stock option expense             --          (4,375)
Pro-forma net loss                   ($1,379,337)      ($465,824)

Net loss per share as reported:
Basic                                $      (.00)      $    (.00)
Diluted                              $      (.00)      $    (.00)
Pro-format net loss per share:
Basic                                $      (.00)      $    (.00)
Diluted                              $      (.00)      $    (.00)
</TABLE>


                                       12

<PAGE>

8. SUBSEQUENT EVENTS:

The Company had identified what it believed to be several material weaknesses in
its internal controls over financial reporting at its subsidiary, JS
Transportation, Inc. The material weaknesses were identified by the Company's
new management team and include inadequate accounting and internal control
functions, as well as the failure by such subsidiary to maintain proper records
or adequate control over its property, accounts and funds. During the
investigation of the full scope of the accounting and internal control
inadequacies at JS Transportation, Inc., the Company ceased all business at JS
Transportation, Inc. by June 30, 2005. As a result of business cessation, the JS
Transportation, Inc. defaulted on its capital lease to CLT, with a balance of
$961,426 and returned all of the related property with a net book value of
$1,341,961. The Company also recognized an impairment of goodwill from the
purchase of JS Transportation, Inc of $381,714, the carrying value. Related to
this matter, the Company has commenced a law suit as described in Item 1 of Part
II.

On November 6, 2005, the Company entered into and completed a Stock and Asset
Purchase Agreement with GJ Railco Acquisition, LLC whereby the Company sold all
of the stock of New York Cross Harbor Railroad Terminal Corp. that it owned
(constituting 93.4% of the issued and outstanding stock of New York Cross Harbor
Railroad Terminal Corp.) to GJ Railco Acquisition, LLC and an asset purchase
with GJ Railco Assets, LLC where by the Company sold all of the assets of CH
Partners, Inc to GJ Railco Assets, LLC. GJ Railco Acquisitions, LLC and its
affiliate GJ Railco Assets, LLC paid total consideration of $4,388,000,
allocated as follows:

     a).$50,000 for the stock, $25,000 of which was paid in cash and the
remainder of which took the form of a promissory note, payable in twenty equal
monthly principal installments of $1,250, together with simple interest thereon
at an annual rate of 6%.

     b).GJ Railco Acquisition, LLC also assumed approximately $3,788,000 of the
liabilities of New York Cross Harbor Railroad Terminal Corp. together with the
contingent liabilities of New York Harbor Railroad Terminal Corp. disclosed in
the Company's Annual Report on Form 10K-SB for the fiscal year ended December
31, 2004.

     c).In addition, pursuant to the Stock and Asset Purchase Agreement, the
Company sold a barge to GJ Railco Acquisition, LLC. GJ Railco Acquisition, LLC
paid $50,000 for the barge, $25,000 of which was paid in cash and the remainder
of which took the form of a promissory note, payable in twenty equal monthly
principal installments of $1,250, together with simple interest thereon at an
annual rate of 6%.


                                       13

<PAGE>

     d).Also on November 6, 2005, the Company's majority-owned subsidiary, CH
Partners, Inc., entered into and completed an Asset Purchase Agreement with GJ
Railco Assets, LLC, whereby CH Partners, Inc. sold substantially all of its
assets to GJ Railco Assets, LLC. These assets were used in connection with the
railroad operations of New York Cross Harbor Railroad Terminal Corp. GJ Railco
Assets, LLC paid $400,000 for these assets, $50,000 of which was paid in cash
and the remainder of which took the form of a promissory note, payable in twenty
equal monthly installments of $17,500, together with simple interest thereon at
an annual rate of $6%. The Company took a collateral assignment of a security
interest (obtained for the benefit of both buyer's financing sources) in all of
the assets sold.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

SELECTED FINANCIAL DATA

The following discussion contains forward-looking statements that involve a
number of risks and uncertainties. While these statements represent the
Company's current judgment in the future direction of the business, such risks
and uncertainties could cause actual results to differ materially from any
future performance suggested herein. Certain factors that could cause results to
differ materially from those projected in the forward-looking statements include
the level of freight shipments, competition, future contractual terms with
landfill authorities, impact of government regulations, availability of capital
to finance growth and general economic conditions.

The following should be read in conjunction with the attached financial
statements and notes thereto of the Company.

General

The Company operated a short-line railroad, which transported freight via
rail/barges across New York Harbor.

RECENT DEVELOPMENTS

Change in Control

Pursuant to an agreement dated February 4, 2004 Transit Rail, LLC purchased 750
shares of Series D Preferred Stock at a purchase price of $1,000 per share and
agreed to purchase up to 1,750 additional shares of Series D Preferred Stock. In
connection with the transaction Transit Rail LLC received a proxy from the
holder of the shares of Series C Preferred Stock granting it the right to vote
approximately 39.8% of the Company's voting securities. Upon the purchase of
1,700 shares of Series D Preferred Stock and the conversion of all of the
outstanding shares of Series C Preferred Stock each share of Series D Preferred
Stock shall be entitled to 120,000 votes, which would represent 50.5% of the
Company's voting securities based upon the number of shares of common stock
presently outstanding.


                                       14

<PAGE>

Affiliates of Transit Rail, LLC own or operate a fleet of approximately 575
railcars that transport construction and demolition material generated from
high-cost disposal markets in the Northeastern United States to low-cost
landfills located in the Midwest. Such affiliates own and operate rail-served
transfer stations in Connecticut and Massachusetts which handle construction and
demolition material. They also provide rail disposal services for the largest
transfer station in New York City and operate a municipal solid waste landfill
in Ohio. The Company expects that in addition to its investment, Transit Rail,
LLC or its affiliates in conjunction with the Company will submit proposals and
bid on projects, which are in the waste transportation and disposal areas,
utilizing the Company's unique rail assets.

See Form 8-K "Items 1, 5, and 7. CHANGES IN CONTROL OF REGISTRANT, OTHER EVENTS
AND REGULATION FD DISCLOSURE and FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS", respectively with filed February 19, 2004, with date
of report February 4, 2004, incorporated by reference.

As of June 30, 2005, management's business strategy for the Company's rail
segment was as follows:

     The Company intends to capitalize on the New York City metropolitan area's
     need for faster, lower cost services for the movement of freight between
     New York City and New Jersey. Based upon the implementation of
     recommendations of studies prepared by the City of New York, Port Authority
     of NY/NJ and the Army Corps of Engineer reconstruction and expansion of the
     rail infrastructure is underway and additional projects may be commenced.
     The studies recommend that a substantial portion of freight which is
     presently transported by truck be transported by rail. The Company believes
     that there will be significant opportunity for growth as a result of these
     projects.

     The Company plans to seek opportunities for growth based on New York City's
     need to find alternative means for the removal of the approximately 26,000
     tons of waste that it produces daily. New York City has completed plans for
     the disposal of its waste. The main impetus for the plans was the closing
     of New York City's primary landfill, the Fresh Kills Landfill, in March
     2001. Although New York City's plan intends for such waste to be shipped to
     out-of-state landfills, this plan has encountered several roadblocks,
     including litigation, a fragile highway and bridge infrastructure and
     resistance from the public. New York City has been soliciting long-term
     proposals and plans to handle the shipping of waste.

     The Company's plan is to utilize its services to assist New York City in
     such plans while addressing the issues and concerns raised by proponents of
     such plans.

     The Company is exploring expanding its services to include providing barge
     unloading facilities. Management believes that barge unloading services are
     synergistic with the Company's rail and trucking operations and offer a
     significant opportunity to increase revenue from new services as well as
     increase revenue from its existing services.


                                       15

<PAGE>

     Based upon these opportunities and the Company's independent development of
     originating shipments including containerized freight, the Company believes
     that the Company's rail operations are positioned to attain profitability.
     However, there can be no assurance that the Company will achieve
     profitability in the next 12 months, or at all.

The Company's rail segment's assets were sold as per the discussion of factors
and events in the subsequent events section of notes to the consolidated
financial statements, above.

As of June 30, 2005, management was evaluating operations and assets to
determine their true economic value and ascertain the extent to which the
Company would be able to recover the assets and opportunities that new
management believed had been diverted as summarized in Part II, Item 1.

Recent Accounting Pronouncements

On December 16, 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets, an amendment of APB Opinion No. 29". SFAS No. 153 replaces the exception
from fair value measurement in APB Opinion No. 29 for nonmonetary exchanges of
similar productive assets with a general exception from fair value measurement
for exchanges of nonmonetary assets that do not have commercial substance. A
nonmonetary exchange has commercial substance if the future cash flows of the
entity are expected to change significantly as a result of the exchange. SFAS
No. 153 is to be applied prospectively, and is effective for nonmonetary asset
exchanges occurring in fiscal periods beginning after the date of issuance of
SFAS No. 153. The adoption of SFAS No. 153 did not have a material impact on our
financial statements.

In December 2004, the FASB issued SFAS No. 123R, Share Based Payments, which
requires companies to measure compensation cost for all share-based payments,
including employee stock options. SFAS No. 123R is effective as of the first
fiscal period beginning after June 15, 2005. In March 2005, the SEC issued SAB
No. 107 regarding the SEC's interpretation of SFAS No. 123R and the valuation of
share-based payments for public companies. The Company will adopt SFAS No. 123R
on January 1, 2005, and the Company does not believe adoption of SFAS No. 123R
will have a material effect on our consolidated financial position, results of
operations or cash flows.

In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections", a replacement of APB Opinion No. 20, "Accounting Changes", and
SFAS No. 3, "Reporting Accounting Changes in Interim Financial Statements". SFAS
No. 154 changes the requirements of the accounting for and reporting of a change
in accounting principle. Previously, most voluntary changes in accounting
principles required recognition via a cumulative effect adjustment within net
income of the period of the change. SFAS No. 154 requires retrospective
application to prior periods' financial statements, unless it is impractical to
determine either the period-specific effects or the cumulative effect of the
change. SFAS No. 154 is effective for accounting changes made in fiscal years
beginning after December 15, 2005; however, the Statement does not change the
transition provisions of any of the existing accounting pronouncements. We do
not believe adoption of SFAS No. 154 will have a material effect on our
consolidated financial position, results of operations or cash flows.


                                       16

<PAGE>

SIX MONTHS ENDED JUNE 30, 2005 COMPARED TO THE SIX MONTHS ENDED JUNE 30,2004

RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
                     Six months ended   Three months ended
                       June 30, 2005       June 30, 2005
                     ----------------   ------------------
<S>                  <C>                <C>
Operating revenues       $999,480            $543,973
Operating expenses        318,882             159,219
Gross profit              680,598             384,754
</TABLE>

<TABLE>
<CAPTION>
                     Six months ended   Three months ended
                       June 30, 2004       June 30, 2004
                     ----------------   ------------------
<S>                  <C>                <C>
Operating revenues       $543,972            $312,321
Operating expenses        159,218             133,827
Gross profit              384,754             178,494
</TABLE>

     During the six months ended June 30, 2005, the Company had $999,480 in
revenue compared to $543,972 in revenue during the corresponding prior period,
an increase of $455,508 or 83.7%. This increase was primarily due to current
management's plan to increase utilization of all railroad assets.

     During the three months ended June 30, 2005, the Company had $543,973 in
revenue compared to $312,321 in revenue during the corresponding prior period,
an increase of $231,652 or 74.2%. This increase is, again, primarily due to
current management's plan to increase utilization of all railroad assets.

     Operating expenses for the six months ended June 30, 2005 were $318,882
compared to $159,218 for the six months ended June 30, 2004, an increase of
$159,664 or 100.3%. This increase in operating expenses, as a percentage of
revenue, is primarily due to current management's reduction of the operating
inefficiencies

     Operating expenses for the three months ended June 30, 2005 were $159,219
compared to $133,827 for the three months ended June 30, 2004, an increase of
$25,392 or 19.0%. This increase in operating expenses is primarily due to the
increase of crew payroll and tug services, related to the increase in revenue,
offset by current management's reduction of the operating inefficiencies.

     Operating expenses as a percentage of operating revenue were 29.3% for the
six months ended June 30, 2004. During the same time period in 2005, operating
expenses increased to 31.9% of operating revenue due to the increase of crew
payroll and tug services, related to the increase in revenue, offset by current
management's reduction of the operating inefficiencies.

     Operating expenses as a percentage of operating revenue were 42.8% for the
three months ended June 30, 2004. During the same time period in 2005, operating
expenses decreased to 29.3% of operating revenue, due to current management's
increase utilization of all assets and reduction in operating inefficiencies.


                                       17
<PAGE>

     Administrative expenses increased in the six months ended June 30, 2005, by
$497,718 as compared to the six months ended June 30, 2004. As a percentage of
operating revenues, administrative expenses decreased to 121.7% for the six
months ended June 30, 2005, from 132.1% for the six months ended June 30, 2004.
The increase of $497,718 is primarily due to an increased insurance, utility and
repair and maintenance costs, offset by current management's reduction in
operating inefficiencies.

     Administrative expenses increased in the three months ended June 30, 2005,
by $261,631. As a percentage of operating revenues, administrative expenses
decreased to 128.6% for the three months ended June 30, 2005, from 140.1% for
the three months ended June 30, 2004. The decrease is due to an increase in
legal and professional fees, insurance, utilities and repair and maintenance
expenses, offset by current management's reduction in operating inefficiencies.

     Net interest expense was $100,279 for the six months ended June 30, 2005,
as compared to $26,955 for the six months ended June 30, 2004. This increase is
attributed to accrued interest not recorded in the last quarter of 2004, but
charged in 2005.

     Net interest expense was $26,955 for the three months ended June 30, 2005,
as compared to $35,671 for the three months ended June 30, 2004.

     The Company recognized a net loss for the six months ended June 30, 2005 of
$1,379,337 versus a loss for the six months ended June 30, 2004 of $439,449 due
to the factors listed above and the disposition of JST's assets associated with
the capital lease and the associated goodwill impairment charge at June 30,
2005.

LIQUIDITY AND CAPITAL RESOURCES

The Company had net cash used in operating activities of $590,337 during the six
months ended June 30, 2005 compared to net cash used in operating activities of
$461,413 for the six months ended June 30, 2004. The increase of $128,924 was
primarily caused by an increase in net loss, loss from the disposal of JST's
assets, income from the termination of the JST capital lease, impairment of
goodwill arising from the discontinued operations of the trucking division, an
increase in accounts receivable, which was further increased by the reduction of
accounts payable and accrued expenses.

The Company had net cash used in investing activities of $75,439 during the six
months ended June 30, 2005 as compared to net cash used in investing activities
of $567,803 for the six months ended June 30, 2004. The decrease of $492,364 was
the result of a decrease in the purchase of machinery and equipment.

The Company had net cash provided by financing activities of $341,042 during the
six months ended June 30, 2005 as compared to net cash provided by financing
activities of $955,070 for the six months ended June 30, 2004. The decrease of
$614,028 was caused primarily by the sale of preferred stock for $1,000,000
during the six months ended June 30, 2005 offset by an approximate $43,000
charge to professional fees and by payments approximately $123,089 of debt.


                                   18

<PAGE>

The Company's total assets on June 30, 2005 were $4,348,593, a decrease of
$1,987,840 from $6,336,433 on December 31, 2004. Total current assets of the
Company on June 30, 2005 decrease by $102,180 to $1,201,502 from $1,303,682 on
December 31, 2004. The decreased assets are primarily attributable to an
decrease in property and equipment associated with the disposition of equipment
related to the capital lease terminated. Other assets were $28,316 on June 30,
2005 as compared to $34,506 on December 31, 2004. The decrease in other assets
is attributed expiration of permits and licenses.

On June 30, 2005, the Company had total liabilities of $7,368,026 as compared to
$8,376,527 on December 31, 2004. On June 30, 2005, current liabilities were
$6,395,510 as compared to $6,490,739 on December 31, 2004.

The Company's working capital deficit on June 30, 2005 increased by $6,951 to
$5,194,008 from $5,187,057 on December 31, 2004.

The Company's total stockholders deficit on June 30, 2005 increased by $979,339
to $3,019,433 from $2,040,094 on December 31, 2004.

As of June 30, 2005 the Company had the following current liabilities:

<TABLE>
<S>                                                 <C>
Accounts payable                                    $  665,673
Accrued expenses                                    $3,364,995
Notes payable and current maturities
   of long-term debt                                $  646,135
Payroll taxes payable                               $1,265,269
Other Current Liabilities-discontinued operations   $  453,438
</TABLE>

Accounts payable are being paid generally in accordance with their terms. The
Company reasonably expects to continue to pay these amounts from cash flow from
operations.

Accrued expenses include $1,002,590 for accrued real estate taxes payable to New
York and New Jersey.

The City of New York has billed the Company in excess of $6,800,000 for property
taxes dating back to 1984. The Company claims that the tax assessments are for
the most part erroneous because they relate either to real property that the
Company had not owned or leased, or to property that is not subject to the real
property tax. The Company further claims that New York City taxing authorities
have assessed taxes based on flawed valuations, resulting in substantial
overcharges. The New York State Board of Equalization and Assessment has
proposed significant reductions to these valuations, subject to the approval of
the New York City Corporation Counsel. Management expects, but cannot give
assurance, that the outstanding liabilities will be settled for a lesser amount.
Pending a settlement of the tax arrears, the Company has recorded a liability on
its books of $556,200 for these real estate taxes. As of January 18, 2006, the
Company is actively attempting to settle this dispute.


                                   19

<PAGE>

The State of New Jersey has assessed the Company approximately $63,000 per year
since 1996 for real estate taxes. The Company believes that the proper tax
should be approximately $17,000 annually. Pending a settlement, the Company has
recorded a liability on its books of $551,390 for these real estate taxes. As of
January 18, 2006, the Company is actively attempting to settle this dispute.
(See Note I of the Form 10KSB for the year ended December 31, 2004 for
additional information in regards to this matter.)

Accrued expenses also include a "Reserve for Legal Contingencies and Other
Commitments" of approximately $2,091,924. In accordance with recently issued
accounting pronouncements of the FASB, specifically SFAS Statement No. 150,
which establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity the
Company has re-classified $1,500,000 of temporary equity to "Reserve for Legal
Contingencies and Other Commitments". Additionally, the Company also
reclassified approximately $456,000 of short-term debt and accrued interest.
(See Note I of the Form 10KSB for the year ended December 31, 2004 for
additional information in regards to this matter.)

Accrued expenses include approximately $143,000 owed for accrued interest on
convertible notes. The Company anticipates that most of the accrued interest
will be satisfied through the issuance of common shares. However, there can be
no assurance that this will occur.

Notes payable and current maturities of long-term debt totaling $646,135
includes $288,147 of current maturities of long-term debt primarily for
equipment leases or settlement payments on outstanding debts and are payable
over 12 months. It also includes $235,000 of convertible notes, which the
Company anticipates will be converted into equity. However, there can be no
assurance that this will occur.

The Company has an accrual for payroll taxes payable in the amount of
$1,265,269. The dispute regarding the payroll taxes stems from 1996 and prior,
when the Company was first delinquent in payment of such taxes. The past due
taxes then had interest and penalties applied. Subsequently, the Company began
paying its payroll tax; however these payments were applied to the past due
amounts, causing penalties and interest to be imposed on the current liability.
If properly applied only interest would have been charged on the older past due
taxes. This misapplication continued until 1998 when the Company was successful
in obtaining relief for a portion of this misapplication. The Company received a
refund in 1999. The Company believes it is still due a substantial refund for
past-misapplied payments and expects that the final settlement will be
substantially less than the amount, which it has accrued. As of January 18,
2006, the Company is actively attempting to settle this dispute. However, there
can be no assurance that the Company will achieve a satisfactory settlement.


                                   20

<PAGE>

The lease portion of the 2003 Agreement signed with Conrail provides a 20-year
land lease, with a 10-year option, to the Company for the use of Conrail's
railroad operating property and water rights in Greenville, New Jersey. Pursuant
to the lease, in September 2003, the Company exercised an option to lease an
additional five acres in the Greenville Yard. The agreement contains rent
concessions early in the lease term and then the base rent is $168,500 annually
in 2008. Rent expense under the lease has been recognized on a straight-line
basis to account for the rent concessions provided during the lease term,
resulting in a $43,554 non-cash deferred rent charge during the three months
ended June 30, 2005.

Long-term liabilities include a perfected judgment by the Port Authority of New
York and New Jersey ("PANYNJ"). In April 2002, the Company entered into an
agreement with PANYNJ. Under the agreement the PANYNJ will be paid five percent
(5%) of the Company's revenues collected by Norfolk Southern Corporation on
behalf of the Company's customers which will be applied against the amount of
the judgment. This agreement was extended on October 15, 2005 for an additional
year. All payments will be applied to the amounts due PANYNJ by virtue of their
judgments. The Company's current liability is estimated to be $310,000 and
assumes no interest charges. The term of the repayment agreement is eighteen
months. During the term of the agreement the parties intend to continue
negotiations on a final settlement. As of January 18, 2006, the Company is
actively attempting to settle this dispute.

Long-term liabilities is made up predominately of approximately $700,000 in the
long term portion of notes payable including interest.

There are administrative remedies available to the Company's creditors
including, but not limited to, judgments, liens and levies, which can be placed
on the Company's bank accounts. Historically, these remedies have been used by
the creditors of the Company and have resulted in additional cash flow hardships
for the Company. There can be no assurance that any of these remedies may not be
used in the future. Absent resolution of these matters and assuming the
agencies, vendors and taxing authorities fully prevail in court proceedings,
monetary damages could approximate $6 million, but management currently
anticipates that these matters will be resolved at a comparatively lower sum and
further believes absent satisfactory resolution it would ultimately prevail in
the judicial process. The failure of the Company to achieve satisfactory
settlements or prevail with respect to pending or threatened litigation may have
a material adverse effect on the Company.


                                  21

<PAGE>

The Company does not have any significant available credit or bank financing,
except for lease financing for the Company's trucking operations. However, the
Company may qualify for low interest loans through the Federal Rail
Administration for short-line railroads and grants from New York and New Jersey
State Department of Transportation for capital improvements. Due to historical
operating losses, the Company's operations have not been a source of liquidity.
Until such time as the Company becomes profitable, the Company's continued
operations will depend upon the availability of additional funding. In order to
obtain capital, the Company may need to sell additional shares of its common
stock or borrow funds from private lenders. There can be no assurance that the
Company will be able to obtain additional funding, if needed, or, if available,
on terms satisfactory to the Company. There can be no assurance that the
Company's operations will be able to generate sufficient revenues to be
profitable. Based on the Company's anticipated operations and assuming the
receipt of the financing from the sale of 1,750 shares of Series D Preferred and
prevailing in outstanding litigation and/or obtaining satisfactory settlements
with its creditors, the Company believes that it will have sufficient financing
for the next 12 months.

The Company has a working capital deficit and has required additional financing.
Until recently, the only source of funds available to the Company has been
though issuance of floating rate convertible debentures or by issuing shares in
return for services.

Item 3. CONTROLS AND PROCEDURES

(a) Under the supervision and with the participation of our management,
including our principal executive officer and principal financial officer, we
conducted an evaluation of our disclosure controls and procedures, as such term
is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), within 90 days of the filing date of this
report. Based on their evaluation, our principal executive officer and principal
accounting officer concluded that New York Regional Rail's disclosure controls
and procedures are effective.

(b) There have been no significant changes (including corrective actions with
regard to significant deficiencies or material weaknesses) in our internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the evaluation referenced in paragraph (a) above.

                           Part II: Other Information

Item 1. Legal Proceedings:

Regulation S-B requires only updates of existing or new legal matters, which
occurred since the last report be contained in this report on Form 10 QSB.
Please see the Company's annual report on Form 10-KSB for year ended December
31, 2004 for further information on legal matter and other contingencies.


                                   22

<PAGE>

On July 21, 2005, New York Regional Rail Corporation ("NYRR") and its
subsidiaries, J.S. Transportation, Inc. and GM Trucking and Associates, Inc.
(together with NYRR, the "Company") filed a complaint (the "Complaint") in the
Superior Court of New Jersey against Ronald W. Bridges, Darryl S. Caplan, Esq.,
Todd Sage, Stacey Sage a/k/a Stacie Sage, Mary Sage, and John Taylor (the
"Individual Defendants"), Cureton Caplan, P.C. f/k/a Cureton Caplan, Hunt,
Scaramella & Clark, P.C. (the "Caplan Firm"), Consolidated Logistics and
Transportation, LLC a/k/a CLT, CME Services, LLC a/k/a CME, National
Transportation Services, LLC, 833 Rancocas Road, LLC, J.S. Transportation Truck
Repair, LLC, GM Trucking, Inc. and Blue Ribbon Group, Inc. (with the Individual
Defendants, the "Defendants").

The Company has asserted the following causes of action against the Defendants
in the Complaint: (i) breach of fiduciary duty against the Individual Defendants
and the Caplan Firm; (ii) breach of duty of loyalty and good faith against the
Individual Defendants; (iii) accounting against the Defendants; (iv) fraud and
deceit against the Individual Defendants; (v) competition with employer or
principal against the Individual Defendants except Darryl S. Caplan, Esq.; (vi)
conversion against the Defendants; (vii) unfair competition against the
Defendants except Darryl S. Caplan, Esq. and the Caplan Firm; and (viii) unjust
enrichment against the Defendants.

On December 2, 2005, John Marsala, Steven Hirsch and Joel Marcus commenced an
action against the Company claiming breach of fiduciary duties, mismanagement,
aiding and abetting those breaches, fraud and unjust enrichment related to
transactions described in Form 8K, filed November 5, 2005. The Company is
vigorously defending this action.

The outcome of the Company's legal matters as described above and in the annual
report on Form 10-KSB for the year ended December 31, 2004 can not be determined
and, accordingly, no related contingencies have be recorded.

Item 2. Changes in Securities:

Pursuant to an agreement dated February 4, 2004 Transit Rail, LLC purchased 750
shares of Series D Preferred Stock at a purchase price of $1,000 per share and
agreed to purchase up to 1,750 additional shares of Series D Preferred Stock.

See Notes to Financial Statements of this report, Note 2, Capital Stock, Series
D Preferred Stock and Form 8-K "Items 1, 5, and 7. CHANGES IN CONTROL OF
REGISTRANT, OTHER EVENTSAND REGULATION FD DISCLOSURE and FINANCIAL STATEMENTS,
PRO FORMA FINANCIAL INFORMATION AND EXHIBITS", respectively filed February 19,
2004, with date of report February 4, 2004, incorporated by reference.

The sale of these securities was exempt from the registration requirements of
the Security Act of 1933 as amended ("the Act") pursuant to Section 4 (2)
thereof. The shares issued in these transactions were acquired for investment
purposes only and without a view to distribution. The persons that acquired
these shares were fully informed about matters concerning the Company, including
its business, financial affairs and other matters and acquired the securities
for their own accounts. The securities referred to in this paragraph are
"restricted" securities as defined in Rule 144 promulgated under the Act. No
underwriters were used and no commissions were paid in connection with the
issuance of these shares.


                                       23

<PAGE>

Item 3. Defaults Upon Senior Securities:

     None

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

     None

Item 5. Other Information:

     None

Item 6. Exhibits and Reports on Form 8-K:

     (a) Exhibits

31.1   Certification by the Principal Executive Officer pursuant to Section 302
       of the Sarbanes-Oxley Act of 2002

31.2   Certification by the Chief Financial Officer pursuant to Section 302 of
       the Sarbanes-Oxley Act of 2002

32.1   Certification by the Principal Executive Officer pursuant to 18 U.S.C.
       Section 1350, Section 906 of the Sarbanes-Oxley Act of 2002

32.2   Certification by the Chief Financial Officer pursuant to 18 U.S.C.
       Section 1350, Section 906 of the Sarbanes-Oxley Act of 2002

(b) Reports on Form 8-K:

See Form 8-K "Items 1, 5, and 7. CHANGES IN CONTROL OF REGISTRANT, OTHER EVENTS
AND REGULATION FD DISCLOSURE and FINANCIAL STATEMENTS, PRO FORMA FINANCIAL
INFORMATION AND EXHIBITS", respectively with filed February 19, 2004, with date
of report February 4, 2004, incorporated by reference.


                                   24

<PAGE>

                                   Signatures

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


Date: May 11, 2006                      By: /s/ Donald B. Hutton
                                            ------------------------------------
                                            Donald B. Hutton
                                            Chief Executive Officer


Date: May 11, 2006                      By: /s/ Russell J. Arnst
                                            ------------------------------------
                                            Russell J. Arnst
                                            Chief Financial Officer


                                       25