UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)




þ
                Quarterly
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934


For the
quarterly period endedMarch
31, 2009




o
                Transition
      report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
      1934





Commission
file number: 1-9043





B.H.I.T.
      Inc.(Exact
      name of registrant as specified in its
charter)





Delaware
              
              36-3361229(State
      of incorporation)
              
              (I.R.S.
      Employer Identification No.)





2255
      Glades Road, Suite 342-W, Boca Raton, Florida 33431(Address
      of principal executive offices)





561-443-5300(Registrant’s
      telephone number)





Indicate
by a check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þNo  ̈





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files).  Yes  ̈No  ̈





Indicate
by a check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act (Check one):





Large
      Accelerated Filer  ̈
            Accelerated
      Filer  ̈Non-Accelerated
      Filer  ̈
            Smaller
      Reporting Company þ





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes þNo  ̈




Indicate
the number of shares outstanding of each of the issuer’s classes of common
stock, as of the latest practicable date: 25,838,051 shares of common stock,
$0.01 par value per share, as of May 4, 2009.















Table
of Contents




Part
      I — Financial Information
                      3Item
      1.
                      Financial
      Statements
                      3Item
      2.
                      Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                      3Forward
      Looking Statements
                      3Results
      of Operations
                      4Comparison
      of Three Months Ended March 31, 2009 and 2008
                      4Financial
      Condition and Liquidity
                      4Off-Balance
      Sheet Arrangements
                      4How
      to Learn More About BHIT
                      4Item
      4(T).
                      Controls
      and Procedures
                      4Part
      II — Other Information
                      5Item
      1.
                      Legal
      Proceedings
                      5Item
      2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      5Item
      3.
                      Defaults
      Upon Senior Securities
                      5Item
      4.
                      Submission
      of Matters to a Vote of Security Holders
                      5Item
      5.
                      Other
      Information
                      5Item
      6.
                      Exhibits
                      6Signatures
                      6Financial
      Statements
                      F-1Notes
      to Financial Statements
                      F-4





2




Part
I — Financial Information


Item
1.Financial
Statements
 
 Our March
31, 2009 unaudited financial statements follow this quarterly report beginning
on page F-1.
  Item
2.Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
 
 B.H.I.T.
Inc. is a shell company without significant operations or sources of revenues
other than its investments. Our existing operations relate primarily to
servicing our cash investment portfolio and maximizing existing capital with
stable interest-generating instruments. However, our management team is
aggressively investigating potential operating companies to acquire and
additional sources of financing. Currently we are focusing our efforts on
railroad track construction, repair and maintenance businesses, but we cannot
guarantee we will complete an acquisition in this industry. Accordingly, we may
explore potential acquisitions in other industries as well.
 
 Forward
Looking Statements
  Some of
the statements that we make in this report, including statements about our
confidence in BHIT’s prospects and strategies, are forward-looking statements
within the meaning of § 21E of the Securities Exchange Act. Some of these
forward-looking statements can be identified by words like “believe,” “expect,”
“will,” “should,” “intend,” “plan,” or similar terms; others can be determined
by context. Statements contained in this report that are not historical facts
are forward-looking statements. These statements are necessarily estimates
reflecting our best judgment based upon current information, and involve a
number of risks and uncertainties. Many factors could affect the accuracy of
these forward-looking statements, causing our actual results to differ
significantly from those anticipated in these statements. While it is impossible
to identify all applicable risks and uncertainties, they include our ability
to:
  ·
              execute our business plan by
      identifying and acquiring an operating company or
      companies;
 
 ·
              obtain appropriate financing to
      complete potential
acquisitions;
 
 ·
              effectively invest our existing
      funds and raise additional capital to fund our operations;
      and
 
 ·
              comply with SEC regulations and
      filing requirements applicable to us as a public
      company.
 
 You
should not place undue reliance on our forward-looking statements, which reflect
our analysis only as of the date of this report. The risks and uncertainties
listed above and elsewhere in this report and other documents that we file with
the Securities and Exchange Commission, including our annual report on Form
10-K, quarterly reports on Form 10-Q, and any current reports on Form 8-K, must
be carefully considered by any investor or potential investor in BHIT. All
subsequent written and oral forward-looking statements attributable to us or any
person acting on our behalf are expressly qualified in their entirety by the
cautionary statements contained or referred to in this section. We do not
undertake any obligation to release publicly, any revisions to our
forward-looking statements to reflect events or circumstances after the date of
this Quarterly Report on Form 10-Q.
  3
  Results
of Operations
  Comparison
of Three Months Ended March 31, 2009 and 2008
  Our total
revenues for the quarter ended March 31, 2009 were $5,566, compared to $17,749
for the same period in 2008, a decrease of $12,183, or 68.6%. Revenues decreased
as the result of a decrease in invested funds as well as lower interest rates
earned on invested funds.
 
 Our total
expenses for the first quarter of 2009 decreased $17,891, or 26.9%, to $48,643,
compared to $66,534 for the first quarter of 2008. The decrease was caused by a
reduction in professional fees and other general expenses.
 
 Accordingly,
our net loss for the first quarter of 2009 was $43,077, compared to a net loss
of $48,785 in 2008, a decrease of $5,708.
 
 Financial
Condition and Liquidity
  Cash and
cash equivalents consist of cash and short-term investments. Our cash and cash
equivalents balance at March 31, 2009 was $1,515,649, a decrease of $97,524 from
$1,613,173 at December 31, 2008. Cash and cash equivalents decreased in the
first three months of 2009 primarily as the result of our net loss for the
period and the purchase of 250,000 shares of treasury stock for
$62,500.
 
 At this
time, we have no material commitments for capital expenditures, although we are
reviewing various acquisition opportunities. We believe our cash is sufficient
to meet our needs for anticipated operating expenses as a shell company for
2009. However, we are exploring additional sources of financing to fund the
possible acquisition of an operating company.
 
 Off-Balance
Sheet Arrangements
  We do not
have any material off-balance sheet arrangements.
 
 How
to Learn More About BHIT
  We file
annual, quarterly and current reports and other information with the SEC. Our
SEC filings are available to the public on the internet at the SEC’s web site at
SEC.gov. To learn more about BHIT you can also contact our CEO, Gary O. Marino,
at 561-443-5300.
  Item
4(T).Controls and
Procedures
 
 Under the
direction of our chief executive officer and chief financial officer, management
evaluated our disclosure controls and procedures (as defined in Exchange Act
Rule 13a-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rule 13a-15(f)) and concluded that our disclosure controls and
procedures were effective as of March 31, 2009. Further, there have been no
changes in our internal control over financial reporting during the quarter
ended March 31, 2009 that have materially affected, or are reasonably likely to
materially affect, our internal control over financial reporting.
  4
  Part
II — Other Information
  Item
1.Legal
Proceedings
 
 On July
24, 2008, we entered into an asset purchase agreement with L.A. Colo, LLC
(“Colo”) and Iron Rail Group, LLC, the owner of Colo, pursuant to which we
agreed to purchase substantially all of the assets of Colo for $15.0 million,
subject to adjustment. Colo provides railroad maintenance and construction
services to short line railroads and industrial customers. The transaction was
delayed due to deteriorating financial and economic conditions and was
ultimately terminated by us due to a reported reduction in the financial results
of Colo, which were contrary to prior representations of Colo as to their
financial performance.
 
 We had
originally placed $60,000 in a purchase money escrow for the acquisition. On
September 30, 2008, we placed an additional $290,000 in the escrow and paid Colo
$50,000 for the option to extend the proposed closing date of the acquisition.
Colo and Iron Rail demanded payment of the $350,000 in escrow in connection with
the termination of the purchase agreement. We authorized the distribution of
$10,000 of the escrow to Iron Rail on October 31, 2008, but dispute that Colo
and Iron Rail are entitled to the remaining $340,000. On November 18, 2008, Colo
and Iron Rail instituted arbitration proceedings before the American Arbitration
Association under the terms of the escrow agreement against BHIT and the escrow
agent to obtain the remaining contents of the escrow in an action captioned
L.A. Colo, LLC and Iron Rail
Group LLC v. B.H.I.T. Inc. and Kohrman Jackson & Krantz PLL. Because
of the nature of the circumstances surrounding the termination of the
acquisition, we believe that we are entitled to the escrow and intend to contest
this matter vigorously. Of course, we cannot guaranty the outcome of this action
and BHIT could be required to disburse the escrow proceeds to Colo as well as
pay for their legal costs, which would negatively impact our results of
operations. The remaining escrow proceeds of $340,000 are reflected as a deposit
on the March 31, 2009 Balance Sheet.
 
 We are
not aware of any other pending legal proceedings involving BHIT as of May 4,
2009, nor were any proceedings terminated in 2008.
  Item
2.Unregistered Sales
of Equity Securities and Use of Proceeds
 
 On March
26, 2009, we repurchased 250,000 shares of our common stock from a private
investor in a non-market transaction for $0.25 per share (the market price of
our shares on the day of the transaction) for a total of $62,500. The repurchase
was not part of a publicly announced plan. We have no plans to repurchase shares
in the future, but may decide to do so on an ad hoc basis.
  Item
3.Defaults Upon Senior
Securities
 
 Not
applicable.
  Item
4.Submission of
Matters to a Vote of Security Holders
 
 Not
applicable.
  Item
5.Other
Information
 
 Not
applicable.
  5
  Item
6.Exhibits
 
 31.1
                Rule
      13a-14(a)/15d-14(a) Certification of Principal Executive Officer Pursuant
      to § 302 of the Sarbanes-Oxley Act of 200231.2
                Rule
      13a-14(a)/15d-14(a) Certification of Principal Financial Officer Pursuant
      to § 302 of the Sarbanes-Oxley Act of 200232.1
                Rule
      13a-14(b)/15d-14(b) Certification of Principal Executive Officer Pursuant
      to § 906 of the Sarbanes-Oxley Act of 200232.2
                Rule
      13a-14(b)/15d-14(b) Certification of Principal Financial Officer Pursuant
      to § 906 of the Sarbanes-Oxley Act of
2002
 
 Signatures
 
 In
accordance with Section 13 or 15(d) of the Exchange Act, B.H.I.T. Inc. caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 B.H.I.T.
      Inc.Date:
      May 6, 2009
                    /s/
      Gary O. MarinoBy
      Gary O. Marino,Chief
      Executive Officer and Chairman of the Board(Principal
      Executive Officer)Date:
      May 6, 2009
                    /s/
      Bennett MarksBy
      Bennett Marks,Vice
      President and Chief Financial Officer(Principal
      Financial and Accounting
Officer)
  6
  B.H.I.T.
Inc.
 Balance
Sheets
 As
of March 31, 2009 (Unaudited) and December 31, 2008
 
 March
      31, 2009
                                    
                                    
                                    December 31, 2008(Unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                                    
                                    $
                                    1,515,649
                                    
                                    
                                    $
                                    1,613,173Interest
      receivable on cash and cash equivalents
                                    
                                    
                                    -
                                    
                                    
                                    
                                    107Prepaid
      insurance
                                    
                                    
                                    6,500
                                    
                                    
                                    
                                    9,750Total
      current assets
                                    
                                    
                                    1,522,149
                                    
                                    
                                    
                                    1,623,030Other
      assetsDeposit
                                    
                                    
                                    340,000
                                    
                                    
                                    
                                    340,000Total
      assets
                                    
                                    $
                                    1,862,149
                                    
                                    
                                    $
                                    1,963,030LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and other accrued expenses
                                    
                                    $
                                    14,999
                                    
                                    
                                    $
                                    10,303Stockholders'
      equityCommon
      stock, $0.01 par value. 75,000,000 shares
      authorized;  26,120,808 shares issued at March 31, 2009 and
      December 31, 2008, respectively
                                    
                                    
                                    261,208
                                    
                                    
                                    
                                    261,208Additional
      paid-in capital
                                    
                                    
                                    89,533,389
                                    
                                    
                                    
                                    89,533,389Accumulated
      deficit
                                    
                                    
                                    (87,876,758
                                    )
                                    
                                    
                                    (87,833,681
                                    )Treasury stock, at cost, for
      282,757 and 32,757 shares at March 31, 2009 and at December
      31, 2008, respectively
                                    
                                    
                                    (70,689
                                    )
                                    
                                    
                                    (8,189
                                    )Total
      stockholders' equity
                                    
                                    
                                    1,847,150
                                    
                                    
                                    
                                    1,952,727Total
      liabilities and stockholders' equity
                                    
                                    $
                                    1,862,149
                                    
                                    
                                    $
                                    1,963,030
 
 See
accompanying notes to financial statements
  F-1
  B.H.I.T.
Inc.
 Statements
of Operations
 For
the Three Months Ended March 31, 2009 and 2008
 (Unaudited)
 
 Three Months Ended2009
                          
                          
                          2008RevenueInterest
      earned on cash and cash equivalents
                          
                          $
                          5,566
                          
                          
                          $
                          17,749ExpensesGeneral
      and administrative
                          
                          
                          48,643
                          
                          
                          
                          66,534Total
      expenses
                          
                          
                          48,643
                          
                          
                          
                          66,534Net
      loss
                          
                          $
                          (43,077
                          )
                          
                          $
                          (48,785
                          )Weighted
      average number of  common shares outstanding
                          
                          
                          26,074,315
                          
                          
                          
                          24,988,051Basic
      and diluted net loss per share of common stock
                          
                          $
                          (0.00
                          )
                          
                          $
                          (0.00
                          )
  See
accompanying notes to financial statements
  F-2
  B.H.I.T.
Inc.
 Statements
of Cash Flows
 For
the Three Months Ended March 31, 2009 and 2008
 (Unaudited)
  2009
                          
                          
                          2008Operating
      activitiesNet
      loss
                          
                          $
                          (43,077
                          )
                          
                          $
                          (48,785
                          )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Changes
      in assets and liabilities:Interest
      receivable on cash and cash equivalents
                          
                          
                          107
                          
                          
                          
                          879Prepaid
      insurance
                          
                          
                          3,250
                          
                          
                          
                          4,595Accounts
      payable and accrued expenses
                          
                          
                          4,696
                          
                          
                          
                          (41,793
                          )Net
      cash used in operating activities
                          
                          
                          (35,024
                          )
                          
                          
                          (85,104
                          )Financing
      ActivitiesPurchase
      of treasury stock
                          
                          
                          (62,500
                          )
                          
                          
                          -Net
      cash used in financing activities
                          
                          
                          (62,500
                          )
                          
                          
                          -Net
      decrease in cash
                          
                          
                          (97,524
                          )
                          
                          
                          (85,104
                          )Cash
      and cash equivalents at beginning of period
                          
                          
                          1,613,173
                          
                          
                          
                          2,269,054Cash
      and cash equivalents at end of period
                          
                          $
                          1,515,649
                          
                          
                          $
                          2,183,950
  See
accompanying notes to financial statements
  F-3
  B.H.I.T. Inc.
 Notes
to Financial Statements
 Three
Months Ended March 31, 2009 and 2008
 (Unaudited)
  Note
1.  Nature of Operations
 
 B.H.I.T.
Inc. (“BHIT,” “we,” “our” or the “company”) was originally organized under the
laws of the State of Massachusetts in 1985, under the name VMS Hotel Investment
Trust, for the purpose of investing in mortgage loans, principally to entities
affiliated with VMS Realty Partners. The company was subsequently reorganized as
a Delaware corporation in 1987. We changed our name from Banyan Hotel Investment
Fund to B.H.I.T. Inc. in 1998.
 
 Currently,
BHIT is a shell company without significant operations or sources of revenues
other than interest on its investments. However, our management team is
aggressively investigating potential operating companies to acquire and
additional sources of financing. Currently we are focusing our efforts on
railroad track construction, repair and maintenance businesses, but we cannot
guarantee we will complete an acquisition in this industry and we may explore
potential acquisitions in other industries as well.
  Note
2.  Basis of Presentation
 
 We have
prepared the accompanying financial statements pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion of
management, these financial statements give effect to all normal recurring
adjustments necessary to present fairly the financial position of the company as
of March 31, 2009 and December 31, 2008, and the results of operations and cash
flows for the three months ended March 31, 2009 and 2008. The financial
information for the three months ended March 31, 2009 and 2008 is
unaudited.
 
 Although
we believe that the disclosures included in our financial statements are
adequate to make the information presented not misleading, certain information
and footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been omitted.
Accordingly, the accompanying financial statements should be read in conjunction
with BHIT’s latest annual report on Form 10-K for the year ended December 31,
2008.
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect amounts reported in the financial
statements and accompanying notes. Actual results could differ from these
estimates.
 
 The
results of operations for the three months ended March 31, 2009 are not
necessarily indicative of the results to be expected for the full 2009
year.
  F-4
  B.H.I.T. Inc.
 Notes
to Financial Statements
 Three
Months Ended March 31, 2009 and 2008
 (Unaudited)
 
 Note
3.  New Accounting Pronouncements
 
 In
September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements,” which
defines fair value, provides a framework for measuring fair value, and expands
the disclosures required for fair value measurements. SFAS 157 applies to other
accounting pronouncements that require fair value measurements; it does not
require any new fair value measurements. SFAS 157 was to be effective for BHIT
on January 1, 2008. However, in February 2008, the FASB released a FASB Staff
Position (FSP FAS 157-2 — Effective Date of FASB Statement No. 157) which
delayed the effective date of SFAS No. 157 for BHIT to January 1, 2009. We
adopted SFAS 157 on January 1, 2009. The implementation of SFAS 157 in 2009 did
not have a significant impact on the Company’s financial position or results of
operations.
 
 In
December 2007, the FASB issued Statement 141 (revised 2007), “Business
Combinations” (SFAS 141R) to change how an entity accounts for the acquisition
of a business. SFAS 141R will replace existing SFAS 141 in its
entirely.
 
 SFAS 141R
carries forward the existing requirements to account for all business
combinations using the acquisition method (formerly called the purchase method).
In general, SFAS 141R will require acquisition-date fair value measurement of
identifiable assets acquired, liabilities assumed and noncontrolling interests
in the acquiree. SFAS 141R will eliminate the current cost-based purchase method
under SFAS 141.
 
 SFAS 141R
amends the goodwill impairment test requirements in SFAS 142. For a goodwill
impairment test as of a date after the effective date of SFAS 141R, the value of
the reporting unit and the amount of implied goodwill, calculated in the second
step of the test, will be determined in accordance with the measurement and
recognition guidance on accounting for business combinations under SFAS 141R.
This change could effect the determination of what amount, if any, should be
recognized as an impairment loss for goodwill recorded before the effective date
of SFAS 141R. This accounting will be required when SFAS 141R becomes effective
(January 1, 2009 for the Company) and applies to goodwill related to
acquisitions accounted for originally under SFAS 141 as well as those accounted
for under SFAS 141R.
 
 The
Company adopted SFAS 141R effective January 1, 2009 and will apply its
provisions prospectively. The implementation of SFAS 141R in 2009 did not have a
significant impact on the Company’s financial position or results of
operations.
  F-5
  B.H.I.T. Inc.
 Notes
to Financial Statements
 Three
Months Ended March 31, 2009 and 2008
 (Unaudited)
 
 Note
4.  Stock-Based Compensation
 
 The
Company has stock option agreements with its directors that provide for the
issuance of a total of 2,125,000 shares of common stock for serving on the
Company’s Board of Directors as of March 31, 2009 as follows:
 
 Weighted Average
                                    
                                    Weighted AverageNumber
                                    
                                    
                                    Exercise Price
                                    
                                    RemainingDate
      of Grant
                                    
                                    of Shares
                                    
                                    
                                    per Share
                                    
                                    Contractual LifeMarch
      2, 2007
                                    
                                    
                                    1,000,000
                                    
                                    
                                    $
                                    .15
                                    
                                    1.2
      yearsOctober
      23, 2007
                                    
                                    
                                    1,000,000
                                    
                                    
                                    
                                    .35
                                    
                                    1.8
      yearsNovember
      14, 2008
                                    
                                    
                                    125,000
                                    
                                    
                                    
                                    .30
                                    
                                    2.8
      yearsNovember
      19, 2008
                                    
                                    
                                    (125,000
                                    )
                                    
                                    
                                    .35
                                    
                                    CancelledDecember
      16, 2008
                                    
                                    
                                    125,000
                                    
                                    
                                    
                                    .22
                                    
                                    2.9
      yearsOutstanding,
      March 31, 2009
                                    
                                    
                                    2,125,000
                                    
                                    
                                    $
                                    .25
                                    
                                    1.6
      years
 
 The
number of options issued and the grant dates were determined at the discretion
of the Company’s Board. The options vested at the date of grant, and are
exercisable for a period not to exceed three years from the date of grant. No
options were exercised during the three months ended March 31, 2009 or
2008.
 
 The stock
options are not considered in calculating diluted earnings per share because
there effect would be anti-dilutive due to the Company’s losses.
 
 Note
5. Stockholders’ Equity
 
 On March
26, 2009, the Company purchased an aggregate of 250,000 shares of its common
stock in a non-market transaction. The treasury shares were purchased at a price
of $0.25 per share (the market price on the day of the transaction) for a total
of $62,500.
  F-6
  B.H.I.T. Inc.
 Notes
to Financial Statements
 Three
Months Ended March 31, 2009 and 2008
 (Unaudited)
 
 Note
6. Income Taxes
  The
Company reported no income tax expense or benefit for the three months ended
March 31, 2009 and 2008 due to the net operating losses incurred during both
periods.
 
 Our
Federal net operating loss (“NOL”) carryforward balance as of December 31, 2008
was $2,684,645. Our NOL carryforwards are scheduled to expire between 2009 and
2028. NOL utilization may be subject to a limitation contained in Internal
Revenue Code Section 382. The purchase of common stock from Summa (a former
significant shareholder) in 2000 and subsequent stock issuances may have
substantially limited or eliminated the opportunity to utilize our NOL
carryforwards.
 
 In June
2006, the FASB issued FASB Interpretation No. 48 (FIN 48), “Accounting for
Uncertainty in Income Taxes.” Previously, the Company had accounted for
contingencies in accordance with Statement of Financial Accounting Standards No.
5, “Accounting for Contingencies.” The interpretation provides guidance on
recognition, classification and disclosure concerning uncertain tax liabilities.
The evaluation of a tax position requires recognition of a tax benefit if it is
‘more-likely-than-not’ that it will be sustained upon examination. For tax
positions meeting the ‘more-likely-than-not’ threshold, the amount recognized in
the financial statements is the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement with the relevant tax
authority. FIN 48 is effective for fiscal years beginning after December 15,
2006. Accordingly, the Company adopted FIN 48 effective January 1, 2007. At the
adoption date, the Company applied FIN 48 to all positions for which the statute
of limitations remained open and determined that no liability existed for
uncertain tax positions. The Company has updated its FIN 48 assessment through
March 31, 2009 and determined that no adjustments were necessary.
 
 Note
7. Contingencies
 
 In July
24, 2008, we entered into an asset purchase agreement with L.A. Colo, LLC and
Iron Rail Group, LLC (Colo’s parent), pursuant to which we agreed to purchase
substantially all of the assets of Colo for $15,000,000, subject to adjustment.
Colo provides railroad maintenance and construction services to short line
railroads and industrial customers. The transaction was delayed due to
deteriorating financial and economic conditions and was ultimately terminated by
BHIT due to a reported reduction in the financial results of Colo, which were
contrary to prior representations of Colo as to its financial
performance.
 
 We had
originally placed $60,000 in a purchase money escrow for the acquisition. In
September, 2008 we placed an additional $290,000 in escrow and paid $50,000 to
Colo for the option to extend the closing date. Colo and Iron Rail demanded
payment of the $350,000 in escrow in connection with the termination of the
purchase agreement. We authorized the distribution of $10,000 of the escrow to
Iron Rail, but dispute that Colo and Iron Rail are entitled to the remaining
$340,000. The parties are scheduled for binding arbitration in 2009 to resolve
this matter. Because of the nature of the circumstances surrounding the
termination of the acquisition, the Company believes it is entitled to the
escrow and intends to contest this matter vigorously. Accordingly, no provision
for loss of the escrowed funds has been recorded as of March 31,
2009.  The remaining escrow proceeds of $340,000 are reflected as a
deposit on the March 31, 2009 balance sheet.
  F-7