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 endedJune 30,
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 July 31, 2009.
















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
                      
                      
                      3Nature
      of Operations
                      
                      
                      3Results
      of Operations
                      
                      
                      4Comparison
      of Six and Three Months Ended June 30, 2009 and 2008
                      
                      
                      4Financial
      Condition and Liquidity
                      
                      
                      4Off-Balance
      Sheet Arrangements
                      
                      
                      5Recent
      Accounting Pronouncements
                      
                      
                      5How
      to Learn More About BHIT
                      
                      
                      6Item
      4(T).
                      Controls
      and Procedures
                      
                      
                      6Part
      II — Other Information
                      
                      
                      7Item
      1.
                      Legal
      Proceedings
                      
                      
                      7Item
      2.
                      Unregistered
      Sales of Equity Securities and Use of Proceeds
                      
                      
                      7Item
      3.
                      Defaults
      Upon Senior Securities
                      
                      
                      7Item
      4.
                      Submission
      of Matters to a Vote of Security Holders
                      
                      
                      7Item
      5.
                      Other
      Information
                      
                      
                      7Item
      6.
                      Exhibits
                      
                      
                      8Signatures
                      
                      
                      8Financial
      Statements
                      
                      
                      F-1Notes
      to Financial Statements
                      
                      
                      F-4







2




Part
I — Financial Information





Item
1.         Financial
Statements





Our June
30, 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





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.




Nature
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.





On May
28, 2009, we entered into a Stock Purchase Agreement (the “Agreement”) with
Stephanie G. Smith and Greg Smith, Trustees of the Stephanie G. Smith Trust U/A
dated December 20, 1995, as amended (the “Trust”), Andy C. Lewis (together with
the Trust, the “Sellers”), and The Wood Energy Group, Inc. (“Wood”), pursuant to
which we agreed to purchase all of the issued and outstanding common stock of
Wood, which is owned by the Sellers, for a purchase price of $4.8 million in
cash and $1.0 million in shares of common stock of the Company, or 2,857,143
shares. The number of shares of common stock of the Company was determined by
the market value of the shares based on the average closing price of the stock
for the five business days prior to June 1, 2009. The purchase price may be
increased or decreased by a working capital adjustment based on the closing date
balance sheet. The transaction is expected to close in the third quarter of
2009. Closing of the transaction is contingent on the satisfaction of standard
conditions, including obtaining financing, completion of due diligence review
and the execution of employment agreements with Messrs. Smith and Lewis. Wood
engages in the business of railroad tie reclamation and
disposal.


3





The
Agreement contains non-solicitation and noncompetition provisions pursuant to
which the Sellers agree not to solicit any employee or affiliate of Wood or
engage in competitive business for a period of two years after the date of
closing of the transaction. The Agreement also contains customary
representations, warranties, covenants and indemnification
provisions.





There can
be no assurances that the transaction will be completed on the proposed terms or
at all.





Results
of Operations





Comparison
of Three Months Ended June 30, 2009 and 2008





Our total
revenues for the quarter ended June 30, 2009 were $3,904, compared to $11,406
for the same period in 2008, a decrease of $7,502, or 65.77%. 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 second quarter of 2009 increased $142,987, or 289.4%, to
$192,387, compared to $49,400 for the second quarter of 2008. The increase was
caused by the non-cash stock compensation charge of $87,500 due to an award of
stock options in the second quarter of 2009 and an increase in professional fees
and other general expenses relating to the pursuit of acquisition targets,
particularly The Wood Energy Group, Inc. as discussed above.





Accordingly,
our net loss for the second quarter of 2009 was $188,463, compared to a net loss
of $37,994 in the second quarter of 2008, an increase of $150,469.





Comparison
of Six Months Ended June 30, 2009 and 2008





Our total
revenues for the six months ended June 30, 2009 were $9,470, compared to $29,156
for the same period in 2008, a decrease of $19,686, or 67.5%. 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 six months ended June 30, 2009 increased $125,076, or 107.9%,
to $241,010, compared to $115,934 for the six months ended June 30, 2008. The
increase was caused by the non-cash stock compensation charge of $87,500 due to
an award of stock options in the second quarter of 2009 and an increase in
professional fees and other general expenses relating to the pursuit of
acquisition targets, particularly The Wood Energy Group.





Accordingly,
our net loss for the six months ended June 30, 2009 was $231,540, compared to a
net loss of $86,778 for the six months ended June 30, 2008, an increase of
$144,762.





Financial
Condition and Liquidity





Cash and
cash equivalents consist of cash and short-term investments. Our cash and cash
equivalents balance at June 30, 2009 was $1,445,914, a decrease of $167,259 from
$1,613,173 at December 31, 2008. Cash and cash equivalents decreased in the
first six 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 other material commitments for capital expenditures. 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, The Wood
Energy Group, Inc., as discussed above.


4





Off-Balance
Sheet Arrangements





We do not
have any material off-balance sheet arrangements.





Recent
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.





On May
28, 2009, the FASB announced the issuance of SFAS 165, Subsequent Events. SFAS 165
should not result in significant changes in the subsequent events that an entity
reports. Rather, SFAS 165 introduces the concept of financial statements being
available to be issued. Financial statements are considered available to be
issued when they are complete in a form and format that complies with generally
accepted accounting principles (GAAP) and all approvals necessary for issuance
have been obtained.





The FASB
issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles, on June 29, 2009 and, in
doing so, authorized the Codification as the sole source for authoritative
guidance on U.S. GAAP.   SFAS No. 168 will be effective for
financial statements issued for reporting periods that end after September 15,
2009.  SFAS No. 168 replaces SFAS No. 162 to establish a new hierarchy of
GAAP sources for non-governmental entities under the FASB Accounting Standards
Codification.  The adoption of this standard will not have an effect
on the Company’s operations or financial position.


5


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 concluded that our disclosure controls and procedures were
effective as of June 30, 2009. Further, there have been no changes in our
internal control over financial reporting during the quarter ended June 30, 2009
that have materially affected, or are reasonably likely to materially affect,
our internal control over financial reporting (as defined in Exchange Act Rule
13a-15(f)).


6





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 (“Iron Rail”), 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 because of the
nature of the circumstances surrounding the termination of the acquisition we
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. The parties had a binding arbitration in July 2009 to resolve
this matter. A final decision on this matter is expected in September
2009.  We cannot predict the outcome of the arbitration. However, BHIT
could be required to disburse the escrow proceeds to Colo as well as pay
interest and legal costs, which would negatively impact our future results of
operations. The remaining escrow proceeds of $340,000 are reflected as a deposit
on the June 30, 2009 Balance Sheet.





We are
not aware of any other pending legal proceedings involving BHIT, nor were any
proceedings terminated in the quarter ended June 30, 2009.





Item
2.         Unregistered Sales of Equity
Securities and Use of Proceeds





On June
1, 2009, BHIT granted non-qualified stock options to purchase 875,000 shares of
the Company’s common stock for $0.35 per share to BHIT’s officers in
compensation for their service to the Company. The options were fully vested on
the date of grant and expire on June 1, 2014. The options were not registered
under the Securities Act of 1933 (the “Act”) in reliance on the private offering
exception from registration provided by paragraph 4(2) of the Act and related
Rule 506 of Regulation D.





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.


7


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:
      August 13, 2009
                /s/
      Gary O. MarinoBy
      Gary O. Marino,Chief
      Executive Officer and Chairman of the Board(Principal
      Executive Officer)Date:
      August 13, 2009
                /s/
      Bennett MarksBy
      Bennett Marks,Vice
      President and Chief Financial Officer(Principal
      Financial and Accounting
Officer)




8




B.H.I.T.
Inc.
 Balance
Sheets
 June
30, 2009 and December 31, 2008
 
 June 30, 2009
                                    
                                    
                                    December 31, 2008(Unaudited)ASSETSCurrent
      assetsCash
      and cash equivalents
                                    
                                    $
                                    1,445,914
                                    
                                    
                                    $
                                    1,613,173Interest
      receivable on cash and cash equivalents
                                    
                                    
                                    -
                                    
                                    
                                    
                                    107Prepaid
      insurance
                                    
                                    
                                    3,250
                                    
                                    
                                    
                                    9,750Total
      current assets
                                    
                                    
                                    1,449,164
                                    
                                    
                                    
                                    1,623,030Other
      assetsDeposit
                                    
                                    
                                    340,000
                                    
                                    
                                    
                                    340,000Total
      assets
                                    
                                    $
                                    1,789,164
                                    
                                    
                                    $
                                    1,963,030LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      liabilitiesAccounts
      payable and other accrued expenses
                                    
                                    $
                                    42,977
                                    
                                    
                                    $
                                    10,303Stockholders'
      equityCommon
      stock, $0.01 par value. 75,000,000 shares
      authorized;  26,120,808 shares issued at June 30, 2009 and
      December 31, 2008, respectively
                                    
                                    
                                    261,208
                                    
                                    
                                    
                                    261,208Additional
      paid-in capital
                                    
                                    
                                    89,620,889
                                    
                                    
                                    
                                    89,533,389Accumulated
      deficit
                                    
                                    
                                    (88,065,221
                                    )
                                    
                                    
                                    (87,833,681
                                    )Treasury
      stock, at cost, for 282,757 and 32,757 shares at June 30, 2009 and
      December 31, 2008, respectively
                                    
                                    
                                    (70,689
                                    )
                                    
                                    
                                    (8,189
                                    )Total
      stockholders' equity
                                    
                                    
                                    1,746,187
                                    
                                    
                                    
                                    1,952,727Total
      liabilities and stockholders' equity
                                    
                                    $
                                    1,789,164
                                    
                                    
                                    $
                                    1,963,030
 
 See
accompanying notes to financial statements
  F-1
 
 B.H.I.T.
Inc.
 Statements
of Operations
 Three
and Six Months Ended June 30, 2009 and 2008
 (Unaudited)
 
 Three Months Ended
                                              
                                              
                                              Six Months Ended2009
                                              
                                              
                                              2008
                                              
                                              
                                              2009
                                              
                                              
                                              2008RevenueInterest
      earned on cash and cash equivalents
                                              
                                              $
                                              3,904
                                              
                                              
                                              $
                                              11,406
                                              
                                              
                                              $
                                              9,470
                                              
                                              
                                              $
                                              29,156ExpensesGeneral
      and administrative
                                              
                                              
                                              104,867
                                              
                                              
                                              
                                              49,400
                                              
                                              
                                              
                                              153,510
                                              
                                              
                                              
                                              115,934Stock-based
      compensation
                                              
                                              
                                              87,500
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              87,500
                                              
                                              
                                              
                                              -Total
      expenses
                                              
                                              
                                              192,367
                                              
                                              
                                              
                                              49,400
                                              
                                              
                                              
                                              241,010
                                              
                                              
                                              
                                              115,934Net
      loss
                                              
                                              $
                                              (188,463
                                              )
                                              
                                              $
                                              (37,994
                                              )
                                              
                                              $
                                              (231,540
                                              )
                                              
                                              $
                                              (86,778
                                              )Weighted
      average number of  common shares outstanding
                                              
                                              
                                              25,838,051
                                              
                                              
                                              
                                              24,988,051
                                              
                                              
                                              
                                              25,956,183
                                              
                                              
                                              
                                              24,988,051Basic
      and diluted net loss per share of common stock
                                              
                                              $
                                              (0.01
                                              )
                                              
                                              $
                                              (0.00
                                              )
                                              
                                              $
                                              (0.01
                                              )
                                              
                                              $
                                              (0.00
                                              )
 
 See
accompanying notes to financial statements
  F-2
 
 B.H.I.T.
Inc.
 Statements
of Cash Flows
 Six
Months Ended June 30, 2009 and 2008
 (Unaudited)
 2009
                                    
                                    
                                    2008Operating
      activitiesNet
      loss
                                    
                                    $
                                    (231,540
                                    )
                                    
                                    $
                                    (86,778
                                    )Adjustments
      to reconcile net loss to net cash used in operating
      activities:Stock
      based compensation
                                    
                                    
                                    87,500
                                    
                                    
                                    
                                    -Changes
      in assets and liabilities:Interest
      receivable on cash and cash equivalents
                                    
                                    
                                    107
                                    
                                    
                                    
                                    1,897Prepaid
      insurance
                                    
                                    
                                    6,500
                                    
                                    
                                    
                                    9,190Accounts
      payable and accrued expenses
                                    
                                    
                                    32,674
                                    
                                    
                                    
                                    (39,473
                                    )Net
      cash used in operating activities
                                    
                                    
                                    (104,759
                                    )
                                    
                                    
                                    (115,164
                                    )Investing
      ActivitiesDeferred
      acqusition costs
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (99,837
                                    )Net
      cash used in investing
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (99,837
                                    )Financing
      ActivitiesDeferred
      financing cost
                                    
                                    
                                    
                                    
                                    
                                    
                                    (25,000
                                    )Purchase
      of treasury stock
                                    
                                    
                                    (62,500
                                    )
                                    
                                    
                                    -Net
      cash used in financing activities
                                    
                                    
                                    (62,500
                                    )
                                    
                                    
                                    (25,000
                                    )Net
      decrease in cash
                                    
                                    
                                    (167,259
                                    )
                                    
                                    
                                    (240,001
                                    )Cash
      and cash equivalents, beginning of period
                                    
                                    
                                    1,613,173
                                    
                                    
                                    
                                    2,269,054Cash
      and cash equivalents, end of period
                                    
                                    $
                                    1,445,914
                                    
                                    
                                    $
                                    2,029,053
 See
accompanying notes to financial statements
  F-3




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.
 
 On May
28, 2009, we entered into a Stock Purchase Agreement (the “Agreement”) with
Stephanie G. Smith and Greg Smith, Trustees of the Stephanie G. Smith Trust U/A
dated December 20, 1995, as amended (the “Trust”), Andy C. Lewis (together with
the Trust, the “Sellers”), and The Wood Energy Group, Inc. (“Wood”), pursuant to
which we agreed to purchase all of the issued and outstanding common stock of
Wood, which is owned by the Sellers, for a purchase price of $4.8 million in
cash and $1.0 million in shares of common stock of the Company, or 2,857,143
shares. The number of shares of common stock of the Company was determined by
the market value of the shares based on the average closing price of the stock
for the five business days prior to June 1, 2009. The purchase price may be
increased or decreased by a working capital adjustment based on the closing date
balance sheet. The transaction is expected to close in the third quarter of
2009. Closing of the transaction is contingent on the satisfaction of standard
conditions, including obtaining financing, completion of due diligence review
and the execution of employment agreements with Messrs. Smith and Lewis. Wood
engages in the business of railroad tie reclamation and disposal.
 
 The
Agreement contains non-solicitation and noncompetition provisions pursuant to
which the Sellers agree not to solicit any employee or affiliate of Wood or
engage in competitive business for a period of two years after the date of
closing of the transaction. The Agreement also contains customary
representations, warranties, covenants and indemnification
provisions.
 
 There can
be no assurances that the transaction will be completed on the proposed terms or
at all.
  F-4
 
 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 June 30, 2009 and December 31, 2008, and the results of operations and cash
flows for the three and six months ended June 30, 2009 and 2008. The financial
information for the three and six months ended June 30, 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 six months ended June 30, 2009 are not necessarily
indicative of the results to be expected for the full 2009
year.
  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.
  F-5
 
 Note 3.  New Accounting
Pronouncements (Continued)
 
 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.
 
 On May
28, 2009, the FASB announced the issuance of SFAS 165, Subsequent Events. SFAS 165
should not result in significant changes in the subsequent events that an entity
reports. Rather, SFAS 165 introduces the concept of financial statements being
available to be issued. Financial statements are considered available to be
issued when they are complete in a form and format that complies with generally
accepted accounting principles (GAAP) and all approvals necessary for issuance
have been obtained.
 
 The FASB
issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles, on June 29, 2009 and, in
doing so, authorized the Codification as the sole source for authoritative
guidance on U.S. GAAP.   SFAS No. 168 will be effective for
financial statements issued for reporting periods that end after September 15,
2009.  SFAS No. 168 replaces SFAS No. 162 to establish a new hierarchy
of GAAP sources for non-governmental entities under the FASB Accounting
Standards Codification. The adoption of this standard will not have an effect on
the Company’s operations or financial position.
  F-6
 
 Note
4.  Stock-Based Compensation
 
 The
Company has stock option agreements with its directors and officers that provide
for the issuance of a total of 3,000,000 shares of common stock for serving on
the Company’s Board of Directors and as officers. As of June 30, 2009 the
options activity is as follows:
 
 Weighted Average
                                
                                Weighted AverageNumber
                                
                                
                                Exercise Price
                                
                                Remaining
                                
                                IntrinsicDate
      of Grant
                                
                                of Shares
                                
                                
                                per Share
                                
                                Contractual Life
                                
                                ValueMarch
      2, 2007
                                
                                
                                1,000,000
                                
                                
                                $
                                0.15
                                
                                0.7
      years
                                
                                $
                                230,000October
      23, 2007
                                
                                
                                1,000,000
                                
                                
                                
                                0.35
                                
                                1.3
      years
                                
                                
                                30,000November
      14, 2008
                                
                                
                                125,000
                                
                                
                                
                                0.30
                                
                                2.3
      years
                                
                                
                                10,000November
      19, 2008
                                
                                
                                (125,000
                                )
                                
                                
                                0.35
                                
                                Cancelled
                                
                                
                                (3,750
                                )December
      16, 2008
                                
                                
                                125,000
                                
                                
                                
                                0.22
                                
                                2.4
      years
                                
                                
                                20,000June
      1, 2009
                                
                                
                                875,000
                                
                                
                                
                                0.35
                                
                                5.0
      years
                                
                                
                                26,250Outstanding,
      June 30, 2009
                                
                                
                                3,000,000
                                
                                
                                $
                                0.27
                                
                                2.3
      years
                                
                                $
                                312,500
 
 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 five years from the date of grant. No
options were exercised during the six months ended June 30, 2009.
 
 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.
 
 The fair
values of the stock options issued during 2009 have been estimated using the
Black-Scholes method, whereby the valuation model takes into account variables
such as estimated volatility, expected holding period, dividend yield, and the
risk free interest rate. Management has determined that the June 1, 2009 options
have a value of $0.10 per share ($87,500 in total), which has been recorded as
compensation expense during the quarter ended June 30, 2009.
 
 Expected
volatility rate was estimated using the average volatility rates of seven public
companies in the railroad industry. The expected lives of the options represents
the period that the options granted are expected to be outstanding. The risk
free rate is based on the yield curve of a zero coupon U.S. Treasury bond over
the term of the expected life. The Company does not expect to pay a dividend on
common stock.The weighted average assumptions used in the option-pricing models
during 2009 were as follows:
 
 Risk
      free interest rate
                    
                    
                    2.55
                    %Expected
      life (years)
                    
                    
                    5Expected
      volatility
                    
                    
                    27.00
                    %Dividend
      yield
                    
                    
                    0
  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-7
 
 Note
6. Income Taxes
 
 The
Company reported no income tax expense or benefit for the six months ended June
30, 2009 and 2008 due to the net operating losses incurred during both periods
and a valuation allowance established against 100% of the Company’s tax
assets.
 
 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. 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 June 30,
2009 and determined that no adjustments were necessary.
 
 Note
7. Contingencies
 
 On July
24, 2008, we entered into an asset purchase agreement with L.A. Colo, LLC
(“Colo”) and Iron Rail Group, LLC (“Iron Rail”), 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 because of the
nature of the circumstances surrounding the termination of the acquisition we
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. The parties had a binding arbitration in July 2009 to resolve
this matter. A final decision on this matter is expected in September
2009.  We cannot predict the outcome of the arbitration. However, BHIT
could be required to disburse the escrow proceeds to Colo as well as pay
interest and legal costs, which would negatively impact our future results of
operations. The remaining escrow proceeds of $340,000 are reflected as a deposit
on the June 30, 2009 Balance Sheet.
 
 Note
8. Subsequent Events
 
 The
Company evaluated all events and transactions that occurred after June 30, 2009
up through August 13, 2009, the date the Company issued these financial
statements.
  F-8