SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB
(Mark One)
(X)  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934

For the Fiscal Year Ended December 31, 2000
                                       OR
      ( )   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934
Commission File No. 000-28583

                       NEW YORK REGIONAL RAIL CORPORATION
                       ----------------------------------
                 (Name of Small Business Issuer in Its Charter)

           Delaware                                         13-3881577
   ---------------------------                        ------------------------
   (State or Other Jurisdiction of                         (IRS Employer
   Incorporation or Organization)                        Identification No.)

                     4302 First Avenue, Brooklyn, NY, 11232
                    (Address of Principal Executive Offices)


Registrant's  telephone number,  including Area Code: (718) 788-3690
Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:

                                  Common Stock
                                (Title of Class)

Check 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 past 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.
                                      X
                                     YES        NO

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best  of  the  Registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]

The Company's revenues for the most recent fiscal year were $8,626,093.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Company,  (168,433,564  shares)  based upon the closing  price of the  Company's
Common Stock on March 15, 2001 was approximately $16,843,000.

As of March 15, 2001 the Company had 170,426,189  issued and outstanding  shares
of common stock.



<PAGE>


ITEM 1.  DESCRIPTION  OF BUSINESS

     The Company was  incorporated  in Delaware on April 19, 1994 under the name
Best  Sellers  Group,  Inc.  Between  April  1994 and May 1996 the  Company  was
involved  in a number  of  business  ventures,  all of  which  have  since  been
discontinued.

      In May 1996 the Company acquired all of the issued and outstanding  common
stock of New York Regional Rail Corporation ("NYRR"), a Delaware Corporation, in
consideration  for the issuance of  87,000,000  shares of the  Company's  common
stock. NYRR is a short-line  railroad which transports freight via barges across
the New York City harbor. As a result of this  acquisition,  the Company changed
its name to "New York Regional Rail Corp".  NYRR  currently owns 93% of New York
Cross Harbor Railroad, Inc. ("NYCH"), a corporation which transports freight via
barges  across the New York City harbor,  and a 95% interest in CH  Proprietary,
Inc. ("CHP"),  a corporation which owns  substantially all of the equipment used
by NYCH in conducting its rail/barge freight  transportation  operation.  Unless
otherwise  indicated,  any  reference  to the  Company  includes  NYRR  and  any
reference to NYRR includes CHP and NYCH.

      In April 1999, the Company purchased a 51% interest in JS  Transportation,
Inc. ("JST"), in exchange for 5,000,000 shares of unregistered common stock, and
escrowed an additional  1,000,000 shares to settle  outstanding JST liabilities.
JST,  which was  incorporated  in New  Jersey in 1998,  is a  regional  trucking
company in the  business  of  short-haul  freight  transportation  and  landfill
management.  Unless  otherwise  indicated,  any  reference  to the Company  also
includes JST.

      The Company's headquarters are located at 4302 First Avenue, Brooklyn, NY,
11232. The Company's telephone number is (718) 788-3690 and its facsimile number
is (718) 788-4462.

Railroad Operations

      The Company is part of the  national  railroad  system and holds a Surface
Transportation  Board  certificate of convenience and necessity for the movement
of rail  freight by rail  barge  across the New York City  harbor.  The  Company
exchanges rail cars with the Canadian  Pacific ("CP"),  Norfolk  Southern ("NS")
and CSX Transportation ("CSX") railroads in New Jersey. In Brooklyn, the Company
interchanges freight with the New York and Atlantic Railroad ("NYA").

      Operating  from its  main  base of  operations  at the  Bush  Terminal  in
Brooklyn,  New York, the Company  receives  railcars for transport to New Jersey
and points  beyond.  Rail cars are loaded onto float barges,  then by means of a
tugboat they are ferried between the Bush Terminal and the Company's  Greenville
Yard in Jersey  City,  New Jersey.  When the railcars  arrive at the  Greenville
Yard,  they are placed on the national rail network for further  transportation.
For incoming  freight from New Jersey and points  beyond,  the Company  reverses
this operation and connects with the New York and Atlantic  Railroad on the east
side of New York harbor.

      Diesel-fueled  locomotives  are used by the Company to switch  railcars at
its Bush  Terminal and  Greenville  facilities.  Tugboat  services are currently
subcontracted from an independent company on a monthly basis.



<PAGE>


      The Company's rail equipment consists of the following:

                                       Operational           Not Operational

      Locomotives                           3                       2
      Float bridges                         2                       4
      Float barges                          3                       1

      The  Company  has  approximately  13 miles of track on the New  Jersey and
Brooklyn waterfronts.  All of the Company's rail and bedrock are operational and
in good  working  order.  Float  bridges  serve as the  rail  link  between  the
Company's  float barges and the  Company's  land-based  rail tracks.  Two of the
Company's three operational float barges are 40 ft. by 290 ft. and one is 41 ft.
by 360 ft. Each float  barge  contains  three rail  tracks and can hold  between
seven and eighteen railcars depending upon the size of the railcars being loaded
and the size of the car float used.

      The Bush  Terminal in Brooklyn is  currently  operated by the Company on a
month-to  month  permit  with New York City.  Although  this  facility  is fully
operational,  it currently operates at less than 10% of its total capacity.  The
monthly rental of the Bush Terminal is $2,200.  The  Greenville  Yard has always
served as the primary rail car float facility in New Jersey and connects by rail
to the Oak Island freight yard in Newark,  New Jersey.  The  Greenville  Yard is
situated on a one-mile long, 14.86-acre parcel leased to the Company until 2023.
The  annual  rental is $24,870  for the year 2001.  From 2002 to 2023 the annual
rental is $28,825.  The lease  agreement with Conrail also  transferred all real
property  associated  with the  operation  of the rail yard to the  Company  for
$1.00.

      Approximately 55% of the freight  transported by the Company is the result
of tariff division  agreements.  As a result,  the Company comprises part of the
traffic  route which a customer has chosen for freight  shipments.  Although the
majority  of this  type of  traffic  involves  railcars  received  from  Norfolk
Southern  and  delivered  to the New York and  Atlantic  Railroad,  the  Company
carries freight for a wide variety of customers.

      The remaining 45% of the freight  transported  by the Company is on behalf
of customers  whose  shipments  originate in New York and are transported by the
Company to its Greenville yard for shipment to other destinations.

      As of March 15, 2001, the Company had  approximately 40 customers.  During
the periods indicated below the following  customer  accounted for more than 10%
of the Company's revenues from its railroad operations.

                                Year Ended               Year Ended
      Customer                December 31, 1999       December 31, 2000
      --------                -----------------       -----------------

      Norfolk Southern               95%                     90%

      There are 10,950,000  estimated  truck  crossings per year in the New York
City  metropolitan  area (a truck  crossing  occurs when a truck  travels over a
bridge or through a tunnel).  In  contrast,  rail traffic into the New York City

<PAGE>

metropolitan  area is estimated to be 19,500  railcars per year (a railcar holds
the  equivalent  of three to four  truckloads).  The New York City  metropolitan
region is the only major  economic  area in the United States that has a freight
transportation system that is almost completely dependent on its highway system.
In the New York City metropolitan area, 97% of freight is moved via truck versus
3% by rail.  All other major  metropolitan  regions are roughly  balanced at 60%
truck versus 40% via rail.

      In May  2000  the  City of New York  published  a Major  Investment  Study
entitled  "Cross Harbor  Freight  Movement".  The study was conducted by the New
York City Economic  Development  Corporation to address shortcomings in New York
City's freight  transportation  network. The study sighted specific problems due
to the region's  reliance on trucking.  Among the issues  addressed by the study
was traffic congestion and the resulting delays in freight shipments.

      Modern  "high-cube"  cargo containers on trailers reach 13' 16" in height,
exceeding  Lincoln  and  Holland  Tunnel  vertical   clearances,   forcing  more
heavy-duty  truck  traffic  onto the George  Washington  and  Verazanno  Narrows
Bridges,  increasing distance, time and truck freight costs into the region. The
study indicated that increased use of a cross-harbor rail/float operation,  such
as that  provided by the  Company,  is the most  efficient  means of moving rail
freight  throughout  the New York City  region.  The 2.5 mile  float  barge trip
across the New York City harbor takes  approximately 45 minutes and eliminates a
35 to 50 mile truck trip across the New York City regional  bridge,  highway and
tunnel  system.  As a result  of the  foregoing,  the  Company  believes  that a
substantial  portion of the freight  presently  transported by truck will in the
future be transported by rail.

      Although the Company's current operating  capacity is approximately  2,000
carloads  per month,  as of January  31,  2001,  the  Company  was  transporting
approximately  290 carloads per month (a carload refers to one loaded rail car).
Although  this is an increase  from periods  prior to December 31, 1999 when the
Company was transporting an average of approximately 140 carloads per month, the
Company projects it will need to transport  approximately 300 carloads per month
in order to become  profitable.  The Company charges between $250 and $1,250 per
carload  depending  upon the length and weight of the  railcar,  and the type of
commodity being shipped.

      The Company believes that its revenues will continue to increase, in part,
as a result of the June 1999  acquisition of Conrail by Norfolk Southern and CSX
Transportation.  Conrail, in the past, resisted using the Company's rail system,
preferring  to transport  freight  destined for New York  City/Long  Island over
Conrail's  land  based  tracks.  Since  Conrail's  operations  were  effectively
acquired  by Norfolk  Southern  and CSX  Transportation  in June  1999,  Norfolk
Southern has used the Company more  frequently to transport  freight between New
Jersey and the New York/Long Island areas. The Company also believes there is an
emerging market for rail shipment of hazardous and non-hazardous waste.

      Based upon the foregoing, the Company believes that there is a significant
opportunity  to  increase  the  revenues  from its rail  freight  operations  by
providing  faster service at lower costs for freight moving between New York and
New Jersey.  There can be no assurance that the Company will be able to increase
revenues to the level required to generate profits.

<PAGE>


      If  additional  capacity is needed the Company  plans to repair one of its
float  bridges and add  additional  track at the  Greenville  yard, at a cost of
approximately  $8,000,000,  which would increase capacity to approximately 4,000
carloads  per month.  If more  capacity is still needed the Company can add four
float bridges, at a cost of approximately  $18,000,000,  to increase capacity to
10,000 carloads per month. See Item 6 of this report.

      The City of New York has recently completed  construction of two new float
bridges  at its 65th  Street  Rail  Yard.  In  September  2000,  the City made a
"Request for Proposal" ("RFP") for the operation of this facility. This facility
includes not only the float bridges but,  intermodal  tracks and loading  docks.
The RFP stipulated that any proposals  submitted must include access on the west
side of the river.  Currently,  only the Company's Greenville Yard, affords this
access.  On October 16, 2000, the Company  submitted to the City its response to
the RFP.

Trucking Operations

      In  April  1999  the  Company  acquired  51% of the  common  stock of J.S.
Transportation,  Inc.  ("JST") in exchange for 6,000,000 shares of the Company's
common stock. A total of 5,000,000 shares were issued to the shareholders of JST
in return for 51% of the common stock of JST and an additional  1,000,000 shares
were provided to JST to be used for the repayment of certain liabilities of JST.
As of March 15,  2001  160,000  of these  shares  had been used to  satisfy  JST
liabilities of $175,300.

      JST is a short-haul  regional trucking company which hauls and disposes of
garbage,  rubbish,  trash and other solid waste.  JST does not collect trash and
solid waste from residential or commercial customers,  but rather collects trash
and other  solid waste from  transfer  stations  operated by trash,  garbage and
rubbish collection companies.  The waste collected from the transfer stations is
then hauled to various  waste dumps and  landfills.  The waste  collected by JST
consists primarily of construction and demolition  materials.  JST does not haul
or dispose of hazardous, toxic, or medical waste.

      JST had an agreement  between  January 1999 and December 31, 2000 with the
Glouster  County  landfill  which allowed JST and its customers to dump waste at
the rate of $20 per ton. The  Glouster  County  landfill  closed its facility to
waste  shipped from  outside of Glouster  County in December  2000.  In November
2000, the Company began dumping waste at the Eagle Land  Management  landfill in
Pennsylvania and the Recovermat,  Inc. landfill in Maryland. The agreements with
these  landfills  may be  terminated  on 30 days or less  notice.  Although  the
dumping  rates with these  landfills  are higher  than the rates  charged by the
Glouster County  Landfill,  JST has been able to pass the higher rates on to its
customers without any adverse effect on JST's operations.

      JST's  services  customers in New Jersey,  the New York City  metropolitan
area, Pennsylvania,  Maryland and Delaware. The various transfer stations served
by JST are located in Pennsylvania and New Jersey.

      As of January 31, 2001 JST owned 27 tractor/trailers, of which 17 tractors
and 15 trailers were operational. JST's 17 tractors are fully utilized. Of JST's
fifteen  operational  trailers,  nine are  fully  utilized.  The  remaining  six
trailers   consist  of  flatbed  or   refrigerated   trailers   which  are  used
infrequently.  As of January 31, 2001 JST was using five tractor/trailers  which

<PAGE>

it subcontracted from various  independent  owner/operators.  In order to expand
its business during the next twelve months JST anticipates  that it will need an
additional  five tractors and ten additional  trailers.  JST estimates that this
additional equipment will cost between $300,000 and $500,000.

      The  equipment   owned  by  JST  is  leased  to  a   subcontractor   on  a
month-to-month  basis.  The  subcontractor  hauls and  disposes of the waste for
JST's customers and bills JST for the drivers and related expenses.

      As  of  January  31,  2001  JST's  trucking   equipment  was  transporting
approximately 10,000 tons of waste per month.

      In September 2000, JST acquired the assets of MHT, Incorporated ("MHT"), a
small regional  trucking company engaged in waste  transportation.  MHT's assets
included  three  tractors and two trailers and a customer base  generating  over
$500,000 in annual sales. The assets of MHT were acquired for 200,000 restricted
shares of the Company's  common stock and the  assumption of  liabilities in the
amount of $156,000.

      JST  believes  it can expand  its  business  by  acquiring  other  smaller
trucking companies that are involved in the collection of waste. As of March 15,
2001, JST did not have any agreements  relating to the  acquisition of any other
trucking companies.

      JST does not require any  licenses  or permits  which are  material to its
operations since subcontractors  perform the waste hauling and disposal services
for JST.

      During the years ending December 31, 1999 and 2000  approximately  29% and
15%  respectively  of JST's  revenues  were  derived  from  collection  services
provided to Waste  Management.  No other customer  represented  more than 10% of
JST's revenues during these periods.  All of JST's agreements with its customers
may be terminated on 30 days or less notice.

      The number of shares which the Company  issued for the 51% interest in JST
was  based  upon  the  following  considerations:  (1) the  market  value of the
Company's   common  stock,   (2)  the  capital   contributed  to  JST  by  JST's
shareholders,  and (3) JST's monthly revenues.  The Company acquired JST because
JST was  profitable  and would be able to provide  the  Company  with cash until
revenues from the Company's railroad operations equaled expenses.  See Item 6 of
this report.

      The Company only acquired 51% of JST because the Company wanted Todd Sage,
JST's  General  Manager,  to retain a financial  interest in JST for a period of
time  following the  acquisition.  Although the Company does not have any formal
agreements  concerning the acquisition of additional  shares in JST, the Company
believes it can acquire the remaining  49% interest in JST for 7,000,000  shares
of the  Company's  common  stock.  At its next  annual  meeting  the Company may
request  its  shareholders  to approve  the  acquisition  of the  remaining  49%
interest in JST.



<PAGE>


      The remaining 49% of JST is owned by the following persons:

                     Todd Sage                         14.7%
                     Darryl Caplan                      9.6%
                     John Marsala                      17.4%
                     Golden Aspen Corp.                 7.3%

      Todd  Sage is JST's  general  manager.  Darryl  Caplan is an  officer  and
director of the Company. John Marsala is the beneficial owner of more than 5% of
the Company's  common stock and due to his  ownership of the Company's  Series C
Preferred  shares  has the  right to cast a  majority  of the  shares  which are
entitled  to vote at any meeting of the  Company's  shareholders.  Golden  Aspen
Corp. is not affiliated with the Company.

Competition

      The Company competes with, numerous national,  regional and local railroad
and  trucking  companies,  many of whom have  significantly  larger  operations,
greater financial, marketing, human, and other resources than the Company.

      Competition  in the  waste  hauling  field is  highly  competitive.  There
appears to be a  consolidation  in the industry and as a result,  transportation
rates  have  been  affected.  In  addition,   increased  fuel  prices,  lack  of
experienced  drivers and  insurance  costs have all  affected  the bottom  line.
Overall, profits generated from the transportation segment of this business have
decreased  over the past twelve (12)  months.  Historically,  this is a cyclical
pattern.  Many waste  haulers  enter the market,  reduce  rates and realize they
cannot  survive,  then  rates  eventually  return.  The  larger  waste  disposal
customers  are  keenly  aware of this and tend not to change  haulers on pricing
alone.  JST is of the opinion that its  competitive  advantage  lies in customer
service and reliability.

Regulation

      The  Company's  rail  operations  are subject to regulation by the Surface
Transportation  Board (STB), the Federal Railroad  Administration  (FRA),  state
departments of transportation and some state and local regulatory agencies.  The
STB has jurisdiction  over, among other things,  service levels and compensation
of  carriers  for use of  railcars by other  carriers.  The STB also  authorizes
extension or  abandonment of rail lines,  the  acquisition of rail lines and the
consolidation, merger or acquisition of control of railroads. The STB may review
rail carrier  pricing only in response to a complaint  concerning  rates charged
for transportation where there is an absence of effective  competition.  The FRA
has  jurisdiction  over safety and railroad  equipment  standards  and regularly
monitors  the  maintenance  of the  Company's  equipment.  The Company is of the
opinion that it is in compliance with all applicable  regulations of the STB and
the FRA.

      Since l980,  federal  regulatory  policy has  emphasized  the promotion of
revenue  adequacy (e.g.,  the  opportunity to earn revenues  sufficient to cover
costs and attract  capital) for the  railroads  and has allowed  competition  to
determine  to a great  extent rail prices and route and  service  options.  As a
result of these changes in  legislative  policy,  the railroad  industry's  rate
structure  has evolved  from a system of  interrelated  prices that applied over
different  routes  between  the same  points to a  combination  of  market-based
prices.   While  federal  regulation  of  rail  prices  has  been  significantly

<PAGE>

curtailed, federal regulation of services continues to have a material effect on
profitability and competitiveness in the railroad industry.

      JST's  operations  are subject to regulation by various  federal and state
departments  of  transportation  and some state and local  regulatory  agencies.
However since JST utilizes the services of  subcontractors  to transport  waste,
JST is not required to have any permits or licenses  from any federal,  state or
local government agencies.

Environmental Matters

      The  operations  of the Company  and JST are  subject to various  federal,
state  and  local  laws  and  regulations  relating  to  the  protection  of the
environment.  These  environmental  laws  and  regulations,  which  have  become
increasingly  stringent,  are  implemented  principally  by  the  United  States
Environmental  Protection  Agency and comparable  state agencies that govern the
management of hazardous  wastes,  the  discharge of pollutants  into the air and
into surface and underground waters, and the manufacture and disposal of certain
substances.  The Company  believes that its  operations are in compliance in all
material respects with current laws and regulations.  The Company estimates that
any  expenses   incurred  in  maintaining   compliance  with  current  laws  and
regulations will not have a material effect on the Company's earnings or capital
expenditures.  However,  there is always the possibility that current regulatory
requirements may change, currently unforeseen environmental incidents may occur,
or  past  non-compliance  with  environmental  laws  may  be  discovered  on the
Company's properties. In any of such events, the business, prospectus, financial
condition and results of operations of the Company could be materially adversely
effected.

      The Company  received a Phase I  environmental  clearance  report prior to
signing  its lease on the  Greenville  yard in 1993.  In  addition,  the Company
received  a letter  from  Conrail  indemnifying  the  Company  with  respect  to
environmental claims that pertain to activities prior to 1993.

      Pursuant to the Emergency  Planning and Community Right to Know provisions
of the  Superfund  Amendments  and  Reauthorization  Act the Company has adopted
procedures  that  employees  will follow in case of any  inadvertent  release of
hazardous materials.  The Company periodically  conducts training exercises with
respect to these procedures as required by FRA.

      Although  neither  the  Company  nor JST  transport  or  dispose of toxic,
hazardous  or  medical  waste,  the  Company  transports   hazardous   materials
(primarily propane and freon) across the New York City harbor. The Company has a
permit  from  the  US.  Department  of  Transportation  to  transport  hazardous
materials.

      See Item 3 of this  report  for  information  concerning  a lawsuit  filed
against the Company which alleges that the Company  disposed of hazardous  waste
at the Company's Bush Terminal.

Convertible Notes and Series C Preferred Stock

      Between  April 1997 and December 31,  2000,  the Company sold  convertible
notes in the principal  amount of $3,892,000 to various private  investors.  The
notes bear  interest at 10% per year and were payable  between  April and May of

<PAGE>

2000. At the option of the note holder,  each note,  plus any accrued  interest,
may be converted  into shares of the Company's  common stock at the lower of the
Conversion  Price or 90% of the average  closing price of the  Company's  common
stock for the ten trading days preceding the date of conversion.  The Conversion
Price for the  convertible  notes varies between $.075 and $.60 and in each case
was equal to the  market  price of the  Company's  common  stock on the date the
notes were issued.  In connection  with the sale of certain of these notes,  the
Company  issued  options,  which  allow  the  holders  of the  notes to  acquire
additional  shares of the  Company's  common  stock upon the  conversion  of the
notes.  The  amounts  raised  from  the  sale  of the  notes  were  used  to pay
liabilities, purchase assets, and fund the Company's operations.

      As of January  31,  2001 notes in the  principal  amount of  approximately
$1,659,000,  plus related interest, had been converted into 27,749,454 shares of
the Company's  common stock.  As a result of the conversion of these notes,  the
Company  issued  warrants to the note  holders  which allow the note  holders to
purchase  10,092,524  shares of the  Company's  common  stock at prices  ranging
between $.12 and $.60 per share.  The  warrants  expire 90 days after the shares
issuable  upon  the  exercise  of the  options  are  covered  by a  registration
statement  which has been  declared  effective  by the  Securities  and Exchange
Commission.

      If the remaining  outstanding notes, plus accrued interest  (approximately
$1,115,000), were converted into shares of the Company's common stock on January
31, 2001 the Company would be required to issue an additional  9,673,379  shares
of common  stock,  plus  warrants  for the purchase of an  additional  2,828,309
shares of common stock. The warrants,  if issued, would be exercisable at prices
ranging  between  $.12 and $.60 per share  and would  expire on the later of the
date the notes were  converted  or 90 days after the  shares  issuable  upon the
exercise of the options are covered by a registration  statement  which has been
declared effective by the Securities and Exchange Commission

      The Company agreed to the terms of the convertible notes since the Company
was  unable to obtain  conventional  financing  due to the  Company's  financial
condition.  Notes in the principal  amount of  approximately  $800,940 contain a
restriction on short selling.

      See Item 5 of this report for information concerning the convertible notes
held  by the  Company's  present  and  former  officers  and  directors  and the
Company's principal shareholders.

      In June 2000 the Company  issued  500,000 shares of its Series C preferred
stock to John Marsala in payment of $500,000 in past due  convertible  notes and
accrued interest owed to Mr. Marsala. At the option of Mr. Marsala,  each Series
C preferred  share may be converted  into the greater of (i) 12.82 shares of the
Company's common stock or (ii) the number of shares determined by dividing $1.00
by an amount equal to 90% of the average  closing price of the Company's  common
stock for the five trading days preceding the date of conversion. For each share
of common stock received upon the  conversion of the Series C Preferred  shares,
Mr.  Marsala  will  receive a warrant  which will allow Mr.  Marsala to purchase
1.0452 shares of the Company's common stock at a price of $0.12 per share at any
time prior to the later of 90 days  following the date the shares  issuable upon
the  exercise of the  warrant  have been  registered  for public sale or 90 days
after the conversion of the Preferred shares.

      The actual  number of shares which will be issued upon the  conversion  of
the notes which remain  outstanding  or the conversion of the Series C Preferred

<PAGE>

stock  cannot be  determined  at this time and will depend upon the price of the
Company's  common stock at the time of conversion.  The issuance of common stock
upon  the  conversion  of  the  notes,  the  exercise  of the  warrants,  or the
conversion  of the  Series C  Preferred  stock as well as  future  sales of such
common  stock or the  perception  that such sales could occur,  could  adversely
affect the market price of the Company's common stock.

      The Company's  shareholders  did not approve the terms of the  convertible
notes or the Series C Preferred stock.

      The Company intends to file a registration  statement  covering the shares
issued or issuable  upon the  conversion of the notes and/or the exercise of the
warrants and the shares  issuable upon the  conversion of the Series C Preferred
stock.

Employees

      As of January 31, 2001 the Company had 13 full-time employees and two part
time employees.  Eight of the Company's employees are executive officers or work
in administration.  Six of the Company's executive officers serve on a full time
basis and two executive officers serve on a part time basis.

      The Company's Railroad division employs twelve full time and two part time
employees.  The  Company's  railroad  employees  are  members  of the  Seafarers
International Union. The Company had a collective  bargaining agreement with the
union  which  expired  in June 2000.  The  Company is  currently  negotiating  a
long-term  agreement  with  the  union.  The  railroad  employees  consist  of a
locomotive  engineer,  one general  manager  who is a  locomotive  engineer  and
instructor, two brakeman, two conductors and one bridgeman.

      JST has one operational manager. All other personnel used in the Company's
trucking operations are subcontracted.

ITEM  2. DESCRIPTION OF PROPERTIES See Item 1 of this report.

ITEM 3   LEGAL PROCEEDINGS.
         -----------------
      On  November  19,  1998 the City of New York filed a lawsuit  against  the
Company  and  Robert  Crawford,  the  Company's  former  President,  in the U.S.
District Court,  Southern District of New York for the purpose of recovering the
cost of the removal and cleanup of certain hazardous substances and petroleum at
the Company's Bush Terminal facility. The suit alleges that certain parties were
instructed  by the Company to dispose of  hazardous  and toxic  materials  in an
illegal manner.  The plaintiff is seeking  recovery of  approximately  $600,000,
which it claims to have spent on the  investigation  and  cleanup of the alleged
disposal, as well as all future investigation and cleanup costs, and the cost of
this  litigation.  The Company  intends to  vigorously  defend this action.  The
lawsuit is presently in the early stages of discovery;  accordingly the ultimate
resolution  of this matter is not  ascertainable  at this time. No provision has
been made in the financial  statements  related to this matter.  The City of New

<PAGE>

York v. New York Cross Harbor Railroad  Terminal  Corp.,  Robert R. Crawford and
New York  Regional  Rail  Corporation.  United  States  District  Court  Eastern
District of New York case no. 98 Civ. 7227.

     Fraser, McIntyre and Spartz v NYCH. Supreme Court of the State of New York,
County of Kings,  Index no.  45966/99 action  commenced  November 23, 1999. This
lawsuit  was  filed by three  persons  alleging  ownership  in NYCH.  One of the
individuals,  Stephen  H.  Fraser  is a  shareholder  of  NYCH.  The  other  two
individuals  sold  their  interest  to Robert  R.  Crawford  in 1993.  These two
individuals  claim that they were not paid by Crawford.  The  plaintiffs  allege
that NYCH  guaranteed  the  performance  of Mr.  Crawford.  The  Company has not
conducted an extensive review of the allegations in the complaint.

     Murphy,  Marseilles,  Smith & Nammack,  Inc.  Chapter 7 Case No. 98 B 42104
(SMB) Richard E. O'Connell v NYRR Adversary Proceeding No. 00-02413.  This is an
action brought by the trustee for the Murphy, Marseilles,  Smith & Nammack, Inc.
bankruptcy estate. The bankruptcy trustee claims that Murphy, Marseilles,  Smith
& Nammack,  Inc.  made a $50,000 loan to the Company in April 1996.  The Company
has denied this claim.

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

      Not Applicable

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

      As of January 31, 2001, there were  approximately  1,200 record and 10,000
beneficial owners of the Company's common stock.

      The Company's  common stock is traded on the OTC Bulletin Board. Set forth
below is the range of high and low bid quotations  for the periods  indicated as
reported by the National  Association  of  Securities  Dealers,  Inc. The market
quotations  reflect  interdealer  prices,  without retail mark-up,  mark-down or
commissions and may not necessarily represent actual transactions.

      Quarter Ending          High           Low

      March 31, 1997         $0.19         $0.13
      June 30, 1997           0.26          0.13
      September 30, 1997      0.19          0.09
      December 31, 1997       0.14          0.06

      March 31, 1998         $0.23          $0.06
      June 30, 1998           0.45           0.17
      September 30, 1998      0.25           0.16
      December 31, 1998       0.22           0.11

      March 31, 1999        $0.195          $0.10
      June 30, 1999           1.78          0.132
      September 30, 1999      0.84           0.42
      December 31, 1999       0.68           0.37

<PAGE>


      March 31, 2000         $0.63          $0.22
      June 30, 2000           0.49           0.24
      September 30, 2000      0.32          0.155
      December 31, 2000       0.22          0.091

      Holders of common stock are  entitled to receive such  dividends as may be
declared by the Board of Directors out of funds legally available therefore and,
in the  event of  liquidation,  to share  pro  rata in any  distribution  of the
Company's  assets after  payment of  liabilities.  The Board of Directors is not
obligated to declare a dividend.  The Company has not paid any  dividends on its
common stock and the Company  does not have any current  plans to pay any common
stock dividends.

      The provisions in the Company's  Certificate of Incorporation  relating to
the  Company's  Preferred  Stock would allow the  Company's  directors  to issue
Preferred  Stock with rights to multiple  votes per share and  dividends  rights
which would have priority over any dividends  paid with respect to the Company's
common  stock.  The issuance of  Preferred  Stock with such rights may make more
difficult  the removal of  management  even if such removal  would be considered
beneficial  to  shareholders  generally,  and will have the  effect of  limiting
shareholder  participation  in  certain  transactions  such as mergers or tender
offers if such transactions are not favored by incumbent management.

Issuance of Additional Shares

      As of January 31, 2001, the Company had 170,416,689 shares of common stock
issued and  outstanding.  The  following  table lists  additional  shares of the
Company's common stock to be issued as the result of the exercise of outstanding
options,  warrants or the conversion of other securities  issued by the Company.
The Company is  authorized  to issue  200,000,000  shares of common  stock.  The
Company plans to increase its authorized  common stock to allow for the issuance
of the additional shares described below.

                                            Number of Shares     Note Reference

Shares outstanding as of January 31, 2001     170,416,689

Shares issuable upon conversion of notes
and exercise of warrants sold in private
offerings, based upon the lower of the
Conversion Price or 90% of market price
of the Company's common stock on
January 31, 2001 ($0.15 per share).            22,594,212              A

Shares issuable upon each exercise of
options to be granted to Ronald Bridges        Undeterminable          B

Shares issuable upon exercise of options
granted to current and former officers and
employees                                        170,000              C

<PAGE>

Shares issuable upon the exercise of options
granted to consultants.                        1,100,000              D

Shares issuable to former officers             1,166,665              E

Shares  issuable  upon  conversion of Series
C Preferred Stock, based upon the lower of
Conversion Price 90% of market price of the
Company's common stock on January 31, 2001
($.146 per share)                             15,718,000              F

A. Between April 1997 and December 31, 2000, the Company sold convertible  notes
in the principal  amount of $3,892,000 to various private  investors.  The notes
bear interest at 10% and were due and payable  between April and May of 2000. At
the option of the note  holder,  each note,  plus any accrued  interest,  may be
converted  into  shares  of the  Company's  common  stock  at the  lower  of the
Conversion  Price or 90% of the average  closing price of the  Company's  common
stock for the ten trading days preceding the date of conversion.  The Conversion
Price for the  convertible  notes varies between $.075 and $.60 and in each case
was equal to the  market  price of the  Company's  common  stock on the date the
notes were issued.  In connection  with the sale of certain of these notes,  the
Company  issued  options,  which  allow  the  holders  of the  notes to  acquire
additional  shares of the  Company's  common  stock upon the  conversion  of the
notes.  The  amounts  raised  from  the  sale  of the  notes  were  used  to pay
liabilities, purchase assets, and fund the Company's operations.

      As of January  31,  2001 notes in the  principal  amount of  approximately
$1,659,000,  plus related interest, had been converted into 27,749,454 shares of
the Company's  common stock.  As a result of the conversion of these notes,  the
Company  issued  warrants to the note  holders  which allow the note  holders to
purchase  10,092,524  shares of the  Company's  common  stock at prices  ranging
between $.12 and $.60 per share.  The  warrants  expire 90 days after the shares
issuable  upon  the  exercise  of the  options  are  covered  by a  registration
statement  which has been  declared  effective  by the  Securities  and Exchange
Commission.

      If the remaining  outstanding notes, plus accrued interest  (approximately
$1,115,000), were converted into shares of the Company's common stock on January
31, 2001 the Company would be required to issue an additional  9,673,379  shares
of common  stock,  plus  warrants  for the purchase of an  additional  2,828,309
shares of common stock. The warrants,  if issued, would be exercisable at prices
ranging  between  $.12 and $.60 per share  and would  expire on the later of the
date the notes were  converted  or 90 days after the  shares  issuable  upon the
exercise of the options are covered by a registration  statement  which has been
declared effective by the Securities and Exchange Commission

      The Company  used the market price of its common stock on January 31, 2001
($0.15  per share) for  purposes  of  computing  the  shares  issuable  upon the
conversion  of the notes,  as well as the shares  issuable  upon the exercise of
warrants issued upon the conversion of the notes.

      The  following  table  shows as of  January  31,  2001:  (A) the amount of
convertible  notes held by former and  present  officers  and  directors  of the
Company and by those  shareholders who are the beneficial owners of more than 5%
of the  Company's  common  stock,  (B) the amount of note  principal and accrued

<PAGE>

interest  converted into shares of the Company's common stock, (C) the shares of
common  stock  issued upon the  conversion  of the notes  and/or the exercise of
warrants  held by such  persons,  and (D)  assuming  all  outstanding  notes are
converted into shares of the Company's  common stock, the shares of common stock
issuable upon the conversion of the notes and/or the exercise of the warrants.

<TABLE>
<S>                    <C>         <C>            <C>                 <C>
                                             Shares of Common    Shares of Common
                                             Stock Issued upon    Stock Issuable
                                  Amount    Conversion of Notes upon Conversion
                   Convertible   of Notes    and/or Exercise    of Notes and/or
                  Notes Held     Converted    of Warrants      Exercise of Warrants
Name                  (A)          (B)           (C)                   (D)
------          -------------   ----------   -----------        ------------------

Ronald Kuzon        $23,000           --             --                   --
Robert Crawford    $ 40,000           --             --              595,735
Arline Crawford    $175,000      $25,000        333,333            2,606,421
Citrus Springs
  Trust             $75,400           --             --              637,580
John Marsala        $18,877      $99,346      1,203,590            1,190,087
Steven Hirsch      $150,000     $720,008      8,123,151            7,540,390

</TABLE>

      In 1998 notes and accrued interest of $23,069 were repaid to Mr.Kuzon.

      Ronald Kuzon,  Robert Crawford and Arline Crawford are former officers and
directors  of  the  Company.  The  Company  considers  Ms.  Crawford  to be  the
controlling  person of the Citrus Springs Trust.  John Marsala and Steven Hirsch
are the beneficial owners of more than 5% of the Company's common stock.

     In the case of Steven Hirsch,  includes  notes held by CCC Financial,  Inc.
and the HiTel Group, Inc., corporations controlled by Mr. Hirsch.

   See Note F below for  information  concerning  preferred stock issued to John
Marsala in exchange for convertible notes.

      The actual  number of shares which will be issued upon the  conversion  of
the notes which remain  outstanding  cannot be  determined at this time and will
depend upon the price of the Company's  common stock at the time of  conversion.
The issuance of common stock upon the conversion of the notes or the exercise of
the  warrants,  as well as future sales of such common  stock or the  perception
that such sales could  occur,  could  adversely  affect the market  price of the
Company's common stock.

B. The Company has an Employment  Agreement with Ronald  Bridges,  the Company's
President.  The  Employment  Agreement  provides  that in the  event  the  gross
revenues from the Company's  railroad  operations  increase between September 1,
2000 and August 31, 2001 then Mr.  Bridges will be granted an option to purchase
one share of the Company's common stock for each $10 in additional revenue.  Any
options  granted  will be  exercisable  at a price of $0.19  per  share and will
expire one year from the date earned.


<PAGE>

C. Options are held by the following  present and former  officers and directors
of the  Company.  With the  exception of the options  held by Mr.  Eastman,  all
options are currently exercisable. Mr. Eastman's options are contingent upon his
future employment with the Company.

                          Shares Issuable
                           Upon Exercise        Option          Expiration Date
Name                        of Option        Exercise Price       of Option

Joel Marcus                  120,000            $0.20              12/2001

Wayne Eastman                 50,000            $0.19              various

D. The options were issued to Anthony Ricco and Dominic Massa who are members of
the  Company's  Advisory  Committee  and  provide  consulting  services  for the
Company. The options are exercisable at a price of $0.40 per share and expire on
August 14,  2001.  Options  for the  purchase  of 500,000  shares are  presently
exercisable.  Options for the purchase of the remaining  600,000 shares may only
be exercised in the event the  consultants  are successful in obtaining  certain
agreements  from  connecting  railroads,  the City of New York and  other  third
parties which agreements  would increase rail traffic and otherwise  benefit the
Company's railroad operations.

E. Shares are issuable to W. Robert Bentley and Tad Mahoney,  former officers of
the Company.  See Item 10 of this report for further information  concerning the
issuance of these shares.

F. In June 2000 the  Company  issued  500,000  shares of its Series C  Preferred
stock to John Marsala in payment of $500,000 in past due  convertible  notes and
accrued interest owed to Mr. Marsala. At the option of Mr. Marsala,  each Series
C Preferred  share may be converted  into the greater of (i) 12.82 shares of the
Company's common stock or (ii) the number of shares determined by dividing $1.00
by an amount (the "Conversion  Price") equal to 90% of the average closing price
of the  Company's  common stock for the five trading days  preceding the date of
conversion.  For each share of common stock  received upon the conversion of the
Series C Preferred  shares,  Mr. Marsala will receive a warrant which will allow
Mr. Marsala to purchase  1.0452 shares of the Company's  common stock at a price
of $0.12 per share at any time prior to the later of 90 days  following the date
the shares  issuable upon the exercise of the warrant have been  registered  for
public sale or 90 days after the conversion of the Preferred shares.

      The Company  used the market price of its common stock on January 31, 2001
($0.15  per share) for  purposes  of  computing  the  shares  issuable  upon the
conversion of the Series C Preferred  stock, as well as the shares issuable upon
the exercise of warrants  issued upon the  conversion  of the Series C Preferred
stock.

      The actual  number of shares which will be issued upon the  conversion  of
the Series C Preferred  stock cannot be  determined at this time and will depend
upon the price of the  Company's  common  stock at the time of  conversion.  The
issuance of common stock upon the conversion of the Series C Preferred  stock or
the  exercise of the  warrants,  as well as future sales of such common stock or
the perception that such sales could occur,  could  adversely  affect the market
price of the Company's common stock.

<PAGE>

ITEM 6.  MANAGEMENT'S DISCUSSION AND ANALYSIS/ PLAN OF OPERATIONS

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

      The following should be read in conjunction  with the Company's  financial
statements and related notes, which are a part of this report.

Balance Sheet Data
                              December 31, 2000          December 31, 1999
                              -----------------          -----------------

   Current Assets                $1,088,399                  $  906,846
   Total Assets                   5,270,089                   5,487,046
   Current Liabilities            4,937,604                   6,619,786
   Total Liabilities              6,113,947                   7,340,318
   Temporary Equity               1,512,500                   1,512,000
   Working Capital (Deficit)     (3,849,205)                 (5,712,940)
   Stockholders' (Deficit)       (2,441,592)                 (3,414,879)

Operating Data

                                        Years Ending December 31,
                                 2000              1999             1998
                                 ---------------------------------------

Operating revenues           $8,626,093        $5,614,567        $1,178,507
Operating expenses           (7,613,144)       (5,107,981)       (1,002,428)
Administrative
 expenses                    (1,802,773)       (2,147,766)       (2,029,070)
Interest and other
    expenses                   (389,303)       (1,641,180)         (589,880)
Minority interest               (36,127)     (     49,107)               --
Extraordinary gain
 debt forgiveness               263,271           109,468                --
Loss on disposition
 of equipment                        --                 --          167,095
                        ----------------------------------   --------------

Net loss                      $(951,856)      $(3,205,428)      $(2,552,871)
                              ==========      ===========       ============

Results of Operations

      The Company has incurred  substantial losses since it was formed. From the
date of its formation through December 31, 2000, the Company incurred net losses

<PAGE>

of approximately $(12,130,000).  The Company expects to continue to incur losses
until such time, if ever, it earns net income.

      Prior to 1976, the New York City region  benefited from  significant  rail
freight  competition.  During 1976 NYCH,  now a subsidiary  of the Company,  was
transporting almost 1,000 rail cars per day across the New York City harbor.

      In 1976,  Conrail was formed and became the area's  exclusive rail link to
the balance of the national  rail  network.  Rail freight  operations in the New
York City metro area became  dependent on Conrail which  controlled the movement
and pricing of rail freight in and around New York City.

      Conrail  elected to focus on rail  delivery  west of the  Hudson  River by
developing  "reload  centers" in northern  New Jersey for  reloading  goods from
railcars onto trucks for delivery to  destinations  into New York City.  Conrail
also routed a significant number of railcars destined for the New York City area
along land  based  tracks  north of New York City.  This added 288 miles and 1-4
days to the trip rather than the  three-mile  trip to the  Company's  Greenville
Yard and a forty-five  minute trip across the New York City harbor.  The Company
believes this policy  discouraged  many customers from using rail altogether and
led to a decline in NYCH's rail traffic.

      In January 1995 the Company's  docking facility in Greenville,  New Jersey
required repairs resulting in the inability of the Company to move freight for a
14-week  period.  As a result  of the  failure  of the  docking  facility,  rail
traffic,  which would  otherwise have been carried by the Company,  was rerouted
along track north of New York City.  Much of the rail traffic which was rerouted
did not return to the  Company  following  the repair of the  docking  facility,
resulting  in a  further  decline  in the  Company's  revenues  during  1995 and
thereafter.

      In June 1999  Norfolk  Southern and CSX  acquired  operational  control of
Conrail's  assets.  Since  then  Norfolk  Southern  has  used the  Company  more
frequently to transport  freight between New Jersey and the New York/Long Island
areas.  The Company also believes there is an emerging  market for rail shipment
of hazardous and non-hazardous waste.

      As of October  31, 2000 the Company  was  transporting  approximately  250
railcars per month. Based upon the average rate received by the Company for each
railcar  transported and the Company's  estimated operating expenses the Company
projects that it will need to transport  approximately 300 railcars per month in
order to become marginally profitable.

      During the three years  ending  December  31,  1999 the  Company  recorded
significant  expenses as the result of the issuance of (1) common stock at below
market prices, (2) options and warrants with exercise prices below market prices
and (3)  convertible  debt which was  convertible  into shares of the  Company's
common stock at prices below the then  prevailing  market prices.  These charges
did not  require  the use of cash and were  offset by  corresponding  credits to
stockholders'  equity.  The  amounts  expensed by the Company as a result of the
foregoing were:



<PAGE>


                              Year Ended December 31,
                        1997             1998         1999
                        ----             ----         ----

                      $174,552        $444,150     $1,395,000

Year Ended December 31, 2000

      The  increase  in revenue  and  operating  expenses  during the year ended
December 31, 2000 was the result of an increase in railcars  transported  by the
Company, an increase in the average amount received per railcar transported, and
the Company's acquisition of a 51% interest in JST in April 1999.

      The  components  of the  Company's  operating  revenues  and  expenses  by
business segment during the year ending December 31, 2000 were:

                             Railroad               Trucking

Operating revenues         $1,301,087              $7,325,006
Operating expenses            580,879               7,032,265
Gross profit                  720,208                 292,741

      The  beneficial  conversion  expense of  $1,395,000  during the year ended
December  31,  1999  was  due  to the  sale  of  promissory  notes,  which  were
convertible into shares of the Company's common stock at prices below prevailing
market prices.  Beneficial  conversion expense with respect to notes sold during
the year ended  December  31,  2000 with  similar  conversion  features  was not
material.  See Item 5 of this  report for  further  information  concerning  the
Company's convertible notes.

Year Ended December 31, 1999

    The  increase  in  revenue  and  operating  expenses  during  the year ended
December 31, 1999 was the result of an increase in railcars  transported  by the
Company, an increase in the average amount received per railcar transported, and
the Company's acquisition of a 51% interest in JST in April 1999.

   The components of the Company's  operating  revenues and expenses by business
segment during the year ended December 31, 1999 were:

                                                     Railroad      Trucking

Operating revenues                                   $899,000     $4,716,000
Operating expenses                                   $929,000     $4,179,000
Gross profit                                         ($30,000)    $  537,000



<PAGE>




      Interest  expense  for 1999  includes  beneficial  conversion  expenses of
$1,395,000 associated with the issuance of warrants and options for services and
the sale of promissory notes which were convertible into shares of the Company's
common stock at prices below prevailing market prices.

      Operating  expenses  as a percent of  operating  revenues  were 85% during
1998. In 1999 operating  expenses  increased to 91% of operating revenues due to
costs associated with equipment maintenance and modernization.

Liquidity and Capital Resources

      As of December 31, 2000 the Company had the following liabilities:

      Accounts payable and accrued expenses       $2,478,773
      Notes payable                                1,668,916
      Accrued payroll and payroll taxes              905,585
      Convertible notes                              959,173

      Accounts payable and accrued liabilities include $508,000 owed for accrued
interest  on  convertible  notes and for accrued  legal fees.  A majority of the
legal fees are payable through options granted to the respective law firms.  The
Company  anticipates  that most of the accrued  interest  and legal fees will be
satisfied through the exercise of said conversion features.

      Accounts payable and accrued expenses include a perfected judgement by the
Port  Authority  of  New  York  and  New  Jersey  ("PANYNJ")  in the  amount  of
approximately $440,000. The Company is currently negotiating with the PANYNJ for
a long-term payout. Management is confident such an agreement will be reached in
the near future.

      Accounts  payable  and  accrued  expenses  include  $345,000  to a  former
customer  for  advances  and  accrued  tug  boat  charges.  Management  has been
negotiating a settlement in exchange for shares of common stock and  anticipates
a resolution in the near future.

      Accounts payable and accrued expenses also include approximately  $815,000
for accrued real estate taxes.  Based upon  discussions the Company has had with
local taxing  authorities,  the Company  believes  that its  liability  for real
estate taxes can be settled for approximately $150,000.

      See  Item 5 of  this  report  for  information  concerning  the  Company's
convertible  notes. The Company  believes that all or  substantially  all of the
remaining notes will be converted into shares of the Company's common stock.

      During the year ended  December  31, 1999 the  Company's  operations  used
approximately  $1,582,800 of cash. In order to fund its  operating  losses,  the
Company  sold  shares of its  common  stock  and  convertible  notes in  private
offerings.

      During the year ended  December  31, 2000 the  Company's  operations  used
approximately  $702,000 in cash and the Company acquired  approximately $360,000

<PAGE>

of property  and  equipment.  The Company  financed  its cash needs  during this
period primarily through the sale of convertible notes. In April 2000 JST became
profitable and began providing the Company with a source of cash.

      Although  during fiscal 2001 the Company  expects that its operations will
begin to generate net income, the Company nevertheless  anticipates that it will
suffer losses of approximately $100,000 until the Company becomes profitable.

      The Company's  anticipated  capital needs during the year ending  December
31, 2001 are:

      Operating Losses                                         $100,000
      Payment of trade payables and accrued liabilities        $100,000
      Repairs to Bush and Greenville terminals                 $100,000
      Repairs to locomotives and car floats                    $100,000
      Payroll taxes, real estate taxes related interest
      and penalties                                            $750,000

      The Company does not have any available  credit,  bank  financing or other
external sources of liquidity. Due to historical operating losses, the Company's
operations  have not been a source of liquidity.  Until such time as the Company
becomes  profitable,  the Company's  continued  operations  will depend upon the
availability of additional funding. In order to obtain capital,  the Company may
need to sell additional  shares of its common stock or borrow funds from private
lenders.  There  can be no  assurance  that the  Company  will be able to obtain
additional  funding,  if needed, or, if available,  on terms satisfactory to the
Company.  There can be no  assurance  that the Company  will be able to generate
sufficient revenues to be profitable.

ITEM 7.  FINANCIAL STATEMENTS

      See the financial statements attached to this report.

ITEM 8.  CHANGES  IN  AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
         FINANCIAL DISCLOSURE

      Effective June 8, 2000 the Company  retained Feldman Sherb Horowitz & Co.,
P.C.  ("Feldman/Sherb")  to act as the Company's  independent  certified  public
accountants.   In  this  regard  Feldman/Sherb   replaced  Schneider  Ehrlich  &
Associates,  LLP  ("Schneider/Ehrlich")  which audited the  Company's  financial
statements  for the fiscal year ended  December 31, 1997 and 1998. The report of
Schneider/Ehrlich  for these fiscal years did not contain an adverse opinion, or
disclaimer  of opinion  and was not  qualified  or modified as to audit scope or
accounting principles. However, the report of Schneider/Ehrlich for these fiscal
years was qualified with respect to  uncertainty as to the Company's  ability to
continue  as a going  concern.  As a result of a judgement  entered  against the
Company prior to December 31, 1998,  the  Company's  financial  statements  were
restated  to reflect an  increase  in  liabilities  and an  increase in retained
earnings  deficit  for the same  amount.  During the  Company's  two most recent
fiscal years and subsequent  interim  period ending June 8, 2000,  there were no
disagreements with  Schneider/Ehrlich on any matter of accounting  principles or
practices, financial statement disclosure or auditing scope or procedures, which
disagreements,  if not resolved to the satisfaction of  Schneider/Ehrlich  would
have caused it to make reference to such disagreements in its reports.

<PAGE>


      The change in the Company's  auditors was  recommended and approved by the
board of directors of the Company. The Company does not have an audit committee.

      During the two most recent  fiscal  years and  subsequent  interim  period
ending June 8, 2000,  the Company did not consult  Feldman/Sherb  regarding  the
application  of  accounting  principles  to  a  specified  transaction,   either
completed  or proposed,  or the type of audit  opinion that might be rendered on
the  Company's  financial  statements,  or any matter  that was the subject of a
disagreement  or a  reportable  event  as  defined  in  the  regulations  of the
Securities and Exchange Commission.

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS, COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT

      Set forth below is certain  information  concerning  the management of the
Company:

      Name                   Age       Position

      Ronald W. Bridges       53       President
      Wayne A. Eastman        50       Vice President of Operations
      Darryl Caplan           38       Vice President of Corporate Affairs and
                                       a Director
      Joel Marcus             59       Chief Financial Officer and a Director
      Sabato Catucci          62       Director
      Gordon Kuhn             50       Director

      Ronald W. Bridges has been the  President of the Company  since  September
2000. Mr. Bridges has over 25-years experience in the railroad industry;  having
served as Conrail's  Assistant Vice  President,  Forest and  Manufactured  Goods
Business  Group,  until his retirement in May 1999.  After his  retirement  from
Conrail,  Mr.  Bridges  served  as  a  consultant  to  numerous   transportation
companies.

      Wayne A. Eastman has been the Vice President of Operations since September
2000. Wayne has over 30-years  experience in all phases of railroad  operations.
He retired form Conrail as District  Superintendent  of Oak Island  Terminal and
Yard Operations in Newark, NJ. Prior to joining Conrail he was superintendent of
two  regional  railroads in the Midwest and spent  eighteen  (18) years with the
Illinois Central Railroad. Mr. Eastman is also an adjunct Professor of Economics
at Middlesex College in Edison, NJ.

     Darryl  Caplan has been an officer and director of the Company since August
1999. Mr. Caplan has been an attorney in private practice since 1986.

     Joel Marcus,  CPA,  has been an officer and  director of the Company  since
June 2000.  Mr.  Marcus has over 25 years of  experience  in  corporate  and tax
accounting.  Mr. Marcus has been a CPA in private practice for over 20 years and
is Chief  Financial  Officer and Director of SMLX  Technologies  Inc. a publicly
traded company.

      Sabato  Catucci has been a director of the  Company  since July 1999.  Mr.
Catucci  serves as NYRR's  Chairman of the Board.  Mr.Catucci is the founder and

<PAGE>

CEO of American  Warehousing  and American  Stevedoring  ("American").  American
currently  runs for the City of New York and The Port  Authority  of NY/NJ,  the
Redhook  Marine  Terminal,  and  the  majority  of all  piers  on  the  Brooklyn
waterfront. American's piers are home to the world's largest cocoa port and they
are actively engaged in containerized  freight shipments.  He also owns a number
of  other  businesses.  Mr.  Catucci  is  one  of the  persons  responsible  for
establishing  the New York Task Force on Port, Rail and Industrial  Development.
He sits on the  Advisory  Committee  of the New York City  Economic  Development
Corporations Cross Harbor Major Investment Study (MIS).

      Gordon Kuhn has been a director of the Company since September 2000. He is
a highly respected lifetime railroader with over 25 years experience in the rail
industry.  Mr. Kuhn retired from Conrail after serving as Senior Vice  President
in charge of its Core Business Group, with annual sales of over  $1,800,000,000.
His responsibilities included all aspects of Sales, Marketing, Customer Service,
Billing & Collecting, Car Management, as well as, Industrial Development.

Change in Management

      Beginning in November  1998 the  management  of the Company  changed.  The
following  provides certain  information  concerning the dates of service of the
former and present management of the Company.

                                                                   Periods of
Name                             Position                            Service
----                             --------                          -----------

Robert Crawford            President, Treasurer and a Director   10/95 to 11/98

Arline Crawford            Vice President of Operations, Secretary
                           and a Director                         10/95 to 7/99

Bruce Crawford             Assistant Secretary, Assistant Treasurer
                           and a Director                          4/99 to 7/99

W. Robert Bentley          Director                                3/98 to 9/00

W. Robert Bentley          President                              12/98 to 9/00

Irene Bodkin               Director                               10/95 to 6/00

Donald Boehm               Director                                3/98 to 5/00

Ira Levy                   Chief Financial Officer                 5/99 to 6/00

Darryl Caplan              Vice President of Corporate Affairs
                           and a Director                            Since 8/99

James White                Director                                8/98 to 4/99

Ronald Kuzon               Director                                6/99 to 2/00

<PAGE>


Sabato Catucci             Director                                  Since 7/99

Joel Marcus                Chief Financial Officer and a Director    Since 6/00

Ronald Bridges             President                                 Since 9/00

Tad Mahoney                Vice President of Operations            4/00 to 9/00

Wayne Eastman              Vice President of Operations              Since 9/00

Gordon Kuhn                Director                                  Since 9/00

ITEM 10. EXECUTIVE COMPENSATION

      The following table sets forth in summary form the  compensation  received
by (i) the  Chief  Executive  Officer  of the  Company  and  (ii) by each  other
executive  officer of the Company who received in excess of $100,000  during the
fiscal years indicated.

                                                             Re-
                                                Other       stric-
                                               Annual        ted
Name and                                       Compen-      Stock    Options
Principal        Fiscal    Salary   Bonus      sation       Awards   Granted
Position          Year       (1)      (2)       (3)          (4)       (5)
---------        ------    ------   -----      ------       ------   -------


Ronald Bridges,   2000
President since
September 2000

W. Robert Bentley, 2000   $75,000  $ 9,939         --          --         --
President from    1999    $75,000  $15,200         --          --         --
January 1999 to   1998    $75,000       --   $ 15,200          --         --
September 2000

(1)  The dollar  value of base  salary  (cash and  non-cash)  received.  Amounts
     include the compensation paid by the Company's subsidiaries.
(2)  The dollar value of bonus (cash and non-cash) received.
(3)  Any other annual compensation not properly  categorized as salary or bonus,
     including perquisites and other personal benefits,  securities or property.
     Amounts in the table represents housing and automobile allowances.
(4)  Amounts  reflect  the value of the  shares of the  Company's  common  stock
     issued as compensation for services.  The number of shares of the Company's
     common  stock  owned by the  officer  listed  above,  and the value of such
     shares as of December 31, 2000 were:

      Name                          Shares                  Value

      Ronald Bridges                  --                      --

<PAGE>


(5)  The shares of common  stock to be received  upon the  exercise of all stock
     options granted during the fiscal years shown in the table.

      The following  shows the amount,  which the Company  expects to pay to its
executive  officers  during the year ending December 31, 2001 and the time which
the Company's executive officers plan to devote to the Company's business.

                              Proposed             Time to be Devoted
Name                       Compensation         To Company's Business

Ronald W. Bridges            $84,000                    100%
Wayne Eastman                $36,000                    100%
Joel Marcus                        A                       A
Darryl Caplan                      B                       B

A.   For the six months  ending  December 31, 2000 the Company used a consulting
     company  affiliated  with Joel  Marcus to perform  certain  accounting  and
     bookkeeping services. For these services the consulting company was granted
     options to purchase  120,000 shares of the Company's  common stock and will
     be  paid  $30,000  in  monthly   increments  of  $5,000.  The  options  are
     exercisable  at a price of $0.21 per share,  (which was the market price of
     the Company's  common stock on the date of the consulting  agreement),  and
     expire between June and December 2001.

B.   The  Company  does not  expect to  compensate  Mr.  Caplan for acting as an
     officer and director of the Company.  Mr.  Caplan's law firm bills fees for
     legal  services to the Company at rates  ranging  between $150 and $220 per
     hour.  In  September  1999  Mr.  Caplan's  law  firm  received  options  in
     consideration  for past and  future  legal  services  for the  purchase  of
     500,000 shares of the Company's  common stock. The options were exercisable
     at the lesser  $0.40 per share or 90% of the average  closing  price of the
     Company's  common  stock for the ten  trading  days  preceding  the date of
     exercise.  On the date the options  were  granted  the market  price of the
     Company's common stock was $.40 per share. In November 1999 options for the
     purchase of 300,000 shares were  exercised.  The remaining  200,000 options
     were  exercised  in March 2000.  All options  were  exercised  at $0.40 per
     share.  In  September  2000 the Company  issued  302,286  shares of the its
     common stock to Mr. Caplan's law firm in payment of $63,480 in legal fees.

      The Company's Board of Directors may increase the compensation paid to the
Company's   officers   depending  upon  the  results  of  the  Company's  future
operations.

Employment Contracts

      In  September  2000,  the  Company  entered  into  a  one-year  Employment
Agreement  with  Ronald  Bridges.  Pursuant to the terms of this  agreement  Mr.
Bridges,   or  a  company  controlled  by  Mr.  Bridges,   will  receive  annual
compensation  of $84,000.  In the event the gross  revenues  from the  Company's
railroad  operations  increase between September 1, 2000 and August 31, 2001 Mr.
Bridges will be granted an option to purchase one share of the Company's  common
stock for each $10 in additional revenue. Mr. Bridges will also be entitled to a
cash bonus equal to 5% of the first $1,000,000 of additional revenues and a cash
bonus  equal to 2.5% of any  additional  revenues in excess of  $1,000,000.  Any

<PAGE>

options granted will be exercisable at a price of $0.19 per share (which was the
market  price  of the  Company's  common  stock  on the  date of the  employment
agreement) and will expire one year from the date earned.

      In September  2000, the Company and Wayne Eastman  entered into a one year
employment  agreement  which provides for an annual salary of $36,000 and a $500
monthly car allowance.  The employment agreement further provides that for every
six months of employment  Mr.  Eastman will receive  options to purchase  25,000
shares of the Company's  common stock. The options are exercisable at a price of
$0.19 per share (which was the market price of the Company's common stock on the
date of the employment agreement) and will expire one year from the date earned.

      W. Robert Bentley had an employment  contract with the Company whereby Mr.
Bentley was employed as the  President  of the  Company's  subsidiary,  New York
Cross Harbor Railroad,  until January 5, 2001 at an annual salary of $75,000 per
year. In September  2000,  Mr.  Bentley  agreed to an early  termination  of his
contract.  As part of the termination  agreement,  the Company agreed to pay Mr.
Bentley  $21,630 plus  unreimbursed  expenses and Mr.  Bentley  agreed to cancel
options to purchase  500,000 shares of the Company's  common stock. In addition,
the Company  agreed to issue Mr.  Bentley  1,000,000  shares of common  stock in
three equal  annual  installments  beginning  in March 2001.  The first  333,333
shares due Mr. Bentley were issued in March 2001.

      In April 2000 the Company  entered into a five month  employment  contract
with Tad Mahoney, the Company's former Vice President of Operations. The contact
provided for the issuance of 166,665  shares of the Company's  common stock plus
monthly payments of $7,500. The Company issued the 166,665 shares to Mr. Mahoney
in March 2001.

Long Term Incentive Plans - Awards in Last Fiscal Year

      None.

Employee Pension, Profit Sharing or Other Retirement Plans

      Except  as  provided  in the  Company's  employment  agreements  with  its
executive officers,  the Company does not have a defined benefit,  pension plan,
profit sharing or other retirement  plan,  although the Company may adopt one or
more of such plans in the future.

Compensation of Directors

      Standard  Arrangements.  At present the Company does not pay its directors
for attending  meetings of the Board of Directors,  although the Company expects
to adopt a  director  compensation  policy in the  future.  The  Company  has no
standard  arrangement pursuant to which directors of the Company are compensated
for any  services  provided  as a director  or for  committee  participation  or
special assignments.

      Except as disclosed  elsewhere in this report,  no director of the Company
received  any  form of  compensation  from the  Company  during  the year  ended
December 31, 2000.



<PAGE>


Stock Option and Bonus Plans.

      The Company has an Incentive  Stock Option  Plan,  a  Non-Qualified  Stock
Option  Plan and a Stock  Bonus  Plan.  A  summary  description  of these  Plans
follows. In some cases these Plans are collectively referred to as the "Plans".

Incentive Stock Option Plan.

      The Incentive Stock Option Plan collectively authorizes the issuance of up
to 2,000,000  shares of the  Company's  Common  Stock to persons  that  exercise
options  granted  pursuant to the Plan.  Only Company  employees  may be granted
options pursuant to the Incentive Stock Option Plan.

      To be  classified as incentive  stock  options under the Internal  Revenue
Code,  options  granted  pursuant  to the Plans must be  exercised  prior to the
following dates:

      (a) The  expiration  of three  months  after  the date on which an  option
holder's  employment by the Company is terminated (except if such termination is
due to death or permanent and total disability);

      (b) The expiration of 12 months after the date on which an option holder's
employment  by the  Company is  terminated,  if such  termination  is due to the
Employee's permanent and total disability;

      (c) In the event of an option  holder's  death  while in the employ of the
Company,  his  executors or  administrators  may  exercise,  within three months
following  the  date  of his  death,  the  option  as to any of the  shares  not
previously exercised;

      The total fair market value of the shares of Common Stock  (determined  at
the time of the  grant of the  option)  for which any  employee  may be  granted
options,  which are first  exercisable  in any  calendar  year,  may not  exceed
$100,000.

      Options may not be exercised  until one year  following the date of grant.
Options  granted to an employee then owning more than 10% of the Common Stock of
the Company may not be  exercisable  by its terms after five years from the date
of grant.  Any other option granted  pursuant to the Plan may not be exercisable
by its terms after ten years from the date of grant.

      The purchase price per share of Common Stock  purchasable  under an option
is  determined by the Committee but cannot be less than the fair market value of
the  Common  Stock on the date of the grant of the  option  (or 110% of the fair
market  value in the  case of a person  owning  more  than 10% of the  Company's
outstanding shares).

Non-Qualified Stock Option Plan.

      The  Non-Qualified  Stock  Option Plan  authorizes  the  issuance of up to
2,000,000  shares of the Company's Common Stock to persons that exercise options
granted pursuant to the Plans.  The Company's  employees,  directors,  officers,
consultants  and  advisors are  eligible to be granted  options  pursuant to the
Plans,  provided  however  that  bona fide  services  must be  rendered  by such

<PAGE>

consultants  or advisors and such services  must not be in  connection  with the
offer  or  sale of  securities  in a  capital-raising  transaction.  The  option
exercise price is determined by the Committee but cannot be less than the market
price of the Company's Common Stock on the date the option is granted.

Stock Bonus Plan.

      Up to  1,000,000  shares of Common  Stock may be  granted  under the Stock
Bonus Plan.  Such shares may consist,  in whole or in part,  of  authorized  but
unissued shares,  or treasury shares.  Under the Stock Bonus Plan, the Company's
employees, directors, officers, consultants and advisors are eligible to receive
a grant of the Company's  shares,  provided however that bona fide services must
be  rendered  by  consultants  or  advisors  and  such  services  must not be in
connection   with  the  offer  or  sale  of  securities  in  a   capital-raising
transaction.

Other Information Regarding the Plans.

      The Plans are administered by the Company's  Compensation  Committee ("the
Committee"),  each member of which is a director of the Company.  The members of
the Committee were selected by the Company's  Board of Directors and serve for a
one-year tenure and until their successors are elected. As of March 15, 2001 the
Compensation  Committee  was  made  up of Joel  Marcus,  Darryl  Caplan  and Sal
Catucci.  A member of the  Committee may be removed at any time by action of the
Board of Directors.  Any vacancies,  which may occur on the  Committee,  will be
filled by the Board of Directors.  The Committee is vested with the authority to
interpret the  provisions of the Plans and supervise the  administration  of the
Plans.  In addition,  the Committee is empowered to select those persons to whom
shares or options are to be granted,  to determine the number of shares  subject
to each grant of a stock bonus or an option and to determine when, and upon what
conditions,  shares or options granted under the Plans will vest or otherwise be
subject to forfeiture and cancellation.

      In the  discretion of the Committee,  any option  granted  pursuant to the
Plans may include installment  exercise terms such that the option becomes fully
exercisable  in  a  series  of  cumulating  portions.  The  Committee  may  also
accelerate  the date upon which any option (or any part of any options) is first
exercisable.  Any shares issued pursuant to the Stock Bonus Plan and any options
granted pursuant to the Incentive Stock Option Plan or the  Non-Qualified  Stock
Option Plan will be  forfeited  if the  "vesting"  schedule  established  by the
Committee  administering  the Plan at the time of the grant is not met. For this
purpose,  vesting  means the period  during  which the  employee  must remain an
employee  of the  Company  or the  period of time a  non-employee  must  provide
services to the Company.  At the time an employee ceases working for the Company
(or at the time a non-employee ceases to perform services for the Company),  any
shares or options  not fully  vested will be  forfeited  and  cancelled.  At the
discretion of the Committee,  payment for the shares of Common Stock  underlying
options may be paid through the delivery of shares of the Company's Common Stock
having an aggregate  fair market value equal to the option price,  provided such
shares have been owned by the option  holder for at least one year prior to such
exercise. A combination of cash and shares of Common Stock may also be permitted
at the discretion of the Committee.

      Options  are  generally  non-transferable  except upon death of the option
holder.  Shares  issued  pursuant to the Stock Bonus Plan will  generally not be

<PAGE>

transferable  until the  person  receiving  the  shares  satisfies  the  vesting
requirements imposed by the Committee when the shares were issued.

      The Board of  Directors  of the Company may at any time,  and from time to
time, amend,  terminate,  or suspend one or more of the Plans in any manner they
deem appropriate,  provided that such amendment,  termination or suspension will
not  adversely  affect rights or  obligations  with respect to shares or options
previously  granted.  The  Board  of  Directors  may  not,  without  shareholder
approval:  make any amendment,  which would  materially  modify the  eligibility
requirements  for the Plans;  increase or decrease the total number of shares of
Common  Stock which may be issued  pursuant to the Plans except in the case of a
reclassification  of the Company's capital stock or a consolidation or merger of
the Company;  reduce the minimum  option price per share;  extend the period for
granting options;  or materially increase in any other way the benefits accruing
to employees who are eligible to participate in the Plans.

Summary.

      The  following  sets forth certain  information,  as of December 31, 2000,
concerning  the stock  options and stock  bonuses  granted by the Company.  Each
option represents the right to purchase one share of the Company's common stock.

                             Total        Shares
                            Shares     Reserved for     Shares       Remaining
                           Reserved    Outstanding     Issued as  Options/Shares
Name of Plan              Under Plans    Options     Stock Bonus   Under Plans
------------              -----------  -----------   -----------  --------------

Incentive Stock Option
  Plan                     2,000,000      170,000        N/A        1,830,000
Non-Qualified Stock
   Option Plan             2,000,000           --        N/A        2,000,000
Stock Bonus Plan           1,000,000           --    166,665          833,335

Other Options Granted

      The following tables set forth information concerning the options granted,
during the  fiscal  year ended  December  31,  2000,  to the  Company's  present
officers and directors during the year, and the value as of December 31, 2000 of
all unexercised  options  (regardless of when granted) held by these persons. In
each case the  exercise  price of the  option was  greater  than or equal to the
market price of the  Company's  common stock on the date the option was granted.
The options listed below were not granted pursuant to the Company's incentive or
non-qualified  stock  option  plans.  The  options in the table  exclude  shares
issuable  upon  conversion of notes and exercise of warrants held by the persons
named in the table. See Item 5 of this report.

                                          % of Total
                                         Options Granted   Exercise
                  Date of   Options      to Employees in  Price Per   Expiration
Name               Grant   Granted (#)     Fiscal Year      Share       Date
-----             ------   -----------   ---------------   --------  -----------

Joel Marcus        6/8/00    120,000       12.3%          $0.20         12/2001
Wayne Eastman      9/1/00     50,000        5.1%          $0.19    Various dates

<PAGE>


Option Exercises and Option Values

<TABLE>
<S>               <C>          <C>              <C>                       <C>


                                          Number of Securities
                                        Underlying Unexercised    Value of Unexercised
                                         In-the-Money Options     In-the-Money Options
                 Shares                  at December 31, 2000     at December 31, 2000
               Acquired on    Value          Exercisable/             Exercisable/
Name           Exercise (1) Realized (2)    Unexercisable (3)       Unexercisable (4)
----           ------------ ------------ --------------------     --------------------

Darryl Caplan    500,000     $27,000                --/--          $         --/--
Joel Marcus          --          --         80,000/40,000          $         --/--
Wayne Eastman        --          --         25,000/25,000          $         --/--

</TABLE>


(1)  The number of shares of common  stock  received  upon  exercise  of options
     during the fiscal year ended December 31, 2000.  Excludes  shares  issuable
     upon conversion of notes and exercise of warrants held by the persons named
     in the table. See Item 5 of this report.

(2)   With respect to options  exercised  during the Company's fiscal year ended
      December  31, 2000 the dollar value of the  difference  between the option
      exercise price and the market value of the option shares  purchased on the
      date of the exercise of the options.

(3)   The total  number of  unexercised  options  held as of December  31, 2000,
      separated  between those options that were  exercisable  and those options
      not exercisable.

(4)   For all  unexercised  options held as of December 31, 2000,  the excess of
      the market value of the stock underlying those options (as of December 31,
      2000) and the exercise price of the option.

ITEM 11.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     The  following  tables  identify  as of  January  31,  2001 the  beneficial
ownership  of the  Company's  common stock by (i) each person or entity known by
the  Company  to be the  beneficial  owner  of more  than  five  percent  of the
Company's common stock, (ii) each officer and executive  director of the Company
(iii) all the directors and  executive  officers of the Company as a group,  and
(iv) certain other persons. Unless otherwise indicated,  all shares are owned of
record.

      The first table shows the shares owned by the  foregoing  persons  without
giving effect to the exercise of options or warrants or the  conversion of notes
or  preferred  shares  and other  securities  (collectively  referred  to as the
"derivative  securities")  of the  Company.  The second  table shows the shares,
which would be owned by the foregoing persons assuming the issuance of shares of
the Company's  common stock upon the exercise or  conversion  of all  derivative
securities.  See Item 5 of this  report for a  description  of these  derivative
securities.



<PAGE>


Share Ownership Assuming No Exercise or Conversion of Derivative Securities

                                      Shares of
Name                                Common Stock            Percent of Class

Ronald W. Bridges                      50,000                       *

Darryl Caplan (1)                   1,882,625                    1.1%

Joel Marcus                                --                      --

Wayne A. Eastman                       60,000                       *

Sabato Catucci                             --                      --

Gordon Kuhn                                --                      --

Robert R. Crawford                 4,400,000                     2.6%

Arline C. Crawford (2)              1,250,000                       *

R. Bruce Crawford                   5,400,689                    3.2%

Estate of A. S. Daniels (2)        6,304,944                     3.7%

Citrus Springs Trust (2)           31,199,786                   18.3%

All Officers and
Directors as a Group (six persons)  1,992,625                    1.2%

Share Ownership Assuming Exercise or Conversion of all Derivative Securities

                                     Shares of
Name                                Common Stock            Percent of Class

Ronald Bridges                         50,000                       *

Darryl Caplan (1)                   2,084,924                       *

Joel Marcus (4)                       120,000                       *

Wayne Eastman                         110,000                       *

Sabato Catucci                             --                      --

Gordon Kuhn                                --                      --

<PAGE>


Robert R. Crawford                  5,029,452                    2.4%

Arline C. Crawford (2)              3,750,000                    1.8%

R. Bruce Crawford                   5,400,689                    2.6%

Estate of A. S. Daniels (2)         6,510,944                    3.1%

Citrus Springs Trust (2)           31,611,590                     15%

John Marsala                       18,014,867                    8.5%

Steven Hirsch (3)                  12,251,768                    5.8%

All Officers and Directors
  as a Group (six persons)          2,364,924                    1.1%

Voting Rights

      The following table indicates,  as of January 31, 2001 the votes which may
be cast on any matter presented to the Company's shareholders by (i) each person
or  entity  known by the  Company  to have the right to cast more than 2% of the
votes  eligible to vote on any matter  presented to the Company's  shareholders,
and (ii) each officer and executive director of the Company.

                                                            Percent of All Votes
Name                                    Votes               Eligible to be Cast
----                                    -----               --------------------

Ronald W. Bridges                      50,000                       *

Darryl Caplan (1)                   1,882,625                       *

Joel Marcus                                --                      --

Wayne A. Eastman                       60,000                       *

Sabato Catucci                             --                      --

Gordon Kuhn                                --                      --

Robert R. Crawford                  4,400,000                     1.4%

Arline C. Crawford (2)              1,250,000                       *

R. Bruce Crawford                   5,400,689                    1.7%

Estate of A. S. Daniels (2)         6,304,944                    2.0%

<PAGE>


Citrus Springs Trust (2)           31,199,786                    9.7%

John Marsala                      151,771,777                   47.4%

*    Less than 1%

(1)  Includes shares held by Mr. Caplan's law firm.

(2)  The Company  considers Arline C. Crawford to be the beneficial owner of the
     shares owned by the estate of A.S. Daniels and the Citrus Springs Trust.

(3)  Includes  shares of common stock issuable upon the conversion of derivative
     securities  held  by CCC  Financial,  Inc.  and  the  Hi-Tel  Group,  Inc.,
     corporations controlled by Mr.Hirsch. See Item 5 of this report.

(4)  Includes options held by a company affiliated with Mr. Marcus.

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      In April 1999, the Company  acquired a 51% interest in JS  Transportation,
Inc. ("JST").  JST is a short haul regional trucking company.  JST was formed in
November 1998 by Todd Sage, the present  general  manager of JST,  Darryl Caplan
(who became an officer and  director of the Company in August  1999) and by John
Marsala and Steven Hirsch, two of the Company's shareholders. See Item 1 of this
report for additional information concerning JST. The following table sets forth
certain additional information concerning the acquisition of JST.

                 Shares of
                Company's       Cost of JST Shares  Remaining
               common stock   Exchanged for Shares  percentage
                received for     of Company's       interest     Position
Name           shares of JST      common stock      in JST       with JST
----           -------------  -----------------   -------------  --------

Todd Sage      1,500,000          $180,000          14.7%        General Manager
Darryl Caplan    983,425          $115,000           9.6%        None
John Marsala   1,777,371          $207,843          17.4%        None
Steven Hirsch    739,204          $ 86,441            (1)        None

(1)  Subsequent  to the  Company's  acquisition  of JST,  Steven Hirsch sold his
     remaining interest in JST to an unrelated third party.

      See Item 5 of this report for information concerning:

o    options granted to the Company's former and present officers and directors,
     and

o    shares of the  Company's  common  stock  issuable  upon the  conversion  of
     certain promissory notes, the exercise of warrants, and upon the conversion
     of the Company's Series C Preferred stock.

<PAGE>


Item 13.  Exhibits and Reports on Form 8-K

Exhibit 2   Plan of Acquisition, Reorganization, Arrangement,
            Liquidation, etc.                                          None

Exhibit 3 Articles of Incorporation, as amended, and Bylaws              (1)
                                                                       -----

Exhibit 4   Instruments Defining the Rights of Security Holders

      4.1   Incentive Stock Option Plan                                  (1)
                                                                       -----

      4.2   Non-Qualified Stock Option Plan                              (1)
                                                                       -----

      4.3   Stock Bonus Plan                                             (1)
                                                                       -----

      4.4   Designation of Series B Preferred Stock                      (1)
                                                                       -----

      4.5   Designation of Series C Preferred Stock                      (2)
                                                                       -----

Exhibit 9   Voting Trust Agreement                                     None

Exhibit 10  Material Contracts                                         None

10.1 Lease and Asset Agreement-Greenville Yard,
            Jersey City, New Jersey.                                     (3)
                                                                       -----

      10.2  Employment Agreement with Ronald Bridges                     (1)
                                                                       -----

Exhibit 21  Subsidiaries of the Registrant                               (1)
                                                                       -----

(1)   Incorporated  by reference to the same  exhibit  filed with the  Company's
      registration statement on Form 10-SB.

(2)   Incorporated  by  reference  to the same  exhibit  filed  with the  second
      amendment to the Company's registration statement on Form 10-SB.

(3)   This Exhibit has been omitted from this report pursuant to Rule 406 of the
      Securities and Exchange Commission. This Exhibit has been separately filed
      with  the  Commission  in  accordance  with the  rules  of the  Commission
      concerning  confidential  treatment  of  information  required to be filed
      under the Securities Act of 1933.




<PAGE>



                          INDEX TO FINANCIAL STATEMENTS


                                                                  Page

Consolidated Financial Statements

     Independent Auditors' Report                                   3

     Balance Sheet                                                 F-1

     Statement of Operations                                       F-2

     Statement of Stockholders' Deficit                            F-3

     Statement of Cash Flows                                       F-4

     Notes to Financial Statements                               F-5 - F-25




<PAGE>




                          INDEPENDENT AUDITORS' REPORT


To the Stockholders and Board of Directors
New York Regional Rail Corporation
Brooklyn, New York

We have  audited  the  accompanying  consolidated  balance  sheets  of New  York
Regional  Rail  Corporation  and  subsidiaries  as of December  31, 2000 and the
related consolidated statements of operations,  changes in stockholders' deficit
and cash flows for the years ended December 31, 1999 and 2000.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of New  York  Regional  Rail
Corporation  and  subsidiaries  as of  December  31, 2000 and the results of its
operations,  changes in stockholders' deficit and cash flows for the years ended
December  1999  and  2000  in  conformity  with  generally  accepted  accounting
principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern.  The Company  incurred losses
of  $951,983  and  $3,205,428  for the years ended  December  31, 2000 and 1999,
respectively.  Additionally,  the Company had a working  capital  deficiency  of
$3,849,205 at December 31, 2000. These conditions raised substantial doubt about
the  Company's  ability to continue as a going  concern.  Management  plans with
respect  to  these  matters  are  also  described  in  Note A to  the  financial
statements. The accompanying financial statements do not include any adjustments
that might result should the Company be unable to continue as a going concern.



                                                   Feldman Sherb & Co., P.C.
                                                   Certified Public Accountants

New York, New York
March 17, 2001


<PAGE>


               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET
                                DECEMBER 31, 2000

ASSETS

Current assets
   Cash                                                             $41,070
   Accounts receivable, net of allowance for doubtful
      accounts of $27,865                                           956,329
   Prepaid expenses and other current assets                         91,000
                                                                -----------
      Total current assets                                        1,088,399
Property, plant and equipment, net                                3,698,175
Other assets                                                        483,515
                                                               ------------
                                                                 $5,270,089
                                                               ============
LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
  Current maturities of long term debt                             $239,451
     Convertible promissory notes:
      Related parties                                               459,173
      Others                                                        500,000
   Other short-term debt:
      Related parties                                                92,913
      Others                                                        261,709
   Accounts payable                                                 546,040
   Accrued expenses                                               1,932,733
   Payroll taxes payable                                            905,585
                                                                 ----------
      Total current liabilities                                   4,937,604
Deferred rent payable                                               101,500
Long term debt                                                    1,074,843
Minority interest                                                    85,234
Temporary equity                                                  1,512,500
Stockholders' deficit:
   Series A Convertible Preferred Stock, $.001 par
    value, 1,000 shares authorized; no shares issued
    and outstanding Series B Convertible Preferred Stock,
    $.001 par value, 15,000 shares authorized; no shares
    issued and outstanding Series C Convertible Preferred
    Stock, $.001 par value, 500,000 shares authorized;
    500,000 shares issued and outstanding                           500,000
   Common stock, $.0001 par value, 200,000,000 shares
      authorized; 170,416,689 shares issued and outstanding          17,042
   Additional paid-in-capital                                     9,170,945
   Accumulated deficit                                          (12,129,579)
                                                                 -----------
      Total stockholders' deficit                                 2,441,592
                                                                -----------
                                                                 $5,270,089


                 See notes to consolidated financial statements.

<PAGE>


               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                                FOR THE YEARS ENDED
                                                    DECEMBER 31,
                                                -----------------------
                                                2000              1999

Operating revenues                          $8,626,093        $5,614,567
                                            ----------        ----------

Operating expenses                           7,613,144         5,107,981

Administrative expenses                      1,802,773         2,147,766
                                             ---------         ---------

Total expenses                               9,415,917         7,255,747
                                             ---------         ---------

Loss before other (income) expenses
   extraordinary item, and minority interest  (789,824)       (1,641,180)

Other (income) expenses:
   Interest expense, net                       389,303         1,680,847
   Other (income)                                   --           (56,238)
      Total other (income) expenses            389,303         1,624,609
                                           -----------         ---------

Loss before extraordinary item and
   minority interest                        (1,179,127)       (3,265,789)

Extraordinary gain - forgiveness of debt      (263,271)         (109,468)
                                              ---------         ---------

Loss before minority interest                 (915,856)       (3,156,321)

Minority interest in income of subsidiary       36,127            49,107
                                            ----------     -------------

Net loss                                      (951,983)       (3,205,428)

Deemed preferred stock dividend                 29,167                --
                                           -----------------------------

Loss applicable to common shareholders       ($981,150)      ($3,205,428)
                                             ==========      ============

Loss per share - basic and diluted:
   Continuing operations                       ($0.01)           ($0.02)
   Extraordinary                                    --                --
                                            ==========       ===========

Weighted average common shares outstanding
   basic and diluted                       167,658,274       152,193,577
                                           ===========       ===========





                 See notes to consolidated financial statements.


<PAGE>


                    NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                     YEARS ENDED DECEMBER 31, 2000 AND 1999

<TABLE>
<S>                       <C>         <C>       <C>       <C>     <C>      <C>    <C>      <C>      <C>        <C>           <C>


                                                  Preferred       Preferred        Preferred     Additional
                           Common Stock           Series A        Series B         Series C       Paid-in   Accumulated
                         Shares     Amount     Shares   Amount  Shares   Amount  Shares   Amount  Capital    Deficit        Total

Balance at
 January 1, 1999      145,619,459  $14,562       --     $ --      180    $18,000    --      --  $4,170,704 ($7,972,168) ($3,768,902)
Common stock issued
 for services             865,000       87       --       --       --         --    --      --     189,052          --      189,139
Exercise of stock
 options                   34,619       63       --       --       --         --    --      --      69,067          --       69,130
Value of beneficial
 conversion feature
 of convertible notes          --       --       --       --       --         --    --      --   1,395,000          --    1,395,000
Shares issued for JS
 Transportation
 acquisition            5,000,000      500       --       --       --         --    --      --     599,500          --      600,000
Shares issued for
 reduction of JS
 Transportation
 debt                   1,000,000      100       --       --       --         --    --      --     399,900          --      400,000
Conversion of debt
 into common stock      8,318,036      832       --       --       --         --    --      --     905,350          --      906,182
Conversion of preferred
 Series B into common
 stock                    249,055       25       --       --     (180)   (18,000)   --      --      17,975          --           --
Net loss                       --       --       --       --       --         --    --      --          --  (3,205,428)  (3,205,428)
Balance at
 December 31, 1999    161,686,169   16,169       --       --       --         --    --      --   7,746,548 (11,177,596)  (3,414,879)
Exercise of stock
 options                  101,924       10       --       --       --         --    --      --      12,221          --       12,231
Conversion of debt
 into common stock      7,531,012      753       --       --       --         --    --      --   1,022,108          --    1,022,861
Common stock issued for
 services                 502,086       50       --       --       --         --    --      --     143,430          --      143,480
Common stock issued for
 acquisition              480,000       48       --       --       --         --    --      --     187,152          --      187,200
Common stock issued for
 shares of New York
 Cross Harbor and CH
 Proprietary               49,498        5       --       --       --         --    --      --      49,493          --       49,498
Common stock issued for
 interest                  50,000        5       --       --       --         --    --      --       9,995          --       10,000
Other                      16,000        2       --       --       --         --    --      --         (2)          --           --
Series C Convertible
 Preferred Stock issued
 for debt                      --       --       --       --       --         --  500,000  500,000      --          --      500,000
Net loss                       --       --       --       --       --         --    --      --          --    (951,983)    (951,983)
                ----------------------------------------  ----- --------------------------------------------------------------------

Balance at
 December 31,
 2000                 170,416,689  $17,042       --     $ --       --       $ -- 500,000 $500,00 $9,170,945($12,129,579)($2,441,592)
                ====================================================================================================================

</TABLE>

                      See notes to consolidated financial statements.


<PAGE>



                NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
                             STATEMENT OF CASH FLOWS

                                                     FOR THE YEARS ENDED
                                                          DECEMBER 31,
                                                     ----------------------
                                                     2000              1999
                                                     ----              ----
Increase in cash and cash equivalents
 Cash flows from operating activities:
      Net loss                                    ($951,983)      ($3,205,428)
                                                  ----------      ------------
   Adjustments to reconcile net loss to net cash
      (used in) operating activities:
      Depreciation                                  444,001           307,000
      Amortization of goodwill                       42,750            11,325
      Loss on disposal of fixed assets              365,002                --
      Stock issued for services                     353,480           189,139
      Beneficial conversion feature of
        convertible debt                                 --         1,395,000
      Minority Interest in subsidiary earnings       36,127            49,107
      Changes in operating assets and liabilities:
      Accounts receivable                          (298,472)         (543,705)
      Other current assets                            5,015           (35,520)
      Other  assets                                 143,058          (342,000)
      Accounts payable                           (1,146,813)        1,125,886
      Accrued expenses                              102,749           (97,851)
      Payroll taxes payable                         195,580          (443,003)
      Deferred rent                                   7,250             7,250
                                                 ----------     -------------
   Total adjustments                                249,727         1,622,628
                                                  ---------       -----------
Net cash used in operating activities              (702,256)       (1,582,800)
                                                   =========       ===========
Cash flows from investing activities:
   Purchase of property, plant and equipment       (359,603)          (70,251)
                                                   ---------          --------
Net cash used in investing activities               359,603           (70,251)
                                                    =======           ========
Cash flows from financing activities:
   Long term debt                                    478,392          736,177
   Convertible notes - other                         411,492          881,356
   Convertible notes - related party                  54,851          598,532
   Other current debt - related party                 (3,740)         (64,993)
   Other current debt - other                        (53,271)        (372,468)
   Proceeds from issuance of capital stock
     for options                                      12,231           69,130
                                                    --------       ----------
Net cash provided by financing activities           899,955         1,847,734
                                                    =======         =========
Net decrease in cash and cash equivalents          (161,904)          194,683
Cash at beginning of year                           202,974             8,291
                                                    -------       -----------
Cash and cash equivalents at end of year            $41,070          $202,974
                                                    =======          ========
Supplemental cash flow information:
   Cash paid during the year for:
      Interest                                           --             7,868
      Income taxes                                       --                --
Non-Cash Transactions
   Common shares issued in exchange for
     interest in subsidiary                         236,698           600,000
   Common shares issued for reduction of
     subsidiary debt                                     --         1,000,000
   Conversion of debt into common stock           1,022,861         8,316,036
   Conversion of debt into convertible
     preferred series C                             500,000                --
   Debt issued for supplies                          50,000                --
   Common shares issued in exchange for
     accrued interest                                10,000                --
   Purchase of equipment for debt;
      Equipment acquired                                 --           901,500
      Liabilities assumed                                --           901,500

                 See notes to consolidated financial statements.



<PAGE>


               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




NOTE A -    NATURE AND ORGANIZATION OF BUSINESS AND SUMMARY OF SIGNIFICANT
            ACCOUNTING POLICIES

            Description of the Merger with New York Regional Rail Corporation

            New York Regional Rail Corporation (the Company),  formerly known as
            Bestsellers  Group,  Inc. (BSLR) was  incorporated on April 19, 1994
            under the laws of the state of Florida.

            In May 1996,  BSLR merged with New York  Regional  Rail  Corporation
            (NYRR) pursuant to an Agreement to Exchange Stock dated May 20, 1996
            by and between BSLR and NYRR (the "Merger  Agreement").  Under terms
            of the  Merger  Agreement,  NYRR  exchanged  all of its  issued  and
            outstanding shares for 87,000,000 Company shares.  After the merger,
            the Company  owned  84.57% of the  outstanding  common  stock of the
            combined entity, changed its state of incorporation to Delaware, and
            became the surviving  corporation to the merger. The merger has been
            accounted for as a reverse acquisition under the purchase method for
            business  combinations.  Accordingly,  the  combination  of the  two
            companies is recorded as a recapitalization of NYRR to which NYRR is
            treated as the continuing entity.

            Description of Business

            The  Company   operates  an  ICC  certified   railroad  through  its
            majority-owned  subsidiary,  New York Cross Harbor Railroad Terminal
            Corporation  ("NYCH").  NYCH's  business is to transport and deliver
            rail  traffic via barges  across New York Harbor and the East River,
            thus  connecting  the Long  Island  Railroad  and  other  lines.  In
            addition,  it receives and delivers  railcars at certain  industrial
            facilities  located on partially  owned and  partially  leased track
            located in Brooklyn,  New York and Jersey City, New Jersey.  Another
            majority-owned   subsidiary,  CH  Proprietary,   Inc.,  formerly  CH
            Partners,  Inc.  ("CHP")  holds  title to the  railroad,  marine and
            terminal  equipment  used in the business.  At December 31, 2000 the
            Company owned 93.4% and 94.5% of NYCH and CHP, respectively.

            In  April  1999,  the  Company  purchased  a 51%  interest  in  J.S.
            Transportation,  Inc.  ("JST") in exchange for  5,000,000  shares of
            unregistered  common  stock,  and escrowed an  additional  1,000,000
            shares to settle  outstanding JST liabilities.  JST, formed in 1998,
            is a regional trucking company in the business of short-haul freight
            transportation  and landfill  management.  Related  parties  owned a
            combined  70%  interest  in  JST  prior  to  the  acquisition.   The
            acquisition has been accounted for as a purchase and accordingly the
            acquired  assets  and  liabilities   have  been  recorded  at  their
            estimated  fair values.  The $440,000  excess of purchase price over
            net assets  acquired  was  recorded as  goodwill.  Goodwill is being
            amortized  over four years.  No pro forma  financial  information is
            presented as the operations of JST were immaterial.

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            In  February  2000,  the Company  purchased  a 100%  interest in OSK
            Capital I Corp.  ("OSK") in exchange  for  480,000  shares of common
            stock and $18,000 in cash. The Company's current business plan is to
            seek, investigate and, if warranted,  acquire one or more properties
            or businesses,  and to pursue other related  activities  intended to
            enhance shareholder value. The acquisition has been accounted for as
            a purchase and accordingly the acquired assets and liabilities  have
            been recorded at their estimated fair values. The $205,200 excess of
            purchase  price over net assets  acquired  was recorded as goodwill.
            Goodwill is being  amortized over four years. No pro forma financial
            information is presented as the operations of OSK were immaterial.

            The Company operates in one line of business.

            Principles of Consolidation

            The consolidated  financial  statements  include the accounts of the
            Company and its majority  owned  subsidiaries,  NYCH,  CHP, JST, and
            OSK.  All   intercompany   transactions   and  balances   have  been
            eliminated.

            Basis of Presentation

            The  Company  has a working  capital  deficiency  of  $3,849,205  at
            December 31, 2000, and has incurred significant  recurring operating
            losses which raise  substantial  doubt about its ability to continue
            as a going  concern  without the raising of  additional  debt and/or
            equity financing to fund operations. Management is actively pursuing
            new debt and/or equity  financing  and  continually  evaluating  the
            Company's  profitability,  however  any  results of their  plans and
            actions cannot be assured. The consolidated  financial statements do
            not include any  adjustments  that might  result from the outcome of
            this uncertainty.

            Revenue Recognition

            The Company's Railroad  operations  recognize revenue on the date of
            the  freight  delivery  to the  consignee  or the  other  commercial
            carrier.

            The Company's  Trucking  operations  recognize revenue in three ways
            depending upon the scope of work performed.

1)             Transportation  Services - Revenue is  recognized on the date the
               freight is delivered to the customer consignee.
2)             Transportation and Landfill Services - Revenue is recognized on a
               per ton basis,  subject to a minimum  charge  when the freight is
               delivered to the Company's contracted landfill.


<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3)             Landfill Services - Revenue is recognized on a per ton basis when
               the  freight  is  delivered  to one of the  Company's  contracted
               landfills.  The Company  recognizes revenue as earned on the date
               of freight delivery to the consignee or other commercial  carrier
               or waste to the landfill.

            Property, Plant and Equipment

            Property,  plant and equipment are stated at cost, less  accumulated
            depreciation.   The  cost  of   additions   and   improvements   are
            capitalized,  while  maintenance  and repairs are charged to expense
            when incurred.

            Depreciation and amortization is calculated using the  straight-line
            method over the estimated useful lives of the assets.  The estimated
            depreciable  lives  are 5 years  for  machinery  and  transportation
            equipment,  20 years for marine assets,  between 10 and 40 years for
            track  and  roadbed  and  between  10 and  20  years  for  operating
            equipment.

            Concentration of Credit Risk

            At December 31, 2000, 14.6 % of accounts receivable was concentrated
            in one customer while 11.1% was  concentrated in a second  customer.
            Credit is  extended  to  customers  based on an  evaluation  of each
            customer's   financial   condition,   generally   without  requiring
            collateral or other security. Due to the historical concentration of
            receivables and relatively small customer base, the Company could be
            exposed to a large loss if one of its major  customers were not able
            to fulfill its financial obligations.

            Minority Interests

            The minority interest accounts  representing the investments in NYCH
            and CHP have been  reduced to zero for all  periods  presented  as a
            result of cumulative operating losses.  Accordingly,  the portion of
            the losses that would normally be assigned to the minority  interest
            stockholders  ("excess  losses") for NYCH and CHP are  recognized by
            the  Company.  The Company  will  recognize  100% of any  subsequent
            profits until such time as the excess losses  previously  recognized
            by the Company have been recovered.

            In April 1999 the company  acquired a 51% common stock  ownership in
            JS  Transportation.  At December  31,  2000,  the  company  reported
            minority  interest in the balance  sheet of $85,234.  For  financial
            reporting purposes, the assets,  liabilities and earnings of JST are
            consolidated in the company's financial statement, and the remaining
            ownership  of JST has been  recorded as  "Minority  Interest" in the
            balance sheet.



<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            Beneficial Conversion Feature of Convertible Securities

            Since  1996,  the  Company  has issued  convertible  debt and equity
            securities  with   nondetachable   conversion   features  that  have
            intrinsic  value at the date of issue. In accordance with applicable
            accounting  rules, the Company  measures this beneficial  conversion
            feature at the issue date by  multiplying  the number of shares into
            which the security can be converted by the spread between the market
            price of its common stock and the conversion  price of the security.
            The resulting  discount is recognized by allocating a portion of the
            proceeds equal to the discount to additional  paid-in  capital.  For
            convertible debt  securities,  the discount is amortized to interest
            expense  over the  period  ending  on the date  the  security  first
            becomes convertible.  For convertible  preferred stock, the discount
            is amortized as a dividend charge.

            Income Taxes

            The  Company  accounts  for its  income  taxes  using the  liability
            method,  which requires the establishment of a deferred tax asset or
            liability  for the  recognition  of  future  deductible  or  taxable
            amounts and operating  loss  carryforwards.  Deferred tax expense or
            benefit is  recognized  as a result of the changes in the assets and
            liabilities  during the year.  Valuation  allowances are established
            when necessary to reduce deferred tax assets to amounts  expected to
            be realized.

            Long-lived Assets

            In accordance  with SFAS No. 121,  "Accounting for the Impairment of
            Long-Lived  Assets and for Long-Lived Assets to be Disposed of", the
            Company  records  impairment  losses on  long-lived  assets  used in
            operations,  when events and circumstances  indicate that the assets
            might be impaired and the  undiscounted  cash flows  estimated to be
            generated  by those  assets  are less than the  carrying  amounts of
            those assets.

            Use of Estimates

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




<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings Per Share

            Basic loss per share is computed  using the weighted  average number
            of shares of  outstanding  common stock.  Diluted loss per share for
            the years  ended  December  31,  2000 and 1999 is based  only on the
            weighted  average  number of common shares  outstanding  during that
            period including common stock equivalents.  Common stock equivalents
            are not included in the  calculation  of diluted  earnings per share
            because such inclusion would have been  anti-dilutive.  Common stock
            equivalents   consist  of  stock  options,   warrants,   convertible
            preferred stock, and convertible debt.

            Stock-Based Compensation

            The Company has issued shares, warrants and options to employees and
            non-employees  for  services  rendered.  The Company has adopted the
            expense recognition  provisions of Statement of Financial Accounting
            Standards   ("SFAS")   No.   123,    "Accounting   for   Stock-Based
            Compensation",  which establishes a fair value method for accounting
            for stock-based compensation plans. The Company values stock options
            and warrants issued based upon an option-pricing model and recognize
            this value as an expense over the period in which the options  vest.
            Shares  issued for  services  are recorded at fair value at the time
            the services were rendered.

            Recent Accounting Pronouncements

            In June 1998,  the Financial  Accounting  Standard Board issued SFAS
            No.  133,  "Accounting  for  Derivatives   Instruments  and  Hedging
            Activities",  which requires  companies to recognize all derivatives
            as either  assets  or  liabilities  in the  statement  of  financial
            position and measure those  instruments at fair value. SFAS No. 133,
            as amended by SFAS No. 137 is effective  for fiscal years  beginning
            after June 15, 2000.  The Company does not presently  enter into any
            transactions   involving  derivative   financial   instruments  and,
            accordingly,  does not  anticipate  the new  standard  will have any
            effect on its financial statements.

          In February 1999 the Financial  Accounting Standards Board issued SFAS
          No. 135,  Rescission of Financial  Accounting  Standards  Board No. 75
          (SFAS No. 75) and  Technical  Corrections.  SFAS No. 135 rescinds SFAS
          No. 75 and amends  Statement of Financial  Accounting  Standards Board
          No.  35.  SFAS  No.  135  also  amends  other  existing  authoritative
          literature to make various technical corrections, clarify meanings, or
          describe  applicability  under  changed  conditions.  SFAS No.  135 is
          effective  for  financial  statements  issued for fiscal  years ending
          after  February 15, 1999.  The Company  believes  that the adoption of
          SFAS  No.  135 will not have a  significant  effect  on its  financial
          statements.


<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            In  September  2000,  the FASB issued SFAS No. 140  "Accounting  for
            Transfers and Servicing of Financial Assets and  Extinguishments  of
            Liabilities--a  replacement of FASB Statement No. 125" ("SFAS 140").
            SFAS 140 revises the standards for  accounting  for  securitizations
            and other transfers of financial  assets and collateral and requires
            certain  disclosures,  but  it  carries  over  most  of  SFAS  125's
            provisions without reconsideration.  This Statement is effective for
            transfers and servicing of financial assets and  extinguishments  of
            liabilities  occurring  after  March 31,  2001.  This  Statement  is
            effective for recognition and reclassification of collateral and for
            disclosures  relating to securitization  transactions and collateral
            for fiscal  years ending  after  December  15, 2000.  The Company is
            currently analyzing this new standard.

NOTE B -    PROPERTY, PLANT AND EQUIPMENT

            Property, plant and equipment consists of the following:

            Marine equipment and dock facilities           $2,476,144
            Railroad locomotive cars and equipment            338,638
            Track and related land improvements             1,249,391
            Transportation equipment                        1,363,388
            Other                                             198,753
                                                      ---------------
                                                            5,626,314
            Less:  Accumulated depreciation                 1,928,139
                                                      ---------------
                                                           $3,698,175

            Fixed assets include  certain  railroad  operating  assets  acquired
            under a Lease and Asset  Agreement  dated  January 20, 1993  between
            Consolidated Rail Corporation ("Conrail"),  CRC Properties, Inc., an
            affiliate  of  Conrail   ("CRCP")  and  NYCH.  Under  terms  of  the
            agreement,  Conrail sold to NYCH for $1.00 all of the assets located
            on  Conrail-owned  property in  Greenville,  New Jersey that NYCH is
            renting  pursuant  to a 30-year  lease.  (See Note H).  The  assets,
            consisting  principally  of float bridges,  roadbeds and track,  and
            marine  mooring cells,  were recorded on the Company's  books at the
            $1.00  purchase  price.  In the event that it  cancels or  otherwise
            terminates  the lease,  the Company  will be obligated to remove the
            assets from the property.  Conrail,  however,  may elect at its sole
            option to repurchase the assets for $1.00, in which case the Company
            would be relieved of the removal obligation.

            Depreciation  expense  totaled  $444,000  and $307,000 for the years
            ended year ended December 31, 2000 and 1999, respectively.

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE C -    OTHER ASSETS

            Other assets consist of the following:

            Deposits                                    $93,963
            Permits and licenses                         79,300
            Goodwill from acquisitions, net             308,619
            Other                                         1,633
                                               ----------------
                                                       $483,515
NOTE D -    PAYROLL TAXES PAYABLE

            Payroll  taxes payable  includes  overdue  federal,  state and local
            taxes, plus estimated penalties and interest.

NOTE E -    ACCRUED EXPENSES

            Accrued expenses consist of the following:

            Property taxes - City of New York        $  458,700
            Property taxes - New Jersey                 356,389
            Port Authority judgments (including
              Accrued interest)                         771,765
            Other accrued expenses                      135,879
                                                 --------------
            Total                                    $1,722,733

            The Company is involved in a long-standing  dispute with the City of
            New York over property tax assessments dating back to 1984 (see Note
            J).

            New Jersey  property tax accruals as of December  31,2000  cover the
            periods  from 1996 to 2000,  and include  interest of  approximately
            $82,000.

NOTE F -  SHORT-TERM DEBT

            A.  Convertible Notes Payable

            Related party lenders:

            Private investor                          $  18,773
            Former CEO                                   40,000

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            Former officer/wife of former CEO           250,400
            Private investment company                  150,000
                                                       --------
                                                       $459,173

            Private investor

            Note  payable  issued in 1997 in the  original  amount  of  $184,300
            bearing  interest  at 10% per annum  with an  original  maturity  of
            December 31, 1998. Due date extended at various times,  with current
            maturity of December 31, 1999. The note is  convertible  into shares
            of  common  stock at the  lower of $.075  per  share,  or 90% of the
            average  closing bid price of the common shares for the five trading
            days preceding the date of  conversion.  In the event of conversion,
            the note  grants an  option  to  purchase  for $.12 per  share,  one
            additional  share of common  stock for each  share  acquired  in the
            conversion  through the later of  December  31, 1999 or 90 days from
            the effective date of an SEC stock registration. In 1998, the holder
            converted  $47,265 of loan  principal  into 630,160 shares of common
            stock,  and  received an option to purchase  an  additional  630,160
            shares for $.12 per share. In  consideration  of extending the loan,
            the Company increased the ratio of the remaining  contingent options
            to 1.5 shares for each share  acquired on  conversion,  effective in
            1999.  Additional  note  principal of $100,000 was  converted at the
            rate of $0.075 per share into  1,333,333  shares of common  stock in
            January 1999,  which entitled the holder to an option to purchase an
            additional 2,000,000 shares at $.12 per share. The remaining balance
            of the note,  $37,035,  was converted on June 1, 2000 into shares of
            Series C Preferred Stock. (See Note N)


            Note  payable in the amount of $50,000  bearing  interest at 10% per
            annum,  with an original  maturity of September  30, 1998.  Due date
            extended at various  times,  with  current  maturity of December 31,
            1999.  The original note  contained a detachable  option to purchase
            56,250  shares at the lower of $.20 per share or 90% of the  average
            closing  price  of the  common  shares  for the  five  trading  days
            preceding  the date of  conversion  through  January  31,  1999.  In
            consideration  of extending the loan, the Company added a conversion
            feature  entitling  the  holder to convert  the debt into  shares of
            common  stock at the lower of $.08 per  share,  based on the  lowest
            debt conversion price subsequently offered to a third party , or 90%
            of the average  closing bid price of the common  shares for the five
            trading  days  preceding  the date of  conversion.  The Company also
            granted an additional  option to purchase  59,624 shares on the same
            terms as the initial option. In the event of conversion, the revised
            note grants an option to purchase  for $.12 per share,  as adjusted,
            three-quarters  of an additional share of common stock, as adjusted,
            for each  share  acquired  in the  conversion  through  the later of
            December 31, 1999 or 90 days from the effective date of an SEC stock

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            registration.  The note was converted on June 1, 2000 into shares of
            Series C Preferred Stock. (See Note N)

            Note payable in the amount of $101,965  bearing  interest at 10% per
            annum,  with an  original  maturity  of  March  31,  1999.  Due date
            extended at various  times,  with  current  maturity of December 31,
            1999.  The note is  convertible  into shares of common  stock at the
            lower of $.08 per share,  based on the lowest debt conversion  price
            subsequently offered to a third party, or 90% of the average closing
            bid price of the common  shares for the five trading days  preceding
            the date of conversion. In the event of conversion,  the note grants
            an  option  to   purchase   for  $.12  per   share,   as   adjusted,
            three-quarters  of an additional share of common stock, as adjusted,
            for each  share  acquired  in the  conversion  through  the later of
            December 31, 1999 or 90 days from the effective date of an SEC stock
            registration.  The note was converted on June 1, 2000 into shares of
            Series C Preferred Stock. (See Note N)

            Notes payable in the amount of $293,135  bearing interest at 10% per
            annum, with an original maturity of June 30, 1999. Due date extended
            at various  times,  with current  maturity of December 31, 1999. The
            note is  convertible  into  shares of  common  stock at the lower of
            between $.08 and $.14 per share, based on the lowest debt conversion
            price  subsequently  offered to a third party, or 90% of the average
            closing  bid price of the common  shares for the five  trading  days
            preceding the date of conversion.  In the event of  conversion,  the
            note  grants an  option to  purchase  for  between  $.12 to $.18 per
            share, as adjusted,  three-quarters of an additional share of common
            stock,  as  adjusted,  for each  share  acquired  in the  conversion
            through the later of December 31, 1999 or 90 days from the effective
            date of an SEC stock registration.  The notes were converted on June
            1, 2000 into shares of Series C Preferred Stock. (See Note )

            On June 1, 2000,  the Company issued a note in the amount of $18,773
            bearing interest at 10% per annum,  with a maturity date of December
            31, 2001.  The note is  convertible  into  non-restricted  shares of
            common stock at the value of the note divided by $.078 or 90% of the
            average  closing bid price of the common  shares for the ten trading
            days  preceding the date of  conversion.  The note is convertible at
            the holder's option, at any time subsequent to the effective date of
            the Company's  registration  statement filed with the Securities and
            Exchange  Commission.  If the note is not  converted by December 31,
            2001, it shall  automatically  be extended for 60 days. In the event
            of  conversion  by December 31,  2001,  the note grants an option to
            purchase 1.0452 shares of non-restricted  shares of common stock for
            $0.12 per  share  for  every  share  that  holder  acquires  through
            conversion  for each share  acquired in the  conversion  through the
            later of December 31, 1999 or 90 days from the effective  date of an
            SEC stock registration.



<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            Former CEO

            Note  payable in the amount of $40,000  bearing  interest at 10% per
            annum and due March 31, 1999.  Due date  extended at various  times,
            with current  maturity of December 31, 1999. The note is convertible
            into shares of common stock at the lower of $.08 per share, based on
            the lowest debt  conversion  price  subsequently  offered to a third
            party,  or 90% of the average closing bid price of the common shares
            for the five trading days preceding the date of conversion. The note
            is currently in default.

            Former officer/wife of former CEO

            Note  payable  issued  in  1997 in the  amount  of  $60,000  bearing
            interest at 10% per annum, with an original maturity of December 31,
            1998. Due date extended at various times,  with current  maturity of
            December 31,  1999.  The note is  convertible  into shares of common
            stock at the lower of $.075 per share, or 90% of the average closing
            bid price of the common  shares for the five trading days  preceding
            the date of conversion. The note is currently in default.

            Note  payable in the amount of $25,000  bearing  interest at 10% per
            annum,  with an original  maturity of December  31,  1998.  Due date
            extended at various  times,  with  current  maturity of December 31,
            1999.  The note is  convertible  into shares of common  stock at the
            lower of $.20 per share,  or 90% of the average closing bid price of
            the common  shares for the five trading days  preceding  the date of
            conversion.

            Note  payable in the amount of $35,000  bearing  interest at 10% per
            annum,  with an original  maturity of September  30, 1998.  Due date
            extended at various  times,  with  current  maturity of December 31,
            1999.  The original note  contained a detachable  option to purchase
            43,750  shares at the lower of $.20 per share or 90% of the  average
            closing  price  of the  common  shares  for the  five  trading  days
            preceding  the date of  conversion  through  January  31,  1999.  In
            consideration  of extending the loan, the Company added a conversion
            feature  entitling  the  holder to convert  the debt into  shares of
            common  stock at the lower of $.08 per  share,  based on the  lowest
            debt conversion price subsequently  offered to a third party, or 90%
            of the average  closing bid price of the common  shares for the five
            trading  days  preceding  the date of  conversion.  The Company also
            granted an additional  option to purchase  46,375 shares on the same
            terms as the initial option. The note is currently in default.

            Note  payable in the amount of $80,000  bearing  interest at 10% per
            annum,  with an  original  maturity  of  March  31,  1999.  Due date
            extended at various  times,  with  current  maturity of December 31,
            1999.  The note is  convertible  into shares of common  stock at the

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            lower of $.08 per share,  based on the lowest debt conversion  price
            subsequently offered to a third party, or 90% of the average closing
            bid price of the common  shares for the five trading days  preceding
            the date of conversion. The note is currently in default.

            In 1999,  the former officer  exercised her conversion  rights under
            the notes and  converted $ 25,000 of the  outstanding  note  balance
            into shares of common stock.  The  conversion  rate was at $.075 per
            share. Shares in the amount of 333,333 were issued.

            Notes payable in the amount of $75,400  bearing  interest at 10% per
            annum, with an original maturity of June 30, 1999. Due date extended
            at various  times,  with current  maturity of December 31, 1999. The
            note is convertible into shares of common stock at the lower of $.14
            per share,  based on the lowest debt conversion  price  subsequently
            offered to a third party, or 90% of the average closing bid price of
            the common  shares for the five trading days  preceding  the date of
            conversion. In the event of conversion, the note grants an option to
            purchase  for $.18 per  share,  as  adjusted,  three-quarters  of an
            additional  share of  common  stock,  as  adjusted,  for each  share
            acquired in the conversion through the later of December 31, 1999 or
            90 days from the effective  date of an SEC stock  registration.  The
            note is currently in default.

            Private investment company

            In 1998, the private investment company converted loan principal and
            accrued interest of $448,565 into 5,348,752  shares.  As a result of
            the  conversions,  the lender  received  warrants  to  purchase  the
            following:  1,250,000 shares for $.12 per share,  550,000 shares for
            $.15 per share,  1,250,000  shares for $.20 per share,  and  178,292
            shares for $.25 per share. The warrants are exercisable  through the
            later of December 31, 1999 or 90 days from the effective  date of an
            SEC stock registration.

            Note  payable in the amount of $45,000  bearing  interest at 10% per
            annum,  with an original  maturity of September  30, 1998.  Due date
            extended at various  times,  with  current  maturity of December 31,
            1999.  The original note  contained a detachable  option to purchase
            43,750  shares at the lower of $.20 per share or 90% of the  average
            closing  price  of the  common  shares  for the  five  trading  days
            preceding  the date of  conversion  through  January  31,  1999.  In
            consideration  of extending the loan, the Company added a conversion
            feature  entitling  the  holder to convert  the debt into  shares of
            common  stock at the lower of $.08 per  share,  based on the  lowest
            debt conversion price subsequently  offered to a third party, or 90%
            of the average  closing bid price of the common  shares for the five
            trading days preceding the date of conversion.  This conversion took
            place  during 1999 with the  private  investment  company  receiving
            645,043  shares of common  stock for the $45,000  loan plus  accrued
            interest.  The Company also granted an additional option to purchase
            72,500  shares  on the  same  terms  as  the  initial  option.  Upon
            conversion,  the  revised  note  granted  the  holder  an  option to
            purchase  for $.12 per  share,  as  adjusted,  three-quarters  of an

<PAGE>

            additional  share of  common  stock,  as  adjusted,  for each  share
            acquired in the conversion through the later of December 31, 1999 or
            90 days from the effective date of an SEC stock registration.

            Note  payable in the amount of $50,000  bearing  interest at 10% per
            annum,  with an  original  maturity  of  April  30,  1999.  Due date
            extended at various  times,  with  current  maturity of December 31,
            1999.  The note is  convertible  into shares of common  stock at the
            lower of $.08 per share,  based on the lowest debt conversion  price
            subsequently offered to a third party, or 90% of the average closing
            bid price of the common  shares for the five trading days  preceding
            the date of conversion. In the event of conversion,  the note grants
            an option to purchase for $.12 per share,  as adjusted,  one-half of
            an  additional  share of common stock,  as adjusted,  for each share
            acquired in the conversion through the later of December 31, 1999 or
            90 days from the effective date of an SEC stock  registration.  This
            conversion  took  place  during  1999  with the  private  investment
            company  receiving  683,309  shares of common  stock for the $50,000
            loan plus accrued interest.

            Notes payable in the amount of $350,000  bearing interest at 10% per
            annum,  with an  original  maturity of October  31,  1999.  Due date
            extended at various  times,  with  current  maturity of December 31,
            1999. The notes are convertible  into shares of common stock at $.14
            per share,  or 90% of the  average  closing  bid price of the common
            shares for the ten trading days preceding the date of conversion. In
            the event of  conversion,  the note  grants an option to purchase at
            $.18 per share,  one-half of an additional share of common stock, as
            adjusted,  for each share  acquired  in the  conversion  through the
            later of April 30, 2000 or 90 days from the effective date of an SEC
            stock registration. On March 21, 2000, $200,000 principal balance of
            the notes plus accrued interest were converted into 1,556,546 shares
            of common stock.


            Other lenders:

            Notes payable in the amount of $500,000  bearing interest at 10% per
            annum,  with  maturity  dates  ranging  from  December  31,  1999 to
            December 31, 2001. The notes are  convertible  into shares of common
            stock at various  defined  calculations,  based on the  lowest  debt
            conversion price subsequently offered to a third party, or at 90% of
            the  average  closing  bid price of the  common  shares  for the ten
            trading  days  preceding  the date of  conversion.  In the  event of
            conversion,  the note grants the holder an option to purchase  stock
            at  a  range  between  $0.12  to  $0.75  per  share,   as  adjusted,
            three-quarters  of an additional share of common stock, as adjusted,
            for each share acquired in the conversion through the effective date
            of an SEC stock registration.

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


            B. Other Current Debt

            Related parties:

                Unsecured non-interest bearing advances from the
                Company's former CEO; due on demand                  $92,913

            Other lenders:

            a) Notes payable - investors                            $234,209
            b) Loans payable - investors                              27,500
                                                                 -----------
            Total                                                   $261,709
                                                                 ===========


          a)   Notes  bearing  interest  at 10% per annum and  maturing in 2000;
               collateralized  by  accounts  receivable  of NYCH.  Currently  in
               default.

          b)   Unsecured non-interest bearing loans, due on demand.

NOTE G -    LONG-TERM DEBT

            Note in the amount of $121,697  payable to the  Seafarers  Union for
            dues arrears;  monthly  payments of $3,500 due through  August 2004.
            Interest is payable at 5% per annum.

            Various notes payable in the amount of $670,097;  collateralized  by
            transportation  equipment;  interest  payable at rates between 5% to
            14%; monthly payments vary and are due through February 2004.

            Notes payable, related parties in the amount of $522,500; (principal
            of $475,000 plus accrued interest of $47,500). Interest accrues at a
            rate of 10% per annum for a period  of one (1)  year.  Beginning  on
            January 1, 2002, monthly payments of $9,500 plus interest (at a rate
            of 10%) are due through December 2006.

            Maturities of long-term debt are as follows:



<PAGE>


               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



                    Year ending
                    December 31,

                     2001                 $239,451
                     2002                  353,322
                     2003                  355,674
                     2004                  149,276
                     2005                  114,071
                     Thereafter            105,500

NOTE H -    LEASE COMMITMENT

            The lease  portion of the 1993  Agreement  signed with  Conrail (see
            Note B) provides a 30-year  land lease to the Company for the use of
            Conrail's   railroad   operating   property   and  water  rights  in
            Greenville,  New Jersey.  The agreement  contains  rent  concessions
            early in the lease term, but eventually  requires the Company to pay
            a maximum of 10% of the fair market rent, determined on the basis of
            an average of appraised  values  supplied by independent  appraisers
            selected by each party.

            In  February  2001  both  the  Company  and  Conrail  Shared  Assets
            Operation  ("CSAO"),   the  successor  to  Conrail,   submitted  its
            appraisal  of the  fair  market  rental  value  of the  property  in
            accordance  with the terms and  conditions  of the lease  agreement.
            Based upon different interpretations of the rent calculation per the
            lease agreement, CSAO contends that the Company has a rent arrearage
            of  approximately   $1,800,000.   Based  upon  the  Company's  legal
            counsel's  interpretation of the rent  calculation,  rent arrearages
            total  approximately  $200,000.  Such  amount  has been  accrued  at
            December 31, 2000. Both parties are currently in negotiations.

            Rent expense under the lease has been  recognized on a straight-line
            basis to account for the rent concessions  provided during the lease
            term,  resulting  in a deferred  rent  liability  of  $101,500 as of
            December 31, 2000.

            Estimated  future  minimum  lease  payments  under  this lease as of
            December 31, 2000 are as follows:

                     Year ending
                     December 31,

                        2001                             24,870
                        2002                             28,825
                        2003                             28,825


<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


                        2004                             28,825
                        2005                             28,825
                        Thereafter                      490,025
                                                   ------------
                                                       $630,195

            NYCH leases its Bush  Terminal  property in Brooklyn,  New York from
            the  Economic  Development   Corporation  of  New  York  City  on  a
            month-to-month basis at $2,200 per month.

     Aggregate rent expense for the year ended December 31, 2000 was $54,197.

NOTE I -    EMPLOYMENT AGREEMENT

            On September 12, 2000,  the Company  terminated  the services of its
            former  President (Mr. Robert  Bentley).  As part of the termination
            agreement, the Company agreed to compensate the former president for
            wages due from the date of termination through December 31, 2000. In
            addition, the Company agreed to issue common shares per the original
            employment agreement. The Company will issue share grants of 333,333
            shares per year for a three year period  beginning  March 2001.  The
            Company has accrued  $180,000 as  compensation  expense for the year
            ended December 31, 2000.

            On September 1, 2000,  the Company  hired a President of NYRR,  NYCH
            and CHP. The Company entered into an agreement whereby the President
            and his designated  affiliate will receive  annual  compensation  of
            $84,000.  In  addition,  the  President  is eligible  for  incentive
            bonuses.  These bonuses are a combination of cash and stock options.
            The incentive  bonuses are based upon  performance  related to sales
            increases of NYCH. This agreement is for a period of one year and is
            automatically renewable for one year at the option of the parties.

            On  September  18,  2000,  the  Company  hired a Vice  President  of
            Operations  of NYRR,  NYCH and CHP.  The Company and the  individual
            entered into an employment  agreement.  This agreement  provides for
            annual  compensation of $42,000.  The agreement  further  stipulates
            that  for  every  six  months  of  satisfactory  service,  the VP of
            Operations  is vested for 25,000  options.  This  agreement is for a
            period of one year and is  automatically  renewable  for one year at
            the option of the parties.




<PAGE>


               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE J -    LEGAL MATTERS AND OTHER CONTINGENCIES

            The City of New York  ("plaintiff")  has  brought  suit  against the
            Company,  NYCH,  and its former  President in U.S.  District  Court,
            Eastern  District of New York for the purpose of recovering the cost
            of  removal  and  cleanup  of  certain   hazardous   substances  and
            petroleum.  The suit alleges that certain parties were instructed by
            the Company to dispose of the substances in an illegal  manner.  The
            plaintiff is seeking  recovery of  approximately  $600,000  which it
            claims to have spent on the investigation and cleanup of the alleged
            disposal,  as well as all future investigation and cleanup costs and
            the cost of this litigation.  The Company is currently in settlement
            negotiations with the City.

            In June 1997, the Company filed a complaint in U.S.  District Court,
            Eastern District of New York against Conrail,  claiming that Conrail
            violated federal  antitrust laws by adopting policies and procedures
            which were  designed  to  restrain  trade and  undermine  interstate
            commerce.  The suit  further  alleges  that  Conrail  established  a
            systematic policy of offering  predatory and preferential  rates for
            shippers  to move  freight on  Conrail  through  its  Albany  route,
            thereby  re-routing rail traffic away from the Company.  The Company
            is seeking  damages of $901 million.  The court  declined  Conrail's
            request for a dismissal,  and required that the Company's  claims be
            heard  by  an  arbitrator.   Pending  arbitration,  the  Company  is
            exploring the  possibility of a settlement  with CSX  Transportation
            ("CSXT") and Norfolk  Southern  Railroad  ("NSR"),  the acquirers of
            Conrail. The Company cannot give any assurance that discussions with
            CSXT or NSR will lead to a settlement of the claims.

            The City of New York has billed the Company in excess of  $3,200,000
            for property  taxes dating back to 1984. The Company claims that the
            tax assessments are for the most part erroneous  because they relate
            either to real property  that the Company does not own or lease,  or
            to  property  which is not  subject to the real  property  tax.  The
            Company  further claims that New York City taxing  authorities  have
            assessed taxes based on flawed valuations,  resulting in substantial
            overcharges. The New York State Board of Equalization and Assessment
            has proposed significant reductions to these valuations,  subject to
            the approval of the New York City Corporation  Counsel.  Preliminary
            negotiations are underway between the Company's representatives, the
            New  York  City  Real  Estate  Tax  Assessor,  and  the  Corporation
            Counsel's  office.  Pending a  settlement  of the tax  arrears,  the
            Company  has   recorded  a  liability  on  its  books  of  $458,700,
            representing  the tax due on the Bush  Terminal  property,  the only
            parcel  currently used in the rail operations.  Management  expects,
            but cannot give assurance,  that the outstanding liabilities will be
            settled for a lesser amount.

            In 1993 and again in 1995,  the Port  Authority  of New York and New
            Jersey ("PANYNJ")  obtained judgments against NYCH for approximately
            $440,000.  The judgments are for claims involving rent arrearages on
            property  occupied by the Company at the PANYNJ's  Atlantic Terminal
            facility and for accrued lease  payments and  miscellaneous  repairs
            for a Tug Boat owned by the PANYNJ. The financial statements reflect
            a liability of  approximately  $772,000  related to these  judgments
            including  statutory  interest at a rate of 9% per annum. In January

<PAGE>

            2000,  the PANYNJ  enforced  its  judgments by placing a lien on the
            Company's  accounts  receivables with Norfolk  Southern  ("NS").  In
            February  2000 the  Company  and the  PANYNJ  reached  an  agreement
            whereby,  NS remitted 20% of all accounts receivable due the Company
            to the PANYNJ.  To date  approximately  $19,000 has been remitted to
            the PANYNJ in partial  satisfaction of the judgments.  Subsequently,
            the Company and PANYNJ have entered into settlement negotiations for
            a substantially lesser amount. During these negotiations, the PANYNJ
            has agreed to suspend any collection efforts.

            The  Company  is also a party to routine  claims  and suits  brought
            against it in the ordinary course of business. Some of these matters
            are covered by insurance. In the opinion of management,  the outcome
            of these claims is not expected to have a material adverse effect on
            the  Company's  business,   financial   condition,   or  results  of
            operations.  The Company has established a reserve of  approximately
            $315,000 for the estimated costs of litigation and settlements.

            On  September  1, 2000 the  Company was  informed by the  Gloucester
            County Landfill Improvement Authority (GCLIA) that the current waste
            supply agreement between the companies will be terminated  effective
            December 31, 2000. The Company has negotiated three (3) new landfill
            facilities and landfill operations continue without interruption.

NOTE K -    CAPITAL TRANSACTIONS

            In January 1999,  the board of directors  approved  option grants to
            three  employee  members  of the  board of  directors  for  services
            rendered to the Company in 1998. The former  president,  former CEO,
            and his wife each  received a two-year  option to  purchase  500,000
            shares at $.12 per share. The spread between the stock price and the
            exercise  price on the date of grant of $54,300  was accrued in 1998
            as a compensation cost. These options expired in January 2001.

            In September 2000, as part of an overall termination agreement,  the
            former  president agreed to cancel all rights to the above mentioned
            options.

            In January 1999,  the Company  issued 350,000 shares of common stock
            to its attorneys in payment of past services valued at $31,638.  The
            value of the services was accrued in 1998.

            In February  1999,  six  noteholders  exercised  options to purchase
            523,507 shares of common stock for approximately $.11 per share.

            In February  1999,  the Company  completed a $300,000  financing  of
            convertible  notes. The notes bear interest at 10% per annum and are
            convertible  at the  lower of $.08 per  share or 90% of the  average
            closing price for the five days preceding the date of conversion. In
            the  event of  conversion,  the  holder  will  receive  an option to
            purchase for $.12 per share,  three-quarters  of an additional share
            of  common  stock,  as  adjusted,  for each  share  acquired  in the
            conversion  through the later of  December  31, 1999 or 90 days from
            the effective date of an SEC stock registration.

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            In April  1999,  the  Company  purchased  a 51%  interest  in JST in
            exchange for 5,000,000  shares of  unregistered  common  stock,  and
            escrowed an additional  1,000,000  shares to settle  outstanding JST
            liabilities.

            During  1999,  the  Company  completed  a  $1,424,000  financing  of
            convertible  notes.  The notes bear  interest at the rate of 10% per
            annum and are  convertible at the lower of $.14 per share, or 90% of
            the average  closing  price of the common  stock for the ten trading
            days  preceding  the date of  conversion.  The notes also  contain a
            contingent  option  provision  granting the holder one-half share of
            common stock for every share acquired on conversion of the note. The
            contingent  options are  exercisable at $.18 per share and expire on
            the later of April 30, 2000 or 90 days  following the effective date
            of an SEC  registration  of the  Company's  common  stock.  The note
            proceeds  were  used  to pay  accrued  liabilities,  purchase  fixed
            assets, and provide operating capital.

            In June 1999,  options to purchase  111,112  shares of common  stock
            were exercised for $10,000.

            In August 1999, the Company granted  two-year options to purchase up
            to  1,900,000  shares  of  common  stock  for $.40 per  share to two
            consultants.  A total of 500,000  vested  immediately  for  services
            previously performed;  the balance of the options vest in accordance
            with a schedule of services to be rendered  over a two-year  period.
            At  December  31,  1999,   800,000   options  expired  for  lack  of
            performance.

            In  September  1999,  the Company  settled a $63,000  debt owed to a
            vendor for track  maintenance with the issuance of 200,000 shares of
            common stock valued at  $33,000,and a $30,000  unsecured  promissory
            note bearing interest at 10% per annum. The note is convertible into
            common  stock at the lower of $.55 per  share or 90% of the  average
            closing  price  of the  common  shares  for  the  ten  trading  days
            preceding the date of conversion.  In the event of  conversion,  the
            holder will be entitled to an option to purchase for $.75 per share,
            an  additional  one-half  share  for  every  share of  common  stock
            acquired on conversion  through  December 31, 2000. The note matured
            on August 31, 2000.

            In September 1999, the Company filed a certificate of amendment with
            the State of  Delaware  authorizing  an  increase  in the  number of
            common  shares  to  200,000,000  and an  increase  in the  number of
            preferred shares to 1,000,000.

            In September 1999, the Company  granted options to purchase  500,000
            shares of common stock to the law firm in which its general  counsel
            is a partner.  The options are  exercisable at the lower of $.40 per
            share or 90% of the average  closing  price of the common shares for
            the ten days  preceding  the date of  exercise.  Options to purchase
            300,000 shares were issued for services rendered prior to the grant;
            the  balance  is for future  services.  The firm  purchased  300,000
            shares at $.40 by applying  $120,000 of accrued  legal fees  towards
            the exercise price.

            Between  November  5,  1999  and  December  31,  1999,  the  company
            converted  the  sum  of  $615,800  (including  accrued  interest  of

<PAGE>

            $47,834) in  convertible  notes payable into shares of common stock.
            Conversion  rates vary between $.08 and $.14 per share.  The Company
            issued common shares totaling 7,981,280.

            In November  1999,  15,000 shares were issued to two (2) persons for
            site excavation and clearance at the Bush Terminal  facility.  These
            services were valued at $10,000.

            On November 29, 1999 the Company  converted 180 shares of cumulative
            preferred  stock into shares of common  stock.  Common shares issued
            totaled 249,055.

            On December 31,  1999,  the Company  reached a settlement  agreement
            with its former  factor for the sum of $250,000.  The funds would be
            paid  within  one year of the  agreement.  In order  to  secure  the
            payment,  the Company issued 300,000 shares of the company's  common
            stock to the  factor.  The  stock is to be held in  escrow  with the
            Company's  attorneys and liquidated at the Company's option in order
            to fund the  payable.  If said shares are  insufficient  to fund the
            payable in full,  the  Company has been  authorized  by the board of
            directors  to  issue  additional   shares  until  the  liability  is
            satisfied.  In  January  2001,  the  Company  was in  default of the
            agreement.  The Company is currently in  negotiations to satisfy the
            obligation.

            In February  2000,  the  Company  acquired  100% of the  outstanding
            shares of OSK Capital 1  Corporation  in return for an $18,000  cash
            payment and the issuance of 480,000  shares of the Company's  common
            stock valued at $187,200.

            In  March  2000,  the  Company's  corporate  counsel  exercised  the
            remaining  200,000 options which were originally issued in September
            1999 in satisfaction of approximately $80,000 of legal fees.

            In March 2000,  the Company  exchanges  49,498  shares of its common
            stock to one person in  exchange  for 31 shares of CHP and 30 shares
            of NYCH.

            In March 2000,  options to purchase  34,424  shares of common  stock
            were exercised for $4,731.

            Between  April  and  May  2000,  the  company  converted  the sum of
            $937,625  (including  accrued  interest of  $69,564) in  convertible
            notes payable into shares of common stock. The Company issued common
            shares totaling 7,037,558.

            In July 2000,  the Company  issued 50,000 shares of its common stock
            in payment of additional  interest owed to two persons in the amount
            of $10,000.

            In September 2000, the Company's corporate counsel exercised 302,086
            options at $.21 per share.  The options  were  exercised in order to
            satisfy accrued legal fees in the amount of $63,438, incurred by the
            Company through August 2000.

            In September 2000, the Company issued 377,920 shares of common stock
            in payment of repair services valued at $60,000 and accrued interest
            of $9,031.

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

            In October 2000,  options to purchase  62,500 shares of common stock
            were exercised for $7,500.

            In December  2000,  the company  converted  the  principal  value of
            $14,000 and accrued interest of $2,205 in convertible  notes payable
            into 115,534 shares of common stock.

NOTE L -    INCOME TAXES

            The Company has not  recorded  any  provision  for federal and state
            income taxes through  December 31, 2000.  The actual tax expense for
            2000 and 1999  differs  from  "expected"  tax expense  (computed  by
            applying the  statutory  U.S.  federal  corporate tax rate of 34% to
            income before income taxes) as follows:

                                                 2000        1999

            Computed "expected"tax benefit    $(346,187)  $(886,000)
            State income tax benefit, net of
             federal income tax benefit         (61,092)   (153,000)
            Change in valuation allowance
             for deferred tax assets allocated
             to income tax expense              353,528    782,000
            Permanent differences                53,751    239,000
                                                ------------------
                                               $     -     $     -
                                                ==================

The  sources  and  tax  effects  of  temporary  differences  giving  rise to the
Company's deferred tax assets (liabilities) at December 31, 2000 are as follows:

            Accruals and reserves                    $  150,000

            Net operating losses                      3,150,000

            Valuation allowance                     (3,300,000)
                                                  -------------
            Total deferred tax asset                       $ -
                                                  =============

            As a result of significant pretax losses in 1999,  management cannot
            conclude that it is more likely than not that the deferred tax asset
            will be  realized.  Accordingly,  a  valuation  allowance  has  been
            established against the total net deferred tax asset for all periods
            presented.  The Company has net  operating  losses of  approximately
            $9,900,000  available to offset future  taxable  income.  The losses
            expire at various dates ranging  between 2000 and 2020.  Utilization
            of  these   losses   may  be   limited   based  on  IRS  and   state
            change-of-ownership rules.

            The Company and its  subsidiaries  file  separate  federal and state
            income tax returns.



<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE M -    COLLECTIVE BARGAINING AGREEMENT

          NYCH had a collective  bargaining  agreement with the local chapter of
          the Seafarers Union and United, Industrial,  Service,  Transportation,
          Professional and Government  Workers of North America,  covering those
          employees  in the  transportation  and delivery of rail  traffic.  The
          agreement covered 100% of the non-management employees associated with
          NYCH. The contract presently runs on a month-to-month basis

            As of  March  31,  2001  the  Company  is  currently  negotiating  a
            long-term agreement with the Seafarers Union.

NOTE N - PREFERRED STOCK/TEMPORARY EQUITY

            In 1998,  the Company  reversed  the  issuance  of 12,500  shares of
            Series B  Cumulative  Convertible  Preferred  Stock ("the  Preferred
            Shares")  to the  Company's  former  president  which were issued in
            exchange  for  his  return  of  10,000,000  common  shares.  Counsel
            determined that the preferred  shares were invalidly  issued because
            an  amendment  to  the  terms  of  the  Series  B  shares   required
            shareholder approval,  which the Company never obtained. The Company
            has not returned the 10,000,000  shares to the former  president and
            accordingly  has recorded the redemption  value of the common shares
            in a temporary equity account pending resolution of the transaction.

            In December 1999, the Board of Directors  established  the Company's
            Series C Preferred Stock,  ("Series C"), by authorizing the issuance
            of up to  500,000  shares.  The Series C has an annual  dividend  of
            $0.10 per share.  Dividends  not declared by the Board  cumulate and
            accrue interest at 10% per annum.  Upon  liquidation or dissolution,
            each  share  is  entitled  to  distribution  of  $1.20  plus  unpaid
            dividends  prior to  distribution  to holders of common.  The shares
            contain a provision  whereby the holder has a 300 to 1 voting  right
            per share. The shares are convertible into common at the election of
            the holder,  subsequent  to June 1, 2000.  Each share of Series C is
            convertible  into 12.82  shares of common  stock or 90% of the 5 day
            average closing bid price of the Company's common stock plus accrued
            dividend. For each share of common stock received on conversion, the
            holder is entitled to purchase 1.042 shares of the Company's  common
            stock at $0.12 per share.

            In June 2000, 500,000 shares of Series C were issued to John Marsala
            in exchange for a $500,000 delinquent note due him.

NOTE O - SUBSEQUENT EVENTS

            In March 2001, a former officer was issued 166,665 shares as part of
            his  employment  agreement.  The  Company  has  accrued  $30,000  at
            December 31, 2000 as compensation expense.





<PAGE>

                                   SIGNATURES


    In accordance  with Section 13 or 15(a) of the Exchange Act, the  Registrant
has caused this Report to be signed on its behalf by the undersigned,  thereunto
duly authorized on the 12th day of April 2001.

                                    NEW YORK REGIONAL RAIL CORPORATION



                                    By:   /s/ Ronald W. Bridges
                                        -----------------------------------
                                            Ronald W. Bridges, President


                                    By:   /s/ Joel Marcus
                                        -----------------------------------
                                            Joel Marcus, Principal Financial and
                                            Accounting Officer


      In  accordance  with the Exchange  Act, this Report has been signed by the
following persons on behalf of the Registrant in the capacities and on the dates
indicated.

Signature                            Title                    Date


 /s/ Darryl Caplan
Darryl Caplan                       Director            April 12, 2001


 /s/ Joel Marcus
Joel Marcus                         Director            April 12, 2001


 /s/ Sabato Catucci
Sabato Catucci                      Director            April 12, 2001



Gordon Kuhn                         Director            April 12, 2001