SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB/A-4
(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, in an arm's length transaction, 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 McAllister Marine Towing & Transportation Company on a
monthly basis.

                                       2
<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.

      Most freight which is transported by rail travels substantial distances,
and usually over more than one railroad. To facilitate pricing, Class 1
railroads, such as Norfolk Southern, price and collect freight charges on behalf
of all railroads along the route. The portion that belongs to each railroad is
known as their tariff division. The Company comprises part of the traffic route
for most rail freight transported across the New York City harbor.

During the years ended December 31,1999 and December 31, 2000, Norfolk Southern,
pursuant to a tariff division agreement, collected approximately 95% and 90%
respectively, of the Company's receivables from various customers.

As of December 31, 2000, the Company had approximately 40 regular customers.
During the periods listed below the following customers accounted for more than
10% of the Company's revenues from its railroad operations:


       Name                         Year                    Percent

       Hershey Foods                1999                       26%
       Bloomer Chocolates           1999                       14%
       Star Corrugated              1999                       11%

       Hershey Foods                2000                       23%
       Bloomer Chocolates           2000                       16%
       Star Corrugated              2000                       12%


      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

                                       3

<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' 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.

      If additional capacity is needed the Company plans to repair one of its
float bridges and lay four to five miles of additional track at the Greenville
yard, at a cost of approximately $8,000,000, to increase capacity to

                                       4

<PAGE>

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 "Management's
Discussion and Analysis...Liquidity and Capital Resources".

      The City of New York has recently completed construction of two new float
bridges at its 65th Street Rail Yard. This facility includes not only the float
bridges but, intermodal tracks and loading docks. In September 2000, the City
made a "Request for Proposal" ("RFP") for the operation of this facility. The
RFP stipulated that the operator of this facility would be required to transport
rail cars between New Jersey and New York City by means of float barges. The
City of New York has given the Canadian Pacific Railroad preliminary approval to
operate the facility. If Canadian Pacific is given final approval to operate the
65th Street Rail Yard, Canadian Pacific will need to contract with the Company
to float rail cars across the New York City harbor since the Company's
Greenville yard is the only facility on the New Jersey side of the harbor which
is capable of handling rail cars transported by float barges.

Trucking Operations

      In April 1999 the Company, in an arm's length transaction, 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
liabilities of JST. As of March 15, 2001, 160,000 of these shares had been used
to satisfy JST liabilities of $175,300 to non-affiliates of the Company.Once the
parties determine that the liabilities no longer exist or upon acquisition of
the remaining 49% of JST, any remaining shares will be returned to treasury.
There is no time limit on the events of return.

      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. The agreement with
Recovermat, Inc is oral. 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.

                                       5
<PAGE>

      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 April 30, 2001 JST was using five tractor/trailers which 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. 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. By
subcontracting its personnel requirements, JST is able to reduce administrative
expenses and avoid the need to obtain the licenses and permits required to haul
and dispose of waste.

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

      JST believes it can expand its business by acquiring other smaller
trucking companies that are involved in the collection of waste. As of April 30,
2001, JST did not have any agreements relating to the acquisition of any other
trucking companies.

      During the years ending December 31, 1999 and 2000, approximately 29% and
15% of JST's revenues were derived from collection services provided to Waste
Management, Inc. No other customer represented more than 10% of JST's revenues
during this period. 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
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.

      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 has the right to cast a majority of the shares

                                       6

<PAGE>

which are  entitled to vote at any meeting of the  Company's  shareholders.  Mr.
Marsala was the largest shareholder of JST and owned  approximately  $300,000 of
the Company's  convertible  notes,  which were issued between  December 1997 and
January  of 1999  and  were  purchased  for  cash.  Golden  Aspen  Corp.  is not
affiliated with the Company.

         In September 2000, JST acquired the assets of MHT, Incorporated
("MHT"), in an arm's length transaction. MHT is 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.


Competition

Although the Company is the only carrier transporting rail cars across the New
York City harbor, the Company faces intense competition from other railroads for
the movement of commodities and bulk freight. The Company also competes with
medium and short-haul trucking companies for the transportation of commodities.
Any improvement in trucking, for example, legislation allowing increases in
truck size or allowable weight, could increase competition and may adversely
affect the Company's business. The Company believes that competition for the
freight transported by the Company is based, in the long term, as much upon
service and efficiency as on rates. As a result, the Company strives to offer
shippers greater convenience and better service than competing forms of
transportation and at lower costs.

The trucking industry is extremely fragmented. In the past years, periods of
over-capacity in the trucking industry have led to intense competition and price
discounting, resulting in decreased margins and a significant number of business
failures. JST competes with three large national waste management companies:
Allied Waste Services, Waste Management, Inc., and Republic Services, Inc. as
well as numerous regional and local trucking companies. In addition, many
counties and municipalities operate their own waste collection and disposal
facilities, have the benefits of tax-exempt financing and may control the
disposal of waste collected within their jurisdictions. JST also competes with
alternatives to landfill disposal, (such as waste incinerators) because of state
requirements to reduce landfill disposal. JST competes with other motor carriers
for the services of independent operators. Larger waste disposal customers tend
not to change haulers on pricing alone. Consequently, the Company is of the
opinion that JST's 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.

                                       7
<PAGE>

      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
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.

                                       8

<PAGE>

      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 are due and payable between April and
May 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 will issue warrants upon conversion of the notes
into shares of common stock. The warrants allow the holders of the notes to
acquire additional shares of the Company's common stock but are only issuable
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
$2,932,000, 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. As of January 31, 2001 none of the warrants had been exercised.

      If the remaining outstanding notes and 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 9,385,089 shares
of common stock, plus warrants for the purchase of an additional 2,793,592
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 $650,000 restrict the
Note holder from short selling the Company's common stock with the intention of
covering the short position with shares received from the conversion of the
Note. Short selling is a practice of selling shares which are not owned by a
seller with the expectation that the market price of the shares will decline in
value after the sale. With the exception of the restrictions on short selling,
the terms of the notes do not provide the Company or the Company's shareholders
with any protection in the event of a decline in the price of the Company's
common stock.

                                       9
<PAGE>

      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 closing price of the Company's
common stock was $0.27 on the date the preferred shares were issued to Mr.
Marsala.

      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
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.

       If the holders of the notes or the preferred shares convert these
securities at a time when the Company's common stock is declining the Company
will be required to issue more shares of its common stock for any given dollar
amount converted. Shares issued upon the conversion of the notes or the Series C
Preferred shares will cause the Company's then outstanding shares to be diluted
and as a result the Company's stock price could decline further. Any decline in
the price of the Company's common stock may encourage short sales, which could
place further downward pressure on the price of the Company's common stock.

       There is no limit as to the number of shares which could be issued upon
the conversion of the Notes or the Series C Preferred stock nor is there any
limitation as to when, or under what conditions, these securities can be
converted. See Item 5, of this report for information concerning the number of
shares which could be issued upon conversion based on various prices.

The Company's shareholders did not approve the terms of the convertible notes or
the Series C Preferred stock. Depending upon the Company's future capital needs
and available sources of capital, the Company may in the future sell convertible
notes with terms similar to the notes described above to private investors.

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.

                                       10

<PAGE>

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
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. They allege that NYCH has
guaranteed  the  performance of Mr.  Crawford. The plaintiffs are seeking the
restoration of their equitable  interest in the subsidiary (NYCH)and unspecified
monetary damages to be determined by the court.  The term  "restoration of their
equitable  interest" is the exact wording used in the "claim for relief" section
of the complaint.  The term is not defined,  any further within the  complaint."
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 filed on June
7, 2000.  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 settled this claim for $7,500.

                                       11

<PAGE>
         Platinum Funding Corp. ("Platinum")v. New York Regional Rail, New York
Cross Harbor Railroad Terminal Corp. and CH Partners, Inc., Superior Court of
New Jersey, Law Division, Bergen County Docket No.: BER-L-10413-98 on December
24, 1998. The Company was named in a lawsuit by its former factoring agent for
approximately $250,000. The balance resulted from a dispute involving a
factoring agreement which the Company entered into in December 1995. The
arrearage represents a combination of uncollected accounts receivable, factoring
fees and fees charged due to the Company's inability to meet certain
predetermined minimum factoring levels. In March 1999, the case was dismissed.
In December 1999, the Company entered into an agreement whereby the Company
issued 300,000 shares of its common stock into escrow in the name of Platinum.
These shares were to be registered and sold on behalf of Platinum until $250,000
was attained from said sale. Any unsold balance of the 300,000 shares would be
returned to treasury. If the proceeds of $250,000 were not attained, the Company
would issue additional shares to be registered and sold until the total proceeds
to Platinum would be $250,000. The Company has been unable to register these
shares for sale and they still remain in escrow. Platinum refiled the lawsuit in
October 2000. Currently, the Company is negotiating a settlement with Platinum
and believes a settlement will be reached. The Company has reflected the
liability to Platinum as a current liability in the Company's financial
statements. Depending on the terms of the settlement, these shares may be
returned to treasury and/or this liability may be changed.

         Chacobra v. New York Regional Rail Corp. - District Court of New Jersey
filed February 27, 1998. The Company has been named in a suit involving a former
employee. The suit claims the Company failed to make certain payments for
services rendered and reimbursement for certain funds advanced. These alleged
services and advances were performed prior to the reverse merger. The plaintiff
is seeking recovery of approximately $250,000. The Company has recognized a
liability of approximately $53,000 . The Company believes this claim is without
merit and intends to vigorously defend it. In February of 2000, all parties,
without prejudice, dismissed the case.

The Company's Board of Directors is reviewing transactions by former Management,
the Crawford family, as related to the litigation in the matters  entitled:  The
City of New 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 and Fraser,  McIntyre  and
Spartz v NYCH.  Supreme Court of the State of New York,  County of Kings,  Index
no.  45966/99,  as well as, issues  surrounding  the  cancellation of shares and
attempted  issuance  of  Series  "B"  preferred  shares.  The  Company  does not
anticipate that there will be any adverse material effects on it, as a result of
its review.

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

Item 1. Market Price of and Dividends on the Company's Common Equity and Other
Shareholder Matters.

      As of January 31, 2001, there were approximately 10,000 beneficial owners
of the Company's Common Stock including 1,200 of record on the books of the
Company's transfer agent.

  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.

                                       12
<PAGE>

   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

   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).            22,267,024              A

                                       13

<PAGE>

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

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($.15 per share)     13,986,669               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
$2,932,000, 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 9,385,089 shares
of common stock, plus warrants for the purchase of an additional 2,793,592
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 lower of the conversion price of the respective note or
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.

                                       14

<PAGE>

The following table shows: (A) the amount of note principal and accrued interest
converted into shares of the Company's common stock prior to March 15, 2001, (B)
the amount of shares of common stock issued upon the conversion of the notes
per, column "A" of the table (C) the balance of principal on 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 as of March 15, 2001, and (D) the approximate number of shares of
the Company's common stock, which could be issued upon the conversion of the
outstanding notes in Column "C" of the table, and (E) the approximate number
of shares of the Company's common stock, which could be issued upon the exercise
of all warrants held and those warrants which would be issued upon conversion of
all the outstanding notes listed in column "C". The table uses the lower of the
conversion price of the respective note orthe market price of the Company's
common stock of $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.

<TABLE>
<CAPTION>

                               Shares of        Balance of
                   Amount     Common Stock     Principle on        Shares of Common
                  Of Notes    Issued upon      Convertible      Stock Issuable upon:
                 Converted   Conversion of      Notes Held     ------------------------
                 Prior to     Notes prior         As of        Conversion   Exercise of
                  3/15/01     to 3/15/01         3/15/01        of Notes      Warrants
Name                (A)           (B)              (C)             (D)          (E)
-----             ---------    ---------      -------------   -------------   ----------
<S>                                              <C>              <C>
Robert Crawford       --           --            $ 40,000         635,342         --
Arline Crawford   $ 25,000       333,333         $183,028       2,994,346         --
Citrus Springs
 Trust                --           --            $ 75,400         507,917         --
John Marsala      $ 99,346     1,203,590         $ 18,877         259,604       937,483
Steven Hirsch     $777,318     8,123,151(1)      $150,000       1,235,519     6,304,873

</TABLE>

(1) Includes 62,500 shares issued upon the exercise of warrants prior to
3/15/01.



      Robert Crawford and Arline Crawford are former officers and directors of
the Company. Ms. Crawford is the executrix 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

                                       15
<PAGE>
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.

C. Options are held by the following  present  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, for providing consulting services to the
Company in the areas of railroad business development and governmental
relations. 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. Each Series
C Preferred share is entitled to 300 votes on any matter presented to the
Company's shareholders. The closing price of the Company's common stock was $.27
on the date the preferred shares were issued to Mr. Marsala.

Prior to the Company's acquisition of 51% of JST in April 1999, Mr. Marsala was
the largest shareholder of JST and owned approximately $300,000 of the Company's
convertible notes, which were issued between December 1997 and January of 1999
and were purchased for cash. Mr. Marsala received 1,771,777 shares of common
stock of the Company for the shares he exchanged of JST. (SEE Item 1.
Description of Business-Trucking Operations for further disclosure on this
transaction.) Subsequent to the JST acquisition, Mr. Marsala additionally loaned
the Company approximately $200,000 in cash during May\June of 1999. He received
in June 1999, $200,000 in convertible notes that matured in December 1999. The
two notes of approximately $100,000 each were convertible at $.08 and $.14,
respectively and upon conversion the holder would have received .5 warrants for
each share received from the conversion. The warrants were exercisable at $.12
and $.18, respectively, and would have expired 90 days after SEC clearance of a
registration statement for the underlying shares of the warrants. The $200,000
in notes and the above mentioned $300,000 of notes held by Mr. Marsala were
converted to Preferred "C" stock in June 2000.

In December 1999, the Company could not meet its obligations with respect to
various representations made by it regarding payment or the availability of a
sufficient number of authorized but unissued shares to timely meet convertible
debenture conversions and avoid Company default (regarding notes issued in 1998
through 1999 and were to mature December 31, 1999). In December 1999, if all
outstanding notes, warrants and options were converted, the Company would have
had approximately 206,000,000 shares outstanding. This is approximately
6,000,000 more than the Company had authorized.

In December 1999, the Company began to contact the holders of the largest amount
of these notes and asked if the holders would extend their notes or accept new
convertible Preferred stock in exchange. The principal terms of the Preferred
offer were, a deferment on conversion until June 2000 and a dividend of 10% per
annum with all other conversion terms identical to those contained in the
holders notes. The largest holder of the notes, Mr. Marsala, proposed that since
the Company could not issue additional shares or warrants as an incentive to
extend the notes due date and could not pay the amounts owed, the holders should
receive 300 to 1 voting rights. With this modification, Mr. Marsala indicated he
would agree to convert into the newly formed preferred stock. If the Company did

                                       16
<PAGE>
not come up with a satisfactory resolution, Mr. Marsala indicated that he would
be forced to pursue his legal remedies. The Board unanimously approved the
modification and in December 1999, the Company offered the convertible
noteholders the right to exchange the convertible notes that were about to
default, into Preferred "C" stock. The principal terms of the Preferred "C"
offer were, a deferment on conversion until June 2000, special voting rights of
300 votes for each share of Preferred acquired, a dividend of 10% per annum and
all other conversion terms identical to those contained in the holders' notes.
The Preferred "C" shares have no time limitation nor mandatory conversion date.
The December 1999 offer was memorialized in the "Certificate of designation,
preferences and rights of the Series "C" Preferred stock of New York Regional
Rail Corporation" filed as an exhibit to the Company's Registration Statement
filed March 6, 2001. This document contains the material terms of the shares
including the voting rights and that they were not convertible until June 2000.

By accepting the exchange offer Mr. Marsala lost his ability to convert into
common which at that point would have entitled him to utilize Rule 144 every
three months to sell such restrictive shares (as free trading) subject to volume
limitation imposed by Rule 144. This valuable conversion right was lost from
December of 1999 until June of 2000. In exchange for losing such valuable right
Mr. Marsala was given additional voting rights, in an arm's length negotiation
agreed to unanimously by the Company's Board as a means in getting Mr. Marsala
to forebear from pursuing his legal remedies on the notes due date. The term
"arms length" as utilized herein is utilized not withstanding the fact that Mr.
Marsala, at the time was both a creditor and shareholder of the Company due to
the fact that he negotiated his proposal, on his own behalf, with the Company's
Board and then absented himself from both the Board's discussion and
determination which resulted in the Board's unanimous approval. The Company did
not seek an outside opinion as to the reasonableness or fairness of the terms of
the Preferred "C" since the additional voting rights being granted would expire
upon conversion of the Preferred "C" shares. In addition Mr. Marsala did not
request nor was he given board representation nor was he ever proposed to be or
elected as a member of the Board. The legal remedies Mr. Marsala relinquished
pursuing were seeking a judgement on the principal and interest due plus legal
and collection fees, which were his rights under the notes. He then could have
levied against the Company's bank accounts, receivables and assets thereby
causing the Company extreme hardship.

The total amount of the convertible notes subject to the exchange offer for
Preferred was approximately $2,100,000. The number of common shares which could
be issued from the convertible notes subject to the exchange offer was
approximately 36,850,000 (22,200,000 shares and warrants of approximately
14,650,000, which upon exercise would result in 14,650,000 additional shares).
Of the $2,100,000, Mr. Marsala held approximately $500,000, which were to mature
on December 31, 1999. Of the 36,850,000 shares that could have been issued from
the convertible notes, Mr. Marsala's conversion was approximately 13,100,000
(6,400,000 shares and warrants of approximately 6,700,000). From 1997 to 1999,
Mr. Marsala's had agreed to extend the maturity date of his notes when they
became due. In return for the extensions Mr. Marsala received additional
warrants. Additionally, his conversion prices varied at different times of
issuance and were lower than other holders of other notes about to default Mr.
Marsala agreed to convert his notes while, with the exception of one holder who
partially converted, the other similarly situated holders of the convertible
notes elected to convert to approximately 14,500,000 shares and 7,250,000
warrants, which could convert into 7,250,000 additional shares, so that they
could receive trading stock. The holder who partially converted, converted all
notes held except for $150,000 (which upon conversion would be 1,300,000 shares
and warrants of approximately 700,000, which upon exercise would result in
700,000 additional shares). Since the Company had an insufficient number of
shares to issue of approximately 6,000,000 and Mr. Marsala's conversions were in
excess of this amount, the shortfall was temporarily cured until June 2000, when
Mr. Marsala could once again convert into common. At the time of the Preferred
offering, the Company had anticipated that by June 2000 it would requested from
its shareholders a vote, at its annual meeting, to resolve the insufficiency.

The Company issued approximately 14,500,000 shares and 7,250,000 warrants (which
could convert into 7,250,000 additional shares) as a result of conversions.
These conversions occurred in December 1999 and January 2000. The warrants allow
the holders to purchase shares of the Company's common stock at prices ranging
between $.12 and $.18 per share. The warrants will expire 90 days after a
registration statement covering the shares issuable upon the exercise, has been
declared effective by the Securities and Exchange Commission.

The Preferred "C" shares were granted in December of 1999 after which, in
January 2000, Mr. Marsala loaned JST $155,000 in cash and personally guaranteed
$175,000 of JST's equipment leases. Each Series "C" Preferred Share is entitled
to 300 votes will respect to any matter upon which the holders of the
Corporations common stock are entitled to vote and there are no limitations on
Mr. Marsala's voting. This voting power became in effect upon registration with
the Secretary of State of Delaware in March 2000. Since the issuance of the
Preferred "C" there has been no matters upon which the Company has requested a
vote from its shareholders.

    The Company used the lower of the conversion price of the respective note or
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.

                                       17
<PAGE>

      The actual  number of shares which will be issued upon the  conversion  of
the notes or 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 notes or 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.

      The Company recorded an expense to reflect the value of the convertible
notes and warrants received upon conversion. The expense recorded by the Company
during 2000 and 1999 for the persons shown in the foregoing table was as
follows:

                                          Expense
            Name                    2000           1999
                                   -----           ----
         Robert Crawford             --             --
         Arline Crawford             --            $8,460
         Citrus Springs Trust        --            $5,386
         John Marsala                --          $115,495
         Steven Hirsch           $207,254        $947,232


       The table below shows the shares of the Company's common stock which
would be issued assuming all notes which were outstanding on January 31, 2001
were converted into shares of the Company's common stock, based upon varying
prices of the Company's common stock.

Share Price:                   $0.15             $0.10            $0.075
                               -----             -----            ------

Shares Issuable:

Conversion of Notes        9,385,089        11,955,989        14,872,427

Exercise of outstanding
  warrants                10,092,524        10,092,524        10,092,524

Exercise of warrants
  issuable upon future note
  conversions              2,789,411         3,924,196         5,153,538
                         -----------       -----------       -----------

Total                     22,267,024        25,972,700        30,118,489
                          ==========        ==========        ==========

The table below shows the shares of the Company's common stock which would be
issued assuming all Series C Preferred shares were converted into shares of the
Company's common stock, based upon varying prices of the Company's common stock.

Share Price:                   $0.15             $0.10            $0.075
                               -----             -----            ------

Shares Issuable:

Preferred Shares           6,838,778         6,838,778         7,112,329

Warrants                   7,147,891         7,147,891         7,433,806
                         -----------       -----------       -----------

Total                     13,986,669        13,986,669        14,546,135
                          ==========        ==========        ==========

                                       18

<PAGE>

      Although the Series C Preferred stock can be converted into shares of the
Company's common stock at prices below prevailing market prices, the Company did
not record an expense upon the issuance of the Series C Preferred shares since
the preferred shares were exchanged for convertible notes for which an expense
in the amount of approximately $100,000 had previously been recorded.

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


      The following discussion contains forwardlooking 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 forwardlooking
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

                                   (restated)                 (restated)

   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
                              (restated)        (restated)       (restated)


Operating revenues           $8,626,093        $5,146,918        $1,178,507

Operating expenses           (7,613,144)       (4,731,356)       (1,002,428)

Administrative
 expenses                    (1,802,773)       (2,056,742)       (1,461,882)

Interest and other
    expenses                 (1,123,674)       (3,791,532)         (644,229)

Minority interest               (36,127)         ( 49,107)
Extraordinary gain
 debt forgiveness               263,271           109,468
Loss on disposition
 of equipment                                                      (110,000)
                              ----------      ------------      ------------

Net loss                    $(1,686,354)      $(5,372,351)      $(2,040,032)
                              ==========      ===========       ============

                                       19

<PAGE>
RESULTS OF OPERATIONS

         The Company has incurred substantial losses since it was formed. The
Company  expects to continue to incur  losses  until such time,  if ever,  as it
earns net income.  Management has taken many steps to improve  profitability and
increase  revenues.  Such  steps  include  the  acquisition  of JST,  which  has
increased  gross  profit.  In  addition  the  Company  has  reduced  outstanding
liabilities  substantially  which has in turn reduced interest expense.  Between
January 1998 and February 2000, the Company reduced  administrative  expenses by
the  reduction  of over nine  full-time  employees  from its  workforce  and has
reduced  operating costs through better  utilization of manpower,  equipment and
other expense  reductions.  Since  February  2000,  the Company has continued to
reduce operating costs through the better  utilization of its manpower,  its use
of  part-time  employees,  use of  part-time  outside  labor and the use of more
modern fleets, which reduced maintenance and downtime,  in both its trucking and
rail operations.

      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 14
days to the trip rather than the threemile trip to the Company's Greenville
Yard and a fortyfive 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 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 nonhazardous waste.

     In February  2000,  the Company had been  designated  with an "E" after its
trading  symbol and had thirty days to comply with new listing  requirements  to
maintain it OTCBB status which requirements  primarily  consisted of the need to
file and clear a Form 10SB registration  statement,  or it would be delisted. By
virtue of NASDAQ's  misunderstanding  of the OSK transaction (NASDAQ thinking it
was a reverse merger into OSK,  which latter firm already met necessary  listing
requirements, while in reality it was an acquisition of OSK by NYRR, which still
left NYRR with the  requirement  to file and clear its Form  10SB).  The "E" was
removed and the Company did not become delisted until April 20, 2001 when NASDAQ
realized its mistake.  (i.e. The improper  assumption that the transaction was a
reverse  merger and that NYRR had not cleared  its  10SB.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.

      As of January 31, 2001 the Company was transporting approximately 290
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.

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

                                     20
<PAGE>

                             Railroad               Trucking

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


      During the two years ending December 31, 2000 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:


                              Year Ended December 31,
                                     2000         1999


                                    $734,371   $ 3,561,923


Restated Financial Statements. The accompanying financial statements have been
restated to properly reflect restatements made to the financial statements of
2000 and prior years. Accounts payable and accrued expenses have been adjusted
to reflect the additional accruals of expenses associated with a judgement
obtained by the Port Authority of New York/New Jersey. An account has been
created called Temporary Equity to reflect the 1998 reversal of the issuance of
12,500 shares of an amended Series B Preferred Stock to the Company's former
president in exchange for return of his 10,000,000 common shares. Counsel
determined that the preferred shares were invailidly issued because of an
amendment to the terms of the Series B required shareholder approval, which the
Company never obtained. The Company has not returned the 10,000,000 shares and
has recorded the redemption value of the common shares as temporary equity and
has reversed the charge reflecting the beneficial conversion feature of the
amended Series B Preferred stock of $567,000.

                  The 1999 financial statements have been revised to reflect the
following: (i) reversal of the overstated beneficial conversion feature of
$4,628,699 and (ii) to record the BlackScholes value of warrants issued on
conversion of notes plus options issued of $2,223,532.


         The 2000 financial statements have been restated to reflect the
issuance of warrants on conversion of notes in March and May 2000 of $717,038
and the beneficial conversion feature on $60,000 of notes issued in March/April
2000 of $17,333.

                  The  effect of such  restatement  on the  Company's  financial
statements  is as follows:

                                           As                            As
                                        Reported      Adjustments     Restated


Balance Sheet AdjustmentsDecember 31, 2000
Additional paidin capital             $9,170,945    $(2,901,294)  $ 12,027,239
Accumulated deficit                  (12,129,579)      2,901,294    (15,030,873)

                                       21
<PAGE>

Statement of Operations
 Adjustments
 Year ended December 31, 2000
 Loss from operations                $    789,824   $             $    789,824
 Net loss                                 951,983      734,371        1,650,227
 Net loss per common share basic     $     (0.01)   $             $     (0.01)

Year ended December 31, 1999
 Loss from operations                $  1,641,180   $             $  1,641,180
 Net loss                               3,205,428      2,166,923      5,372,351
 Net loss per common share basic     $     (0.02)  $             $      (0.04)

See Note Q to the Company's financial statements for the years ended December
31, 1999 and 2000 for further information concerning this restatement.

Year Ended December 31, 2000

During the year ended December 30, 2000, the Company had $8,626,093 in revenue
compared to $5,146,918 in revenue during the corresponding prior year period, an
increase of 67.6%. The increase 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 (the total of both of these
events yielded an increase of approximately $400,000, an increase of 44.5%), and
the Company's acquisition of a 51% interest in JST in April 1999. This increase
in the trucking operations was approximately $7,325,000 from approximately
$4,248,000 for the corresponding period in 1999 an increase of 72.4% (See Note A
for pro forma results).

                  Operating expenses for the year ended December 31, 2000 were
$7,613,144 compared to $4,731,356 an increase of $2,881,788 or 60.9% over the
corresponding year. This increase in expense is due primarily to a corresponding
increase in operating expenses for the trucking operation due to increased
revenues plus the inclusion of JST's operating expenses for a year versus nine
months in the prior year. JST's operating expenses consist of $ 2,371,348 in
hauling fees, $ 4,350,109 in landfill fees and equipment rental, subcontractors
and depreciation of $311,000.

Operating expenses as a percentage of operating revenues were 91.9% for the year
ended December 31, 1999. In 2000 operating expenses decreased to 88.3% of
operating revenues due to modernization. Operating expense from rail operations
decreased by 37.6% in 2000 to approximately $580,000 from approximately $929,000
in 1999.

       Administrative expenses decreased in the year ended December 31, 2000 by
$254,000. As a percentage of operating revenues, administrative expenses
decreased to 20.9% for the year ended December 31, 2000 from 40.0% for year
ended December 31, 1999. The decrease of $254,000, comes from the conscious
effort of the Company to reduce costs.

Interest expense and beneficial conversion feature for the years ended December
31, 2000 and 1999, was approximately $1,124,000 and $3,792,000 respectively.
This includes, the issuance of warrants and options on the sale of promissory
notes which were convertible into shares of the Company's common stock at prices
below prevailing market rates and beneficial conversion feature, of
approximately $734,000 and $3,562,000, respectively of which $221,351 and
$1,077,000 respectively, was to related parties.

                                       22

<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

                  The Company's working capital deficit at September 30, 2000
was $3,849,205 compared to a deficiency of $5,712,940 at December 31, 1999. The
increase in working capital was primarily due to the conversion of approximately
$1,000,000 of convertible notes and debt into shares of common and preferred
stock and a reduction of approximately $1,100,000 in accounts payable.

                  The Company's dramatic improvement in operating income was due
to increased revenues and expense with corresponding reductions of expenses at
both JST and NYCH. Management anticipates continued growth and increased
profitability in both its rail/barge and trucking operations. The acquisition of
JST was a significant contributor to the overall profits from operations.
Management intends on acquiring the remaining 49% of the outstanding shares of
JST. The terms of the acquisition are still under negotiation. Management
anticipates completion of this transaction in the future.

                Although during fiscal 2001 the Company expects that its
operations will begin to generate net income, the Company nevertheless
anticipates, based on projected sales volume that it will suffer losses of
approximately $100,000 until the Company becomes profitable. The Company expects
that it will be able to meet all its routine working capital needs and
operational costs from new business created based on customer demand during the
current year.

As of December 31, 2000 the Company had the following current liabilities;


   Accounts payable and accrued expenses            $   2,478,773

   Notes payable and current maturities
    of longterm debt                                    1,553,246

    Payroll taxes payable                                 905,585

                  Accounts payable and accrued liabilities include $550,000 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 $772,000 including interest. The Company is currently
negotiating with the PANYNJ for a longterm payout. Management is confident such
an agreement will be reached in the future.

                  During year ended December 31, 2000 the Company's expenses
included "Loss on Disposal of Fixed Assets" in the amount of $365,002. In 2000,
the Company was made aware of judgments by PANYNJ, listed above. The Company had
facilities on Port Authority property which was part of the judgment. This
property contained a float bridge and rail trackage. The Company has written-off
the book value of these assets. In addition, the Company had a survey done on
its second float bridge, which sank, at its Bush Terminal facility in Brooklyn.
As a result of this survey the Company decided to write-off the book value of
this bridge.

                  Accounts payable and accrued expenses include $135,000 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 future.

                   Accounts  payable and accrued  expenses  include  $200,000 in
accrued  rent.  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  subject to the terms of the 1993 lease
agreement.  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.   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.   Both  parties  are  currently  in
negotiations.

                                        23

<PAGE>
        The Company has an accrual for payroll taxes payable in the amount of
$905,585.  The dispute  regarding  the payroll  taxes stems from 1996 and prior,
when the Company  was first  delinquent  in payment of such taxes.  The past due
taxes then had interest and penalties applied.  Subsequently,  the Company began
paying its payroll  taxes,  however these  payments were applied to the past due
amounts,  causing penalties and interest to be imposed on the current liability.
If properly  applied only interest would have been charged on the older past due
taxes. This misapplication  continued until 1998 when the Company was successful
in obtaining relief for a portion of this misapplication. The Company received a
refund in 1999.  The Company feels they are still due a  substantial  refund for
past  misapplied  payments  and  expects  that  the  final  settlement  will  be
substantially less than amount which it has accrued.

                  Accounts payable and accrued expenses also include
approximately $815,000 for accrued real estate taxes. 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. Management expects, but cannot give assurance, that the outstanding
liabilities will be settled for a lesser amount. Pending a settlement of the tax
arrears, the Company has recorded a liability on its books of $458,700 for these
real estate taxes. Based upon recent 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. As of March 15, 2001 this
dispute has not yet been settled. The State of New Jersey has assessed the
Company approximately $63,000 per year since 1996 for real estate taxes. The
Company believes that the assessment is incorrect and the proper tax should be
approximately $17,000 annually. Pending a settlement, the Company has recorded a
liability on its books of approximately $356,000 for these real estate taxes.
The Company is working to resolve this dispute. (See Note J of the 1999
Financial Statements for additional information in regards to this matter.)

                 The Company is currently negotiating with vendors, federal and
state taxing authorities and the holders of several material obligations,
whereby management is confident that settlement of these amounts will be
significantly less than the amounts currently recognized on the Company's books.
Absent resolution of these matters and assuming the agencies, vendors and taxing
authorities fully prevail in court proceedings, monetary damages could
approximate $7,678,000, but management currently anticipate that these matters
will be amicably resolved at a comparatively insignificant sum and further
believes absent of satisfactory resolution it would ultimately prevail in the
judicial process.

Longrange plans considered by management include application for low interest
loans through the Federal Rail Administration ("FRA") for shortline railroad's
and grants from New York and New Jersey State Department of Transportation.

                  During the year ended December 31, 2000 the Company's
operations used $450,021 in cash and the Company acquired approximately $360,000
of property and equipment. The Company financed its cash needs during this
period primarily through the issuance of notes.  In order to fund its operating
losses, the Company sold $60,000 of convertible notes to nonaffiliated investors
in private offerings.

                  The Company has needed to fund its working capital deficit.
The Company has raised these funds though issuance of floating rate  convertible
debentures. The Company agreed to the terms of the convertible notes because the
Company  was  unable  to  obtain  conventional  financing  due to the  Company's
financial  condition.  Notes in the principal amount of  approximately  $650,000
restrict the Note holder from short selling the Company's  common stock with the
intention  of  covering  the  short  position  with  shares  received  from  the
conversion of the Note. Short selling is a practice of selling shares, which are
not owned by a seller with the  expectation  that the market price of the shares
will decline in value after the sale. With the exception of the  restrictions on
short  selling,  the  terms  of the  notes do not  provide  the  Company  or the
Company's  shareholders  with any  protection  in the event of a decline  in the
price of the Company's common stock.

                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 purchase1.0452 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 closing price
of the Company's  common stock was $0.27 on the date the  preferred  shares were
issued to Mr. Marsala.

                                       24
<PAGE>
                 The actual number of shares which will be issued upon the
conversion of the notes and the Company's Series C preferred stock, 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 these  securities 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.

                 If the holders of the notes or the preferred shares convert
these  securities  at a time when the  Company's  common stock is declining  the
Company  will be required to issue more shares of its common stock for any given
dollar amount  converted.  Shares issued upon the conversion of the notes or the
Series C Preferred shares will cause the Company's then outstanding shares to be
diluted and as a result the  Company's  stock price could decline  further.  Any
decline in the price of the Company's  common stock may  encourage  short sales,
which could place further downward pressure on the price of the Company's common
stock.

                 There is no limit as to the number of  shares,  which  could be
issued upon the  conversion of the Notes or the Series C Preferred  stock nor is
there any limitation as to when, or under what conditions,  these securities can
be converted.

      Based upon the foregoing, the Company's anticipated capital needs for
 the next twelve months are as follows;

  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, and
   related interest and penalties                                       $750,000

          The Company expects that any additional tractors or trailers required
by JST can be acquired  through  capital  leases or similar  types of  equipment
financing.  JST has been able to arrange these types of financing  since January
of 2000.

          The Company rail operations do not have any available credit, bank
financing or other external  sources of liquidity.  Due to historical  operating
losses, the Company's rail 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.  Additionally,  there are
administrative remedies available to the Company's creditors including,  but not
limited to,  judgments,  liens and levies,  which can be placed on the Company's
bank accounts.  Historically,  these remedies have been used by the creditors of
the Company and have resulted in additional cash flow hardships for the Company.
There can be no assurance that these remedies may not be used in the future.

                                       25

<PAGE>

            The Company expects that it will be able to meet all its routine
working capital needs and operational  costs from new business  created based on
customer demand during the current year. The Company's two largest  expenditures
in its rail  operations  are towing and  manpower.  By utilizing  its larger car
float the Company can greatly reduce these two  expenditures.  The third largest
expense  is per diem car hire.  The per diem car hire  expenses  are the  rental
charges that the owners of rail cars charge railroads.  Rents are charged to the
Company after the first day for cars  destined for  immediate  transfer to other
railroads,  and five days for cars which are  destined  for loading by the local
customers of the Company.  The largest local  customers of the Company's are its
cocoa  customers.  In the past these per diem car hire charges have  amounted to
10% of the Company's  revenue.  The Company has  renegotiated the rate for local
customers  whereas  the rents now begin  five days after the cars are loaded not
received. This change will greatly reduce the fees the Company will be charged.


Year Ended December 31, 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    $4,248,000

Operating expenses                                   $929,000    $3,803,000

Gross profit                                         ($30,000)   $  445,203


Operating revenues increased during the year ended December 31, 1999 solely due
to the acquisition of JST.

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.  Operating expense from
rail  operations  decreased  by  7%  in  1999  to  approximately  $929,000  from
approximately  $1,002,000 in 1998.  Operating  expenses  increased by $3,729,000
during the year ended  December  31,  1999.  The  increase was the result of the
acquisition of JST and the inclusion of JST's  operating  expenses of $3,803,000
from the date of acquisition.  JST's operating expenses consist of $2,089,000 in
hauling fees,  $1,459,000 in landfill  fees and  equipment and  depreciation  of
$255,000.

Administrative  expenses  increased  in the  year  ended  December  31,  1999 by
$685,884.  As  a  percentage  of  operating  revenues,  administrative  expenses
decreased to 38.3% for the year ended  December 31, 1999 from 54.7% for the year
ended  December 31, 1998. Of the increase of $685,884,  $324,769  comes from the
operations of JST with the balance of  approximately  $360,000  arising from the
issuance of stock for services in the amount of  approximately  $189,000 and the
remainder from  professional  fees  associated  with the Company's  registration
statement on Form 10SB and various legal matters.

Interest  expense for 1999,  includes  beneficial  conversion  expenses  and the
issuance of  warrants  and  options on the sale of  promissory  notes which were
convertible into shares of the Company's common stock at prices below prevailing
market  rates,  of  $3,561,923,  of which  $1,076,573  was  interest  to related
parties.

                                       26
<PAGE>

Recent   consolidation  in  the  trucking   industry  has  resulted  in  reduced
transportation  rates. In addition,  increased fuel prices,  lack of experienced
drivers and  insurance  costs have all  affected  JST's  results of  operations.
Overall,  profits  generated by JST have  decreased over the past twelve months.
Historically,  this is a cyclical pattern.  Many waste haulers enter the market,
reduce  rates  and then go out of  business.  Rates  then  eventually  return to
profitable levels.


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 resigned on June 1, 2000.
Schneider/Ehrlich 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 judgment 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.

   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:

                                       27
<PAGE>

      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, Chairman of the Board
      Gordon Kuhn             50       Director

Ronald W. Bridges has been the  President of the Company since  September  2000.
Between May 1999 and September 2000 Mr. Bridges was an independent consultant to
numerous  transportation  companies.  Mr. Bridges served as Conrail's  Assistant
Vice President,  Forest and Manufactured  Goods Business Group,  from April 1994
until his retirement in May 1999.

Wayne A.  Eastman has been the  Company's  Vice  President of  Operations  since
September  2000.  Mr. Eastman was the District  Superintendent  of Conrail's Oak
Island Terminal and Yard  Operations in Newark,  NJ from 1998 to 2000. From 1987
To 1988 Mr. Eastman was superintendent of two regional railroads in the Midwest.
Between  1969 and 1987 Mr.  Eastman  held  various  positions  with the Illinois
Central Railroad.

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. Mr. Caplan is
a graduate of Rutgers University and a member

Joel Marcus,  CPA,  has been an officer and  director of the Company  since June
2000. Mr. Marcus has been  selfemployed as a certified public  accountant since
1974. Mr. Marcus is Chief Financial  Officer and a Director of SMLX Technologies
Inc. a publicly  traded company  involved in medical  research and  development.
During the year ended December 31, 2000 SMLX had gross revenues of $1,613,387.

Sabato  Catucci has been a director of the Company since July 1999.  Mr. Catucci
serves as the Chairman of the Company's  Board of  Directors.  Mr.Catucci is the
founder of American  Warehousing and American  Stevedoring  ("American") and has
been American's Chief Executive Officer since 1965.  American currently runs for
the City of New York  and The  Port  Authority  of  NY/NJ,  the  Redhook  Marine
Terminal   as   well   as  the   majority   of  the   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.  Since
October 1997 Mr. Kuhn has been an independent  consultant to corporations in the
railroad  industry.  From November 1992 until his retirement in October 1997 Mr.
Kuhn was Conrail's  Senior Vice President in charge of its Core Business  Group,
with  annual  sales  of over  $1,800,000,000.  While  employed  by  Conrail  his
responsibilities  included all aspects of Sales,  Marketing,  Customer  Service,
Billing & Collecting, Car Management, as well as, Industrial Development.

                                       28

<PAGE>

Advisory Committee

The Company has an Advisory Committee, which is comprised of the following
persons:

Anthony Riccio has been the Vice President of the Harlem River  intermodal  rail
yard since 1990.  From 1988 to 1989 Mr.  Riccio  served as  Commissioner  of the
Department of Ports & International  Trade,  the predecessor to today's New York
City Economic Development Corporation (NYC/EDC). The NYC/EDC guides and overseas
policies relating to intermodal rail freight for the City of New York.

Dominick  Massa is the  property  manager  for the Bush  Terminal  on which  the
Company  operates  in  Brooklyn,  NY,  but  which is owned by the New York  City
Economic  Development  Corporation.  Mr.  Massa also serves on the Cross  Harbor
Major Investment Study (MIS) Advisory Committee.

Change in Management

The following provides certain information concerning changes during the year
ended December 31, 2000 and the dates of service of the former and present
management of the Company.

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

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, Director          5/99 to 6/00

Ronald Kuzon         Director                                   6/99 to 2/00

Joel Marcus          Chief Financial Officer, Director          6/00 to present

Tad Mahoney          VP Operations                              4/00 to 9/00

Darryl Caplan        VP of Corporate Affairs, Director          8/99 to present

Sabato Catucci       Director, Chairman of the Board            7/99 to present

Gordon Kuhn          Director                                   9/00 to present

Ronald W.  Bridges   President                                  9/00 to present

Wayne Eastman        VP Operations                              9/00 to present

                                       29

<PAGE>

In April 2000,  the Company hired Tad Mahoney,  formerly of Conrail as its VP of
Operations.  Mr. Levy,  the  Company's  CFO and director had left the Company to
work for BDO Seidman in June 2000.  Mr. Marcus  replaced Mr. Levy. In July 2000,
Mr. Mahoney  recommended  Mr. Kuhn to be a director to fill a vacancy.  Mr. Kuhn
was a seasoned, extremely successful railroad executive who had recently retired
from  Conrail.  Mr.  Kuhn was asked by the Board to find a  replacement  for Mr.
Bentley whose employment  agreement was soon to expire. Mr. Kuhn recommended Mr.
Bridges to the board as that replacement. Mr.Eastman  was hired as Mr. Mahoney's
replacement in September 2000.



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    $28,000    --         --       --       --
President since
September 2000

W. Robert Bentley,    2000  $75,000   --      $11,400     --         --
President from        1999  $75,000   --      $15,200     --      $34,000
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:
(5)  Black-Scholes value of 500,000 options granted to Mr. Bentley in
     January 1999.


      Name                          Shares                  Value

      Ronald Bridges                  --                      --


      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.

                                       30
<PAGE>

                              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
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

                                       31

<PAGE>

$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.

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.

                                       32

<PAGE>

      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
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.

                                       33
<PAGE>

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
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.

                                       34
<PAGE>

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           70.5%          $0.20    12/2001

Wayne Eastman      9/1/00     50,000           29.5%          $0.19     Various
                                                                         dates

Option Exercises and Option Values

                                       Number of Securities
                                     Underlying Unexercised Value of Unexercised
                                      In-the-Money Options  In-the-Money Options
                 Shares               at January 31, 2001   at January 31, 2001
               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        --          --           --/50,000          $     --/--

                                       35

<PAGE>

(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.


Share Ownership Assuming No Exercise or Conversions.

                                    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%

                                       36
<PAGE>

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 Notes, Preffered Shares,
Options and Warrants.
                                    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                                --                      --

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                       16,951,352                     8%

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.

                                       37
<PAGE>
                                                            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%

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)  Arline C. Crawford is the  executrix of the estate of A.S.  Daniels and the
     Citrus Springs Trust and is therefore considered to be the beneficial owner
     of these shares.

(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.

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. Each Series
C Preferred share is entitled to 300 votes on any matter presented to the
Company's shareholders. The closing price of the Company's common stock was $.27
on the date the preferred shares were issued to Mr. Marsala.

Prior to the Company's acquisition of 51% of JST in April 1999, Mr. Marsala was
the largest shareholder of JST and owned approximately $300,000 of the Company's
convertible notes, which were issued between December 1997 and January of 1999
and were purchased for cash. Mr. Marsala received 1,771,777 shares of common
stock of the Company for the shares he exchanged of JST. (SEE Item 1.
Description of Business-Trucking Operations for further disclosure on this
transaction.) Subsequent to the JST acquisition, Mr. Marsala additionally loaned
the Company approximately $200,000 in cash during May\June of 1999. He received
in June 1999, $200,000 in convertible notes that matured in December 1999. The
two notes of approximately $100,000 each were convertible at $.08 and $.14,
respectively and upon conversion the holder would have received .5 warrants for
each share received from the conversion. The warrants were exercisable at $.12
and $.18, respectively, and would have expired 90 days after SEC clearance of a
registration statement for the underlying shares of the warrants. The $200,000
in notes and the above mentioned $300,000 of notes held by Mr. Marsala were
converted to Preferred "C" stock in June 2000.

In December 1999, the Company could not meet its obligations with respect to
various representations made by it regarding payment or the availability of a
sufficient number of authorized but unissued shares to timely meet convertible
debenture conversions and avoid Company default (regarding notes issued in 1998
through 1999 and were to mature December 31, 1999). In December 1999, if all
outstanding notes, warrants and options were converted, the Company would have
had approximately 206,000,000 shares outstanding. This is approximately
6,000,000 more than the Company had authorized.

                                       38
<PAGE>

In December 1999, the Company began to contact the holders of the largest amount
of these notes and asked if the holders would extend their notes or accept new
convertible Preferred stock in exchange. The principal terms of the Preferred
offer were, a deferment on conversion until June 2000 and a dividend of 10% per
annum with all other conversion terms identical to those contained in the
holders notes. The largest holder of the notes, Mr. Marsala, proposed that since
the Company could not issue additional shares or warrants as an incentive to
extend the notes due date and could not pay the amounts owed, the holders should
receive 300 to 1 voting rights. With this modification, Mr. Marsala indicated he
would agree to convert into the newly formed preferred stock. If the Company did
not come up with a satisfactory resolution, Mr. Marsala indicated that he would
be forced to pursue his legal remedies. The Board unanimously approved the
modification and in December 1999, the Company offered the convertible
noteholders the right to exchange the convertible notes that were about to
default, into Preferred "C" stock. The principal terms of the Preferred "C"
offer were, a deferment on conversion until June 2000, special voting rights of
300 votes for each share of Preferred acquired, a dividend of 10% per annum and
all other conversion terms identical to those contained in the holders' notes.
The Preferred "C" shares have no time limitation nor mandatory conversion date.
The December 1999 offer was memorialized in the "Certificate of designation,
preferences and rights of the Series "C" Preferred stock of New York Regional
Rail Corporation" filed as an exhibit to the Company's Registration Statement
filed March 6, 2001. This document contains the material terms of the shares
including the voting rights and that they were not convertible until June 2000.

By accepting the exchange offer Mr. Marsala lost his ability to convert into
common which at that point would have entitled him to utilize Rule 144 every
three months to sell such restrictive shares (as free trading) subject to volume
limitation imposed by Rule 144. This valuable conversion right was lost from
December of 1999 until June of 2000. In exchange for losing such valuable right
Mr. Marsala was given additional voting rights, in an arm's length negotiation
agreed to unanimously by the Company's Board as a means in getting Mr. Marsala
to forebear from pursuing his legal remedies on the notes due date. The term
"arms length" as utilized herein is utilized not withstanding the fact that Mr.
Marsala, at the time was both a creditor and shareholder of the Company due to
the fact that he negotiated his proposal, on his own behalf, with the Company's
Board and then absented himself from both the Board's discussion and
determination which resulted in the Board's unanimous approval. The Company did
not seek an outside opinion as to the reasonableness or fairness of the terms of
the Preferred "C" since the additional voting rights being granted would expire
upon conversion of the Preferred "C" shares. In addition Mr. Marsala did not
request nor was he given board representation nor was he ever proposed to be or
elected as a member of the Board. The legal remedies Mr. Marsala relinquished
pursuing were seeking a judgement on the principal and interest due plus legal
and collection fees, which were his rights under the notes. He then could have
levied against the Company's bank accounts, receivables and assets thereby
causing the Company extreme hardship.

The total amount of the convertible notes subject to the exchange offer for
Preferred was approximately $2,100,000. The number of common shares which could
be issued from the convertible notes subject to the exchange offer was
approximately 36,850,000 (22,200,000 shares and warrants of approximately
14,650,000, which upon exercise would result in 14,650,000 additional shares).
Of the $2,100,000, Mr. Marsala held approximately $500,000, which were to mature
on December 31, 1999. Of the 36,850,000 shares that could have been issued from
the convertible notes, Mr. Marsala's conversion was approximately 13,100,000
(6,400,000 shares and warrants of approximately 6,700,000). From 1997 to 1999,
Mr. Marsala's had agreed to extend the maturity date of his notes when they
became due. In return for the extensions Mr. Marsala received additional
warrants. Additionally, his conversion prices varied at different times of
issuance and were lower than other holders of other notes about to default Mr.
Marsala agreed to convert his notes while, with the exception of one holder who
partially converted, the other similarly situated holders of the convertible
notes elected to convert to approximately 14,500,000 shares and 7,250,000
warrants, which could convert into 7,250,000 additional shares, so that they
could receive trading stock. The holder who partially converted, converted all
notes held except for $150,000 (which upon conversion would be 1,300,000 shares
and warrants of approximately 700,000, which upon exercise would result in
700,000 additional shares). Since the Company had an insufficient number of
shares to issue of approximately 6,000,000 and Mr. Marsala's conversions were in
excess of this amount, the shortfall was temporarily cured until June 2000, when
Mr. Marsala could once again convert into common. At the time of the Preferred
offering, the Company had anticipated that by June 2000 it would requested from
its shareholders a vote, at its annual meeting, to resolve the insufficiency.

The Company issued approximately 14,500,000 shares and 7,250,000 warrants (which
could convert into 7,250,000 additional shares) as a result of conversions.
These conversions occurred in December 1999 and January 2000. The warrants allow
the holders to purchase shares of the Company's common stock at prices ranging
between $.12 and $.18 per share. The warrants will expire 90 days after a
registration statement covering the shares issuable upon the exercise, has been
declared effective by the Securities and Exchange Commission.

                                      39
<PAGE>

The Preferred "C" shares were granted in December of 1999 after which, in
January 2000, Mr. Marsala loaned JST $155,000 in cash and personally guaranteed
$175,000 of JST's equipment leases. Each Series "C" Preferred Share is entitled
to 300 votes will respect to any matter upon which the holders of the
Corporations common stock are entitled to vote and there are no limitations on
Mr. Marsala's voting. This voting power became in effect upon registration with
the Secretary of State of Delaware in March 2000. Since the issuance of the
Preferred "C" there has been no matters upon which the Company has requested a
vote from its shareholders.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

      In April 1999, the Company acquired, in an arm's length transaction, 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.

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.

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 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.

                                       40


<PAGE>

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. Each Series
C  Preferred  share is  entitled  to 300 votes on any  matter  presented  to the
Company's shareholders. The closing price of the Company's common stock was $.27
on the date the preferred shares were issued to Mr. Marsala.

The  Company   could  not  meet  its   obligations   with   respect  to  various
representations made by it regarding payment or the availability of a sufficient
number of authorized but unissued  shares to timely meet  convertible  debenture
conversions  and avoid Company default  (regarding  notes issued in 1998 through
1999).  By exchanging such debt into Preferred C Mr. Marsala lost his ability to
convert into common which at that point would have  entitled him to utilize Rule
144 every three months to sell such restrictive shares (as free trading) subject
to volume  limitation  imposed by Rule 144. In exchange for losing such valuable
right Mr. Marsala was given additional voting rights.

                                       41


<PAGE>
Item 13.  Exhibits and Reports on Form 8K

(a) Exhibits
                               Index to Exhibits

Exhibit
  No.   Description

10.1      Employment Agreement between NYRR and Tad Mahoney dated April 1, 2000.
          (Incorporated by reference to Exhibit 10.1 of the Registrant's
          quarterly report on Form 10-QSB, Registration No.028583 filed
          November 26, 2001).

10.2      Employment  Agreement  between  Wayne A.  Eastman,  Jr.  and New York
          Cross Harbor Railroad Terminal Corporation, NYRR and CH Propriety
          dated September 18, 2000. (Incorporated by reference to Exhibit
          10.2 of the Registrant's quarterly report on Form 10-QSB,
          Registration No.028583 filed November 26, 2001).


10.3      Handling Line Agreement between Norfolk Southern Corporation and New
          York Cross Harbor Railroad Terminal Corporation dated April 19,2000,
          (Incorporated by reference to Exhibit 10.3 of the Registrant's
          quarterly report on Form 10-QSB, Registration No.028583 filed November
          26, 2001).

10.4      Promissory note dated May 25,1999(Incorporated by reference to Exhibit
          10.16 of the Registrant's Amended Registration Statement on Form 10-SB
          Registration No.028583, dated November 20, 2001; schedule incorporated
          by reference to Exhibit 10.4 of the Registrant's quarterly report on
          Form 10-QSB, Registration No.028583 filed November 26, 2001).

10.5      Promissory note dated December 6, 1999 (Incorporated by reference to
          Exhibit 10.21 of the Registrant's Amended Registration Statement on
          Form 10-SB, Registration No.028583, dated November 20, 2000; schedule
          incorporated by reference to Exhibit 10.5 of the Registrant's
          quarterly report on Form 10-QSB, Registration No.028583 filed November
          26, 2001).

10.6      Form of Subscription Agreement (Incorporated by reference to Exhibit
          10.27 of the Registrant's Amended Registration Statement on Form 10-SB
          Registration No.028583, filed November 20, 2001).

10.7      Promissory note dated June 1, 2000 (Incorporated by reference to
          Exhibit 10.7 of the Registrant's quarterly report on Form 10-QSB
          Registration No.028583 filed November 26, 2001).

10.8      Promissory note dated October 11, 2000. (Incorporated by reference to
          Exhibit 10.8 of the Registrant's Amended Annual Report on
          Form 10-KSB, Registration No.028583, filed November 28, 2001)

10.9      Milton Grove Landfill Agreement between JS Transportation and Eagle
          Land Management  dated September 28, 2000. (Incorporated by reference
          to Exhibit 10.9 of the Registrant's Amended Annual Report on Form
          10-KSB, Registration No.028583, filed November 28, 2001)

(b)      Reports on Form 8K

            Form 8K with Report dated February 24, 2000 filed February 24, 2000

            Form 8K/A with Report dated February 24, 2000 filed April 21, 2000

            Form 8K with Report dated June 8, 2000 filed December 28, 2000


<PAGE>



                          INDEX TO FINANCIAL STATEMENTS


                                                                 Page
NEW YORK REGIONAL RAIL CORPORATION:

Consolidated Financial Statements

     Independent Auditors' Report                                 F-1

     Balance Sheet                                                F-2

     Statements of Operations                                     F-3

     Statement of Stockholders' Deficit                           F-4

     Statements of Cash Flows                                     F-5

     Notes to Financial Statements                            F-6 - F-21


<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 sheet 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, 2000 and 1999. 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 1999, and the results
of its operations,  changes in stockholders' deficit and cash flows for the year
then ended 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 $1,686,354  and  $5,372,351  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.

The financial statements for the year ended December 31, 2000 and 1999 have been
restated (See Note Q).


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

New York, New York
March 17, 2001
Except for Note Q
as of November 24, 2001

                                      F-1
<PAGE>





               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEET

                                DECEMBER 31, 2000

                                   (RESTATED)

                                     ASSETS
Current assets
 Cash                                                 $      41,070
 Accounts receivable, net                                   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' equity:
 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                              12,072,239
 Accumulated deficit                                    (15,030,873)
                                                         -----------
       Total stockholders' deficit                       (2,441,592)
                                                        ------------
                                                      $   5,270,089
                                                        ============

                 See notes to consolidated financial statements.

                                      F-2

<PAGE>
              NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (RESTATED)

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

Operating revenues                        $   8,626,093      $    5,146,918
                                          --------------      ---------------

Operating expenses                            7,613,144           4,731,356

Administrative expenses                       1,802,773           2,056,742
                                          --------------      ---------------
Total expenses                                9,415,917           6,788,098
                                          --------------      ---------------
Loss before other (income) expenses
 extraordinary item, and
 minority interest                             (789,824)         (1,641,180)

Other (income) expenses:
 Interest expense, net                        1,123,674           3,847,770
 Other (income)                                    -                (56,238)
                                          --------------      ---------------
  Total other (income) expenses               1,123,674           3,791,532
                                          --------------      ---------------
Loss before extraordinary item
 and minority interest                       (1,913,498)         (5,432,712)

Extraordinary gain - forgiveness of debt       (263,271)           (109,468)
                                          --------------      ---------------
Loss before minority interest                (1,650,227)         (5,323,244)

Minority interest in income of subsidiary        36,127              49,107
                                          --------------      ---------------
Net loss                                     (1,686,354)         (5,372,351)

Deemed preferred stock dividend                  29,167                -
                                          --------------      ---------------
Loss applicable to common shareholders    $  (1,715,521)     $    (5,372,351)
                                          ==============      ===============

Loss per share - basic and diluted:
     Continuing operations                $       (0.01)     $       (0.04)
     Extraordinary                                 0.00               0.00
                                          --------------      ---------------
                                          $       (0.01)     $       (0.04)
                                          ==============      ===============
Weighted average common shares
 outstanding basic and diluted              167,658,274        152,325,094
                                          ==============      ===============



                 See notes to consolidated financial statements.

                                       F-3

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                          YEAR ENDED DECEMBER 31, 1999
                                   (Restated)
<TABLE>
<S>                         <C>       <C>      <C>         <C>      <C>         <C>         <C>            <C>          <C>


                             Common Stock     Preferred Series B  Preferred Series C    Additional     Accumulated
                           Shares    Amount   Shares      Amount   Shares      Amount  Paid-in Capital    Deficit      Total
                           ------    ------   ------      ------   ------      ------  ---------------  -----------    -----
Balances 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   634,619      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             --            --

Warrants and options
issued for debt                  --      --       --          --        --           --   2,166,923             --     2,166,923

Net loss                         --      --       --          --        --           --          --      (5,372,351)  (5,372,351)
                         ---------------------------------------------------------------------------------------------------------
Balances at
 December 31, 1999       161,686,169  16,169      --          --         --          --    9,913,471     (13,344,519) (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

Value of beneficial
 conversion feature
 of convertible notes            --      --       --          --          --         --        17,333             --      17,333

Warrants and options
issued for debt                  --      --       --          --          --         --       717,038             --     717,038

Net loss                         --      --       --          --          --         --            --     (1,686,354)  (1,686,354)
                        ---------------------------------------------------------------------------------------------------------
Balances at
 December 31, 2000       170,416,689 $17,042      --      $   --      500,000  $500,000  $ 12,072,239  $ (15,030,873)$ (2,441,592)
                        =========================================================================================================

</TABLE>
                                      F-4
                 See notes to consolidated financial statements.


<PAGE>






                NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
                             STATEMENT OF CASH FLOWS
                                   (RESTATED)

                                                     FOR THE YEARS ENDED
                                                          DECEMBER 31,
                                                     ----------------------
                                                     2000              1999
                                                     ----              ----
Increase in cash and cash equivalents
 Cash flows from operating activities:
      Net loss                                  $(1,686,354)      ($5,372,351)
                                                  ----------      ------------
   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                     143,480           189,139
      Beneficial conversion feature of
        convertible debt                             17,333         1,395,000
      Warrants and options issued for debt          717,038         2,166,923
      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                             (684,578)        1,125,886
      Accrued expenses                              102,749           (97,851)
      Payroll taxes payable                         195,580          (443,003)
      Deferred rent                                   7,250             7,250
                                                 ----------     -------------
   Total adjustments                              1,236,333         3,789,551
                                                  ---------       -----------
Net cash used in operating activities              (450,021)       (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                                    522,500          736,177
   Convertible notes - other                         115,149          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           647,720         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.

                                      F-5
<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. 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.

            The following unaudited proforma condensed combined statements of
            operations for the year ended December 31, 1999 gives retroactive
            effect to the acquisition of JST on April 1, 1999, which was
            accounted  for as  purchase.  The  unaudited  proforma  condensed
            combined statements of operations gives retroactive effect to the
            foregoing  transaction  as if it had occurred at the beginning of
            1999.  The proforma  statement does not purport to represent what
            the Company's  results of operations  would actually have been if
            the foregoing  transaction had actually been  consummated on such
            date or  project  the  Company's  results of  operations  for any
            future period or date.

            The proforma statement should be read in conjunction with the
            historical financial statements and notes thereto.

                                                         (unaudited)

                  Revenues                        $       5,615,000
                  ---------
                  Loss before extraordinary items and
                  minority interest                      (5,453,000)
                  Net Loss                               (5,443,000)
                  Loss per share                              (0.04)
                  Weighted average number of shares
                  outstanding                           153,825,094

                                      F-6
<PAGE>

            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.
          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.

                                      F-7
<PAGE>

            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.


            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.

            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.

                                      F-8
<PAGE>

            Stock-Based Compensation

            The Company  accounts for stock  transactions  in accordance with
            APB Opinion No. 25,  "Accounting  For Stock Issued to Employees."
            In accordance  with Statement of Financial  Accounting  Standards
            ("SFAS") No. 123, "Accounting for Stock-Based Compensation",  the
            Company  adopted the pro forma  disclosure  requirements  of SFAS
            123.

            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.

            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.

            The Company wrote off fixed assets totaling $365,002 during the year
            in response to property lost from the PANYNJ judgments (See Note J)
            and the sinking of a float bridge.

                                       F-9
<PAGE>

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


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                      345,879
                                                      ---------
            Total                                    $1,932,733
                                                      =========

            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
            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)

                                      F-10
<PAGE>


            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
            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.

                                      F-11

<PAGE>

            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
            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.

                                      F-12
<PAGE>

            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
            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.

                                      F-13
<PAGE>

            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:

                    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.

                                      F-14
<PAGE>

            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
                        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.

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.

                                      F-15
<PAGE>

            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.

            The State of New Jersey has  assessed  the Company  approximately
            $63,000  per year since 1996 for real estate  taxes.  The Company
            believes  that the  assessment  is  incorrect  and the proper tax
            should be approximately  $17,000  annually.  Pending a settlement
            the   Company  has   recorded  a   liability   on  its  books  of
            approximately  $356,000 for these real estate taxes.  The Company
            is working to resolve this dispute.

            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
            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.

            Platinum Funding Corp. ("Platinum")v. New York Regional Rail, New
            York Cross Harbor Railroad Terminal Corp. and CH Partners,  Inc.,
            Superior Court of New Jersey, Law Division,  Bergen County Docket
            No:BER-L-10413-98  on December 24, 1998. The Company was named in a
            lawsuit by its former  factoring  agent for  approximately $250,000.
            The  balance  resulted  from  a  dispute  involving  a factoring
            agreement  which the Company  entered into in December 1995.  The
            arrearage  represents a  combination  of  uncollected accounts
            receivable,  factoring fees and fees charged due to the Company's
            inability  to  meet  certain   predetermined   minimum factoring
            levels. In March  1999,  the case was  dismissed.  In December 1999,
            the Company entered into an agreement  whereby the Company  issued
            300,000 shares of its common stock into escrow in the name of
            Platinum. These shares were to be registered and sold on behalf of
            Platinum until $250,000 was attained from said sale. Any unsold
            balance of the  300,000  shares  would be returned to treasury.  If
            the proceeds of $250,000 were not attained,  the Company would issue
            additional shares to be registered and sold until the total proceeds
            to  Platinum  would be  $250,000.  The Company  has been unable to
            register  these  shares for sale and they still  remain in escrow.
            Platinum refiled the lawsuit in October 2000. Currently, the Company
            is negotiating a settlement with Platinum and believes a  settlement
            will be reached.  The Company  has  reflected  the  liability  to
            Platinum as a current liability in the Company's financial
            statements. Depending on the terms of the settlement, these shares
            may be returned to treasury and/or this liability may be changed.

                                      F-16
<PAGE>

            Chacobra v. New York Regional Rail Corp. - District  Court of New
            Jersey filed  February 27, 1998.  The Company has been named in a
            suit  involving  a former  employee.  The suit claims the Company
            failed  to  make  certain  payments  for  services  rendered  and
            reimbursement for certain funds advanced.  These alleged services
            and advances  were  performed  prior to the reverse  merger.  The
            plaintiff  is seeking  recovery of  approximately  $250,000.  The
            Company has recognized a liability of approximately $53,000 . The
            Company  believes  this  claim is  without  merit and  intends to
            vigorously  defend it. In February of 2000, all parties,  without
            prejudice, dismissed the case.

            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.

            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.

                                      F-17
<PAGE>

            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
            $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.

                                      F-18
<PAGE>

            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 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
            interest. 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.

            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.

            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                $      -
                                                  =============

                                      F-19
<PAGE>

            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.


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 -    SEGMENT INFORMATION

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

            NYCH operates in the transportation and delivery of rail traffic via
            barges segment. During 1999 the Company acquired a 51% interest in
            JST which operates in the regional trucking business of short-haul
            freight transportation and landfill management segment.

            The Company's reportable segments are strategic business units that
            offer different services. They are managed separately because each
            business requires different technology and marketing strategies. The
            accounting policies of the segments are the same as those described
            in the summary of significant accounting policies.

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


                                      F-20

<PAGE>

                                     Railroad         Trucking

                                    Operations       Operations       Total
                                  ---------------    ------------  ------------

Year ended December 31, 1999

  Operating revenues               $    898,866      $ 4,248,502   $ 5,146,918

  Gross profit                          (29,641)         445,203       415,562

   Segment profit (loss)             (5,423,462)          51,111   (5,372,351)

   Interest income                           40             -              40

   Interest expense                   3,816,530           31,240    3,847,770

   Depreciation and                      183,325         135,000       318,325
   amortization

Year ended December 31, 2000

  Operating revenues               $  1,301,087      $ 7,325,006   $ 8,626,093

  Gross profit                          720,208          292,741     1,012,949

  Segment profit (loss)              (1,873,254)         186,900    (1,686,354)

   Interest income                         -                -             -

   Interest expense                     958,045          165,629     1,123,674

   Depreciation and                      238,693         248,058       486,751
   amortization

            MAJOR CUSTOMER

            Trucking operations sales to Waste Management Inc., represented
            approximately 13% and 24% of net sales for the year ended December
            31, 2000 and 1999, respectively.  There was no other customer of the
            Company whose sales exceeded 10%.


NOTE P - 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.

NOTE Q - RESTATEMENT

            The accompanying financial statements have been restated to properly
            reflect restatements made to the  financial  statements  of 1999 and
            prior years.Accounts payable and accrued expenses have been adjusted
            to reflect the additional  accruals of  expenses  associated  with a
            judgment obtained by the Port Authority of New York/New  Jersey.  An
            account has been created called Temporary Equity to reflect the 1998
            reversal of the issuance  of 12,500  shares of an  amended  Series B
            Preferred Stock to the Company's  former  president  in exchange for
            return of his 10,000,000 common shares.  Counsel determined that the
            preferred shares were invailidly issued because of an amendment to
            the terms of the Series B required shareholder approval, which the
            Company never obtained. The Company has not returned the 10,000,000
            shares and has recorded the redemption value of the common shares as
            temporary equity  and  has  reversed  the  charge   reflecting   the
            beneficial conversion feature of  the  amended  Series  B  Preferred
            stock  of $567,000.

            The 1999 financial statements  have  been  revised  to  reflect  the
            following: (i) reversal  of  the  overstated  beneficial  conversion
            feature of $4,628,699 and (ii) to record the Black-Scholes  value of
            warrants issued on  conversion  of  notes  plus  options  issued  of
            $2,223,532.

            The 2000 financial statements  have been  restated  to  reflect  the
            issuance of warrants on conversion of notes in March and May 2000 of
            $717,038 and the beneficial  conversion  feature on $60,000 of notes
            issued in March/April 2000 of $17,333.


            The  effect  of  such  restatements  on the  Company's financial
            statement is as follows:

                                           As                            As
                                        Reported      Adjustments     Restated
                                      ------------------------------------------

Balance Sheet Adjustments
 Additional paid-in capital             9,170,945      2,901,294     12,072,239
 Accumulated deficit                  (12,129,579)    (2,901,294)   (15,030,873)

Statement of Operations
 Adjustments
Year ended December 31, 2000
 Loss from operations                $    789,824   $             $    789,824
 Net loss                                 951,983      734,371        1,650,227
 Net loss per common share basic     $     (0.01)   $             $     (0.01)

Year ended December 31, 1999
 Loss from operations                $  1,641,180   $             $  1,641,180
 Net loss                               3,205,428      2,166,923      5,372,351
 Net loss per common share basic     $     (0.02)  $             $      (0.04)

                                       F-21
<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 28th day of March 2002.

                                    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