SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB

  (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
                                  ACT OF 1934

                   For the Fiscal Year Ended December 31, 2004
                                       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

                         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, par value $.0001

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.
                                                                     YES X 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. [ ]

The Company's revenues for the most recent fiscal year were $8,360,743.

The  aggregate  market value of the voting stock held by  non-affiliates  of the
Company,  (shares) based upon the closing price of the Company's Common Stock on
May 12, 2005 was approximately $17,302,757

As of May 12, 2005 the Company had 216,284,468  issued and outstanding shares of
common stock.


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                                Table of Contents
PART I
Item 1.   Business.............................................................3
Item 2.   Description of Properties...........................................15
Item 3.   Legal Proceedings...................................................15
Item 4.   Submission of Matters to a Vote of Security Holders.................16

PART II
Item 5.   Market for Registrant's Common Stock and
          Related Stockholder Matters ........................................17
Item 6.   Selected Financial Data.............................................21
Item 7.   Management's Discussion and Analysis or Plan of Operation...........22
Item 7A.  Quantitative and Qualitative Disclosures About
            Market Risk.......................................................29
Item 8.   Financial Statements and Supplementary Data.........................30
Item 9.   Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure...............................57
Item 9A.  Controls and Procedures.............................................57
Item 9B.  Other Information...................................................57

PART III
Item 10.  Directors and Executive Officers of the Registrant..................58
Item 11.  Executive Compensation..............................................61
Item 12.  Security Ownership of Certain Beneficial Owners and
            Management and Related Stockholder Matters........................67
Item 13.  Certain Relationships and Related Transactions......................68
Item 14.  Principal Accountant Fees and Services..............................71
Item 15.  Exhibits and Financial Statement Schedules (Index)..................72

SIGNATURES        ............................................................76

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PART I

Item 1. Description of Business

The Company

Through its  subsidiaries,  the Company  operates a short-line  railroad,  which
transports  freight  via  rail/barges  across  New York  Harbor  and a  regional
trucking  company in the  business  of  short-haul  freight  transportation  and
landfill management.

Background

The Company was  incorporated  as Best Sellers Group,  Inc. in Delaware on April
19, 1994 and changed its name to New York  Regional Rail  Corporation,  upon the
acquisition  of all of the capital stock of New York  Regional Rail  Corporation
("NYRR") in May 1996.  NYRR operates a short-line  railroad.  NYRR owns 93.4% of
the capital stock of New York Cross Harbor Railroad,  Inc. ("NYCH"),  which owns
the operational railroad and 94.5% of the capital stock of CH Proprietary,  Inc.
("CHP"),   which  owns   substantially   all  of  the  Company's   rail  freight
transportation equipment.

In  April  1999,  the  Company   purchased  51%  of  the  capital  stock  in  JS
Transportation, Inc. ("JST"), a regional trucking company. In February 2004, the
Company purchased the remaining 49% of JST.

Unless  otherwise  indicated,  any  references to the Company also include NYRR,
NYCH, CHP, and JST.

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

CAUTIONARY  STATEMENTS FOR PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE PRIVATE
SECURITIES  LITIGATION  REFORM ACT OF 1995.  Investment in the securities of the
Company  involves a high degree of risk.  In  evaluating  an  investment  in the
Company's common stock,  stockholders and prospective investors should carefully
consider the information contained in this Form 10-KSB for the fiscal year ended
December 31, 2004 including,  without  limitation,  Item 1 "Business" and Item 6
"Management's Discussion and Analysis or Plan of Operation".

This Form  10-KSB  contains  certain  "forward-looking"  statements  within  the
meaning of The Private Securities Litigation Reform Act of 1995, and information
relating to New York Regional Rail  Corporation  and its  subsidiaries  that are
based on the beliefs of our  management and that involve known and unknown risks
and uncertainties.  When used in this report, the terms "anticipate," "believe,"
"estimate,"  "expect" and "intend"  and words or phrases of similar  import,  as
they  relate  to us or our  subsidiaries  or our  management,  are  intended  to
identify forward-looking statements. These statements reflect the current risks,
uncertainties  and  assumptions  related to various factors  including,  without
limitation,  currency risk,  competitive  factors,  general economic conditions,
customer  relations,  fuel costs,  the interest rate  environment,  governmental
regulation and  supervision,  the inability to successfully  integrate  acquired
operations,  weather,  the ability to service  debt,  one-time  events and other

                                      - 3 -

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factors in this report and in other filings made by us with the  Securities  and
Exchange Commission.  Based upon changing conditions,  should any one or more of
these risks or uncertainties  materialize,  or should any underlying assumptions
prove incorrect, actual results may vary materially from those described in this
report  as  anticipated,  believed,  estimated  or  intended.  We  undertake  no
obligation to update, and we do not have a policy of updating or revising, these
forward-looking  statements.  Except where the context otherwise  requires,  the
terms  "we,"  "us," or "our" refer to the  business  of New York  Regional  Rail
Corporation and its consolidated subsidiaries.

BUSINESS OF REGISTRANT
Business Strategy-Rail

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

Based upon these  opportunities  and the Company's  independent  development  of
originating shipments including containerized freight, the Company believes that
the Company's rail operations are positioned to attain  profitability,  however,
there can be no assurance  that this will be achieved in the next 12 months,  or
at all. The Company  believes  that the  Greenville,  NJ and  Brooklyn,  NY rail
yards,  which are connected by the Company's rail barge service,  provide a cost
effective and time  efficient link for the movement of freight in and out of the
New York City market. A customer  utilizing the Company's rail barge service can
save as much as five days  delivering  its goods,  when compared to  traditional
land constrained rail and trucking service.

Current  utilization  of this rail barge  capacity  is less than 13%,  providing
substantial opportunity for growth. Additionally,  the Company believes that the
27  acre  Greenville  yard  is  ideally   situated  to  accommodate   intermodal
operations,  providing  opportunities for freight exchange among differing means
of conveyance, such as between truck and rail. Such opportunities could include,
but  are  not  limited  to,  intermodal   transfer  of  agricultural   products,
aggregation and transfer of  construction  and demolition  debris,  and truck to
rail exchange of environmentally  affected materials from remediation activities
within the New York/New Jersey region.

To increase  utilization of the Company's  rail barge service,  and to establish
the  facilities and  infrastructure  necessary to build  intermodal  operations,
significant capital investment will be required.  The Company does not presently
have  sufficient  financing  for such capital  expenditures  and there can be no
assurance that such financing will be available on acceptable  terms in the near
term, if at all. Further,  each of the planned intermodal operations require the
consent of various unrelated parties, each of which require financial investment
by the  Company,  for  professional  services  necessary  to design,  apply for,
negotiate,  consummate and develop. Consent may need to be obtained from Conrail
Shared Assets (the Company's landlord at the Greenville Rail Yard), the State of
New Jersey,  various federal and other state agencies,  and local municipalities
and others.  There is no assurance  that the  requisite  consent of such parties

                                     - 4 -

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will be obtained.  Therefore,  there can be no  assurance  that the Company will
achieve profitability in the next 12 months, or at all.

In April  2004,  the  Environmental  Defense  and East of  Hudson  Rail  Freight
Operations  Task Force  released a new report on freight rail  investment in New
York City and northern  New Jersey.  The report  outlined  the region's  growing
congestion problem and how to address it through investments in freight rail and
roadway  pricing.  A number of major  projects were  recommended  in the report,
including the expansion and modernization of cross-harbor float operations.  The
improvements  in the report are intended to revitalize  the freight rail network
east of the Hudson  River and improve  regional  mobility  by  shifting  freight
traffic from trucks to rail. However, there is no assurance that the initiatives
envisioned  within the report  will be  implemented,  or that the  Company  will
benefit from them if they are implemented.

Industry Overview

Railroads are divided into three classes based on operating  revenues:  Class I,
$277.7  million or more;  Class II, $22.2 million to $277.7  million;  and Class
III, less than $22.2 million. As a result of mergers and  consolidations,  there
are now only seven  Class I  railroads  in the  country.  The Class I  railroads
handle 93% of the nation's rail freight business.

The rail freight industry became  revitalized  after the passage of the Staggers
Rail Act,  which  deregulated  the  pricing  and types of  services  provided by
railroads. As a result,  railroads were able to achieve significant productivity
gains and operating  cost  decreases  while gaining  pricing  flexibility.  Rail
freight service became more  competitive  with other  transportation  modes with
respect to both quality and price. The volume of freight moved by rail has risen
dramatically since 1980 and industry profitability has improved significantly.

One result of the revitalization of the industry has been the growth of regional
(over 350 miles)  and  short-line  railroads.  Fueled by a trend  among  Class I
railroads to divest  certain  branch lines in order to focus on their  long-haul
core  systems,  there  are now  nearly  550 of  these  regional  and  short-line
railroads.  They  operate in all 50 states,  account  for nearly 30% of all rail
track, employ 11% of all rail workers and generate about 7% of all rail revenue.

Generally, freight railroads handle two types of traffic:  conventional carloads
and intermodal  containers  used in the shipment of goods via more than one mode
of  transportation,  e.g.,  by ship,  rail and truck.  By using a  hub-and-spoke
approach to shipping,  multiple  containers  can be moved by rail to and from an
intermodal  terminal and then either  delivered to their final  destinations  by
truck or  transferred  to ship for  export.  Over  the  past  decade,  commodity
shippers have increasingly turned to intermodal transportation principally as an
alternative to long-haul trucking. The development of new intermodal technology,
which allows containers to be moved by rail double stacked (i.e., stacked one on
top of the other) in  specially  designed  railcars,  together  with  increasing
highway  traffic  congestion  and the shortage of long-haul  truck  drivers have
contributed to this trend.

                                     - 5 -

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Railroad Operations

The  Company  is  part of the  national  railroad  system  and  holds a  Surface
Transportation  Board ("STB")  certificate of convenience  and necessity for the
movement of rail freight by rail and rail barge across New York Harbor. By means
of its float bridges located in Jersey City, NJ and Brooklyn, NY it provides the
only rail car float  operation  in the New York  Harbor.  New York Cross  Harbor
(NYCH)  holds the  Company's  rail  assets and  delivers  its  services  via its
carfloat  operation,  connecting rail freight and rail freight customers east of
the Hudson to the national freight network west of the Hudson.

The Company  operates  from its  Greenville  Terminal  Yard in Jersey City,  New
Jersey,  and Bush Terminal  Yard in Brooklyn,  New York. On the west side of New
York  Harbor,  the  Company  exchanges  (interchanges)  rail  cars  with the CSX
Transportation  ("CSX") and Norfolk  Southern ("NS") railroads at Conrail Shared
Asset Operations'  ("CSAO") Greenville yard, New Jersey. On the east side of New
York Harbor,  the Company  interchanges rail cars with the New York and Atlantic
Railroad ("NYA") at Bay Ridge yard, Brooklyn, New York.

The Company is dependent upon the railroads with which it  interchanges  freight
traffic to enable it to properly  service its  customers at  competitive  rates.
Failure of any of these  connecting  railroads  to provide  adequate  and timely
service at reasonable rates can result in significant  demurrage charges, a loss
of freight customers and revenues.

The Company's  Greenville Yard functions as a transfer  station for freight,  to
and from the national  railroad system.  In the Greenville yard, in Jersey City,
NJ various commodities are transferred from truck to rail. The railcars are then
given  to the  CSX  or  Norfolk  Southern  Railroads  to  transport  to  various
destinations  throughout the US. Most of the Company's "bridge traffic" (defined
below) or "transfer"  freight arrives at its Greenville yard and is destined for
points east.  Most of the Company's rail traffic is bridge  traffic  linking the
CSX and Norfolk  Southern  Railroads,  west of the  Hudson,  to the New York and
Atlantic  Railroad  that serves all of the freight  customers on the Long Island
Railroad throughout  Brooklyn,  Queens and Long Island, NY. The Company also can
provide  dockside  rail  service to any  location in the New York Harbor where a
rail barge, loaded with railcars, can be docked.

The Company can also  provide a wide array of niche and  over-dimension  service
throughout the New York Harbor. Large transformers,  generators,  steam turbines
and other large  equipment can be railed either into or out of the New York area
by means of the rail  float  operation.  Railcars  placed on car  floats  can be
positioned  and  "portable"  rail service  extended  along side ships,  piers or
construction sites.

The primary commodities that the Company "transferred" from west to east, during
2003 and 2004 were forest  products,  plastic  resins,  and food  products.  The
principal  commodity that the Company  "transferred"  from east to west,  during
2003 and 2004 was scrap metal.  In addition,  the Company  originates  westbound
traffic that includes cocoa, bio-solids,  and construction and demolition debris
("C&D").  Some of this business is originated through the Company's  subsidiary,
JS Transportation.

The  Company  believes  that  offering  coordinated  services  as  part  of  the
originating  traffic provides a turn-key solution to its customers and increases
the  Company's  revenue  from both its  trucking  and rail  operations.

                                     - 6 -

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Current Business

Rail freight to and from the New York metropolitan  region,  representing one of
the largest  consumer  markets in the world,  has only two main  routes.  CSX is
served via Selkirk,  NY down the east side of the Hudson,  or via the  Company's
rail  float  operation  between  Jersey  City and  Brooklyn.  Since the  Conrail
purchase in 1999 by the CSX and Norfolk Southern Railroads, the Company believes
that its float operation is the only cost effective  means the Norfolk  Southern
can get to the New York market,  and that its Company's  railcar barge operation
is a vital link to  maintaining  competition  in the  marketplace  by having two
major class one railroads  serving the region.  Since 1999, both NS and CSX have
used the Company more frequently to transport freight between New Jersey and the
New  York/Long  Island areas.  The Company  believes,  although  there can be no
assurance, that this trend will continue.

Most freight that is transported by rail travels substantial distances,  usually
over more than one railroad. To facilitate pricing,  Class 1 railroads,  such as
NS and CSX, 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 rail  freight
transported across the New York City harbor.

NYCH has four distinct areas of business:

     1)   Bridge Traffic.  Bridge Traffic has historically  been the core of the
          rail operations revenue.  At both its terminals,  the Company receives
          rail cars,  which are loaded on to float  barges,  and are  ferried by
          tugboat  between  the  Greenville  Terminal  New  Jersey  and the Bush
          Terminal Yard in New York.

          a)   Westbound Freight: Railcars arrive either from local customers or
               from the Bayridge Junction interchange yard. They are then loaded
               on to float  barges,  and are  ferried by  tugboat to  Greenville
               Terminal  where they are sorted for local New Jersey  delivery or
               are interchanged  with CSAO for destinations on the national rail
               network.

          b)   Eastbound  Freight.  When the railcars  arrive at the  Greenville
               Yard from the  national  rail network they are loaded on to float
               barges,  and are ferried by tugboat to Bush  Terminal  where they
               are sorted for local New York delivery or are  interchanged  with
               the NYA for destinations in Long Island or the Northeast.

     2)   Transload Operations. At both its terminals, the Company receives rail
          cars that are destined for transload operation.

          a)   Greenville Operations:

               i)   Containers.  Rail cars arrive at Greenville Terminal and are
                    set  aside  on  holding   tracks.   Trucks  carrying  loaded
                    containers   from   various   locations   in  the  New  York
                    Metropolitan  Region arrive at the Greenville facility where
                    the  containers are loaded on to the rail cars by means of a
                    forklift. Empty containers are then placed on the trucks for
                    reloading.   Once  the  rail  cars  are   loaded   they  are
                    interchanged with CSAO for destinations on the national rail
                    network.

                                     - 7 -

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          b)   Bush Terminal:

               i)   Pipe.  Loaded rail cars arrive at Bush  Terminal and are set
                    aside on warehouse  tracks.  Trucks are loaded with the pipe
                    using  a  crane  for  local  delivery.   Pipe  is  sometimes
                    warehoused  for  future  delivery.  Once the  rail  cars are
                    emptied  they are  interchanged  with CSAO for their  reload
                    destination.

               ii)  Scrap Metal.  Empty rail cars arrive at Bush Terminal  where
                    they are placed on holding tracks. Truckloads of scrap metal
                    are  unloaded  into  the  waiting  rail  cars by  means of a
                    magnetic  crane.  Once the rail  cars  are  loaded  they are
                    interchanged for final shipping.

               iii) Lumber. Loaded rail cars arrive at Bush Terminal and are set
                    aside on  warehouse  tracks.  Using a  forklift,  trucks are
                    loaded with lumber for local delivery.

     3)   Shipside & Dockside.  The Company  can, by means of its float  barges,
          anchor  shipside or dockside for receipt or delivery of various  types
          of  cargo.  If the cargo is  destined  for  local  delivery  it can be
          ferried to the  appropriate  terminal for offloading or transported to
          its final  destination.  During  2004,  the Company  used the shipside
          method of transfer for structural steel shipments for Balfour Beatty.

          a)   Cocoa - The  Company is the  "originating"  railroad  for a large
               portion of the country's supply of cocoa.  Empty rail cars arrive
               in  Greenville  where  they are  loaded  on to float  barges  for
               ferrying  to the  Brooklyn  docks at Red Hook.  At Red Hook,  the
               Company in  conjunction  with American  Stevedoring  and the Port
               Authority  of New York & New Jersey has  developed  an  efficient
               system whereby the Company's  float barges are docked  pier-side.
               Then,  using a system of ramps or conveyor  belts,  the beans are
               loaded directly from the warehouses. Once loaded they are ferried
               back to  Greenville  Terminal and are placed on the national rail
               network for final destination across the country.

          b)   Bridge  Steel- The  Company  is the  "destination"  railroad  for
               oversized  steel beams and other heavy steel  structures  used in
               the  re-construction  of a bridge  over the  Housitanic  River in
               Connecticut.  Railcars  laden  with  oversized  and  over  weight
               structural  steel are received at the Company's  Greenville  Yard
               facility  by rail from the  foundry.  These  railcars  are stored
               until  needed  at the  project.  Then  they are  loaded on to the
               Company's rail barge and ferried to a ship anchored in the Harbor
               for loading and transportation to the project site.

     4)   Local Deliveries.  At both its Greenville and Bush Terminal facilities
          the Company  receives  rail cars  destined for its local  customers in
          Brooklyn.  Rail cars received in Greenville are  transported  via rail
          barge  to Bush  Terminal.  From  Bush  Terminal,  all  rail  cars  are
          delivered directly to the Company's rail served customers.

As of December 31, 2004,  the  Company's  rail  operation had  approximately  23
active customers.  Norfolk Southern  represents 72.55% and CSX 10.14% of segment
revenues,  respectively. The Company anticipates that these major customers will

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continue to utilize  Company's  services at or above these  levels in the future
due to the factors discussed above.

The Company's current  cross-harbor  operating  capacity is approximately  2,000
carloads  per month.  For the year  ended  December  31,  2004 the  Company  was
transporting  an average  of 283  carloads  per month (a  carload  refers to one
loaded  rail car) as compared  to an average of 191  carloads  per month for the
year ended  December 31, 2003. The Company  charges  between $250 and $1,500 per
carload  depending  upon the length and weight of the  railcar,  and the type of
commodity  being  shipped and method of  shipment.  The Company  estimates  that
depending  on the mix, it needs to handle in excess of 350 carloads per month in
order for the railroad operations to achieve profitability,  before imputing the
cost of necessary capital improvements as discussed below.

Sales and Marketing

The Company must expand its base of customers and the  utilization of its assets
in order to achieve profitability.  To do so, the Company is currently assessing
and  reformulating  the  means  and  methods  by which it  engages  in sales and
marketing  activity.  The Company  believes  that a number of  competencies  are
required to be successful in these efforts. Substantial expertise in pricing and
marketing railroad  services;  understanding and meeting the material supply and
product transportation  requirements of current and prospective  customers;  and
building  and  maintaining  productive  working  relationships  with  connecting
carriers, intermodal freight sources, and customers.

The Company intends to generate new business for the rail operation  through (i)
targeting  companies  seeking an efficient means for access to and exit from the
New York Region  where the time  savings  afforded by the  Company's  rail barge
service will be a key factor,  (ii) targeting  existing customers and connecting
carriers to increase their utilization of Company's services, (iii) working with
state  and local  development  officials  and  complimentary  service  providers
seeking  access to the New York  Regional  market,  where the  Company's  unique
resources may enable them to achieve competitive advantage, and (iv) identifying
and targeting the non-rail transportation of goods into and out of the region in
which the Company operates.

Safety

An  important  part of the  Company's  operating  strategy  is to  conduct  its'
railroad  operations  safely  for  the  benefit  and  protection  of  employees,
customers  and the  communities  it serves.  The  Company  requires  substantial
additional  financing to improve docking,  barge and track  infrastructure,  and
track maintenance to continue to minimize the risk of safety incidents including
derailments.  Several  initiatives  at the  State  and  Federal  level are being
pursued  to  obtain  governmental  support  for  these  important  improvements,
however,  there is no assurance that such efforts will be successful or that the
additional financing will be obtained.

Rail Traffic

Rail traffic is classified as on-line or overhead  traffic.  On-line  traffic is
traffic that  originates  or  terminates  with  shippers  located on a railroad.
Overhead  traffic  passes  from one  connecting  carrier to another  and neither

                                     - 9 -

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originates nor terminates with shippers located on a railroad.  Presently,  NYCH
is largely an  overhead  carrier  but may move  toward a greater  percentage  of
online service in the future as a result of increasing intermodal utilization of
its Greenville yard.

Rail freight  rates can be in various  forms.  Generally,  customers are given a
"through"  rate,  a single  figure  encompassing  the rail  transportation  of a
commodity from point of origin to point of destination, regardless of the number
of carriers  which handle the car.  Rates are developed by the carriers based on
the commodity,  volume,  distance and  competitive  market  considerations.  The
entire freight bill is paid either to the originating  carrier ("prepaid") or to
the  destination  carrier  ("collect")  and divided  between all carriers  which
handle the move.  The basis for the division  varies and can be based on factors
(or revenue requirements)  independently  established by each carrier that share
in the through rate, or on a percentage basis established by division agreements
among the carriers.

A carrier such as NYCH, which serves largely as an overhead carrier,  receives a
smaller  percentage of the total  revenue of the haul than would an  originating
carrier.  However, the unique competitive  advantage of the Company's rail barge
operations  provides  potential  opportunities  to achieve  incremental  revenue
improvements over other overhead carriers. Additionally, origination of loads as
a result of prospective  intermodal  operations at the Company's Greenville Yard
can yield similar  incremental  improvements  in revenue.  However,  there is no
assurance that the Company will be able to achieve such revenue  improvements in
the absence of obtaining additional financing and the cooperation and consent of
unrelated  third  parties.  Consent may need to be obtained from Conrail  Shared
Assets (the Company's  landlord at the Greenville  Rail Yard),  the State of New
Jersey,  various federal and other state agencies,  and local municipalities and
from others.

Operating Property and Equipment

The Company's rail operational equipment,  including leased equipment,  consists
of four  locomotives,  two float bridges and four float barges.  The Company has
approximately 13 miles of track on the New Jersey and Brooklyn waterfronts.  The
Company's  track  is  operational  and in  working  order,  although  in need of
substantial  rehabilitation.  The  float  bridges  that  serve as the rail  link
between the  Company's  rail "float"  barges and the Company's  land-based  rail
tracks are in need of major rehabilitation. 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 barges
built  in 1947 to 1952  are in need of  major  overhaul.  Tugboat  services  are
subcontracted from John Brown & Sons on a monthly basis.

Capital requirements for capital repairs and expenditures for 2005 are estimated
at $1,600,000 based on management  estimates obtained in consultation with third
party  vendors and  consultants.  Capital  expenditures  for major track,  dock,
barge, float and other capital  improvements  believed to be necessary to ensure
the continued viability of operational assets and infrastructure, and to support
attaining  sustainable  profitable  operations exceeds an additional $5 Million.
While the Company may be able to achieve  profitability  without  these  capital
expenditures and capital  improvements,  the continued and consistent functional
utility of operating assets cannot then be reasonably  predicted or assured, and
any breakdown or failure of individual  operating  assets,  or groups of assets,

                                     - 10 -

<PAGE>

could  result  in a  cessation  of  operations  while  repairs  are made  and/or
replacements  can be obtained,  if such repairs or  replacements  can be made at
all. This estimated  capital  requirement does not include any provision for the
additional  financing  that  may be  required  to  facilitate  and/or  construct
additional  facilities and/or  infrastructure to support the expanded intermodal
operations at the Greenville Yard. This estimated capital  requirement also does
not  include any  provision  for the capital  that may be  necessary  to resolve
Company liabilities or legal matters as discussed herein.

The Company operates the Bush Terminal on a month-to-month  permit with New York
City.  The monthly rental of the Bush Terminal is $2,200.  The  Greenville  Yard
serves as the primary rail car float facility in New Jersey and connects by rail
to the Oak Island  freight yard in Newark,  New Jersey.  In September  2003, the
Company  exercised its option for 7 additional acres in the Greenville Yard. The
Company's Greenville Yard is approximately 27-acres and is leased to the Company
until  2023 at a rental  rate of  $62,500  for  2005,  with  annual  escalations
thereafter, plus a non-cash deferred rent charge of $87,105. The lease agreement
with Conrail also transferred all real property associated with the operation of
the rail yard to the Company for $1.00.

Trucking Operations
Business Strategy- Trucking

The Company's primary strategy to expand its subsidiary's trucking operations is
to  focus  on  increasing  revenues  by  providing   dispatching   services  and
transloading  services in conjunction  with the Company's rail  operations.  The
Company's  strategy  to expand its  trucking  operations  and to meet its future
equipment  and  manpower  needs also  includes  subcontracting  with  additional
companies,  leasing  equipment  directly and acquiring  other  smaller  trucking
companies.  In 2003 the Company commenced utilizing the Company's  relationships
with independent  operators and subcontractors to provide dispatching  services.
These services are provided to assist larger  companies  which often need trucks
and drivers, in times of peak demand, and companies,  which do not own fleets or
employ drivers. This practice continued in 2004.

The  Company's  strategy  is to  have  these  companies  (which  include  waste,
container  and  shipping  companies)  retain  JST  to  provide  them  with  such
transportation needs for a fixed rate.

Current Business

JST,  the  Company's  trucking  subsidiary,  is a short-haul  regional  trucking
company,  which hauls and disposes of commercial and residential trash, which is
referred to as municipal  solid waste.  JST collects  municipal solid waste from
transfer stations operated by collection companies, such as Waste Management and
Republic Waste  Services.  JST does not collect  municipal  solid waste directly
from residential or commercial customers.  The waste collected from the transfer
stations is then hauled to various waste dumps and landfills.

                                     - 11 -

<PAGE>

Since July 2001, in conjunction  with NYCH, the Company's rail  subsidiary,  JST
has engaged in the movement of  bio-solids.  JST picks up  containers at various
locations  throughout the New York  metropolitan area and transports them either
to the  Company's  Greenville  rail  facility  for  further  shipment by NYCH or
directly by truck to landfills.

JST  dispatches  its own trucks and drivers  primarily  in the movement of steel
products pursuant to its contract with Transload Services, LLC. JST also employs
dispatch  services  using  independent  operators  for other  containerized  and
non-containerized freight transportation.

During the year ended  December 31, 2004, the Company also  transported  various
other  types of  containerized  and  non-containerized  freight.  Currently  the
freight handled by JST consists primarily of municipal solid waste, construction
and demolition materials,  non-hazardous  contaminated soil, crushed rock, pipe,
structural  steel,  rolled  steel and  bio-solids.  JST services  customers  and
transfer stations primarily in the Northeastern United States.  During 2004, JST
had  approximately  $2,106,756  of one-time  revenue from one contract with Site
Contractors, Inc. The contract was substantially completed during 2004.

As of December 31, 2004, the Company's  trucking  operation had approximately 34
active customers. Consolidated Logistics & Transportation, LLC (CLT) represented
21.18%, Site Contractors, Inc. represented 24.34%, and Tully Environmental, LLC.
represented  14.58%  of  trucking  segment  revenue.  Consolidated  Logistics  &
Transportation, LLC is owned by the Company's former CEO, Ronald Bridges.

Operating Equipment and Personnel

JST's  operational  equipment,   including  leased  equipment,  consists  of  13
tractors,  two dump trucks and 15  trailers.  In  addition to the  Company-owned
equipment,  JST leases  tri-axle  dump  trucks,  walking  floor  trailers,  dump
trailers and tractors as needed.

Under  JST's  contracts,  waste  materials  are hauled and  disposed  of through
licensing  and  permits of GM  Trucking  that  maintains  necessary  permits and
compliance  procedures for the movement and disposal of hazardous wastes. Either
JST, GM Trucking,  or both  generate  bills to customers for drivers and related
expenses.

JST and GM Trucking use a professional employer organization to lease drivers. A
professional  employer  organization  provides  an  integrated  approach  to the
management and  administration  of the human  resources and employer risk of its
clients,    by    contractually    assuming    substantial    employer   rights,
responsibilities,  and risks. JST pays the professional  employer  organization,
which pays the payroll taxes and the drivers directly. The Company believes that
leasing drivers from the professional  employer  organization provides it with a
cost effective solution to the normal administrative requirements and additional
costs required to administer its own personnel.

During  2004,  the  Company  regularly  employed  several  additional  union and
non-union  subcontracting  companies and independent operators to facilitate its
freight  operations.  These companies run between six and 20 additional vehicles
daily to service the Company's requirements.

Competition

Rail
Although  the  Company's  NYCH  operation  is the only rail barge  service
transporting  rail cars across New York Harbor,  the Company  faces  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 change in trucking legislation, for example,

                                     - 12 -

<PAGE>

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.

Trucking

The  trucking  industry  is  extremely  fragmented.  In 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 numerous regional and local trucking companies.  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.

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 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 material compliance with all applicable  regulations of the STB and the
FRA.

See Item 3 of this report for information  concerning the abandonment proceeding
against the Company's operations at Bush Terminal in Brooklyn, New York.

The Company's  trucking  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  currently  required to have any permits or licenses from any
federal, state or local government agencies.

Environmental Matters

The  operations of the Company 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

                                     - 13 -
<PAGE>

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.

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,  prospects,  financial  condition  and  results of
operations of the Company could be materially adversely affected.

NYCH  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  are to 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.

The Company has a permit from the US Department of  Transportation  to transport
hazardous materials.

Employees

As of March 31, 2005, the Company had 15 employees,  12 full-time  employees and
three part-time employees.

Of these employees,  four serve as executive officers,  one on a full time basis
as NYCH President, one on a full-time basis as JST President, one on a full-time
basis as NYRR Chief  Executive  Officer  and one on a part-time  basis,  as NYRR
Chief  Financial  Officer.  Three other  employees work in  administration,  two
part-time  for the trucking  subsidiary  and one  part-time  bookkeeper.  Of the
remaining 10 employees, five work in trucking and five work in rail operations.

NYCH has a collective  bargaining  agreement  with the  Seafarers  International
Union of North  America,  which was signed in August  2001 and expires in August
2005, for four of the operational employees.

Internet Address and SEC Reports

We maintain a website with the address  www.nyrr.com.  We are not  including the
information  contained  on our  website  as a part of,  or  incorporating  it by
reference  into,  this Annual Report on Form 10-KSB.  We make  available free of
charge and on a best efforts and good faith basis through our website our Annual
Reports on Form 10-KSB,  Quarterly Reports on Form 10-QSB and Current Reports on
Form 8-K, and  amendments to these  reports,  as soon as reasonably  practicable
after we  electronically  file such material  with, or furnish such material to,
the Securities and Exchange Commission.  We may also, from time to time, include
on our website other  information  related to our business,  markets,  corporate
governance, and any amendments to, or waivers from, our code of business conduct
and ethics that are required to be publicly  disclosed  pursuant to rules of the
SEC.

                                     - 14 -
<PAGE>

Item 2. Description of Property.

(See Item 1 of this report.)

Item 3. Legal Proceedings

The Company is involved in numerous legal proceedings as follows:

A) The City of New York  commenced  an action in November  1998 against New York
Cross Harbor Railroad  Terminal Corp.,  Robert R. Crawford and New York Regional
Rail  Corporation in the United States  District Court Southern  District of New
York The City has alleged that Robert Crawford,  the Company's former President,
and the Company are required to  indemnify  the City for its cost of removal and
cleanup of certain  hazardous  substances  and petroleum at the  Company's  Bush
Terminal facility.

On December 2004 the case was settled  under the following  terms 1) the Company
will share the City's  remediation  expenses to the extent of $450,000;  (2) the
Company shall retain a claim against Mr.  Crawford for the amount,  if any, that
the Company's  $450,000  payment exceeds its proper share of the City's damages,
to be decided by the Court; (3) Mr. Crawford shall retain a counterclaim against
the Company for  indemnification  of any damages he is liable to the City, based
on an alleged  indemnification  agreement the Company and Arline Crawford signed
on July 16, 1999.  The City of New York and the Company  filed a Second  Amended
Complaint   against  Crawford  in  March  2005.  The  Company   re-asserted  its
cross-claim against Crawford on April 22, 2005.

B) In July 2003 Robert R.  Crawford and others  commenced an action  against New
York  Regional Rail  Corporation  in the Supreme Court of the State of New York,
County of Kings. The plaintiff alleges that they are due approximately  $314,000
and 10,000,000  shares of common stock.  The Company has asserted  counterclaims
and  independent  claims  against each of Robert R. Crawford,  Arline  Crawford,
Bruce  Crawford and Citrus  Springs Trust,  which is  beneficially  owned by the
Crawford family and others, for, among other things,  alleged theft of corporate
assets.  The case is ongoing and the Company does not anticipate that there will
be any adverse material  effects on its financial  statement as a result of this
matter. However, there is no assurance that this will be the case.

C) On November 2, 2001, the New York City Environmental  Development Corporation
("NYCEDC") filed an adverse abandonment petition with the Surface Transportation
Board (the "STB") against the Company's rail subsidiary  NYCH.  NYCEDC acting on
behalf of the City of New York  sought to remove  NYCH,  from the Bush  Terminal
Yard in Brooklyn, New York.

The STB,  in response to the  favorable  decision  for the Company by the United
States Court of Appeals for the District of Columbia Circuit,  issued a decision
asking the NYCEDC to show cause, why the STB should not deny its application for
adverse abandonment and dismiss this proceeding. On December 8, 2004, the NYCEDC
filed a reply  to the STB  stating  that it did  not  intend  to  introduce  any
evidence in this  proceeding to address the issues raised by the court. In light
of this filing,  the Company  believes  that  NYCEDC's  application  for adverse
abandonment will be denied and the proceeding dismissed.

D) In November 1999 Fraser, McIntyre and Spartz commenced an action against NYCH
in the Supreme Court of the State of New York,  County of Kings.  The action 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


                                     - 15 -
<PAGE>

interest to Robert R.  Crawford in 1993.  These two  individuals  claim that Mr.
Crawford did not pay them.  They allege that NYCH has guaranteed the performance
of Mr.  Crawford.  The plaintiffs are seeking the restoration of their equitable
interest in NYCH and unspecified monetary damages to be determined by the court.
The plaintiffs seek "restoration of their equitable interest",  a term which was
used but not defined within the complaint.  The Company is vigorously  defending
this action. The Company has satisfied its retained portion of the costs of this
litigation,  any  additional  litigation  costs  will be borne by the  Company's
insurance carrier.

E) Ben-Ami  Friedman  commenced an action in 1993 against NYCH and CH Partners,
in the Supreme  Court of the State of New York,  New York County.  The claim was
settled in December  2004 by the  Company  paying  $35,000 in cash and  $208,334
shares of common stock in NYRR valued at $.12 per share.

F) In 2002, the Jersey City Health Division commenced an action against New York
Cross  Harbor  Terminal  Corp.,  in the  Superior  Court of New  Jersey and in a
related action New York Cross Harbor Railroad Terminal Corp. commenced an action
against  the Jersey City Health  Division in the Federal  District  Court of New
Jersey. The case related to contaminated soil at the Greenville Yard.

In June 2004 the Company settled all  controversies  with the Jersey City Health
Division.  The Company has agreed that it will complete  confirmatory testing of
the fill in a minor portion of its Greenville  Yard under the supervision of the
New Jersey Department of Environmental Protection.  The parties have also agreed
to work more closely in the future to avoid  further  controversies.  As part of
the  Company's  initiative  to be a good  corporate  neighbor,  it has agreed to
sponsor  Earth day events in the  community  which  will  focus on  ecology  and
environmental improvements in Jersey City.

G) In 1995 Ameril  Corp.  commenced  an action  against New York  Regional  Rail
Corporation,  in the 11th Judicial Circuit, Dale County,  Florida.  Ameril Corp.
alleged that it was owed  $338,983 in  connection  with the alleged  issuance of
promissory  notes by the Company to Ameril Corp. On March 24, 2005 the Company's
motion for summary judgment was granted.

H) The Company is also a party to routine  claims and suits  brought  against it
from  time-to-time  in the  ordinary  course of  business.  Management  does not
believe that any such claims exist that would have a material  adverse effect on
the Company's business, financial condition, or results of operations.

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

None

                                     - 16 -
<PAGE>

PART II

ITEM 5.  Market for  Common  Equity,  Related  Stockholders  Matters  and Issuer
Purchases of Equity Securities

(a) Market Information

The  Company's  common  stock,  $.0001  par value is  listed  on the  Electronic
Over-the-Counter  Bulletin Board and traded under the symbol NYRR. The Company's
Common Stock has traded on the Electronic  Over-the-Counter Bulletin Board since
May 9, 2002.  From March 21, 2001 until May 8, 2002 the  Company's  common stock
was listed on the National Quotation Data Service ("pink sheets") under the same
symbol.

The following table sets forth, for the periods indicated,  the closing high and
low  prices on the dates  indicated  below  for our  common  stock for each full
quarterly period within the two most recent fiscal years.


Fiscal Year Ended December 31, 2004            Quarterly Common Stock Price Bid
By Quarter                                     Ranges (1)
----------                                     ----------

                                                High      Low
                                               ------   ------
March 31, 2004                                  0.12     0.11
June 30, 2004 (1)                               0.09     0.09
September 30, 2004 (1)                          0.11     0.09
December 30, 2004 (1)                           0.13     0.12


Fiscal Year Ended December 31, 2003            Quarterly Common Stock Price Bid
By Quarter                                     Ranges (1)
----------                                     ----------

                                                High      Low
                                               ------   ------
 March 31, 2003                                 0.08     0.05
 June 30, 2003                                  0.09     0.05
 September 30, 2003                             0.06     0.04
 December 31, 2003                              0.10     0.05


1) The  existence  of limited  or  sporadic  quotations  should not of itself be
deemed to constitute an "established  public trading market." To the extent that
limited trading in the Company's common stock took place, such transactions have
been limited to the  over-the-counter  market. The  over-the-counter  market and
other quotes  indicated  reflect  inter-dealer  prices without  retail  mark-up,
mark-down or commission and do not necessarily represent actual transactions.

(b) Holders

As of the close of business on December  31, 2004 there were 1,862  stockholders
of record of the Company's common stock and 209,207,597 shares outstanding.

                                     - 17 -

<PAGE>

(c) Dividends

The payment by the Company of dividends,  if any, in the future rests within the
discretion of its Board of Directors and will depend,  among other things,  upon
the Company's earnings, its capital requirements and its financial condition, as
well as  other  relevant  factors.  The  Company  has not paid or  declared  any
dividends  upon its  common  stock  since its  inception  and,  by reason of its
present financial status and its contemplated financial  requirements,  does not
contemplate  or  anticipate  paying any  dividends  upon its common stock in the
foreseeable  future.  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  and any
preferred stock outstanding.

The  provisions in the Company's  Certificate of  Incorporation  relating to the
Company's preferred stock allow the Company's directors to issue preferred stock
with  rights  to  multiple  votes per share and  dividends  rights,  which  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.

(d) Recent Issuance of Unregistered Stock, Warrants and Options

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

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

In February  2004,  the Company  entered into an employment  agreement  with Ron
Bridges,  then a Director and the Company's Chief Executive Officer. The Company
issued Mr. Bridges a warrant to purchase 1,000,000 shares of commons stock at an
exercise  price of $.0001 per share.  Mr.  Bridges  exercised  these warrants in
November  2004 and the  Company  recorded  a charge to  compensation  expense of
$80,000.

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

                                     - 18 -

<PAGE>

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

In February  2004,  the Company  purchased  the remaining 49% of the stock of JS
Transportation,  Inc.  from John  Marsala,  Michael  Hausman C/F Daniel  Marsala
UGMA/NY,  Darryl  Caplan,  Todd Sage and Aspen Golden in exchange for  1,420,408
shares of common stock and warrants to purchase 2,579,592 shares of common stock
at an  exercise  price of $.0001 per share and the return to treasury of 860,000
shares of the Company's common stock. On the date of the acquisition the closing
price  for the  Company's  common  stock  was  $0.08.  The  warrants  issued  in
connection with this transaction were exercised in November 2004.

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

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

(e) Series D Preferred Stock

In February  2004, the Board of Directors  designated  2,500 shares of preferred
stock as Series D Preferred  Stock.  The shares of Series D Preferred Stock have
no annual  dividend.  Upon  liquidation or  dissolution,  each share of Series D
Preferred Stock is entitled to a distribution  of 110% of the face amount.  Each
share of Series D Preferred  Stock is  entitled  to 120,000  votes on any matter
submitted to a vote of the  stockholders  provided that at least 1,700 shares of
Series D  Preferred  Stock have been  issued and there are no shares of Series C
Preferred Stock outstanding.  The shares can convert into shares of common stock
under various terms.

Pursuant to an agreement  dated February 4, 2004 Transit Rail, LLC purchased 500
shares of Series D Preferred  Stock at a purchase  price of $1,000 per share and
agreed to purchase up to 2,000 additional shares of Series D Preferred Stock. In
connection  with the  transaction  Transit  Rail LLC  received  a proxy from the
holder of the shares of Series C Preferred  Stock  granting it the right to vote
approximately  39.8% of the Company's  voting  securities.  Upon the purchase of
1,700  shares  of Series D  Preferred  Stock  and the  conversion  of all of the
outstanding  shares of Series C Preferred Stock each share of Series D Preferred
Stock shall be entitled to 120,000  votes,  which would  represent  50.5% of the

                                     - 19 -

<PAGE>

Company's  voting  securities  based upon the  number of shares of common  stock
presently  outstanding.  (See Note - N "Subsequent Events" and the Company's 8-K
filed  February 19, 2004 for further  details.) As of December 31, 2004, a total
of 2100 shares, and as of May 12, 2005 2,500 shares, of Series D Preferred Stock
have been purchased and issued, respectively.

See Form 8-K "Items 1, 5, and 7. CHANGES IN CONTROL OF REGISTRANT,  OTHER EVENTS
AND  REGULATION FD  DISCLOSURE  and FINANCIAL  STATEMENTS,  PRO FORMA  FINANCIAL
INFORMATION  AND EXHIBITS",  respectively  filed February 4, 2004,  February 19,
2004, and February 4, 2005, incorporated by reference.

Shares Reserved For Potential Future Issuance

The Company  currently has the shares it requires by virtue of obligations under
various notes, options, warrants, employment agreements,  consulting agreements,
retainer agreements and other agreements.

                                     - 20 -

<PAGE>
Item 6 Selected Financial Data

The selected  financial data set forth below has been derived from the Company's
audited  financial  statements.  The data should be read in conjunction with the
Company's  audited  financial  statements  and notes  thereto and  "Management's
Discussion and Analysis or Plan of Operation" and the other information included
elsewhere in this annual report on Form 10-KSB.



                                                    Years Ended December 31,
                                                       2004           2003
                                                    ------------------------
                                                      (in thousands, except
                                                        per share amounts)

Income Statement Data:
 Operating revenues ..........                     $  8,361      $  5,624
 Other income ...............                             -            52
                                                    ------------------------
 Total Revenues ..............                        8,361         5,676
 Operating & Administrative expenses .........       10,386         6,515
                                                    ------------------------
(Loss) before income taxes ..                        (2,025)         (839)
Provision for income taxes ..                             -             -

Net income ..................                        (2,025)         (839)
 Preferred Stock dividend ....                           44            44
                                                    ------------------------
Net income available to
  common shareholders ........                     $ (2,069)     $   (883)
 Basic income per common
  share ......................                     $   (.01)     $      0
                                                    ------------------------
 Diluted income per common
  share .....................                      $      0      $      0

 Weighted average
  shares-basic (000's)...............               200,073       188,171
                                                    ------------------------
 Weighted average
  shares-diluted .(000's)............               200,073       188,171
                                                    ------------------------
 Cash dividends declared on
  Common Stock ...............                     $      0      $      0
Balance Sheet Data:
 Total assets ................                     $  6,336      $  4,909
 Shareholders' deficit ........                    $ (2,040)     $ (2,960)


                                     - 21 -

<PAGE>

Item 7 Management's Discussion and Analysis or Plan of Operation

The following discussion should be read in connection with the Company's audited
financial statements and notes thereto included elsewhere in this annual report.

The  statements  contained in  Management's  Discussion  and Analysis or Plan of
Operation  ("MDA") which are not  historical  are  "forward-looking  statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities  Exchange Act of 1934, as amended.  These forward-
looking  statements  represent the  Company's  present  expectations  or beliefs
concerning  future events.  The Company cautions,  however,  that actual results
could differ  materially  from those  indicated in MDA.  While these  statements
represent  the  Company's  current  judgment  in  the  future  direction  of the
business,   risks  and  uncertainties  could  cause  actual  results  to  differ
materially from any future performance suggested herein.

Certain  factors  that  could  cause  results  to differ  materially  from those
projected in the forward-looking statements include, but are not limited to, the
level of freight shipments,  competition, future contractual terms with landfill
authorities,  impact of government regulations,  the inability of the company to
reduce it's outstanding liabilities,  and the availability of capital to finance
growth and general economic conditions.

Critical Accounting Policies

The Securities  and Exchange  Commission  ("SEC")  defines  critical  accounting
policies as those that  require  application  of  management's  most  difficult,
subjective or complex judgments, often as a result of the need to make estimates
about the  effect of matters  that are  inherently  uncertain  and may change in
subsequent periods.

The  Company's  significant  accounting  policies are described in Note A of the
Notes to Financial Statements.  Not all of these significant accounting policies
require  management  to make  difficult,  subjective  or  complex  judgments  or
estimates.  Management  believes  that  the  Company's  current  policy  for the
evaluation of long-lived asset impairment meets the SEC definition of critical.

Recent Developments
Change in Control

Pursuant to an agreement  dated  February 4, 2004 Transit  Rail,  LLC  purchased
2,100 shares of Series D Preferred Stock at a purchase price of $1,000 per share
as of December 31, 2004, and  subsequently  purchased 400  additional  shares of
Series D  Preferred  Stock at the same price in the first  quarter  of 2005.  In
connection  with the  transaction  Transit  Rail LLC  received  a proxy from the
holder of the shares of Series C Preferred  Stock  granting it the right to vote
approximately 39.8% of the Company's voting securities. Upon the purchase of the
2,500  shares  of Series D  Preferred  Stock  and the  conversion  of all of the
outstanding  shares of Series C Preferred Stock each share of Series D Preferred
Stock became entitled to 120,000 votes, which represented 50.5% of the Company's
voting  securities  based  upon the number of shares of common  stock  presently
outstanding.

Affiliates of Transit Rail, LLC own or operate a fleet of approximately 500 rail
cars  that  transport   construction  and  demolition  material  generated  from
high-cost  disposal  markets  in the  Northeastern  United  States  to  low-cost

                                     - 22 -

<PAGE>

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

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

Overview

The  Company  operates a  short-line  railroad,  which  transports  freight  via
rail/barges across New York Harbor with intermodal  freight transfer  operations
at its Greenville,  NJ rail yard and a regional trucking company in the business
of short-haul freight transportation.

The Company generates  operating revenues primarily from the movement of freight
in its rail barge,  intermodal  transfer operations and freight hauled by truck.
Freight  revenues are  recorded at the time  delivery is made to the customer or
the connecting  carrier.  Modest freight related operating  revenues are derived
from demurrage, storage and yard use fees.

The  Company's  operating  expenses  consist of  salaries  and wages and related
payroll taxes and employee benefits, subcontractors, depreciation, insurance and
casualty claim expense,  diesel fuel, car hire,  property  taxes,  materials and
supplies,  purchased services,  track usage fees and other expenses. Many of the
Company's  operating  expenses  are  of a  relatively  fixed  nature  and do not
increase or decrease  proportionately  with  increases or decreases in operating
revenues.

When comparing the Company's results of operations from one year to another, the
following  factors should be taken into  consideration.  First,  the Company has
historically  experienced fluctuations in operating revenues and expenses due to
unpredictable  events  such as  one-time  freight  moves and changes in customer
requirements due to variations in the customers business.  Second, the Company's
freight  volumes are  susceptible  to increases  and decreases due to changes in
international,  national and regional economic conditions.  Third, the extent of
unanticipated  maintenance and repair activities  required to keep the companies
operating assets, such as aging locomotives, barges, docking facilities and yard
track systems, can vary significantly from year to year, thereby impacting total
operating expenses.

The  Company  also  generates,  from  time to time,  income  through,  grants of
easements,  licenses and leases of land,  tracks and  equipment.  Income or loss
from sale and  disposal  of  property  and  equipment  and grants of  easements,
licenses and leases is recorded at the time the transaction is consummated. This
income varies significantly from year to year.

                                     - 23 -
<PAGE>

Results of Operations

The  components  of the  Company's  operating  revenues and expenses by business
segment during the year ending December 31, 2004 were:

                                    Railroad             Trucking

Operating revenues                  $ 1,441,269          $ 6,919,474
Operating expenses                      589,300            6,095,853
Gross profit                            851,969              823,621



The components of the Company's operating revenues and expenses by business
segment during the year ending December 31, 2003 were:

                                    Railroad             Trucking

Operating revenues                  $ 1,368,832          $ 4,254,793
Operating expenses                      482,960            3,827,610
Gross profit                            885,872              427,183

During the year ended  December 31, 2004,  the Company had $8,360,743 in revenue
compared to  $5,623,625 in revenue  during the year ended  December 31, 2003, an
increase  of  $2,737,118  or 49%.  Management  believes  that  the  increase  is
primarily  attributable to non-recurring  income in the amount of $2,106,756 for
hazardous material transportation services for Site Contractors, Inc.

Operating expenses for the year ended December 31, 2004 were $6,685,153 compared
to  $4,310,570  an increase of  $2,374,583  or 55% as compared to the year ended
December 31, 2003. Operating expenses as a percentage of operating revenues were
80% for the year  ended  December  31,  2004 as  compared  to 77% for year ended
December 31, 2003. Management believes that the increase was caused primarily by
increased  fuel costs and an  increase in revenue at of the  Company's  trucking
operations, which has a lower margin than rail operations.

Administrative  expenses  increased in the year ended  December  31, 2004,  by $
1,264,625.  As a  percentage  of  operating  revenues,  administrative  expenses
increased to 41% for the year ended  December  31,  2004,  from 39% for the year
ended  December 31,  2003.  Management  believes  that the increase is primarily
attributable to the increase in bad debts.

Liquidity and Capital Resources

The Company had net cash used in  operating  activities  of $620,663  during the
year  ended  December  31,  2004  compared  to net cash  provided  by  operating
activities  of $89,467 for the year ended  December  31,  2003.  The decrease of
$710,130 was primarily caused by an increase in net loss and gain on forgiveness
of debt, which was reduced  primarily by increases in the reserve for bad debts,
payroll taxes payable, accrued expenses, deferred rent and accounts payable.

                                     - 24 -

<PAGE>

The Company had net cash used in investing  activities  of $754,557,  during the
year  ended  December  31,  2004 as  compared  to net  cash  used  in  investing
activities  of $133,510 for the year ended  December  31, 2003.  The increase of
$621,047  was the  result  of an  increase  in the  purchase  of  machinery  and
equipment.

The Company had net cash provided by financing activities of $1,826,286,  during
the year ended  December 31, 2004 as compared to net cash  provided by financing
activities  of $174,807 for the year ended  December  31, 2003.  The increase of
$1,651,479 was caused  primarily by the sale of stock for $2,686,412  during the
year ended December 31, 2004 and offset by principal  payments of long term debt
of $650,626.

The Company's working capital deficit on December 31, 2004 increased by $435,839
from $4,751,218 on December 31, 2003 to $5,187,057.

Capital requirements for capital repairs and expenditures for 2005 are estimated
at $1,600,000 based on management  estimates obtained in consultation with third
party  vendors and  consultants.  Capital  expenditures  for major track,  dock,
barge, float and other capital  improvements  believed to be necessary to ensure
the continued viability of operational assets and infrastructure, and to support
attaining  sustainable  profitable  operations exceeds an additional $5 million.
While the Company may be able to achieve  profitability  without  these  capital
expenditures and capital  improvements,  the continued and consistent functional
utility of operating assets cannot then be reasonably  predicted or assured, and
any breakdown or failure of individual  operating  assets,  or groups of assets,
could  result  in a  cessation  of  operations  while  repairs  are made  and/or
replacements  can be obtained,  if such repairs or  replacements  can be made at
all. This estimated  capital  requirement does not include any provision for the
additional  financing  that  may be  required  to  facilitate  and/or  construct
additional  facilities and/or  infrastructure to support the expanded intermodal
operations at the Greenville Yard. This estimated capital  requirement also does
not  include any  provision  for the capital  that may be  necessary  to resolve
company liabilities or legal matters as discussed herein.

Total assets of the Company on December  31, 2004  increased  by  $1,427,808  to
$6,336,433  from $4,908,625 on December 31, 2003. The increase was due primarily
to equipment  purchases  and the sale of Series D stock.  These  increases  were
offset by  deprecation  and  amortization  expense of $508,600.  Current  assets
decreased  by $12,349 to  $1,303,682  on December  31, 2004 from  $1,316,031  on
December 31, 2003. The decrease in current assets is primarily  attributable  to
an increase in cash on hand as a result of the issuance of Series D stock offset
by the  operating  losses.  Other  assets were  $445,704 on December 31, 2004 as
compared to $324,663 on December 31, 2003.

On December  31,  2004,  the  Company had total  liabilities  of  $8,376,527  as
compared to  $7,868,558  on December  31, 2003.  On December  31, 2004,  current
liabilities were $6,490,739 as compared to $6,067,249 on December 31, 2003.

Convertible  Notes are  convertible  into shares of common stock at the lower of
various  set  conversion  prices or at 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, certain of the notes grant the holder an option to purchase
from one half to three  quarters  of an  additional  share of common  stock,  at
exercise  prices ranging from $0.12 to $0.18 per share,  for each share acquired
in the conversion.  These options will expire 90 days from the effective date of

                                     - 25 -

<PAGE>

a registration  statement  registering the shares of common stock underlying the
options.  In February 2004,  notes in the original  principal amount of $210,000
were the subject of a settlement agreement.

As of December 31, 2004 the Company had the following current liabilities:

Accounts payable $716,079

Accrued expenses $3,660,423

Notes payable and current maturities of long-term debt $885,836

Payroll taxes payable $1,228,401

Accounts  payable  include  $716,079  of  trade  payables  that are  being  paid
generally in  accordance  with their terms.  The Company  reasonably  expects to
continue to pay these amounts from cash flow from operations.

Accrued expenses include $1,080,490 for accrued real estate taxes payable to New
York and New Jersey.

The City of New York has billed the Company in excess of $6,800,000 for property
taxes dating back to 1984. The Company claims that the tax  assessments  are for
the most part  erroneous  because they relate  either to real  property that the
Company had not owned or leased,  or to property that is not subject to the real
property tax. The Company  further claims that New York City taxing  authorities
have  assessed  taxes  based on  flawed  valuations,  resulting  in  substantial
overcharges.  The New  York  State  Board of  Equalization  and  Assessment  has
proposed significant reductions to these valuations,  subject to the approval of
the New York City  Corporation  Counsel.  Management  expects,  but cannot  give
assurance, that the outstanding liabilities will be settled for a lesser amount.
Pending a settlement of the tax arrears, the Company has recorded a liability on
its books of  $578,700  for these real estate  taxes.  As of May 12,  2005,  the
Company is actively attempting to settle this dispute.

The State of New Jersey  Division  of Taxation  has claimed  that the Company is
responsible for taxes of $663,251 plus penalties and interest  totaling $362,994
(1996-2004).  The State of New Jersey  also  contends  that the  Company has not
submitted  Franchise tax since 1996. The Company  disputes the total numbers and
is working toward a settlement. Pending a settlement, the Company has recorded a
liability  on its  books of  $423,890.  As of March 31,  2005,  the  Company  is
actively attempting to settle this dispute.

Accrued  expenses  also  include a "Reserve  for Legal  Contingencies  and Other
Commitments".  In accordance with recently issued  accounting  pronouncements of
the FASB,  specifically SFAS Statement No. 150, which establishes  standards for
how an  issuer  classifies  and  measures  certain  financial  instruments  with
characteristics  of both  liabilities  and equity the Company has  re-classified
approximately  $300,000 of short-term  debt and $1,500,000 of equity to "Reserve
for Legal Contingencies and Other Commitments.

                                     - 26 -
<PAGE>

Notes  payable  and current  maturities  of  long-term  debt  totaling  $885,836
includes  $374,127  of  current  maturities  of  long-term  debt  primarily  for
equipment leases or settlement payments on outstanding debts and is payable over
12 months.  It also includes  $235,000 of convertible  notes. Of these notes the
Company anticipates that $235,000 will be converted into equity.  However, there
can be no assurance that this will occur.

The Company has an accrual for payroll taxes  payable and related  penalties and
interest in the amount of  $1,228,401.  The dispute  regarding the payroll taxes
stems from 1996 and prior,  when the Company was first  delinquent in payment of
such  taxes.  The past  due  taxes  then had  interest  and  penalties  applied.
Subsequently,  the Company began paying its payroll tax;  however these payments
were  applied to the past due  amounts,  causing  penalties  and  interest to be
imposed on the current  liability.  If properly applied only interest would have
been charged on the older past due taxes.  This  misapplication  continued until
1998 when the Company was  successful in obtaining  relief for a portion of this
misapplication.  The Company  received a refund in 1999. The Company believes it
is still due a substantial refund for past-misapplied  payments and expects that
the final  settlement will be substantially  less than the amount,  which it has
accrued. As of March 31, 2005, the Company is actively attempting to settle this
dispute.  However,  there can be no  assurance  that the Company  will achieve a
satisfactory settlement.

The lease portion of the 2003 Agreement  signed with Conrail  provides a 20-year
land lease,  with a 10-year  option,  to the  Company  for the use of  Conrail's
railroad operating property and water rights in Greenville, New Jersey. Pursuant
to the lease,  in September  2003,  the Company  exercised an option to lease an
additional  five acres in the  Greenville  Yard.  The  agreement  contains  rent
concessions  early in the lease term and then the base rent is $168,500 annually
in 2008.  Rent expense under the lease has been  recognized  on a  straight-line
basis to  account  for the rent  concessions  provided  during  the lease  term,
resulting  in an $87,105  non-cash  deferred  rent charge  during the year ended
December 31, 2004.

Long-term  liabilities include a perfected judgment by the Port Authority of New
York and New Jersey  ("PANYNJ").  In April  2002,  the Company  entered  into an
agreement with PANYNJ.  Under the agreement the PANYNJ will be paid five percent
(5%) of the Company's  revenues  collected by Norfolk  Southern  Corporation  on
behalf of the Company's  customers  which will be applied  against the amount of
the judgment.  This  agreement was extended on October 1, 2003 for an additional
year.  All payments will be applied to the amounts due PANYNJ by virtue of their
judgments.  The  Company's  current  liability  is  estimated  to be $48,000 and
assumes no interest  charges.  The term of the  repayment  agreement is eighteen
months.  During  the  term of the  agreement  the  parties  intend  to  continue
negotiations on a final settlement.  As of May 11, 2005, the Company is actively
attempting to settle this dispute.

There  are  administrative   remedies  available  to  the  Company's   creditors
including, but not limited to, judgments,  liens and levies, which can be placed
on the Company's bank accounts.  Historically,  these remedies have been used by
the creditors of the Company and have resulted in additional cash flow hardships
for the Company. There can be no assurance that any of these remedies may not be
used in the  future.  Absent  resolution  of  these  matters  and  assuming  the
agencies,  vendors and taxing  authorities  fully prevail in court  proceedings,
monetary  damages  could  approximate  $7  million,   but  management  currently
anticipates  that these matters will be resolved at a  comparatively  lower sum.

                                     - 27 -
<PAGE>

The failure of the Company to achieve  satisfactory  settlements or prevail with
respect to pending or threatened  litigation may have a material  adverse effect
on the Company.

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

The Company has a working capital deficit and has required additional financing.
There can be no assurance that the Company will be able to secure any additional
financing.  Until recently the only source of funds available to the Company has
been though  issuance  of floating  rate  convertible  debentures  or by issuing
shares  in  return  for  services.  The  report  of  the  Company's  independent
accountants  contains an explanatory  paragraph  that expresses  doubt about the
Company's ability to continue as a going concern.

During the year ended December 31, 2004,  $210,000 of the Company's  convertible
notes were exchanged for 2,100,000 shares of common stock.

Notes  payable,  related  parties  totaling  $689,700 in principal  plus accrued
interest were converted into 6,890,700  shares of common stock in February 2004.
In February  2004,  the Company  purchased  the remaining 49% of the stock of JS
Transportation,  Inc. in exchange for 4,000,0000  shares of common stock and the
return to treasury of 840,000  shares of the  Company's  common  stock.  The 49%
ownership interest was held by John Marsala,  Darryl Caplan, Michael Hausman C/F
Daniel Marsala, Todd Sage and Aspen Gold.

The  Company has options and  warrants to purchase an  aggregate  of  14,775,278
shares of common stock outstanding primarily as a result of past financings. The
options and warrants are  exercisable at  approximately  $0.15 per share. In the
event that all of the options and warrants are exercised, then the Company would
receive gross proceeds of  approximately  $2,241,000.  There can be no assurance
that such warrants and options will be exercised.

Recent Accounting Pronouncements

In December 2004, the Financial  Accounting  Standards  Board,  or FASB,  issued
Statement of Financial Accounting Standards No. 123R,  "Share-Based Payment", or
SFAS No. 123R.  This  Statement is a revision of SFAS No. 123,  "Accounting  for
Stock-Based  Compensation",  and supersedes  Accounting Principles Board Opinion
No.  25,   "Accounting   for  Stock  Issued  to  Employees",   and  its  related
implementation  guidance.  SFAS No. 123R  focuses  primarily on  accounting  for
transactions in which an entity obtains employee services in share-based payment
transactions.  The Statement  requires entities to recognize stock  compensation

                                     - 28 -
<PAGE>

expense for awards of equity  instruments  to employees  based on the grant-date
fair value of those awards (with limited exceptions). SFAS No. 123R is effective
for the first  interim or annual  reporting  period that  begins  after June 15,
2005.  Under SFAS No. 123R,  the Company had the option to utilize the intrinsic
value method of measuring such compensation, and provided additional disclosures
in its quarterly  financial  statements  that reflected the impact on net income
and  earnings  per share on a pro forma  basis as if the Company had applied the
fair  value  method  to  stock-based  employee   compensation.   The  pro  forma
disclosures  previously  permitted  under  SFAS  No.  123 will no  longer  be an
alternative  to  financial  statement  recognition.  Although  we  have  not yet
determined whether the adoption of SFAS No. 123R will result in amounts that are
similar  to the  current  pro  forma  disclosures  under  SFAS No.  123,  we are
evaluating the  requirements  under SFAS No. 123R and do not expect the adoption
to have a significant  adverse impact on our statements of income and net income
per share.

On December 16, 2004,  the FASB issued SFAS No. 153,  "Exchanges of  Nonmonetary
Assets,  an amendment of Accounting  Principles  Board ("APB")  Opinion No. 29".
SFAS 153  addresses  the  measurement  of  exchanges of  nonmonetary  assets and
redefines the scope of  transactions  that should be measured  based on the fair
value of the assets  exchanged.  SFAS 153 is  effective  for  nonmonetary  asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The Company
does not  believe  adoption  of SFAS  153 will  have a  material  effect  on its
financial position, results of operations or cash flows.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Cash and Equivalents

As of December 31, 2004, the Company is exposed to market risks which  primarily
include  changes in U.S.  interest  rates.  The Company invests cash balances in
excess of operating  requirements  in  short-term  interest  bearing  depository
accounts,  which are generally  available to the Company on demand.  The Company
believes that the effect,  if any, of reasonably  possible  near-term changes in
interest rates on the Company's  financial  position,  results of operations and
cash flows should not be material.

                                     - 29 -
<PAGE>

Item 8. Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Board of Directors and Stockholders
New York Regional Rail
New York, NY

We have audited the accompanying consolidated balance sheet of New York Regional
Rail  Corporation  and  Subsidiaries  as of  December  31,  2004 and the related
consolidated  statements of operations,  changes in stockholders'  deficit,  and
cash flows for the years ended  December 31, 2004 and 2003.  These  consolidated
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 audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the consolidated  financial  position of New
York Regional Rail Corporation and Subsidiaries as of December 31, 2004, and the
results of their  operations  and their cash flows for the years ended  December
31, 2004 and 2003, in conformity with accounting  principles  generally accepted
in the United States of America.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note A to the
consolidated  financial  statements,   the  Company  has  suffered  losses  from
operations and has a working capital deficiency and an accumulated  deficit that
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
Note A. The  consolidated  financial  statements do not include any  adjustments
that might result from the outcome of this uncertainty.

/s/ Sherb & Co., LLP
-----------------------------
Certified Public Accountants


May 19, 2005
New York, New York

                                     - 30 -
<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEET
                                December 31 2004

ASSETS
Current assets
 Cash                                                               $   667,978
 Accounts receivable, net of allowance for doubtful
  accounts of $516,128                                                  540,374
 Prepaid expenses and other current assets                               95,330
                                                                    ------------

    Total current assets                                              1,303,682

Property and equipment, net                                           4,587,047

Other assets                                                            445,704
                                                                    ------------
                                                                     $ 6,336,433
                                                                    ============

                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
 Current maturities of long term debt                               $   374,127
 Convertible promissory notes:
  Others                                                                235,000
Other short-term debt:
  Related parties                                                        42,500
  Others                                                                234,209
Accounts payable                                                        716,079
Accrued expenses                                                      3,660,423
Payroll taxes payable                                                 1,228,401
                                                                    ------------

    Total current liabilities                                         6,490,739

Deferred rent payable                                                   175,858

Long term debt                                                        1,709,930

Stockholders' deficit:
 Series C Convertible Preferred Stock,
$.001 par value, 500,000 shares authorized;
  440,000 shares issued and outstanding                                 440,000
 Series D Convertible Preferred Stock,
  $.001 par value, 2,500 shares authorized;
  2100 shares issued and outstanding                                          2
 Treasury Stock; 155,210 shares, at cost                                (26,355)
 Common stock, $.0001 par value, 280,000,000 shares
  authorized; 209,991,270 shares issued
  and outstanding                                                        20,999
 Additional paid-in-capital                                          16,549,318
 Accumulated deficit                                                (19,024,058)
                                                                    ------------

    Total stockholders' deficit                                      (2,040,094)
                                                                    ------------
                                                                    $ 6,336,433
                                                                    ============
                See notes to consolidated financial statements.

                                     - 31 -

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                               FOR THE YEARS ENDED

                                                           December 31,
                                                  ------------------------------
                                                      2004              2003
                                                  ------------      ------------
Operating revenues                                $ 8,360,743       $ 5,623,625

Operating expenses                                  6,685,153         4,310,570
                                                  ------------      ------------
Gross Profit                                        1,675,590         1,313,055

Legal                                                 305,761           306,421
Selling and administrative expenses                 3,162,693         1,897,408
                                                  ------------      ------------
Total Administrative Expenses                       3,468,454         2,203,829
                                                  ------------      ------------
Loss from operations                               (1,792,864)         (890,774)

Other income (expenses):
 Contract settlement                                        -           (16,000)
 Forgiveness of debt &
         gain on fixed assets                         292,213           230,720

Other Expense                                        (449,518)                -
                                                  ------------      ------------
Interest expense, net                                 (74,445)         (182,549)
                                                  ------------      ------------
Total other income (expenses)                        (231,750)           32,171
                                                  ------------      ------------
Loss before minority interest                      (2,024,614)         (858,603)
                                                  ------------      ------------
Minority interest in loss of subsidiary                     -            19,845

Net loss                                           (2,024,614)         (838,758)

Deemed preferred stock dividend                        44,000            44,000
                                                  ------------      ------------
Loss applicable
         to common shareholders                   $(2,068,614)      $  (882,758)
                                                  ============      ============

Loss per share - basic and diluted:               $     (0.01)      $     (0.00)
                                                  ============      ============

Weighted average common
    shares outstanding
      basic and diluted                           200,073,135       188,171,115
                                                  ============      ============

                See notes to consolidated financial statements.

                                     - 32 -

<PAGE>

               NEW YORK REGIONAL RAIL CORPORATION AND SUBSIDIARIES
           CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                     YEARS ENDED DECEMBER 31, 2004 AND 2003

<TABLE>
<CAPTION>

                            Common Stock     Preferred Series C&D     Treasury
                       --------------------- --------------------  ----------------    Additional    Accumulated
                         Shares      Amount   Shares     Amount     Shares  Amount   Paid-in Capital    Deficit        Total
                       ----------- --------  --------  ----------  ------- --------  --------------- ------------- ------------
<S>   <C> <C>          <C>         <C>        <C>      <C>                 <C>       <C>             <C>           <C>
Balances at
 Dec. 31, 2002         182,822,876 $ 18,282   440,000  $ 440,000         - $      -  $12,879,930     $(16,005,778) $(2,667,566)

Conversion of debt
 into common stock       4,397,519      440         -          -         -        -      223,551                -      223,991
Common stock issued
 for options               111,403       11         -          -         -        -        7,489                -        7,500
Common stock issued
 for services              800,000       80         -          -         -        -       42,320                -       42,400
Common stock issued
 for cash                6,812,500      681         -          -         -        -      271,819                -      272,500

Net loss                         -        -         -          -         -        -            -         (838,758)    (838,758)
-------------------------------------------------------------------------------------------------------------------------------
 Balances at
  Dec 31, 2003         194,944,298   19,494   440,000    440,000         -        -   13,425,109      (16,844,536)  (2,959,933)


Conversion of debt
 into common stock       4,413,200      441         -          -         -        -      275,425                -      275,866
Common stock issued
 for options and
 purchase of JST         5,744,029      575         -          -         -        -      312,074                -      312,649
Common stock issued
 for services            2,630,522      263         -          -         -        -      257,778                -      258,041
Preferred stock
 issued for cash                 -              2,100          2         -        -    2,099,250                -    2,099,252
Purchase of treasury
 Stock                           -        -         -          -   155,210  (26,355)           -                -      (26,355)
Common stock issued
 for legal settlement      208,334       21         -          -         -        -       24,979                -       25,000
Common stock issued
 for dividends &
 Black Scholes effect    2,050,887      205         -          -         -        -      154,703         (154,908)           -

Net loss                         -        -         -          -         -        -            -       (2,024,614)   2,024,614)
-------------------------------------------------------------------------------------------------------------------------------
Balances at
 Dec 31 2004           209,991,270 $ 20,999   442,100  $ 440,002   155,210 $(26,355) $16,549,318     $(19,024,058) $(2,040,094)
                       =========== ========   =======  =========   ======= ========  ============    ============= ============
</TABLE>

See notes to consolidated financial statements.

                                     - 33 -

<PAGE>

                NEW YORK REGIONAL RAIL CORPORATION AND AFFILIATES
                            STATEMENTS OF CASH FLOWS
                               FOR THE YEAR ENDED

                                                            December 31,
                                                  ------------------------------
                                                       2004              2003
                                                  -------------    -------------
Cash flows from operating activities:
 Net loss                                         $ (2,024,614)    $   (838,758)
                                                  ------------------------------
Adjustments to reconcile net loss to net
 cash provided by (used in)operating activities:
 Depreciation and amortization                         508,600          558,548
 Non-cash compensation                                 258,041           42,400
 Allowance for bad debts                               338,519          261,836
 Loss on disposal of fixed assets                       12,415                -
 Gain on exchange of forgiveness of debt              (304,628)        (230,720)
 Minority Interest in subsidiary earnings                    -         ( 19,845)
Changes in operating assets and liabilities:
 Accounts receivable                                   100,624         (322,511)
 Other current assets                                   24,272          (82,053)
 Other assets                                         (121,041)          47,936
 Accounts payable                                       41,011          264,688
 Accrued expenses                                      380,636          235,381
 Payroll taxes payable                                  78,394           83,815
 Deferred rent                                          87,108           88,750
                                                  ------------------------------
     Total adjustments                               1,403,951          928,225
Net cash provided by (used in)
 operating activities                                 (620,663)          89,467
                                                  ------------------------------
Cash flows from investing activities:
 Purchase of property and equipment                   (754,557)        (133,510)
                                                  ------------------------------
Net cash used in investing activities                 (754,557)        (133,510)
                                                  ------------------------------
Cash flows from financing activities:
 Payments of long term debt                           (650,626)         (67,507)
 Stock issuances and purchases, net                  2,476,412          272,500
 Proceeds (payments) of current debt -
  related party                                            500          (30,286)
                                                  ------------------------------
Net cash provided by financing activities            1,826,286          174,807
                                                  ------------------------------
Net increase in cash and cash equivalents              451,066          130,764
 Cash at beginning of year                             216,912           86,148
                                                  ------------------------------
Cash and cash equivalents at end of period        $    667,978     $    216,912
                                                  =============    =============
Supplemental Disclosure of Cash
 flow information:
  Equipment purchased through the
       Issuance of debt                           $  1,085,574     $          -
                                                  =============    =============
      Common stock issued
         For debt                                 $    275,866     $    223,991
                                                  =============    =============

See notes to consolidated financial statements.

                                     - 34 -

<PAGE>

               New York Regional Rail Corporation And Subsidiaries
                   Notes To Consolidated Financial Statements
                 For the years ended December 31, 2004 and 2003

Note A - Nature and Organization of Business and Summary of Significant
Accounting Policies

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  acquired all of the common stock of New York  Regional  Rail
Corporation  ("NYRR")  pursuant to an Agreement to Exchange  Stock dated May 20,
1996  by  and  between  BSLR  and  the   stockholders  of  NYRR  (the  "Exchange
Agreement").  Under terms of the Exchange  Agreement,  the  stockholders of NYRR
exchanged all of  outstanding  shares of common stock of NYRR for  approximately
87,000,000  shares of the  Company's  common stock,  representing  84.57% of the
Company's common stock after the transaction.  The Company then changed its name
to New  York  Regional  Rail  Corporation  and its  state  of  incorporation  to
Delaware. The exchange of shares 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, 2004 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 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.  In 1999,  the Company used 160,000 of
these  shares for  liability  payments  and the  balance  of 860,000  shares was
returned to treasury in February 2004. The acquisition has been accounted for as
a  purchase  and  accordingly  the  acquired  assets and  liabilities  have been
recorded at their  estimated  fair values.  In September  2000, JST acquired the
assets  of MHT,  Inc.,  a small  regional  trucking  company  engaged  in  waste
transportation.  In  February  2004,  the Company  acquired  the  remaining  49%
interest in JST held by minority shareholders.

                                     - 35 -

<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
acquisition  has been accounted for as a purchase and  accordingly  the acquired
assets and liabilities  have been recorded at their  estimated fair values.  The
investment  in OSK Capital I Corp.  was  written  off during 2004 as  management
believes there is no inherent value in the company.

Principles of Consolidation

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

Basis of Presentation

The Company has a working capital deficiency of $5,187,057 at December 31, 2004,
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.  From February 2004
to December 31, 2004,  the Company  received  equity  financing in the amount of
$2,100,000,  and in the first quarter of 2005 received an additional $400,000 as
a result of the sale of Series D  Preferred  Stock  discussed  herein,  all at a
purchase  price of $1,000 per share.  Additionally,  the Company is  continually
evaluating  its plan to attain  profitability;  however  any  results  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 and Equipment

Property 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.

                                     - 36 -

<PAGE>

Depreciation and amortization is calculated using the straight-line  method over
the estimated useful lives of the assets.

The estimated depreciable lives are:

5 - 7 years for  machinery  and  transportation  equipment,  20 years for marine
assets,  10 to 40 years for track and roadbed,  and 10 to 20 years for operating
equipment.

Concentration of Credit Risk

At December 31, 2004,  17.64% of accounts  receivable  was  concentrated  in one
customer.  Credit  is  extended  to  customers  based on an  evaluation  of each
customer's financial condition,  generally without requiring collateral or other
security.  Due to the historical  concentration  of  receivables  and relatively
small  customer base, the Company could be exposed to a large loss if one of its
major customers were not able to fulfill its financial obligations.

Minority Interests

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

The Company follows Statement of Financial  Accounting  Standards Board Standard
No. 109 which  requires the  establishment  of a deferred tax asset or liability
for the  recognition of future  deductible or taxable amounts and operating loss
carry forward.  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.  At  December  31,  2004  a  full  valuation  allowance  has  been
established.

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.

                                     - 37 -

<PAGE>

Loss 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,  2004 and 2003 is based 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, convertible preferred stock, and convertible debt.

Stock-Based Compensation

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

The fair value of the options granted was estimated at the date of grant using a
Black-Scholes  option  pricing model with the following  assumptions at December
31, 2003 and 2004:

    Average risk free interest rate                                 3
    Expected lives (in days)                                       365
    Dividend yield                                                  0
    Expected volatility                                           100.47

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

<TABLE>
<CAPTION>

                                                     December 31, 2004          December 31, 2003
                                                     -----------------          -----------------
<S>                                                     <C>                         <C>
        Net loss as reported                            ($2,024,614)                ($838,758)
        Less: FAS123 stock option expense                  4,375                        85
        Pro-forma net loss                              ($2,028,989)                ($838,843)

        Net loss per share as reported:
        Basic                                           $  (.01)                        -
        Diluted                                         $  (.01)                        -
        Pro-forma net loss per share:
        Basic                                           $  (.01)                        -
        Diluted                                         $  (.01)                        -
</TABLE>

                                     - 38 -

<PAGE>

Applying  SFAS 148 may not be  representative  of the  effects  on pro forma net
income (loss) for future years as options vest over several years and additional
awards will likely be made each year.

Recent Pronouncements

In December 2004, the Financial  Accounting  Standards  Board,  or FASB,  issued
Statement of Financial Accounting Standards No. 123R,  "Share-Based Payment", or
SFAS No. 123R.  This  Statement is a revision of SFAS No. 123,  "Accounting  for
Stock-Based  Compensation",  and supersedes  Accounting Principles Board Opinion
No.  25,   "Accounting   for  Stock  Issued  to  Employees",   and  its  related
implementation  guidance.  SFAS No. 123R  focuses  primarily on  accounting  for
transactions in which an entity obtains employee services in share-based payment
transactions.  The Statement  requires entities to recognize stock  compensation
expense for awards of equity  instruments  to employees  based on the grant-date
fair value of those awards (with limited exceptions). SFAS No. 123R is effective
for the first interim or annual  reporting period that begins after December 15,
2005.  Under SFAS No. 123R,  the Company had the option to utilize the intrinsic
value method of measuring such compensation, and provided additional disclosures
in its quarterly  financial  statements  that reflected the impact on net income
and  earnings  per share on a pro forma  basis as if the Company had applied the
fair  value  method  to  stock-based  employee   compensation.   The  pro  forma
disclosures  previously  permitted  under  SFAS  No.  123 will no  longer  be an
alternative  to  financial  statement  recognition.  Although  we  have  not yet
determined whether the adoption of SFAS No. 123R will result in amounts that are
similar  to the  current  pro  forma  disclosures  under  SFAS No.  123,  we are
evaluating the  requirements  under SFAS No. 123R and do not expect the adoption
to have a significant  adverse impact on our statements of income and net income
per share.

On December 16, 2004,  the FASB issued SFAS No. 153,  "Exchanges of  Nonmonetary
Assets,  an amendment of Accounting  Principles  Board ("APB")  Opinion No. 29".
SFAS 153  addresses  the  measurement  of  exchanges of  nonmonetary  assets and
redefines the scope of  transactions  that should be measured  based on the fair
value of the assets  exchanged.  SFAS 153 is  effective  for  nonmonetary  asset
exchanges occurring in fiscal periods beginning after June 15, 2005. The Company
does not  believe  adoption  of SFAS  153 will  have a  material  effect  on its
financial position, results of operations or cash flows.

Note B - Property and Equipment

Property and equipment consists of the following at December 31, 2004:

Marine equipment and dock facilities        $2,726,145
Railroad locomotive cars and equipment         542,853
Track and related land improvements          1,321,880
Transportation equipment                     2,801,076
Other                                          817,991
                                            ----------
                                             8,209,945
 Less: Accumulated depreciation              3,622,898
                                            ----------
                                            $4,587,047
                                            ==========

                                     - 39 -

<PAGE>

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 - "COMMITMENTS and  Contingencies"  for
further details). 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.

In November 2004 New York Regional Rail has entered into a fleet equipment lease
with Consolidated  Logistics &  Transportation,  LLC. The fleet includes 27 dump
trailers, 6 walking floor trailers, 5 tri-axel dump trucks, and 9 tractors.  The
term of the lease will be 48 months at a cost of $25,000  per month,  a purchase
option of $1 at the end of the lease and  includes  an option by the  Company to
terminate the lease with 90 days notice.

Depreciation expense totaled $ 497,273 and $546,921 for the years ended December
31, 2004 and 2003, respectively.

The Company has entered into capital leases for  transportation  equipment.  The
leases are for 48 months and contain  bargain  purchase  provisions  so that the
Company can purchase the equipment at the end of each lease.  Capital leases are
included in long term debt.  The following  sets forth the minimum  future lease
payments  and  present  values of the net  minimum  lease  payments  under these
capital leases:

Year ended December 31,
                  2005                                          $   318,496
                  2006                                              300,000
                  2007                                              300,000
                  2008                                              249,896
                                                                ------------
                  Total minimum lease payments                    1,168,391
                                                                ------------
                  Less: Imputed interest                           (127,052)
                  Present value of net minimum lease payments   $ 1,041,339
                                                                ============

         The capitalized lease payments for the years ended December 31, 2004
and 2003 was $82,537.


Note C - Other Assets

Other assets consist of the following at December 31, 2004:

Deposits                                             $ 29,484
Permits and licenses                                   34,506
Goodwill from acquisitions, net                       381,714
                                                     ---------
                                                     $445,704
                                                     =========

                                     - 40 -

<PAGE>

Note D - Payroll Taxes Payable

Payroll taxes payable  includes  overdue  federal,  state and local taxes,  plus
estimated  penalties and  interest.  The Company has been current on its federal
taxes since October 2002.


Note E - Accrued Expenses

Accrued expenses consist of the following at December 31, 2004:

Accrued interest                                              $  114,863
Accrued EDC settlement                                           450,000
Accrued Legal and Accounting                                     106,430
Property taxes - City of New York                                578,700
Property taxes - New Jersey                                      423,890
Other accrued expenses                                         1,986,540
                                                              ----------
Total                                                         $3,660,423
                                                              ==========

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 H - COMMITMENTS and
Contingencies for further details).

New Jersey  property tax accruals as of December 31, 2004 cover the periods from
1996 to 2004. The Company has estimated the annual  assessment to be $63,000 and
has accrued $38,390 in interest. (See Note H - COMMITMENTS and Contingencies for
further details).

Accrued other includes Reserves for Contingency  Liabilities including potential
legal settlements. (See Note -I "Legal Matters")

Note F - Short-Term Debt

a.       Convertible Notes
Convertible  Notes are  convertible  into shares of common stock at the lower of
various  set  conversion  prices or at 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, certain of the notes grant the holder an option to purchase
from one half to three  quarters  of an  additional  share of common  stock,  at
exercise  prices ranging from $0.12 to $0.18 per share,  for each share acquired
in the conversion.  These options will expire 90 days from the effective date of
a registration  statement  registering the shares of common stock underlying the
options.

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

Note  Payable  in the  amount of  $15,244  none of which is  long-term;  monthly
payments  of $3,000 due  through  March 2005 and $4,000  final  payment in April
2005.

Note  payable to  Conrail  in the amount of $30,000  none of which is long term,
payable in monthly installments of $2,500.

                                     - 41 -

<PAGE>

b.       Other Current Debt
Related parties
Unsecured  non-interest  bearing  advances  totaling  $42,000 from the Company's
former Director and CEO Ronald  Bridges;  due on demand were converted to common
stock. (See Note N "Related Party Transactions" for further details),

Notes payable - investors; non-interest bearing, currently in default $269,709

Note G - Long-Term Debt

Amounts  payable  classified  as  long  term  in  the  amount  of  $345,268  for
liabilities assumed with purchase of assets

Various Demand Notes payable due  individuals at various terms, in the amount of
$40,666 of which $28,666 is long-term,  payable to the Seafarers  Union for dues
in arrears;  monthly  payments of $1,000 due through  October 2006.  Interest is
payable at 5% per annum

Various  leases  payable  in the  amount  of  $1,041,339  of which  $828,366  is
long-term; collateralized by transportation equipment; interest payable at rates
between 5% to 20%; monthly payments vary.

Long-term  debt also includes  deposits held by Company of $7,500  relating to a
September  2001  Option  Agreement.  (See Item 12.  "Certain  Relationships  and
Related Transactions.")

Note Payable in the amount of $ 295,062 of which $247,062 is long-term,  payable
to the Port Authority; bi-monthly payments vary based on 5% revenue collected by
Norfolk Southern Corporation. (See Note H - "Commitments and Contingencies".)

Maturities of long-term debt are as follows:

Year ending
December 31,

2005                             $  374,127
2006                                326,503
2007                                340,136
2008                                278,483
2009                                 48,000
Thereafter                          716,808
                                 ----------
                                  2,084,057
Less: current portion               374,127
                                 $1,709,930
                                 ===========
Note H - Commitments and Contingencies

Employment Agreements

                                     - 42 -

<PAGE>

On October  1, 2004 the  employment  agreement  with the NYCH  President,  Wayne
Eastman,  was  automatically   renewed.   This  agreement  provides  for  annual
compensation of $84,000. In addition,  he is eligible for incentive bonuses. The
bonus is in the form of cash and stock  options.  The  incentive  bonus is based
upon  performance  related to sales  increases of NYCH.  This agreement is for a
period of one year.

On April  1,  2004  Ron  Bridges  of the Blue  Ribbon  Group,  a North  Carolina
Corporation  (hereinafter referred to as BRG), signed an employment agreement to
be the Chief Executive  Officer.  This agreement is for a period of one year and
provided for compensation in the amount of one million  (1,000,000)  warrants of
NYRR. Each warrant shall be exercisable at $0.0001 into one share of NYRR common
stock for a period  ending March 31, 2005.  The warrant was  exercised  November
2004 and 1,000,000 shares of common stock were issued. Mr. Bridges  subsequently
resigned his position as CEO and as a director of NYRR on February 9, 2005 .

On April 1, 2004 Todd Sage and the company signed an employment  agreement to be
the President and General Manager of JS Transportation.  This agreement provides
for annual  compensation of $78,000.  In addition,  he is eligible for incentive
bonuses.  The bonus is in the form of cash.  The  incentive  bonus is based upon
performance  related to  profitability of JST. This agreement is for a period of
one year and was renewed by its terms April 1, 2005.

On  February  3, 2004,  Donald B Hutton  and the  Company  signed an  employment
agreement to be Executive Vice  President.  This  agreement  provides for annual
compensation of $115,000.  In addition,  he is eligible for incentive bonuses at
the sole discretion of the Board of Directors. This agreement is for a period of
three years. On February 9, 2005, Mr. Hutton became CEO of the Company.

In January  2004,  the Company  entered into an employment  agreement  with Joel
Marcus,  the Company's  chief  financial  officer.  The  agreement  provides for
compensation  of $1,500 per month.  In addition Mr. Marcus received an option to
purchase  250,000  shares of common stock at $.0001,  which option was exercised
November  2004.  In February  2004,  Mr. Marcus  exercised the remaining  38,597
options  granted in accordance with the terms of his employment  agreement.  The
exercise  prices  ranged from $.0495 per share to $0.074 per share.  Mr.  Marcus
exercised these warrants using $2,384 of accrued consulting fees.

Union Agreement

On August 1, 2001 the Company  entered into a long-term  union contract with the
Seafarers  International  Union of North America.  The contract expires July 31,
2005,  but is  automatically  renewed for one-year  periods  unless either party
submits 60-day written notification.  Under the contract the Company is required
to pay health benefits for all its union employees at the rate of  approximately
$540 per person per month.  At  December  31,  2004 the  Company  had four union
employees.

(See Note - O "Subsequent  Events" for additional  Employment  Contracts entered
into in 2005.)

                                     - 43 -

<PAGE>

Lease Commitment

The  lease  portion  of the 2003  Agreement  signed  with  Conrail  (see Note B)
provides a 20-year land lease, with a 10 year option, to the Company for the use
of Conrail's  railroad  operating  property and water rights in Greenville,  New
Jersey.  In  September  2003,  the Company  increased  the size of the  railroad
operating  property by exercising  an option.  As a result the Company now rents
approximately  27 acres and its rent  increased 25%, from $50,000 to $62,500 for
the year ending December 31, 2005. The agreement contains rent concessions early
in the lease term then bases at $168,750 annually in 2008.

Rent expense  under the lease has been  recognized on a  straight-line  basis to
account for the rent  concessions  provided during the lease term,  resulting in
$175,858 deferred rent liability as of December 31, 2004.

Estimated  future rents payments under this lease as of December 31, 2004 are as
follows:

 Year ending
December 31,

 2005              $100,000
 2006               112,500
 2007               125,000
 2008               168,750
 2009               168,750
 Thereafter       2,193,750
                 ----------
                 $2,868,750
                 ==========

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,  2004 and 2003 was
$216,599 and $145,950, respectively.

Other Commitments

The City of New York has claimed that the Company  owes in excess of  $6,000,000
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  $578,700,
representing  the  tax  due on the  Bush  Terminal  property,  the  only  parcel
currently used in the rail operations.  Management expects,  but there can be no
assurance, that the outstanding liabilities will be settled for a lesser amount.

                                     - 44 -

<PAGE>

The State of New Jersey has assessed the Company  approximately $63,000 per year
since 1996 for real estate taxes.  The Company  believes that the  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
$423,890  for these real estate  taxes.  The Company is working to resolve  this
dispute.  However, there can be no assurance that the Company will be able to do
so.

Port Authority

In April 2002 and in October 2003, the Company  entered into agreements with the
Port  Authority of New York and New Jersey  ("PANYNJ").  Under the agreement the
Port  Authority  will be  paid  five  percent  (5%)  of the  Company's  revenues
collected by Norfolk Southern  Corporation.  All payments will be applied to the
amounts  owed to PANYNJ by virtue of judgments  which  totaled  $442,129.  As of
December 31, 2004, the balance  remaining is estimated to be $604,040  including
accrued  interest of $308,978.  The current term of the  repayment  agreement is
twelve  months.  The  parties  intend  to  continue   negotiations  on  a  final
settlement.  However, there can be no assurance that the Company will be able to
reach a final settlement.

Platinum Funding

In September 2002, the Company entered into a settlement agreement with Platinum
Funding  ("Platinum"),  its former factoring agent. Under the agreement Platinum
was paid $85,000  upon  signing,  plus the release of the 300,000  shares of the
Company's common stock held in escrow,  an additional  250,000 shares of donated
treasury  stock and $3,000 paid  monthly  for 33 months with a final  payment of
$4,000 in April  2005.  The  Company  is  current  on all  payments  under  this
settlement.

Note I - Legal Matters

A) The City of New York  commenced  an action in November  1998 against New York
Cross Harbor Railroad  Terminal Corp.,  Robert R. Crawford and New York Regional
Rail  Corporation in the United States  District Court Southern  District of New
York The City has alleged that Robert Crawford,  the Company's former President,
and the Company are required to  indemnify  the City for its cost of removal and
cleanup of certain  hazardous  substances  and petroleum at the  Company's  Bush
Terminal facility.

On December 2004 the case was settled  under the following  terms 1) the Company
will share the City's  remediation  expenses to the extent of $450,000;  (2) the
Company shall retain a claim against Mr.  Crawford for the amount,  if any, that
the Company's  $450,000  payment exceeds its proper share of the City's damages,
to be decided by the Court; (3) Mr. Crawford shall retain a counterclaim against
the Company for  indemnification  of any damages he is liable to the City, based
on an alleged  indemnification  agreement the Company and Arline Crawford signed
on July 16, 1999.  The City of New York and the Company  filed a Second  Amended
Complaint   against  Crawford  in  March  2005.  The  Company   re-asserted  its
cross-claim against Crawford on April 22, 2005.

B) In July 2003 Robert R.  Crawford and others  commenced an action  against New
York  Regional Rail  Corporation  in the Supreme Court of the State of New York,
County of Kings. The plaintiff alleges that they are due approximately  $314,000
and 10,000,000  shares of common stock.  The Company has asserted  counterclaims
and  independent  claims  against each of Robert R. Crawford,  Arline  Crawford,
Bruce  Crawford and Citrus  Springs Trust,  which is  beneficially  owned by the
Crawford family and others, for, among other things,  alleged theft of corporate
assets.  The case is ongoing and the Company does not anticipate that there will
be any adverse material  effects on its financial  statement as a result of this
matter. However, there is no assurance that this will be the case.

                                     - 45 -

<PAGE>

C) On November 2, 2001, the New York City Environmental  Development Corporation
("NYCEDC") filed an adverse abandonment petition with the Surface Transportation
Board (the "STB") against the Company's rail subsidiary  NYCH.  NYCEDC acting on
behalf of the City of New York  sought to remove  NYCH,  from the Bush  Terminal
Yard in Brooklyn, New York.

The STB,  in response to the  favorable  decision  for the Company by the United
States Court of Appeals for the District of Columbia Circuit,  issued a decision
asking the NYCEDC to show cause, why the STB should not deny its application for
adverse abandonment and dismiss this proceeding. On December 8, 2004, the NYCEDC
filed a reply  to the STB  stating  that it did  not  intend  to  introduce  any
evidence in this  proceeding to address the issues raised by the court. In light
of this filing,  the Company  believes  that  NYCEDC's  application  for adverse
abandonment will be denied and the proceeding dismissed.

D) In November 1999 Fraser, McIntyre and Spartz commenced an action against NYCH
in the Supreme Court of the State of New York,  County of Kings.  The action 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 Mr.
Crawford did not pay them.  They allege that NYCH has guaranteed the performance
of Mr.  Crawford.  The plaintiffs are seeking the restoration of their equitable
interest in NYCH and unspecified monetary damages to be determined by the court.
The plaintiffs seek "restoration of their equitable interest",  a term which was
used but not defined within the complaint.  The Company is vigorously  defending
this action. The Company has satisfied its retained portion of the costs of this
litigation,  any  additional  litigation  costs  will be borne by the  Company's
insurance carrier.

E). Ben-Ami  Friedman  commenced an action in 1993 against NYCH and CH Partners,
in the Supreme  Court of the State of New York,  New York County.  The claim was
settled in December  2004 by the  Company  paying  $35,000 in cash and  $208,334
shares of common stock in NYRR valued at $.12 per share.

F) In 2002, the Jersey City Health Division commenced an action against New York
Cross  Harbor  Terminal  Corp.,  in the  Superior  Court of New  Jersey and in a
related action New York Cross Harbor Railroad Terminal Corp. commenced an action
against  the Jersey City Health  Division in the Federal  District  Court of New
Jersey. The case related to contaminated soil at the Greenville Yard.

In June 2004 the Company settled all  controversies  with the Jersey City Health
Division.  The Company has agreed that it will complete  confirmatory testing of
the fill in a minor portion of its Greenville  Yard under the supervision of the
New Jersey Department of Environmental Protection.  The parties have also agreed
to work more closely in the future to avoid  further  controversies.  As part of
the  Company's  initiative  to be a good  corporate  neighbor,  it has agreed to
sponsor  Earth day events in the  community  which  will  focus on  ecology  and
environmental improvements in Jersey City.

                                     - 46 -

<PAGE>

G) In 1995 Ameril  Corp.  commenced  an action  against New York  Regional  Rail
Corporation,  in the 11th Judicial Circuit, Dale County,  Florida.  Ameril Corp.
alleged that it was owed  $338,983 in  connection  with the alleged  issuance of
promissory  notes by the Company to Ameril Corp. On March 24, 2005 the Company's
motion for summary judgment was granted.

H) The Company is also a party to routine  claims and suits  brought  against it
from  time-to-time  in the  ordinary  course of  business.  Management  does not
believe that any such claims exist that would have a material  adverse effect on
the Company's business, financial condition, or results of operations.

Note J - Capital Transactions

PREFERRED STOCK
In  December  1999,  the Board of  Directors  designated  500,000  shares of the
Company's blank check preferred stock as Series C Preferred Stock. The shares of
Series C  Preferred  Stock  provide  for an annual  dividend of $0.10 per share.
Dividends  which  are not paid are  cumulative  at a rate  10% per  annum.  Upon
liquidation or  dissolution,  each share of Series C Preferred Stock is entitled
to a distribution of $1.20 plus unpaid  dividends  prior to any  distribution to
the Company's  common  stockholders.  Each share of Series C Preferred  Stock is
entitled  to 300 votes on any matter  submitted  to a vote of the  stockholders.
Each share of Series C  Preferred  Stock and the accrued  dividends  thereon are
convertible into shares of common stock in an amount equal to the greater of (i)
for each $1.00 of the face amount of each share of Series C Preferred  Stock and
the accrued dividends thereon, 12.82 shares of common stock or (ii) the quotient
of the face  amount  of a share of  Series C  Preferred  Stock or each  $1.00 of
accrued  dividends  thereon and 90% of the five day average closing price of the
Company's  common stock. For each share of common stock received upon conversion
of shares of Series C  Preferred  Stock,  the holder is entitled to a warrant to
purchase  1.042 shares of the Company's  common stock at an exercise price $0.12
per share.  If the  Company  does not have a  registration  statement  in effect
covering the sale of the common stock  underlying the Series C Preferred  stock,
then  for  each  five day  period  that  the  shares  of  common  stock  are not
registered,  the Company will issue a number of  additional  shares equal to the
product  of .0125 and the  number of shares of common  stock not  covered  by an
effective registration statement.

In June 2000,  500,000  shares of Series C  Preferred  Stock were issued to John
Marsala in exchange  for  $500,000 in  delinquent  notes.  On February 21, 2002,
$60,000 face value of Series C Preferred Stock plus accrued dividends of $86,301
were converted into 4,358,099 shares of common stock. Upon conversion the holder
received a warrant to purchase an additional 4,555,085 shares of common stock at
an exercise price of $0.12 per share.

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

                                     - 47 -

<PAGE>

In February  2004, the Board of Directors  designated  2,500 shares of preferred
stock as Series D Preferred  Stock.  The shares of Series D Preferred Stock have
no annual  dividend.  Upon  liquidation or  dissolution,  each share of Series D
Preferred Stock is entitled to a distribution  of 110% of the face amount.  Each
share of Series D Preferred  Stock is  entitled  to 120,000  votes on any matter
submitted to a vote of the  stockholders  provided that at least 1,700 shares of
Series D  Preferred  Stock have been  issued and there are no shares of Series C
Preferred  Stock  outstanding.  The shares can convert into the shares of common
stock under  various  terms.  As of December 31, 2004,  2,100 shares of Series D
Preferred Stock have been issued.

Common Stock

In January  2004,  the Company  entered into an employment  agreement  with Joel
Marcus,  the Company's  chief  financial  officer.  The  agreement  provides for
compensation of $1,500 per month and Mr. Marcus was issued an option to purchase
250,000 shares of common stock at an exercise price of $.0001 per share.  On the
date of the grant the closing price for the Company's  common stock was $0.0625,
accordingly  the Company  recorded a $15,625 charge to  compensation  expense in
connection with the issuance of the option.

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

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

In  December  2003,  promissory  notes and  accrued  interest  in the  amount of
$464,640 were  converted  into warrants to purchase  4,646,400  shares of common
stock at an exercise  price of $.0001 per share.  On such date the closing price
for the  Company's  common stock was $0.08.  The  warrants  were  exercised  and
4,646,400 shares of common stock were issued in November 2004.

In  February  2004,  promissory  notes and  accrued  interest  in the  amount of
$225,060 held by John Marsala were  converted  into  2,250,600  shares of common
stock. On such date the closing price for the Company's  common stock was $0.08.
The Company  recognized a gain on the  settlement  of this debt of $84,398.  The
warrants were exercised in February 2004.

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

                                     - 48 -

<PAGE>

In February  2004,  the Company  purchased  the remaining 49% of the stock of JS
Transportation,  Inc.  in  exchange  for  1,420,408  shares of common  stock and
warrants to purchase  2,579,592  shares of common stock at an exercise  price of
$.001 per share and the return to  treasury of 860,000  shares of the  Company's
common stock. On the date of the acquisition the closing price for the Company's
common stock was $0.08. The Company  recognized a gain on the settlement of this
debt of $15,750. The warrants were exercised in November 2004.

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

On December 15, 2003, the Company's chief financial officer  exercised  warrants
to purchase 26,411 shares of common stock, which were granted in accordance with
the terms of his employment  agreement.  The warrant exercise prices ranged from
$.0495 per share to $0.066 per share.  The warrants were  exercised  through the
use of $1,500 of accrued consulting fees.

Between October 20, 2003 and November 12, 2003 the Company sold 6,187,500 shares
of common stock for an aggregate of $247,500, to 10 unrelated third parties.

On October 28, 2003 the Company sold 625,000  shares of common stock for $25,000
to a director of the Company.

On September 30, 2003, the Company's chief financial officer exercised  warrants
to purchase 21,898 shares of common stock, which were granted in accordance with
the terms of his employment  agreement.  The warrant exercise prices ranged from
$.057 per share to $0.077 per share. The warrants were exercised through the use
of $1,500 of accrued consulting fees.

On June 30, 2003, Joel Marcus, the Company's Chief Financial Officer,  exercised
warrants  to  purchase  19,869  shares of common  stock,  which were  granted in
accordance  with the terms of his  employment  agreement.  The warrant  exercise
prices  ranged  from  $0.052 per share to $0.077 per share.  The  warrants  were
exercised through the use of $1,500 of accrued consulting fees.

On March 31, 2003, the Company's chief financial officer  exercised  warrants to
purchase  43,225 shares of common stock,  which were granted in accordance  with
the terms of his employment  agreement.  The warrant exercise prices ranged from
$0.066 per share to $0.088 per share.  The warrants were  exercised  through the
use of $3,000 of accrued consulting fees.

On March 29, 2003, three unrelated third parties  converted $15,587 of principal
and interest into 311,745  shares of common stock at a conversion  price of $.05
per share, the closing price of the common stock on such date.

                                     - 49 -

<PAGE>

On March 29, 2003, a principal  stockholder  converted $187,146 of principal and
interest into 3,742,914 shares of common stock at a conversion price of $.05 per
share, the closing price of the common stock on such date.

On March 7, 2003, approximately $67,000 of accrued legal fees was converted into
800,000  shares of common  stock,  on such date the closing  price of the common
stock was $.053.

In March 2003,  the Company  issued the  remaining  333,334  shares to W. Robert
Bentley in accordance with the terms of his 2000  settlement  agreement with the
Company.

On February 7, 2003, two unrelated third parties  converted $21,257 of principal
and interest into 342,860 shares of common stock at a conversion  price of $.062
per share, the closing price of the common stock on such date.

COMMON STOCK OPTIONS

The Company's  1999 Stock Option Plan (the "Plan")  provides for granting to the
Company's  employees,   directors  and  consultants,   qualified  incentive  and
nonqualified  options to  purchase  common  shares of stock.  The plan  provides
options  exercisable  for a maximum of  4,000,000  shares of common  stock to be
granted.  Both incentive and nonqualified stock options may be granted under the
Plan. The exercise price of options granted  pursuant to this plan is determined
by a committee but may not be less than 100% of the fair market value on the day
of grant. The term of each option is fixed by the committee;  provided, however,
that the term of an  Incentive  Stock Option shall not exceed ten years from the
date of grant.

For holders of 10% or more of the  combined  voting  power of all classes of the
Company's  capital  stock,  incentive  stock  options  may not be  granted at an
exercise  price of less than 110% of the fair value of the  common  stock at the
date of grant and the term of the option may not exceed five years from the date
of grant.

During 2004, the Company  granted  options to purchase  250,000 shares of common
stock to the Chief Financial Officer of the Company at $.0001

During  2003,  the Company  also granted  options to purchase  41,955  shares of
common stock to the  President of the Company.  The options are  exercisable  at
$0.055 per share, which was 100% of the fair market value of the common stock on
the date of  grant.  Accordingly,  under  APB 25, no  compensation  expense  was
recognized. These options vest immediately from the date of grant.

Stock option activity for the years ended December 31, 2003 and 2004 is
summarized as follows:
                                             Number of  Weighted average
                                              shares     exercise price
                                            ----------------------------
Outstanding at December 31, 2002            17,029,202    $   0.16
              Granted                        2,990,923    $   0.12
              Exercised                     (4,547,519)   $   0.05
              Canceled                        (616,776)   $   0.16

  Outstanding at December 31, 2003          14,855,830    $   0.15
              Granted                        2,579,592 *  $ 0.0625
              Exercised                     (2,660,144)   $ 0.0625
              Canceled                               -           -
                                            ----------------------------
Outstanding at December 31, 2004            14,775,278    $  0.15

* 6,577,859 shares issued to John Marsala in connection with conversion of
Preferred C on February 4, 2005.

                                     - 50 -

<PAGE>


The following table summarizes the Company's stock options outstanding at
December 31, 2004:

<TABLE>
<CAPTION>

                                    Options outstanding                          Options exercisable
                                    -----------------------------------------------------------------
                                           Weighted         Weighted                         Weighted
                                            average          average                         average
    Range of                               remaining        exercise                         exercise
 exercise price             Number         life (1)           price             Number        price
-----------------------------------------------------------------------------------------------------

<S>    <C>                 <C>                 <C>           <C>              <C>            <C>
       0.12                9,183,853           1             $ 0.12           9,031,764      $  0.12
       0.18                3,895,511           1             $ 0.18           3,895,511      $  0.18
       0.20                1,198,704           1             $ 0.20           1,198,704      $  0.20
       0.25                   287,360          1             $ 0.25             287,360      $  0.25
       0.60                   209,850          1             $ 0.60             209,850      $  0.60
                          -------------------------------------------------------------
                          14,775,278                         $ 0.15          14,775,278      $  0.15

</TABLE>

(1)  The Company  used the  "Weighted  average  remaining  life" of one year for
     purposes  of this  table,  however  the  terms  for the  expiration  of the
     majority  of  the  options  is  90  days  after  the  effective  date  of a
     registration  statement  of the  shares  of  common  stock  underlying  the
     options.

Note K - Income Taxes

The Company has not  recorded any  provision  for federal and state income taxes
through December 31, 2004. The actual tax expense for 2004 and 2003 differs from
"expected"  tax  expense  (computed  by  applying  the  statutory  U.S.  federal
corporate tax rate of 35% to income before income taxes) as follows:

                                                          December 31,
                                                 ----------------------------
                                                      2004            2003
                                                 -------------   ------------
Expected income tax (benefit)                    $ (709,000)     $  (293,000)
State tax (benefit, net of Federal effect        $ (101,000)     $   (42,000)
Permanent differences:
         Write-off of investment                 $   51,000      $       -0-
         Non-cash compensation                   $  103,000      $    16,000

Increase in valuation allowance                  $  656,000      $   319,000
                                                 -------------   ------------
                                                 $ -0-           $  -0-
                                                 =============   ============


The sources and tax effects of temporary differences giving rise to the
Company's deferred tax assets at December 31, 2004 are as follows:

                                     - 51 -

<PAGE>

Allowance for doubtful accounts                                    $  206,000
Accrued real estate taxes                                             401,000
Accrued payroll tax liabilities                                       257,000
Net operating loss                                                    4,877,000
                                                                      5,741,000
Less:  valuation allowance                                           (5,741,000)
                                                                  --------------
Net deferred tax asset                                             $  -0-
                                                                  ==============

As a result of significant pretax losses,  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  $12,193,000 available to offset future taxable income. The losses
expire at various dates ranging through 2024..

Note L - 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.  In  February  2004,  the  Company  acquired  the
remaining 49% interest in JST held by minority shareholders.

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.
<TABLE>
<CAPTION>

                                               Railroad         Trucking
                                               Operations       Operations       Total
                                            --------------------------------------------
As of December 31, 2004
<S>                                         <C>                 <C>         <C>
  Current Assets                            $    944,273        $  359,409  $ 1,303,682

  Property and Equipment                       3,108,536         1,478,511    4,587,047

  Total Assets                                 4,498,513         1,837,920    6,336,433

  Current Liabilities                          5,819,383           671,356    6,490,739

  Long Term Liabilities                          539,181         1,346,607    1,885,788

  Equity                                      (1,957,035)          (83,059)  (2,040,094)

                                     - 52 -

<PAGE>

                                               Railroad         Trucking
                                               Operations       Operations       Total
                                            --------------------------------------------
Year ended December 31, 2004
  Operating revenues                        $  1,441,269      $  6,919,474  $ 8,360,743

  Gross profit                                   851,969           823,621    1,675,590

  Segment (loss)                              (1,770,979)         (253,635)  (2,024,614)

  Interest expense                                50,888            23,557       74,445

  Depreciation and                               258,939           249,661      508,600
   amortization

                                               Railroad         Trucking
                                               Operations       Operations       Total
                                            --------------------------------------------
Year ended December 31, 2003
  Operating revenues                        $  1,368,832      $  4,254,793  $ 5,623,625

  Gross profit                                   885,872           427,183    1,313,055

  Segment (loss)                                (651,385)         (207,218)    (858,603)

  Interest expense                                97,579            84,970      182,549

  Depreciation and                               243,493           315,055      558,548
   amortization
</TABLE>

Note M - Major Customer

As of December 31, 2004, sales to the following customers accounted for more
than 10% of the Company's revenues from operations.

                                                      Year ended December 31,
                                                     -------------------------
                                                     2004             2003
                   Transload Services                 10%              10%
                   Unified Services/CLT               21%              46%
                Norfolk Southern                      12%               -
                Site Contractors                      23%               -

Note N - Related Party Transactions

In February 2004 in connection with the transaction  with Transit Rail, LLC, the
Company,  Transit  Rail,  LLC and John Marsala  entered  into an agreement  (the
"Tri-Party  Agreement"),  pursuant to which Mr. Marsala (i) granted Transit Rail
an irrevocable  proxy with respect to 440,000 shares of Series C Preferred Stock
for a period of up to 12 months  and (ii)  agreed to convert  440,000  shares of
Series C  Preferred  Stock  into  shares  of  common  stock  upon  Transit  Rail
purchasing  1,700  shares of Series D  Preferred  Stock.  Under the terms of the

                                     - 53 -

<PAGE>

Series C Preferred Stock,  each share of Series C Preferred Stock is entitled to
300  votes  per  share.  Based  upon the  shares  of  common  stock  issued  and
outstanding, the proxy represented the right to vote approximately 39.8 % of the
Company's  voting  securities.  Upon the  purchase  of 1,700  shares of Series D
Preferred Stock and the conversion of all of the outstanding  shares of Series C
Preferred  Stock each share of Series D  Preferred  Stock  shall be  entitled to
120,000 votes,  which would represent 50.5% of the Company's  voting  securities
based upon the number of shares of common  stock  presently  outstanding.  As of
December 31,  2004,  2,100 shares and as of March 31,  2005,  2,500  shares,  of
Series D Preferred Stock have been purchased and issued, respectively.

As part of such  transactions,  the  Company  and Mr.  Marsala  entered  into an
agreement  pursuant to which Mr.  Marsala  agreed to waive his rights to certain
additional  shares of Series C Preferred Stock under the terms and conditions of
the Series C Preferred  Stock provided that the Company has a sufficient  number
of authorized  shares of common stock with respect to all  outstanding  options,
warrants and conversion rights no later than June 3, 2004 which was subsequently
extended to September 2004.  Pursuant to the Tri-Party  Agreement,  in the event
that the  Company  does not have a  sufficient  number of  authorized  shares of
common stock with respect to all  outstanding  options,  warrants and conversion
rights by such date,  then Mr.  Marsala has agreed to assign to Transit Rail 50%
of the shares which Mr. Marsala is entitled to receive pursuant to the agreement
between Mr. Marsala and the Company.

Reger Enterprises LLC and Transit Rail are controlled by Gordon Reger.  Pursuant
to an Option Agreement, Reger Enterprises,  LLC holds an option to develop a two
and one-half acre site at the  Company's  Bush  Terminal  Facility  which it may
exercise if the Company's lease dispute with the City of New York is settled and
the City of New York  approves  the  contemplated  use of the site.  The use and
transportation fees payable to the Company, if the option is exercised,  will be
established  at fair market value and subject to approval of the majority of the
Company's disinterested directors.

In  September  2002 the  Company  granted an option to  National  Transportation
Services,  LLC ("NTS"),  an unaffiliated  third party to lease five acres at the
Company's Greenville Yard in New Jersey. Pursuant to the option, the Company was
to be  guaranteed  a minimum of eight rail cars a day at a cost of $500 per rail
car. NTS was  obligated  to install the track and  equipment on the property and
was  receive  to  receive a credit of $50 per rail car  until NTS  recouped  its
costs.  The option  was for a term of 24 months and  provided  for  payments  of
$3,000 per month. Upon NTS' failure to make the payments pursuant to the option,
the option was  cancelled.  Mr.  Bridges became a principal of NTS in March 2003
and the  Company  granted an option to NTS to lease five acres at the  Company's
Greenville  Yard  in New  Jersey.  NTS  intended  to use  the  facility  for the
intermodal transfer of municipal solid waste with the Company's rail operations.
The term of the  option is 36 months  and the  option  payments  are  $2,500 per
month. The term of the lease will be 20 years and NTS will guarantee the Company
a minimum of eight  rail cars a day at a cost of $350 to $450 per rail car.  NTS
is obligated to install the track and equipment on the property and will receive
a credit of $80 per rail car until NTS has recouped its costs.  The foregoing is
referred to as the "Option."

                                     - 54 -

<PAGE>

In  November  2004,  NTS  entered  into an  agreement  to assign  the  Option to
Greenville  Station  LLC, a New Jersey  limited  liability  company.  Greenville
Station LLC is an affiliate of Transit Rail and NTS. If the Option is exercised,
the lease will allow Greenville  Station LLC to construct and operate a transfer
station  at  the  Greenville  Yard  pursuant  to  the  terms  described   above.
Development of the transfer  station is uncertain and there is no assurance that
the proposed transfer station at the Greenville Yard will be developed  pursuant
to the terms of the Option or at all.

In  February  2004,  promissory  notes and  accrued  interest  in the  amount of
$689,700 were  converted into  6,890,700  shares of common stock,  of which John
Marsala held $225,600 and converted  into 2,250,600  shares of common stock.  In
February 2004,  the Company  purchased the remaining 49% of the capital stock of
JS  Transportation,  Inc. in exchange for 4,000,0000  shares of common stock, of
which for 9% of JST was held by John  Marsala.  He  received  734,694  shares of
common stock.

From December  2001 through  October  2002,  Ronald  Bridges (a director and the
Company's former  President,  Director,  and Chief Executive  Officer at various
times) made short-term loans to the Company. Of such loans and other obligations
to Mr.  Bridges,  $42,000 was  outstanding as of December 31, 2003 and converted
into 420,000  shares of common stock in February  2004.  In November  2001,  the
Company  purchased a tractor for  $44,000.  Mr.  Bridges then loaned the Company
$48,000,  which was utilized for the purchase of the tractor and such amount was
payable in eight equal monthly installments.  After the Company made payments in
the amount of $15,000, the Company failed to meet its current obligations to Mr.
Bridges  and  transferred  the  tractor  to Mr.  Bridges  in  exchange  for  the
cancellation  of the  outstanding  loan  balance.  The  Company  then leased the
tractor  from Mr.  Bridges at the rate of $2,200  per month.  For the year ended
December 31, 2003,  the Company paid $6,600 in connection  with the lease and in
December 31, 2003, the Company paid an additional  $28,000 to Blue Ribbon Group,
an affiliate of Mr. Bridges for the leasing of equipment.  In November 2001, the
Company purchased two trailers for a purchase price $40,000.  Mr. Bridges loaned
the Company $40,000 for the purchase which was repaid over a period of 14 months
ending in August 2002. In October 2003 Mr. Bridges  purchased  625,000 shares of
common stock for an aggregate purchase price of $25,000.

Since  October  2003,  Consolidated  Logistics  and  Transportation,   Inc.,  an
affiliate  of Ronald  Bridges,  provides  brokerage  services to the Company and
leases  equipment to the Company.  During the year ended  December 31, 2004, the
Company  paid  Consolidated  Logistics  and  Transportation,  Inc.  $110,500  in
connection  with the brokerage  services and leasing of equipment.  For the year
ended December 31, 2004,  Consolidated  Logistics and Transportation,  Inc. paid
the Company  $1,297,998  for  trucking  services  and the Company had an account
receivable from Consolidated Logistics and Transportation,  Inc. for $8,061 with
respect to trucking revenues.

In  November  2004  the  Company  entered  into a  fleet  equipment  lease  with
Consolidated  Logistics  &  Transportation,  LLC.  The  fleet  includes  27 dump
trailers, 6 walking floor trailers, 5 tri-axel dump trucks, and 9 tractors.  The
term of the lease will be 48 months at a cost of $25,000  per month,  a purchase
option of $1 at the end of the lease and  includes  an option by the  Company to
terminate the lease with 90 days notice.

During the year ended  December  31, 2004,  JST  continued to occupy and lease a
facility at 833 Rancocas  Road, Mt. Holly,  NJ on a  month-to-month  basis.  The
facility is owned by 833 Rancocas Road LLC. Ron Bridges,  the  Company's  former
Chief Executive  Officer,  and Darryl Caplan,  a former director of the Company,
are officers  and/or  directors of 833 Rancocas Road LLC. The current lease rent
is $4,600 each month.

                                     - 55 -

<PAGE>

On May 1, 2001,  the Company  entered into an agreement  with  Construction  and
Marine  Equipment  ("CME"),  which became an affiliate of Ronald  Bridges in the
first half of 2003, to provide loading and unloading of intermodal containers of
railcars at the  Greenville  Yard in Jersey  City,  New Jersey.  The term of the
agreement is through April 30, 2006. Pursuant to the agreement,  the Company has
guaranteed  CME a minimum of 540 rail cars per annum at a cost of  $325-375  per
car. CME directly bills customers for its services

Note O -    Subsequent Events

Pursuant to an agreement  dated February 4, 2004 Transit Rail, LLC purchased 500
shares of Series D Preferred  Stock at a purchase  price of $1,000 per share and
agreed to purchase up to 2,000 additional shares of Series D Preferred Stock. In
connection  with the  transaction  Transit  Rail LLC  received  a proxy from the
holder of the shares of Series C Preferred  Stock  granting it the right to vote
approximately  39.8% of the Company's  voting  securities.  Upon the purchase of
1,700  shares  of Series D  Preferred  Stock  and the  conversion  of all of the
outstanding  shares of Series C Preferred Stock each share of Series D Preferred
Stock shall be entitled to 120,000  votes,  which would  represent  50.5% of the
Company's  voting  securities  based upon the  number of shares of common  stock
presently  outstanding.  As of December 31, 2004, 2,100 shares,  and as of March
31,  2005,  2,500  shares of Series D Preferred  Stock have been  purchased  and
issued, respectively.  (See the Company's 8-K filed February 8, 2005 for further
details.)

See Form 8-K "Items 1,5 and 7.  CHANGES IN CONTROL OF  REGISTRANT,  OTHER EVENTS
AND  REGULATION  FD  DISCLOSURE  and FINANCIAL  STATEMENTS,  PROFORMA  FINANCIAL
INFORMATION AND EXHIBITS" , filed February 8, 2005.

                                     - 56 -

<PAGE>

Item  9.  Changes  In and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

None

Item 9A. Controls and Procedures.

As required by Rule 13a-15 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), the Company carried out an evaluation of the effectiveness
of the design and operation of the Company's  disclosure controls and procedures
as of the end of the year covered by this annual report.  During our preparation
of our Annual Report for the year ended  December 31, 2004,  our  management and
our independent  registered public  accounting firm identified  several material
weaknesses in our internal  controls over  financial  reporting.  Although these
material  weaknesses did not result in a misstatement of our financial  results,
they relate closely to assuring the  fulfillment  of critical  components of the
financial reporting functions of our business.

Limitations on the  Effectiveness of Controls.  Our CEO does not expect that our
Disclosure  Controls or our  internal  control  over  financial  reporting  will
prevent all error and all fraud. A control system,  no matter how well conceived
and operated,  can provide only  reasonable,  not absolute,  assurance  that the
control system's objectives will be met. Further, the design of a control system
must reflect the fact that there are resource  constraints,  and the benefits of
controls must be considered relative to their costs.

Because of the inherent  limitations  in all control  systems,  no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, within the Company have been detected. These inherent limitations
include the realities that judgments in decision-making  can be faulty, and that
breakdowns  can occur because of simple error or honest  mistake.  Additionally,
controls  can be  circumvented  by the  individual  acts  of  some  persons,  by
collusion of two or more persons, or by management override of the controls. The
design of any system of controls also is based in part upon certain  assumptions
about the  likelihood of future  events,  and there can be no assurance that any
design will succeed in achieving  its stated  goals under all  potential  future
conditions.  Over  time,  specific  controls  may or may not  become  inadequate
because of changes in  conditions or  deterioration  in the degree of compliance
with  policies  or  procedures.   Because  of  the  inherent  limitations  in  a
cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

As of this date, the material  weaknesses  identified  include the fact that our
Company  does  not  have a  full-time  Chief  Financial  Officer,  and  that the
decentralization of financial  accounting functions precludes effective and cost
efficient oversight of routine financial  accounting  functions.  For the period
ended  December 31, 2004, the Audit  Committee of the Company  consisted of Joel
Marcus,  CPA, a director and Chief Financial  Officer.  We may therefore need to
incur  significant  additional  expenses to achieve  compliance and we may incur
other costs in connection  with  regulatory  enforcement  actions,  any of which
could negatively impact our business.

Item 9B. Other Information
None

                                     - 57 -

<PAGE>

PART III

Item  10.  Directors,   Executive  Officers,   Promoters  and  Control  Persons,
Compliance With Section 16(a) of the Exchange Act

Directors are elected to serve until the next annual meeting of stockholders and
until their  successors  have been elected and have  qualified.  Officers of the
Company serve at the discretion of the Board of Directors of the Company.

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

At December 31, 2004, Directors and Officers were:

Name                                Age              Position
Gordon Kuhn                         52               Chairman of the Board
Ronald Bridges                      55               Chief Executive Officer
Doug Szalasny                       47               Director
Joel Marcus                         61               Director and Chief
                                                     Financial Officer
Wayne Eastman                       53               President
Don Hutton                          46               Executive Director
Todd Sage                           47               President - JST

After the Change of Control of Company, and at May 19, 2005

James W. Cornell                    48               Chairman of the Board
Donald Hutton                       46               Chief Executive Officer and
                                                     a Director
Lawrence F. Pignataro               46               Director
Joel Marcus                         61               Chief Financial Officer and
                                                     a Director
Wayne A. Eastman                    53               President - NYCH
Todd Sage                           47               President - JST

Biographical Information of Directors and Officers
Gordon Kuhn was a director of the Company since September 2000 and has served as
the Chairman of the Board of  Directors  since  January  2003 to December  2004.
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.  As Senior Vice President Mr.
Kuhn, was a key figure in Conrail's monumental restructuring, whereby management
turned a $1  million  per day  loss  into a $2  million  per day  profit.  While
employed  by  Conrail  his  responsibilities  included  all  aspects  of  Sales,
Marketing,  Customer Service, Billing & Collecting,  Car Management, as well as,
Industrial Development. Mr. Kuhn resigned from his positions with the Company in
December 2004.

Ronald W. Bridges was been a director of the Company since  September  2000. Mr.
Bridges  served  as the  Company's  President  from  September  2000  until  his
retirement in October 2002 and from February 2004 to February  2005. Mr. Bridges
was also the chief executive officer of the Company from October 2001, until his
retirement in October 2002. Between May 1999 and September 2000, Mr. Bridges was
an independent consultant to numerous transportation  companies. From April 1994
until his retirement in May 1999, Mr. Bridges served as Conrail's Assistant Vice
President,  Forest and  Manufactured  Goods Business Group. Mr. Bridges resigned
his positions with the Company in February 2005.

                                     - 58 -

<PAGE>

Joel Marcus has been an officer and director of the Company since June 2000. Mr.
Marcus has been  self-employed as a certified public  accountant since 1974. Mr.
Marcus attended Hofstra University.

Douglas  Szalasny,  became a director of the Company in February 2004,  upon the
approval of the Board of Directors in connection  with the purchase of shares of
Series D Preferred  Stock by Transit  Rail LLC.  For the last three  years,  Mr.
Szalasny  has  been  the  Controller  for  Reger  Holdings  and  certain  of its
affiliated  companies  that are owned by the Reger  family.  Prior to that,  Mr.
Szalasny was a member of senior  management at WebMD  Corporation at its Buffalo
location. His responsibilities at WebMD Corporation included financial functions
and  quality  assurance.  WebMD  Corporation  provides  a range of  information,
transaction and technology solutions that help consumers,  physicians, providers
and health plans navigate the complexity of the healthcare system.

Donald B. Hutton became an Executive Vice President - Government Relations and a
director  in  February  2004,  and was  elected  as Chief  Executive  Officer in
February  2005.  Prior to joining the Company,  Mr. Hutton served as a member of
the  Executive  Staff for New York State Thruway  Authority,  from 1996 where he
held the titles of Director of the Department of Operations; and Director of the
Department  of  Planning  Services.  Mr.  Hutton was also the  Executive  Deputy
Inspector General for the New York State Office of Inspector General,  from 1995
to 1996. He has had an extensive career in public service and criminal  justice,
having  worked for the  Delaware and Hudson  Railroad  Police  Department,  as a
Federal Police Officer for the US Department of Veterans Affairs, US Customs and
others. Mr. Hutton is also a US Coast Guard Veteran. He is a published author of
several books on the subjects of military, law enforcement and Homeland Security
careers.

James W. Cornell was elected as a director of the Company in February  2005, and
then  Chairman of the  Company's  Board of Directors  on March 25,  2005.  He is
President of Praxiis Business  Advisors and since 1980 has advised  companies to
turnaround  of  troubled  operations,   mergers  and  acquisitions,   government
contracts and security.  He holds a Master of Business  Administration from SUNY
Empire State  College and has been awarded  numerous  professional  credentials,
notably including the Certified Turnaround Professional,  Certified in Mergers &
Acquisitions,  Certified Protection Professional designations. He is a member of
the board of the Alliance of Merger &  Acquisition  Advisors,  and a Governor of
the Federation Board of Governors of SUNY Empire State College.

Lawrence F Pignataro, Jr, was director of the Company in March 2005. He has been
the President of Pignataro  Financial Group since 1987. He has had over 20 years
experience  as a Financial and Tax Advisor.  He has a Bachelor of Science,  from
SUNY  Empire  State  College  and a Master of  Science  in  Management  from the
American College.  He is a Certified Financial Planner and Certified in Merger &
Acquisitions.

Wayne A. Eastman  became  President of NYCH October  2002.  From October 2001 to
October 2002,  Mr.  Eastman was Chief  Operating  Officer of NYCH, the Company's
rail  subsidiary.  From September 2000 until October 2001, Mr. Eastman served as
NYCH's Vice  President of  Operations.  From 1998 to 2000,  Mr.  Eastman was the
District  Superintendent of Conrail's Oak Island Terminal and Yard Operations in
Newark,  New Jersey.  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.

                                     - 59 -

<PAGE>

Todd Sage has been the President and General Manager of JS  Transportation,  the
Company's trucking subsidiary, since April 2004. Mr. Sage has more than 20 years
in the trucking industry.

The Board of Directors  has  responsibility  for  establishing  broad  corporate
policies and for overseeing the performance of the Company. Members of the Board
of Directors  are kept  informed of the  Company's  business by various  reports
and/or  documents sent to them in  anticipation  of Board meetings as well as by
operating and financial reports presented at Board meetings.

The Board of Directors  formally  adopted a Code of Ethics in February 2004. The
Code of Ethics is attached to the Company's  Form 10-KSB for Year Ended December
31, 2002.

The Company did not  compensate  its  directors,  in their capacity as directors
during the years ended December 31, 2004 and 2003.

The  Board  does not  currently  have a  standing  nominating  committee  or any
committee or committees  performing similar functions,  but acts, as a whole, in
performing the functions of such committee.

The Board did not have a  standing  executive  committee  during  the year ended
December 31, 2004. An executive committee was established in April 2005.

The Board's  compensation  committee  during the year ended  December  31, 2004,
consisted of Mr. Marcus and Mr. Bridges.  The Board's audit committee during the
year ended December 31, 2004, consisted of Mr. Marcus.

A member of a  Committee  may be  removed  at any time by action of the Board of
Directors. The Company has no audit committee financial expert, as defined under
Section  228.401,  serving on its audit committee  because it is not required to
have an audit committee consisting of independent directors.

                                     - 60 -

<PAGE>


Item 11. 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.

<TABLE>
<CAPTION>

                                                              Restricted
Name and                               Annual     Other         Stock       Options
Principal         Fiscal    Salary     Bonus    Compensation    Awards      Granted
Position          Year       (1)        (2)          (3)         (4)          (5)
----------        ------   ------      -----        ------     -------      -------
<S>               <C>                                         <C>
Ronald Bridges    2004         -          -           -       1,000,000
CEO               2003         -          -           -       1,000,000
Wayne Eastman,    2004    $  84,000
President         2003    $  84,000   $ 10,489    $ 15,300        --         $ 260
                  2002    $  21,000      --          --           --          --
Donald Hutton     2004    $ 115,000      --          --           --          --
Exec. Vice Pres
</TABLE>

(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.  Mr. Eastman's bonus
covers the period from October 1, 2002 to September  30, 2003 and resulted  from
an increase in revenues from the Company's rail  operations by $209,772 over the
prior period.

(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) The dollar value of any stock awards granted to the employee.

(5) Black-Scholes value of 41,955 options granted to Mr. Eastman in October 2003
as a result of his employment agreements (See (2) Above).

STOCK OPTIONS

The following sets forth certain information  concerning the grant of options to
purchase shares of Company's  common stock to each of the executive  officers of
the  Company  for the  fiscal  years  listed,  as well  as  certain  information
concerning  the  exercise  and  value  of such  stock  options  for each of such
individuals.  Options  generally become  exercisable upon issuance and expire no
later than one year from the date of grant.

                                     - 61 -

<PAGE>

STOCK OPTIONS GRANTED IN FISCAL YEAR ENDED DECEMBER 31, 2004

                   Number of
                   securities       % of Total
                   underlying       Options Granted    Exercise
                   Options to        Employees in      Price Per    Expiration
Name                Granted         Fiscal Year        Share         Date
--------------------------------------------------------------------------------
Joel Marcus (A)    250,000           33  %             $.0625        5/05

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

STOCK OPTIONS GRANTED IN FISCAL YEAR ENDED DECEMBER 31, 2003

                           Number of
                          securities     % of Total
                          underlying    Options Granted    Exercise
                           Options       Employees in     Price Per   Expiration
Name                       Granted       Fiscal Year        Share        Date
--------------------------------------------------------------------------------
Joel Marcus   (A)          10,000            6  %            $.077        7/03
Joel Marcus   (A)          10,000            6  %            $.068        8/03
Joel Marcus   (A)          10,000            6  %            $.056        9/03
Joel Marcus   (A)          10,000            6  %            $.057       10/03
Joel Marcus   (A)          10,000            6  %            $.077       11/03
Joel Marcus   (A)          10,000            6  %            $.066       12/03
Joel Marcus   (A)          10,000            6  %            $.055        1/04
Joel Marcus   (A)          10,000            6  %            $.055        2/04
Joel Marcus   (A)          10,000            6  %            $.049        3/04
Joel Marcus   (A)          10,000            6  %            $.060        4/04
Joel Marcus   (A)          10,000            6  %            $.060        5/04
Joel Marcus   (A)          10,000            6  %            $.071        6/04
Wayne Eastman (A)          10,000            26 %             .066        5/03

A.  For  each  of the 15  months  ending  December  31,  2003,  as  part  of his
compensation  as chief  financial  officer,  Mr.  Marcus  received  10,000 stock
options,  under the Company's  qualified  plan, and $500,  which accrues and can
only be used to exercise these options.  The options are  exercisable at various
prices  between  $.049 and $.088 per share,  (which was 110% the market price of
the Company's common stock on the date of each grant).  These options expire six
months after the date of grant.

EMPLOYMENT CONTRACTS

On October 1, 2004 the employment agreement with the Company's President,  Wayne
Eastman,  was  automatically   renewed.   This  agreement  provides  for  annual
compensation of $ 84,000. In addition, he is eligible for incentive bonuses. The
bonus is in the form of cash and stock  options.  The  incentive  bonus is based
upon  performance  related to sales  increases of NYCH.  This agreement is for a
period of one year and is renewable for one year upon mutual agreement.

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

In February  2004,  the Company  entered into an employment  agreement  with Ron
Bridges,  then a Director and the Company's Chief Executive Officer. The Company
issued Mr. Bridges a warrant to purchase 1,000,000 shares of commons stock at an
exercise  price of $.0001 per share.  Mr.  Bridges  exercised  these warrants in
November  2004 and the  Company  recorded  a charge to  compensation  expense of
$80,000.

                                     - 62 -

<PAGE>

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

Except as  disclosed  elsewhere  in this  10-KSB,  no  director  of the  Company
received  any  form of  compensation  from the  Company  during  the year  ended
December 31, 2004.

Stock Option and Bonus Plans.

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

Incentive Stock Option Plan.

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

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

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

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

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

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

                                     - 63 -

<PAGE>

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 Plan. The Company's employees,  directors, officers, consultants
and advisors are eligible to be granted options  pursuant to the Plan,  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.

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.  As of May 19,
2004, the  Compensation  Committee was made up of Joel Marcus.  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.

                                     - 64 -

<PAGE>

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.

Summary:

The  following  sets  forth  certain  information,  as  of  December  31,  2004,
concerning  the stock options and stock  bonuses  granted by the Company and the
remaining  Options/Shares  that can be issued under the respective  plans.  Each
option represents the right to purchase one share of the Company's common stock.

<TABLE>
<CAPTION>

                              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
<S>                          <C>                                            <C>
 Plan                        2,000,000        --              N/A           1,698,228
Non-Qualified Stock
 Option Plan                 2,000,000        --              N/A           2,000,000
Stock Bonus Plan             1,000,000        --              --              833,335

</TABLE>

The  following  sets  forth  certain  information,  as  of  December  31,  2004,
concerning the Company's equity compensation plans.

                                     - 65 -

<PAGE>

                      Equity Compensation Plan Information

                                  Plan Category

<TABLE>
<CAPTION>

                  Number of securities      Weighted average           Number of securities
                  to be issued upon         exercise price of          remaining available for
                  exercise of               outstanding options,       future issuance
                  outstanding options,      warrants and rights        warrants and rights
                  ---------------------------------------------------------------------------------
<S>                                                                                     <C>
Equity compensation plans
approved by                         -                          -                        1,698,228
security holders

Equity compensation
plans not approved                  -                          -                        2,833,335
by security holders

Total                               -                                                   4,531,563

</TABLE>

                                     - 66 -

<PAGE>

Item 12. Security Ownership of Certain Beneficial Owners and Management.

The  following  table  sets  forth  certain  information   regarding  beneficial
ownership  of more  than  five  percent  of any  class of the  Company's  voting
securities as of May 12, 2005 (except where otherwise noted) with respect to (a)
each person  known by the Company to be the  beneficial  owner of more than five
percent of the  outstanding  shares of Common  Stock,  (b) each  director of the
Company, (c) the Company's executive officers and (d) all officers and directors
of the Company as a group.  Except as indicated  in the  footnotes to the table,
all of such  shares of Common  Stock are owned with sole  voting and  investment
power. The title of class of all securities indicated below is Common Stock with
$.0001 par value per share.  The Company  disputes the ownership of more than 5%
of the  common  stock by any other  person.  (See  -Paragraph  B. Item 3.  Legal
Proceedings)

Share Ownership Assuming Exercise or Conversion of all Notes,  Preferred Shares,
Options.

                                    Shares of
Name                                Common Stock            Percent of Class

*
Wayne Eastman                         155,955                       *
Joel Marcus                           700,000                       *
James Cornell                              -0-                      *
Larry Pignataro                            -0-                      *
Ronald Bridges                      1,775,000                       *
Donald Hutton                              -0-                      *
Transit Rail, LLC (1)              33,341,349                   14.4%
John Marsala (2)                   15,437,781                    6.7%
All Officers and Directors
  as a Group (five persons)         2,626,955                       *

* Less than 1%

(1) Change of Control:  Pursuant to an agreement  dated February 4, 2004 Transit
Rail,  LLC purchased 500 shares of Series D Preferred  Stock at a purchase price
of $1,000  per share and agreed to  purchase  up to 2,000  additional  shares of
Series D Preferred  Stock. In connection  with the transaction  Transit Rail LLC
received  a proxy  from the  holder of the  shares of Series C  Preferred  Stock
granting  it the  right  to vote  approximately  39.8% of the  Company's  voting
securities.  Upon the purchase of 1,700  shares of Series D Preferred  Stock and
the conversion of all of the outstanding shares of Series C Preferred Stock each
share of Series D Preferred  Stock shall be  entitled  to 120,000  votes,  which
would represent 50.5% of the Company's  voting  securities based upon the number
of shares of common stock presently outstanding.

The  31,248,016  shares of common stock  issuable  upon the  conversion of 2,500
shares of Series D Preferred  Stock which may be  purchased  by Transit Rail LLC
are  convertible  12 months  from the date of issuance of the shares of Series D
Preferred  Stock.See  Form  8-K  "Items  1, 5,  and 7.  CHANGES  IN  CONTROL  OF
REGISTRANT,  OTHER EVENTS AND REGULATION FD DISCLOSURE and FINANCIAL STATEMENTS,
PRO FORMA FINANCIAL INFORMATION AND EXHIBITS",  respectively with filed February
19, 2004, with date of report February 4, 2004, incorporated by reference.

                                     - 67 -

<PAGE>

(2) In December  1999, the Board of Directors  designated  500,000 shares of the
Company's blank check preferred stock as Series C Preferred Stock. The shares of
Series C  Preferred  Stock  provide  for an annual  dividend of $0.10 per share.
Dividends  which  are not paid are  cumulative  at a rate  10% per  annum.  Upon
liquidation or  dissolution,  each share of Series C Preferred Stock is entitled
to a distribution of $1.20 plus unpaid  dividends  prior to any  distribution to
the Company's  common  stockholders.  Each share of Series C Preferred  Stock is
entitled  to 300 votes on any matter  submitted  to a vote of the  stockholders.
Each share of Series C  Preferred  Stock and the accrued  dividends  thereon are
convertible into shares of common stock in an amount equal to the greater of (i)
for each $1.00 of the face amount of each share of Series C Preferred  Stock and
the accrued dividends thereon, 12.82 shares of common stock or (ii) the quotient
of the face  amount  of a share of  Series C  Preferred  Stock or each  $1.00 of
accrued  dividends  thereon and 90% of the five day average closing price of the
Company's  common stock. For each share of common stock received upon conversion
of shares of Series C  Preferred  Stock,  the holder is entitled to a warrant to
purchase  1.042 shares of the Company's  common stock at an exercise price $0.12
per share.  If the  Company  does not have a  registration  statement  in effect
covering the sale of the common stock  underlying the Series C Preferred  stock,
then  for  each  five day  period  that  the  shares  of  common  stock  are not
registered,  the Company will issue a number of  additional  shares equal to the
product  of .0125 and the  number of shares of common  stock not  covered  by an
effective  registration  statement.  The underlying  6,577,859  shares of common
stock were issued to Mr. Marsala in February 2005.

Item 13. Certain Relationships and Related Transactions.

John  Marsala,  the holder of 440,000  shares of Series C Preferred  Stock,  has
guaranteed  lease  obligations of the Company to Citibank and All Points Capital
with outstanding  amounts of $37,000 and $18,000,  respectively,  as of December
31, 2003. The Company remains primary obligor on said  obligations.  In December
2003,  accrued  dividends on 440,000 shares of Series C Preferred  Stock held by
Mr. Marsala  totaling  $118,131 were  converted into 2,050,887  shares of common
stock and a warrant to purchase an additional  2,828,968  shares of common stock
at an exercise price of $0.12 per share.

In February 2004 in connection with the transaction  with Transit Rail, LLC, the
Company,  Transit  Rail,  LLC and John Marsala  entered  into an agreement  (the
"Tri-Party  Agreement"),  pursuant to which Mr. Marsala (i) granted Transit Rail
an irrevocable  proxy with respect to 440,000 shares of Series C Preferred Stock
for a period of up to 12 months  and (ii)  agreed to convert  440,000  shares of
Series C  Preferred  Stock  into  shares  of  common  stock  upon  Transit  Rail
purchasing  1,700  shares of Series D  Preferred  Stock.  Under the terms of the
Series C Preferred Stock,  each share of Series C Preferred Stock is entitled to
300  votes  per  share.  Based  upon the  shares  of  common  stock  issued  and
outstanding,  the proxy represents the right to vote approximately  39.8% of the
Company's voting securities.  As part of such transactions,  the Company and Mr.
Marsala entered into an agreement  pursuant to which Mr. Marsala agreed to waive
his rights to certain  additional  shares of Series C Preferred  Stock under the
terms and  conditions of the Series C Preferred  Stock provided that the Company
has a sufficient number of authorized shares of common stock with respect to all
outstanding options,  warrants and conversion rights no later than June 3, 2004.
Pursuant to the Tri-Party Agreement, in the event that the Company does not have
a  sufficient  number of  authorized  shares of common stock with respect to all
outstanding  options,  warrants and conversion  rights by June 3, 2004, then Mr.
Marsala has agreed to assign to Transit Rail 50% of the shares which Mr. Marsala
is entitled to receive  pursuant to the  agreement  between Mr.  Marsala and the
Company.

                                     - 68 -

<PAGE>

In February,  2004,  an Option  Agreement  was executed  between the Company and
Reger  Enterprises LLC. Reger Enterprises LLC and Transit Rail are controlled by
Gordon Reger. Pursuant to the Option Agreement, Reger Enterprises,  LLC holds an
option to develop a two and one-half  acre site at the  Company's  Bush Terminal
Facility  which it may exercise if the Company's  lease dispute with the City of
New York is settled and the City of New York  approves the  contemplated  use of
the site. The use and transportation  fees payable to the Company, if the option
is exercised,  will be  established at fair market value and subject to approval
of the majority of the Company's disinterested directors.

In  September  2002 the  Company  granted an option to  National  Transportation
Services,  LLC ("NTS"),  an unaffiliated  third party to lease five acres at the
Company's Greenville Yard in New Jersey. Pursuant to the option, the Company was
to be  guaranteed  a minimum of eight rail cars a day at a cost of $500 per rail
car. NTS was  obligated  to install the track and  equipment on the property and
was  receive  to  receive a credit of $50 per rail car  until NTS  recouped  its
costs.  The option  was for a term of 24 months and  provided  for  payments  of
$3,000 per month. Upon NTS' failure to make the payments pursuant to the option,
the option was cancelled. Ronald Bridges, the former Chief Executive Officer and
a  director  of the  Company  became a  principal  of NTS in March  2003 and the
Company granted an option to NTS to lease five acres at the Company's Greenville
Yard in New Jersey. NTS intended to use the facility for the intermodal transfer
of municipal  solid waste with the Company's  rail  operations.  The term of the
option is 36 months and the option  payments  are $2,500 per month.  The term of
the lease will be 20 years and NTS will guarantee the Company a minimum of eight
rail  cars a day at a cost of $350 to $450 per rail  car.  NTS is  obligated  to
install the track and equipment on the property and will receive a credit of $80
per rail car until NTS has recouped its costs.  The  foregoing is referred to as
the "Option."

In  November  of 2004,  NTS entered  into an  agreement  to assign the Option to
Greenville  Station  LLC, a New Jersey  limited  liability  company.  Greenville
Station LLC is an affiliate of Transit Rail and NTS. If the Option is exercised,
the lease will allow Greenville  Station LLC to construct and operate a transfer
station  at  the  Greenville  Yard  pursuant  to  the  terms  described   above.
Development of the transfer  station is uncertain and there is no assurance that
the proposed transfer station at the Greenville Yard will be developed  pursuant
to the terms of the Option or at all.

In  February  2004,  promissory  notes and  accrued  interest  in the  amount of
$689,700 were  converted into  6,890,700  shares of common stock,  of which John
Marsala held $225,600 and converted  into 2,250,600  shares of common stock.  In
February 2004,  the Company  purchased the remaining 49% of the capital stock of
JS  Transportation,  Inc. in exchange for 4,000,0000  shares of common stock, of
which Mr. Marsala received 734,694 shares of common stock.

                                     - 69 -

<PAGE>

From December 2001 through  October 2002,  Ronald Bridges (a former director and
the Company's  former  President and Chief  Executive  Officer) made  short-term
loans to the  Company.  Of such  loans and  other  obligations  to Mr.  Bridges,
$42,000 was  outstanding  as of December  31, 2003 and  converted  into  420,000
shares of common stock in February 2004. In November 2001, the Company purchased
a tractor for $44,000.  Mr. Bridges then loaned the Company  $48,000,  which was
utilized  for the  purchase  of the tractor and such amount was payable in eight
equal  monthly  installments.  After the Company made  payments in the amount of
$15,000,  the Company failed to meet its current  obligations to Mr. Bridges and
transferred  the tractor to Mr. Bridges in exchange for the  cancellation of the
outstanding  loan balance.  The Company then leased the tractor from Mr. Bridges
at the rate of $2,200  per month.  For the year ended  December  31,  2003,  the
Company paid $6,600 in connection  with the lease and in December 31, 2003,  the
Company paid an  additional  $28,000 to Blue Ribbon  Group,  an affiliate of Mr.
Bridges for the leasing of  equipment.  In October  2003 Mr.  Bridges  purchased
625,000 shares of common stock for an aggregate purchase price of $25,000.

On May 1,  2001,  the  Company  the  Company  entered  into  an  agreement  with
Construction and Marine Equipment  ("CME"),  which became an affiliate of Ronald
Bridges  in the  first  half of  2003,  to  provide  loading  and  unloading  of
intermodal  containers of railcars at the  Greenville  Yard in Jersey City,  New
Jersey.  The term of the  agreement is through  April 30, 2006.  Pursuant to the
agreement,  the Company has  guaranteed CME a minimum of 540 rail cars per annum
at a cost of $325-375 per car. CME directly bills customers for its services.

Since  October  2003,  Consolidated  Logistics  and  Transportation,   Inc.,  an
affiliate  of Ronald  Bridges,  provides  brokerage  services to the Company and
leases  equipment to the Company.  During the year ended  December 31, 2004, the
Company  paid  Consolidated  Logistics  and  Transportation,  Inc.  $110,500  in
connection  with the brokerage  services and leasing of equipment.  For the year
ended December 31, 2004,  Consolidated  Logistics and Transportation,  Inc. paid
the Company  $1,297,998  for  trucking  services  and the Company had an account
receivable from Consolidated Logistics and Transportation,  Inc. for $8,061 with
respect to trucking revenues.

In November  2004 the Company  reported  it has entered  into a fleet  equipment
lease with Consolidated  Logistics & Transportation,  LLC. The fleet includes 27
dump trailers, 6 walking floor trailers, 5 tri-axel dump trucks, and 9 tractors.
The term of the lease  will be 48  months  at a cost of  $25,000  per  month,  a
purchase  option  of $1 at the end of the lease  and  includes  an option by the
Company to terminate the lease with 90 days notice.

During the year ended  December  31, 2004,  JST  continued to occupy and lease a
facility at 833  Rancocas  Road,  Mt.  Holly,  NJ. The  facility is owned by 833
Rancocas Road LLC. Ronald Bridges, former Chief Executive Officer and a director
of the  Company,  and Darryl  Caplan,  a former  director  of the  Company,  are
officers  and/or  directors of 833 Rancocas Road LLC. The current rent is $4,600
each month.

                                     - 70 -

<PAGE>

Item 14. Principal Accountant Fees and Services.

(1) Audit Fees

The aggregate fees billed for each of the last two fiscal years for professional
services  rendered by the  principal  accountant  for the audit of the Company's
annual financial  statements and review of financial  statements included in the
Company's  Form 10-Q (17 CFR  249.308a) or 10-QSB (17 CFR  249.308b) or services
that are normally  provided by the  accountant in connection  with statutory and
regulatory  filings or  engagements  for those  fiscal years was $35,000 for the
fiscal  year ended  December  31,  2003 and  $35,000  for the fiscal  year ended
December 31, 2004.

(2) Audit-Related Fees

The aggregate fees billed in each of the last two fiscal years for assurance and
related services by the principal  accountant that are reasonably related to the
performance  of the audit or review of the Company's  financial  statements  was
$-0- for the fiscal years ended December 31, 2003 and 2004.

(3) Tax Fees

The aggregate fees billed in each of the last two fiscal years for  professional
services  rendered by the principal  accountant for tax compliance,  tax advice,
and tax  planning  was $-0- for the fiscal  years  ended  December  31, 2003 and
December 31, 2004.

(4) All Other Fees

The aggregate  fees billed in each of the last two fiscal years for products and
services provided by the principal accountant,  other than the services reported
above was $-0- for the fiscal years ended December 31, 2003 and 2004.

                                     - 71 -

<PAGE>

Item 15. Exhibits and Reports on Form 8K

(a) Index to Exhibits

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

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

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

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

(b)               Report on Form 10-QSB for the Quarter ended September 30,
                  2004, dated November 19, 2004

(c)               Reports on Form 8K

Form 8-K " Items 1, 5, and 7. Changes In Control Of Registrant, Other Events And
Regulation  FD  Disclosure  And  Financial   Statements,   Pro  Forma  Financial
Information  And Exhibits",  respectively  filed February 19, 2004, with date of
report February 4, 2004; and

Form 8-K "Departure of Directors or Principal  Officers;  Election of Directors;
Appointment of Principal Officers": filed January 7, 2005; and

Form 8-K "Items 3.02,  5.01 and 9.  Unregistered  Sales of Equity of Securities,
Changes  in Control of  Registrant,  and  Financial  Statements  And  Exhibits",
respectively filed February 7, 2005; and

Form 8-K "Departure of Directors or Principal  Officers;  Election of Directors;
Appointment of Principal Officers": filed February 17, 2005; and

Form 8-K "Departure of Directors or Principal  Officers;  Election of Directors;
Appointment of Principal Officers": filed April 7, 2005;

Are hereby incorporated by reference.


                                     - 72 -

<PAGE>

                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  registrant  caused  this report to be signed on its behalf on
April 20, 2005 by the undersigned, thereunto duly authorized.


                                        New York Regional Rail Corporation


                                               /s/ Donald B. Hutton
                                               -----------------------
                                                 Donald B. Hutton
                                               Chief Executive Officer


Pursuant to the  requirements  of the Securities and Exchange Act of 1934,  this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.


Signature                             Title                           Date

/s/ James W. Cornell             Chairman                          May 19, 2005
--------------------
James W. Cornell

                                 Chief Executive                   May 19, 2005
/s/ Donald B. Hutton             Officer and Director
--------------------             (Principal Executive
Donald B. Hutton                 Officer)


/s/ Joel Marcus                  Chief Financial                   May 19, 2005
--------------------             Officer, Treasurer, Director
Joel Marcus                      (Principal financial
                                 Officer, principal accounting
                                 Officer)

/s/ Larry Pignataro              Director                          May 19, 2005
--------------------
Larry Pignataro