Broad Street Realty, Inc. - Quarter Report: 2010 June (Form 10-Q)
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
þ Quarterly
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
For the
quarterly period ended June 30,
2010
o Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Commission
file number: 1-9043
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Banyan
Rail Services Inc.
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(Exact
name of registrant as specified in its charter)
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Delaware
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36-3361229
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(State
of incorporation)
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(I.R.S.
Employer Identification No.)
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2255
Glades Road, Suite 342-W, Boca Raton,
Florida 33431
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(Address
of principal executive offices)
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561-997-7775
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(Registrant’s
telephone number)
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Indicate
by a check mark whether the registrant: (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes þ No
¨
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files). Yes ¨ No
¨
Indicate
by a check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.
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Large
Accelerated Filer ¨
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Accelerated
Filer ¨
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Non-Accelerated
Filer ¨
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Smaller
Reporting Company þ
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Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act). Yes ¨ No
þ
Indicate the number of shares
outstanding of each of the issuer’s classes of common stock, as of the latest
practicable date: 3,046,067 shares of
common stock, $0.01 par value per share, as of August 9,
2010.
Table
of Contents
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Part
I — Financial Information
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3
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Item
1.
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Financial
Statements
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3
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Item
2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations
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13
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Cautionary
Statement Concerning Forward-Looking Statements
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13
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Overview
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13
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Wood
Energy
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14
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Recent
Events
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14
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Changes
to and the Election of our Board of Directors
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14
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Exchange
of Debentures for Preferred Stock and Issuance of Additional Preferred
Stock
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14
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Reverse
Stock Split
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14
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Completion
of Shreveport Tie Grinding Facility
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14
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Critical
Accounting Policies and Estimates
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15
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Consolidated
Results of Operations — Banyan and Subsidiary
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15
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Revenues
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15
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Gross
margin
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16
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General
and administrative expenses
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16
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Interest
expense
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16
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Financial
Condition and Liquidity
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17
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Off-Balance
Sheet Arrangements
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18
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How
to Learn More about Banyan
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18
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Item
4(T). Controls and Procedures
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18
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Part
II — Other Information
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19
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Item
1.
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Legal
Proceedings
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19
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Item
2.
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Unregistered
Sales of Equity Securities and Use of Proceeds
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19
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Item
3.
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Defaults
Upon Senior Securities
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19
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Item
5.
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Other
Information
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19
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Item
6.
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Exhibits
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20
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Signatures
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20
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Page 2 of
20
Part
I — Financial Information
Item
1. Financial Statements
Banyan
Rail Services Inc. and Subsidiary
Condensed
Consolidated Balance Sheets
As
of
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June 30, 2010
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December 31, 2009
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(Unaudited)
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|||||||
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ASSETS
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||||||||
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Current
assets
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||||||||
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Cash
and cash equivalents
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$ | 49,484 | $ | 101,361 | ||||
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Accounts
receivable - trade
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1,061,422 | 533,661 | ||||||
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Due
from sellers
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57,737 | 341,863 | ||||||
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Cost
incurred related to deferred revenue
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808,052 | 224,176 | ||||||
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Prepaid
expenses and other current assets
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28,371 | 5,362 | ||||||
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Total
current assets
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2,005,065 | 1,206,423 | ||||||
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Property
and equipment, net
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2,509,044 | 2,146,086 | ||||||
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Other
assets
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||||||||
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Deferred
loan costs, net
|
179,703 | 199,993 | ||||||
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Deferred
income taxes
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278,787 | - | ||||||
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Identifiable
intangible assets, net
|
1,693,562 | 1,824,827 | ||||||
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Goodwill
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3,658,364 | 3,658,364 | ||||||
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Deposit
|
12,059 | - | ||||||
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Total
other assets
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5,822,475 | 5,683,184 | ||||||
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Total
assets
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$ | 10,336,584 | $ | 9,035,693 | ||||
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LIABILITIES
AND STOCKHOLDERS' EQUITY
|
||||||||
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Current
liabilities
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||||||||
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Accounts
payable and accrued expenses
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$ | 1,140,360 | $ | 871,533 | ||||
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Deferred
revenue
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558,234 | 151,925 | ||||||
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Line
of credit
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800,000 | 275,000 | ||||||
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Current
portion of long-term debt
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616,468 | 619,206 | ||||||
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Current
portion of capital leases
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90,656 | - | ||||||
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Dividends
Payable
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88,474 | - | ||||||
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Income
tax payable
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39,675 | 35,375 | ||||||
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Total
current liabilities
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3,333,867 | 1,953,039 | ||||||
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Deferred
income taxes
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- | 110,088 | ||||||
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Long-term
debt, less current portion
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2,326,442 | 2,567,394 | ||||||
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Capital
Leases, less current portion
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209,021 | - | ||||||
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Convertible
debentures, net
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- | 441,073 | ||||||
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Total
liabilities
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5,869,330 | 5,071,594 | ||||||
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Commitments
and contingencies
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||||||||
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Stockholders'
equity
|
||||||||
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Series
A Preferred stock, $100 par value. 20,000 shares authorized. 18,725
shares issued at June 30, 2010
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187 | - | ||||||
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Common
stock, $0.01 par value. 75,000,000 shares authorized. 3,046,067
and 3,020,414 and
shares issued at June 30, 2010 December 31, 2009, respectively |
30,460 | 30,204 | ||||||
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Additional
paid-in capital
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93,017,942 | 91,885,935 | ||||||
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Accumulated
deficit
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(88,385,646 | ) | (87,881,351 | ) | ||||
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Treasury
stock, at cost, for 28,276 shares
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(70,689 | ) | (70,689 | ) | ||||
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Subscription
receivable for Series A preferred stock
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(125,000 | ) | - | |||||
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Total
stockholders' equity
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4,467,254 | 3,964,099 | ||||||
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Total
liabilities and stockholders' equity
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$ | 10,336,584 | $ | 9,035,693 | ||||
See Notes
to Condensed Consolidated Financial Statements.
Page 3 of
20
Banyan
Rail Services Inc. and Subsidiary
Condensed
Consolidated Statements of Operations
(Unaudited)
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Predecessor
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Predecessor
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|||||||||||||||||||||||
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Six
Months
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Three
Months
Ended
June 30,
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Three
Months
Ended
June30,
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||||||||||||||||||||||
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Six
Months Ended June 30
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Ended
June30,
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|||||||||||||||||||||||
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2010
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2009
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2009
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2010
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2009
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2009
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Revenues
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$ | 2,622,238 | $ | - | $ | 2,619,928 | $ | 1,365,680 | $ | - | $ | 1,040,086 | ||||||||||||
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Cost
of sales
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2,096,035 | - | 2,259,070 | 1,266,464 | - | 844,574 | ||||||||||||||||||
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Gross
profit
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526,204 | - | 360,858 | 99,217 | - | 195,512 | ||||||||||||||||||
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General
& administrative expenses
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891,926 | 241,010 | 173,223 | 415,595 | 192,367 | 102,103 | ||||||||||||||||||
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Income
(loss) from operations
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(365,722 | ) | (241,010 | ) | 187,635 | (316,378 | ) | (192,367 | ) | 93,408 | ||||||||||||||
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Other
expenses (income)
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||||||||||||||||||||||||
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(Gain)
on extinguishment of debt
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(25,092 | ) | - | - | - | - | - | |||||||||||||||||
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Interest
expense (income)
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159,365 | (9,470 | ) | 39,133 | 70,677 | (3,904 | ) | 26,470 | ||||||||||||||||
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Income
(loss) before income taxes
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(499,995 | ) | (231,540 | ) | 148,502 | (387,055 | ) | (188,463 | ) | 66,939 | ||||||||||||||
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Income
tax provision (benefit)
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4,300 | - | 6,200 | - | - | 6,200 | ||||||||||||||||||
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Net
profit (loss)
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$ | (504,295 | ) | $ | (231,540 | ) | $ | 142,302 | $ | (387,055 | ) | $ | (188,463 | ) | $ | 60,739 | ||||||||
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Dividends
for the benefit of preferred stockholders:
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||||||||||||||||||||||||
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Preferred
stock dividend
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(88,474 | ) | - | - | (45,807 | ) | - | - | ||||||||||||||||
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Amortization
of beneficial conversion feature discount on preferred
stock
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(1,872,500 | ) | - | - | (75,000 | ) | - | - | ||||||||||||||||
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Total
dividends for the benefit of preferred stockholders
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(1,960,974 | ) | - | - | (120,807 | ) | - | - | ||||||||||||||||
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Net
income (loss) attributable to common stockholders
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$ | (2,465,269 | ) | $ | (231,540 | ) | $ | 142,302 | $ | (507,862 | ) | $ | (188,463 | ) | $ | 60,739 | ||||||||
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Weighted
average number of common shares outstanding:
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||||||||||||||||||||||||
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Basic
and diluted
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3,040,571 | 2,607,432 | 3,042,791 | 2,607,432 | ||||||||||||||||||||
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Net
income (loss) per common share:
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||||||||||||||||||||||||
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Basic
and diluted
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$ | (0.81 | ) | $ | (0.09 | ) | $ | (0.17 | ) | $ | (0.07 | ) | ||||||||||||
See Notes
to Condensed Consolidated Financial Statements.
Page 4 of
20
Condensed
Consolidated Statements of Cash Flows
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Predecessor
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||||||||||||
|
Six Months Ended June 30,
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Six
Months Ended
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|||||||||||
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2010
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2009
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June 30, 2009
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||||||||||
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Cash
flows provided by (used in) operating activities:
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||||||||||||
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Net
income (loss)
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$ | (504,295 | ) | $ | (231,540 | ) | $ | 142,302 | ||||
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Adjustments
to reconcile net income (loss) to net cash used in operating
activities:
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||||||||||||
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Depreciation
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124,227 | - | 150,178 | |||||||||
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Stock
compensation expense
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45,800 | 87,500 | - | |||||||||
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Amortization
of deferred loan costs
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20,290 | - | - | |||||||||
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Amortization
of identifiable intangible assets
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131,265 | - | - | |||||||||
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Amortization
of beneficial conversion feature
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15,269 | - | - | |||||||||
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Gain
on extinguishment of debt
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(25,092 | ) | - | - | ||||||||
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Changes
in assets and liabilities:
|
||||||||||||
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Decrease
(increase) in accounts receivable
|
(527,761 | ) | 107 | (110,680 | ) | |||||||
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Decrease
(increase) in costs incurred related to deferred revenue
|
(493,244 | ) | - | 244,972 | ||||||||
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Decrease
(increase) in due from Sellers
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284,126 | - | - | |||||||||
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Decrease
(increase) in prepaid expenses and other current assets
|
(23,009 | ) | 6,500 | - | ||||||||
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Decrease
(increase) in other assets
|
(12,059 | ) | - | - | ||||||||
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Increase
(decrease) in accounts payable and accrued expenses
|
268,827 | 32,674 | 179,311 | |||||||||
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Increase
(decrease) in income taxes payable
|
4,300 | - | 6,200 | |||||||||
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Increase
(decrease) in deferred revenue
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406,309 | - | (418,884 | ) | ||||||||
|
Net
cash provided by (used in) operating activities
|
(285,047 | ) | (104,759 | ) | 193,399 | |||||||
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Cash
flows from investing activities:
|
||||||||||||
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Acquisition
of property and equipment
|
(250,560 | ) | - | (117,555 | ) | |||||||
|
Net
cash used in investing activities
|
(250,560 | ) | - | (117,555 | ) | |||||||
|
Cash
flows from financing activities:
|
||||||||||||
|
Proceeds
from long-term debt
|
56,310 | - | 88,274 | |||||||||
|
Proceeds
from line of credit
|
525,000 | - | - | |||||||||
|
Payment
of capital leases
|
(27,580 | ) | - | (97,932 | ) | |||||||
|
Proceeds
from exercise of stock options
|
37,500 | - | - | |||||||||
|
Proceeds
from sale of preferred stock
|
192,500 | - | - | |||||||||
|
Payment
of long-term debt
|
(300,000 | ) | - | (29,709 | ) | |||||||
|
Purchase
of treasury stock
|
- | (62,500 | ) | - | ||||||||
|
Net
cash provided by (used in) financing activities
|
483,730 | (62,500 | ) | (39,367 | ) | |||||||
|
Net
increase (decrease) in cash and cash equivalents
|
(51,877 | ) | (167,259 | ) | 36,477 | |||||||
|
Cash
and cash equivalents, beginning of period
|
101,361 | 1,613,173 | 2,175 | |||||||||
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Cash
and cash equivalents, end of period
|
$ | 49,484 | $ | 1,445,914 | $ | 38,652 | ||||||
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Supplemental
disclosure of cash flow information:
|
||||||||||||
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Cash
paid during the year for:
|
||||||||||||
|
Interest
|
$ | 128,601 | $ | - | $ | 39,133 | ||||||
|
Taxes
|
$ | - | $ | - | $ | - | ||||||
|
Non
cash financing activities:
|
||||||||||||
|
Issuance
of preferred stock for exchange of convertible debentures
|
$ | 1,525,000 | $ | - | $ | - | ||||||
|
Preferred
stock dividend
|
$ | 88,474 | $ | - | $ | - | ||||||
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Property
acquired under capital leases
|
$ | 327,257 | $ | - | $ | - | ||||||
See Notes
to Condensed Consolidated Financial Statements.
Page 5 of
20
Banyan
Rail Services Inc. and Subsidiary
Consolidated
Statements of Stockholders’ Equity
Periods
Ended December 31, 2009 and June 30, 2010
|
Common Stock
|
Preferred Stock
|
Treasury Stock
|
||||||||||||||||||||||||||||||||||||||
|
Shares
Issued
|
Amount
|
Shares
Issued
|
Amount
|
Additional
Paid in Capital
|
Accumulated
Deficit
|
Subscription
Receivable
|
Shares
|
Amount
|
Total
|
|||||||||||||||||||||||||||||||
|
Stockholders’
equity January 1, 2009 (restated for
the
1 for 10 reverse stock split)
|
2,612,081 | $ | 26,121 | - | - | $ | 89,768,476 | $ | (87,833,681 | ) | - | 3,276 | $ | (8,189 | ) | $ | 1,952,727 | |||||||||||||||||||||||
|
Proceeds
from exercise of stock options
|
75,000 | 750 | - | - | 111,750 | - | - | - | - | 112,500 | ||||||||||||||||||||||||||||||
|
Purchase
of treasury stock
|
- | - | - | - | - | - | - | 25,000 | (62,500 | ) | (62,500 | ) | ||||||||||||||||||||||||||||
|
Stock
compensation expense
|
- | - | - | - | 87,500 | - | - | - | - | 87,500 | ||||||||||||||||||||||||||||||
|
Convertible
debentures beneficial conversion feature
|
- | - | - | 754,875 | - | - | - | - | 754,875 | |||||||||||||||||||||||||||||||
|
Issuance
of shares for acquisition of Wood Energy
|
333,333 | 3,333 | - | - | 1,163,335 | - | - | - | - | 1,166,668 | ||||||||||||||||||||||||||||||
|
Net
loss for the year ended December 31, 2009
|
- | - | - | - | - | (47,669 | ) | - | - | - | (47,669 | ) | ||||||||||||||||||||||||||||
|
Stockholders’
equity December 31, 2009
|
3,020,414 | 30,204 | 91,885,936 | (87,881,350 | ) | - | 28,276 | (70,689 | ) | 3,964,101 | ||||||||||||||||||||||||||||||
|
Issuance
of preferred stock
|
- | - | 18,725 | 187 | 1,137,436 | - | (125,000 | ) | - | - | 1,012,623 | |||||||||||||||||||||||||||||
|
Issuance
of stock options
|
- | - | - | - | 45,800 | - | - | - | - | 45,800 | ||||||||||||||||||||||||||||||
|
Exercise
of stock options
|
25,000 | 250 | - | - | 37,250 | - | - | - | - | 37,500 | ||||||||||||||||||||||||||||||
|
Net
loss for the six months ended June 30, 1010
|
- | - | - | - | - | (504,295 | ) | - | - | - | (504,295 | ) | ||||||||||||||||||||||||||||
|
Preferred
stock dividend
|
- | - | - | - | (88,474 | ) | - | - | - | - | (88,474 | ) | ||||||||||||||||||||||||||||
|
Rounding
|
653 | 6 | - | - | (6 | ) | - | - | - | - | - | |||||||||||||||||||||||||||||
|
Stockholders’
equity June 30, 2010
|
3,046,067 | $ | 30,460 | 18,725 | $ | 187 | $ | 93,017,942 | $ | (88,385,645 | ) | $ | (125,000 | ) | 28,276 | $ | (70,689 | ) | $ | 4,467,255 | ||||||||||||||||||||
See Notes
to Condensed Consolidated Financial Statements.
Page 6 of
20
Notes
to Condensed Consolidated Financial Statements
Note
1. Nature of Operations
Banyan
Rail Services Inc. (“Banyan,” “we,” “our” or the “Company”) was originally
organized under the laws of the Commonwealth of Massachusetts in 1985, under the
name VMS Hotel Investment Trust, for the purpose of investing in mortgage loans,
principally to entities affiliated with VMS Realty Partners. The Company was
subsequently reorganized as a Delaware corporation in 1987 and changed its name
to B.H.I.T. Inc. In 2010, the Company changed its name from B.H.I.T. Inc. to
Banyan Rail Services Inc.
Banyan
was a shell company without significant operations or sources of revenues other
than earnings on its investments. With a change in management in 2008, it was
determined that the Company would seek acquisitions in railroad related
businesses. On September 4, 2009, the Company purchased 100% of the common stock
of The Wood Energy Group, Inc. (“Wood Energy”). Wood Energy engages in the
business of railroad tie reclamation and disposal, principally in Texas and
Louisiana.
Note
2. Basis of Presentation
We have
prepared the accompanying unaudited condensed consolidated financial statements
pursuant to the rules and regulations of the Securities and Exchange Commission
(“SEC”) for Form 10-Q and Regulation S-X. In the opinion of management, these
condensed consolidated financial statements give effect to all normal recurring
adjustments necessary to present fairly the financial position and results of
operations and cash flows of the Company and Wood Energy, its wholly owned
subsidiary, for the periods presented. Because Wood Energy is deemed to be a
predecessor to the Company, the financial statements of Wood Energy for
operations prior to the acquisition are also presented.
The
Company’s results of operations on a consolidated basis subsequent to the
acquisition of Wood Energy are not comparative to the stand alone financial
statements of the acquired business because the acquired assets and liabilities
have been adjusted to fair value pursuant to ASC 805 “Business Combinations” and
the consolidated financial statements include costs related to Banyan, the
parent, whereas the stand alone financial statements of Wood Energy
(predecessor) do not include Banyan costs.
All
significant intercompany transactions and accounts have been eliminated in
consolidation. Certain reclassifications have been made to the December 31, 2009
financial statements to conform to the classifications used in
2010.
Although
we believe that the disclosures included in our condensed consolidated financial
statements are adequate to make the information presented not misleading,
certain information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. Accordingly, the accompanying condensed
consolidated financial statements should be read in conjunction with the
Company’s latest annual report on Form 10-K for the year ended December 31, 2009
filed with the Securities and Exchange Commission.
The
results of operations for the three and six-month periods ended June 30, 2010
are not necessarily indicative of the results to be expected for the full 2010
year.
Page 7 of
20
Note
3. Summary of Significant Accounting Policies
Revenue
Recognition
The
Company utilizes the completed contract method of accounting for revenue
recognition. The Company recognizes revenue for the pick-up and disposal of used
railroad ties upon the completion of the scope of work required under its
contracts. At that point evidence of an arrangement has been obtained, services
are delivered, fees are fixed or determinable and collectability is reasonably
assured. Accordingly, billings related to the services for which contracts have
not been completed have been recorded as deferred revenue. Direct costs,
including payroll, outside labor and trucking expense that are related to the
pick-up and disposal of used railroad ties as well as certain indirect costs,
are deferred until the related revenue is recognized.
The
Company also receives revenue from the processing of railroad ties into saleable
biomass fuel and the sales of the railroad ties to landscapers. These revenues
are recorded when the ties or derivative materials are delivered to the
customer.
Use of
Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those
estimates. Significant estimates include deferred revenue, costs
incurred related to deferred revenue, the useful lives of property and
equipment, the useful lives of intangible assets and accounting for the business
combination.
Fair Value of Financial
Instruments
Recorded
financial instruments consist of cash, accounts receivable, accounts payable,
and short-term and long-term debt and lease obligations. The related fair values
of these financial instruments approximated their carrying values due to either
the short-term nature of these instruments or based on the interest rates
currently available to the Company.
Earnings Per
Share
Basic
earnings per share is computed based on the weighted average shares outstanding
during the period. Diluted earnings per share is computed using the weighted
average number of common and dilutive common stock equivalent shares outstanding
during the period. Dilutive common stock equivalent shares consist of the
dilutive effect of stock options and convertible preferred stock
equivalents.
Income
Taxes
The
Company accounts for income taxes in accordance with ASC 740, Accounting for
Income Taxes, as clarified by ASC 740-10, Accounting for Uncertainty in Income
Taxes. Under this method, deferred income taxes are determined based on
the estimated future tax effects of differences between the financial statement
and tax basis of assets and liabilities given the provisions of enacted tax
laws. Deferred income tax provisions and benefits are based on changes to the
assets or liabilities from year to year. In providing for deferred taxes, the
Company considers tax regulations of the jurisdictions in which the Company
operates, estimates of future taxable income, and available tax planning
strategies. If tax regulations, operating results or the ability to implement
tax-planning strategies vary, adjustments to the carrying value of deferred tax
assets and liabilities may be required. Valuation allowances are recorded
related to deferred tax assets based on the “more likely than not” criteria of
ASC 740.
Page 8 of
20
ASC
740-10 requires that the Company recognize the financial statement benefit of a
tax position only after determining that the relevant tax authority would more
likely than not sustain the position following an audit. For tax positions
meeting the “more-likely-than-not” threshold, the amount recognized in the
financial statements is the largest benefit that has a greater than
50 percent likelihood of being realized upon ultimate settlement with the
relevant tax authority.
Note
4. Capital Leases
The
Company leases equipment used in its operations under capital leases that expire
over three to four years. Payments
under these capital leases were $24,726 and $33,821 for the three and six months
ended June 30, 2010. There were no payments in the comparable periods of
2009.
At June
30, 2010, the total future minimum rental commitments under all the above
operating leases are as follows:
|
Fiscal
year ending December 31,
|
||||
|
2010
|
$ | 57,253 | ||
|
2011
|
114,505 | |||
|
2012
|
114,505 | |||
|
2013
|
57,202 | |||
|
Net
minimum lease payments
|
343,465 | |||
|
Less
amount representing interest
|
43,787 | |||
|
Present
value of net minimum lease payments
|
299,677 | |||
|
Amount
representing current portion
|
(90,656 | ) | ||
|
Capital
leases payable, less current portion
|
$ | 209,021 | ||
Note
5. Convertible Debentures and Preferred Stock
On
February 1, 2010, the Company initiated an exchange of its outstanding
convertible debentures for shares of convertible preferred stock. The holders of
100% of the outstanding debentures agreed to the exchange, and 15,250 shares of
convertible preferred stock were issued. Similar to the debentures, holders of
the convertible preferred stock are entitled to an annual cash dividend of 10%
payable semi-annually, and each share of preferred stock is convertible into 50
shares of common stock. The holders of the preferred stock are not entitled to
redeem their shares for cash. In accordance with ASC 470-20, the Company has
determined that the preferred stock includes a beneficial conversion
feature and a discount valued at $1,525,000 has been accounted for as a
dividend. A gain of $25,092 was recorded on the extinguishment of this debt for
the three months ended March 31, 2010.
In
addition, the Company issued 2,725 and 750 shares of convertible preferred stock
in February 2010 and June 2010, respectively. The Company has determined that
these issuances also include beneficial conversion features and discounts
valued at $272,500 and $75,000 respectively have been accounted for as dividends
for the quarters ended March 31, 2010 and June 30, 2010, respectively. The
proceeds were used for working capital purposes.
Note
6. Earnings per Share
The
Company excluded from the diluted earnings per share calculation 322,500 shares
related to stock options and 936,250 shares issuable upon conversion of
convertible preferred stock that were outstanding at June 30, 2010, as their
inclusion would be anti-dilutive.
Page 9 of
20
Note
7. Stockholders’ Equity
In April
2010, the Company effected a 1 for 10 reverse split of its common stock. Share
and per share amounts have been adjusted retroactively to reflect this
transaction.
Page 10
of 20
Note
8. Stock-Based Compensation
The
Company has stock option agreements with its directors and officers for serving
on the Company’s Board of Directors and as officers. The options activity is as
follows for year ending December 31, 2009 and the six months ended June 30,
2010:
|
Weighted Average
|
Weighted Average
|
Weighted Average
|
|||||||||||||||
|
Number
|
Exercise Price
|
Fair
Value at
|
Remaining
|
Intrinsic
|
|||||||||||||
|
of Shares
|
per Share
|
Grant
Date
|
Contractual Life
|
Value
|
|||||||||||||
|
Balance
January 1, 2009
|
212,500 | 2.50 |
2.5
years
|
$ | 160,000 | ||||||||||||
|
Options
granted
|
87,500 | 3.50 | $ | 87,500 |
4.1
years
|
$ | - | ||||||||||
|
Options
exercised
|
(75,000 | ) | 1.50 | $ | (112,500 | ) | |||||||||||
|
Balance
December 31, 2009
|
225,000 | 3.20 | $ | 47,500 | |||||||||||||
|
Options
granted
|
122,500 | 2.79 | $ | 103,750 |
4.8
years
|
$ | 148,225 | ||||||||||
|
Options
exercised
|
(25,000 | ) | 1.50 | $ | (62,500 | ) | |||||||||||
|
Balance,
June 30, 2010
|
322,500 | $ | 3.16 |
3.1
years
|
$ | 270,250 | |||||||||||
As of
June 30, 2010 the Company had not adopted a formal stock option
plan. The number of options issued and the grant dates were
determined at the discretion of the Company’s Board. Certain options either vest
at the date of grant and others vest over a one year period. The options are
exercisable for periods not exceeding three to five years from the date of
grant. On July 1, 2010 at its annual meeting of stockholders, the 2010 Stock
Option and Award Plan was approved.
The fair
values of stock options are estimated using the Black-Scholes method, which
takes into account variables such as estimated volatility, expected holding
period, dividend yield, and the risk free interest rate. The risk free interest
rate is the five year treasury rate at the date of grant. The expected life is
based on the contractual life of the options at the date of grant. With a change
in management in 2008, it was determined that the Company would seek
acquisitions in railroad related businesses. Accordingly, the 2010
and 2009 expected volatility rate was estimated using the average volatility
rates of seven public companies in the railroad industry. Currently, the Company
has assumed no forfeiture rate. The assumptions used in the option-pricing
models during 2010 and 2009 were as follows:
|
2010
|
2009
|
|||||||
|
Risk
free interest rate
|
2.13-2.37 | % | 2.55 | % | ||||
|
Expected
life (years)
|
5 | 5 | ||||||
|
Expected
volatility
|
29 | % | 27 | % | ||||
|
Dividend
yield
|
0 | 0 | ||||||
Note
9. Major Customers
For the
three and six months ended June 30, 2010, the Company earned 82% and 76% of its
revenues under a contract with one major customer (88% of outstanding accounts
receivable - trade) and 14% and 18% of its revenues under a contract with
another major customer (3% of outstanding accounts receivable - trade). For
the three and six months ended June 30, 2009, the Company earned 78% and 74% of
its revenues under a contract with one major customer.
Page 11
of 20
Note
10. Related Party Transactions
The
Company’s directors and chief executive officer are currently not receiving cash
compensation for their services. Such persons are compensated via the issuance
of stock options which are recognized as a non-cash expense in the Company’s
financial statements.
In 2009,
Wood Energy entered into two 5-year employment agreements with individuals who
are common and preferred stockholders and Banyan entered into a month-to-month
consulting agreement with an individual who is a common and preferred
stockholder. The expense under these agreements for the three and six-month
periods ended June 30, 2010 was $104,000 and $208,000,
respectively.
The
Company’s officers and directors own a total of 10,375 shares of the convertible
preferred stock outstanding as of June 30, 2010.
The
Company leases office space and receives office services from Patriot Rail
Corp., a company related by certain common stock ownership and management, for
$5,000 per month.
Page 12
of 20
Item
2. Management’s Discussion and Analysis of Financial Condition and
Results of Operations
Cautionary
Statement Concerning Forward-Looking Statements
We and
our representatives may from time to time make written or oral statements that
are "forward-looking," including statements contained in this Quarterly Report
on Form 10-Q and other filings with the Securities and Exchange Commission,
reports to our stockholders and news releases. All statements that express
expectations, estimates, forecasts or projections are forward-looking statements
within the meaning of the Section 21E of the Securities Exchange Act. In
addition, other written or oral statements which constitute forward-looking
statements may be made by us or on our behalf. Words such as "expects,"
"anticipates," "intends," "plans," "believes," "seeks," "estimates," "projects,"
"forecasts," "may," "should," variations of such words and similar expressions
are intended to identify such forward-looking statements. These statements are
not guarantees of future performance and involve risks, uncertainties and
assumptions which are difficult to predict. These risks may relate to, without
limitation:
|
|
·
|
executing
our acquisition/expansion plan by identifying and acquiring additional
operating companies;
|
|
|
·
|
obtaining
appropriate funding to complete potential
acquisitions;
|
|
|
·
|
generating
adequate revenue to service our debt and meet our bank loan financial
covenants;
|
|
|
·
|
complying
with SEC regulations and filing requirements applicable to us as a public
company;
|
|
|
·
|
the
impact of current or future laws and government regulations affecting the
disposal of rail ties and
our operations;
|
|
|
·
|
any
of our other plans, objectives, expectations and intentions contained in
this report that are not historical
facts;
|
|
|
·
|
changing
external competitive, business, weather or economic
conditions;
|
|
|
·
|
successfully
operating Wood Energy;
|
|
|
·
|
changes
in our relationships with employees or with our customers;
and
|
|
|
·
|
the
market opportunity for our services, including expected demand for our
services.
|
Therefore,
actual outcomes and results may differ materially from what is expressed or
forecasted in or suggested by such forward-looking statements. We undertake no
obligation to publicly revise these forward-looking statements to reflect events
or circumstances that arise after the date hereof. Readers should carefully
review the factors described herein and in other documents we file from time to
time with the Securities and Exchange Commission, including our Quarterly
Reports on Form 10-Q, Annual Reports on Form 10-K, and any Current Reports on
Form 8-K filed by us.
Overview
In
September 2009, we acquired The Wood Energy Group, Inc., a Missouri corporation
engaged in the business of railroad tie reclamation and disposal. Prior to
acquiring Wood Energy, Banyan was a shell company without significant operations
or sources of revenues other than its investments. Currently our management team
is focused on acquisition opportunities and additional sources of funding. We
are focusing our efforts on railroad track construction, and, railroad repair
and maintenance businesses, and may explore potential acquisitions in other
industries as well.
Page 13
of 20
Wood
Energy
Wood
Energy, headquartered in St. Louis, Missouri, is one of the nation’s largest
railroad tie reclamation and disposal companies. Founded in 2001, we provide
railroad tie pickup, reclamation and disposal services to the Class 1 railroads
(defined by the American Association of Railroads as a railway company with
annual operating revenue over $401.4 million) and industrial customers. Prior to
2001, Wood Energy’s founder Greg Smith provided the same services through Wood
Waste Energy, Inc., a company he founded in 1991, built into the largest
railroad tie recovery business in the U.S., and sold in 1999. Wood Energy
operates primarily in Texas and Louisiana.
Wood
Energy’s services include picking up scrap railroad ties for major Class I
railroads and disposing of the ties by selling them to the landscape tie market
or having the ties ground to create chipped wood for sale as biomass fuel to the
co-generation market. In 2009, we recovered over one million railroad ties, 73%
of which were used by the co-generation market, 22% for the landscape market and
5% went to landfill.
Recent
Events
Changes
to and the Election of our Board of Directors
The
Company held its annual meeting of stockholders on July 1, 2010 in Boca Raton,
Florida. The stockholders elected Paul S. Dennis, Gary O. Marino, Bennett Marks,
and Donald D. Redfearn to the Company’s board of directors to hold office until
the 2011 annual meeting of stockholders or until their respective successors are
elected and qualified.
Exchange
of Debentures for Preferred Stock and Issuance of Additional Preferred
Stock
In order
to raise additional capital for our acquisition of Wood Energy, we conducted a
private placement of Series A Convertible Debentures. The debentures bore
interest at the rate of 10%, payable semi-annually. Each debenture was
convertible at the holder’s option into shares of common stock of Banyan at a
conversion price of $2.00 per share, subject to customary adjustments for any
future stock dividends, stock splits and certain reorganizations and
recapitalizations. Also, we agreed that if we conduct a registered offering of
securities following the private placement, we would register the shares of
common stock underlying the debentures at the request of the holders of these
shares. Through this private placement, we issued debentures in the aggregate
principal amount of $1,525,000 on September 4, 2009.
On
February 1, 2010, all of the holders of the debentures exchanged their
debentures for 15,250 shares of newly authorized Series A Preferred Stock.
Similar to the debentures, the preferred stock pays cash dividends at the rate
of 10%, payable semi-annually, and each preferred share is convertible at the
holder’s option into shares of common stock of Banyan at a conversion price of
$2.00 per share, subject to customary adjustments for any future stock
dividends, stock splits and certain reorganizations and recapitalizations. Also,
we agreed that if we conduct a registered offering of securities, we will
register the shares of common stock underlying the preferred stock at the
request of the holders of these shares. There is no requirement for the Company
to redeem the preferred stock at any time. In addition, in February and June
2010 we sold 2,750 and 750 shares of convertible preferred stock respectively,
resulting in proceeds of $272,500 and $75,000, respectively, which was used for
working capital purposes.
Reverse
Stock Split
In April
2010 the Company effectuated a 1-for-10 reverse stock split pursuant to which
each stockholder received one share of common stock for every ten shares owned
prior to the reverse split. All share and per share amounts in this Quarterly
Report on Form 10-Q have been adjusted retroactively to reflect this reverse
stock split.
Completion
of Shreveport Tie Grinding Facility
In
February 2010, Wood Energy completed the construction of a railroad tie grinding
facility in Shreveport, Louisiana. Wood Energy is now grinding a substantial
portion of its reclaimed rail ties at the Shreveport facility and continues to
outsource its remaining grinding requirements. We provide the chipped wood
product to a customer as a source of biomass fuel for its plant. The new tie
grinding facility increases Wood Energy’s ability to improve its operating
margin for this business as all of the grinding was previously
outsourced.
Page 14
of 20
In
February 2010, Wood Energy entered into a scrap tie disposal agreement with
another Class I rail carrier. The agreement sets forth the terms for the
customer’s delivery of its reclaimed railroad ties to the Shreveport grinding
facility. It is expected that deliveries will begin in the third quarter of
2010.
Critical
Accounting Policies and Estimates
The
following discussion and analysis of our results of operations and financial
condition is based upon our condensed consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States of America. The preparation of these financial statements
requires us to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and disclosure of contingent assets
and liabilities, if any, at the date of the financial statements. We base our
estimates on historical experience and various other assumptions that we believe
to be reasonable under the circumstances. If these estimates differ materially
from actual results, the impact on our condensed consolidated financial
statements may be material.
We review
our financial reporting and disclosure practices and accounting policies
quarterly to ensure that they provide accurate and transparent information
relative to the current economic and business environment. During the six months
ended June 30, 2010, there were no significant changes to the critical
accounting policies that we disclosed in our 2009 Form 10-K filed with the SEC
on April 15, 2010. Please see a complete list of significant accounting policies
in Note 3 of the notes to our consolidated financial statements included with
our 2009 Form 10-K. In addition, a summary of significant accounting policies is
included in Note 3 of the notes to the financial statements included with this
Form 10-Q.
Consolidated
Results of Operations — Banyan and Subsidiary
We
acquired Wood Energy effective September 4, 2009 and our operating results
discussed below include the consolidated results of operations of Banyan and
Wood Energy for the three and six months ended June 30, 2010. Prior to acquiring
Wood Energy, Banyan was a shell company without significant operations or
sources of revenues other than its investments, as reflected in the results of
operations of Banyan for the three months and six months ended June 30, 2009.
The “predecessor” results of operations for the three and six months ended June
30, 2009 include only the results of Wood Energy.
Revenues
Revenues
include the pickup and disposal of scrap railroad ties for major Class I
railroads, the sale of ties into the landscaper market and both ground and whole
ties into the bio mass fuel markets.
The
revenue for the three and six months ended June 30, 2010 was $1,365,680 and
$2,622,238, respectively, compared to revenue of $0 for the three and six months
ended June 30, 2009. In 2009, Banyan was a shell company and had no revenues
other than interest earned on its cash balances. The revenue recorded in 2010
consists of the revenue generated by Banyan’s subsidiary, Wood Energy (the
“predecessor”), which was acquired on September 4, 2009. For the three and six
months ended June 30, 2009, the predecessor’s revenue was $1,040,086 and
$2,619,928, or 31.3% and 0.1% less than the 2010 revenue for the three and six
months ended June 30, 2010.
Revenues
increased for the three months ended June 30, 2010 above the comparable 2009
period primarily due to: (i) the timing of completion of various tie pickup
contract projects. Contract projects completed in the three months ended June
30, 2010 were $402,000 greater than the comparable period in 2009; (ii) the
initiation of biomass fuel revenue from the grinding plant began in February
2010. Revenues from the sales of biomass fuel were $186,000 for the three months
ended June 30, 2010 vs. none for the comparable period of 2009; and partially
offset by a $350,000 reduction in sales of whole ties.
Page 15
of 20
Gross
margin
The gross
margin was 7.3% and 20.1% in the three and six months ended June 30, 2010
compared to 0% in the 2009 periods, as there were no operations for Banyan in
2009. The gross margin for the predecessor for the three and six months ended
June 30, 2009 was 13.8% and 18.8%.
The
decrease in the gross margins for the three months ended June 30, 2010 compared
to the comparable 2009 period is due primarily to an increase of 15% in the tie
pickup sales as a percentage of total revenues (which have a lower margin than
the other product lines); inefficiencies in the tie pickup process caused by
customer work limitations negatively impacting our labor and project equipment
efficiency; and the relatively reduced profitability of tie pickup
projects that were staffed with contract labor.
Also our
gross margin for the three months ended June 30, 2010 was negatively impacted by
(i) customer shutdowns limiting our delivery of the biomass fuel and (ii)
grinding plant efficiency improvements which interrupted production, while we
incurred the cost of the plant overhead.
General
and administrative expenses
General
and administrative expenses include: (i) Wood Energy costs such as compensation,
amortization of identifiable intangible assets and insurance expenses and (ii)
Banyan professional fees, stock compensation costs and other costs related to
being a public company.
This
table summarizes the general and administrative expenses for the three and six
months ended June 30:
|
General
and administrative costs
|
Three
Months Ended June 30
|
Six
Months Ended June 30
|
||||||||||||||||||||||
|
Predecessor
|
Predecessor
|
|||||||||||||||||||||||
|
2010
|
2009
|
2009
|
2010
|
2009
|
2009
|
|||||||||||||||||||
|
Professional
fees and other public company costs
|
$ | 130,425 | $ | 60,645 | $ | 1,686 | $ | 309,987 | $ | 103,656 | $ | 5,177 | ||||||||||||
|
Amortization
of intangible assets
|
65,632 | - | - | 131,265 | - | - | ||||||||||||||||||
|
Other
costs
|
234,538 | 131,722 | 100,417 | 450,674 | 137,354 | 168,046 | ||||||||||||||||||
|
Consolidated
general and administrative
|
$ | 430,595 | $ | 192,367 | $ | 102,103 | $ | 891,926 | $ | 241,010 | $ | 173,223 | ||||||||||||
For the
three and six months ended June 30, 2010 costs increased approximately $136,000
and $478,000 or 46% and 115% respectively compared to the three and six months
ended June 30, 2009 of the combined Company and predecessor expenses. These
increases are primarily due to: (i) an increase of approximately $83,000 and
$201,000 in professional fees and other costs related to being a public company
incurred by Banyan for the three and six months ended June 30, 2010 over the
comparable 2009 periods (the increase in professional fees for the six months
was sharply higher due to non-recurring audit and accounting fees in conjunction
with its work performed to incorporate its new subsidiary into the public
filings); (ii) the amortization of identifiable intangible assets pertaining to
the revaluation of assets upon the purchase of Wood Energy in September, 2009;
and (iii) an increase of approximately $51,000 and $85,000 in compensation, rent
and office services incurred for the three and six months ended June 30, 2010
over the comparable 2009 periods in connection with the transition of Banyan
from a shell company to an operating company after the acquisition in September
2009 of Wood Energy.
Interest
expense
Net
interest expense for the three and six months ended June 30, 2010 was $70,677
and $159,635, compared to net interest expense of the combined Company and
Predecessor for the 2009 comparable periods of $22,566 and $29,663 for the three
and six months ended June 30, 2009. The increase in costs is due primarily to:
interest expense related to the senior debt facilities incurred in connection
with the acquisition of Wood Energy; interest expense on the credit line to
support Wood Energy’s working capital requirements; and interest expense on
capitalized leases for new equipment for the grinding plant and for increased
tie pickup volume.
Page 16
of 20
Financial
Condition and Liquidity
Cash and
cash equivalents consist of cash and short-term investments. Our cash and cash
equivalents balance at June 30, 2010 was $49,484, as compared to $101,361 of
cash and cash equivalents at December 31, 2009.
The
Company utilizes the completed contract method of accounting for revenue
recognition. The Company recognizes revenue for the pick-up and disposal of used
railroad ties upon the completion of the scope of work required for each project
within the contract. Each project requires the completion of two major phases
before a contract’s project is completed. Under the contract terms, we invoice
50% of the work upon completion of the first phase of each project, which is
included in our balance sheet as deferred revenue. Upon the completion of the
second phase the project and we invoice the remaining 50% and recognize that
project’s revenue. The first phase is typically more cost intensive then the
second phase. All project costs are shown in our balance sheet as
costs incurred related to deferred revenue, until the associated project is
completed.
Deferred
revenues as of June 30, 2010, were $558,234 for the completion of phase one of
these projects and we will invoice another $558,234 upon contract completion
(defined as the ties are delivered to our grinding plant for further
processing). The costs incurred related to both phases of the projects are
$808,052. We expect the projects outstanding as of the balance sheet
date to be completed before December 31, 2010. As of December 31, 2009 deferred
revenue was $151,925 and the costs incurred related to these deferred revenues
were $224,176.
To
finance the acquisition of Wood Energy, we entered into a five-year senior
secured term loan with a bank in the amount of $3.0 million. Banyan guaranteed
the loan and Wood Energy is the borrower. Payments of $50,000 of principal and
interest are due monthly. As of June 30, 2010, there was $2,550,000 outstanding
under the term loan. To obtain additional funds for the acquisition,
Banyan also issued Series A Convertible Debentures bearing interest at the rate
of 10%, payable semi-annually. We raised $1,525,000 through the issuance of the
debentures. The debentures were due in five years, and were convertible into
shares of common stock of Banyan at a conversion price of $2.00 a share. In
February 2010, the holders of all of the convertible debentures elected to
exchange their debentures for shares of Series A Convertible Preferred Stock.
The terms of the preferred stock are substantially the same as the terms of the
convertible debentures, except that Banyan has no obligation to redeem the
preferred stock at any time. This exchange reduces our long-term cash
requirements.
In
connection with the acquisition of Wood Energy, we also obtained two bank credit
lines in the amounts of $500,000 and $1.5 million for working capital and
capital expenditures respectively. Maximum loan advances on the working capital
line are based on specific percentages of eligible working capital amounts,
including accounts receivable and inventory. Draws on the capital expenditures
line are based on 80% of the cost of such capital expenditures. On May 21, 2010,
the Company and the bank amended the terms of the credit lines whereby the
working capital and capital expenditures lines of credit are now $1,000,000 and
$1,000,000, respectively. As of June 30, 2010, $200,000 and $605,000 were
available under the working capital and capital expenditure lines, respectively.
At this time, we have no material commitments for capital
expenditures.
The term
loan and lines of credit from the bank described above are subject to certain
loan covenants that require, among other things, compliance with fixed charge
coverage and total debt coverage ratios, as well as minimum levels of EBITDA
(earnings before interest, taxes, depreciation and amortization). As of June
30th
2010, we were in compliance with the covenants. Based on our operating
plan as described below, we believe that we will comply with the loan covenants
in the foreseeable future. However, we can make no assurances that we will
maintain compliance with the loan covenants.
At June
30, 2010, we had a net working capital deficit of $1,328,802 and incurred
negative cash flows from operating activities for the six months ended June 30,
2010 of $285,047. Although we anticipate that cash flow will improve in the
second six months of 2010 as we complete our annual contracts with our major
customer, the future timing of these customer contract completions and
realization of our deferred revenues may not allow us to generate positive cash
flow in the near future.
Page 17
of 20
After our
acquisition of Wood Energy, we adopted a plan designed to operate at a profit
and generate positive cash flows from operations into the foreseeable future.
Also, as mentioned above, we have availability under our credit facilities to
help finance our cash needs should the need arise. Our working capital line of
credit matures in September 2011 (as amended on May 21, 2010) and we believe
that we will be able to refinance or extend the term of this facility, although
we cannot guarantee that we will be able to do so on terms that are acceptable
to us or at all. In addition, in February and June 2010 we sold 2,750 and 750
shares of convertible preferred stock respectively, resulting in proceeds of
$272,500 and $75,000, respectively, which was used for working capital purposes.
Although we believe that we will be able to successfully execute our plan and
meet our future liquidity needs, there can be no assurances in this
regard.
We are
exploring various additional acquisition opportunities and may incur due
diligence, legal and accounting costs in connection with evaluating these
opportunities. We are also exploring additional sources of financing
to fund such possible opportunities. However, we cannot guarantee we will be
able to obtain adequate financing on acceptable terms.
Off-Balance
Sheet Arrangements
We do not
have any material off-balance sheet arrangements.
We file
annual, quarterly and current reports and other information with the SEC. Our
SEC filings are available to the public on the internet at the SEC’s web site at
SEC.gov. To learn more about Banyan you can also contact our CEO, Gary O.
Marino, at 561-443-5300.
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Item
4(T).
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Controls
and Procedures
|
Under the
direction of our chief executive officer and chief financial officer, management
evaluated the effectiveness of the design and operation of our disclosure
controls and procedures (as defined in Exchange Act Rule 13a-15(e)). Based on
this evaluation, our chief executive officer and chief financial officer each
concluded that our disclosure controls and procedures were effective as of June
30, 2010. Further, except that we have instituted new controls over the internal
control systems of Wood Energy, such as (i) adding a full time CFO and
Controller at Banyan, and an assistant to the president of Wood Energy, (ii)
increasing the oversight provided by Banyan’s executives over Wood Energy’s
operations and financial activities, and (iii) procedures to more accurately
identify direct costs incurred for each of Wood Energy’s tie pick up and
disposal contracts, there have been no changes in our internal control over
financial reporting during the quarter ended June 30, 2010 that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting (as defined in Exchange Act Rule
13a-15(f)).
Page 18
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Part
II — Other Information
|
Item
1.
|
Legal
Proceedings
|
We are
not aware of any pending legal proceedings involving Banyan or Wood Energy other
than litigation arising in the ordinary course of business. We believe the
outcome of the litigation will not have a material adverse effect on our
financial condition, cash flows or results of operations.
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of
Proceeds
|
In order
to raise additional capital for our acquisition of Wood Energy, we conducted a
private placement of Series A Convertible Debentures. Through this private
placement, we issued debentures in the aggregate principal amount of $1,525,000
on September 4, 2009.
Effective
January 1, 2010, all of the holders of the debentures exchanged their debentures
for 15,250 shares of newly authorized Series A Preferred Stock. Similar to the
debentures, the preferred stock pays cash dividends at the rate of 10%, payable
semi-annually, and each preferred share is convertible at the holder’s option
into shares of common stock of Banyan at a conversion price of $2.00 per share,
subject to customary adjustments for any future stock dividends, stock splits
and certain reorganizations and recapitalizations. Also, we agreed that if we
conduct a registered offering of securities, we will register the shares of
common stock underlying the preferred stock at the request of the holders of
these shares. There is no requirement for Banyan to redeem the preferred stock
at any time.
In
February and June 2010 we sold, respectively, 2,725 and 750 shares of Series A
preferred stock resulting in proceeds of $272,500 and $75,000, respectively,
which was used for working capital purposes. The proceeds from the sale of
preferred stock were used for working capital purposes. The issuance of the
preferred shares to the debenture holders and the private placement of
additional preferred shares were made in reliance on Section 4(2) of the
Securities Act of 1933 for the offer and sale of securities not involving a
public offering and Rule 506 of Regulation D of the Securities Act.
On June
1, 2009 The Company granted non-qualified stock options to purchase 87,500
shares of the Company’s common stock for $3.50 per share to the Company’s
directors and officers in compensation for their service to the Company. The
options were fully vested on the date of grant and expire on June 1, 2014. The
options were not registered under the securities Act of 1933 (the “Act”) in
reliance on the private offering exception from registration provided in
paragraph 4(2) of the Act and related rule 506 of Regulation D.
|
Item
3.
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Defaults
Upon Senior Securities
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Not
applicable.
|
Item
5.
|
Other
Information
|
For
information regarding significant events of the second quarter, please turn to
“Recent Events” on page 14.
Page 19
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|
Item
6.
|
Exhibits
|
|
|
10.1
|
Amendment
to Loan and Security Agreement between The Wood Energy Group, Inc. and
Fifth Third Bank dated May 21, 2010
|
|
|
31.1
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Executive Officer Pursuant
to § 302 of the Sarbanes-Oxley Act of
2002
|
|
|
31.2
|
Rule
13a-14(a)/15d-14(a) Certification of Principal Financial Officer Pursuant
to § 302 of the Sarbanes-Oxley Act of
2002
|
|
|
32
|
Rule
13a-14(b)/15d-14(b) Certification Pursuant to § 906 of the Sarbanes-Oxley
Act of 2002
|
Signatures
In
accordance with the requirements of the Securities Exchange Act of 1934, Banyan
Rail Services Inc. has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
|
Banyan
Rail Services Inc.
|
||
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Date:
August 16, 2010
|
/s/ Larry Forman
|
|
|
Larry
Forman,
|
||
|
Vice
President and Chief Financial Officer
|
||
|
(Principal
Financial and Accounting
Officer)
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||
Page 20
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