Broad Street Realty, Inc. - Annual Report: 2013 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2013

or

 For the transition period from __________ to __________

Commission file number: 1-9043

Securities registered pursuant to Section 12(b) of the Exchange Act:  None

Securities registered pursuant to Section 12(g) of the Exchange Act:  Common stock, $0.01 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.   Yes ¨   No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.   Yes ¨   No x

Indicate by check mark whether the registrant (1) 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 x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (section 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 x

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes x    No ¨

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter.  $1,553,136 as of June 30, 2013.

Indicate the number of shares outstanding of each of the registrant’s classes of common equity, as of the latest practicable date:  1,084,608 shares of common stock, $0.01 par value per share, as of March 15, 2014.

Table of Contents

PART I

As used in this report, all references to “Banyan,” the “Company,” “we,” “our” and “us” refer to Banyan Rail Services Inc. (formerly B.H.I.T. Inc.).

In September 2013 the Company effectuated a one-for-five reverse split pursuant to which each shareholder received one common share for every five shares owned prior to the reverse split. All shares and per share amounts in this report have been adjusted retroactively to reflect this reverse stock split.

Forward Looking Statements

This Annual Report on Form 10-K contains information about us, some of which includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements other than historical information or statements about our current condition. You can identify forward-looking statements by the use of terms such as “believes,” “contemplates,” “expects,” “may,” “will,” “could,” “should,” “would,” or “anticipates,” other similar phrases, or the negatives of these terms. We have based the forward-looking statements relating to our operations on our current expectations, estimates and projections about us and the markets we serve. We caution you that these statements are not guarantees of future performance and involve risks and uncertainties. These statements should be considered in conjunction with the discussion in Part I, the information set forth under Item 1A, “Risk Factors” and with the discussion of the business included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” We have based many of these forward-looking statements on assumptions about future events that may prove to be inaccurate. Accordingly, our actual outcomes and results may differ materially from what we have expressed or forecast in the forward-looking statements. Any differences could result from a variety of factors, including the following:

You should not place undue reliance on our forward-looking statements, which reflect our analysis only as of the date of this report. The risks and uncertainties listed above and elsewhere in this report and other documents that we file with the SEC, including this annual report on Form 10-K, quarterly reports on Form 10-Q, and any current reports on Form 8-K, must be carefully considered by any investor or potential investor in the Company.

Item 1. Business.

In September 2009, we completed the acquisition of all of the issued and outstanding stock of The Wood Energy Group, Inc. (“Wood Energy”), 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.

Wood Energy provided 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 $452.7 million as of 2012) and industrial customers.   We operated primarily in the southern region of the United States of America. Our services included removing scrap railroad ties (ties), disposing of the ties by selling them to the landscape and relay tie markets or having the ties ground to create chipped wood for subsequent sale as fuel to the co-generation markets.  

On January 11, 2013, Wood Energy filed a voluntary petition for reorganization relief under the provisions of Chapter 11 of Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court Southern District of Florida, which was voluntarily converted into a Chapter 7 Bankruptcy on February 5, 2013.

The assets of Wood Energy were liquidated by the Trustee of the Bankruptcy Court. The proceeds for the sale were used to satisfy a portion of the secured claims, with the remainder if any, allocated to the unsecured claims.

As a result of Banyan’s guarantee of Wood Energy’s outstanding secured debt, at the time of its bankruptcy filing, to Fifth Third Bank (“FTB” or “Fifth Third”), FTB filed an action against Banyan in the Circuit Court of the Fifteenth Judicial Circuit in Palm Beach County, Florida. The action was subsequently settled on September 26, 2013 when Banyan paid $200,000 to FTB which fully satisfied Banyan’s obligation and provided a full release for Banyan by FTB.

Our History Prior to Acquiring Wood Energy

The Company was originally organized under the laws of the Commonwealth of Massachusetts in 1985, for the purpose of investing in mortgage loans. The Company was reorganized as a Delaware corporation in 1987. From 1989 to 1992 the Company experienced severe losses as a result of a decline in real estate values and the resulting defaults on the mortgages it held. In 1998, the Company changed its name to B.H.I.T. Inc., and again changed its name to Banyan Rail Services Inc. in 2010.

On January 24, 2007, a group of private investors purchased 41.7% of our outstanding shares held by our largest shareholder at the time. Because members of our new management team have experience with the railroad industry, we began investigating acquisitions of companies in the rail industry. In the spring of 2009, we entered negotiations with the owners of Wood Energy to acquire the company. As a result of the acquisition of Wood Energy, we were no longer a shell company. On January 4, 2010, we changed our name to Banyan Rail Services Inc. to reflect our new business. As a result of the bankruptcy and liquidation of Wood Energy, Banyan is now a shell Company seeking to acquire an operating entity.

Item 1A.     Risk Factors.

The following is a description of what we consider the key challenges and risks relating to our business and investing in our common stock. This discussion should be considered in conjunction with the discussion under the caption “Forward-Looking Information” preceding Part I, the information set forth under Item 1, “Business” and with the discussion of the business included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These risks comprise the material risks of which we are aware. If any of the events or developments described below or elsewhere in this Annual Report on Form 10-K, or in any documents that we subsequently file publicly were to occur, it could have a material adverse effect on our business, financial condition or results of operations.

Risks Relating to Our Company

Banyan is a shell company without significant assets or operations.

After the liquidation of the assets of Wood Energy, Banyan became a shell company without significant operations or sources of revenue other than investments. Without revenue we are currently dependent upon loans and equity infusions from affiliates to meet our cash needs. Our ability to continue on an on-going basis dependent upon, among other things, raising capital and identifying an operating business to acquire, among other factors, many of which are beyond our control.

We have issued preferred stock, which may decrease both our net income available to common shareholders and cash flow.

We have issued 49,950 shares of preferred stock for working capital needs in the amount of $5.07 million. Although investments in leveraged companies offer the opportunity for capital appreciation, leveraged investments also involve a high degree of risk.  The amount of our preferred stock outstanding could have important consequences for us and our investors.  For example, it could:

Our ability to make scheduled payments dividends on our preferred stock will depend primarily on our ability to successfully find an operating entity to acquire, as well as the future performance of that entity. All of which to a certain extent is subject to economic, financial, competitive and other factors beyond our control.  We have been unable to make payments on our outstanding preferred stock and many of our preferred shareholders have agreed to accept common stock in lieu of cash dividends. There can be no assurance that our business plan will generate sufficient cash flow to pay mandatory preferred stock dividends or meet our other cash needs.  

We will need to raise additional capital, which may not be available to us and may limit our operations or growth.

We will need additional capital to fund the implementation of our business plan. We cannot assure you that any necessary subsequent financing will be successful. Our future liquidity and capital requirements are difficult to predict as they depend upon many factors, including our ability to identify and complete acquisitions and the success of any business we do acquire. We will need to raise additional funds in order to meet working capital requirements or additional capital expenditures or to take advantage of other opportunities. We cannot be certain that we will be able to obtain additional financing on favorable terms or at all. If we are unable to raise needed capital, our growth and operations may be impeded. In addition, if we raise capital by selling additional shares of stock, your percentage ownership in Banyan will be diluted.

We may not be able to successfully acquire or integrate a new business.

We face a variety of risks associated with acquiring and integrating new business operations.  The growth and success of our business will depend on our ability to identify, acquire and operate new assets or businesses. We may compete with companies that have significantly greater resources than we do for potential acquisition candidates.  We cannot provide assurance that we will be able to:

Businesses that we acquire in the future could involve unforeseen difficulties, which could have a material adverse effect on our business, financial condition, and operating results.

Certain employees and directors own a significant interest in Banyan.

Certain directors and officers, control 60.6% of our outstanding common shares (70.2% if they exercised their options and converted their shares of preferred stock). Accordingly, they possess a significant vote on all matters submitted to a vote of our shareholders including the election of the members of our board. This concentration of ownership may have the effect of preventing or discouraging transactions involving an actual or a potential change of control of Banyan, regardless of whether a premium is offered over then-current market prices.

The current state of debt markets could have a material adverse impact on our earnings and financial condition.

The cost of commercial debt may increase or may contract as a result of certain factors including the tightening of underwriting standards by lenders and credit rating agencies. Credit spreads for major sources of capital may grow significantly as investors may demand a higher risk premium. Should our borrowing cost increase, either by increases in the index rates or by increases in lender spreads, we will need to factor such increases into the economics of our business plan. This may result in our generating lower overall economic returns and potentially reducing cash flow available for business operations and business development.

Risks Relating to Our Shares

Directors’ options and outstanding convertible preferred stock may depress the price of our common stock.

As a result of the private placements including issuances of preferred stock in 2012 and prior, there are shares of outstanding preferred stock which can be converted into as many as 532,939 shares of our common stock for $4.50 to $12.50 per share.  In addition, as of December 31, 2013 we have issued options to purchase 30,000 shares to our directors as compensation for serving on the board at prices ranging from $13.50 to $17.50 a share. If the directors’ options are exercised or the shares of preferred stock are converted, your ownership of the Company will be diluted. In addition, the issuance of a significant number of shares upon conversion of shares of preferred stock or the exercise of options could depress the price of our stock if there isn’t enough demand for the shares in the market. Even if the shares of preferred stock are not converted, the large number of shares issuable upon conversion of the preferred stock could cause an overhang on the market.

If you invest in Banyan, you may experience substantial dilution and the market price of our shares may decrease.

In the event we identify and obtain an operating entity, there may be a dilutive effect on the holders of our securities. In addition, as part of our recruitment process and in connection with our efforts to attract and retain employees and directors, we may offer stock options, restricted stock shares or other types of equity-based incentives to its future employees and directors. The Company’s issuance of equity-based incentives to new hires, senior management and directors, may cause you significant dilution as a result of such issuances. Also, we agreed that if we conduct a registered offering of securities, we will register the shares of common stock issued to the sellers of Wood Energy and underlying the preferred stock issued in connection with our acquisition of Wood Energy.   Further, although shares of common stock issued to the sellers and to be issued upon conversion of our preferred stock will be “restricted” securities under the Securities Act of 1933 prior to any registration statement being filed and being declared effective by the SEC, they may nonetheless be sold prior to that time in reliance on registration exemptions contained in Rule 144 of the Securities Act, subject to certain resale restrictions imposed by Rule 144.  Such issuances and sales may also depress the market price of our shares.

Our common stock may be considered a “penny stock.”

The SEC has adopted regulations which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. The market price for our common stock has been below $5.00 per share in the past, and if our stock trades for less than $5.00 per share, it will be considered a “penny stock” according to SEC rules. This designation requires any broker or dealer selling these securities to disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. These rules may restrict the ability of brokers or dealers to sell our common stock and may affect the ability of investors to sell their shares.

You may not be able to sell your shares because there is a limited market for our stock.

Although our common stock is traded on the OTC Bulletin Board®, currently there is limited trading volume in our stock and there may be very limited demand for it as well. As a result, it may be difficult for you to sell our common stock despite the fact it is traded on the OTC Bulletin Board®.

Our preferred stock could adversely affect the holders of our common stock.

We have issued 49,950 shares of preferred stock, pursuant to our certificate of incorporation; our board of directors has the authority to fix the rights, preferences, privileges and restrictions of unissued preferred stock and to issue those shares without any further action or vote by the common stockholders. The holders of the preferred stock are entitled to receive payment before any of the common stockholders upon liquidation of the Company and we cannot pay a dividend on our common stock unless we first pay dividends required by our preferred stock. In addition, the rights of the holders of our common stock will be subject to, and may be adversely affected by, the rights of the holders of any series of preferred stock that may be issued in the future. These adverse effects could include subordination to preferred shareholders in the payment of dividends and upon our liquidation and dissolution, and the use of preferred stock as an anti-takeover measure, which could impede a change in control that is otherwise in the interests of holders of our common stock. In December of 2012, the Company extended an offer to preferred shareholders to receive payment of dividends in the form of common stock in lieu of cash. As of December 31, 2013, 89% or approximately $444,000 of the annual dividend due to preferred shareholders is paid in common stock; the balance will remain accrued until such time as the Company has sufficient cash from operations to issue cash payment. We do not anticipate paying cash dividends on our common stock in the foreseeable future. When the Company issues payment of these dividends in common stock, your percentage ownership in Banyan will be diluted

We do not intend to pay any cash dividends on our common stock.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. The payment of cash dividends depends on our future earnings, financial condition and other business and economic factors that our board of directors may consider relevant.  Because we do not intend to pay cash dividends, the only return on your investment may be limited to the market price of the shares.

Item 2.      Properties.

We do not own any real property.

Item 3.      Legal Proceedings.

Not applicable.

PART II

Item 5.      Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Shares of our common stock are traded over-the-counter and sales are reported on the OTC Bulletin Board® under the symbol “BARA”. The last reported sale price on March 15, 2014 was $8.00 per share. The following table lists the high and low closing sale prices of our stock during 2013 and 2012 as reported on OTC Bulletin Board®. These sale prices reflect inter-dealer prices, without retail mark-up, mark-down or commission, and may not represent actual transactions.

There were approximately 1,386 stockholders of record of Banyan’s common stock as of March 15, 2014. There are additional stockholders who own stock in their accounts at brokerage firms and other financial institutions.

All share and per share amounts in this Annual Report on Form 10-K have been adjusted retroactively to reflect this reverse stock split. See Reverse Stock Split.

Common Stock

As of December 31, 2013, our certificate of incorporation provided that we were authorized to issue 7.5 million shares of common stock, par value $0.01 per share. The holders of our common stock are entitled to one vote per share on all matters to be voted upon by our stockholders, including the election of directors. Our shares of common stock are not convertible into any other security and do not have any preemptive rights, conversion rights, redemption rights or sinking fund provisions. Stockholders are entitled to receive dividends out of funds legally available if our board of directors, in its discretion, determines to issue dividends and only then at the times and in the amounts that our board of directors may determine. In the event of our liquidation, dissolution, or winding up, our stockholders receive ratably any net assets that remain after the payment of all of our debts, preferred stock and other liabilities.

Our certificate of incorporation also limits the number of shares that may be held by any one person or entity.  No person or entity may directly or indirectly acquire shares if it would cause the person or entity to be:

Our board has the authority and has in the past exercised their discretion to exempt shareholders from the foregoing limitations if such shareholders can provide evidence to assure the board that no NOLs will be lost or limited by such exemption or the board determines such exemption is in the best interests of Banyan.

Dividends

We intend to reinvest our earnings, if any, in the business, and have never declared or paid, and do not intend to declare or pay, any cash dividends on our common stock.  

Stock Options

In 2013, no compensatory stock options were issued.

Item 6.      Selected Financial Data. 

Not applicable.

Item 7.      Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included under Item 8 of this Annual Report on Form 10-K.

Overview

In September 2009, we completed the acquisition of all of the issued and outstanding stock of 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.

Wood Energy provided 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 $452.7 million as of 2012) and industrial customers.   We operated primarily in the southern region of the United States of America. Our services included removing scrap railroad ties (ties), disposing of the ties by selling them to the landscape and relay tie markets or having the ties ground to create chipped wood for subsequent sale as fuel to the co-generation markets.  

On January 11, 2013, Wood Energy filed a voluntary petition for reorganization relief under the provisions of Chapter 11 of Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court Southern District of Florida, which was voluntarily converted into a Chapter 7 Bankruptcy on February 5, 2013.

The assets of Wood Energy were liquidated by the Trustee of the Bankruptcy Court. The proceeds for the sale were used to satisfy a portion of the secured claims, with the remainder if any, allocated to the unsecured claims.

As a result of Banyan’s guarantee of Wood Energy’s outstanding secured debt, at the time of its bankruptcy filing, to Fifth Third Bank (“FTB” or “Fifth Third”), FTB filed an action against Banyan in the Circuit Court of the Fifteenth Judicial Circuit in Palm Beach County, Florida. The action was subsequently settled on September 26, 2013 when Banyan paid $200,000 to FTB which fully satisfied Banyan’s obligation and provided a full release for Banyan by FTB.

The Company’s ability to continue on a going-concern basis is dependent upon, among other things, raising capital, implementation of the reorganization plan and finding an operating business to acquire, and other factors, many of which are beyond our control.

The Company is actively seeking acquisitions of leading companies within the industrial, energy, transportation, technology and health care industries throughout North America, and intends to keep its statutory filings current during the process.

Recent Events

Common Stock Issuances

On September 24, 2013, the Company issued 48,000 shares of common stock to Banyan Rail Holdings LLC (Banyan Holdings) as part of a private placement of common stock in exchange for cash in the amount of $203,000 and cancellation of debt in the amount of $157,000. The proceeds of the money received were used to fund working capital requirements. Gary O. Marino, the Company’s Chairman, is the Chief Executive Officer of Banyan Holdings and a significant stockholder of Banyan Holding’s ultimate parent company.

On September 24, 2013, the Company issued 4,000 shares of common stock to Gary O. Marino as part of a private placement for $7.50 per share or $30,000 in the aggregate. Gary O. Marino is the Company’s Chairman of the Board. The proceeds were used to fund working capital requirements.

On September 30, 2013, the Company issued 2,000 shares of common stock to Donald Redfearn as part of a private placement for $7.50 per share or $15,000 in the aggregate. Donald Redfearn is the Company’s Chief Executive Officer and a director. The proceeds were used to fund working capital requirements.

On October 28, 2013, the Company issued 4,000 shares of common stock to Coalbrookdale Partners as part of a private placement of common stock in exchange for cash in the amount of $30,000. The proceeds of the money received were used to fund working capital requirements. Donald Denbo, a Director of Banyan Rail, is a partner in Coalbrookdale Partners.

On November 12, 2013, the Company issued 4,000 shares of common stock to the Paul S. Dennis Trust as part of a private placement of common stock in exchange for cash in the amount of $30,000. The proceeds of the money received were used to fund working capital requirements. Paul S. Dennis, a Director of Banyan Rail, is the trustee of the trust.

On December 31, 2013, the Company agreed to issue 16,230 shares of common stock to Banyan Rail Holdings, LLC (”Banyan Holdings”) in conjunction with the note payable entered into on December 31, 2013 in the amount of $150,000. The common shares were issued in January 2014. Our chairman is the President of Banyan Holdings. The fair market value of the shares at the date of grant have been recorded as additional interest expense on the Company’s Consolidated Statement of Operations.

On February 14, 2014, the Company agreed to issue 5,500 shares of common stock in connection with a $50,000 advance under the line of credit agreement it entered into with Banyan Holdings in the amount of $200,000. These shares were issued on February 26, 2014. The proceeds received were used to fund working capital requirements.

Reverse Stock Split

In September 2013, the Company effectuated a 1-for-5 reverse stock split pursuant to which each stockholder received one share of common stock for every five shares owned prior to the reverse split. All share and per share amounts in this Annual Report on Form 10-K have been adjusted retroactively to reflect this reverse stock split.

Officers and Directors Changes

On October 4, 2013, Bennett Marks resigned as a director of Banyan and the board of directors of the Company increased the number of directors from four to six and appointed Jon Ryan, Donald Denbo and Mark Friedman to fill the resulting vacancies.

Also on October 4, 2013, Gary O. Marino stepped down as the Company’s Chief Executive Officer but will remain Chairman of the Board. Concurrently, the Board elected Donald D. Redfearn to serve as the Chief Executive Officer of the Company and Jon Ryan to take over the role of President from Mr. Redfearn.

Financing Agreements

On December 31, 2013, the Company entered into a demand loan with Banyan Holdings in the amount of $150,000 at an annual interest rate of 10%. In addition, the Company issued 16,230 shares of common stock to Banyan Holdings as an incentive to enter into the note. These shares were issued on January 21, 2014. The proceeds received were used to fund working capital requirements. The fair market value of the shares at the date of grant, $162,300 has been recorded as common stock payable in the Company’s Consolidated Statements of Stockholders’ Equity and additional interest expense on the Company’s Consolidated Statement of Operations.

In January 2014, the Company issued 25,177 shares of common stock in lieu of $222,000 of the dividends accrued at year end.

On February 14, 2014, the Company entered into a demand line of credit with Banyan Holdings in the amount of $200,000 at an annual interest rate of 10%. In addition the Company agreed to issue shares of stock as an incentive to enter into the note at a ratio of 110 of the Company’s common shares for every $1,000 drawn on the line of credit. On February 14, 2014, the Company drew $50,000 on the line of credit and agreed to issue 5,500 shares of common stock. The shares were issued on February 26, 2014 and the proceeds received were used to fund working capital requirements.

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 year ended December 31, 2013, there were no significant changes to the critical accounting policies.

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 the useful lives of property and equipment, and the useful lives of intangible assets.

Cash

The Company considers all cash, bank deposits and highly liquid investments with an original maturity of three months or less to be cash.

Accounts Receivable

Trade accounts receivable are recorded net of an allowance for expected losses. An allowance is estimated from historical performance and projections of trends. Bad debt expense is charged to operations if write offs are deemed necessary. At December 31, 2012, the Company recorded an allowance for doubtful accounts of $63,938.

Property and Equipment

Property and equipment owned and under capital leases were carried at cost. Depreciation of property and equipment was provided using the straight line method for financial reporting purposes at rates based on the following estimated useful lives:

Expenditures for major renewals and betterments that extend the useful lives of property and equipment were capitalized. Expenditures for maintenance and repairs were charged to expense as incurred.

Fair Value of Financial Instruments

Recorded financial instruments at December 31, 2013 consist of cash, accounts payable and short-term 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 (loss) per share are computed based on weighted average shares outstanding during the period. Diluted earnings (loss) per share are 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 preferred stock common stock equivalents.

Discontinued Operations

The application of current accounting principles that govern the classification of our subsidiary as held-for-sale on our consolidated balance sheets, or the presentation of results of operations and gains on the sale or disposal of this subsidiary as discontinued, requires management to make certain significant judgments. In evaluating whether a subsidiary meets the criteria set forth, we make a determination as to the point in time that it is probable that disposal will be consummated. Therefore, based on our evaluation of our subsidiary in Chapter 7 Bankruptcy where we no longer have continuing involvement or cash flows, we have classified the subsidiary as discontinued operations. Certain prior year amounts have been reclassified to conform to the current year presentation.

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.

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.

Retained Earnings Distributions

The Company’s preferred stockholders are entitled to receive payment before any of the common stockholders upon a liquidation of the Company and we cannot pay dividends on our common stock unless we first pay dividends required by our preferred stock.

Consolidated Results of Operations - Banyan and Subsidiary

The following table summarizes our results for the years ended December 31, 2013 and 2012:

General and administrative expenses

General and administrative expenses include: compensation, professional fees and costs related to being a public company, amortization of identifiable intangible assets and other costs. The below table summarizes the general and administrative expenses for the years ended December 31, 2013 and 2012:

General and administrative expenses for the year ended December 31, 2013 were $505,976 as compared to $736,548 for the year ended December 31, 2012. The primary reason for the decrease was a reduction in compensation costs of $157,150 and other costs of $106,304. The decrease in compensation costs is due to the reduction in staffing as a result of the bankruptcy of Wood Energy. The reduction in other costs in the amount of $106,304 was due primarily rent savings of $72,000 due to the Company sharing office space with a related party at no cost, a reduction in travel costs of approximately $23,000 and taxes and licenses of approximately $12,000. These reductions were partially offset by increased professional fees of $32,882, which related to costs associated with the subsidiary bankruptcy and public filings associated with the reverse stock split.

Interest expense

Interest expense was $162,300 for the year ended December 31, 2013 is due to the discount interest to Banyan Holdings, on a demand note entered into on December 31, 2013. See “Recent Events – Financing Agreements” for more information concerning the equity grant.

Income tax expense

Income tax expense was $0 for the year ended December 31, 2013 as compared to the $569,582 for the year ended December 31, 2012. The decrease in expense is the result of the Company recording a full valuation allowance against its deferred tax assets in the amount of $569,582 during the year ended December 31, 2012.

A valuation allowance offsets net deferred tax assets for which future realization is considered to be less likely than not. A valuation allowance is evaluated by considering all positive and negative evidence about whether the deferred tax assets will be realized. At the time of evaluation, the allowance can be either increased or reduced. A reduction could result in the complete elimination of the allowance, if positive evidence indicates that the value of the deferred tax assets is no longer impaired and the allowance is no longer required.

The Company's net deferred tax assets before valuation allowance as of December 31, 2013 was $1,900,776, most of which relates to net operating losses that expire from 2018 to 2033. The Company recorded an operating loss for the year and has a recent history of operating losses. After assessing the realization of the net deferred tax assets, we have recorded a valuation allowance of 100% of the value of the net deferred tax assets as we currently believe it more likely than not that the Company will not realize operating profits and taxable income so as to utilize all of the net operating losses in the near future.

Net income (loss) attributable to common stockholders

Net income attributable to common stockholders was $1.11 per share for the year ending December 31, 2013 compared to a net loss attributable to common shareholders of ($12.81) per share for the year ended December 31, 2012. The difference of $13.92 per common share is primarily due a net gain as a result of the disposal of the Company’s operating subsidiary of approximately $1.8 million versus the prior year loss from discontinued operations of ($7.6) million.

Financial Condition and Liquidity

Cash consists of cash and short-term investments. Our cash balances at December 31, 2013 and 2012 were $27,124 and $5,745, respectively. The following is a summary of our cash flow activity for the years ended December 31, 2013 and 2012:

Net cash used in operating activities

For the year ended December 31, 2013, our net income of $1,142,827 adjusted for non-cash expenses and benefits was approximately $(899,358). This was offset by an increase in accounts payable which provided cash of approximately $100,508, a decrease in accounts receivable of approximately $22,000 and a decrease in prepaids and other current assets of approximately $21,000. For the year ended December 31, 2012, our net loss of $(8,920,051) adjusted for non-cash expenses and benefits was approximately $(2,035,000). This was offset by an increase in accounts payable which provided cash of approximately $225,000 and a decrease in accounts receivable which provided cash of approximately $65,000.

At December 31, 2013, the Company had a net working capital deficiency of approximately $563,000 as compared to a net working capital deficiency of approximately $5,600,000 at December 31, 2012. The change in net working capital deficiency is primarily the result of the bankruptcy and subsequent deconsolidation of the Company’s operating subsidiary. The Company recognizes that as a result of the Bankruptcy petition and the lack of operations and cash flow that it will have to rely upon future capital contributions from investors to generate cash flow for the foreseeable future.

Net cash used in investing activities

During the year ended December 31, 2012, the Company purchased $1,023,945 of equipment for use in its former operating subsidiary.

Net cash provided by financing activities

During 2013 the Company issued 160,822 shares of its common stock for $771,800 to Banyan Holdings. The proceeds of the money received were used to fund working capital requirements.

Preferred stock dividends for Series A, B and C are accrued for the semi-annual period ended December 31, 2013 in the amount of $382,267. During 2012, due to the lack of cash flow, the Company offered to pay the accrued dividends in common stock in lieu of cash. Substantially all preferred shareholders accepted the common stock in lieu of cash and the Company paid $600,895 of dividends in common stock in 2013.

New Accounting Pronouncements

In July 2013 the Financial Accounting Standards Board (“FASB”) issued ASU 2013-11, Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). This guidance requires an entity to present unrecognized tax benefits as a decrease in a net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. The determination of whether a deferred tax asset is available is based on the unrecognized tax benefit and the deferred tax asset that exists at the reporting date and presumes disallowance of the tax position at the reporting date.

The guidance will eliminate the diversity in practice in the presentation of unrecognized tax benefits but will not alter the way in which entities assess deferred tax assets for realizability.

The amendments are effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after 15 December 2014. The amendments should be applied prospectively to unrecognized tax benefits that exist at the effective date. Early adoption is permitted.

In February 2013, FASB issued ASU 2013-02, Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income This guidance requires companies to report, in one place, information about reclassifications out of accumulated other comprehensive income (AOCI). Companies also are required to present reclassifications by component when reporting changes in AOCI balances. For significant items reclassified out of AOCI to net income in their entirety in the period, companies must report the effect of the reclassifications on the respective line items in the statement where net income is presented. In certain circumstances, this can be done on the face of that statement. Otherwise, it must be presented in the notes. For items not reclassified to net income in their entirety in the period (e.g., pension amounts that are capitalized in inventory), companies must cross-reference in a note to other required disclosures.

The amendments are effective for public companies in fiscal years, and interim periods within those years, beginning after 15 December 2012. For nonpublic companies, the ASU is effective for fiscal years beginning after 15 December 2013, and interim and annual periods thereafter. The guidance should be applied prospectively.

Off-Balance Sheet Financing Arrangements

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

Inflation

We do not believe inflation had a material impact on our results of operations for the years ended December 31, 2013 and 2012.

Item 7A.     Quantitative and Qualitative Disclosures About Market Risk.

Not applicable.

Item 8.      Financial Statements and Supplementary Data.

Our consolidated financial statements for the years ended December 31, 2013 and 2012 follow this annual report, beginning on page F-1.

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

Not applicable.

Item 9A.  Controls and Procedures. 

Evaluation of Disclosure Controls and Procedures

As of December 31, 2013, our management, under the direction of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended. Based on this evaluation, our chief executive officer and chief financial officer each concluded that our disclosure controls and procedures were effective as of December 31, 2013.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining an adequate system of internal control over financial reporting as defined in Exchange Act Rule 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements for external purposes in accordance with generally accepted accounting principles defined in the Exchange Act.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements and even when determined to be effective, can only provide reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with policies or procedures may deteriorate.

At the end of December 31, 2013 we carried out evaluations under the direction of the Chief Executive Officer and Chief Financial Officer of our effectiveness of internal control over financial reporting. In making this evaluation, management used the criteria set forth in Internal Control Over Financial Reporting — Guidance for Smaller Public Companies (2006) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO. At December 31, 2013, based upon those evaluations, management concluded that our internal control over financial reporting was effective as of December 31, 2013.

Attestation Report of Independent Registered Public Accounting Firm

This annual report does not include an attestation report of our registered public accounting firms regarding internal control over financial reporting. Management’s report on internal control over financial reporting was not subject to attestation by our registered public accounting firms pursuant to Section 989G of the Dodd Frank Wall Street Reform and Consumer Protection Act and rules of the Securities and Exchange Commission.

Item 9B.     Other Information.

None.

PART III

Item 10.     Directors, Executive Officers and Corporate Governance.

Directors and Executive Officers

Our directors and executive officers are:

Gary O. Marino, age 69, joined our board in January 2007, was appointed chairman in January 2008 and also served as our chief executive officer from November 2008 until he stepped down in October 2013. Mr. Marino served as chairman, president and CEO of Patriot Rail Corp. which was traded on the NYSE, an owner and operator of short line and regional railroads, from 2005 until 2012, and formerly held the same positions at RailAmerica, Inc. a company he founded in 1985, until his retirement in 2004. From 1984 until 1993, Mr. Marino served as chairman, president and CEO of Boca Raton Capital Corporation, a publicly owned venture capital investment company. Prior to that he spent more than fifteen years in commercial banking in New York as a senior loan officer and was also president and CEO of two small business investment companies (SBICs), as well as president of a Florida-based commercial bank. Mr. Marino received his B.A. degree from Colgate University and his M.B.A. from Fordham University. From 1966 to 1969, he served as an officer of the United States Army Ordnance Corps. He has also served on the board of directors of the American Association of Railroads. We believe Mr. Marino is well qualified to serve on the board due to his extensive knowledge of the railroad industry as well as his banking experience.

Paul S. Dennis, age 75, joined the board in January 2007 and was appointed interim chief financial officer in February 2007 and interim chief executive officer in April 2008. Mr. Dennis stepped down as interim CEO and CFO in November 2008. Mr. Dennis has served as president and CEO of Associated Health Care Management Company, Inc. since 1977. Health Care Management is a Cleveland, Ohio based company that managed eight nursing care facilities and four congregate living facilities. The company has sold all but one of its facilities. Mr. Dennis has also been a director and officer with various companies and business ventures in the hardware distribution, pharmaceuticals distribution and steel fabrication industries and a real estate developer, general contractor, owner and investor. We believe Mr. Dennis is highly qualified to serve on Banyan’s board due to his broad experience as an entrepreneur and CEO.

Donald D. Redfearn, age 61, joined the board in January 2012. Mr. Redfearn was appointed our Chief Executive Officer in October 2013. In addition he served as our President from May 2011 until October 2013. Mr. Redfearn has been the owner of Redfearn Enterprises, LLC, a real estate holding company, since 2007. From 2004 to 2007, he served as president of RailAmerica, Inc., a railroad holding company which was traded on the NYSE, and from 1989 to 2004 he served as executive vice president of RailAmerica. He also served as a director of RailAmerica since its inception in 1986 through 2007. Mr. Redfearn received his B.A. degree in Business Administration from the University of Miami and graduated from the School of Banking of the South at Louisiana State University. Active in local charities, Mr. Redfearn is a member of the United Way Leadership Circle. We believe Mr. Redfearn is highly qualified to serve as a director due to his experience in the railroad industry.

Jon Ryan, age 42, serves as and was appointed as Banyan Rail’s Chief Financial Officer in May 2011. In addition Mr. Ryan joined the board and was appointed as our President in October 2013. He has over 16 years of major accounting firm experience, including as a Senior Assurance Manager at both Ernst & Young in Fort Lauderdale, Florida, and Smoak, Davis & Nixon LLP in Jacksonville, Florida. Most recently he was Corporate Controller at the The Gazit Group, USA, a subsidiary of Gazit-Globe, one of the world’s leading multi-national real estate development and management companies. Mr. Ryan, a CPA, holds a Bachelor of Business Administration from the University of North Florida.

Mark L. Friedman, age 66, was joined the board in October 2013. Mr. Friedman has over 40 years of business experience. Since 1993 Mr. Friedman has been a private equity and venture capital investor, currently serving as the Managing Partner of Constellation Investment Partners LLC (which he co-founded in 2001). He has also served as a director and audit committee member of several publicly-traded companies. While practicing corporate finance law as a partner at the law firm Shea & Gould, a major international law firm based in New York, Mr. Friedman represented primarily investment banking firms including Bear Sterns, Alex Brown, Drexel Burnham and Goldman Sachs. He co-founded RCL Capital Partners in 1992, which purchased substantial equity positions in Allied Digital Technologies and Disc Graphics. In 1986, he served as counsel and one of five principal investors in a structured leveraged buyout of Checker Motors Corporation. Mr. Friedman received a B.A. in History in 1970 (Magna Cum Laude) and a J.D. in 1973 (Cum Laude) from the University of Pennsylvania. He was elected to Phi Beta Kappa and served as Articles Editor of the University of Pennsylvania Law Review.

Don Denbo, age 64, joined the board in October 2013. Mr. Denbo has over 40 years of business experience, and is a founding member of Commercial Insurance Associates, LLC (CIA), and an independent insurance agency specializing in risk management for a diversified client base. His knowledge and practice is varied, as it encompasses his more than 30 years of success in the insurance industry. In addition Mr. Denbo has been an owner of Denbo Metal Recovery and a director of Tennessee Valley Recycling LLC, Bancroft Technology Group, Jet Plex Associates, Shadowbluff Development, Reid Hill and Greymont Kennels, LLC. Mr. Denbo’s education includes a B.S. and M.S. in Psychology from the University of Tennessee, studies at the Vanderbilt School of Medicine and a PhD in Economics from the London School of Economics.

The board of directors has established certain attributes that it seeks in identifying candidates for directors. In particular they look for individuals who have very high integrity, business savvy, an owner-oriented attitude and a deep genuine interest in Banyan. These are the same attributes that Gary O. Marino, Banyan’s Chairman and former CEO, believes to be essential if one is to be an effective member of the Board of Directors. In considering candidates for director, the board considers the entirety of each candidate’s credentials in the context of these attributes. In the judgment of the Board as a whole, each of the candidates being nominated for director possesses such attributes.

Committees of the Board

We are currently a shell company without operations and are presently investigating potential acquisition candidates. As a result, our directors have not designated audit, nominating or other committees. Instead, these responsibilities are handled by the entire board. Without an audit committee, we have not designated a director as an “audit committee financial expert” as defined by SEC rules. Although we are pleased with the diverse skills and level of expertise that our directors possess, we may add additional directors as our operations grow and form appropriate committees at that time.

Code of Ethics

In March 2004, our board of directors unanimously adopted a code of conduct and ethics that applies to all of our officers, directors and employees, including our principal executive officer and principal financial and principal accounting officer. We will provide a copy of our code without charge upon written request to Donald D. Redfearn, 2255 Glades Road, Suite 111-E, Boca Raton, Florida 33431.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Act of 1934 requires our directors and executive officers, and persons who own more than 10% of our common stock, to make filings with the SEC reporting their ownership of our common stock and to furnish us with copies of these filings. In 2013, Gary O. Marino, our Chairman, failed to timely file a Form 4 on one occasion reporting the acquisition of shares of common stock. Also in 2013, Donald Denbo and Mark Friedman, two of our directors, failed to timely file their respective Form 3’s following their appointments to the board of directors. Based solely on our review of copies of reports furnished to us, we believe all other Section 16(a) filing requirements were timely met in 2013. Copies of these filings are available on the SEC’s website at www.sec.gov.

Director Nominations

Our board of directors does not have a nominating committee. Instead, the board believes it is in the best interests of the Company to rely on the insight and expertise of all directors in the nominating process.

Our directors will recommend qualified candidates for director to the full board and nominees are subject to approval by a majority of our board members. Nominees are not required to possess specific skills or qualifications; however, nominees are recommended and approved based on various criteria including relevant skills and experience, personal integrity and ability and willingness to devote their time and efforts to Banyan. Qualified nominees are considered without regard to age, race, color, sex, religion, disability or national origin. We do not use a third party to locate or evaluate potential candidates for director. The board of directors considers nominees recommended by stockholders according to the same criteria. A stockholder desiring to nominate a director for election must deliver a notice to our president at our principal executive office. The notice must include as to each person whom the stockholder proposes to nominate for election or re-election as director:

and as to the stockholder giving the notice:

We may require any proposed nominee to furnish additional information reasonably required by us to determine the eligibility of the proposed nominee to serve as our director.

Item 11.     Executive Compensation.

Summary Compensation Table

The following table summarizes the compensation paid by us to our chairman, president and chief executive officer and our other most highly compensated executive officers receiving more than $100,000 annually.

Outstanding Equity Awards at December 31, 2013

The following table summarizes information with respect to the stock options held by the executive officers and employees listed in our summary compensation table as of December 31, 2013.

Director Compensation

No compensation was paid to our directors in 2013.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The following table lists the stock ownership of our directors, executive officers listed under executive compensation and significant stockholders as of March 1, 2014.

Equity Compensation Plan Information

We have not issued any other options, warrants or rights in 2013 or 2012. In 2013, 600 options expired for former employee. Our equity plans are summarized in the following table.

Item 13.     Certain Relationships and Related Transactions, and Director Independence.

Transactions with Related Parties

On August 29, 2011, Wood Energy entered into a lease with a former related party for a new facility in Gibsland, La. This lease was compromised under the laws of Chapter 7 bankruptcy. This facility replaced the Company’s facility in Shreveport, La. The lease took effect in January 2012 upon the completion of development of the site. The lease called for annual rental payments of $10,000 per year and an additional commitment of 1,200 railcars per year to the leased facility at a rate of $300 per car.

During 2012 the Company issued 9,950 shares of its Series C Preferred Stock of Banyan Holdings. The preferred shares were issued for $100 a share, or $995,000 in the aggregate.

On September 24, 2012, the Company issued 112,822 shares of common stock for $500,000 to Banyan Holdings. The proceeds were used for both working capital purposes.

On November 12, 2012, the Company entered into a demand loan with Banyan Holdings in the amount of $150,000 at an annual interest rate of 6%. The proceeds received were used to fund working capital requirements. The loan was subsequently converted into 1,500 shares of its Series C Preferred stock.

On December 28, 2012, the Company entered into a demand loan with Banyan Holdings in the amount of $225,000 at an annual interest rate of 6%. The proceeds received were used to fund working capital requirements.

On March 20, 2013, the Company issued 564,110 shares of common stock to Banyan Holdings in exchange for the cancellation of the loan payable in the amount of $225,000 and the advances of $186,800.

On September 24, 2013, the Company issued 4,000 shares of common stock to Gary O. Marino for $7.50 a share or $30,000 in total, and 48,000 Shares to Banyan Holdings for $7.50 a share or $360,000 ($203,000 of cash and $157,000 in cancellation of previous advances) in total. The proceeds from the sale were used for working capital purposes.

Also in September and November 2013, the Company issued 6,000 shares of common stock to officers and directors of the Company for $7.50 a share, for an aggregate total of $45,000, as part of a private placement of common stock. The proceeds of the money received were used to fund working capital requirements.

On October 31, 2013, the Company issued 4,000 shares of common stock to Coalbrookdale Partners for a price of $7.50 a share, as part of a private placement of common stock in exchange for cash in the amount of $30,000. The proceeds of the money received were used to fund working capital requirements. Donald Denbo, a Director of the Company, is a partner in Coalbrookdale Partners.

On December 31, 2013, the Company entered into a demand promissory note with Banyan Holdings in the amount of $150,000 at an annual interest rate of 10%. The proceeds were used to fund working capital requirements. In connection with the demand promissory note, the Company issued 16,230 shares of common stock to Banyan Holdings on January 21, 2014 to induce Banyan Holdings to loan the Company working capital.

Director Independence

Our board has determined that three of our six directors, Paul S. Dennis, Donald Denbo and Mark L. Friedman, are “independent” as defined by NASDAQ Stock Market Listing Rule 5605(a) (2). Although we are not listed for trading on the NASDAQ stock market, we have selected the NASDAQ rules as an appropriate guideline for determining the independence of our board members.

Item 14.     Principal Accounting Fees and Services.

Daszkal Bolton LLP serves as our independent registered public accounting firm and was paid $77,250 and $95,500 for their audit and review of the financial statements and financial information contained in our filings for the years ended December 31, 2013 and 2012, respectively. Additionally, Daszkal Bolton LLP has been approved by the audit committee and paid $12,695 and $13,500 to perform certain tax services for the years ended December 31, 2013 and 2012, respectively.

Because of the small size of our board, the directors have not designated an audit committee.  Instead, these responsibilities are handled by the entire board, which considers and pre-approves any audit or non-audit services to be performed by Daszkal Bolton LLP. Our board believes the services provided by Daszkal Bolton LLP are compatible with maintaining our auditor’s independence.

Item 15.     Exhibits, Financial Statement Schedules.

*Filed herewith.

**Management contract or compensatory plan or arrangement.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, Banyan Rail Services Inc. caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of Banyan Rail Services Inc. and in the capacities and on the dates indicated.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

Banyan Rail Services Inc.

We have audited the accompanying consolidated balance sheets of Banyan Rail Services Inc. (the “Company”) as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ (deficit) equity, and cash flows for each of the years then ended. The Company’s management is responsible for these consolidated financial statements. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the 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. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 financial position of the Company as of December 31, 2013 and 2012, and the results of its operations and its cash flows for each of the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. The Company has a net capital deficiency and continues to experience recurring losses and negative cash flows from operations. In addition, during 2013, the operating subsidiary of the Company filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court Southern District of Florida, which consequently was converted to a case under Chapter 7 of the Bankruptcy Code. As a result, the assets of the operating subsidiary were liquidated and deconsolidated from the Company. These matters raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans regarding those matters are described in the footnotes accompanying the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.

/s/ Daszkal Bolton, LLP

Boca Raton, Florida

March 27, 2014

Banyan Rail Services Inc. and Subsidiary

Consolidated Balance Sheets

As of December 31,

See Notes to Consolidated Financial Statements

Banyan Rail Services Inc. and Subsidiary

Consolidated Statements of Operations

See Notes to Consolidated Financial Statements.

Banyan Rail Services Inc. and Subsidiary

Consolidated Statements of Cash Flows

See Notes to Consolidated Financial Statements.

Banyan Rail Services Inc. and Subsidiary

Consolidated Statements of Stockholders’ (Deficit) Equity

Periods Ended December 31, 2013 and 2012

See Notes to Consolidated Financial Statements.

Notes to 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. and purchased The Wood Energy Group, Inc. (“Wood Energy” or “Wood”). Wood Energy was engaged in the business of railroad tie reclamation and disposal.

On January 11, 2013, Wood Energy filed a voluntary petition for reorganization relief under the provisions of Chapter 11 of Title 11 of the United States Bankruptcy Code in the United States Bankruptcy Court Southern District of Florida, which was voluntarily converted into a Chapter 7 bankruptcy on February 5, 2013. The assets of Wood were liquidated by the Trustee of the Bankruptcy Court. The proceeds from the sale were used to satisfy a portion of secured claims, with the remainder if any, allocated to the unsecured claims.

The Company is actively seeking acquisitions of leading companies within the industrial, energy, transportation, technology and health care industries throughout North America.

See Note 12, Subsidiary Bankruptcy and Settlement Agreement, regarding a settlement of the corporate guarantee for certain debts.

Going Concern (See Note 5) The Company’s ability to continue on a going-concern basis is dependent upon, among other things, raising capital, implementation of the reorganization plan and finding an operating business to acquire, and other factors, many of which are beyond our control.

Note 2.  Basis of Presentation

The accompanying consolidated financial statements give effect to all adjustments necessary to present fairly the financial position and results of operations and cash flows of the Company. All significant intercompany transactions and accounts have been eliminated in consolidation.

Certain reclassifications have been made to the 2012 financial statements to conform to the classifications used in 2013. In September 2013, the Company effectuated a 1 for 5 reverse split of its common stock. Share and per share amounts have been adjusted retroactively to reflect this transaction.

Note 3.  Summary of Significant Accounting Policies

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 the useful lives of property and equipment, and the useful lives of intangible assets.

Cash

The Company considers all cash, bank deposits and highly liquid investments with an original maturity of three months or less to be cash equivalents. From time to time our cash deposits exceed federally insured limits.

Accounts Receivable

Trade accounts receivable at December 31, 2012 were recorded net of an allowance for expected losses. An allowance was estimated from historical performance and projections of trends. Bad debt expense was charged to operations as write offs were deemed necessary. As of December 31, 2012, the Company recorded an allowance for doubtful accounts of $63,938.

Property and Equipment

Property and equipment owned and under capital leases were carried at cost. Depreciation of property and equipment was provided using the straight line method for financial reporting purposes at rates based on the following estimated useful lives:

Expenditures for major renewals and betterments that extend the useful lives of property and equipment were capitalized. Expenditures for maintenance and repairs were charged to expense as incurred.

Fair Value of Financial Instruments

Recorded financial instruments as of December 31, 2013 consist of cash, accounts payable and short-term 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 (loss) per share is computed based on the weighted average shares outstanding during the period. Diluted earnings (loss) 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.

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.

Retained Earnings distributions

The Company’s preferred stockholders are entitled to receive payment before any of the common stockholders upon a liquidation of the Company and we cannot pay dividends on our common stock unless we first pay dividends required by our preferred stock.

Note 4.  Recently Issued Accounting Pronouncements

In July 2013 the Financial Accounting Standards Board (“FASB”) issued ASU 2013-11, Income Taxes (Topic 740), Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists (a consensus of the FASB Emerging Issues Task Force). This guidance requires an entity to present unrecognized tax benefits as a decrease in a net operating loss, similar tax loss or tax credit carryforward if certain criteria are met. The determination of whether a deferred tax asset is available is based on the unrecognized tax benefit and the deferred tax asset that exists at the reporting date and presumes disallowance of the tax position at the reporting date.

The guidance will eliminate the diversity in practice in the presentation of unrecognized tax benefits but will not alter the way in which entities assess deferred tax assets for realizability.

The amendments are effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after 15 December 2013. For nonpublic entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after 15 December 2014. The amendments should be applied prospectively to unrecognized tax benefits that exist at the effective date. Early adoption is permitted.

In February 2013, FASB issued ASU 2013-02, Comprehensive Income (Topic 220), Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income This guidance requires companies to report, in one place, information about reclassifications out of accumulated other comprehensive income (AOCI). Companies also are required to present reclassifications by component when reporting changes in AOCI balances. For significant items reclassified out of AOCI to net income in their entirety in the period, companies must report the effect of the reclassifications on the respective line items in the statement where net income is presented. In certain circumstances, this can be done on the face of that statement. Otherwise, it must be presented in the notes. For items not reclassified to net income in their entirety in the period (e.g., pension amounts that are capitalized in inventory), companies must cross-reference in a note to other required disclosures.

The amendments are effective for public companies in fiscal years, and interim periods within those years, beginning after 15 December 2012. For nonpublic companies, the ASU is effective for fiscal years beginning after 15 December 2013, and interim and annual periods thereafter. The guidance should be applied prospectively.

Note 5. Liquidity and Going Concern

At and for the period ended December 31, 2013, the Company had a net working capital deficiency of approximately $562,600 and incurred negative cash flows from operating activities of approximately $797,800. The Company recognizes the need to raise additional funds in order to meet working capital requirements. We cannot be certain that we will be able to obtain financing on favorable terms or at all. If we are unable to raise needed capital, our growth and our ability to continue as a going concern will be curtailed. In addition, if we raise capital by selling additional shares of stock, the percentage ownership of current shareholders in Banyan will be diluted.

Note 6. Preferred Stock and Common Stock

Preferred stock dividends for Series A, B and C are accrued for the semi-annual period ended December 31, 2013 in the amount of $382,267. During 2012, due to the lack of cash flow, the Company offered to pay the accrued dividends in common stock in lieu of cash. Substantially all preferred shareholders accepted the common stock in lieu of cash and the common shares for these dividends.

As of December 31, 2013, Banyan Rail Holdings LLC (“Banyan Holdings”) owned 3,000, 10,000, 17,800 and 496,826 shares of Series A Preferred, Series B Preferred, Series C Preferred and Common stock, respectively. If converted Banyan Holdings would own 842,560 shares of common stock at December 31, 2013.

Note 7.  Property and Equipment

Property and equipment consist of the following:

Depreciation expense was $2,445 and $938,993 for the years ended December 31, 2013 and 2012, respectively. Depreciation expense for 2013 and 2012 are included in general & administrative expense and loss from discontinued operations in the consolidated statements of operations, respectively.

Note 8.  Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consist of the following:

Note 9.  Stock-Based Compensation

The Company has stock option agreements with its directors for serving on the Company’s board of directors and with certain officers and employees as part of their compensation. The option activity is as follows for years ended December 31, 2013 and 2012:

Prior to 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 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.

The fair value of shares that vested was $5,189 and $5,538 for the years ended December 31, 2013 and 2012, respectively.

As of December 31, 2013 total compensation cost related to non-vested awards not yet recognized was $2,619 to be recognized over a 12 month period.

Note 10. Income Taxes 

The provision for income taxes consists of the following components:

The current income tax benefit relates to a reduced level of uncertain tax positions identified in ASC 740 -10 Income Taxes. The components of deferred income tax assets and liabilities are as follows:

The Company’s federal net operating loss (“NOL”) carryforward balance as of December 31, 2013 was $4,892,596, expiring between 2018 and 2033.

A schedule of the NOLs is as follows: