Broad Street Realty, Inc. - Quarter Report: 2013 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2013

¨ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Commission file number: 1-9043

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 x 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 x

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.

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 4,430,724 shares of common stock, $0.01 par value per share, as of July 15, 2013.

Table of Contents

Part I — Financial Information

Item 1. Financial Statements

Banyan Rail Services Inc. and Subsidiary

 Condensed Consolidated Balance Sheets

See Notes to Condensed Consolidated Financial Statements.

See Notes to Condensed Consolidated Financial Statements.

Banyan Rail Services Inc. and Subsidiary

Consolidated Statements of Stockholders’ (Deficit) Equity

Periods Ended June 30, 2013 and 2012

See Notes to Consolidated Financial Statements.

 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 interest on its investments. With a change in management in 2008, it was determined that the Company would seek acquisitions in rail related businesses. On September 4, 2009, the Company purchased 100% of the common stock of The Wood Energy Group, Inc. (“Wood Energy” or “Wood”). Wood Energy was engaged in the business of railroad tie reclamation and disposal, principally in the southern region.

Bankruptcy of Subsidiary. 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, Case No. 13 – 10688-PGH. We were not successful in arranging financing to continue to operate our business as debtors and debtors-in-possession under the jurisdiction of the Bankruptcy Court, and therefore on February 5, 2013, Wood filed a motion to voluntarily convert the case to a Chapter 7 Bankruptcy. The filing of the Chapter 11 petitions triggered repayment obligations under a number of our debt instruments and agreements. As a result, all of our debt obligations became immediately payable. We believe that any efforts to enforce the payment obligations of Wood are stayed as a result of the Chapter 11 and Chapter 7 filings.

As a result of Wood’s noncompliance with payment terms to Fifth Third Bank (“FTB”) under a $3.0 million term note, and Wood’s subsequent bankruptcy filing, on February 7, 2013, FTB filed an action against Banyan in the Circuit Court of the Fifteenth Judicial Circuit in Palm Beach County, Florida (Case No. CA002288XXXXMB). At the time, Wood also owed amounts to FTB under a $1.0 million working capital line and a $520,000 capital expenditure line. The Wood indebtedness was guaranteed by Banyan.

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

See Note 6, Settlement Agreement Payable, 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, satisfaction of the settlement agreement dated June 26, 2013 related to the corporate guarantee for certain debt (see Note 6) and other obligations, 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

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 for the periods presented.

All significant intercompany transactions and accounts have been eliminated in consolidation.

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, 2012 filed with the SEC.

The results of operations for the six months ended June 30, 2013 are not necessarily indicative of the results to be expected for the full 2013 year.

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 and Cash Equivalents

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

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. As of June 30, 2013 and December 31, 2012, the Company recorded an allowance for doubtful accounts of $0 and $63,938, respectively.

Property and Equipment

Property and equipment owned and under capital leases are carried at cost. Depreciation of property and equipment is 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 are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.

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.

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.

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.

Note 4. Recently Issued Accounting Pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update 2011-05, "Presentation of Comprehensive Income." This update provided entities with an option of presenting the total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. This update eliminated the option to present the components of other comprehensive income as part of the statement of changes in stockholders' equity. The Company adopted this update in 2012. Adoption affected the manner of presentation of the components of comprehensive income in the Company's consolidated financial statements, but did not have an impact on the Company's consolidated balance sheets, statement operations or cash flows. Accounting Standards Update 2011-12 delayed the effective date of certain requirements of Accounting Standards Update 2011-05 related to the presentation of reclassifications of items out of accumulated other comprehensive income.

Note 5. Liquidity and Going Concern

At and for the period ended June 30, 2013, the Company had a net working capital deficiency of approximately $776,000, and incurred negative cash flows from operating activities of approximately $370,000. The Company recognizes that with the bankruptcy of its operating entity, Wood Energy, we will need to raise additional funds in order to meet working capital requirements. 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 necessary 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.

The term loan and lines of credit from the bank, for which we are in default (see Note 6), were not fully satisfied from the sale of all assets of Wood Energy. The unsatisfied amount is guaranteed by Banyan and will require additional capital raises to meet the obligations pursuant to our June 26, 2013 settlement agreement. We cannot be certain that we will be able to obtain the funding required to meet this obligation. If we are unsuccessful in our attempts to raise additional capital, there would be a material adverse effect on the Company.

Note 6. Settlement Agreement Payable

As a result of Wood’s noncompliance with payment terms to Fifth Third Bank (“FTB” or “Fifth Third) under a $3.0 million term note, and Wood’s subsequent bankruptcy filing, on February 7, 2013, FTB filed an action against Banyan in the Circuit Court of the Fifteenth Judicial Circuit in Palm Beach County, Florida (Case No. CA002288XXXXMB). At the time, Wood also owed amounts to FTB under a $1.0 million working capital line and a $520,000 capital expenditure line. The Wood indebtedness was guaranteed by Banyan.

On June 26, 2013 Banyan and FTB agreed to settle the action filed against Banyan by FTB in the Circuit Court of the Fifteenth Judicial Circuit in Palm Beach County, Florida (Case No. CA002288XXXXMB). The settlement agreement calls for Banyan to pay to FTB the amount of $200,000 by September 26, 2013. If Banyan fails to make the agreed upon payment, FTB will be granted a judgment in the full amount of the deficiency, plus fees and interest.

Note 7. Preferred and Common Stock

On March 5, 2013, the Company issued 385,975 shares of common stock in lieu of $378,895 of cash dividends to its preferred shareholders for dividends in arrears as of December 31, 2012.

On March 20, 2013, the Company issued 564,110 shares of common stock to Banyan Rail Holdings LLC (Banyan Holdings) in exchange for the cancellation of the loan payable in the amount of $225,000 and the advances of $186,800 subsequent to December 31, 2012. The proceeds of the money received were used to fund working capital requirements. Banyan Holdings is a company in which Gary O. Marino, the Company’s Chairman and Chief Executive Officer, is the Chief Executive Officer and a significant stockholder of Banyan Holding’s ultimate parent company.

Dividends for Series A, B and C Preferred stock are accrued for the semi-annual period ended June 30, 2013 in the amount of $354,517. During 2012, due to the lack of cash flow, the Company offered to pay the accrued dividends in the form of shares of 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 were paid on March 5, 2013.

As of June 30, 2013, Banyan Holdings owned 3,000, 10,000, 17,800 and 1,936,132 shares of Series A Preferred, Series B Preferred, Series C Preferred and Common stock, respectively. If all shares of Preferred stock were converted by Banyan Holdings, it would own 3,664,805 shares or 59.5% of common stock.

Note 8. Income Taxes 

For the six months ended June 30, 2013 and 2012, the Company recorded an income tax provision of $0, respectively. The effective tax rate for the six months ended June 30, 2013 and 2012 was 0%, respectively. The tax rate differs from the statutory federal rate of 34% primarily due to valuation allowances recorded on the Company’s net operating loss carryforward generated during the period. The Company recorded an operating loss for the quarter, when excluding the one-time gain from discontinued operations, 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 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 future.

Note 9. Earnings per Share

The Company excluded from the diluted earnings per share calculation 2,665,486 and 1,964,030 shares issuable upon conversion of shares of convertible preferred stock that were outstanding at June 30, 2013 and 2012, as their inclusion would be anti-dilutive. In addition, the Company excluded 228,000 stock options as of June 30, 2013 as their inclusion would be anti-dilutive.

Note 10.  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:

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.

Note 11. Related Party Transactions

The Company’s directors, chief executive officer and president are currently not receiving cash compensation for their services, and no amounts have been recorded in the Company’s financial statements for the cash value of their services.

The Company’s board of directors, officers, and officers of its subsidiary directly or beneficially own 49,950 shares of the Company’s preferred stock and 2,359,876 shares of common stock as of June 30, 2013 or 4,374,549 shares, if the preferred is converted.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Cautionary Statement Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q 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,” of our 2012 Annual Report on Form 10-K. 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 our 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.

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 was a railroad tie reclamation and disposal company. Founded in 2001, we 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 $378.8 million as of 2011) 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. In 2012, we removed and disposed of approximately 520,000 railroad ties, 73% of which were used by the co-generation market and 27% for the landscape and relay markets.

Bankruptcy of Subsidiary. 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, Case No. 13 – 10688-PGH. We were not successful in arranging financing to continue to operate our business as debtors and debtors-in-possession under the jurisdiction of the Bankruptcy Court, and therefore on February 5, 2013 Wood Energy filed a motion to voluntarily convert the case to a Chapter 7 Bankruptcy. The filing of the Chapter 11 petitions triggered repayment obligations under a number of our debt instruments and agreements. As a result, all of our debt obligations became immediately payable. We believe that any efforts to enforce the payment obligations of Wood are stayed as a result of the Chapter 11 and Chapter 7 filings.

As a result of Wood’s noncompliance with payment terms to Fifth Third Bank (“FTB” or “Fifth Third”) under a $3.0 million term note, and Wood’s subsequent bankruptcy filing, on February 7, 2013, FTB filed an action against Banyan in the Circuit Court of the Fifteenth Judicial Circuit in Palm Beach County, Florida (Case No. CA002288XXXXMB). At the time, Wood also owed amounts to FTB under a $1.0 million working capital line and a $520,000 capital expenditure line. The Wood indebtedness was guaranteed by Banyan.

On June 26, 2013 Banyan and Fifth Third agreed to settle the action filed against Banyan by FTB concerning the Wood Energy debt. The settlement agreement calls for Banyan to pay to FTB the amount of $200,000 by September 26, 2013. If Banyan fails to make the agreed upon payment, FTB will be granted a judgment in the full amount of the deficiency, plus fees and interest.

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

The Company’s ability to continue on a going-concern basis is dependent upon, among other things, raising capital, satisfaction of the settlement agreement dated June 26, 2013 related to the corporate guarantee of the FTB debt, implementation of the reorganization plan and finding an operating business to acquire, and other factors, many of which are beyond our control.

Recent Events

Settlement Agreement Payable

On June 26, 2013 Banyan and Fifth Third agreed to settle the action filed against Banyan by FTB concerning the Wood Energy debt. The settlement agreement calls for Banyan to pay to FTB the amount of $200,000 by September 26, 2013. If Banyan fails to make the agreed upon payment, FTB will be granted a judgment in the full amount of the deficiency, plus fees and interest.

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 quarter ended June 30, 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 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.

Cash and Cash Equivalents

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

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. As of June 30, 2013 and December 31, 2012, the Company recorded an allowance for doubtful accounts of $0 and $63,938, respectively.

Property and Equipment

Property and equipment owned and under capital leases are carried at cost. Depreciation of property and equipment is 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 are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred.

Fair Value of Financial Instruments

Recorded financial instruments consist of cash, accounts receivable, accounts payable, short-term and long-term debt 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 number of 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 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.

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.

Results from Operations

The following table summarizes our results for the three and six months ended June 30, 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.

For the three and six months ended June 30, 2013, costs decreased $79,836 and $134,720 or 43.6% and 32.5% compared to the three and six months ended June 30, 2012.

The overall decrease in general and administrative costs is primarily due to:

Income tax expense

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 recorded an operating loss for the quarter, when excluding the one-time gain from discontinued operations, 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)

Net loss attributable to common stockholders of $0.06 per share for the three months ended June 30, 2013 as compared to $0.17 per share June 30, 2012. The change was primarily the result of decreased costs associated with general and administrative costs of $0.03, decreased loss associated with discontinued operations of $0.04 and the decrease in income tax provision of $0.03.

Net income (loss) attributable to common stockholders of $0.27 per share for the six months ended June 30, 2013 as compared to $(0.27) per share June 30, 2012. The change is primarily the result of the gain of $0.55 per share attributable to the disposal and deconsolidation of Wood Energy as a result of the chapter 7 liquidation. In addition, the increase in income per share is the result of a decrease in general and administrative expenses of $0.02, which is offset by an increased loss from discontinued operations of $0.08 per share.

Financial Condition and Liquidity

Our cash and cash equivalents consist of cash. Our cash and cash equivalents balance at June 30, 2013 and 2012 was $2,131 and $5,745, respectively.

The following is a summary of our cash flow activity:

Net cash used in operating activities

For the six months ended June 30, 2013, cash used by operating activities was $370,445. The primary use of cash was $100,000 for the bankruptcy petition related to Wood Energy and normal operating activities of the Company. For the six months ended June 30, 2012, cash used by operating activities was $907,465. The primary use of cash was an increase in accounts receivable of $607,875 and an increase in prepaid and other assets (primarily inventory) of $236,738, which were related to discontinued operations

Net cash used in investing activities

During the six months ended June 30, 2012, the Company purchased $819,357 of equipment primarily for the processing of ties at its Louisiana grinding facility, as well as for the pickup and removal of ties for the an existing customer, which were related to its discontinued operation.

Net cash provided by financing activities

For the six months ended June 30, 2013, net cash provided by financing activities was $366,831. The primary sources of cash was approximately $312,000 the Company received in advances from Banyan Holdings, which were subsequently converted to common stock and approximately $55,000 of additional advances on the Wood Energy line of credit prior to Wood’s filing for Chapter 11 protection.

At June 30, 2013, the Company had a net working capital deficiency of approximately $776,000 as compared to a net working capital deficiency of approximately $5,600,000 at December 31, 2012. The primary reason for the change in working capital deficiency from December 31, 2012 was the bankruptcy petition and the subsequent deconsolidation of Wood Energy. The Company recognizes that as a result of the Wood Energy bankruptcy petition and the lack of operations and cash flow that it will have to rely upon sales of stock or future capital contributions from investors to generate cash flow for the foreseeable future.

Off-Balance Sheet Arrangements

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

How to Learn More about Banyan

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 561-997-7775.

Item 4. 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, 2013. Further, there have been no changes in our internal control over financial reporting during the quarter ended June 30, 2013 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)).

Part II — Other Information

Item 1. Legal Proceedings

As a result of Wood Energy’s failure to make the January 2013 payment to FTB under a $3.0 million term note (in addition to the term loan, Wood Energy has a $1.0 million working capital line of credit and a $500,000 capital expenditure line of credit with FTB; Banyan has guaranteed all three loans), and Wood’s subsequent bankruptcy filing, on February 7, 2013, FTB filed an action against Banyan in the Circuit Court of the Fifteenth Judicial Circuit in Palm Beach County, Florida (Case No. CA002288XXXXMB).

On June 26, 2013 Banyan and FTB agreed to settle the action in the amount of $200,000 payable to FTB by September 26, 2013. If Banyan fails to make the agreed upon payment FTB will be granted a judgment in the full amount of the deficiency, plus fees and interest.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

See “Legal Proceedings” above concerning Wood’s default on its debt with FTB.

Item 5. Other Information

For information regarding significant events of the second quarter, please turn to “Recent Events” on page 14.

Item 6. Exhibits

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.