Broad Street Realty, Inc. - Quarter Report: 2014 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

For the quarterly period ended September 30, 2014

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 þNo ¨

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 þ

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 þ No ¨

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 1,563,424 shares of common stock, $0.01 par value per share, as of November 19, 2014.

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

Banyan Rail Services Inc. and Subsidiary

Condensed Consolidated Statements of Operations

(Unaudited)

See Notes to Condensed Consolidated Financial Statements.

Banyan Rail Services Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(Unaudited)

See Notes to Condensed Consolidated Financial Statements.

Banyan Rail Services Inc. and Subsidiary

Condensed Consolidated Statements of Stockholders’ Deficit

Periods Ended September 30, 2014 and December 31, 2013

See Notes to Condensed Consolidated Financial Statements.

Notes to Condensed 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. 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 10, Subsidiary Bankruptcy and Settlement Agreement, regarding a settlement of the corporate guarantee for certain debts.

Going Concern (See Note 4) The Company’s ability to continue on a going-concern basis is dependent upon, among other things, raising capital and finding an operating business to acquire, and other factors, many of which are beyond our control.

Note 2.  Basis of Presentation

The accompanying condensed consolidated financial statements give effect to all normal and recurring 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 2013 condensed consolidated financial statements to conform to the classifications used in 2014.

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 and bank deposits to be cash. From time to time our cash deposits exceed federally insured limits.

Fair Value of Financial Instruments

Recorded financial instruments as of September 30, 2014 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. Liquidity and Going Concern

At and for the nine month period ended September 30, 2014, the Company had a net working capital deficiency of $678,418 and sustained negative cash flows from operating activities of $171,305. 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 5. Preferred Stock and Common Stock

On September 30, 2014 the Company completed an offering to its Preferred stockholders to convert its outstanding Preferred Stock into common stock, in addition to its accrued and outstanding Preferred stock dividends into common shares. As a result of this offering the holders substantially all of the preferred stock agreed to convert and the Company agreed to issue 442,145 shares of common stock in conjunction with this conversion. The shares were issued on November 18, 2014.

Preferred stock dividends for Series A, B and C are accrued for the semi-annual period ended September 30, 2014 in the amount of $124,884. During 2012, due to the lack of cash flow, the Company offered to settle 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 part of this offer, the Company issued 25,671 shares of common stock in lieu of $222,000 of dividends.

As of September 30, 2014, Banyan Rail Holdings LLC (“Banyan Holdings”) owned, inclusive of its shares to be issued in connection with the conversion of Preferred stock discussed above, 918,706 shares of Common stock.

Note 6. Income Taxes 

For the nine months ended September 30, 2014 and 2013, the Company recorded an income tax provision of $0. The effective tax rate for the nine months ended September 30, 2014 and 2013 was 0%. The tax rate differs from the statutory federal rate of 34% primarily due to valuation allowances recorded on the Company’s net operating loss carry forward 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 7. Earnings (loss) per Share

The Company excluded from the diluted earnings per share calculation 103,750 and 533,097 shares issuable upon conversion of shares of convertible preferred stock that were outstanding at September 30, 2014 and 2013, respectively, as their inclusion would be anti-dilutive. In addition, the Company excluded 27,500 stock options as of September 30, 2014 as their inclusion would be anti-dilutive.

Note 8.  Stock-Based Compensation

The Company has stock option agreements with its directors and officers for serving on the Company’s Board of Directors and as officers. The options activity is as follows:

Prior to September 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 9. Related Party Transactions

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.

On February 14, 2014, the Company entered into a 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 shares for every $1,000 drawn on the line of credit. As of September 30, 2014, the Company had drawn $150,000 on the line of credit and issued 16,500 shares of common stock to Banyan Holdings. The proceeds were used to fund working capital requirements.

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

The Company’s board of directors and officers directly or beneficially own 1,113,411 shares of common stock, inclusive of the common shares to be issued in connection with the Preferred stock conversion discussed in Note 5, as of September 30, 2014, or 1,141,744 shares, if their options are exercised.

Note 10. Subsidiary Bankruptcy and Settlement Agreement

On January 11, 2013, The 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.

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 2013 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 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.

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 Quarterly Report on Form 10-Q have been adjusted retroactively to reflect this reverse stock split.

Recent Events

Common Stock

On September 8, 2014 the Company issued 25,671 shares of common stock in lieu of $222,000 of dividends.

On September 30, 2014 the Company completed an offering to its Preferred stockholders to convert its outstanding Preferred Stock into common stock, in addition to its accrued and outstanding Preferred stock dividends into common shares. As a result of this offering the holders of substantially all the preferred shares agreed to convert and the Company agreed to issue 442,145 shares of common stock in connection with the conversion.

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 nine months ended September 30, 2014, 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 and bank deposits to be cash.

Fair Value of Financial Instruments

Recorded financial instruments at September 30, 2014 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.

Results from Operations

The following table summarizes our results for the three and nine months ended September 30, 2014 and 2013:

Banyan Rail Services Inc. and Subsidiary

Condensed Consolidated Statements of Operations

General and administrative expenses

General and administrative expenses include: compensation, professional fees and costs related to being a public company.

For the three and nine months ended September 30, 2014, costs decreased $50,078 and $91,386 or 45.3% and 23.4% respectively, compared to the three and nine months ended September 30, 2013.

The overall decrease in general and administrative costs for the three months ended September 30, 2014 as compared to the three months ended September 30, 2013 is primarily due to:

The overall decrease in general and administrative costs for the nine months ended September 30, 2014 as compared to the nine months ended September 30, 2013 is primarily due to:

Interest expense

Interest expense for the three and nine months ended September 30, 2014 increased by $7,667 and $159,250, respectively, compared to the three and nine months ended September 30, 2013. The increase is the result of the financing agreements the Company obtained from a related party to fund working capital requirements.

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, 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 (Loss) Income

Net loss attributable to common stockholders was $0.17 per share for the three months ended September 30, 2014 as compared to the net loss of $0.31 per share for the three months ended September 30, 2013. The change is primarily the result of the reduction of general and administrative expenses of $0.05 for the period and the decrease in amortization of preferred stock beneficial conversion feature of $0.04.

Net loss attributable to common stockholders was $0.75 per share for the nine months ended September 30, 2014 as compared to net income of $1.04 per share for the nine months ended September 30, 2013. The change was primarily the result of a decrease in income associated with discontinued operations of $1.70 and an increase in interest expense of $0.15; offset by decreased costs associated with general and administrative costs of $0.08 and a decrease in amortization of preferred stock beneficial conversion feature of $0.10.

Financial Condition and Liquidity

Our cash balance at September 30, 2014 and 2013 was $5,819 and $48,394, respectively.

The following is a summary of our cash flow activity:

Net cash used in operating activities

For the nine months ended September 30, 2014, cash used by operating activities was $171,305. The primary use of cash was to fund the normal operating activities of the Company.

Net cash provided by financing activities

For the nine months ended September 30, 2014, net cash provided by financing activities was $150,000. The primary source of cash was a $150,000 advance on a line of credit that the Company received from Banyan Holdings.

At September 30, 2014, the Company had a net working capital deficiency of $678,418 as compared to a net working capital deficiency of $562,589 at December 31, 2013. The increase is due to the normal costs associated with a public entity without operations. The Company recognizes that as a result of 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 Chairman, 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 September 30, 2014. Further, there have been no changes in our internal control over financial reporting during the quarter ended September 30, 2014 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

Not applicable.

On September 8, 2014 the Company issued 25,671 shares of common stock in lieu of $222,000 of dividends accrued on shares of the Company’s Preferred stock.  The issuance of the shares was made in reliance on section 4(2) of the Securities Act of 1933 for the offer and sale of securities not involving a public offering and Rule 506 of Regulation D of the Securities Act.

On September 30, 2014 the Company completed an offering to its Preferred stockholders to convert its outstanding Preferred Stock into common stock, in addition to its accrued and outstanding Preferred stock dividends into common shares.  As a result of this offering the holders of substantially all the preferred shares agreed to convert and the Company agreed to issue 442,145 shares of common stock in connection with the conversion.  The shares were issued on November 18, 2014.  The issuance of the shares was made in reliance on section 4(2) of the Securities Act of 1933 for the offer and sale of securities not involving a public offering and Rule 506 of Regulation D of the Securities Act.

Not applicable.

For information regarding significant events of the second quarter, please turn to “Recent Events” on page 12.

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.