10-Q/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

(Mark One)

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

For the quarterly period ended June 30, 2011

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

Commission file number: 1-9043

Banyan Rail Services Inc.
(Exact name of registrant as specified in its charter)
Delaware	36-3361229
(State of incorporation)	(I.R.S. Employer Identification No.)
2255 Glades Road, Suite 342-W, Boca Raton, Florida  33431
(Address of principal executive offices)
561-997-7775
(Registrant’s telephone number)

Indicate by a check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes þ   No ¨

Indicate by a check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large Accelerated Filer  ¨                                                    Accelerated Filer  ¨

Non-Accelerated Filer  ¨                                                    Smaller Reporting Company  þ

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

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 3,045,856 shares of common stock, $0.01 par value per share, as of August 9, 2011.

Explanatory Note

The purpose of this Amendment No. 1 to Banyan Rail Services Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, filed with the Securities and Exchange Commission on August 15, 2011 (the “Form 10-Q”), is solely to furnish Exhibits 101 to the Form 10-Q in accordance with Rule 405 of Regulation S-T. Exhibits 101 to this report provide the condensed consolidated financial statements and related notes from the Form 10-Q formatted in XBRL (eXtensible Business Reporting Language).

No other changes have been made to the Form 10-Q. This Amendment No. 1 to the Form 10-Q speaks as of the original filing date of the Form 10-Q, does not reflect events that may have occurred subsequent to the original filing date, and does not modify or update in any way disclosures made in the original Form 10-Q.

Item 6.              Exhibits

31.1 Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer Pursuant to § 302 of the Sarbanes-Oxley Act of 2002*

31.2 Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer Pursuant to § 302 of the Sarbanes-Oxley Act of 2002*

32 Rule 13a-14(b)/15d-14(b) Certification Pursuant to § 906 of the Sarbanes-Oxley Act of 2002*

101.INS  XBRL Instance Document.**

101.SCH  XBRL Taxonomy Extension Schema Document.**

101.CAL  XBRL Taxonomy Calculation Linkbase Document.**

101.LAB  XBRL Taxonomy Label Linkbase Document.**

101.PRE  XBRL Taxonomy Presentation Linkbase Document.**

101.DEF  XBRL Taxonomy Extension Definition Linkbase Document.**

* Furnished, not filed.

** Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability.

Signatures

In accordance with the requirements of the Securities Exchange Act of 1934, Banyan Rail Services Inc. has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Banyan Rail Services Inc.
Date: September 12, 2011	By:	/s/ Jon Ryan
		Jon Ryan,
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-31.1

 Exhibit 31.1

Rule 13a-14(a)/15d-14(a) Certification of

Principal Executive Officer Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002

I, Gary O. Marino, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Banyan Rail Services Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 12, 2011	By:	/s/ Gary O. Marino
		Gary O. Marino
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

 Exhibit 31.2

Rule 13a-14(a)/15d-14(a) Certification of

Principal Financial Officer Pursuant to Section 302

of the Sarbanes-Oxley Act of 2002

I, Jon Ryan, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Banyan Rail Services Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)        Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)        Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)       All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)       Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 12, 2011	By:	/s/ Jon Ryan
		Jon Ryan
		Chief Financial Officer
		(Principal Financial Officer)

EX-32

Exhibit 32

Certification Pursuant to 18. U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the quarterly report of Banyan Rail Services Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2011(the “Report”) filed with the Securities and Exchange Commission on the date hereof, I, Gary O. Marino, Chairman and Chief Executive Officer of the Company, and I, Jon Ryan, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:

(1)           The Report fully complies with the requirements of § 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)           The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Gary O. Marino

Gary O. Marino

Chairman and Chief Executive Officer

/s/ Jon Ryan

Jon Ryan

 Chief Financial Officer

September 12, 2011

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2011	Dec. 31, 2010
Common stock, par value	$ 0.01	$ 0.01
Common stock, authorized	7,500,000	7,500,000
Common stock, issued	3,045,856	3,045,856
Treasury stock, shares	28,276	28,276
Series A Preferred stock
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	20,000	20,000
Preferred stock, shares issued	20,000	20,000
Series B Preferred Stock
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	10,000	10,000
Preferred stock, shares issued	10,000	10,000

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Condensed Consolidated Statements of Operations (USD $)	3 Months Ended		6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010	Jun. 30, 2011	Jun. 30, 2010
Revenues	$ 1,598,428	$ 1,365,680	$ 2,908,316	$ 2,622,238
Cost of sales	1,183,128	1,266,464	2,166,841	2,096,035
Gross profit	415,300	99,216	741,475	526,203
General & administrative expenses	567,320	415,595	1,073,381	891,926
Loss from operations	(152,020)	(316,379)	(331,906)	(365,723)
Interest expense	81,261	70,677	156,206	159,365
Gain on extinguishment of debt				(25,092)
Loss before income taxes	(233,281)	(387,056)	(488,112)	(499,996)
Income tax provision				(4,300)
Net loss	(233,281)	(387,056)	(488,112)	(504,296)
Dividends for the benefit of preferred stockholders:
Preferred stock dividends	(74,269)	(45,807)	(141,269)	(88,474)
Amortization of preferred stock beneficial conversion feature	(38,851)	(75,000)	(65,843)	(1,872,500)
Total dividends for the benefit of preferred stockholders	(113,120)	(120,807)	(207,112)	(1,960,974)
Net loss attributable to common stockholders	$ (346,401)	$ (507,863)	$ (695,224)	$ (2,465,270)
Weighted average number of common shares outstanding:
Basic and diluted	3,045,856	3,042,791	3,045,856	3,040,571
Net loss per common share, basic and diluted	$ (0.08)	$ (0.13)	$ (0.16)	$ (0.17)
Net loss attributable to common shareholders per share	$ (0.11)	$ (0.17)	$ (0.23)	$ (0.81)

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Document and Entity Information	6 Months Ended
	Jun. 30, 2011	Aug. 09, 2011
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2011
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q2
Trading Symbol	BARA
Entity Registrant Name	BANYAN RAIL SERVICES INC.
Entity Central Index Key	0000764897
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		3,045,856

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Convertible Debentures and Preferred Stock

6 Months Ended

Jun. 30, 2011

Convertible Debentures and Preferred Stock

Note 6. Convertible Debentures and Preferred Stock

In connection with the purchase of Wood Energy, the Company issued $1,525,000 of convertible debentures bearing interest at 10% per annum and payable in five years. The debentures were convertible into the Company’s common stock at $2.00 per share. In accordance with ASC 470-20 (Debt with Conversion and Other Options), the Company determined that the convertible debentures had beneficial conversion features because the embedded conversion feature was an “in-the-money” issuance. Therefore the embedded beneficial conversion feature was valued separately at issuance. The convertible debentures met the definition of “conventional convertible debt” because the number of shares which may be issued upon the conversion of the debt is fixed. Therefore, the beneficial conversion feature qualified for equity classification.

Subsequently in February 2010, the Company completed an exchange of the outstanding convertible debentures for shares of convertible preferred stock. The holders of 100% of the outstanding debentures agreed to the exchange, and 15,250 shares of series A convertible preferred stock were issued. Similar to the debentures, holders of the Series A Convertible preferred stock are entitled to an annual cash dividend of 10% payable semi-annually, and each share of preferred stock is convertible into 50 shares of common stock at the holder’s option. The holders of the preferred stock are not entitled to redeem their shares for cash. In accordance with ASC 470-20, the Company has determined that the preferred stock includes a beneficial conversion feature and a discount valued at $1,525,000 has been accounted for as a dividend in 2010.

During the remainder of 2010, the Company issued 4,750 additional shares of Series A Convertible preferred stock. The Company has determined that these issuances also include beneficial conversion features and discounts valued at $475,000 which has been accounted for as dividends for the year ended December 31, 2010. These proceeds were used for working capital purposes.

In October 2010, the Company filed a certificate of designation with the Delaware Secretary of State designating 10,000 shares of its preferred stock as Series B Preferred stock. The issuance price of the Series B Preferred stock is $100 per share and it is convertible into 44.4 shares of common stock by the holder at any time after the following conditions are met:

(i)   The Common Stock is listed for trading on Nasdaq or any national securities exchange;

(ii)   The bid price of the Common Stock is equal to or exceeds $5.00 a share for 30 consecutive days, and thereafter so long as the bid price continues to equal or exceed $5.00 per share;

(iii)   The trading volume of the Common Stock is equal to or exceeds 10,000 shares a day for 30 consecutive days, and thereafter so long as the daily trading volume continues to equal or exceed 10,000 shares; or

(iv)   October 15, 2013.

At that time the Company may also elect to convert or redeem the Series B Preferred stock. The conversion price is $2.25 per share of common stock, subject to adjustment for stock dividends, stock splits and reorganizations.

The Company issued 6,000 shares of its Series B Preferred stock through December 31, 2010. In the six months ended June 30, 2011, the Company issued 4,000 shares of Series B Preferred stock. All shares of the Series B Preferred Stock were issued to Patriot Rail Services Inc. Gary O. Marino, the Company’s Chairman and Chief Executive Officer, is also a significant stockholder of the owner of Patriot Rail Services Inc. The preferred shares were issued for $100 per share.

As of June 30, 2011, Patriot Rail Services Inc. owned 3,000, 10,000 and 568,281 shares of Series A Preferred, Series B Preferred and common stock, respectively.  If converted Patriot Rail Services Inc. would own 1,145,481 shares of common stock.

In July 2011, the Company filed a certificate of designation with the Delaware Secretary of State designating 10,000 shares of its preferred stock as Series C Preferred stock. The issuance price of the Series C Preferred stock is substantially the same as Series A and B Preferred stock with the exception of the conversion price and the date of conversion as June 30, 2014.

The conversion pricewill be the closing price of the Company’s Common Stock on the trading date preceding the issuance of that share of Series C Preferred Stock, subject to adjustment for stock dividends, stock splits and reorganizations.  If the Common Stock is not quoted on any market or exchange, the Conversion Price will be determined by the Board of Directors on the date of issuance.

The Series C Preferred stock ranks senior to the common stock and pari-passu with the Series A and Series B Preferred stock of the Company as to dividends and distribution of assets upon the liquidation, dissolution or winding up of the Company.

On August 3, 2011, the Company issued 1,000 shares of its Series C Preferred stock to Patriot Rail Services, Inc.  The preferred shares were issued for $100 per share, or $100,000 in the aggregate at a conversion price of $2.06 per share of common stock.  The proceeds of the money received in 2011 were used to fund working capital requirements.

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Related Party Transactions

6 Months Ended

Jun. 30, 2011

Related Party Transactions

Note 11. Related Party Transactions

In September 2009, the Company entered into two 5-year employment agreements and one month-to-month consulting agreement with individuals who are shareholders and/or officers of the Company. The aggregate expense under these agreements was $110,000 and $224,850 for the three and six months ended June 30, 2011 and $104,000 and $208,000 for the three and six months ended June 30, 2010, respectively.

The Company leases office space and receives office services from Patriot Rail Corp., a company related by certain common management and ownership, for $5,000 per month. These costs are included in General and Administrative expenses in the statement of operations. The costs for the six months ended June 30, 2011 and 2010 are each $30,000, respectively.   On July 26, 2011 this cost was increased to  $6,000 per month.

Our 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 21,000 shares of the Company’s series A and series B preferred stock and 1,266,407 shares of common stock as of June 30, 2011 or 2,021,027 common shares, if the preferred is converted.

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Basis of Presentation

6 Months Ended

Jun. 30, 2011

Basis of Presentation

Note 2.  Basis of Presentation

We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for Form 10-Q and Regulation S-X. In the opinion of management, these condensed consolidated financial statements give effect to all normal recurring adjustments necessary to present fairly the financial position and results of operations and cash flows of the Company and Wood Energy, its wholly owned subsidiary, for the periods presented.

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

Certain reclassifications have been made to the 2010 financial statements to conform to the classifications used in 2011.

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, 2010 filed with the Securities and Exchange Commission.

The results of operations for the three and six-month periods ended June 30, 2011 are not necessarily indicative of the results to be expected for the full 2011 year.

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Earnings per Share

6 Months Ended

Jun. 30, 2011

Earnings per Share

Note 8. Earnings per Share

The Company excluded from the diluted earnings per share calculation 1,444,444 and 1,258,750 shares issuable upon conversion of shares of convertible preferred stock that were outstanding at June 30, 2011 and 2010, respectively, as their inclusion would be anti-dilutive.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2011

Stock-Based Compensation

Note 9.  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:

				Weighted		Weighted		Weighted
				Average		Average		Average
	Number			Exercise Price		Fair Value at		Remaining		Intrinsic
	of Shares			per Share		Grant Date		Contractual Life		Value
Balance January 1, 2010		225,000			3.20						13,875
Options granted		140,500			2.91	$	121,125	3.8 years			-
Options exercised		(25,000	)		1.50						(37,500	)
Options expired		(87,500	)		3.50				-		-
Balance, December 31, 2010		253,000		$	3.08			3.5 years		$	(23,625	)
Options granted		-			-						-
Options exercised		-			-						-
Options expired		-			-				-		-
Balance, June 30, 2011		253,000		$	3.08			3.2 years		$	(23,625	)

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. With a change in management in 2008, it was determined that the Company would seek acquisitions in railroad related businesses.  Accordingly, the 2010 expected volatility rate was estimated using the average volatility rates of seven public companies in the railroad industry. The Company uses an estimated forfeiture rate of 0% due to limited experience with historical forfeitures.

The assumptions used in the option-pricing models during 2010 were as follows:

	2010
Risk free interest rate		1.39-2.37	%
Expected life (years)		5
Expected volatility		29	%
Dividend yield		0

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Income Taxes

6 Months Ended

Jun. 30, 2011

Income Taxes

Note 7. Income Taxes 

The provision for income taxes consists of the following components:

	Six months ended June 30,
	2011		2010
Current (benefit) expense	$	-	$	43,022
Deferred Tax (benefit)		-		(38,722	)
	$	-	$	4,300

The components of deferred income tax assets and liabilities are as follows:

	June 30,			December 31,
	2011			2010
Long-term deferred tax assets:
Stock compensation benefit	$	215,185		$	206,170
Net operating loss carryforward		1,480,689			1,375,108
Total long-term deferred tax assets		1,695,874			1,581,278
Valuation allowance		(144,926	)		-
		1,550,948			1,560,938
Long-term deferred tax liabilities:
Intangible assets		(500,862	)		(546,804	)
Property and equipment		(480,504	)		(464,892	)
Total long-term deferred tax liabilities		(981,366	)		(1,011,696	)
Net deferred tax assets (liabilities)	$	569,582		$	569,582

Our Federal net operating loss (“NOL”) carryforward balance as of June 30, 2011 was $4,271,252, expiring  between 2011 and 2030. Management has assessed the realization of the deferred tax assets and has determined that it is more likely than not that a significant portion will be realized.  A schedule of the NOLs is as follows:

	Net operating
Tax Year	loss
1996	$	111,017
1997		66,707
1998		184,360
1999		187,920
2000		25,095
2001		104,154
2002		15,076
2003		96,977
2004		78,293
2005		70,824
2006		48,526
2007		180,521
2008		534,087
2009		1,444,831
2010		812,332
Current year taxable  loss		310,532
	$	4,271,252

The Company's net deferred tax assets before valuation allowance as of June 30, 2011 was approximately $714,000, most of which relates to net operating losses that expire from 2011 to 2030. The Company recorded an operating loss for the six months ended June 30, 2011 and has a history of operating losses. The Company has maintained the value of the deferred tax asset as we believe it more likely than not that the Company will realize operating profits and taxable income so as to utilize the net operating losses in the future. However, the Company has recorded a valuation allowance due to the potential that the 1996 and 1997 net operating losses will expire before being utilized.

The Company is subject to income taxes in the U.S. federal jurisdiction and a number of state jurisdictions. The tax regulations within each jurisdiction are subject to interpretation of related tax laws and regulations and require significant judgment to apply. With few exceptions, the Company is no longer subject to U.S. federal, state and local examinations by tax authorities for the years before 2007.

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Consolidated Statements of Stockholders' Equity (USD $)	Total	Common Stock	Preferred Stock	Additional Paid in Capital	Accumulated Deficit	Treasury Stock	Series A Preferred stock	Series A Preferred stock Preferred Stock	Series A Preferred stock Additional Paid in Capital	Series B Preferred Stock	Series B Preferred Stock Preferred Stock	Series B Preferred Stock Additional Paid in Capital
Beginning Balance at Dec. 31, 2009	$ 3,964,100	$ 30,204		$ 91,885,936	$ (87,881,351)	$ (70,689)
Beginning Balance (in shares) at Dec. 31, 2009		3,020,414				28,276
Stock compensation expense	91,097			91,097
Exercise of stock options (in shares)		25,000
Exercise of stock options	37,500	250		37,250
Net loss	(977,851)				(977,851)
Preferred stock dividends	(194,038)			(194,038)
Common Stock Adjustment (in shares)		442
Common Stock Adjustment	4	4
Issuance of preferred stock (in shares)								20,000			6,000
Issuance of preferred stock							1,202,006	200	1,201,806	600,000	576,437	23,563
Ending Balance at Dec. 31, 2010	4,722,818	30,458	576,637	93,045,614	(88,859,202)	(70,689)
Ending Balance (in shares) at Dec. 31, 2010		3,045,856	26,000			28,276
Stock compensation expense	25,758			25,758
Net loss	(488,112)				(488,112)
Preferred stock dividends	(141,269)			(141,269)
Issuance of preferred stock (in shares)											4,000
Issuance of preferred stock										393,382	334,156	59,226
Ending Balance at Jun. 30, 2011	$ 4,512,577	$ 30,458	$ 910,793	$ 92,989,329	$ (89,347,314)	$ (70,689)
Ending Balance (in shares) at Jun. 30, 2011		3,045,856	30,000			28,276

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2011

Summary of Significant Accounting Policies

Note 3.  Summary of Significant Accounting Policies

Revenue Recognition

The Company recognizes revenue for the pick-up and disposal of used railroad ties upon the completion of the scope of work required under its contracts, which is when the Company considers amounts to be earned (evidence of an arrangement has been obtained, services are delivered, fees are fixed and determinable and collectability is reasonably assured).  Accordingly, monies received or progress invoices for services for which contracts have not been completed have been recorded as deferred revenue on the balance sheet.  Direct costs, including but not limited to payroll, fuel, equipment rental, transportation expense and strapping costs for contracts which have not been completed are also deferred until the related revenue process is complete.

The Company receives revenue from the processing of railroad ties into scrap tie fuel and the sale of certain scrap ties to landscapers, railroad tie users (relay) and other railroad tie processors.  These revenues are recorded when the ties or derivative materials are delivered to the customer.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.  Significant estimates include deferred revenue, costs incurred related to deferred revenue, the useful lives of property and equipment, 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 doubtful accounts.  An allowance is estimated from historical performance and current market and economic conditions.  Uncollectible accounts are charged to operations if write offs are deemed necessary.  As of June 30, 2011 and December 31, 2010 no allowance has been provided as all accounts receivable are deemed collectible.

Under the completed contract method of revenue recognition the Company has recorded progress payments received for uncompleted contracts as deferred revenue in the amounts of $1,455,073 and $758,849 as of June 30, 2011 and December 31, 2010, respectively.  Amounts that had not been billed and were not billable to customers at the balance sheet dates are $667,650 and $758,849 as of June 30, 2011 and December 31, 2010, respectively.  These amounts represent unbilled future amounts due under existing contracts to be recognized as revenue upon the removal of all of each contract’s ties from the customer’s premises.

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:

	Years
Machinery and equipment	3-7
Track on leased properties	4

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.

Valuation of Long-Lived Assets

The Company reviews long-lived assets for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  In evaluating the fair value and future benefits of its assets, management performs an analysis of the anticipated undiscounted future net cash flows of the individual assets over the remaining amortization period or an appraisal of market value is obtained.

Fair Value of Financial Instruments

Recorded financial instruments consist of cash, accounts receivable, accounts payable, and short-term and long-term debt and lease obligations. The related fair values of these financial instruments approximated their carrying values due to either the short-term nature of these instruments or based on the interest rates currently available to the Company.

Earnings Per Share

Basic earnings per share is computed based on the weighted average shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of common and dilutive common stock equivalent shares outstanding during the period. Dilutive common stock equivalent shares consist of the dilutive effect of stock options and convertible preferred stock equivalents.

Goodwill and Intangibles

Goodwill is not amortized but rather is tested at least annually for impairment.  The Company assesses impairment by comparing the fair value of the goodwill with its carrying value.  The determination of fair value involves significant management judgment.  Impairments are expensed when incurred.  For goodwill, a two-step impairment model is used.  The first step compares the fair value of the reporting unit with its carrying amount, including goodwill.  If the fair value of the reporting unit is less than the carrying amount, goodwill would be considered impaired.  The second step measures the goodwill impairment as the excess of the recorded goodwill over the asset’s implied fair value.  During the six months ended June 30, 2011 and 2010, there were no impairments of goodwill.

Intangible assets that have finite useful lives continue to be amortized over their estimated useful lives.

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.

Inventory

Inventory includes the costs of material, labor and direct overhead and is stated at the lower of cost or market.  Inventory is accumulated to service the landscape tie, relay tie and scrap tie fuel markets.  Inventory at June 30, 2011 was approximately $30,000 and included in prepaid and other current assets on the balance sheet.

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.  In addition, the Company is unable to pay dividends on its common stock until dividends are paid on  its preferred stock.

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Capital Leases

6 Months Ended

Jun. 30, 2011

Capital Leases

Note 4.  Capital Leases

The Company leases equipment used in its operations under capital leases that expire over two to five years. Payments under these capital leases were $45,732 and $27,580 for the six months ended June 30, 2011and 2010.

At June 30, 2011, the total future minimum rental commitments under all the above operating leases are as follows:

For the years ending December 31,
2011	$	59,910
2012		119,960
2013		60,043
2014		5,450
2015		5,450
Net minimum lease payments		250,813
Less amount representing interest		27,675
Present value of net minimum lease payments		223,138
Amount representing current portion		(100,298	)
Capital leases payable, less current portion	$	122,840

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Subsequent Events

6 Months Ended

Jun. 30, 2011

Subsequent Events

Note 12. Subsequent Events

On July 26, 2011 we granted our Chief Financial Officer an incentive stock option to purchase 25,000 share of our common stock for $2.06 per share.  The options vest in three equal annual installments beginning July 26, 2012 and expire on July 26, 2016.

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Term Loan and Revolving Credit Line

6 Months Ended

Jun. 30, 2011

Term Loan and Revolving Credit Line

Note 5. Term Loan and Revolving Credit Line

The Company had a $3.0 million senior secured term loan, a $1.0 million working capital credit line and a $1.0 million capital expenditure credit line.  At December 31, 2010, the Company was not in compliance with certain financial covenants.  On April 1, 2011, the lender granted a waiver with respect to non-compliance with the financial covenants at December 31, 2010. On April 7, 2011, the Company and its Wood Energy subsidiary amended its credit facility with the bank.  In this respect, (i) the $1.0 million working capital credit line was extended to April 1, 2012, (ii) approximately $720,000 borrowed on the $1.0 million line of credit for capital expenditures was converted into a term loan and (iii) a new capital expenditure line of $500,000 was granted.

The $720,000 term loan matures on September 3, 2014, the same date as Wood Energy’s existing $1,950,000 term loan.

The new $500,000 capital expenditure line matures on April 1, 2012, at which time the amount outstanding will convert to a term loan which matures on September 3, 2014.

The maximum loan advances on the working capital line are based on specific percentages of eligible working capital amounts, including accounts receivable and inventory. Draws on the capital expenditures line are based on 80% of the cost of such capital expenditures.

The credit facility amendments contain modified financial covenants pertaining to fixed charges, total debt and minimum EBITDA and are tested quarterly. As of June 30, 2011, the Company is in compliance with the financial covenants included in the modification and extension of our term loan and credit lines.

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Condensed Consolidated Statements of Cash Flows (USD $)	6 Months Ended
	Jun. 30, 2011	Jun. 30, 2010
Cash flows from operating activities:
Net loss	$ (488,112)	$ (504,296)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation	311,523	124,227
Amortization of identifiable intangible assets	131,266	131,265
Stock compensation expense	25,758	45,800
Amortization of deferred loan costs	25,703	20,290
Gain on sales of equipment	(9,193)
Amortization of beneficial conversion feature		15,269
Gain on extinguishment of debt		(25,092)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable	245,085	(527,761)
(Increase) in costs incurred related to deferred revenue	(471,868)	(493,244)
Decrease in due from sellers		284,126
Decrease (increase) in prepaid expenses and other current assets	74,190	(23,009)
Increase in other assets	(21,580)	(12,059)
(Decrease) increase in accounts payable and accrued expenses	(73,373)	268,827
Increase in income taxes payable		4,300
Increase in deferred revenue	696,224	406,309
Net cash provided by (used in) operating activities	445,623	(285,047)
Cash flows from investing activities:
Acquisition of property and equipment	(500,692)	(250,560)
Proceeds from the sale of equipment	78,000
Net cash used in investing activities	(422,692)	(250,560)
Cash flows from financing activities:
Proceeds from sale of preferred stock	393,382	192,500
Payment of preferred stock dividends	(105,563)
Proceeds from long-term debt	337,161	56,310
Proceeds from exercise of stock options		37,500
(Repayment of) line of credit	(116,028)
Proceeds from line of credit		525,000
Payment of capital leases	(45,732)	(27,580)
Payments of long-term debt	(396,017)	(300,000)
Net cash provided by financing activities	67,203	483,730
Net increase (decrease) in cash and cash equivalents	90,134	(51,877)
Cash and cash equivalents, beginning of period	61,969	101,361
Cash and cash equivalents, end of period	152,103	49,484
Cash paid during the period for:
Interest	110,793	128,601
Taxes	2,300
Non cash financing activities:
Issuance of preferred stock for exchange of convertible debentures		1,525,000
Preferred stock dividend in excess of payments	141,269	88,474
Property acquired under capital leases	$ 23,496	$ 327,257

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Nature of Operations

6 Months Ended

Jun. 30, 2011

Nature of Operations

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 owns 100% of the common stock of The Wood Energy Group, Inc. (“Wood Energy”). Wood Energy engages in the business of railroad tie reclamation and disposal, principally in the south and southwest.

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Major Customers

6 Months Ended

Jun. 30, 2011

Major Customers

Note 10. Major Customers

For the three months ended June 30, 2011, the Company earned 10.8%, 11.2%, 19.4%, and 49.2% of revenues from four major customers, respectively.  For the six months ended June 30, 2011, the Company earned 11.0%, 19.4% and 48.1% or revenues from three major customers, respectively.  These customers comprised 8.6%, 11.6%, 20.5%, and 33.3% of outstanding accounts receivable – trade for the period ended June 30, 2011. For the three and six months ended June 30, 2010, the Company earned 82% and 76% of its revenues under a contract with one major customer, comprising 88% of outstanding accounts receivable - trade.

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Condensed Consolidated Balance Sheets (USD $)	Jun. 30, 2011	Dec. 31, 2010
Current assets
Cash and cash equivalents	$ 152,103	$ 61,969
Accounts receivable - trade	443,049	688,134
Cost incurred related to deferred revenue	1,449,746	977,878
Prepaid expenses and other current assets	41,821	116,011
Total current assets	2,086,719	1,843,992
Property and equipment, net	3,030,132	2,886,275
Other assets
Deferred income taxes	569,582	569,582
Identifiable intangible assets, net	1,431,031	1,562,297
Goodwill	3,658,364	3,658,364
Other assets	167,419	171,542
Total other assets	5,826,396	5,961,785
Total assets	10,943,247	10,692,052
Current liabilities
Accounts payable and accrued expenses	861,416	934,789
Deferred revenue	1,455,073	758,849
Revolving credit line	778,300	894,328
Current portion of long-term debt	744,066	680,707
Current portion of capital leases	100,298	90,179
Accrued dividends	141,269	105,563
Total current liabilities	4,080,422	3,464,415
Long-term debt, less current portion	2,227,408	2,349,623
Capital Leases, less current portion	122,840	155,196
Total liabilities	6,430,670	5,969,234
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value. 7,500,000 shares authorized. 3,045,856 issued	30,458	30,458
Additional paid-in capital	92,989,329	93,045,614
Accumulated deficit	(89,347,314)	(88,859,202)
Treasury stock, at cost, for 28,276 shares	(70,689)	(70,689)
Total stockholders' equity	4,512,577	4,722,818
Total liabilities and stockholders' equity	10,943,247	10,692,052
Series A Preferred stock
Stockholders' equity
Preferred stock	200	200
Series B Preferred Stock
Stockholders' equity
Preferred stock	$ 910,593	$ 576,437