10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2014

¨ 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 111-E, 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 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.

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 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	3
Item 1.  Financial Statements	3
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations	11
Cautionary Statement Concerning Forward-Looking Statements	11
Overview	11
Our History Prior to Acquiring Wood Energy	11
Recent Events	12
Critical Accounting Policies and Estimates	12
Results from Operations	14
General and administrative expenses	14
Interest expense	15
Income tax expense	15
Net (Loss) Income	15
Financial Condition and Liquidity	15
Off-Balance Sheet Arrangements	16
How to Learn More about Banyan	16
Item 4.      Controls and Procedures	16
Part II — Other Information	17
Item 1.      Legal Proceedings	17
Item 2.      Unregistered Sales of Equity Securities and Use of Proceeds	17
Item 3.      Defaults Upon Senior Securities	17
Item 5.      Other Information	17
Item 6.      Exhibits	17
Signatures	18

Page 2 of 18

Part I — Financial Information

Item 1. Financial Statements

Banyan Rail Services Inc. and Subsidiary

Condensed Consolidated Balance Sheets

	September 30, 2014			December 31, 2013
		(Unaudited)
ASSETS
Current assets
Cash	$	5,819		$	27,124
Prepaid expenses and other current assets		-			10,904
Total current assets		5,819			38,028
Total assets	$	5,819		$	38,028
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable	$	85,244		$	30,293
Accrued payroll		31,165			33,311
Accrued professional fees		10,491			3,123
Accrued interest		19,000			-
Accrued Expenses		-			1,623
Advances - related parties		55,000			-
Demand loans - related party		300,000			150,000
Accrued dividends		183,337			382,267
Total liabilities		684,237			600,617
Commitments and contingencies
Stockholders' deficit
Series A Preferred stock, $.01 par value. 20,000 shares authorized and 10,375 and 20,000 shares issued at September 30, 2014 and December 31, 2013, respectively		104			200
Series B Preferred stock, $.01 par value. 10,000 shares authorized. 0 and 10,000 shares issued at September 30, 2014 and December 31, 2013, respectively		-			552,817
Series C Preferred stock, $.01 par value. 20,000 shares authorized. 0 and 19,950 shares issued at September 30, 2014 and December 31, 2013, respectively		-			1,995,000
Common stock, $0.01 par value. 7,500,000 shares authorized. 1,121,279 and 1,036,945 issued as of September 30, 2014 and December 31, 2013, respectively		11,212			10,369
Accrued common stock payable		2,552,967			162,300
Additional paid-in capital		94,751,093			94,252,890
Accumulated deficit		(97,923,105	)		(97,465,476	)
Treasury stock, at cost, for 5,655 shares		(70,689	)		(70,689	)
Total stockholders' deficit		(678,418	)		(562,589	)
Total liabilities and stockholders' deficit	$	5,819		$	38,028

See Notes to Condensed Consolidated Financial Statements

Page 3 of 18

Banyan Rail Services Inc. and Subsidiary

Condensed Consolidated Statements of Operations

(Unaudited)

	Nine months ended September 30,						Three months ended  September 30,
	2014			2013			2014			2013
General & administrative expenses	$	298,379		$	389,765		$	60,479		$	110,557
Loss from operations		(298,379	)		(389,765	)		(60,479	)		(110,557	)
Interest expense		(159,250	)		-			(7,667	)		-
Loss from continuing operations before income taxes and discontinued operations		(457,629	)		(389,765	)		(68,146	)		(110,557	)
Loss from discontinued operations		-			(239,130	)		-			-
Gain attributable to discontinued operations		-			2,050,233			-			-
Net (loss) income	$	(457,629	)	$	1,421,338		$	(68,146	)	$	(110,557	)
Dividends for the benefit of preferred stockholders:
Preferred stock dividends		(374,634	)		(374,625	)		(124,875	)		(124,875	)
Amortization of preferred stock beneficial conversion feature		-			(116,554	)		-			(39,278	)
Total dividends for the benefit of preferred stockholders		(374,634	)		(491,179	)		(124,875	)		(164,153	)
Net (loss) income attributable to common stockholders	$	(832,263	)	$	930,159		$	(193,021	)	$	(274,710	)
Weighted average number of common shares outstanding:
Basic and diluted		1,106,732			897,010			1,106,732			897,010
Net loss per common share from continuing operations, basic and diluted	$	(0.41	)	$	(0.43	)	$	(0.06	)	$	(0.12	)
Net income per common share from discontinued operations, basic and diluted		-			2.02			-			-
Net (loss) income per common share, basic and diluted	$	(0.41	)	$	1.59		$	(0.06	)	$	(0.12	)
Net (loss) income attributable to common shareholders per share	$	(0.75	)	$	1.04		$	(0.17	)	$	(0.31	)

See Notes to Condensed Consolidated Financial Statements.

Page 4 of 18

Banyan Rail Services Inc. and Subsidiary

Condensed Consolidated Statements of Cash Flows

(Unaudited)

	Nine months ended September 30,
	2014			2013
Cash flows from operating activities:
Net (loss) income	$	(457,629	)	$	1,421,338
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation		-			2,445
Stock compensation expense		2,619			4,066
Stock in lieu of cash interest		140,250			-
Loss on sales of equipment		-			414
Gain on discontinued operations		-			(2,050,233	)
Changes in assets and liabilities, net of effects of discontinued operations:
Decrease in accounts receivable		-			22,478
Decrease in prepaid expenses and other current assets		10,905			11,168
Increase in accounts payable and accrued expenses		132,550			184,142
Net cash used in operating activities		(171,305	)		(404,182	)
Cash flows from financing activities:
Proceeds from sale of common stock		-			248,000
Proceeds on demand loan - related party		150,000			343,800
Payment of settlement agreement		-			(200,000	)
Proceeds from line of credit		-			55,031
Net cash from financing activities		150,000			446,831
Net (decrease) increase in cash		(21,305	)		42,649
Cash, beginning of period		27,124			5,745
Cash, end of period	$	5,819		$	48,394
Supplemental disclosure of cash flow information:
Non cash financing activities:
Preferred stock dividend in excess of payments	$	374,634		$	257,392
Issuance of common shares in lieu of cash dividends payable	$	573,565		$	600,895
Issuance of shares in settlement of loans and advances payable	$	-		$	568,800
Issuance of shares in lieu of cash interest	$	302,550		$	-

See Notes to Condensed Consolidated Financial Statements.

Page 5 of 18

Banyan Rail Services Inc. and Subsidiary

Condensed Consolidated Statements of Stockholders’ Deficit

Periods Ended September 30, 2014 and December 31, 2013

	Common Stock				Common Stock			Preferred Stock						Additional Paid						Treasury Stock
	Shares Issued		Amount		Payable			Shares Issued			Amount			in Capital			Accumulated Deficit			Shares		Amount			Total
Stockholders’ equity December 31, 2012		696,128	$	6,961	$	0			49,950		$	2,670,975		$	93,149,957		$	(98,608,303	)		5,655	$	(70,689	)	$	(2,851,099	)
Amortization of beneficial conversion feature preferred stock - Series B									(122,958	)		122,958											-
Issuance of common stock		340,817		3,408											1,474,287											1,477,695
Common stock payable						162,300																				162,300
Stock compensation expense															5,189											5,189
Net loss for the year ended December 31, 2013																		1,142,827								1,142,827
Preferred stock dividends															(499,501	)										(499,501	)
Stockholders’ (deficit) equity December 31, 2013		1,036,945	$	10,369	$	162,300			49,950			2,548,017		$	94,252,890		$	(97,465,476	)		5,655		(70,689	)	$	(562,589	)
Issuance of common stock		84,334		843		(162,300	)								870,218											708,761
Common stock payable						2,552,967			(39,575	)		(2,547,913	)													5,054
Stock compensation expense															2,619											2,619
Net loss for the nine months ended September 30, 2014																		(457,629	)							(457,629	)
Preferred stock dividends															(374,634	)										(374,634	)
Stockholders’ (deficit) equity September 30, 2014		1,121,279	$	11,212	$	2,552,967			10,375		$	104		$	94,751,093		$	(97,923,105	)		5,655	$	(70,689	)	$	(678,418	)

See Notes to Condensed Consolidated Financial Statements.

Page 6 of 18

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.

Page 7 of 18

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.

Page 8 of 18

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:

				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, 2013		45,600		$	14.75					0.9 years		-
Options granted		-			-		$	-		-		-
Options exercised		-			-					-		-
Options expired		(600	)	$	(0.05	)				-		-
Balance, January 1, 2014		45,000		$	14.75					0.9 years	$	-
Options granted		-			-		$	-		-		-
Options exercised		-			-					-		-
Options expired		(17,500	)	$	(1.83	)				-		-
Balance, September 30, 2014		27,500		$	12.92					0.9 years	$	-

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.

Page 9 of 18

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.

Page 10 of 18

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:

· successfully raising capital to fund our operations;

· successfully finding an operating entity to acquire;

· complying with SEC regulations and filing requirements applicable to us as a public company; and

· any of our other plans, objectives, expectations and intentions contained in this report that are not historical facts.

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.

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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.

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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.

Page 13 of 18

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

	Three months ended September 30,						Variance						Nine months ended  September 30,						Variance
	2014			2013			$			%			2014			2013			$			%
General & administrative expenses	$	60,479		$	110,557		$	(50,078	)		-45.3	%	$	298,379		$	389,765		$	(91,386	)		-23.4	%
Loss from operations		(60,479	)		(110,557	)		(50,078	)		-45.3	%		(298,379	)		(389,765	)		(91,386	)		-23.4	%
Interest expense		(7,667	)		-			7,667			100.0	%		(159,250	)		-			159,250			100.0	%
Loss from continuing operations before income taxes and discontinued operations		(68,146	)		(110,557	)		(42,411	)		-38.4	%		(457,629	)		(389,765	)		67,864			17.4	%
Loss from discontinued operations		-			-			-			0.0	%		-			(239,130	)		(239,130	)		-100.0	%
Gain attributable to the disposal of discontinued operations		-			-			-			100.0	%		-			2,050,233			(2,050,233	)		-100.0	%
Net (loss) income	$	(68,146	)	$	(110,557	)	$	(42,411	)		-38.4	%	$	(457,629	)	$	1,421,338		$	1,878,967			132.2	%

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:

· A decrease in professional fees of approximately $31,000,

· A decrease in stock transfer agent expense of approximately $16,000,

· A decrease in printing expenses of approximately $4,000,

· Offset by an increase in insurance expense of approximately $5,000.

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:

· A reduction in corporate staffing due to the bankruptcy of our only operating subsidiary Wood Energy of approximately $44,000,

· A decrease in professional fees of approximately $71,000, due to the lack of overall activity in the shell,

· A decrease in stock transfer agent expense of approximately $18,000,

· A decrease in printing expenses of approximately $7,000,

· Offset by an increase in insurance costs of approximately $14,000 due to the increased costs of insurance,

· An increase in rent expense primarily related to the prior period reversal of an over accrual of rent expense recorded in the previous periods in the amount of $18,000, and

· An increase in travel costs of approximately $18,000 related to the Company’s search for an operating subsidiary.

Page 14 of 18

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:

	Nine months ended September 30,
	2014			2013
Net cash used in operating activities	$	(171,305	)	$	(404,182	)
Net cash from financing activities	$	150,000		$	446,831

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.

Page 15 of 18

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)).

Page 16 of 18

Part II — Other Information

Item 1. Legal Proceedings

Not applicable.

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

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.

Item 3. Defaults Upon Senior Securities

Not applicable.

Item 5. Other Information

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

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

32.1 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 Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

Page 17 of 18

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: November 19, 2014	/s/ Jon Ryan
	Jon Ryan,
	President and Chief Financial Officer
	(Principal Financial and Accounting Officer)

Page 18 of 18

EX-31.1

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

I, Donald D. Redfearn, 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: November 19, 2014

/s/ Donald D. Redfearn

Donald D. Redfearn

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Rule 13a-14(a)/15d-14(a) Certification of	Exhibit 31.2
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: November 19, 2014	/s/ Jon Ryan
	Jon Ryan
	Chief Financial Officer
	(Principal Financial Officer)

EX-32.1

Exhibit 32.1

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 September 30, 2014 (the “Report”) filed with the Securities and Exchange Commission on the date hereof, I, Donald D. Redfearn, 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/ Donald D. Redfearn

Donald D. Redfearn

Chief Executive Officer

/s/ Jon Ryan

Jon Ryan

Chief Financial Officer

November 19, 2014

XML

Stock-Based Compensation - Additional Information (Details)	9 Months Ended
	Sep. 30, 2014
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for certain options	1 year
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options exercisable period	3 years
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Options exercisable period	5 years

XML

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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.

XML

Basis of Presentation

9 Months Ended

Sep. 30, 2014

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

Basis of Presentation

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.

XML

Condensed Consolidated Balance Sheets (USD $)	Sep. 30, 2014	Dec. 31, 2013
Current assets
Cash	$ 5,819	$ 27,124
Prepaid expenses and other current assets	0	10,904
Total current assets	5,819	38,028
Total assets	5,819	38,028
Current liabilities
Accounts payable	85,244	30,293
Accrued payroll	31,165	33,311
Accrued professional fees	10,491	3,123
Accrued interest	19,000	0
Accrued Expenses	0	1,623
Advances - related parties	55,000	0
Demand loans - related party	300,000	150,000
Accrued dividends	183,337	382,267
Total liabilities	684,237	600,617
Commitments and contingencies
Stockholders' deficit
Common stock, $0.01 par value. 7,500,000 shares authorized. 1,121,279 and 1,036,945 issued as of September 30, 2014 and December 31, 2013, respectively	11,212	10,369
Accrued common stock payable	2,552,967	162,300
Additional paid-in capital	94,751,093	94,252,890
Accumulated deficit	(97,923,105)	(97,465,476)
Treasury stock, at cost, for 5,655 shares	(70,689)	(70,689)
Total stockholders' deficit	(678,418)	(562,589)
Total liabilities and stockholders' deficit	5,819	38,028
Series A Preferred stock
Stockholders' deficit
Preferred stock	104	200
Series B Preferred stock
Stockholders' deficit
Preferred stock	0	552,817
Series C Preferred stock
Stockholders' deficit
Preferred stock	$ 0	$ 1,995,000

XML

Consolidated Statements of Stockholders' Deficit (USD $)	Total	Common Stock	Common Stock Payable	Preferred Stock	Additional Paid in Capital	Accumulated Deficit	Treasury Stock
Beginning Balance at Dec. 31, 2012	$ (2,851,099)	$ 6,961	$ 0	$ 2,670,975	$ 93,149,957	$ (98,608,303)	$ (70,689)
Beginning Balance (in shares) at Dec. 31, 2012		696,128		49,950			5,655
Amortization of beneficial conversion feature preferred stock - Series B				122,958			0
Amortization of beneficial conversion feature preferred stock - Series B (in shares)				(122,958)
Issuance of common stock	1,477,695	3,408			1,474,287
Issuance of common stock (in shares)		340,817
Common stock issuable	162,300		162,300
Stock compensation expense	5,189				5,189
Net (loss) income	1,142,827					1,142,827
Preferred stock dividends	(499,501)				(499,501)
Ending Balance at Dec. 31, 2013	(562,589)	10,369	162,300	2,548,017	94,252,890	(97,465,476)	(70,689)
Ending Balance (in shares) at Dec. 31, 2013		1,036,945		49,950			5,655
Issuance of common stock	708,761	843	(162,300)		870,218
Issuance of common stock (in shares)		84,334
Stock compensation expense	2,619				2,619
Net (loss) income	(457,629)					(457,629)
Preferred stock dividends	(374,634)				(374,634)
Common stock payable	5,054		2,552,967	(2,547,913)
Common stock payable (in shares)				(39,575)
Ending Balance at Sep. 30, 2014	$ (678,418)	$ 11,212	$ 2,552,967	$ 104	$ 94,751,093	$ (97,923,105)	$ (70,689)
Ending Balance (in shares) at Sep. 30, 2014		1,121,279		10,375			5,655

XML

Income Taxes - Additional Information (Details) (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Income Tax [Line Items]
Percentage Of Valuation Allowance	100.00%
Income Tax Expense (Benefit)	$ 0	$ 0
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent	0.00%	0.00%
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Percent	34.00%

XML

Stock-Based Compensation (Stock Option Activities) (Details) (USD $)	9 Months Ended	12 Months Ended
	Sep. 30, 2014	Dec. 31, 2013
Number of shares
Beginning Balance	45,000	45,600
Options granted	0	0
Options exercised	0	0
Options expired	(17,500)	(600)
Ending Balance	27,500	45,000
Weighted Average Exercise Price per Share
Beginning Balance	$ 14.75	$ 14.75
Options granted	$ 0	$ 0
Options exercised	$ 0	$ 0
Options expired	$ (1.83)	$ (0.05)
Ending Balance	$ 12.92	$ 14.75
Weighted Average Fair Value at Grant Date
Options granted	$ 0	$ 0
Weighted Average Remaining Contractual Life
Weighted Average Remaining Contractual Life	10 months 24 days	10 months 24 days
Intrinsic Value
Beginning Balance	$ 0	$ 0
Options granted	0	0
Options exercised	0	0
Options expired	0	0
Ending Balance	$ 0	$ 0

XML

Nature of Operations

9 Months Ended

Sep. 30, 2014

Organization, Consolidation and Presentation Of Financial Statements [Abstract]

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. 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.

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $)	Sep. 30, 2014	Dec. 31, 2013
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	7,500,000	7,500,000
Common stock, issued	1,121,279	1,036,945
Treasury Stock, Shares	5,655	5,655
Series A Preferred stock
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	20,000	20,000
Preferred stock, shares issued	10,375	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	0	10,000
Series C Preferred stock
Preferred stock, par value	$ 0.01	$ 0.01
Preferred stock, shares authorized	20,000	20,000
Preferred stock, shares issued	0	19,950

XML

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2014

Accounting Policies [Abstract]

Use of Estimates

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

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

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

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

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

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.

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Document And Entity Information	9 Months Ended
	Sep. 30, 2014	Nov. 19, 2014
Document Information [Line Items]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2014
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q3
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
Trading Symbol	BARA
Entity Common Stock, Shares Outstanding		1,563,424

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 30, 2014

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Stock Option Activities

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, 2013	45,600	$	14.75			0.9 years		-
Options granted	-		-	$	-	-		-
Options exercised	-		-			-		-
Options expired	(600)	$	(0.05)			-		-
Balance, January 1, 2014	45,000	$	14.75			0.9 years	$	-
Options granted	-		-	$	-	-		-
Options exercised	-		-			-		-
Options expired	(17,500)	$	(1.83)			-		-
Balance, September 30, 2014	27,500	$	12.92			0.9 years	$	-

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Condensed Consolidated Statements of Operations (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013	Sep. 30, 2014	Sep. 30, 2013
General & administrative expenses	$ 60,479	$ 110,557	$ 298,379	$ 389,765
Loss from operations	(60,479)	(110,557)	(298,379)	(389,765)
Interest expense	(7,667)	0	(159,250)	0
Loss from continuing operations before income taxes and discontinued operations	(68,146)	(110,557)	(457,629)	(389,765)
Loss from discontinued operations	0	0	0	(239,130)
Gain attributable to discontinued operations	0	0	0	2,050,233
Net (loss) income	(68,146)	(110,557)	(457,629)	1,421,338
Dividends for the benefit of preferred stockholders:
Preferred stock dividends	(124,875)	(124,875)	(374,634)	(374,625)
Amortization of preferred stock beneficial conversion feature	0	(39,278)	0	(116,554)
Total dividends for the benefit of preferred stockholders	(124,875)	(164,153)	(374,634)	(491,179)
Net (loss) income attributable to common stockholders	$ (193,021)	$ (274,710)	$ (832,263)	$ 930,159
Weighted average number of common shares outstanding:
Basic and diluted	1,106,732	897,010	1,106,732	897,010
Net loss per common share from continuing operations, basic and diluted	$ (0.06)	$ (0.12)	$ (0.41)	$ (0.43)
Net income per common share from discontinued operations, basic and diluted	$ 0	$ 0	$ 0	$ 2.02
Net (loss) income per common share, basic and diluted	$ (0.06)	$ (0.12)	$ (0.41)	$ 1.59
Net (loss) income attributable to common shareholders per share	$ (0.17)	$ (0.31)	$ (0.75)	$ 1.04

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Income Taxes

9 Months Ended

Sep. 30, 2014

Income Tax Disclosure [Abstract]

Income Taxes

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.

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Preferred Stock and Common Stock

9 Months Ended

Sep. 30, 2014

Equity [Abstract]

Preferred Stock and Common Stock

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.

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Earnings (loss) per Share - Additional Information (Details)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Convertible Preferred Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, shares	103,750	533,097
Stock Options
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share, shares	27,500

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Summary of Significant Accounting Policies - Additional Information (Details)	9 Months Ended
	Sep. 30, 2014
Percentage Of Income Tax Examination Likelihood Of Tax Benefits Being Realized Upon Settlement	50.00%

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Related Party Transactions

9 Months Ended

Sep. 30, 2014

Related Party Transactions [Abstract]

Related Party Transactions

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.

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Earnings (loss) per Share

9 Months Ended

Sep. 30, 2014

Earnings Per Share [Abstract]

Earnings (loss) per Share

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.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2014

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Stock-Based Compensation

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:

		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, 2013	45,600	$	14.75			0.9 years		-
Options granted	-		-	$	-	-		-
Options exercised	-		-			-		-
Options expired	(600)	$	(0.05)			-		-
Balance, January 1, 2014	45,000	$	14.75			0.9 years	$	-
Options granted	-		-	$	-	-		-
Options exercised	-		-			-		-
Options expired	(17,500)	$	(1.83)			-		-
Balance, September 30, 2014	27,500	$	12.92			0.9 years	$	-

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.

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Subsidiary Bankruptcy and Settlement Agreement

9 Months Ended

Sep. 30, 2014

Commitments and Contingencies Disclosure [Abstract]

Subsidiary Bankruptcy and Settlement Agreement

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.

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Preferred Stock and Common Stock- Additional Information (Details) (USD $)	9 Months Ended
	Sep. 30, 2014
Stockholders Equity Note [Line Items]
Common shares issuable upon conversion of convertible preferred stock	442,145
Preferred Stock, Amount of Preferred Dividends in Arrears	$ 124,884
Dividends, Common Stock	$ 222,000
Common Stock Dividends, Shares	25,671
Banyan Rail Holdings LLC
Stockholders Equity Note [Line Items]
Common shares issuable upon conversion of convertible preferred stock	918,706

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Related Party Transactions - Additional Information (Details) (USD $)	0 Months Ended	9 Months Ended		1 Months Ended	9 Months Ended			9 Months Ended
	Feb. 14, 2014	Sep. 30, 2014	Sep. 30, 2013	Jan. 21, 2014 Banyan Holdings	Sep. 30, 2014 Banyan Holdings	Feb. 14, 2014 Banyan Holdings	Dec. 31, 2013 Banyan Holdings	Sep. 30, 2014 Banyan Holdings Common Stock
Related Party Transaction [Line Items]
Ownership of related party in common Stock		1,113,411
Ownership of related party in common stock if preferred stock is converted		1,141,744
Notes Payable, Total							$ 150,000
Debt Instrument, Interest Rate, Stated Percentage							10.00%
Stock Issued During Period, Shares, New Issues				16,230				16,500
Line of Credit Facility, Maximum Borrowing Capacity						200,000
Line of Credit Facility, Interest Rate at Period End						10.00%
Line Of Credit Facility Incentive Description	at a ratio of 110 shares for every $1,000 drawn on the line of credit.
Proceeds from Lines of Credit		$ 0	$ 55,031		$ 150,000

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Condensed Consolidated Statements of Cash Flows (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Cash flows from operating activities:
Net (loss) income	$ (457,629)	$ 1,421,338
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation	0	2,445
Stock compensation expense	2,619	4,066
Stock in lieu of cash interest	140,250	0
Loss on sales of equipment	0	414
Gain on discontinued operations	0	(2,050,233)
Changes in assets and liabilities, net of effects of discontinued operations:
Decrease in accounts receivable	0	22,478
Decrease in prepaid expenses and other current assets	10,905	11,168
Increase in accounts payable and accrued expenses	132,550	184,142
Net cash used in operating activities	(171,305)	(404,182)
Cash flows from financing activities:
Proceeds from sale of common stock	0	248,000
Proceeds on demand loan - related party	150,000	343,800
Payment of settlement agreement	0	(200,000)
Proceeds from line of credit	0	55,031
Net cash from financing activities	150,000	446,831
Net (decrease) increase in cash	(21,305)	42,649
Cash, beginning of period	27,124	5,745
Cash, end of period	5,819	48,394
Non cash financing activities:
Preferred stock dividend in excess of payments	374,634	257,392
Issuance of common shares in lieu of cash dividends payable	573,565	600,895
Issuance of shares in settlement of loans and advances payable	0	568,800
Issuance of shares in lieu of cash interest	$ 302,550	$ 0

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Liquidity and Going Concern

9 Months Ended

Sep. 30, 2014

Liquidity And Going Concern [Abstract]

Liquidity and Going Concern

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.

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Subsidiary Bankruptcy and Settlement Agreement - Additional Information (Details) (USD $)	1 Months Ended	9 Months Ended
	Sep. 26, 2013	Sep. 30, 2014	Sep. 30, 2013
Payments for Legal Settlements	$ 200,000	$ 0	$ 200,000

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Liquidity and Going Concern - Additional Information (Details) (USD $)	9 Months Ended
	Sep. 30, 2014	Sep. 30, 2013
Working Capital Deficiency	$ 678,418
Net Cash Provided by (Used in) Operating Activities, Total	$ (171,305)	$ (404,182)