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 June 30, 2015
¨ 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 324-A, 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 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 þ No ¨
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 9,752,753 shares of common stock, $0.01 par value per share, as of July 15, 2015.
Table of Contents
| Page 2 of 17 |
Part I — Financial Information
Banyan Rail Services Inc. and Subsidiary
Condensed Consolidated Balance Sheets
| December 31, | ||||||||
| June 30, 2015 | 2014 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 490,604 | $ | 402,401 | ||||
| Total current assets | 490,604 | 402,401 | ||||||
| Total assets | $ | 490,604 | $ | 402,401 | ||||
| LIABILITIES AND STOCKHOLDERS' DEFICIT | ||||||||
| Current liabilities | ||||||||
| Accounts payable | $ | 30,900 | $ | 33,895 | ||||
| Accrued payroll | 5,259 | 20,869 | ||||||
| Accrued professional fees | 10,341 | 14,706 | ||||||
| Accrued expenses | 1,135 | - | ||||||
| Advances - related parties | - | 30,481 | ||||||
| Accrued dividends | 231,892 | 209,267 | ||||||
| Total current liabilities | 279,527 | 309,218 | ||||||
| Total liabilities | 279,527 | 309,218 | ||||||
| Commitments and contingencies | - | - | ||||||
| Stockholders' equity | ||||||||
| Series A Preferred stock, $0.01 par value. 20,000 shares authorized and 10,375 issued | 104 | 104 | ||||||
| Common stock, $0.01 par value. 50,000,000 shares authorized. 8,731,753 and 1,563,424 issued as of June 30, 2015 and December 31, 2014, respectively | 87,316 | 15,633 | ||||||
| Accrued common stock payable | 18,000 | 11,427,963 | ||||||
| Additional paid-in capital | 109,020,363 | 97,273,708 | ||||||
| Accumulated deficit | (108,844,017 | ) | (108,553,536 | ) | ||||
| Treasury stock, at cost, for 5,655 shares | (70,689 | ) | (70,689 | ) | ||||
| Total stockholders' equity | 211,077 | 93,183 | ||||||
| Total liabilities and stockholders' equity | $ | 490,604 | $ | 402,401 | ||||
See Notes to Condensed Consolidated Financial Statements
| Page 3 of 17 |
Banyan Rail Services Inc. and Subsidiary
Condensed Consolidated Statements of Operations
(Unaudited)
| Six months ended June 30, | Three months ended June 30, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| General & administrative expenses | $ | 290,481 | $ | 237,900 | $ | 157,802 | $ | 122,195 | ||||||||
| Loss from operations | (290,481 | ) | (237,900 | ) | (157,802 | ) | (122,195 | ) | ||||||||
| Interest expense | - | (151,583 | ) | - | (97,708 | ) | ||||||||||
| Net loss | $ | (290,481 | ) | $ | (389,483 | ) | $ | (157,802 | ) | $ | (219,903 | ) | ||||
| Dividends for the benefit of preferred stockholders: | ||||||||||||||||
| Preferred stock dividends | (51,875 | ) | (249,750 | ) | (25,930 | ) | (124,875 | ) | ||||||||
| Total dividends for the benefit of preferred stockholders | (51,875 | ) | (249,750 | ) | (25,930 | ) | (124,875 | ) | ||||||||
| Net loss attributable to common stockholders | $ | (342,356 | ) | $ | (639,233 | ) | $ | (183,732 | ) | $ | (344,778 | ) | ||||
| Weighted average number of common shares outstanding: | ||||||||||||||||
| Basic and diluted | 7,899,702 | 1,072,572 | 7,899,702 | 1,072,572 | ||||||||||||
| Net loss per common share from continuing operations, basic and diluted | $ | (0.04 | ) | $ | (0.36 | ) | $ | (0.02 | ) | $ | (0.21 | ) | ||||
| Net loss per common share, basic and diluted | $ | (0.04 | ) | $ | (0.36 | ) | $ | (0.02 | ) | $ | (0.21 | ) | ||||
| Net loss attributable to common shareholders per share | $ | (0.04 | ) | $ | (0.60 | ) | $ | (0.02 | ) | $ | (0.32 | ) | ||||
See Notes to Condensed Consolidated Financial Statements.
| Page 4 of 17 |
Banyan Rail Services Inc. and Subsidiary
Condensed Consolidated Statements of Cash Flows
(Unaudited)
| Six months ended June 30, | ||||||||
| 2015 | 2014 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (290,481 | ) | $ | (389,483 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Stock compensation expense | - | 2,245 | ||||||
| Stock in lieu of cash interest | - | 140,250 | ||||||
| Changes in assets and liabilities, net of effects of discontinued operations: | ||||||||
| Decrease in prepaid expenses and other current assets | - | (863 | ) | |||||
| (Decrease) increase in accounts payable and accrued expenses | (52,316 | ) | 76,217 | |||||
| Net cash used in operating activities | (342,797 | ) | (171,634 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from sale of common stock | 431,000 | - | ||||||
| Proceeds on demand loan - related party | - | 150,000 | ||||||
| Net cash from financing activities | 431,000 | 150,000 | ||||||
| Net increase (decrease) in cash | 88,203 | (21,634 | ) | |||||
| Cash, beginning of period | 402,401 | 27,124 | ||||||
| Cash, end of period | $ | 490,604 | $ | 5,490 | ||||
| Supplemental disclosure of cash flow information: | ||||||||
| Non cash financing activities: | ||||||||
| Preferred stock dividend in excess of payments | $ | 51,875 | $ | 249,750 | ||||
| Issuance of common shares in lieu of cash dividends payable | $ | 29,250 | $ | 222,000 | ||||
| Issuance of shares in settlement of loans and advances payable | $ | 11,719,963 | $ | - | ||||
| Issuance of shares in lieu of cash interest | $ | - | $ | 302,550 | ||||
See Notes to Condensed Consolidated Financial Statements.
| Page 5 of 17 |
Banyan Rail Services Inc. and Subsidiary
Condensed Consolidated Statements of Stockholders’ Equity
Periods Ended June 30, 2015 and December 31, 2014
| Common Stock | Preferred Stock | Treasury Stock | ||||||||||||||||||||||||||||||||||||||
| Shares | Common Stock | Shares | Additional Paid | Accumulated | ||||||||||||||||||||||||||||||||||||
| Issued | Amount | Payable | Issued | Amount | in Capital | Deficit | Shares | Amount | Total | |||||||||||||||||||||||||||||||
| Stockholders’ deficit 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 | 526,479 | 5,264 | (162,300 | ) | (39,575 | ) | (2,547,913 | ) | (3,211,793 | ) | (5,916,742 | ) | ||||||||||||||||||||||||||||
| Common stock payable | 11,427,963 | 11,427,963 | ||||||||||||||||||||||||||||||||||||||
| Stock compensation expense | 6,633,175 | 6,633,175 | ||||||||||||||||||||||||||||||||||||||
| Net loss for the year ended December 31, 2014 | (11,088,060 | ) | (11,088,060 | ) | ||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | (400,564 | ) | (400,564 | ) | ||||||||||||||||||||||||||||||||||||
| Stockholders’ equity December 31, 2014 | 1,563,424 | $ | 15,633 | $ | 11,427,963 | 10,375 | 104 | $ | 97,273,708 | $ | (108,553,536 | ) | 5,655 | (70,689 | ) | $ | 93,183 | |||||||||||||||||||||||
| Common stock payable | 310,000 | 310,000 | ||||||||||||||||||||||||||||||||||||||
| Issuance of common stock | 7,168,329 | 71,683 | (11,719,963 | ) | 11,798,530 | 150,250 | ||||||||||||||||||||||||||||||||||
| Net loss for the six months ended June 30, 2015 | (290,481 | ) | (290,481 | ) | ||||||||||||||||||||||||||||||||||||
| Preferred stock dividends | (51,875 | ) | (51,875 | ) | ||||||||||||||||||||||||||||||||||||
| Stockholders’ equity June 30, 2015 | 8,731,753 | $ | 87,316 | $ | 18,000 | 10,375 | $ | 104 | $ | 109,020,363 | $ | (108,844,017 | ) | 5,655 | ($ | 70,689 | ) | $ | 211,077 | |||||||||||||||||||||
See Notes to Condensed Consolidated Financial Statements.
| Page 6 of 17 |
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” ). Wood Energy was engaged in the business of railroad tie reclamation and disposal. As a result of the bankruptcy and liquidation of Wood Energy, Banyan is now a shell Company seeking to acquire an operating entity.
The Company is actively seeking acquisitions of leading companies within the industrial, energy, transportation, technology and health care industries throughout North America.
Note 2. Basis of Presentation
The accompanying consolidated financial statements give effect to all adjustments necessary to present fairly the financial position and results of operations and cash flows of the Company. All significant intercompany transactions and accounts have been eliminated in consolidation.
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 Equivalents
The Company considers all bank deposits and highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at June 30, 2015 or December 31, 2014. From time to time our cash deposits exceed federally insured limits.
Fair Value of Financial Instruments
Recorded financial instruments as of June 30, 2015 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.
| Page 7 of 17 |
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
At and for the period ended June 30, 2015, the Company had a net working capital of $211,077 and incurred negative cash flows from operating activities of $342,797. The Company’s future liquidity and capital requirements are dependent upon many factors, including our ability to identify and complete acquisitions and the success of any business we do acquire. We may need to raise additional funds in order to meet working capital requirements, additional capital expenditures or to take advantage of other opportunities. We cannot be certain that we will be able to obtain additional financing on favorable terms or at all. If we are unable to raise needed capital, our growth may be impeded. In addition, if we raise capital by selling additional shares of stock, the percentage ownership of current Banyan shareholders will be diluted.
Note 5. Preferred Stock and Common Stock
Preferred stock dividends for Series A Preferred stock are accrued for the semi-annual period ended June 30, 2015 in the amount of $51,875. During 2012, due to the lack of cash flow, the Company offered to pay the accrued dividends in common stock in lieu of cash. In January of 2015, we issued 10,921 shares of common stock in lieu of $29,250 of cash dividends for dividends accrued through December 31, 2014. Substantially all preferred shareholders accepted the common stock in lieu of cash and the common shares for these dividends.
At June 30, 2015, the Company had received subscriptions for 100,000 shares of common stock in the amount of $18,000. The cash received from these subscriptions will be used to fund the working capital requirements of the Company. The shares will be issued upon receipt of the completed subscription documents.
As of June 30, 2015, directors owned 5,976,375 shares of Common stock or 68.4% of all outstanding common shares.
Note 6. Income Taxes
For the six months ended June 30, 2015 and 2014, the Company recorded an income tax provision of $0. The effective tax rate for the six months ended June 30, 2015 and 2014 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 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.
| Page 8 of 17 |
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 June 30, 2015 and 2014, respectively, as their inclusion would be anti-dilutive. In addition, the Company excluded 5,000 stock options as of June 30, 2015 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, 2014 | 45,000 | 14.75 | 1.1 years | - | ||||||||||||||||
| Options granted | - | - | $ | 0 | - | - | ||||||||||||||
| Options exercised | - | - | - | - | ||||||||||||||||
| Options expired | (17,500 | ) | $ | (1.83 | ) | - | - | |||||||||||||
| Balance, January 1, 2015 | 27,500 | $ | 12.92 | 1.1 years | $ | - | ||||||||||||||
| Options granted | - | - | $ | 0 | - | - | ||||||||||||||
| Options exercised | - | - | - | - | ||||||||||||||||
| Options expired | (22,500 | ) | $ | (2.62 | ) | - | - | |||||||||||||
| Balance, June 30, 2015 | 5,000 | $ | 10.30 | 1.1 years | $ | - | ||||||||||||||
Prior to June 30, 2010 the Company had not adopted a formal stock option plan. The number of options issued and the grant dates were determined at the discretion of the Company’s Board. Certain options vest at the date of grant and others vest over a one year period. The options are exercisable for periods not exceeding three to five years from the date of grant. On July 1, 2010 at its annual meeting of stockholders, the 2010 Stock Option and Award Plan was approved.
The fair values of stock options are estimated using the Black-Scholes method, which takes into account variables such as estimated volatility, expected holding period, dividend yield, and the risk free interest rate. The risk free interest rate is the five year treasury rate at the date of grant. The expected life is based on the contractual life of the options at the date of grant.
Note 9. Related Party Transactions
The Company’s directors 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 as of June 30, 2015.
On June 1, 2015, the Company entered into a month-to-month office lease and administrative support agreement (the “Agreement”) with Boca Equity Partners LLC (“BEP”). The Agreement is effective as of January 1, 2015. The Agreement provides for the Company’s use of a portion of BEP’s offices and certain overhead items at the BEP offices such as space, utilities and other administrative services for $4,750 a month.
Also on June 1, 2015, the Company entered into a support agreement (the “Support Agreement”) with BEP. The Support Agreement is effective as of January 1, 2015 and provides for corporate support services. The Support Agreement is for a month-to-month term and will terminate upon the Company’s payment of a success fee, should the Company acquire more than 50% of the assets of capital stock of any company (an “Acquisition”) during the term of the Support Agreement or within the one year period following the termination of the Support Agreement. Within five days of the closing of any potential Acquisition, Banyan will pay to BEP 2% of the cash purchase price paid by the Company to the seller(s) for the Acquisition.
| Page 9 of 17 |
Gary O. Marino, the Company’s chairman of the board, is the chairman, president, and chief executive officer of BEP. Gary O. Marino and directors Don Denbo and Paul Dennis also hold membership interests in BEP.
The Company’s board of directors and officers directly or beneficially own 5,976,375 shares of common stock as of June 30, 2015 or 5,981,375, if their options are exercised.
Note 10. Subsequent Events
On July 7, 2015, the Company issued an aggregate of 896,000 shares of Common Stock to Donald S. Denbo, Paul S. Dennis, Mark L. Friedman and Gary O. Marino as compensation for services as a director.
Also on July 7, 2015, the Company issued 125,000 Shares for $0.18 a share to an accredited investor, pursuant to a private placement for $22,500. The Company intends to use the proceeds from the private placement for general working capital purposes.
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 2014 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.
Banyan is a shell company without significant operations or sources of revenues other than its investments. Our management team is aggressively investigating potential operating companies to acquire and additional sources of financing. Currently we are actively seeking acquisitions of leading companies within the industrial, energy, transportation, technology and health care industries throughout North America, but we cannot guarantee we will complete an acquisition in any of these industries. Accordingly, we may explore potential acquisitions in other industries as well.
| Page 10 of 17 |
The Company was originally organized under the laws of the Commonwealth of Massachusetts in 1985, for the purpose of investing in mortgage loans. The Company was reorganized as a Delaware corporation in 1987. From 1989 to 1992 the Company experienced severe losses as a result of a decline in real estate values and the resulting defaults on the mortgages it held. In 1998, the Company changed its name to B.H.I.T. Inc., and again changed its name to Banyan Rail Services Inc. in 2010.
On January 24, 2007, a group of private investors purchased 41.7% of our outstanding shares held by our largest shareholder at the time. Because members of our new management team have experience with the railroad industry, we began investigating acquisitions of companies in the rail industry. In the spring of 2009, we entered negotiations with the owners of Wood Energy to acquire the company. As a result of the acquisition of Wood Energy, we were no longer a shell company. On January 4, 2010, we changed our name to Banyan Rail Services Inc. to reflect our new business. As a result of the bankruptcy and liquidation of Wood Energy, Banyan is now a shell Company seeking to acquire an operating entity.
Common Stock
On May 7, 2015, the Company issued an aggregate of 2,294,444 Shares for $0.18 a share, or $413,000 total, to twenty-three accredited investors in a private placement. The Company intends to use the proceeds from the private placement for general working capital purposes.
On July 7, 2015, the Company issued an aggregate of 896,000 Shares to Donald S. Denbo, Paul S. Dennis, Mark L. Friedman and Gary O. Marino as compensation for services as a director.
Also on July 7, 2015, the Company issued 125,000 Shares for $0.18 a share to an accredited investor, pursuant to a private placement for $22,500. The Company intends to use the proceeds from the private placement for general working capital purposes.
Related Party Transactions
On June 1, 2015, the Company entered into a month-to-month office lease and administrative support agreement (the “Agreement”) with Boca Equity Partners LLC (“BEP”). The Agreement is effective as of January 1, 2015. The Agreement provides for the Company’s use of a portion of BEP’s offices and certain overhead items at the BEP offices such as space, utilities and other administrative services for $4,750 a month.
Also on June 1, 2015, the Company entered into a support agreement (the “Support Agreement”) with BEP. The Support Agreement is effective as of January 1, 2015 and provides for corporate support services. The Support Agreement is for a month-to-month term and will terminate upon the Company’s payment of a success fee, should the Company acquire more than 50% of the assets of capital stock of any company (the “Acquisition”) during the term of the Support Agreement or within the one year period following the termination of the Support Agreement. Within five days of the closing of any potential Acquisition, Banyan will pay to BEP 2% of the cash purchase price paid by the Company to the seller(s) for the Acquisition.
Gary O. Marino, the Company’s chairman of the board, is the chairman, president, and chief executive officer of BEP. Gary O. Marino and directors Don Denbo and Paul Dennis also hold membership interests in BEP.
| Page 11 of 17 |
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 six months ended June 30, 2015, there were no significant changes to the critical accounting policies.
Use of Estimates
The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the useful lives of property and equipment, and the useful lives of intangible assets.
Cash Equivalents
The Company considers all bank deposits and highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at June 30, 2015 or December 31, 2014.
Fair Value of Financial Instruments
Recorded financial instruments at June 30, 2015 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.
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.
| Page 12 of 17 |
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.
The following table summarizes our results for the three and six months ended June 30, 2015 and 2014:
| Six months ended June 30, | Variance | Three months ended June 30, | Variance | |||||||||||||||||||||||||||||
| 2015 | 2014 | $ | % | 2015 | 2014 | $ | % | |||||||||||||||||||||||||
| General & administrative expenses | $ | 290,481 | $ | 237,900 | $ | 52,581 | 22.1 | % | $ | 157,802 | $ | 122,195 | $ | 35,607 | 29.1 | % | ||||||||||||||||
| Loss from operations | (290,481 | ) | (237,900 | ) | 52,581 | -22.1 | % | (157,802 | ) | (122,195 | ) | 35,607 | 29.1 | % | ||||||||||||||||||
| Interest expense | - | (151,583 | ) | 151,583 | 100.0 | % | - | (97,708 | ) | 97,708 | -100.0 | % | ||||||||||||||||||||
| Net loss | $ | (290,481 | ) | $ | (389,483 | ) | $ | (99,002 | ) | -25.4 | % | $ | (157,802 | ) | $ | (219,903 | ) | $ | (62,101 | ) | -28.2 | % | ||||||||||
General and administrative expenses
General and administrative expenses include: compensation, professional fees and costs related to being a public company.
The overall increase in general and administrative costs of $52,581 for the six months ended June 30, 2015 as compared to the six months ended June 30, 2014 is primarily due to:
| · | An increase in professional fees of approximately $34,000 due to the Company obtaining a fairness opinion from an independent investment banking firm in connection with its equity transactions, |
| · | An increase in stock transfer agent fees of approximately $13,000 due to the increased number of stock issuances related to the ongoing private placement, |
| · | An increase in office expense of approximately $28,000 due to the Company entering into a monthly lease with Boca Equity Partners, |
| · | Offset by decrease in travel costs of approximately $4,000, |
| · | A decrease in payroll of approximately $3,000, and |
| · | A decrease in insurance costs of approximately $15,000. |
The overall increase in general and administrative costs of $35,607 for the three months ended June 30, 2015 as compared to the three months ended June 30, 2014 is primarily due to:
| · | An increase in professional fees of approximately $2,000, |
| · | An increase in stock transfer agent fees of approximately $9,000 due to the increased number of stock issuances related to the ongoing private placement, |
| · | An increase in office expense of approximately $28,000 due to the Company entering into a monthly lease with Boca Equity Partners, |
| · | An increase in travel costs of approximately $4,000, |
| · | Offset by a decrease in payroll of approximately $1,000, and |
| · | A decrease in insurance costs of approximately $7,000. |
| Page 13 of 17 |
Interest expense for the three and six months ended June 30, 2015 decreased by $97,708 and $151,583 compared to the three and six months ended June 30, 2014, respectively. The decrease is the result of the Company converting its prior interest bearing obligations into equity in 2014.
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 attributable to common stockholders was $0.02 per share for the three months ended June 30, 2015 as compared to net loss of $0.21 per share at June 30, 2014. The change was primarily the result of a decrease in interest expense of $97,708 and dividends of $98,945, which were offset by an increase in general and administrative costs of $35,607 and an increase in the number of shares outstanding.
Net loss attributable to common stockholders was $0.04 per share for the six months ended June 30, 2015 as compared to net loss of $0.36 per share at June 30, 2014. The change was primarily the result of a decrease in interest expense of $151,583 and dividends of $197,875, which were offset by an increase in general and administrative costs of $52,581 and an increase in the number of shares outstanding.
Financial Condition and Liquidity
Our cash balance at June 30, 2015 and 2014 was $490,604 and $5,490, respectively.
The following is a summary of our cash flow activity:
| Six months Ended June 30, | ||||||||
| 2015 | 2014 | |||||||
| Net cash used in operating activities | $ | (342,797 | ) | $ | (171,634 | ) | ||
| Net cash from financing activities | $ | 431,000 | $ | 150,000 | ||||
Net cash used in operating activities
For the six months ended June 30, 2015, cash used in operating activities was $342,797. The primary use of cash was to fund the normal operating activities of the Company.
Net cash provided by financing activities
For the six months ended June 30, 2015, net cash provided by financing activities was $431,000, which was provided by the sale of common stock.
| Page 14 of 17 |
At June 30, 2015, the Company had net working capital of $211,077 as compared to net working capital of $93,183 at December 31, 2014. The increase in working capital is the result of sale of common stock in 2015. 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 concluded that our disclosure controls and procedures were effective as of June 30, 2015. Further, there have been no changes in our internal control over financial reporting during the quarter ended June 30, 2015 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 15 of 17 |
| Item 1. | Legal Proceedings |
Not applicable.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Not applicable.
| 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 11.
| 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 16 of 17 |
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: August 5, 2015 | /s/ Jon Ryan | |
| Jon Ryan, | ||
| President, CEO and Chief Financial Officer | ||
| (Principal Financial and Accounting Officer) |
| Page 17 of 17 |
| 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, 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: August 5, 2015 |
||
| /s/ Jon Ryan | ||
| Jon Ryan | ||
| Chief Executive Officer | ||
| (Principal Executive Officer) |
| 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: August 5, 2015 | ||
| /s/ Jon Ryan | ||
| Jon Ryan | ||
| Chief Financial Officer | ||
| (Principal Financial Officer) |
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 June 30, 2015 (the “Report”) filed with the Securities and Exchange Commission on the date hereof, I, Jon Ryan, Chief Executive Officer and 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/ Jon Ryan | |
| Jon Ryan | |
| Chief Executive officer and Chief Financial Officer |
August 5, 2015
Related Party Transactions - Additional Information (Details) - Jun. 30, 2015 - USD ($) |
Total |
|---|---|
| Related Party Transaction [Line Items] | |
| Ownership of related party in common Stock | 5,976,375 |
| Ownership of related party in common stock if preferred stock is converted | 5,981,375 |
| Boca Equity Partners LLC [Member] | |
| Related Party Transaction [Line Items] | |
| Monthly Lease And Rental Expense | $ 4,750 |
| Support Agreement Description | The Support Agreement is for a month-to-month term and will terminate upon the Company’s payment of a success fee, should the Company acquire more than 50% of the assets of capital stock of any company |
Summary of Significant Accounting Policies |
6 Months Ended | |
|---|---|---|
Jun. 30, 2015 | ||
| 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 Equivalents The Company considers all bank deposits and highly liquid investments with an original maturity of three months or less to be cash equivalents. The Company had no cash equivalents at June 30, 2015 or December 31, 2014. From time to time our cash deposits exceed federally insured limits. Fair Value of Financial Instruments Recorded financial instruments as of June 30, 2015 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. |
Basis of Presentation |
6 Months Ended | |
|---|---|---|
Jun. 30, 2015 | ||
| Organization, Consolidation and Presentation Of Financial Statements [Abstract] | ||
| Basis of Presentation | Note 2. Basis of Presentation The accompanying consolidated financial statements give effect to all adjustments necessary to present fairly the financial position and results of operations and cash flows of the Company. All significant intercompany transactions and accounts have been eliminated in consolidation. |
Condenced Consolidated Statements of Stockholders' Equity - USD ($) |
Total |
Common Stock |
Common Stock Payable |
Preferred Stock |
Additional Paid in Capital |
Accumulated Deficit |
Treasury Stock |
|---|---|---|---|---|---|---|---|
| Stockholders’ deficit at Dec. 31, 2013 | $ (562,589) | $ 10,369 | $ 162,300 | $ 2,548,017 | $ 94,252,890 | $ (97,465,476) | $ (70,689) |
| Stockholders’ deficit (in shares) at Dec. 31, 2013 | 1,036,945 | 49,950 | 5,655 | ||||
| Common stock payable | 11,427,963 | 11,427,963 | |||||
| Issuance of common stock | (5,916,742) | $ 5,264 | (162,300) | $ (2,547,913) | (3,211,793) | ||
| Issuance of common stock (in shares) | 526,479 | (39,575) | |||||
| Stock compensation expense | 6,633,175 | 6,633,175 | |||||
| Preferred stock dividends | (400,564) | (400,564) | |||||
| Net loss | (11,088,060) | (11,088,060) | |||||
| Stockholders’ deficit at Dec. 31, 2014 | 93,183 | $ 15,633 | 11,427,963 | $ 104 | 97,273,708 | (108,553,536) | $ (70,689) |
| Stockholders’ deficit (in shares) at Dec. 31, 2014 | 1,563,424 | 10,375 | 5,655 | ||||
| Common stock payable | 310,000 | 310,000 | |||||
| Issuance of common stock | 150,250 | $ 71,683 | (11,719,963) | 11,798,530 | |||
| Issuance of common stock (in shares) | 7,168,329 | ||||||
| Preferred stock dividends | (51,875) | (51,875) | |||||
| Net loss | (290,481) | (290,481) | |||||
| Stockholders’ deficit at Jun. 30, 2015 | $ 211,077 | $ 87,316 | $ 18,000 | $ 104 | $ 109,020,363 | $ (108,844,017) | $ (70,689) |
| Stockholders’ deficit (in shares) at Jun. 30, 2015 | 8,731,753 | 10,375 | 5,655 |
Income Taxes - Additional Information (Details) - USD ($) |
6 Months Ended | 12 Months Ended | |
|---|---|---|---|
Jun. 30, 2015 |
Jun. 30, 2014 |
Dec. 31, 2014 |
|
| 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% | ||