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 March 31, 2016

 

¨

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)
561-988-8480
(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: 10,347,235 shares of common stock, $0.01 par value per share, as of May 6, 2016.

 

 

 

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	11
Recent Events	11
Critical Accounting Policies and Estimates	12
Results from Operations	14
General and Administrative Expenses	14
Income Tax expense	15
Net (loss) Income	15
Financial Condition and Liquidity	15
Off-Balance Sheet Arrangements	15
How to Learn More About Banyan	15
Item 4.    Controls and Procedures	16
Part II — Other Information	16
Item 1.    Legal Proceedings	16
Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds	16
Item 3.    Defaults Upon Senior Securities	16
Item 5.    Other Information	16
Item 6.    Exhibits	16
Signatures	18

 

 

Part I — Financial Information

Item 1. Financial Statements

Banyan Rail Services Inc.

Condensed Balance Sheets

 

		(Unaudited)
		March 31, 2016				December 31, 2015
ASSETS
Current assets
Cash		$	181,167			$	327,382
Prepaid insurance			9,493				8,752
Total current assets			190,660				336,134
Total assets		$	190,660			$	336,134
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities
Accounts payable		$	66,942			$	42,304
Accrued payroll			3,842				4,855
Accrued professional fees			6,000				6,982
Accrued expenses			1,130				-
Accrued dividends			251,212				254,517
Total current liabilities			329,126				308,658
Total liabilities			329,126				308,658
Commitments and contingencies			-				-
Stockholders' (deficit) equity
Series A Preferred stock, $.01 par value. 20,000 shares authorized and 10,375 issued			104				104
Common stock, $0.01 par value. 50,000,000 shares authorized. 10,347,235 and 10,317,379 issued as of March 31, 2016 and December 31, 2015, respectively			103,472				103,174
Additional paid-in capital			109,655,907				109,652,901
Accumulated deficit			(109,827,260	)			(109,658,014	)
Treasury stock, at cost, for 5,655 shares			(70,689	)			(70,689	)
Total stockholders' (deficit) equity			(138,466	)			27,476
Total liabilities and stockholders' (deficit) equity		$	190,660			$	336,134

 

See Notes to Condensed Financial Statements

 

 

Banyan Rail Services Inc.

Condensed Statements of Operations

(Unaudited)

 

		Three months ended March 31,
		2016				2015
General & administrative expenses		$	169,246			$	132,679
Loss from operations			(169,246	)			(132,679	)
Net loss		$	(169,246	)		$	(132,679	)
Dividends for the benefit of preferred stockholders:
Preferred stock dividends			(25,945	)			(25,945	)
Total dividends for the benefit of preferred stockholders			(25,945	)			(25,945	)
Net loss attributable to common stockholders		$	(195,191	)		$	(158,624	)
Weighted average number of common shares outstanding:
Basic and diluted			10,331,487				4,670,559
Net loss per common share, basic and diluted		$	(0.02	)		$	(0.03	)
Net loss attributable to common shareholders per share		$	(0.02	)		$	(0.03	)

 

See Notes to Condensed Financial Statements.

 

 

Banyan Rail Services Inc.

Condensed Statements of Cash Flows

(Unaudited)

 

		Three months ended March 31,
		2016				2015
Cash flows from operating activities:
Net loss		$	(169,246	)		$	(132,679	)
Changes in assets and liabilities, net of effects of discontinued operations:
Decrease in prepaid expenses			(741	)			-
Increase (decrease) in accounts payable and accrued expenses			23,772				(45,779	)
Net cash used in operating activities			(146,215	)			(178,458	)
Cash flows from financing activities:
Proceeds from sale of common stock			-				292,000
Net cash from financing activities			-				292,000
Net (decrease) increase in cash			(146,215	)			113,542
Cash at beginning of period			327,382				402,401
Cash at end of period		$	181,167			$	515,943
Supplemental disclosure of cash flow information:
Non cash financing activities:
Preferred stock dividend in excess of payments		$	25,945			$	25,945
Issuance of common shares in lieu of cash dividends payable		$	29,250			$	29,250
Issuance of shares in settlement of loans and advances payable		$	-			$	11,427,963

 

See Notes to Condensed Financial Statements.

 

 

Banyan Rail Services Inc.

Statements of Stockholders’ (Deficit) Equity

Periods Ended March 31, 2016 and December 31, 2015

 

		Common Stock												Preferred Stock																Treasury Stock
		Shares Issued				Amount				Common Stock Payable				Shares Issued				Amount				Additional Paid in Capital				Accumulated Deficit				Shares				Amount				Total
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
Issuance of common stock			7,857,955				78,581				(11,427,963	)											11,936,383																587,001
Stock compensation expense			896,000				8,960																546,560																555,520
Net loss for the year ended December 31, 2015																											(1,104,478	)											(1,104,478	)
Preferred stock dividends																							(103,750	)															(103,750	)
Stockholders’ equity December 31, 2015			10,317,379			$	103,174			$	-				10,375				104			$	109,652,901			$	(109,658,014	)			5,655				(70,689	)		$	27,476
Issuance of common stock			29,856				298																28,951																29,249
Net loss for the three months ended March 31, 2016																											(169,246	)											(169,246	)
Preferred stock dividends																							(25,945	)															(25,945	)
Stockholders’ (deficit) equity March 31, 2016			10,347,235			$	103,472			$	0				10,375			$	104			$	109,655,907			$	(109,827,260	)			5,655			$	(70,689	)		$	(138,466	)

 

See Notes to Condensed Financial Statements.

 

 

Notes to Condensed Financial Statements

 

Notes to Condensed Financial Statements.

 

Note 1.  Nature of Operations

 

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. From 2009 to 2012, the Company operated and experienced severe losses from an operating subsidiary in the rail services sector and is now a shell company.

 

The Company is actively seeking acquisitions of leading companies within the industrial, energy, transportation, technology and health care industries throughout North America.

 

Liquidity and 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 financial statements give effect to all adjustments necessary to present fairly the financial position and results of operations and cash flows of the Company.

 

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, bank deposits and highly liquid investments with an original maturity of three months or less to be cash. From time to time our cash deposits exceed federally insured limits.

 

Fair Value of Financial Instruments

 

Recorded financial instruments as of March 31, 2016 consist of cash, prepaid expenses, 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 period ended March 31, 2016, the Company had a net working capital deficit of $138,466 and incurred negative cash flows from operating activities of $146,215. 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 three months ended March 31, 2016, in the amount of $25,945. 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 February of 2016, we issued 29,856 shares of common stock in lieu of $29,250 of cash dividends for dividends accrued through December 31, 2015. Substantially all preferred shareholders accepted the common stock in lieu of cash and the common shares for these dividends.

 

As of March 31, 2016, Banyan Rail Holdings LLC (“Banyan Holdings”) and Marino Family Holdings LLC owned 2,726,114 and 3,057,778 shares of Common stock, respectively.

 

Note 6. Income Taxes 

 

For the three months ended March 31, 2016 and 2015, the Company recorded an income tax provision of $0. The effective tax rate for the three months ended March 31, 2016 and 2015 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.

 

 

Note 7. Earnings (loss) per Share

 

The Company excluded from the diluted earnings per share calculation 103,750 shares issuable upon conversion of shares of convertible preferred stock that were outstanding at March 31, 2016 and 2015, as their inclusion would be anti-dilutive. In addition, the Company excluded 5,000 stock options as of March 31, 2016 and 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  Average				Weighted  Average				Weighted  Average
		Number				Exercise Price				Fair Value at				Remaining				Intrinsic
		of Shares				per Share				Grant Date				Contractual Life				Value
Balance January 1, 2015			27,500				12.92								0.3 years				-
Options granted			-				-			$	0				-				-
Options exercised			-				-								-				-
Options expired			(22,500	)		$	(2.62	)							-				-
Balance, January 1, 2016			5,000			$	10.30								0.3 years			$	-
Options granted			-				-			$	0				-				-
Options exercised			-				-								-				-
Options expired			-			$	-								-				-
Balance, March 31, 2016			5,000			$	10.30								0.3 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

 

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 or 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.

 

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 Donald S. Denbo and Paul S. Dennis also hold membership interests in BEP.

 

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 March 31, 2016 and 2015, respectively.

 

 

The Company’s board of directors and officers directly or beneficially own 6,872,375 shares of common stock as of March 31, 2016 or 6,877,375 shares, if their options are exercised.

 

Note 10. Subsequent Events

 

On April 20, 2016, the previously announced asset purchase agreement (the “Purchase Agreement”), dated February 16, 2016, between the Company, Thermocast Acquisition Corp., a Delaware corporation (“Thermocast Acquisition”) and a wholly-owned subsidiary of the Company, International Thermocast Corporation, a Georgia corporation, The Dekor Corporation, a Georgia Corporation (collectively, “Sellers”), and Mark Anderson, an individual resident of the State of Georgia and the sole shareholder of Sellers, for the purchase of Sellers’ business was terminated by Thermocast Acquisition. Thermocast Acquisition terminated the Purchase Agreement in accordance with its right to terminate such agreement pursuant to Section 8.1.5 thereunder.

 

Also on April 20, 2016, the previously announced Real Estate Purchase Agreement, dated February 16, 2016, between Thermocast Acquisition and Anderson Investment Management, Inc. (“Anderson Investment”), an affiliate of Sellers, for the purchase of Anderson Investment’s real property, including its buildings, improvements, easements and appurtenant rights and privileges, located at 189 Etowah Industrial Court, Canton, Georgia, was terminated. Thermocast Acquisition terminated the Real Estate Purchase Agreement in accordance with its right to terminate such agreement due to the parties’ failure to consummate the transactions contemplated by the Purchase Agreement.

 

All of the transactions contemplated in the Purchase Agreement and the Real Estate Purchase Agreement are collectively referred to as the “Transaction.”

 

The foregoing description of the Transaction is not complete and is qualified in its entirety by reference to the Purchase Agreement and the Real Estate Purchase Agreement, filed as Exhibits 10.1 and 10.2 to the Current Report on Form 8-K dated February 18, 2016, incorporated by reference herein.

 

 

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 2015 Annual Report on Form 10-K, filed on March 22, 2016. 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

 

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.

 

Our History

 

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 The Wood Energy Group Inc. (“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.

 

Recent Events

 

Common Stock

 

In February of 2016, we issued 29,856 shares of common stock in lieu of $29,250 of cash dividends for dividends accrued for our Preferred Series A stock through December 31, 2015.

 

 

Thermocast Termination

 

On April 20, 2016, the previously announced asset purchase agreement (the “Purchase Agreement”), dated February 16, 2016, between the Company, Thermocast Acquisition Corp., a Delaware corporation (“Thermocast Acquisition”) and a wholly-owned subsidiary of the Company, International Thermocast Corporation, a Georgia corporation, The Dekor Corporation, a Georgia Corporation (collectively, “Sellers”), and Mark Anderson, an individual resident of the State of Georgia and the sole shareholder of Sellers, for the purchase of Sellers’ business was terminated by Thermocast Acquisition. Thermocast Acquisition terminated the Purchase Agreement in accordance with its right to terminate such agreement pursuant to Section 8.1.5 thereunder.

 

Also on April 20, 2016, the previously announced Real Estate Purchase Agreement, dated February 16, 2016, between Thermocast Acquisition and Anderson Investment Management, Inc. (“Anderson Investment”), an affiliate of Sellers, for the purchase of Anderson Investment’s real property, including its buildings, improvements, easements and appurtenant rights and privileges, located at 189 Etowah Industrial Court, Canton, Georgia, was terminated. Thermocast Acquisition terminated the Real Estate Purchase Agreement in accordance with its right to terminate such agreement due to the parties’ failure to consummate the transactions contemplated by the Purchase Agreement.

 

All of the transactions contemplated in the Purchase Agreement and the Real Estate Purchase Agreement are collectively referred to as the “Transaction.”

 

The foregoing description of the Transaction is not complete and is qualified in its entirety by reference to the Purchase Agreement and the Real Estate Purchase Agreement, filed as Exhibits 10.1 and 10.2 to the Current Report on Form 8-K dated February 18, 2016, incorporated by reference herein.

 

Critical Accounting Policies and Estimates

 

The following discussion and analysis of our results of operations and financial condition is based upon our condensed 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 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 three months ended March 31, 2016, there were no significant changes to the critical accounting policies.

 

Use of Estimates

 

The preparation of financial statements, in conformity with accounting principles generally accepted in the United States, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates include the useful lives of property and equipment, and the useful lives of intangible assets.

 

Cash

 

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

 

 

Fair Value of Financial Instruments

 

Recorded financial instruments at March 31, 2016 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.

 

ASC 740-10 requires that the Company recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the “more-likely-than-not” threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority.

 

Retained Earnings Distributions

 

The Company’s preferred stockholders are entitled to receive payment before any of the common stockholders upon a liquidation of the Company and we cannot pay dividends on our common stock unless we first pay dividends required by our preferred stock.

 

Results from Operations

 

The following table summarizes our results for the three months ended March 31, 2016 and 2015:

 

		Three months ended March 31,								Variance
		2016				2015				$				%
General & administrative expenses		$	169,246			$	132,679			$	36,567				27.6	%
Loss from operations			(169,246	)			(132,679	)			(36,567	)			27.6	%
Net loss		$	(169,246	)		$	(132,679	)		$	(36,567	)			27.6	%

 

General and Administrative Expenses

 

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

 

For the three months ended March 31, 2016, costs increased $36,567 or 27.6% compared to the three months ended March 31, 2015.

 

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

 

·

An increase in deal costs of approximately $35,500 relating to the terminated International Thermocast acquisition and other pursuits,

·

An increase in rent expense paid to a related party of $14,250,

·

An increase in public filing fees of $10,000,

·

Offset by decrease in professional fees of approximately $23,000.

 

 

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 $0.02 per share for the three months ended March 31, 2016 as compared to net loss of $0.03 per share March 31, 2015. The change was the result of an increase in general and administrative costs of $36,567.

 

Financial Condition and Liquidity

 

Our cash balance at March 31, 2016 and 2015 was $181,167 and $515,943, respectively.

 

The following is a summary of our cash flow activity:

 

		Three months Ended March 31,
		2016				2015
Net cash used in operating activities		$	(146,215	)		$	(178,458	)
Net cash from financing activities		$	-			$	292,000

 

Net cash used in operating activities

 

For the three months ended March 31, 2016, cash used in operating activities was $146,215 as compared to $178,458 for the three months ended March 31, 2015. The use of cash was to fund the normal operating activities of the Company.

 

Net cash provided by financing activities

 

For the three months ended March 31, 2016, the Company had no financing activities. For the three months ended March 31, 2015, net cash provided by financing activities was $292,000, which was provided by the sale of common stock.

 

At March 31, 2016, the Company had net working capital deficit of $138,466 as compared to net working capital of $27,476 at December 31, 2015. The decrease in working capital is the result of normal operations of the Company in 2016. 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 561-988-8480.

 

 

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 March 31, 2016. Further, there have been no changes in our internal control over financial reporting during the quarter ended March 31, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)).

 

Part II — Other Information

 

Item 1.

Legal Proceedings

 

Not applicable.

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

In February of 2016, we issued 29,856 shares of common stock in lieu of $29,250 of cash dividends for dividends accrued for our Preferred Series A stock through December 31, 2015.

 

The issuances of common stock were 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 first quarter, please turn to “Recent Events” on page 12.

 

Item 6.

Exhibits

 

10.3	Asset Purchase Agreement by and among Thermocast Acquisition Corp., Banyan Rail Services Inc., International Thermocast Corporation, The Dekor Corporation and Mark Anderson dated February 16, 2016, Exhibit 10.1 to the Form 8-K dated February 18, 2016 is incorporated by reference herein.
10.4	Real Estate Purchase Agreement by and among Anderson Investment Management Inc. and Thermocast Acquisition Corp. dated February 16, 2016, Exhibit 10.2 to the Form 8-K dated February 18, 2016 is incorporated by reference herein.
31.1*	Rule 13a-14(a)/15d-14(a) Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Rule 13a-14(a)/15d-14(a) Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

 

 

32.1*	Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS*	XBRL Instance Document
101.SCH*	XBRL Schema Document
101.CAL*	XBRL Calculation Linkbase Document
101.DEF*	XBRL Definition Linkbase Document
101.LAB*	XBRL Label Linkbase Document
101.PRE*	XBRL Presentation Linkbase Document

 

* Filed herewith.

 

 

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: May 13, 2016	/S/ Jon Ryan
	Jon Ryan,
	President, Chief Executive Officer and Chief Financial Officer
	(Principal Financial and Accounting Officer)