Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 2011.
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT.
For the transition period from to
----------- ----------
Commission file number: 1-10024
BKF Capital Group, Inc.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-0767530
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
225 N.E. Mizner Boulevard, Suite 400 Boca Raton, Florida 33432
--------------------------------------------------------------
(Address of Principal Executive Office) (Zip Code)
(561) 362-4199
--------------------------------------------------
(Registrant's telephone number including area code)
Indicate by 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 past 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.
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically
and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T
(Section 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).
[X] Yes [ ] No
Indicate by 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 [X]
Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
[X] Yes [ ] No
As of May 11, 2011, 7,446,593 shares of the registrant's common stock,
$1.00 par value, were outstanding.
TABLE OF CONTENTS
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements 3
Consolidated Statements of Financial Condition as of
March 31, 2011 (unaudited) and December 31, 2010 3
Consolidated Statements of Operations and Comprehensive Income
for the Three Months Ended March 31, 2011
and 2010(unaudited) 4
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2011 and 2010 (unaudited) 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 4T. Controls and Procedures 12
Part II. Other Information 13
Item 1. Legal Proceedings 13
Item 5. Other Information 13
Item 6. Exhibits 14
Signatures 14
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BKF CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollar amounts in thousands)
March 31, December 31,
2011 2010
----------- ------------
(unaudited)
Assets
Cash and cash equivalents $ 8,678 $ 9,744
Investments 3,038 2,863
Royalty and other receivables 16 15
Prepaid expenses and other assets 57 277
----------- -----------
Total assets $ 11,789 $ 12,899
=========== ===========
Liabilities and Stockholders' Equity
Accrued expenses $ 13 $ 73
Accrued lease liability expense -- 1,139
----------- -----------
Total liabilities $ 13 $ 1,212
----------- -----------
Commitments and contingencies
Stockholders' equity
Common stock, $1 par value, authorized -- 15,000,000 shares, 7,973,216
issued and 7,446,593 outstanding as of March 31, 2011 and December 31, 2010 7,973 7,973
Treasury stock (598) (598)
Additional paid-in capital 68,269 68,269
Accumulated deficit (64,363) (64,277)
Accumulated other comprehensive income 495 320
----------- -----------
Total stockholders' equity 11,776 11,687
----------- -----------
Total liabilities and stockholders' equity $ 11,789 $ 12,899
=========== ===========
See accompanying notes
3
BKF CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(Dollar amounts in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
--------------------------
2011 2010
----------- -----------
Operating income:
Royalties $ -- $ 179
Non Operating Income
Interest income 7 2
Other income 4 64
----------- -----------
Total revenues 11 245
----------- -----------
Expenses:
Employee compensation and benefits 61 60
Occupancy and equipment rental 16 32
Other operating expenses 20 47
Interest expense -- 72
----------- -----------
Total expenses 97 211
----------- -----------
Net income/(loss) (86) 34
=========== ===========
Other Comprehensive Income
Unrealized gain
on securities 175 63
----------- -----------
Comprehensive Income 89 97
=========== ===========
Net income/(loss) per share:
Basic and Diluted $ (0.01) $ 0.00
----------- -----------
Weighted average common shares outstanding 7,446,593 7,973,216
=========== ===========
See accompanying notes
4
BKF CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
Three Months Ended
March 31,
---------------------
2011 2010
-------- --------
Cash flows from operating activities
Net income (loss) $ (86) $ 34
Changes in operating assets and liabilities:
Decrease in advisory trailer fees and
other receivable -- (26)
Decrease in prepaid expenses and other assets 219 1
Decrease in accrued expenses (60) (106)
Decrease in accrued lease liability expense (1,139) (341)
-------- --------
Net cash (used in) provided by operating activities (1,066) (438)
-------- --------
Net (decrease)/increase in cash and cash equivalents (1,066) (438)
Cash and cash equivalents at the beginning of the period 9,744 11,839
-------- --------
Cash and cash equivalents at the end of the period $ 8,678 $ 11,401
======== ========
Supplemental disclosure of cash flow information
Cash paid for interest $ -- $ --
======== ========
Cash paid for income taxes $ -- $ --
======== ========
See accompanying notes
5
BKF CAPITAL GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The unaudited condensed consolidated financial statements included herein were
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted pursuant
to such rules and regulations. In the opinion of management, disclosures made
are adequate to make the information not misleading. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes included in the Company's Form 10-K for the year
ended December 31, 2010.
In the opinion of management, the interim data includes all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the results for the interim period. The results of operations for the interim
periods are not necessarily indicative of the results that may be expected for
the fiscal year.
1. Organization and Summary of Significant Accounting Policies
Organization and Basis of Presentation
BKF Capital Group, Inc. (the "Company") operates through a wholly-owned
subsidiary, BKF Management Co., Inc. and its subsidiaries, all of which are
referred to as "BKF." The Company trades on the over the counter market under
the symbol ("BKFG"). Currently, the Company is seeking to consummate an
acquisition, merger or business combination with an operating entity to enhance
BKF's revenues and increase shareholder value.
The consolidated financial statements of BKF include its wholly-owned
subsidiaries BKF Asset Management, Inc., ("BAM"), BAM's two wholly-owned
subsidiaries, BKF GP Inc. ("BKF GP") and LEVCO Securities, Inc. ("LEVCO
Securities"). All inter-company accounts have been eliminated. All adjustments
necessary for a fair statement of results for the interim period have been made
and all such adjustments were of a normal recurring nature.
Use of Estimates
The preparation of the consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the consolidated financial statements and reported amounts of
revenues and expenses during the reporting periods. Actual results could differ
from those estimates.
6
BKF CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Revenue Recognition
Under an agreement with a former partner, BKF was entitled to 15% of the annual
revenues collected from carry-over clients by this former partner. This
agreement terminated on September 30, 2010.
Cash and Cash Equivalents
Investments in money market funds are valued at net asset value. The Company
maintains substantially all of its cash and cash equivalents in interest bearing
instruments at two nationally recognized financial institutions, which at times
may exceed federally insured limits. As a result the Company is exposed to
credit risk related to the money market funds and the market rate inherent in
the money market funds.
OTHER COMPREHENSIVE INCOME
The Company presents other comprehensive income in accordance with ASC
Topic 220, Comprehensive Income. This section requires that an enterprise (a)
classify items of other comprehensive income by their nature in a financial
statement and (b) display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid in capital in the equity
section of a statement of position. The Company reports its unrealized gains and
losses on investments in securities as other comprehensive income (loss) in its
financial statements.
Fair Values of Financial Instruments
Financial instruments, including cash and cash equivalents, accounts receivable
and accounts payable are carried in the consolidated financial statements at
amounts that approximate fair value at March 31, 2011 and December 31, 2010.
Fair values are based on market prices and assumptions concerning the amount and
timing of estimated future cash flows. Investments have been valued using level
1 inputs under ASC Topic 820, Fair Value Measurements and Disclosures.
7
BKF CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
2. Investments
Investments are classified as available-for-sale according to the provisions of
ASC Topic 320, Investments - Debt & Equity Securities. Accordingly, the
investments are carried at fair value with unrealized gains and losses reported
separately in other comprehensive income.
At March 31, 2011 the Company held 13,500 of IAAC common shares valued at
approximately $343,000 and 1,505,700 common shares of Qualstar valued at
approximately $2,695,000.
3. Concentrations
On October 3, 2008, the Emergency Economic Stabilization Act of 2008 increased
the insurance coverage offered by the Federal Deposit Insurance Corporation
(FDIC) from $100,000 to $250,000 per depositor. This limit is anticipated to
return to $100,000 after December 31, 2013. Additionally, under the FDIC's
Temporary Liquidity Guarantee Program, amounts held in non-interest bearing
transaction accounts at participating institutions are fully guaranteed by the
FDIC through December 31, 2013. The Company had amounts in excess of $250,000 in
a single bank during the year. Amounts over $250,000 are not insured by the
Federal Deposit Insurance Corporation. These balances fluctuate during the year
and can exceed this $250,000 limit.
4. Related Party Transactions
Royalties
Royalties are the Company's portion of fee sharing arrangements from departed
portfolio managers. The Company had royalty revenue of zero and approximately
$175,000 for the three months ended March 31, 2011 and 2010, respectively. The
agreement that provided for the royalties terminated on September 30, 2010.
8
BKF CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
5. Commitments and Contingencies
The Company could be subject to a variety of claims, suits and proceedings that
arise from time to time, including actions with respect to contracts, regulatory
compliance and public disclosure. These actions may be commenced by a number of
different constituents, including vendors, former employees, regulatory
agencies, and stockholders. The following is a discussion of the more
significant matters involving the Company.
The Company is a defendant in a lawsuit for claims for alleged services in
the amount of approximately $171,000. The complaint was filed in the New York
State Supreme Court and alleges a claim for breach of contract against BAM for
alleged goods and services delivered to BAM. The Company is vigorously defending
this action. The Company has no specific reserve for this action.
6. Share Repurchase Plan.
On July 19, 2010 the Board of Directors of the Company approved a share
repurchase plan, authorizing the Company to repurchase in the aggregate up to 1
million shares of its outstanding common stock, $1 par value, over the twelve
month period July 19, 2010 through July 18, 2011 (the "2010 Repurchase Plan").
As of March 31, 2011, the Company had repurchased an aggregate amount 526,623
shares of the Company's common stock as follows: 40,000 shares at an average
price of $.94 per share; 156,983 shares at an average price of $1.10; 90,000
shares at an average price of $1.15 and 239,640 shares at an average price of
$1.18.
9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Quarterly Report on Form 10-Q contains certain statements that are not
historical facts, including, most importantly, information concerning possible
or assumed future results of operations of BKF Capital Group, Inc. (the
"Company") and statements preceded by, followed by or that include the words
"may," "believes," "expects," "anticipates," or the negation thereof, or similar
expressions, which constitute "forward-looking statements" within the meaning of
the Section 27A of the Securities Act of 1933 and Section 21E (the "Reform Act")
of the Securities Exchange Act of 1934 (the "Exchange Act"). For those
statements, the Company claims the protection of the safe harbor for
forward-looking statements contained in the Reform Act. These forward-looking
statements are based on the Company's current expectations and are susceptible
to a number of risks, uncertainties and other factors, including the risks
specifically enumerated in Company's Annual Report on Form 10-K for the year
ended December 31, 2010, and the Company's actual results, performance and
achievements may differ materially from any future results, performance or
achievements expressed or implied by such forward-looking statements. The
Company will not undertake and specifically declines any obligation to publicly
release the result of any revisions, which may be made to any forward-looking
statements to reflect events or circumstances after the date of such statements
or to reflect the occurrence of anticipated or unanticipated events. In
addition, it is the Company's policy generally not to make any specific
projections as to future earnings, and the Company does not endorse any
projections regarding future performance that may be made by third parties.
The following discussion and analysis provides information which the
Company's management believes to be relevant to an assessment and understanding
of the Company's results of operations and financial condition. This discussion
should be read together with the Company's financial statements and the notes to
financial statements, which are included in this report, as well as the
Company's Annual Report on Form 10-K for the year ended December 31, 2010.
BKF was incorporated in Delaware in 1954. The Company's securities trade on
the over the counter market under the symbol "BKFG." During the third quarter of
2006, the Company ceased all operations, except for maintaining its status as an
Exchange Act reporting company and winding down certain investment partnerships
for which BKF acts as general partner. Currently, the Company is seeking to
consummate an acquisition, merger or other business combination with an
operating entity to enhance BKF's revenues and increase shareholder value.
The Company operates through its wholly-owned subsidiary, BKF Management
Co., Inc. ("BMC") and its subsidiaries, all of which are collectively referred
to herein as the "Company" or "BKF." The consolidated financial statements of
BKF include its wholly-owned subsidiary BMC, BMC's wholly owned subsidiary BKF
Asset Management, Inc., ("BAM") and BAM's two wholly-owned subsidiaries, LEVCO
Securities, Inc. ("LEVCO Securities") and BKF GP Inc. ("BKF GP"). There were no
affiliated partnerships in BKF's December 31, 2010 consolidated financial
statements.
10
Historically the Company operated in the investment advisory and asset
management business entirely through BAM, which was a registered investment
adviser with the Securities and Exchange Commission ("SEC"). BAM specialized in
managing equity portfolios for institutional investors through its long-only
equity and alternative investment strategies. BAM withdrew its registration as a
registered investment advisor on December 19, 2006 and ceased operating in the
investment advisory and asset management business. LEVCO Securities, a
subsidiary of BAM, was a broker dealer registered with the SEC and a member of
the National Association of Securities Dealers, Inc. (now known as the Financial
Industry Regulatory Authority). LEVCO Securities withdrew its registration as a
broker-dealer on November 30, 2006 and ceased operating as a broker dealer. BKF
GP, Inc., the other subsidiary of BAM, acts as the managing general partner of
several affiliated investment partnerships which are in the process of being
liquidated and dissolved.
Since January 1, 2007, the Company has had no operating business and no
assets under management. The Company's principal assets consist of a significant
cash position, sizable net operating tax losses to potentially carry forward,
its status as a publicly traded Exchange Act reporting company and a small
revenue stream consisting of royalty payments from a departed portfolio manager.
BKF's current revenue stream will not be sufficient to cover BKF's ongoing
expenses.
The Company's current plan of operation is to arrange for a merger,
acquisition, business combination or other arrangement by and between the
Company and a viable operating entity. The Company shall endeavor to utilize
some or all of the Company's net operating loss carryforwards in connection with
a business combination transaction; however, there can be no assurance that the
Company will be able to utilize any of its net operating loss carryforwards. The
Company has not identified a viable operating entity for a merger, acquisition,
business combination or other arrangement, and there can be no assurance that
the Company will ever successfully arrange for a merger, acquisition, business
combination or other arrangement by and between the Company and a viable
operating entity.
RESULTS OF OPERATIONS
The following discussion and analysis of the results of operations is based
on the Consolidated Statements of Financial Condition and Consolidated
Statements of Operations for BKF Capital Group, Inc. and Subsidiaries.
Income
Total revenues for the three months ended March 31, 2011 was $11,000,
compared to $245,000 in the same period in 2010, a decrease of $234,000. The
decrease is primarily due to the royalty revenue agreement which terminated on
September 30, 2010.
Expenses
Total expenses for the three months ended March 31, 2011 were approximately
$97,000, reflecting a decrease of 54% from $211,000 in expenses in the same
period in 2010. The decrease is primarily attributable to a decrease in other
operating expenses, based on the efforts of management to reduce expenses and
conserve the assets of the Company.
11
Net Income/Net Loss
Net loss for the three months ended March 31, 2011 was $86,000, as compared
to net income of $34,000 in the same period in 2010.
LIQUIDITY AND CAPITAL RESOURCES
BKF's current assets as of March 31, 2011 consist primarily of cash, and
investments.
While BKF has historically met its cash and liquidity needs through cash
generated by operating activities, cash flow from current activities may not be
sufficient to fund operations in the future. BKF will use a portion of its
existing working capital for such purposes.
At March 31, 2011, BKF had cash and cash equivalents of $8.7 million,
compared to $9.7 million of cash and cash equivalents at December 31, 2010.
OFF BALANCE SHEET RISK
There has been no material change with respect to the off balance sheet
risk incurred by the Company since March 31, 2011.
Item 4T. Controls and Procedures
We maintain "disclosure controls and procedures," as defined in Rules
13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that
information required to be disclosed by us in reports we file or submit under
the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC's rules and forms, and that such information is
accumulated and communicated to our principal executive officer to allow timely
decisions regarding required disclosure.
Evaluation of disclosure and controls and procedures.
As of the end of the period covered by this report, the Company carried out
an evaluation, under the supervision and with the participation of our Principal
Executive Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act). Based on the evaluation, the Company's
Principal Executive Officer has concluded that the Company's disclosure controls
and procedures are designed to provide reasonable assurance that information
required to be disclosed by the Company in the reports that it files or submits
under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms and are operating in an
effective manner.
12
Changes in internal controls over financial reporting.
There have been no changes in Company's internal control over financial
reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act)
that occurred during Company's most recent quarter that has materially affected,
or is reasonably likely to materially affect, Company's internal control over
financial reporting.
It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system are met. In addition, the design of any control system
is based in part upon certain assumptions about the likelihood of future events.
Because of these and other inherent limitations of control systems, there is
only reasonable assurance that the Company's controls will succeed in achieving
the stated goals under all potential future conditions.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a defendant in a lawsuit for claims for alleged services in
the amount of approximately $171,000. The complaint was filed in the New York
State Supreme Court, New York County and is entitled: Thomson Financial, LLC v.
BKF Asset Management, Inc. and assigned Index No. 601390/09. In the action
Thomson Financial alleges a claim for breach of contract against BAM for alleged
goods and services delivered to BAM. The Company is vigorously defending this
action. The Company has not recorded a liability reserve because the Company
does not believe it will be held liable in the action.
The Company's management is unaware of any other material existing or
pending legal proceedings or claims against the Company.
Item 5. Other Information
As of March 31, 2011 the Company held 13,500 of IAAC common shares valued at
approximately $343,000. The Company holds the shares in FC Stone for investment
purposes.
At March 31, 2011 the Company held 1,505,700 common shares of Qualstar valued at
approximately $2,695,000. The Company holds the shares of Qualstar for
investment purposes.
13
Share Repurchase Plan.
On July 19, 2010 the Board of Directors of the Company approved a share
repurchase plan, authorizing the Company to repurchase in the aggregate up to 1
million shares of its outstanding common stock, $1 par value, over the twelve
month period July 19, 2009 through July 18, 2010 (the "2010 Repurchase Plan").
As of March 31, 2011, the Company had repurchased an aggregate amount 526,623
shares of the Company's common stock as follows: 40,000 shares at an average
price of $.94 per share; 156,983 shares at an average price of $1.10; 90,000
shares at an average price of $1.15 and 239,640 shares at an average price of
$1.18.
Subsequent Event.
On April 14, 2011, the Company purchase an additional 10,000 shares of Qualstar
common stock at $1.79 per share or approximately $17,900.
Item 6. Exhibits
31.1 Section 302 Certification of Chief Executive Officer
31.2 Section 302 Certification of Chief Financial Officer
32.1 Section 906 Certification of Chief Executive Officer
32.2 Section 906 Certification of Chief Financial Officer
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 12, 2011
BKF CAPITAL GROUP, INC.
By: /s/ Steven N. Bronson
-------------------------------
Steven N. Bronson,
Chief Executive Officer,
as Registrant's duly authorized
officer
1
