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 June 30, 2009.
or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT.
For the transition period from to
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Commission file number: 1-10024
BKF Capital Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 36-0767530
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 North Federal Highway, Suite 201 Boca Raton, Florida 33432
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(Address of Principal Executive Office) (Zip Code)
(561) 362-5385
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(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 August 13, 2009, 7,973,216 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
June 30, 2009 (unaudited) and December 31, 2008 3
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 2009 and 2008 (unaudited) 4
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2009 and 2008 (unaudited) 5
Notes to Interim Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 11
Item 4T. Controls and Procedures 14
Part II. Other Information 14
Item 1. Legal Proceedings 14
Item 5. Other Information 15
Item 6. Exhibits 16
Signatures 16
2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BKF CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollar amounts in thousands)
June 30, December 31,
2009 2008
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(unaudited)
Assets
Cash and cash equivalents $ 14,531 $ 1,551
U.S. Treasury bills -- 13,320
Royalty and other receivables 199 783
Prepaid expenses and other assets 229 206
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Total assets $ 14,959 $ 15,860
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Liabilities and stockholders' equity
Accrued expenses 26 257
Lease liability 138 --
Accrued lease liability expense 3,356 4,077
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Total liabilities $ 3,520 $ 4,334
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Commitments and contingencies
Stockholders' equity
Common stock, $1 par value, authorized -- 15,000,000 shares, issued and
outstanding -- 7,973,216 shares 7,973 7,973
Additional paid-in capital 68,269 68,269
Accumulated deficit (64,803) (64,716)
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Total stockholders' equity 11,439 11,526
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Total liabilities and stockholders' equity $ 14,959 $ 15,860
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See accompanying notes
3
BKF CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollar amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
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2009 2008 2009 2008
----------- ----------- ----------- -----------
Operating income:
Royalties $ 161 $ 294 $ 336 $ 792
Non Operating Income
Interest income 18 221 36 492
Other income 2 -- 56 --
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Total revenues 181 515 428 1,284
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Expenses:
Employee compensation and benefits 50 176 91 382
Occupancy and equipment rental 11 238 75 408
Other operating expenses 78 (149) 203 506
Interest expense 73 73 146 246
Restructuring costs -- 21 -- 42
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Total expenses 212 359 515 1,584
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Net profit/(loss) (31) 156 (87) (300)
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Net profit/(loss) per share:
Basic and Diluted $ (0.01) $ 0.02 $ (0.01) $ (0.04)
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Weighted average common shares outstanding 7,973,216 7,973,216 7,973,216 7,973,216
============ =========== =========== ===========
See accompanying notes
4
BKF CAPITAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
Six Months Ended
June 30,
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2009 2008
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Cash flows from operating activities
Net loss $ (87) $ (300)
Loss on disposal of fixed assets -- 27
(Decrease) Increase in Accrued Restructuring Costs -- (219)
Changes in operating assets and liabilities:
(Increase)Decrease in U.S. treasury bills 13,320 (260)
Decrease in investment advisory trailer fees and other receivable 584 13
(Increase)Decrease in prepaid expenses and other assets (23) 466
(Decrease) in accrued expenses (231) (498)
(Decrease) in accrued lease liability expense (721) --
Increase in other liabilities 138 --
(Decrease) in accrued lease amendment expense -- (220)
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(Net cash (used in) operating activities 12,980 (991)
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Net decrease in cash and cash equivalents 12,980 (991)
Cash and cash equivalents at the beginning of the period 1,551 1,161
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Cash and cash equivalents at the end of the period $ 14,531 $ 170
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Cash paid for income taxes $ -- $ 116
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See accompanying notes
5
BKF CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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, 2008.
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.
BAM was an investment advisor which was registered under the Investment Advisers
Act of 1940, as amended; it withdrew its registration on December 19, 2006. BAM
had no operations during the three months ended June 30, 2009 and the year ended
December 31, 2008.
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. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
(Unaudited)
Revenue Recognition
Under an agreement with a former partner, BKF is entitled to 15% of the annual
revenues collected from carry-over clients by this former partner which are
generated based on the utilization of the same investment strategy used
previously with respect to such clients at BKF (the "Royalties"). This agreement
is in effect through September 30, 2010. Royalties are paid to BKF on a
quarterly basis following the former partner's actual collection of revenue. The
Company believes that these Royalties are fully collectible and therefore has
not recorded any reserves against the related receivable.
Cash, Cash Equivalents and U.S. Treasury Bills
The Company treats all United States Treasury Bills with maturities at
acquisition of three months or less as cash equivalents. Investments in U.S.
Treasury Bills with maturities at acquisition that are greater than three months
are considered held-to-maturity securities and are stated at amortized cost
which approximates fair value. As of June 30, 2009, the Company no longer held
any U.S. Treasury Bills. 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.
Investments in Affiliated Investment Partnerships
BKF GP served as the managing general partner for several affiliated investment
partnerships ("AIP"), which primarily engaged in the trading of publicly traded
equity securities, and in the case of one partnership, distressed corporate
debt. Currently all AIP activities have been terminated and BKF GP is in the
process of dissolving those partnerships.
Income Taxes
The Company accounts for income taxes under the liability method prescribed by
Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." The Company has also adopted FASB Interpretation No. 48,
Accounting for Uncertainty in Income Taxes, an Interpretation of FASB Statement
No. 109, Accounting for Income Taxes (FIN48).
Interest costs and penalties related to income taxes are classified as interest
expense and general and administrative costs, respectively, in the Company's
consolidated financial statements.
The Company and its subsidiaries file consolidated Federal and combined state
and local tax returns. The Company is currently subject to a three year statute
of limitations by major tax jurisdictions. The Company has settled examination
issues with New York State and New York City related to income allocation for
the years 1999-2004. New York State has recently commenced an audit of the years
2005-2007.
7
BKF CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Income Taxes (Continued)
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to the differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
basis. Future tax benefits are recognized only to the extent that realization of
such benefits is more likely than not to occur.
Included in other receivables as of December 31, 2008, were tax receivable
amounts of approximately $297,000, which represented cash refunds due with
respect to the federal carry back claims for 2004 and 2003 taxes paid. This
amount, plus additional interest, was received in the first quarter of 2009.
Certain Reclassifications
Certain amounts previously reported may have been reclassified to conform to the
current year financial statement presentation. Such reclassifications did not
affect net income or stockholders' equity.
Earnings Per Share
The Company accounts for Earnings Per Share under SFAS No. 128, "Earnings Per
Share." Basic earnings (loss) per share is calculated by dividing net income
(loss) by the weighted average number of common shares outstanding during the
year. Diluted earnings (loss) per share is computed by dividing net income
(loss) by the total of the weighted average number of shares of common stock
outstanding and common stock equivalents. Diluted earnings (loss) per share is
computed using the treasury stock method.
In calculating diluted (loss) per share for the three months ended June 30, 2009
and 2008, zero and 450,000 common stock equivalents were excluded due to their
anti-dilutive effect on the calculation.
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 June 30, 2009 and December 31, 2008.
Fair values are based on market prices and assumptions concerning the amount And
timing of estimated future cash flows. The U.S. Treasury Bills have been valued
using level 1 inputs under SFAS No. 157, "Fair Value Measurements". In April
2007, SFAS No. 159, "The Fair Value Option for Financial Assets and Financial
Liabilities," was issued. This statement permits entities to choose to measure
many financial instruments and certain other items at fair value that are not
currently required to be measured at fair value. We did not elect to use the
fair value option.
8
BKF CAPITAL GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
Recent Accounting Developments
In December 2007, the FASB issued SFAS No. 141(R), Business Combinations ("SFAS
141(R)"). SFAS 141(R) expands the definition of transactions and events that
qualify as business combinations; requires that the acquired assets and
liabilities, including contingencies, be recorded at the fair value determined
on the acquisition date and changes thereafter reflected in revenue, not
goodwill; changes the recognition timing for restructuring costs; and requires
acquisition costs to be expensed as incurred. Adoption of SFAS 141(R) is
required for combinations after December 15, 2008. Early adoption and
retroactive application of SFAS 141(R) to fiscal years preceding the effective
date are not permitted. The adoption of SFAS 141(R) did not have any effect on
the Company's financial statements.
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in
Consolidated Financial Statements ("SFAS 160"). SFAS 160 re-characterizes
minority interests in consolidated subsidiaries as non-controlling interests and
requires the classification of minority interests as a component of equity.
Under SFAS 160, a change in control will be measured at fair value, with any
gain or loss recognized in earnings. The effective date for SFAS 160 is for
annual periods beginning on or after December 15, 2008. Early adoption and
retroactive application of SFAS 160 is for annual periods beginning on or after
December 15, 2008. Early adoption and retroactive application of SFAS 160 to
fiscal years preceding the effective date are not permitted. The adoption of
SFAS 160 did not have any effect on the Company's financial statements.
2. 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, 2009. 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, 2009. 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. Management regularly monitors the financial
institution, together with its cash balances, and tries to keep this potential
risk to a minimum.
3. Related Party Transactions
Royalties
Royalties are the Company's portion of fee sharing arrangements from departed
portfolio managers. The Company had royalty revenue of $161,000 and $294,000 for
the three months ended June 30, 2009 and 2008, respectively and $336,000 and
$792,000 for the six months ended June 30, 2009 and 2008, respectively,
9
4. Accrued Lease Liability Expense
In September 2001, BKF entered into a 10 year lease agreement with Levin
Management Co. Inc. under which they agreed to lease several floors of a
building located at One Rockefeller Plaza in New York City. Subsequent to that
agreement, the Company determined that they did not need all of the space and
surrendered some of the space back to the landlord and sublet other portions.
During 2003, BKF surrendered approximately 20,000 square feet of office space
back to the landlord and agreed to pay the landlord monthly payments through
September 2011 (the end date of the original lease). The present value of the
remaining payments was recorded as a lease liability.
During 2006, BKF vacated additional office space under the lease and subleased
this space to another company. The sublease was executed at a rate which was
below the rate of the existing primary lease obligation. As a result, the
Company recorded additional lease reserves to account for the lease obligation,
less sublease payments expected.
The lease liability will be reduced as monthly rent payments are made to the
landlord, net of any sublease income received.
As of June 30, 2009 and 2008, the lease liability was $3.4 million and $4.1
million, respectively, based on a present value presumption.
5. Commitments and Contingencies
The Company is a defendant in a lawsuit seeking damages in the amount of
approximately $600,000. The complaint was filed in the Supreme Court of New York
and alleges unjust enrichment. The Company is vigorously defending the lawsuit.
The Company has no specific reserve for this action.
The Company is a defendant in a lawsuit seeking damages in the amount of
approximately $171,000. The complaint was filed in the Supreme Court of New York
and alleges breach of contract. The Company is vigorously defending the lawsuit.
The Company has no specific reserve for this action.
6. Subsequent Events
During the period July 2, 2009 through July 13, 2009, the registrant acquired a
total of 500,000 shares of FCStone Group, Inc. ("FCStone") common stock in open
market transactions at an average price of approximately $3.97 per share or an
aggregate amount of approximately $1,985,000.
Previously 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 7, 2009 through July 6, 2010. As of August 13, 2009, the Company had
made no repurchases.
10
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, 2008, 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, 2008.
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, 2008 or December 31, 2007
consolidated financial statements.
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
11
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
finally 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.
On July 22, 2008, the Company paid a $1 per share distribution of capital
to shareholders of record as of July 8, 2008. The distribution of capital was
approved by the prior Board of Directors on June 24, 2008.
On August 27, 2008, the Company entered into an agreement with Catalyst
Fund, L.P. a hedge fund which owned approximately 47.5% of the Company's
outstanding common stock, Steven N. Bronson, who was the fund manager for the
Catalyst Fund, L.P., and each of the Company's current directors and officers to
effect a change of control of the Company (the "Change of Control Agreement"). A
copy of the Change of Control Agreement was attached as an Exhibit to a Current
Report on Form 8-K filed by the Company on September 2, 2008. Pursuant to the
Change of Control Agreement all existing officers and directors resigned and new
directors and management was appointed. Specifically, effective September 19,
2008, Harvey Bazaar, Marvin Olshan, Ronald LaBow and J. Clark Gray each resigned
as directors and/or officers of the Company, pursuant to the Change of Control
Agreement. Simultaneously therewith, the following persons were appointed to the
Board of Directors of the Company: Steven N. Bronson, John Brunjes and Leonard
Hagan and Steven N. Bronson was appointed President of the Company. In
connection with the change of control the Company filed and mailed out to all
shareholders of record an Information Statement Pursuant to Section 14(f) of the
Securities Exchange Act of 1934 and Rule 14f-1 thereunder, which is incorporated
herein by reference.
Prior to September 19, 2008, the Company was engaged in evaluating
strategic alternatives, including merging with, acquiring or commencing a
business potentially being funded by a capital raising event; or liquidating the
Company and distributing a portion of the Company's remaining cash to
stockholders.
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.
12
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 income for the three months ended June 30, 2009 was $181,000,
reflecting a decrease of 65% from $515,000 in the same period in 2008. This
decrease is primarily attributable to a decrease in interest income, due to a
decrease in the amount of outstanding Treasury Bills owned by the Company as
well as lower interest rates, as compared to the prior period.
Total income for the six months ended June 30, 2009 was $428,000,
reflecting a decrease of 67% from 1,284,000 in the same period in 2008. This
decrease is primarily attributable to a decrease in interest income, due to a
decrease in the amount of outstanding Treasury Bills owned by the Company as
well as lower interest rates, as compared to the prior period.
Expenses
Total expenses for the three months ended June 30, 2009 were approximately
$212,000, reflecting a decrease of 41% from $359,000 in expenses in the same
period in 2008. 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.
Total expenses for the six months ended June 30, 2009 were approximately
$515,000, reflecting a decrease of 67% from $1.584 million in expenses in the
same period in 2008. 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.
Operating Loss
Operating loss for the three months ended June 30, 2009 was $31,000, as
compared to an operating profit of $156,000 in the same period in 2008.
Operating loss for the six months ended June 30, 2009 was $87,000, as compared
to an operating loss of $300,000 in the same period in 2008. Despite a 65%
reduction of revenue (royalty and interest income) during the three months ended
June 30, 2009, management was able to reduce operating expenses by 41% and
continue to preserve the Company's assets.
LIQUIDITY AND CAPITAL RESOURCES
BKF's current assets as of June 30, 2009 consist primarily of cash,
receivables and security deposits.
While BKF has historically met its cash and liquidity needs through cash
generated by operating activities, cash flow from current activities will not be
sufficient to fund operations in the future. BKF will use a portion of its
existing working capital for such purposes.
At June 30, 2009, BKF had cash and cash equivalents of $14.5 million,
compared to $14.9 million of cash, cash equivalents and U.S Treasury bills at
December 31, 2008.
13
OFF BALANCE SHEET RISK
There has been no material change with respect to the off balance sheet
risk incurred by the Company since June 30, 2009.
Item 4T. Controls and Procedures
Disclosure Controls and Procedures: An evaluation was performed under the
supervision and with the participation of the Company's principal executive
officer, who also serves as the Company's principal financial 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 that evaluation, the Company's principal executive officer,
concluded that the Company's disclosure controls and procedures were effective
as of the end of the period covered by this report.
Changes in Internal Control over Financial Reporting: There have been no
changes in the 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
the Company's most recent quarter that has materially affected, or is reasonably
likely to materially affect, the 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 $600,000. The complaint was filed in the New York
State Supreme Court, New York County and is entitled: Merrill, Lynch, Pierce,
Fenner & Smith, Inc. v. BKF Asset Management, Inc. and assigned Index No.
602069/07. In the action Merrill Lynch alleges a claim for unjust enrichment
against BAM based on a soft dollar arrangement. 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 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 Financail 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.
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Item 5. Other Information
On June 30, 2009 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 7, 2009 through July 6, 2010. As of August 13, 2009, the
Company had made no repurchases of its common stock.
Subsequent Event
During the period July 2, 2009 through July 13, 2009, the registrant
acquired a total of 500,000 shares of FCStone Group, Inc. ("FCStone") common
stock in open market transactions at an average price of approximately $3.97 per
share or an aggregate amount of approximately $1,985,000.
FCStone is a financial services firm that provides risk management
consulting and transaction execution services to commercial commodity
intermediaries, end-users and producers. FCStone is headquartered in Kansas
City, Missouri and its common stock trades on the NASDAQ Market under the symbol
"FCSX." On July 2, 2009, FCStone and International Assets Holding Corporation
("IAAC") announced that they had signed a definitive agreement to merge in a
share swap that creates a combined company with a market capitalization of
approximately $260 million. Pursuant to the merger agreement FCStone
shareholders will receive 0.2950 shares of IAAC common stock for each share of
FCStone common stock held, thus valuing FCStone shares at approximately $4.64 as
of July 2, 2009. IAAC is a financial services firm focused on select
international securities, foreign exchange and commodities markets. IAAC commits
its capital and expertise to market-making and trading of international
financial instruments, currencies and commodities. IAAC's activities are
currently divided into five functional areas -- international equities
market-making, international debt capital markets, foreign exchange trading,
commodities trading and asset management. IAAC is headquartered in New York, New
York and its securities trade on the NASDAQ Market under the symbol "IAAC."
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Item 6. Exhibits
31 Section 302 Certification of Principal Executive Officer
32 Section 906 Certification of Principal Executive 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: August 13, 2009
BKF CAPITAL GROUP, INC.
By: /s/ Steven N. Bronson
-------------------------------
Steven N. Bronson, President
(Principle Executive Officer),
as Registrant's duly authorized
officer
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