PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
BKF CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(Dollar amounts in thousands)
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,756
|
|
|
$
|
8,292
|
|
Investments
|
|
|
3,270
|
|
|
|
3,337
|
|
Prepaid expenses and other assets
|
|
|
34
|
|
|
|
77
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
10,060
|
|
|
$
|
11,706
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders' Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
70
|
|
|
$
|
41
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
70
|
|
|
|
41
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Stockholders' equity
|
|
|
|
|
|
|
|
|
Common stock, $1 par value, authorized — 15,000,000 shares, 7,446,593 issued and outstanding as of September 30, 2012 and December 31, 2011
|
|
|
7,447
|
|
|
|
7,447
|
|
Additional paid-in capital
|
|
|
68,269
|
|
|
|
68,269
|
|
Accumulated deficit
|
|
|
(65,248
|
)
|
|
|
(64,570
|
)
|
Accumulated other comprehensive income/(loss)
|
|
|
(478
|
)
|
|
|
519
|
|
|
|
|
|
|
|
|
|
|
Total stockholders' equity
|
|
|
9,990
|
|
|
|
11,665
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders' equity
|
|
$
|
10,060
|
|
|
$
|
11,706
|
|
See accompanying notes
BKF CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
(Dollar amounts in thousands, except per
share data)
(Unaudited)
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Royalties
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non Operating Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
4
|
|
|
|
6
|
|
|
|
14
|
|
|
|
20
|
|
Other income
|
|
|
7
|
|
|
|
16
|
|
|
|
30
|
|
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
11
|
|
|
|
22
|
|
|
|
44
|
|
|
|
66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee compensation and benefits
|
|
|
68
|
|
|
|
71
|
|
|
|
212
|
|
|
|
202
|
|
Occupancy and equipment rental
|
|
|
16
|
|
|
|
16
|
|
|
|
48
|
|
|
|
48
|
|
Other operating expenses
|
|
|
39
|
|
|
|
8
|
|
|
|
462
|
|
|
|
78
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total expenses
|
|
|
123
|
|
|
|
95
|
|
|
|
722
|
|
|
|
328
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss)
|
|
|
(112
|
)
|
|
|
(73
|
)
|
|
|
(678
|
)
|
|
|
(262
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income, net of tax
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain (loss) on investments
|
|
|
(985
|
)
|
|
|
186
|
|
|
|
(997
|
)
|
|
|
375
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income/(loss)
|
|
$
|
(1,097
|
)
|
|
$
|
113
|
|
|
$
|
(1,675
|
)
|
|
$
|
113
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted
|
|
$
|
(0.02
|
)
|
|
$
|
(0.01
|
)
|
|
$
|
(0.09
|
)
|
|
$
|
0.04
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding
|
|
|
7,446,593
|
|
|
|
7,446,593
|
|
|
|
7,446,593
|
|
|
|
7,446,593
|
|
See accompanying notes
BKF CAPITAL GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollar amounts in thousands)
(Unaudited)
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2012
|
|
|
2011
|
|
|
|
|
|
|
|
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(678
|
)
|
|
$
|
(262
|
)
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Decrease in advisory trailer fees and other receivable
|
|
|
—
|
|
|
|
15
|
|
Decrease in prepaid expenses and other assets
|
|
|
42
|
|
|
|
246
|
|
Increase (decrease) in accrued expenses
|
|
|
29
|
|
|
|
(57
|
)
|
Decrease in accrued lease liability expense
|
|
|
—
|
|
|
|
(1,139
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(607
|
)
|
|
|
(1,197
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Purchase of investment securities
|
|
|
(929
|
)
|
|
|
(267
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(928
|
)
|
|
|
(267
|
)
|
|
|
|
|
|
|
|
|
|
Net decrease in cash and cash equivalents
|
|
|
(1,536
|
)
|
|
|
(1,464
|
)
|
Cash and cash equivalents at the beginning of the period
|
|
|
8,292
|
|
|
|
9,744
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the end of the period
|
|
$
|
6,756
|
|
|
$
|
8,280
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
See accompanying notes
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, 2011.
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.
BKF CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
— (Continued)
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 September 30, 2012 and December 31, 2011. 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.
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 September 30, 2012 the Company held 2,239,419 common shares
of Qualstar Corporation valued at approximately $3,270,000.
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.
BKF CAPITAL GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
— (Continued)
4. 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.
5. Warrants
On March 1, 2011, the Company granted
warrants to purchase 200,000 shares of the Company’s common stock, $1.00 par value to an executive of the company in
exchange for certain services to be rendered. The warrants are exercisable for a period of 5 years, but they shall expire and
terminate ninety (90) days after the Executive’s separation from the Company for any reason. The warrants shall vest
and be exercisable as follows: (i) 50,000 warrants exercisable at $1.55 per share shall vest upon the occurrence of BKF
raising $5,000,000 through the sale of equity and completion of twelve months of employment; (ii) 50,000 warrants exercisable
at $1.55 per share shall vest upon the occurrence of BKF Capital raising an aggregate amount of $10,000,000 from the
execution of this Agreement; (iii) 50,000 warrants exercisable at $2.00 per share shall vest upon the occurrence of BKF
Capital raising an aggregate amount of $15,000,000 from the execution of this Agreement; and (iv) 50,000 warrants exercisable
at $2.00 per share shall vest upon the occurrence of BKF Capital raising an aggregate amount of $20,000,000 from the
execution of this Agreement. The executive to whom these warrants relate resigned as of April 25, 2012 and the warrants
expired. At September 30, 2012, the Company had no warrants outstanding.
6. Restricted Stock Grant
On August 1, 2012, the Company
rehired Maria Fregosi to serve as the Company’s Chief Operating Officer. In addition to an annual salary of 60,000 per
annum, the Company also issued Ms. Fregosi 100,000 restricted shares, on August 1, 2012, of the Company’s common stock
vesting a follows: (i) 25,000 on July 31, 2013, (ii) 25,000 on July 31, 2014, (iii) 25,000 on July 31, 2015, and (iv) 25,000
on July 31, 2016.
|
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, 2011, 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, 2011.
Background
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
subsidiaries, BKF Investment Group, Inc., formerly known as BKF Management Co., Inc. ("BIG") and BKF Asset Holdings,
Inc. (“BKF Holdings”) all of which are collectively referred to herein as the "Company" or "BKF."
The consolidated financial statements of BKF, BIG and BIG's two wholly owned subsidiaries BKF Advisors, Inc. (“BKF Advisors”)
and BKF Asset Management, Inc., ("BAM") and BAM's two wholly-owned subsidiaries, BKF GP, Inc. (“BKF GP”)
and LEVCO Securities, Inc. ("LEVCO Securities"). There were no affiliated partnerships in BKF's December 31, 2011 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 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 have been in the process of being liquidated and dissolved since 2006.
Plan of Operations
On August 2, 2012, the Company issued a
press release disclosing that the Company plans to create an asset management platform with investment vehicles that focus on areas
of portfolio management that typically receive less attention from investors but also present unique investment opportunities.
The Company is also engaged in seeking to arrange an acquisition, with an operating business with revenues, at least three years
of operating history and unique value opportunities. The Press Release is attached as an exhibit to the Company’s Current
Report on Form 8-K, dated August 3, 2012.
In September 2012, the Company changed the
name of its subsidiary BKF Management Co., Inc. to BKF Investment Group, Inc. and formed a wholly owned subsidiary, BKF Advisors
that is in the process of registering as an investment advisor with the State of Florida and the State of California. The Company
expects that BKF Advisors will act as the investment advisor to the BKF Small Cap Growth and Income, L.P., a newly formed Delaware
limited partnership that plans to engage as an investment fund (the “Partnership”). BAM is the general partner of the
Partnership. The Company expects to seed the Partnership which expects to focus on small-cap and micro-cap companies with a value
based approach to investing. Thereafter, the Company intends to grow its asset management business by acquiring or seeding other
alternative investment funds with unique investment strategies and/or emerging portfolio managers. The Company’s goal is
to grow revenues and income over time and achieve valuation multiples in line with other publicly-traded comparable companies.
The Company expects to create value for its shareholders by rebuilding its asset management operations, and expects to earn fee
income for assets under management, performance fees upon successfully liquidating investments and from its proprietary capital
investments in the investment funds for which BKF acts as the general partner. Moreover, the Company has substantial net operating
loss carry-forwards that it may be able to use to offset future profits and thereby minimize tax liabilities.
The Company is also seeking 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.
The Company anticipates that the selection
of a business opportunity will be a complex process and will involve a number of risks, because potentially available business
opportunities may occur in many different industries and may be in various stages of development. Due in part to depressed economic
conditions in a number of geographic areas and shortages of available capital, management believes that there are numerous firms
seeking either the additional capital which the Company has or the benefits of a publicly traded corporation, or both. The perceived
benefits of a publicly traded corporation may include facilitating or improving the terms upon which additional equity financing
may be sought, providing liquidity for principal shareholders, creating a means for providing incentive stock options or similar
benefits to key employees, providing liquidity for all shareholders and other factors.
In some cases, management of the Company
will have the authority to effect acquisitions without submitting the proposal to the shareholders for their consideration. In
some instances, however, the proposed participation in a business opportunity may be submitted to the shareholders for their consideration,
either voluntarily by the Board of Directors to seek the shareholders' advice and consent, or because of a requirement of State
law to do so.
In seeking to arrange a merger, acquisition,
business combination or other arrangement by and between the Company and a viable operating entity, the Company's objective will
be to obtain long-term capital appreciation for the Company's shareholders. There can be no assurance that the Company will be
able to complete any merger, acquisition, business combination or other arrangement by and between the Company and a viable operating
entity.
The Company may need additional funds in
order to effectuate a merger, acquisition or other arrangement by and between the Company and a viable operating entity, although
there is no assurance that the Company will be able to obtain such additional funds, if needed. Even if the Company is able to
obtain additional funds there is no assurance that the Company will be able to effectuate a merger, acquisition or other arrangement
by and between the Company and a viable operating entity.
Qualstar Investment
On December 17, 2010, the Company purchased
1,500,000 shares of Qualstar Corporation ("Qualstar") common stock in a privately negotiated transaction at the price
of $1.55 per share or the total aggregate amount of $2,325,000 (the “2010 Purchase”). Qualstar is a diversified electronics
manufacturer specializing in data storage, power supplies and computer pointing devices. Qualstar's products are known throughout
the world for high quality and Simply Reliable designs that provide years of trouble-free service. The securities of Qualstar are
traded on NASDAQ under the symbol "QBAK." The registrant purchased the Qualstar shares from Richard A. Nelson and Kathleen
R. Nelson as Co-Trustees of the Nelson Family Trust U/A DTD 01/19/2000. Richard A. Nelson is an officer and director of Qualstar.
Following the 2010 Purchase, BKF owned approximately 12.2% of issued and outstanding shares of Qualstar. The Company previously
disclosed its acquisition of shares of Qualstar in Current Report on Form 8-K filed on December 23, 2010. Between December 23,
2010 and September 30, 2012, BKF increased its Qualstar holdings from 12.2% to 18.2% through open market transactions.
On February 15, 2012 BKF sent a letter to
the Qualstar board of director, which was attached as an exhibit to the Company’s Schedule 13D filing on February 21, 2012.
In the February 15, 2012 letter, BKF suggested steps that the Qualsar board can and should take to maximize shareholder value.
The Qualstar board did not discuss the Feburary 15, 2012 letter with BKF and it failed to take any of the requested actions. In
or about May 2012, the BKF launched a proxy contest to remove and replace the board of directors of Qualstar. See BKF’s Definitive
Proxy Statement on Schedule 14A, filed on June 6, 2012, which is incorporated herein by reference. The special meeting of the shareholders
of Qualstar occurred on June 20, 2012. While BKF’s proposals did receive approval of the majority of the votes cast at the
meeting, they did not receive approval from a majority of the outstanding shares, which was required to remove the incumbent Qualstar
board.
At September 30, 2012 the Company
held 2,239,419 common shares of Qualstar valued at approximately $3,270,000, representing approximately 18.2% of the issued
and outstanding shares of Qualstar. The Company holds the shares of Qualstar for investment purposes and is currently
considering its options. The Company is in the process of transferring its holdings of Qualstar into its wholly owned
subsidiary BKF Asset Holdings, Inc.
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
September 30, 2012 was $ 11,000 compared to $22,000 in the same period in 2011, a decrease of $ 11,000. The decrease is primarily
due to non operating other income. Total revenues for the nine months ended September 30, 2012 was $44,000 compared to $66,000
in the same period in 2011, a decrease of $22,000. The decrease is primarily due to non operating other income.
Expenses
Total expenses for the three months ended
September 30, 2012 were approximately $123,000, reflecting an increase of 29% from $95,000 in expenses in the same period in 2011.
The increase is primarily attributable to professional fees related to the proxy filings for Qualstar. Total expenses for the
nine months ended September 30, 2012 were approximately $722,000, reflecting an increase of 120% from $328,000 in expenses in
the same period in 2011. The increase is primarily attributable to professional fees related to the proxy filings for Qualstar.
Net Income/Net Loss
Net loss for the three months ended September
30, 2012 was $112,000, as compared to a net loss of $73,000 in the same period in 2011.
Net loss for the nine months ended September
30, 2012 was $678,000, as compared to a net loss of $262,000 in the same period in 2011.
LIQUIDITY AND CAPITAL RESOURCES
BKF's current assets as of September 30,
2012 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 September 30, 2012, BKF had cash and
cash equivalents of $6.8 million, compared to $8.3 million of cash and cash equivalents at December 31, 2011.
OFF BALANCE SHEET RISK
There has been no material change with respect to the off balance
sheet risk incurred by the Company since September 30, 2012.