**SECURITIES
AND EXCHANGE COMMISSION**
 **WASHINGTON,
D.C. 20549**
  **FORM
10-QSB**
 
  QUARTERLY
REPORT UNDER SECTION 13 OR 15(D)
 OF
THE SECURITIES EXCHANGE ACT OF 1934
 
 For the
quarterly period ended March 31, 2005
 
 
 Commission
file number 0-15932
  **BF
ENTERPRISES, INC.**
 (Exact
name of small business issuer as specified in its charter)
 **DELAWARE**
      (State
      or other jurisdiction
      of
      incorporation or organization)
    **94-3038456**
      (I.R.S.
      Employer
      Identification
      No.)100 Bush Street
      Suite 1250
      San Francisco, California 94104
      (Address
      of principal executive
offices)
 Issuer's
telephone number, including area code (415) 989-6580
 
   Check
whether the issuer (1) has filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act during the past 12 months and (2) has
been subject to such filing requirements for the past 90 days. Yes þ  No r
 
 Indicate
the number of shares outstanding of each of the issuer's classes of common stock
as of May 2, 2005:
 
 3,482,331
shares of $.10 par value Common Stock
 
  
  1
  
 BF
ENTERPRISES, INC. AND SUBSIDIARIES
 
 INDEX
 
 
 PART
      IFINANCIAL INFORMATION
    PageItem
      1.Financial
      Statements-Consolidated
      balance sheets
    3-Consolidated
      statements of operations
    4-Consolidated
      statements of stockholders' equity
    5-Consolidated
      statements of cash flows
    6-Notes
      to consolidated financial statements
    7Item
      2.Management's
      Discussion and Analysis of Financial Condition and
      Results
      of Operations
    13Item
      3.Controls
      and Procedures
    17PART
      II OTHER INFORMATIONItem
      6.Exhibits
      and Reports on Form 8-K
    18
 
 The
Company and its representatives may from time to time make written or oral
forward-looking statements with respect to long-term goals or prospects of the
Company, including statements contained in the Company's filings with the
Securities and Exchange Commission and in its reports to stockholders.
 
 The words
or phrases “will likely result,” “are expected to,” “will continue,” “is
anticipated,” “estimate,” “project” or similar expressions identify
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements, which speak only
as of the date made, involve risks and uncertainties, including, but not limited
to, the proposed going private transaction through a stock split, the limited
trading volume of the Company’s common stock and the large spread between the
bid offer price and the ask offer price of the Company’s common stock resulting
from the limited liquidity of the stock on the NASDAQ National Market System,
competition, general economic conditions, ability to manage and continue growth,
the strength of the general economy in the Tampa, Florida area, uncertainties
affecting the Tampa real estate market, residential mortgage interest rates,
competitive residential and commercial developments in Tampa, inclement weather
in Tampa that could delay construction of new homes, weakness in the market for
commercial buildings in Tempe, Arizona, the leasing of the Company’s Tempe
commercial building following the expiration on August 31, 2 005 of
the extended lease term with JP Morgan Chase Bank (formerly known as “Bank
One”)(“Morgan Bank”), the uncertainty of fluctuating rental rates for commercial
office space in Tempe, and other factors detailed in the Company’s filings with
the Securities and Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.
 
 
  2
  BF
ENTERPRISES, INC. AND SUBSIDIARIES
 CONSOLIDATED
BALANCE SHEETS
 (in
thousands)
 (Unaudited)
      March
      31,
      2005
    
    
    December
      31,2004ASSETS:Cash
      and cash equivalents
    
    $
    15,100
    
    $
    15,138Marketable
      securities available for sale, at market value
    
    
    485
    
    
    534Mortgage
      loans receivable
    
    
    1,583
    
    
    2,199Other
      receivables
    
    
    60
    
    
    44Real
      estate rental property, net of accumulated depreciation
    
    
    1,980
    
    
    1,992Real
      estate inventory held for current sale and land held for future
      development
    
    
    9,829
    
    
    9,752Lease
      contract receivable
    
    
    350
    
    
    97Other
      assets
    
    
    294
    
    
    291TOTAL
      ASSETS
    
    $
    29,681
    
    $
    30,047LIABILITIES
      AND STOCKHOLDERS' EQUITY:Liabilities:Payables
      and accrued liabilities
    
    $
    490
    
    $
    718Deferred
      revenue
    
    
    660
    
    
    660Deferred
      income taxes
    
    
    939
    
    
    997Total
      liabilities
    
    
    2,089
    
    
    2,375Contingencies
    
    
    --
    
    
    --Stockholders'
      equity:Common
      stock - $.10 par valueAuthorized
      - 10,000,000 sharesIssued
      and outstanding - 3,482,331 shares
    
    
    348
    
    
    348Capital
      surplus
    
    
    13,181
    
    
    13,181Retained
      earnings
    
    
    14,122
    
    
    14,172Other
      accumulated comprehensive loss
    
    
    (59
    )
    
    (29
    )Total
      stockholders' equity
    
    
    27,592
    
    
    27,672TOTAL
      LIABILITIES AND STOCKHOLDERS' EQUITY
    
    $
    29,681
    
    $
    30,047
 
 The
accompanying notes to consolidated financial statements
 are an
integral part of these statements.
  3
  BF
ENTERPRISES, INC. AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF OPERATIONS (UNAUDITED)
(in
thousands, except per share amounts)

Three
      Months Ended
      March
      31,2005
    
    
    2004Revenues:Real
      estate rental income
    
    $
    558
    
    $
    454Real
      estate sales
    
    
    --
    
    
    303Interest
      and dividends from marketable securities
    
    
    93
    
    
    27Interest
      from mortgage loans
    
    
    26
    
    
    50677
    
    
    834Costs
      and Expenses:Cost
      of real estate sold
    
    
    --
    
    
    83Depreciation
      and amortization
    
    
    20
    
    
    24General
      and administrative
    
    
    743
    
    
    521763
    
    
    628Income
      (loss) before income taxes
    
    
    (86
    )
    
    206Provision
      (benefit) for income taxes
    
    
    (36
    )
    
    79Net
      income (loss)
    
    $
    (50
    )
    $
    127Net
      income (loss) per share:Basic
    
    $
    (.01
    )
    $
    .04Diluted
    
    $
    (.01
    )
    $
    .04Weighted
      average shares used in computing basic
      net
      income (loss) per share
    
    
    3,482
    
    
    3,494Weighted
      average shares and share equivalents used
      in
      computing diluted net income (loss) per share
    
    
    3,482
    
    
    3,591

The
accompanying notes to consolidated financial statements
are an
integral part of these statements.

4
 BF
ENTERPRISES, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
 (in
thousands)
 Three
      Months Ended
      March
      31,2005
    
    
    2004Common
      stock - shares:Balance
      at beginning of period
    
    
    3,482
    
    
    3,506Tender
      or surrender of common stock for principal and interest payments on
      notes
      receivablefrom
      employees
    
    
    --
    
    
    (20
    )Balance
      at end of period
    
    
    3,482
    
    
    3,486Common
      stock - par value:Balance
      at beginning of period
    
    $
    348
    
    $
    351Principal
      and interest payments on notes receivable from employees
    
    
    --
    
    
    (2
    )Balance
      at end of period
    
    $
    348
    
    $
    349Capital
      surplus:Balance
      at beginning of period
    
    $
    13,181
    
    $
    13,402Principal
      and interest payments on notes receivable from employees - excess over
      par
      value
    
    
    --
    
    
    (179
    )Balance
      at end of period
    
    $
    13,181
    
    $
    13,223Retained
      earnings:Balance
      at beginning of period
    
    $
    14,172
    
    $
    13,953Net
      income (loss)
    
    
    (50
    )
    
    127Balance
      at end of period
    
    $
    14,122
    
    $
    14,080Accumulated
      other comprehensive loss:Balance
      at beginning of period
    
    $
    (29
    )
    $
    (10
    )Unrealized
      losses from marketable equity securities, net of income taxes
    
    
    (30
    )
    
    (19
    )Balance
      at end of period
    
    $
    (59
    )
    $
    (29
    )Notes
      receivable from employees:Balance
      at beginning of period
    
    $
    --
    
    $
    (180
    )Interest
      on notes received from employees
    
    
    --
    
    
    (1
    )Principal
      and interest payments
    
    
    --
    
    
    181Balance
      at end of period
    
    $
    --
    
    $
    --Accumulated
      comprehensive income:Balance
      at beginning of period
    
    $
    14,143
    
    $
    13,943Net
      income (loss)
    
    
    (50
    )
    
    127Unrealized
      losses from marketable equity securities, net of income taxes
    
    
    (30
    )
    
    (19
    )Comprehensive
      income (loss) for period
    
    
    (80
    )
    
    108Balance
      at end of period
    
    $
    14,063
    
    $
    14,051
 
 The
accompanying notes to consolidated financial statements
 are an
integral part of these statements.
 5
  
 BF
ENTERPRISES, INC. AND SUBSIDIARIES
 CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED)
 (in
thousands)
 Three Months
      Ended
      March
      31,2005
    
    
    2004Cash
      flows from operating activities:Net
      income (loss)
    
    $
    (50
    )
    $
    127Adjustments
      to reconcile net income (loss) to net cash provided (used) by operating
      activities:Gains
      from sales of real estate
    
    
    --
    
    
    (220
    )Provision
      (benefit) for deferred income taxes
    
    
    (36
    )
    
    79Net
      cash proceeds from sales of real estate
    
    
    --
    
    
    247Real
      estate development costs
    
    
    (77
    )
    
    (357
    )Reimbursement
      of real estate development costs
    
    
    --
    
    
    35Changes
      in certain assets and liabilities:Decrease
      (increase) in other receivables
    
    
    (16
    )
    
    233Decrease
      (increase) in lease contract receivable
    
    
    (253
    )
    
    7Decrease
      in payables and accrued liabilities
    
    
    (228
    )
    
    (58
    )Other,
      net
    
    
    6
    
    
    55Total
      adjustments to net income
    
    
    (604
    )
    
    21Net
      cash provided (used) by operating activities
    
    
    (654
    )
    
    148Cash
      flows from investing activities:Principal
      payments on mortgage loans receivable
    
    
    619
    
    
    107Additions
      to mortgage loans receivable
    
    
    (3
    )
    
    --Net
      cash provided by investing activities
    
    
    616
    
    
    107Net
      increase (decrease) in cash and cash equivalents
    
    
    (38
    )
    
    255Cash
      and cash equivalents at beginning of period
    
    
    15,138
    
    
    14,036Cash
      and cash equivalents at end of period
    
    $
    15,100
    
    $
    14,291Supplemental
      disclosure of non-cash investing activities:Tender
      or surrender of the Company’s common stock for:Principal
      and interest payments on notes receivable from employees
    
    $
    --
    
    $
    181
 
 The
accompanying notes to consolidated financial statements
 are an
integral part of these statements.
 6
 BF
ENTERPRISES INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
   
 Note A -
Interim Financial Information
 
 The
accompanying consolidated financial statements of BF Enterprises, Inc. and its
subsidiaries (collectively the "Company") have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission ("SEC") and, in
management's opinion, include all adjustments necessary to present fairly the
consolidated financial position of the Company at December 31, 2004 and March
31, 2005, and the consolidated results of its operations and its consolidated
cash flows for the three months ended March 31, 2005 and 2004. Certain
information and note disclosures normally included in annual financial
statements prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to SEC rules or
regulations. It is suggested that these consolidated financial statements be
read in conjunction with the consolidated financial statements and the notes
thereto included in the Company's Form 10-KSB for the year ended December 31,
2004 and in the Company's Form 10-QSB for the quarterly period ended March 31,
2004. The results for the three months ended March 31, 2005 are not necessarily
indicative of the results for the full year or any other or future
period.
 
 Note B -
Business Segments
 
 The
Company currently is engaged in only one business segment, real estate
activities. The Company’s net investment in and the operating results of its
various real estate activities may be derived directly from the accompanying
consolidated financial statements.
 
 Note C -
Earnings Per Share
 
 Earnings
per share data for the periods reported have been computed as follows (in
thousands, except per share amounts):
 Three
      Months Ended
      March
      31,2005
    
    
    2004Net
      income (loss)
    
    $
    (50
    )
    $
    127Weighted
      average number of shares outstanding:Common
      stock
    
    
    3,482
    
    
    3,494Common
      stock equivalents - stock options
    
    
    --
    (1)
    
    973,482
    
    
    3,591Net
      income (loss) per share:
      Basic
      - based on weighted average number of shares of common stock
      outstanding
    
    $
    (.01
    )
    $
    .04Diluted
      - based on weighted average number
      of
      shares of common stock and common stock
      equivalents
      outstanding
    
    $
    (.01
    )
    $
    .04
 (1) As the
Company was in a loss position in the three months ended March 31, 2005, stock
options were excluded from the computation of diluted earnings per share because
the effect would be anti-dilutive.
  7
 BF
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
   Note D -
Mortgage Loans Receivable
 
 Mortgage
loans receivable consists of (1) a promissory note in the principal amount of
$1,000,000 (“Hobson Note”) received from Hobson Park, LLC, a Georgia limited
liability company
(“Hobson”), as part of the proceeds from the sale of the Company’s 21 acres of
raw land, located in Nashville, Tennessee (the “Property”) on October 13, 2004,
and (2) participation in certain mortgage loans with Graham Mortgage
Corporation. The principal balance of mortgage loans receivable at March 31,
2005 and 2004 was (in thousands):
 March
      31,2005
    
    
    2004Hobson
      Note
    
    $
    1,000
    
    $
    --Graham
      Mortgage Loans
    
    
    583
    
    
    2,199$
    1,583
    
    $
    2,199
 
 *Hobson
Note*
 
 The
Hobson Note is secured by a First Deed of Trust on the Nashville Property with
variable interest payable semi-annually at the initial rate of 3.32% (subject to
semi-annual adjustment based upon the Treasury Note Rate as published in the
Wall Street Journal), with all outstanding principal and interest due and
payable on October 13, 2009 (the “Maturity Date”); provided, however, that in
the event any portion of the Property is sold prior to the Maturity Date, Hobson
shall apply 50% of the net sale proceeds to repay amounts outstanding under the
Hobson Note. In
accordance with Statement of Financial Accounting Standards (“SFAS”) No. 66, *Accounting
for Sales of Real Estate* , the
Company is using the installment method to account for the sale of the Property.
The Company recorded a deferred gain of $825,000 when the Property was sold, of
which twenty percent ($165,000), or the amount of the down payment as a
percentage of the sales value, was recorded as a current gain at the time of
sale. Further gains will be recognized as principal payments are made and will
be based on the percentage of total gain to total sales value. As
allowed by SFAS No. 66, the Hobson Note is carried at face value.
 
 *Graham
Mortgage Loans*
 
 In March
2002, the Company’s Board of Directors authorized and approved the participation
of the Company in certain mortgage loans (“Loans”), with Graham Mortgage
Corporation, a Texas corporation (“Graham Mortgage”). Pursuant to a Master
Participation Agreement, by and between the Company and Graham Mortgage, dated
as of March 14, 2002, the Company’s four participating interests at March 31,
2005, were: $150,000 in each of three Loans and one other Loan of $250,000. The
Loans are for terms of 54 to 84 months with yields to the Company, net of a
one-half percent administrative fee, ranging from 8.50% to 13.50% per annum. The
Loans are secured by First Deeds of Trust in real property located in Texas.
Management believes that the security for all loans is more than adequate and
that no impairment reserve is currently necessary.
 
 8
 Note E -
Real Estate Rental Property
 
 Real
estate rental property consists of a 220,000 square foot office building located
on 16 acres of land in Tempe, Arizona. In 1995, the Company entered into a
10-year triple net lease agreement (“Lease Agreement”) with JP Morgan Chase Bank
(formerly known as “Bank One”) (“Morgan Bank”). The lease provided for the
phased occupancy and rental of space by Morgan Bank during 1995, with rental of
the entire premises commencing January 1, 1996. Contractual rental revenues from
the lease with Morgan Bank were $330,000 in the two months ending February 28,
2005, the lease expiration date.
 
 On
September 25, 2003, representatives of Morgan Bank verbally advised the Company
that Morgan Bank did not intend to exercise its renewal option under the lease
agreement. In accordance with the terms of the Lease Agreement, the option to
renew expired on May 31, 2004. On November 5, 2004, Morgan Bank signed a lease
extension for the building which terminates on August 31, 2005 at a monthly
triple net rental of $209,000, or $1,254,000 for the six month period of the
extension. The tenant has no option to extend the lease beyond the August 31,
2005 expiration date unless the parties agree in writing. The Company believes
it is unlikely that Morgan Bank will agree to a further extension. The Company
is actively marketing the property for lease to prospective tenants.
 
 On
January 1, 1996, as required by accounting principles generally accepted in the
United States (“GAAP”), the Company began amortizing on a straight-line basis
(1) income from the lease with Morgan Bank, resulting in annual real estate
leasing income of $1,815,000 ($151,000 monthly) through February 28, 2005, and
(2) a related $423,000 lease advisory fee (for services rendered by a real
estate brokerage firm in connection with the Morgan Bank lease), with annual
amortization expense of $46,000 over the same period. Straight-line amortization
of income from the lease was adjusted, as required by GAAP, with the signing of
the lease extension by Morgan Bank on November 5, 2004. This adjustment
increased the recognition of income from the lease to $186,000 monthly for the
period extending from November 1, 2004 through August 31, 2005.
 
 Note F-
Real Estate Inventory Held for Current Sales and Land
 Held for
Future Development
 
 At
December 31, 2004 real estate inventory held for current sale and land held for
future development consisted primarily of approximately 53 acres of the 1,724
acres originally included in the Company’s master-planned, mixed use development
known as Meadow Pointe near Tampa, Florida. The parcels within this project are
in various stages of development. Parcels on which the Company has completed
substantially all of its development activities are considered to be held for
current sale. Parcels on which development is not yet complete are considered to
be held for future development. These assets were carried at a cost of
$9,829,000 at March 31, 2005 and $9,752,000 at December 31, 2004. The Company
believes that the current fair market value of these assets is greater than
their carrying value.
 
 The Meadow Pointe project is subject to, and is being
developed in accordance with, a Development of Regional Impact Development Order
(the “DO”) approved by the Tampa Bay Regional Planning Council (the “TBRPC”) and
Florida Department of Community Affairs (the “FDCA”) and issued by the Pasco
County Board of County Commissioners (“Pasco County”). The DO includes a
requirement that the
   9
 BF
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  
 development build-out be completed by December 31, 2003,
notwithstanding a DO expiration date of December 31, 2008. During the quarter
ended September 30, 2004, the Company was notified by Pasco County that, in
light of the expiration of the build-out date, it would no longer approve site
plans and issue construction permits covering the Meadow Pointe project (“Pasco
County Approvals”). As a result, on September 27, 2004, the Company filed a
Notice of Proposed Change with Pasco County, TBRPC, and FDCA extending the
build-out date for the DO until November 30, 2008 (“Build-out Extension”). On
November 8, 2004 the TBRPC, on behalf of itself as reviewer and on behalf of the
FDCA, approved the Build-out Extension. In apparent disagreement with the TBRPC,
Pasco County notified the Company by letter, dated October 27, 2004, that it
deemed the proposed Build-out Extension as a substantial deviation pursuant to
Section 380.06 (19) (c), Florida Statutes, and it would, therefore, not approve
the Build-out Extension until a public hearing was held on the matter. However,
on March 8, 2005, Pasco County approved the Build-Out Extension contained in the
Notice ofProposed
Change pursuant to the Settlement Agreement, by and between the Company and
Pasco County, dated March 8, 2005 (the “Settlement Agreement”). The Settlement
Agreement, among other obligations, requires the Company i) to construct a park
access road within Meadow Pointe (“Park Access Road”); ii) to purchase from
Pasco County approximately 1.1 acres of land for mitigation use (required as a
result of the location of the Park Access Road) at a purchase price of
approximately $38,500 (“Mitigation Area”); provided, however, if construction of
the Park Access Road and Mitigation Area are not completed by January 8, 2006,
the Company will pay approximately $165,000 for the Mitigation Area; iii) to
secure its obligations and performance under the Settlement Agreement by
providing to Pasco County a letter of credit in the amount of $465,000 to secure
the construction of the Park Access Road and purchase of the Mitigation Area,
and iv) to dismiss, with prejudice, litigation pending in the Circuit Court of
Pasco County involving the denial by the Board of County Commissioners of Pasco
County of the Company’s special exception use application relating to certain
commercial property located in Meadow Pointe. The Company is not yet in the
initial phase of construction of the Park Access Road and, accordingly, cannot
estimate the total cost with certainty.
 
 It is the
Company’s policy to review and update its projections on the Meadow Pointe
project on a periodic basis. Periodic adjustments to cost of sales are made to
reflect the results of these reviews. As a result, gross margins and related
percentages, derived on a period-to-period basis, may not be directly
comparable.
 
 Note G -
Stockholders' Equity
 
 In
February 2004, two employees, both of whom are officers, repaid in full
promissory notes issued in 2001 under the terms of the Company’s stock option
loan program. The notes, in the aggregate amount of $181,000, including $4,000
of accrued interest, were paid with the tender or surrender of 20,437 shares of
the Company’s common stock with a market value of $8.85 per share. The notes
were repaid under their original terms.
  10
 BF
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  
 Note H -
Stock-Based Compensation

The
Company accounts for stock-based employee compensation arrangements in
accordance with provisions of Accounting PrinciplesBoard Opinion
No. 25, *Accounting
for Stock Issued to Employees* (APB
25), and complies with the disclosure provisions of SFAS No. 123, *Accounting
for Stock-Based Compensation* (“SFAS
123”). In December 2002, the Financial Accounting Standards Board (FASB) issued
SFAS 148, *Accounting
for Stock-Based Compensation-Transition and Disclosure-an Amendment of FASB
Statement 123* . This
statement amends SFAS 123 to provide three alternative methods of transition for
a voluntary change to the fair value based method of accounting for stock-based
employee compensation. In addition, this statement amends the disclosure
requirements of SFAS 123 to require prominent disclosures in both annual and
interim financial statements about the method of accounting for stock-based
employee compensation and the effect of the method used on reported results, *i.e.* , net
income and net income per share. The Company currently uses the intrinsic value
based method of accounting for stock-based compensation in accordance with APB
25 and related interpretations.
 
 The
Company does not recognize any compensation expense related to the options that
it grants, as they are all exercisable at the fair value of the Company's common
stock on the date of grant. Had compensation costs for the Company's option
plans been determined
 consistent
with SFAS 123, the Company’s consolidated net income and net income per share
would have been reduced, to the extent applicable, to the following pro forma
amounts for the periods ended March 31, 2005 and 2004 (in thousands, except per
share amounts):
 Three
      Months Ended
      March
      31,2005
    
    
    2004Net
      income (loss)
    
    $
    (50
    )
    $
    127Less:
      Total stock based employee compensation expense determined under fair
      value based method for all awards, net of related tax
    effects
    
    
    --
    
    
    21Pro
      Forma net income (loss)
    
    $
    (50
    )
    $
    106Net
      income (loss) per share:Basic:As
      reported
    
    $
    (.01
    )
    $
    .04Pro
      Forma
    
    $
    (.01
    )
    $
    .03Diluted:As
      reported
    
    $
    (.01
    )
    $
    .04Pro
      Forma
    
    $
    (.01
    )
    $
    .03
   Note I -
Reverse/Forward Stock Split
 
 On March
30, 2005, the Company’s Board of Directors approved a reverse split of the
Common Stock of the Company (the “Reverse Stock Split”) intended to take the
Company private. Under the terms of the Reverse Stock Split, each 4,000 shares
of the Company’s Common Stock will be converted into one share of Common Stock
and holders of less than 4,000 shares of Common Stock prior to the Reverse Stock
Split will receive cash presently estimated to be $8.88 per pre-split
share.
  11
 BF
ENTERPRISES, INC. AND SUBSIDIARIES
 NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
  
 Immediately
following the Reverse Stock Split, the Company will effect a 4,000 for one
forward split (together, the Reverse Stock Split and the forward split are the
“Reverse/Forward Stock Split”) so that the number of shares held by each holder
of at least 4,000 shares of Common Stock prior to the Reverse/Forward Stock
Split will ultimately be unchanged.
 
 The
per-share cash price for fractional shares following the Reverse/Forward Stock
Split will be determined based on a valuation of Sutter Securities Incorporated,
an independent investment bank ("Sutter Securities").  The valuation of
Sutter Securities, effective as of February
25, 2005, was $8.88 per share. The closing price for the Common Stock on March
30, 2005, the last day of trading prior to the Board’s approval of the
Reverse/Forward Stock Split, was $7.595 per share. In addition to its valuation,
Sutter Securities will issue an opinion that the price to be paid to
stockholders who receive cash in the Reverse/Forward Stock Split is fair to
those stockholders from a financial point of view.
 
 The
anticipated result of the Reverse/Forward Stock Split will be to reduce the
number of our stockholders of record to fewer than 300. Pursuant to the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules
and regulations promulgated thereunder, the Company intends to cease filing
periodic reports with the Securities and Exchange Commission (the “Commission”)
and to terminate the listing of its Common Stock on the NASDAQ National Market
System. The Board of Directors has approved the Reverse/Forward Stock Split
based on its determination that the Company achieves few of the benefits of
public ownership because of a lack of an active trading market for its Common
Stock while remaining burdened with the significant costs of being a publicly
held company.
 
 The
Company will obtain approval of the Reverse/Forward Stock Split by written
consent of the holders of a majority of its Common Stock. The Company’s officers
and directors and certain other stockholders currently beneficially own or
control 53.5% of the Company’s outstanding common stock, and have indicated that
they intend to vote in favor of the Reverse/Forward Stock Split. The Company
will not solicit proxies from its shareholders; instead it will (1) distribute a
definitive Information Statement on Schedule 14C under the Exchange Act (the
“Information Statement”) to all holders of its Common Stock, and (2) effect the
Reverse/Forward Stock Split on or after 20 days following distribution of the
Information Statement. On March 31, 2005, concurrent with the filing of its
Annual Report on Form 10-KSB, the Company filed a preliminary Information
Statement with the Commission. Following review by the Commission, the Company
expects to distribute the definitive Information Statement in the second quarter
of 2005.
 
 The
Company reserves the right not to proceed with the Reverse/Forward Stock Split
in the event that it determines that the amount of cash to be paid for
fractional shares will exceed $3,000,000, or if the Company otherwise determines
that abandoning the Reverse/Forward Stock Split is in the best interests of our
stockholders. The Company anticipates that the Reverse/Forward Stock Split will
be effectuated by the end of the second quarter of 2005.
 
 The
Company intends for the Reverse/Forward Stock Split to treat holders of Common
Stock in street name through a nominee (such as a bank or broker) in the same
manner as holders whose shares are registered in their names, and nominees will
be instructed to effect the Reverse/Forward Stock Split for their beneficial
holders.
 
   12
   Item
2.  Management's
Discussion and Analysis of
 Financial
Condition and Results of Operations
  The
Company and its representatives may from time to time make written or oral
forward-looking statements with respect to long-term goals or prospects of the
Company, including statements contained in the Company's filings with the
Securities and Exchange Commission and in its reports to stockholders.
 
 The words
or phrases “will likely result,” “are expected to,” “will continue,” “is
anticipated,” “estimate,” “project” or similar expressions identify
“forward-looking statements” within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements, which speak only
as of the date made, involve risks and uncertainties, including, but not limited
to, the proposed going private transaction through a stock split, the limited
trading volume of the Company’s common stock and the large spread between the
bid offer price and the ask offer price of the Company’s common stock resulting
from the limited liquidity of the stock on the NASDAQ National Market System,
competition, general economic conditions, ability to manage and continue growth,
the strength of the general economy in the Tampa, Florida area, uncertainties
affecting the Tampa real estate market, residential mortgage interest rates,
competitive residential and commercial developments in Tampa, inclement weather
in Tampa that could delay construction of new homes, weakness in the market for
commercial buildings in Tempe, Arizona, the leasing of the Company’s Tempe
commercial building following the expiration on August 31, 2 005 of
the extended lease term with JP Morgan Chase Bank (formerly known as “Bank One”)
(“Morgan Bank”), the uncertainty of fluctuating rental rates for commercial
office space in Tempe, and other factors detailed in the Company’s filings with
the Securities and Exchange Commission. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated.
  Results
of Operations
 
 A net
loss of $50,000 and net income of $127,000 in the three months ended March 31,
2005 and 2004, respectively, included, in the 2004 period, gains of $220,000
from sales of properties within the Company’s Meadow Pointe project near Tampa,
Florida (“Meadow Pointe”). The Company’s reported gains and losses from property
sales at Meadow Pointe are based in part upon estimates of the total revenues
and costs to be derived by the Company over the life of the project. The Company
periodically reviews these estimates and makes adjustments to reflect any
revised estimates.
 
 The
Meadow Pointe project is subject to, and is being developed in accordance with,
a Development of Regional Impact Development Order (the “DO”) approved by the
Tampa Bay Regional Planning Council (the “TBRPC”) and Florida Department of
Community
 
 13
  Affairs
(the “FDCA”) and issued by the Pasco County Board of County Commissioners
(“Pasco County”). The DO included a requirement that the development build-out
be completed by December 31, 2003, notwithstanding a DO expiration date of
December 31, 2008. During the quarter ended September 30, 2004, the Company
was notified by Pasco County that, in light of the expiration of the build-out
date, it would no longer approve site plans and issue construction permits
covering the Meadow Pointe project (“Pasco County Approvals”). As a result on
September 27, 2004, the Company filed a
Notice of Proposed Change with Pasco County, TBRPC, and FDCA extending the
build-out date for the DO until November 30, 2008 (“Build-out Extension”). On
November 8, 2004 the TBRPC, on behalf of itself as reviewer and on behalf of the
FDCA, approved the Build-out Extension. In apparent disagreement with the TBRPC,
Pasco County notified the Company by letter, dated October 27, 2004, that it
deemed the proposed Build-out Extension as a substantial deviation pursuant to
Section 380.06 (19) (c), Florida Statutes, and it would, therefore, not approve
the Build-out Extension until a public hearing was held on the
matter.
 
 On March
8, 2005, however, the Board of County Commissioners of Pasco County approved the
Build-Out Extension contained in the Notice of Proposed Change pursuant to the Settlement
Agreement, by and between the Company and Pasco County, dated March 8, 2005 (the
“Settlement Agreement”). The Settlement Agreement, among other obligations,
requires the Company i) to construct a park access road within Meadow Pointe
(“Park Access Road”); ii) to purchase from Pasco County approximately 1.1 acres
of land for mitigation use (required as a result of the location of the Park
Access Road) at a purchase price of approximately $38,500 (“Mitigation Area”);
provided, however, if construction of the Park Access Road and Mitigation Area
re not completed by January 8, 2006, the Company will pay approximately $165,000
for the Mitigation Area; iii) to secure its obligations and performance under
the Settlement Agreement by providing to Pasco County a letter of credit in the
amount of $465,000 to secure the construction of the Park Access Road and
purchase of the Mitigation Area, and iv) to dismiss, with prejudice, litigation
pending in the Circuit Court of Pasco County involving the denial by the Board
of County Commissioners of Pasco County of the Company’s special exception use
application relating to certain commercial property located in Meadow Pointe.
 
 Real
estate sales at Meadow Pointe are dependent upon, among other things, the
strength of the general economy in the Tampa area, residential mortgage interest
rates, competitive residential developments serving the same group of home
buyers and other factors related to the local Tampa real estate market. The
Company realized revenue of $303,000 from the sale of 55 developed lots at
Meadow Pointe during the three months ended March 31, 2004. There were no such
sales in the 2005 period. As of March 31, 2005, there remained to be sold at
Meadow Pointe, approximately 29 developable acres currently planned for
town-home and condominium residential units and approximately 24 developable
commercial acres. In view of factors beyond the control of the Company,
including, but not limited to, the weather, regulatory approvals, real estate
market conditions in Tampa and the economy generally, the Company cannot predict
with any reasonable certainty future sales activity at Meadow
Pointe.
 
 Real
estate rental income of $558,000 and $454,000 in the three months ended March
31, 2005 and 2004, respectively, was entirely attributable to rental income from
the Company’s Tempe property as were depreciation and amortization expenses
during each of these periods. Straight-line amortization of income from the
Tempe property lease increased monthly from $151,000 to $186,000 with the
signing of a lease extension with Morgan Bank on November 5, 2004 (See Note E of
Notes to Consolidated Financial Statements). For the 2005 period, the Company
derived approximately 82% of its operating revenues from the Morgan Bank lease
agreement covering its Tempe property which expires, after a six-month extension
term, on August 31, 2005. The Company cannot provide any assurance the entire
Tempe property will be re-leased or if re-leased, that rental rates will be
equal to or above the current rental rate. If the rental rate for the Tempe
property decreases or
 
 14
  a
significant portion of its available space is not re-leased, the results of
operations for the Company could be materially and adversely affected. Most
likely, the building will have to be sub-divided into smaller spaces to
accommodate multiple users. Morgan Bank’s decision to vacate could also require
the Company (i) to maintain and operate the vacant building, incurring, among
other costs and expenses, property management fees and property taxes, and ii)
to advance or expend substantial funds to make tenant improvements in connection
with a re-leasing of the building. The incurrence of such costs could have a
material adverse effect on capital resources of the Company. The Company has
engaged a real estate brokerage firm on a commission basis to assist with the
re-leasing of the building.
 
 Interest
and dividends from marketable securities accounted for $93,000 and $27,000 of
revenues in the three months ended March 31, 2005 and 2004, respectively. The
increase in 2005 is primarily due to an increase in interest rates.
 
 Interest
income from mortgage loans accounted for $26,000 and $50,000 of revenues in the
three months ended March 31, 2005 and 2004, respectively. The decrease in 2005
was due to the repayment of five of the nine Graham Mortgage Loans outstanding
at March 31, 2004.
 
 General
and administrative expenses in the three months ended March 31, 2005 were
$222,000 higher than in the comparable period in 2004, due principally to the
inclusion in the 2005 period of $218,000 of professional service fees and other
expenses related to the Reverse/Forward Stock Split approved by the Company’s
Board of Directors on March 30, 2005 (see Note I of Notes to Unaudited
Consolidated Financial Statements).
 
 Liquidity
and Capital Resources
 
 At March
31, 2005, the Company held $15,585,000 in cash, cash equivalents and marketable
securities. Total liabilities at the same date were $2,089,000 in total. From
time to time, the Company purchases shares of its common stock, primarily in the
open market.
 
 During
the period February 1992 through May 2000, two community development districts
encompassing the Meadow Pointe project issued approximately $79,600,000 of
capital improvement revenue bonds. The proceeds of such financings were used to
construct infrastructure improvements necessary for the development and sale of
lots at Meadow Pointe.  In April 2004, one of the districts, the Meadow
Pointe II Community Development District ("District"), issued $10,050,000 of
revenue refunding bonds.  The bonds were issued i) to redeem the $9,325,000
outstanding principal amount of the capital improvement revenue bonds issued by
the District in 1995, ii) to pay for the construction of certain recreational
facilities within the District; iii) to pay bond issuance costs; and iv) to
reduce annual assessments on properties within the District in view of the
improved creditworthiness of the District and the favorable interest rate
climate. The districts may require additional financings from time to time;
however, as the Company’s ownership of land within the districts diminishes with
further lot sales, the potential impact on the Company is reduced
accordingly.
 
 In
September 2003, representatives of Morgan Bank verbally notified the Company
that Morgan Bank did not intend to exercise its renewal option under the lease
agreement covering the Company’s approximately 220,000 square foot commercial
building on 16 acres located in Tempe, Arizona . The
original ten year lease term expired on February 28, 2005. On November 5, 2004,
Morgan Bank signed a lease
 
 15
  extension
for the building which terminates on August 31, 2005 at a monthly triple net
rental of $209,000. At December 31, 2004, contractual rental revenues from the
lease were $1,584,000 through the remaining term of the lease. The tenant has no
option to extend the lease beyond the August 31, 2005 expiration date unless the
parties agree in writing. It is unlikely that Morgan Bank will agree to a
further extension. If Morgan Bank decides not to further extend the lease
agreement relating to our property in Tempe, Arizona our revenues and, in turn,
the value of our most significant asset will be adversely impacted. Morgan
Bank’s decision could also require the Company (i) to maintain and operate the
vacant building, incurring, among other costs, and expenses, property management
fees and property taxes, and (ii) to advance or expend substantial funds to make
tenant improvements in connection with a re-leasing of the building. The
incurrence of such costs could have a material adverse effect on the capital
resources of the Company. Based on current market conditions, the Company cannot
provide any assurance that the entire property will be released at rental rates
equal to or above the current rental rates and, most likely, the building will
have to be sub-divided into smaller spaces to accommodate multiple users. The
Company has engaged a major real estate brokerage firm on a commission basis to
assist with the re-leasing of the building.
 
 Based
upon the current financial condition and the current strategic initiatives of
the Company, the Company believes its existing capital resources will be
sufficient to satisfy its current and projected cash requirements. The Company
currently estimates that its proposed Reverse/Forward Stock Split will require
cash of approximately $3 million.
 
 Qualitative
and Quantitative Disclosures About Market Risk
 
 The
Company holds certain cash equivalents and marketable securities for non-trading
purposes that are sensitive to changes in market value. The Company does not
believe that changes in the market value of these financial instruments will
have a material impact, either favorable or unfavorable, on its consolidated
financial position or results of operations. The Company has not in the past
engaged in transactions requiring the use of derivative financial instruments
either for hedging or speculative purposes, and has no plans to do so in the
future.
  16
   Item
3.   Controls
and Procedures
 
 The
Company maintains disclosure controls and procedures that are designed to ensure
that information required to be disclosed in the Company’s reports under the
Securities Exchange Act of 1934, as amended, are recorded, processed, summarized
and reported within the time periods specified in the SEC’s rules and forms, and
that the information is accumulated and communicated to the Company’s
management, including the Company’s Chief Executive Officer and Chief Financial
Officer, as appropriate, to allow timely decisions regarding required
disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any disclosure controls and procedures, no matter how
well designed and operated, can provide only reasonable assurance of
achieving the desired objectives, and management was required to apply its
judgment in evaluating the cost-benefit relationship of possible disclosure
controls and procedures. The Company’s management, with the participation of the
Company’s Chief Executive Officer and Chief Financial Officer, has evaluated the
effectiveness of the design and operation of the Company’s disclosure controls
and procedures as of the end of the period covered by this report. Based upon
that evaluation and subject to the foregoing, the Company’s Chief Executive
Officer and Chief Financial Officer concluded that the design and operation of
the Company’s disclosure controls and procedures provided reasonable
assurance that the
disclosure controls and procedures are effective to accomplish their
objectives.
 
 There
have been no changes in the Company’s internal control over financial reporting
during the Company’s most recently completed fiscal quarter that have materially
affected or are reasonably likely to materially affect internal control over
financial reporting.
 
   17
  
 
 PART II -
OTHER INFORMATION
 
 
 
 Item
6.   Exhibits
and Reports on Form 8-K .
 
 
 (a)
Exhibit
 Number   Description
 
 
 31.1
    
    
    Certification
      of Brian P. Burns, Chairman of the Board
 and
      Chief Executive Officer of BF Enterprises, Inc., pursuant
    to
 Rule
      13a-14(a) of the Securities Exchange Act of
1934.
 
 31.2
    
    
    Certification
      of S. Douglas Post, Vice President,
Treasurer
 and
      Chief Financial Officer of BF Enterprises, Inc., pursuant
    to
 Rule
      13a-14(a) of the Securities Exchange Act of
1934.
 
 32.1
    
    
    Certification
      of Brian P. Burns, Chairman of the Board
 and
      Chief Executive Officer of BF Enterprises, Inc., pursuant
    to
 18
      U.S.C. Section 1350.
 
 32.2
    
    
    Certification
      of S. Douglas Post, Vice President, Treasurer
 and
      Chief Financial Officer of BF Enterprises, Inc., pursuant
    to
 18
      U.S.C. Section 1350.
 
 (b)
    
    Reports
      on Form 8-K.
 
 The
registrant furnished a Form 8-K dated March 31, 2005, reporting the issuance on
March 31, 2005 of a press release announcing that the Company’s Board of
Directors had approved a reverse stock split to be followed immediately by a
forward stock split.
 
 The
registrant furnished a Form 8-K dated April 19, 2005, reporting the issuance, on
April 19, 2005, of an earnings press release for the quarter and year ended
December 31, 2004.
  
 
  18
   
 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.
 
 
 
 **BF ENTERPRISES,
  INC.**Date:  May 12, 2005
    By:
    /s/ Brian P. BurnsChairman of the Board and Chief Executive
    Officer
 
 **BF ENTERPRISES,
  INC.**Date:  May 12, 2005
    By:
    /s/ S. Douglas PostVice President, Treasurer and Chief Financial
      Officer
 
 
 19