UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

 

Form 10-Q

 

(Mark One)

 

Commission file number: 1-10024

 

BKF Capital Group, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

(212) 332-8400
(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 preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes þ     No o

 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer o     Accelerated filer þ     Non-accelerated filer o

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes o      No þ

 

 

As of August 1, 2006, 8,221,473 shares of the registrant’s common stock, $1.00 par value, were outstanding.

 

 

TABLE OF CONTENTS

 

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION

(Dollar amounts in thousands)

 

 

See accompanying notes

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Organization and Basis of Presentation

 

Basis of Presentation

 

In the opinion of management, the accompanying unaudited consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments except as otherwise disclosed, necessary to present fairly the financial position of BKF Capital Group, Inc. and its subsidiaries (the “Company”) at June 30, 2006 and the results of operations for the six months and three months ended June 30, 2006 and 2005 and cash flows for the six months ended June 30, 2006 and 2005 subject to the organization’s ability to continue as a going concern. In light of the changed business conditions created by the departure of key investment personnel and a resulting steep decline in assets under management, BKF Capital Group, Inc. is currently evaluating strategic alternatives. While the Company has more than sufficient liquidity to meet annual funding requirements for operations for a number of years into the future, it is expected that due to the lack of revenue the Company will need to raise additional capital in order to implement a revised business plan. The results of operations for the six month and three month periods ended June 30, 2006 should not be taken as indicative of the results of operations that may be expected for the entire year 2006.

 

Organization

 

The consolidated interim financial statements of BKF Capital Group, Inc. and its subsidiaries included herein have been prepared in accordance with generally accepted accounting principles for interim financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. These consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K/A for the year ended December 31, 2005. The Company follows the same accounting policies in the preparation of interim reports. In the opinion of management, the consolidated financial statements reflect all adjustments, which are of a normal recurring nature, necessary for a fair presentation of the financial condition, results of operations and cash flows of the Company for the interim periods presented and are not necessarily indicative of a full year’s results. BKF Capital Group, Inc. 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 New York Stock Exchange, Inc. (“NYSE”) under the symbol “BKF”.

 

The Consolidated Financial Statements of the Company include its wholly-owned subsidiaries LEVCO Europe Holdings, Ltd. (“LEVCO Holdings”) and its wholly-owned subsidiary, LEVCO Europe, LLP (“LEVCO Europe”), BKF Asset Management, Inc., (“BAM”), BKF’s two wholly-owned subsidiaries, BKF GP Inc. (“BKF GP”) and LEVCO Securities, Inc. (“LEVCO Securities”) and certain affiliated investment partnerships for which the Company is deemed to have a controlling interest in the applicable partnership. Three investment partnerships were consolidated at June 30, 2006 and five at December 31, 2005. In addition, the operations of three investment partnerships were included in the statements of operation and cash flows for the six-months ended June 30, 2006 and June 30, 2005. Currently LEVCO Holding, LEVCO Securities, and the affiliated partnerships are in the process of winding down and it is expected they will be liquidated by the end of 2006. All intercompany transactions have been eliminated in consolidation.

 

BKF is an investment advisor registered under the Investment Advisers Act of 1940, as amended, which provides investment advisory services to its clients which include U.S. and foreign corporations, mutual funds, limited partnerships, universities, pension and profit sharing plans, individuals, trusts, not-for-profit organizations and foundations. BKF also participates in broker consulting programs (Wrap Accounts) with several nationally recognized financial institutions. LEVCO Securities is registered with the SEC as a broker- dealer and is a member of the National Association of Securities Dealers, Inc. BKF GP acts as the managing general partner of several

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

affiliated investment partnerships and is registered with the Commodities Futures Trading Commission as a commodity pool operator.

 

Consolidation Accounting Policies

 

Operating Companies.  Financial Accounting Standards Board (“FASB”) Interpretation No. 46, “Consolidation of Variable Interest Entities — an interpretation of Accounting Research Bulletin No. 51 (“ARB 51”), “Consolidated Financial Statements,” to variable interest entities (“VIE”), (“FIN 46”), which was issued in January 2003 and revised in December 2003 (“FIN 46R”), defines the criteria necessary to be considered an operating company (i.e., voting interest entity) for which the consolidation accounting guidance of Statement of Financial Accounting Standards (“SFAS”) No. 94, “Consolidation of All Majority-Owned Subsidiaries, (“SFAS 94”) should be applied. As required by SFAS 94, the Company consolidates operating companies in which BKF has a controlling financial interest. The usual condition for a controlling financial interest is ownership of a majority of the voting interest. FIN 46R defines operating companies as businesses that have a sufficient legal equity to absorb the entities’ expected losses and, in each case, for which the equity holders have substantive voting rights and participate substantively in the gains and losses of such entities. Operating companies in which the Company is able to exercise significant influence but do not control are accounted for under the equity method. Significant influence generally is deemed to exist when the Company owns 20% to 50% of the voting equity of an operating entity. The Company has determined that it does not have any VIE. Entities consolidated are based on equity ownership of the entity by the Company and its affiliates.

 

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.

 

Revenue Recognition

 

Generally, investment advisory fees are billed quarterly, in arrears, and are based upon a percentage of the market value of each account at the end of the quarter. Wrap account fees are billed quarterly based upon a percentage of the market value of each account as of the previous quarter end. Incentive fees, general partner incentive allocations earned from affiliated investment partnerships, and incentive fees from other accounts are accrued on a quarterly basis and are billed quarterly or at the end of their respective contract year, as applicable. Such accruals may be reversed as a result of subsequent investment performance prior to the conclusion of the applicable contract year.

 

Commissions earned on securities transactions executed by LEVCO Securities and related expenses are recorded on a trade-date basis net of any sales credits.

 

Commissions earned on distribution of an unaffiliated investment advisor’s funds are recorded once a written commitment is obtained from the investor.

 

Revenue Recognition Policies for Consolidated Affiliated Partnerships (“CAP”)

 

Marketable securities owned and securities sold short, are valued at independent market prices with the resultant unrealized gains and losses included in operations.

 

Security transactions are recorded on a trade date basis.

 

Interest income and expense are accrued as earned or incurred.

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Dividend income and expense are recorded on the ex-dividend date.

 

Investments in Affiliated Investment Partnerships

 

BKF GP serves as the managing general partner for several affiliated investment partnerships (“AIP”), which primarily engage in the trading of publicly traded equity securities and in the case of one partnership, distressed corporate debt. The assets and liabilities and results of operations of the AIP are not included in the Company’s consolidated statements of financial condition with the exception of BKF GP’s equity ownership and certain AIP whereby BKF GP is deemed to have a controlling interest in the partnership (see Note 4). The limited partners of the AIP have the right to redeem their partnership interests at least quarterly.

 

Additionally, the unaffiliated limited partners of the AIP may terminate BKF GP as the general partner of the AIP at any time. BKF GP does not maintain control over the unconsolidated AIP, has not guaranteed any of the AIP obligations, nor does it have any contractual commitments associated with them. Investments in the unconsolidated AIP held through BKF GP, are recorded based upon the equity method of accounting.

 

BKF GP’s investment amount in the unconsolidated AIP equals the sum total of its capital accounts, including incentive allocations, in the AIP. Each AIP values its underlying investments in accordance with policies as described in its audited financial statements and underlying offering memoranda. It is the Company’s general practice to withdraw the incentive allocations earned from the AIP within three months after the fiscal year end. BKF GP has general partner liability with respect to its interest in each of the AIP and has no investments in the AIP other than its interest in these partnerships. See Note 5 — Investments in Affiliated Investment Partnerships and Related Revenue.

 

Income Taxes

 

The Company accounts for income taxes under the liability method prescribed by SFAS No. 109, “Accounting for Income Taxes.” 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.

 

The Company files consolidated Federal and combined state and local income tax returns.

 

Long-Lived Assets

 

Long-lived assets are accounted for in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets,” which requires impairment losses to be recognized on long-lived assets used in operations when an indication of an impairment exists. If the expected future undiscounted cash flows are less than the carrying amount of the assets, an impairment loss would be recognized to the extent the carrying value of such asset exceeded its fair value.

 

During the first quarter of calendar year 2006, the Company completed the amortization of certain long-lived assets (investment advisory contracts). These investment advisory contracts relate to cost in excess of the net assets acquired in June 1996, were reflected as goodwill, investment advisory contracts, and employment contracts in the Consolidated Statements of Financial Condition. In 2005 the Company was terminated as the investment advisor for a significant number of accounts to which the investment advisory contracts relate. The Company performed a valuation of the intangible assets (under SFAS No. 144) and determined that the estimated discounted cash flows for the remaining investment advisory accounts acquired by the Company in 1996 was less than the carrying value of the related assets as determined using the Income approach. As a result, the Company recorded a charge of approximately $2.4 million during 2005 representing the difference between the fair value and the carrying value of the group of assets and recorded a charge of $1.1 million in the first quarter to fully amortize these contracts. Such amount is reflected in amortization expense in the Consolidated Statement of Operations.

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Intangible Assets

 

The cost in excess of net assets of BKF acquired by the Company in June 1996 is reflected as goodwill, investment advisory contracts, and employment contracts in the Consolidated Statements of Financial Condition. Through December 31, 2001, goodwill was amortized straight line over 15 years. Effective January 1, 2002 the Company adopted SFAS No. 142, “Goodwill and Other Intangible Assets”. Under SFAS No. 142, goodwill is no longer amortized but is subject to an impairment test at least annually or when indicators of potential impairment exist. During the second quarter of 2006 the Company determined that goodwill which it carried as $14.8 million since January 1, 2002 had become partially impaired because of the substantial losses the business incurred as a result of the substantial loss of assets under management due to the loss of key personnel. As a result the Company recorded a charge of $5.0 million to partially amortize the balance. Such amount is reflected in restructuring losses in the consolidated Statement of Operations. On July 24, 2006, the Company executed a separation agreement with its Chief Investment Officer. As a result the Company determined that under the circumstances it would not continue managing its long only investment strategies past September 30, 2006. At that point the Company will have no assets under management and no operating businesses. The effect will be the full impairment of the remaining goodwill and the Company will record a $9.8 million charge during the third quarter of 2006.

 

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.

 

The following table sets forth the computation of basic and diluted (loss) per share (dollar amounts in thousands, except per share data):

 

 

In calculating diluted (loss) per share for the three and six months ended June 30, 2006 and 2005 common stock equivalents of 300,000 and 995,007, respectively, were excluded due to their anti-dilutive effect on the calculation.

 

Business Segments

 

The Company has not presented business segment data, in accordance with SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information,” because it operates in one business segment, the investment advisory and asset management business.

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Stock Options

 

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123R) requiring that the compensation cost relating to share-based payment transactions be recognized in financial statements. The cost is to be measured based on the fair value of the equity or liability instruments issued. In April 2005, the adoption date of SFAS No. 123R was delayed to financial statements issued for the first annual period beginning after June 15, 2005. The Company has adopted SFAS No. 123R on January 1, 2006 using the modified prospective method. The impact of adopting this Standard is discussed in Note 8 “Stock Options”.

 

Reclassifications

 

Certain prior period amounts reflect reclassifications to conform with the current year’s presentation.

 

Significant Accounting Policies of Consolidated Affiliated Partnerships (“CAP”)

 

Securities sold short represent obligations to deliver the underlying securities sold at prevailing market prices and option contracts written represent obligations to purchase or deliver the specified security at the contract price. The future satisfaction of these obligations may be at amounts that are greater or less than that recorded on the consolidated statements of financial condition. The CAP monitors their positions continuously to reduce the risk of potential loss due to changes in market value or failure of counterparties to perform.

 

Minority Interest

 

Minority interests in the accompanying consolidated statements of financial condition represent the minority owners’ share of the equity of consolidated investment partnerships. Minority interest in the accompanying consolidated statements of operations represents the minority owners’ share of the income or loss of consolidated investment partnerships.

 

Partner Contributions and Withdrawals

 

Typically, contributions are accepted monthly and withdrawals are made quarterly upon the required notification period having been met. The notification period ranges from thirty to sixty days.

 

Recent Accounting Developments

 

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 replaces APB Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 requires that a voluntary change in accounting principle be applied retrospectively with all prior period financial statements presented on the new accounting principle. SFAS No. 154 also requires that a change in the method of depreciating or amortizing a long-lived non-financial asset be accounted for prospectively as a change in estimate, and correction of errors in previously issued financial statements should be termed “restatements.” SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The implementation of SFAS No. 154 is not expected to have a significant impact on the Company’s consolidated financial statements.

 

In June 2005, the FASB ratified the consensus reached by the Emerging Issues Task Force (“EITF”) on Issue No. 04-05, “Determining Whether a General Partner, or General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights” (“EITF 04-05”). EITF 04-05 provides a framework for determining whether a general partner controls, and should consolidate, a limited partnership or a similar entity. EITF 04-05 became effective on June 29, 2005, for all newly formed or modified limited partnership arrangements and January 1, 2006 for all existing limited partnership arrangements. The

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

Company believes that the adoption of this standard will not have a material effect on its consolidated financial statements.

 

 

LEVCO Securities acts as an introducing broker and all transactions for its customers are cleared through and carried by a major U.S. securities firm on a fully disclosed basis. LEVCO Securities has agreed to indemnify its clearing broker for losses that the clearing broker may sustain from the customer accounts introduced by LEVCO Securities. In the ordinary course of its business, however, LEVCO Securities does not accept orders with respect to client accounts if the funds required for the client to meet its obligations are not on deposit in the client account at the time the order is placed.

 

In the normal course of business, the CAP enter into transactions in various financial instruments, including derivatives, for trading purposes, in order to reduce their exposure to market risk. These transactions include option contracts and securities sold short.

 

Substantially all of the CAP cash and securities positions are deposited with one clearing broker for safekeeping purposes. The broker is a member of major securities exchanges.

 

 

Included in investment advisory fees receivable are approximately $507,000 and $203,000 of accrued incentive fees as of June 30, 2006 and December 31, 2005, respectively, for which the full contract measurement period has not been reached. The Company has provided for the applicable expenses relating to this revenue. If the accrued incentive fees are not ultimately realized, a substantial portion of the related accrued expenses will be reversed. For the three months ended June 30, 2006 approximately $1,370,000 of accrued incentives fees were reversed as a result of a decline in performance incurred during the quarter.

 

 

As required by SFAS 94, the Company consolidates AIP in which the Company has a controlling financial interest. The consolidation of these partnerships does not impact the Company’s equity or net income. BKF GP has general partner liability with respect to its interest in each of the CAP.

 

The following table presents the consolidation of the CAP with BKF as of June 30, 2006. The consolidating statements of financial condition have been included to assist investors in understanding the components of

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

financial condition and operations of BKF and the CAP. A significant portion of the results of operations have been separately identified in the consolidated statements of operations (dollar amounts in thousands):

 

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

Summary financial information, including the Company’s carrying value and income from the unconsolidated AIP is as follows (dollar amounts in thousands):

 

 

Included in the carrying value of investments in AIP at June 30, 2006 and December 31, 2005 are accrued incentive allocations approximating $0 and $5.2 million, respectively.

 

Included in the Company’s incentive fees and general partner incentive allocations are approximately $0 and $964,000 payable directly to employee owned and controlled entities (“Employee Entities”) for the three months ended June 30, 2006 and 2005, respectively and $755,000 and $1.9 million for the six months ended June 30, 2006 and 2005 respectively. These amounts are included in the Company’s carrying value of the AIP at the end of the applicable period. These Employee Entities, which serve as non-managing general partners of several AIP, also bear the liability for all compensation expense relating to the allocated revenue, amounting to approximately $0 and $964,000 for the three months ended June 30, 2006 and 2005, respectively and $755,000 and $1.9 million for the six months ended June 30, 2006 and 2005 respectively. These amounts are included in the Consolidated Statement of Operations.

 

The Company recorded investment advisory fees and incentive allocations/fees from unconsolidated affiliated domestic investment partnerships and affiliated offshore investment vehicles of approximately $(0.3) and $18.2 million for the three months ended June 30, 2006 and 2005, respectively and $7.2 million and $37.3 million for the six months ended June 30, 2006 and 2005 respectively.

 

Included in investment advisory and incentive fees receivable at June 30, 2006 and December 31, 2005 are $0 and $1.9 million, respectively, of advisory fees from AIP and sponsored investment offshore vehicles. Also included in investment advisory and incentive fees receivable are $0.2 and $11.2 million of incentive fees from sponsored offshore investment vehicles at June 30, 2006 and December 31, 2005, respectively.

 

 

In the ordinary course of business, the Company enters into contracts with third parties pursuant to which BKF or the third party provides services to the other. In many of the contracts, the Company agrees to indemnify the third party under certain circumstances. The terms of the indemnity vary from contract to contract and the amount of the indemnification liability, if any, cannot be determined.

 

 

First Quarter 2005:

 

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

Second Quarter 2005:

 

 

First Quarter 2006:

 

 

Second Quarter 2006:

 

 

 

Effective January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards No. 123 (revised 2004), “Share-Based Payment” (SFAS No. 123R) requiring that compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the calculated fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award). Prior to January 1, 2006, the Company accounted for share-based compensation to employees in accordance with Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” (APB No. 25), and related interpretations. We also followed the disclosure requirements of Statement of Financial Accounting Standards No. 123, “Accounting for Stock-Based Compensation”, as amended by Statement of Financial Accounting Standards No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure”. We adopted SFAS 123R using the modified prospective method and, accordingly, financial statement amounts for prior periods presented in this Form 10-Q have not been restated to reflect the fair value method of recognizing compensation cost relating to stock options.

 

There was $489,000 and $198,000 of compensation cost related to non-qualified stock options recognized in operating results (included in selling, general and administrative expenses) in the six months and three months ended June 30, 2006 respectively.

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

The fair value of each option award is estimated on the grant date using the Black-Scholes option-pricing model. Expected volatility is based on implied volatilities from the public trading price of BKF stock. The Company used a 10 year option life as the expected term. The expected term represents an estimate of the time options are expected to remain outstanding. The risk-free rate for periods within the contractual life of the option is based on the U.S. treasury yield curve in effect at the time of grant. The following table sets forth the assumptions used to determine compensation cost for our non-qualified stock options consistent with the requirements of SFAS No. 123R.

 

 

The following table summarizes the information about stock option activity for the six months ended June 30, 2006:

 

 

At June 30, 2006 there was $1.8 million of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 2.50 years. The total fair value of options vested during the six months and three months ended June 30, 2006 was $94,000. There were no options vested during the three months ended June 30, 2006.

 

 

There were no tax provisions for the first half of 2006. This amount differs from the amount of income tax determined by applying the applicable U.S. federal statutory income tax rate principally due to operating losses and the prior utilization of the Company’s tax carry back.

 

The Company has recorded a valuation allowance of approximately $5.7 million against its net deferred tax asset as of June 30, 2006. The Company believes that it is not more likely than not that this deferred tax benefit will be utilized in the foreseeable future.

 

 

During the second quarter of 2006, the Company established a restructuring reserve to account for the termination costs associated with employee separation agreements of $2.5 million, losses incurred in subleasing excess office space of $3.3 million and the full amortization of leaseholds and equipment related to those subleases amounting to $1.6 million and the partial amortization of the goodwill balance of $5.0 million.

 

 

During July 2006, the Company agreed in principle to sublet approximately 17,000 square feet of office space in its headquarters to a third party in addition to the office space sublease executed in May, 2006. The Company will

 

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

establish a reserve of approximately $3.1 million at the point the sublease is signed. The Company is seeking to sublease additional space and will record reserves as appropriate.

 

On July 24, 2006, the Company executed a separation agreement with its Chief Investment Officer. As a result the Company determined that under the circumstances it would not continue managing its long only investment strategies past September 30, 2006. It also has agreed to separate from the related portfolio managers and support staff approximately 20 employees in total. It is anticipated the separation expenses will approximate $5.0 million, a portion of which has already been recorded as guaranteed accrued compensation as of June 30, 2006 and the remainder will be recorded as a restructuring expense as appropriate. It is also expected that the Company’s determination to exit from its only remaining business will result in the full impairment of its goodwill. The Company will record a $9.8 million change to restructuring expense in the third quarter.

 

On July 7, 2006, the Company filed its plan with the New York Stock Exchange (“NYSE”) to remedy its violation of NYSE minimum listing standards. Currently, the Company is responding to NYSE staff comments on the plan. The plan is expected to be submitted to the Listings and Compliance Committee of the NYSE in mid-August for its consideration. If the NYSE approves the business plan, the Company will have 18 months to implement the plan and to comply with the NYSE listing standards. If the business plan is not approved, the NYSE is expected to delist BKF’s common stock.

 

OVERVIEW

 

In the third quarter of 2005, the Company began suffering a substantial loss of assets under management due to the departure of key personnel and uncertainty surrounding the future of the business. The deterioration in assets has continued through the first half of 2006.

 

Since the beginning of 2006 assets managed in the “long only” strategies have declined and as of June 30, 2006 were $1.9 billion down from $4.5 billion at year end. In the second quarter, the two major alternative strategies with assets under management of $752 million at March 31, 2006 were liquidated. During July 2006, the Company announced the departure of its Chief Investment Officer (“CIO”) and its intention to exit the “long only” strategies on an orderly basis during the third quarter. See “— Recent Developments” for additional information.

 

As a result, the Company expects to have no operating business and no assets under management at September 30, 2006. The Company’s principal assets consist of a significant cash position, sizeable net operating tax losses to carry forward, a public listing on the New York Stock Exchange (the “NYSE”) and a small revenue stream consisting of fee sharing payments from departed portfolio managers. The revenue stream will be insufficient to cover operating expenses.

 

As previously disclosed, the Company has been evaluating strategic alternatives. Currently, the Company is considering three options:

 

 

It is expected that the Company will announce a strategic plan during the third quarter of 2006.

 

Since the beginning of the year, the number of employees at BKF has been reduced from 96 to 32 and will be reduced by a further 20 employees once all the long only accounts are terminated.

 

BKF also has a wholly-owned broker-dealer subsidiary that clears through Bear Stearns Securities Corp. on a fully disclosed basis. As of June 30, 2006 the broker-dealer subsidiary has notified customer accounts that it will cease to service them in 30 days. An application to withdraw the broker dealer’s registration will be filed in the third quarter.

 

Recent Developments

 

As of December 31, 2004, the Company had $13.6 billion of assets under management. In the first half of 2005, a group of stockholders launched a proxy fight to elect three new directors. It was announced at the Company’s annual meeting on June 23, 2005, that these stockholders were successful and three new directors were elected to the Company’s board. The proxy contest created significant uncertainty for the Company’s business and employees and, as a result, throughout 2005 the Company suffered significant declines in assets under management.

 

Following the proxy contest, in August 2005, John A. Levin, the Company’s founder and then Chief Executive Officer, agreed to resign effective upon the appointment of a new Chief Executive Officer. The new Chief Executive Officer, John C. Siciliano, assumed his role on September 28, 2005. Under the terms of a separation agreement the Company entered into with Mr. Levin, he was allowed to solicit clients representing approximately $2.1 billion of assets under management by the Company. Under the separation agreement, the Company has an economic stake equal to 15% of the investment fees generated by Mr. Levin’s firm from such former clients (to the extent clients invest in strategies similar to those that had been utilized by them at the Company).

 

In April 2005, the Company entered into a letter agreement with the senior portfolio managers of the Company’s alternative and “event driven” strategies, including Henry Levin, son of John A. Levin, setting forth compensation arrangements for 2005 for these portfolio managers and others in their group. During the third quarter

of 2005, the Company negotiated with various portfolio managers of these alternative and “event driven” strategies to enter into long-term compensation arrangements. The Company announced on October 18, 2005 that it was not successful in these negotiations. As a result, the Company liquidated these alternative and “event driven” strategies, which represented 41.3% of the Company’s revenues during 2005.

 

Also in 2005, the Company entered into compensation arrangements for 2006 with the senior portfolio managers of its two remaining major alternative investment strategies, the actively traded long-short equity and small-mid cap long-short equity strategies, and with Philip Friedman, the Company’s CIO, and the senior portfolio manager of the Company’s long-only equity business. These arrangements contemplated superseding longer-term economic arrangements would be reached in the first quarter of 2006 and provided that the teams in these strategies would receive 25% of their 2006 bonus pool on April 15, 2006 for members of the team still in the employ of the company at March 31, 2006 if no such arrangements were reached. Thereafter, the members of the team would be eligible to receive the balance of 75% of their annual bonus if they were terminated by the company prior to December 31, 2006 or if they were still in the employ of the Company at that date.

 

The Company was unable to reach long-term compensation arrangements with the senior portfolio managers of its actively traded long-short equity and small-mid cap long-short equity strategies. As a result, the strategies were liquidated and the portfolio managers left the Company in April 2006. These strategies represented 23.5% of the Company’s revenues for 2005.

 

The Company also did not enter into a longer term employment arrangement with Mr. Friedman. The Company announced on July 24, 2006 that Mr. Friedman had resigned and that the portfolios following the Company’s “long only” strategies, which represented the remaining $1.9 billion of assets under management as of June 30, 2006, would be liquidated during the third quarter of 2006. As a result, once the Company’s “long only” strategies are liquidated, the Company will no longer have an operating business nor will it have any assets under management.

 

RISK FACTORS

 

As described above, following the departure of its CIO in July 2006, the Company determined to exit its long only business. As a result, BKF will be left with a very small revenue stream, a few staff members, a strong cash position and certain other assets as mentioned above. Although the Company is currently reviewing strategic alternatives, there are a number of additional risks that could adversely affect the Company. These include:

 

The ability of BKF to continue as an operating company is dependent on its ability to consummate a merger or an acquisition and/or to raise additional capital.

 

The Company’s available options include (i) forming a new asset management venture and (ii) merging with or acquiring a third party. The Company has no pending transactions. Any such transaction will be subject to identifying suitable business and negotiating definitive agreements. Furthermore, any definitive agreement could be subject to various conditions, including regulatory approvals. Therefore, there can be no assurance that the Company will be able to effect any such transaction. Furthermore, although the Company’s cash position is sufficient to allow it to operate for a protracted period, the Company believes that it will need to raise debt or equity capital to finance any such transaction. The ability to raise additional capital is subject to market conditions, the willingness of investors to invest in a new or startup business and other factors. Furthermore, certain common stock offerings may require stockholder approval. Also, an equity or rights offering could be dilutive to the existing stockholders of the Company. There can be no assurance that the Company will be able to raise any additional capital on favorable terms at all. If the Company is unable to effect a transaction or to raise additional capital, the Company would expect to be dissolved and liquidated. Furthermore, even if a transaction or financing occurs, the terms of the transaction or financing may not be favorable to the Company and its stockholders and could result in a decline in the stock price of the Company.

If the Company is liquidated, the stockholders of the Company may not receive cash proceeds equal to the current stock price or book value of the Company.

 

If the Company is dissolved and liquidated, the creditors of the Company will be paid prior to any distribution to the stockholders. Furthermore, the Company expects to reserve a significant portion of its cash to pay for future liabilities, such as rental expenses, employment termination costs and other contractual obligations. As a result, the cash remaining to be distributed to stockholders is expected to be significantly less than the Company’s current cash position and could be less than the stock price or book value of the Company.

 

BKF’s common stock may lose its listing on the NYSE.

 

As previously disclosed, on May 24, 2006, BKF was notified by the NYSE that it had failed to meet one of the NYSE listing standards because over a consecutive 30-day trading period its total market capitalization was less than $75 million and its stockholders’ equity as of March 31, 2006 was below $75 million (at $72.0 million). The Company has met with the NYSE staff and is in the process of finalizing a business plan whose goal is to restore compliance with the NYSE listing standards. The business plan is to be submitted to the NYSE on or about August 17, 2006. If the NYSE approves the business plan, the Company will have 18 months to implement the plan and to comply with the NYSE listing standards. If the business plan is not approved, the NYSE is expected to delist BKF’s common stock. Even if the business plan is approved, the Company may not be able to comply with some of the other NYSE listing standards. For example, if BKF’s market capitalization falls below $25 million for 30 consecutive days, it could be subject to delisting. If BKF’s common stock is delisted, it is expected to adversely affect the liquidity and price of the common stock. Finally, in such event, no assurance can be given that any market will develop for the BKF common stock.

 

BKF’s ability to consider strategic alternatives and to make investments in new businesses will be limited by the terms of the Investment Company Act of 1940.

 

Any company primarily that engaged in the business of investing reinvesting, or trading or holding securities is an investment company subject to the registration and other regulatory requirements of the Investment Company Act of 1940 (the “1940 Act”). The Company’s primary business is investment advising and asset management. The significant reduction in its assets under management has substantially reduced BKF’s assets, with the remaining assets being concentrated in cash and cash equivalents, U.S. treasury bills and investments in securities and investment partnerships. The Company does not believe it is an investment company and has no intent to become an investment company. Therefore, as a protective measure, the Company intends to rely upon Rule 3a-2 under the 1940 Act. Under Rule 3a-2, a company that has a bona fide intent to be engaged in a business other than that of an investment company may avoid being classified and regulated as an investment company for up to a year. After that one-year period, the Company must either not be an investment company, be exempt from the provisions of the 1940 Act or registar as an investment Company and become subject to 1940 Act regulation. (The Company may also seek an order from the SEC regulating that the one-year period be extended. There can be an assurance that the SEC would grant such an order). As a result, the Company’s ability to consider strategic alternatives over an extended period will be limited. In addition, the 1940 Act restricts the ability of the Company to make non-controlling investments. Therefore, the Company’s ability to consider different types of strategic alternatives and to determine how to use its cash position will be subject to certain limitations imposed by the 1940 Act.

 

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 and its subsidiaries. Because of the substantial reduction in assets under management and the Company’s determination to exit its long only strategies, these financial results will not be indicative of the Company’s future results. It should be noted that certain affiliated investment partnerships in which BKF may be deemed to have a controlling interest have been consolidated. The number and identity of the partnerships being consolidated may change over time as the percentage interest held by BKF and its affiliates in affiliated partnerships changes. The assets, liabilities and related operations of these partnerships and related minority interest have been reflected in the consolidated financial statements for the three-

months and six months periods ended June 30, 2006 and June 30, 2005. The consolidation of the partnerships does not impact BKF’s equity or net income.

 

Three Months Ended June 30, 2006 as Compared to Three Months Ended June 30, 2005

 

Revenues

 

Total revenues for the second quarter of 2006 were $1.0 million, reflecting a decrease of 96.5% from $29.7 million in revenues in the same period in 2005. This decrease is primarily attributable to the termination of all alternative strategies and the decline in assets under management of the long-only strategies. The Company expects to have no operating business and no assets under management as of September 30, 2006. The revenues generated by the various investment strategies were as follows (all amounts are in thousands):

 

 

The decline in asset-based advisory fees was due to a significant loss of assets under management across all products.

 

In the second quarter of 2006 the actively traded long-short and small-mid cap long-short alternative investment strategies were terminated as the result of the departures of the portfolio managers managing them. Portfolios were liquidated and the proceeds were returned to investors. Investment losses were incurred during the period and a portion of the incentive fees earned during the first quarter was reversed.

 

In 2005, Philip Friedman, then the Chief Investment Officer and the Company entered into a compensation arrangement that extended the existing economic arrangement for the long-only investment team through December 2006. This agreement contemplated that a superseding, longer-term economic arrangement would be reached in the first quarter of 2006. No such longer-term agreement was reached. As a result, under the terms of

the agreement, Mr. Friedman and his investment team were paid 25% of their 2006 bonus pool. On July 24, 2006 Mr. Friedman departed from the Company and entered into a separation agreement with BKF. In light of these changed business conditions, management has decided to exit the long only strategies and is in the process of closing customer accounts.

 

Commission income and other for the second quarter of 2006 was $371,000, as compared to $183,000 for the second quarter of 2005. Of this 2006 amount, $335,000 represents payments from a firm founded by John A. Levin, the former Chief Executive Officer of BKF, pursuant to an agreement between Mr. Levin and BKF. The payments are based on a percentage of the revenues generated by clients of Mr. Levin’s new firm that had been clients of BKF. Revenue generated by the broker-dealer business declined as the result of a decrease in the number of accounts maintained at the broker-dealer and since early May 2006, there has been virtually no commissions.

 

Net realized and unrealized gain on investments and interest and dividend income loss from consolidated affiliated partnerships was $48,000 in the six months ended 2006, as compared to $652,000 in the same period of 2005. The gains/losses on investments and dividend and interest income from consolidated investment partnerships include minority interests, i.e., the portion of the gains or losses generated by the partnerships allocable to all partners other than BKF GP, Inc., which are separately identified on the consolidated statements of operations.

 

Expenses

 

Total operating expenses for the second quarter of 2006 were $9.4 million, reflecting a decrease of 70.5% from $31.8 million in expenses in the same period in 2005.

 

Employee compensation and benefit expense (including grants of equity awards) was $5.9 million in the second quarter of 2006, reflecting a decrease of 76.0% from $24.7 million in the second quarter of 2005. These results primarily reflect the reduction of personnel.

 

Occupancy and equipment rental was $1.7 million in the second quarter of 2006, slightly lower than the same period last year.

 

Other operating expenses were $1.7 million in the second quarter of 2006, reflecting a 52.7% decrease from $3.6 million in the same period in 2005 resulting from the elimination of service and fees , and generally lower expenses of operating the business.

 

Restructuring Expenses

 

Included in the restructuring reserve established in the second quarter of 2006 is the partial write-off of the remaining goodwill of $5.0 million, the lease reserve for the sublease of $4.9 million and severance payments to terminating employees of $2.5 million.

 

BKF continues to be in the process of reducing personnel and seeking to sublease a significant portion of its premises, which can be expected to result in charges relating to lease and personnel costs. In May 2006, BKF executed a sublease of approximately 16,000 square feet of its office space to a third party. A reserve of $4.9 million was established to account for the future losses related to that space. In July 2006, a sublease for an additional 17,000 square feet of office space was agreed to in principle. An additional reserve of approximately $3.1 million will be established in the third quarter to account for future losses related to that sublease. There will be additional reserves related to severance costs established in the third quarter as employees separate from the Company. It is estimated that the payments will be approximately $5 million for the long only employees. The remaining $9.8 million of goodwill will be written off in the third quarter.

 

Taxes

 

There were no income taxes for the second quarter of 2006 compared to $91,000 million of tax expense in the same period of 2005.

 

Net Losses

 

There was a $20.7 net loss for the second quarter of 2006 compared to a net loss of $2.2 million in 2005.

Six Months Ended June 30, 2006 as Compared to Six Months Ended June 30, 2005

 

Revenues

 

Total revenues for the first half of 2006 were $21.0 million, reflecting a decrease of 66.5% from $62.6 million in revenues in the same period in 2005. This decrease is primarily attributable to the termination of all alternative strategies and the decline in assets under management of the long-only strategies. The revenues generated by the various investment strategies were as follows (all amounts are in thousands):

 

 

The decline in asset-based advisory fees was due to a significant loss of assets under management across all products.

 

Commission income (net) and other for the first half of 2006 was $852,000, as compared to $377,000 for the same period of 2005. Of this 2006 amount, $690,000 represents payments from a firm founded by John A. Levin, the former Chief Executive Officer of BKF, pursuant to an agreement between Mr. Levin and BKF. Revenue generated by the broker-dealer business declined as the result of a decrease in the number of accounts maintained at the broker-dealer and reduced trading activity in such accounts.

 

Net realized and unrealized gain on investments and interest and dividend income from consolidated affiliated partnerships was $489,000 in the six months ended 2006, as compared to $1,003 in the same period of 2005. The gains/losses on investments and dividend and interest income from consolidated investment partnerships include minority interests, i.e., the portion of the gains or losses generated by the partnerships allocable to all partners other than BKF GP, Inc., which are separately identified on the consolidated statements of operations.

Expenses

 

Total operating expenses for the first half of 2006 were $31.8 million, reflecting a decrease of 50.0% from $63.5 million in expenses in the same period in 2005.

 

Employee compensation and benefit expense (including grants of equity awards) was $22.5 million in the first half of 2006, reflecting a decrease of 54.9% from $49.9 million in the second quarter of 2005. These results primarily reflect the reduction of personnel.

 

Occupancy and equipment rental was $3.1 million in the first half of 2006, reflecting a 5.4% decrease from $3.3 million in the same period in 2005 as a result of less office equipment expense, lower depreciation and subleases commencing late in the second quarter.

 

Other operating expenses were $4.9 million in the first half of 2006, reflecting a 27.3% decrease from $6.8 million in the same period in 2005 generally due to reduced second quarter business activity.

 

Taxes

 

There was no income tax expense for this first half of 2006 compared to a $1.0 million expense in 2005.

 

Operating Income (Loss)

 

Operating loss for the first half of 2006 was $10.8 million as compared to an operating loss of $931,000 for the same period in 2005.

 

LIQUIDITY AND CAPITAL RESOURCES

 

BKF’s current assets as of June 30, 2006 consist primarily of cash, short-term investments and investment advisory and incentive fees receivable.

 

While BKF has historically met its cash and liquidity needs through cash generated by operating activities, because of the significant decrease in revenues as the result of terminations and withdrawals, cash flow from operating activities has not been sufficient to fund operations during 2006. BKF will use its existing working capital for such purposes. As of June 30, 2006, cash and cash equivalents, US Treasury bills, receivables, investments and consolidated affiliated partnerships assets represent current assets and totaled $54.8 million. There are certain liabilities which would also be considered current in the form of accrued expenses, accrued compensation and consolidated affiliated partnerships liabilities, including minority interest, totaling $12.1 million. Net current assets at June 30, 2006 were approximately $42.7 million. The Company expects net current assets to decline as needed to fund operating losses.

 

At June 30, 2006, BKF had cash, cash equivalents and U.S. Treasury bills of $39.1 million, compared to $56.8 million at December 31, 2005. This decrease primarily reflects the payment of cash bonuses in 2006 that were accrued in 2005, which was partly offset by the collection of receivables and the withdrawal of general partner incentive allocations from affiliated investment partnerships. The decrease in investment advisory and incentive fees receivable from $21.8 million at December 31, 2005 to $1.0 million at June 30, 2006 primarily reflects the receipt of incentive fees earned in 2005, and the substantial reduction in the level of fees receivable generated during the six months ended June 30, 2006. The decrease in investments in affiliated investment partnerships from $7.7 million at December 31, 2005 to $76,000 at June 30, 2006 reflects the withdrawal of the general partner incentive allocations and the general partner’s interest from the partnerships due to the liquidation of these partnerships.

 

Accrued expenses were $3.6 million at June 30, 2006, as compared to $5.6 million at December 31, 2005. Such expenses were comprised primarily of accruals for employee severance, marketing fees and professional fees.

 

Accrued bonuses were $4.2 million at June 30, 2006, as compared to $43.0 million at December 31, 2005, reflecting the payment of 2005 bonuses and the accrual for 2006 bonuses.

 

In addition, the loss of accounts and cost reduction measures being implemented by BKF in 2006 will result in charges relating to lease and personnel costs. Except for its lease commitments, which are discussed in Note 11 in

the Notes to Consolidated Financial Statements in BKF’s Annual Report on Form 10-K for the year ended December 31, 2005, BKF has no material commitments for capital expenditures.

 

OFF BALANCE SHEET RISK

 

There has been no material change with respect to the off balance sheet risk incurred by BKF Capital since December 31, 2005.

 

Since BKF’s revenues are largely driven by the market value of BKF’s assets under management, these revenues are exposed to fluctuations in the equity markets. However as result of the loss of assets, going forward this risk has been substantially reduced. Management fees for most accounts are determined based on the market value of the account on the last day of the quarter, so any significant increases or decreases in market value occurring on or shortly before the last day of a quarter may materially impact revenues of the current quarter or the following quarter (with regard to wrap program accounts). Furthermore, since BKF manages most of its assets in a large cap value style, a general decline in the performance of value stocks could have an adverse impact on BKF’s revenues. Because BKF is primarily in the asset management business and manages equity portfolios, changes in interest rates, foreign currency exchange rates, commodity prices or other market rates or prices impact BKF only to the extent they are reflected in the equity markets.

 

An evaluation was performed under the supervision and with the participation of BKF’s management, including the CEO and CFO, of the effectiveness of the design and operation of BKF’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended). Based on that evaluation, BKF’s management, including the CEO and CFO, concluded that BKF’s disclosure controls and procedures were effective as of the end of the period covered by this report. There have been no changes in BKF’s internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) that occurred during BKF’s most recent quarter that has materially affected, or is reasonably likely to materially affect, BKF’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 BKF’s controls will succeed in achieving their stated goals under all potential future conditions.

 

None

 

See “Part I. Financial Information. Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Risk Factors and Recent Events.” These risk factors have changed during 2006 and reflect adverse material developments that have taken place since the filing of the Annual Report on Form 10-K for the year ended December 31, 2005.

 

None

 

None

 

On June 21, 2006, BKF conducted its Annual Meeting of Stockholders. The following were elected to serve as directors of BKF Kurt Schacht, Ronald LaBow, Harvey J. Bazaar, Keith Meister, Marvin Olshan, Donald Putnam, John C. Siciliano. Warren G. Lichtentstein chose not to seek re-election and his term concluded as of the date of the Annual Meeting of Stockholders. At the Annual Meeting, the stockholders also approved:

 

 

The voting on the above matters is set forth below:

 

 

On May 12, 2006 the Company executed a sublease with a third party for a portion of its office space at One Rockefeller Plaza, NY, NY 10020. A copy of the sublease is attached as Exhibit 10.2 to this Quarterly Report Form 10-Q.

 

On July 24, 2006, Philip Friedman, submitted his resignation as CIO of BKF Capital Group, Inc. This information was disclosed in a current Report on Form 8-K filed on July 24, 2006.

 

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 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 Reform Act. For those statements, BKF claims the protection of the safe harbor for forward-looking statements contained in the Reform Act. These forward-looking statements are based on BKF’s current expectations and are susceptible to a number of risks, uncertainties and other factors, including the risks specifically enumerated in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and BKF’s actual results, performance and achievements may differ materially from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include the following: retention and ability of qualified personnel; the performance of the securities markets and of value stocks in particular; the investment performance of client accounts; the retention of significant client and/or distribution relationships; competition; the existence or absence of adverse publicity; changes in business strategy; quality of management; availability, terms and deployment of capital; business abilities and judgment of personnel; labor and employee benefit costs; changes in, or failure to comply with, government regulations; the costs and other effects of legal and administrative proceedings; and other risks and uncertainties referred to in this document and in BKF’s other current and periodic filings with the Securities and Exchange Commission, all of which are difficult or impossible to predict accurately and many of which are beyond BKF’s control. BKF 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 BKF’s policy generally not to make any specific projections as to future earnings, and BKF does not endorse any projections regarding future performance that may be made by third parties.

 

 

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.

 

BKF Capital Group, Inc.

 

John C. Siciliano

Chief Executive Officer

and President

 

J. Clarke Gray

Senior Vice President and

Chief Financial Officer

 

Date: August 9, 2006