**UNITED        STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, DC 20549**

----

**FORM 10-QSB**

----

 

**(Mark        One)**

|   | x                                                                                                                                    | **Quarterly Report Pursuant to Section 13 or 15(d) of the                    Securities Exchange Act of 1934** |
|--------|--------------------------------------------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------|
|   | **       For the quarterly period                    ended June 30, 2007**

                      |                                                                                                           |
|   | o                                                                                                                                    |                                                                                                           | **  Transition Report Pursuant to Section 13 or 15(d) of                    the Securities Exchange Act of 1934** |   |
|   | **       For the transition                    period from ___________ to ___________**                |                                                                                                           |
|        |                                                                                                                                      |                                                                                                                |  |  |  |  |  |  |

 

**Commission File Number 001-12233**

----

**Bexil Corporation**

**(Name        of small business issuer in its charter)**

 

----

| Maryland                                                                          | 13-3907058                           |
|-----------------------------------------------------------------------------------|--------------------------------------|
| (State or other jurisdiction of incorporation or                    organization) | (I.R.S. Employer Identification No.) |
|  

11 Hanover Square, New York, New York                                     |  

10005                        |
| (Address of principal executive offices)                                          | (Zip Code)                           |

 

**Issuer’s telephone number: 1-212-785-0400**

----

 

Check        whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the        Exchange Act during the past 12 months (or for such shorter period that the registrant was        required to file such reports), and (2) has been subject to such filing requirements for        the past 90 days.

| Yes x No | o |
|----------|---|

 

Indicate by        check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the        Exchange Act).

YesoNox

 

The number        of shares outstanding of the issuer’s classes of common equity, as of August 13,        2007: Common Stock, par value $.01 per share – 883,592 shares.

 

Transitional Small Business Disclosure Format (check one): YesoNox

 

 

|   | **INDEX** |
|--------|-----------|

 

| **PART I. FINANCIAL INFORMATION**                                                                                                                                                                                                                                                     | **PAGE**  |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------|
|  

**Item 1. Financial Statements (Unaudited)**                                                                                                                                                                                                                                  |      |
|  

Condensed Consolidated Balance Sheet at June 30, 2007

                                                                                                                                                                                                                  |  

3 |
| Condensed Consolidated Statements of Income

**•**     Three                    months ended June 30, 2007 and 2006

**•**     Six                    months ended June 30, 2007 and 2006

                          | 4         |
| Condensed Consolidated Statement of Changes in                    Shareholders’ Equity at June 30, 2007                                                                                                                                                                         | 5         |
| Condensed Consolidated Statements of Cash Flows

**•**     Three                    months ended June 30, 2007 and 2006

**•**     Six                    months ended June 30, 2007 and 2006

                      |  

6 |
| Notes to Condensed Consolidated Financial Statements

                                                                                                                                                                                                                           | 7         |
| **Item 2.**Management’s                    Discussion and Analysis or Plan of Operation                                                                                                                                                                                         | 15        |
| **Item 3.**Controls and                    Procedures                                                                                                                                                                                                                                 | 18        |
|                                                                                                                                                                                                                                                                                  |      |
| **PART II. OTHER INFORMATION**

                                                                                                                                                                                                                                                 |      |
| **Item 1.**Legal                    Proceedings                                                                                                                                                                                                                                       | 19        |
| **Item 2.**Unregistered Sales of                    Equity Securities and Use of Proceeds                                                                                                                                                                                             | 19        |
| **Item 3.**Defaults Upon Senior                    Securities                                                                                                                                                                                                                         | 19        |
| **Item 4.**Submission of Matters to a                    Vote of Security Holders                                                                                                                                                                                                     | 19        |
| **Item 5.**Other                    Information                                                                                                                                                                                                                                       | 19        |
| **Item 6.**Exhibits                                                                                                                                                                                                                                                                   | 19        |
|                                                                                                                                                                                                                                                                                  |      |
| **CERTIFICATION SIGNATURES**                                                                                                                                                                                                                                                          | 20        |

 

 

- 2        -

 

 

**BEXIL CORPORATION**

**CONDENDSED CONSOLIDATED BALANCE SHEET**

**June 30, 2007**

**(Unaudited)**

 

| **ASSETS**                               |                                                                                |                                                 |                                                                                                                                                   |
|------------------------------------------|-------------------------------------------------------------------------------------|------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------|
| Current assets:                          |                                                                                |                                                 |
|                                     | Cash and cash equivalents                                                           |                                                 | $                   622,908                             |
|                                     | Investment securities, available-for-sale                                           |                                                 | 36,444,503                                                                                                                                             |
|                                     | Receivables:                                                                        |                                                 |                                                                                                                                                   |
|                                     |                                                                                | Interest receivable                                  |                                                                                                                                                   | 599,679 |
|                                     |                                                                                | Refundable taxes                                     |                                                                                                                                                   | 417,214 |
|                                     | Prepaid expenses                                                                    |                                                 | 8,250                                                                                                                                                  |
|                                     |                                                                                |                                                 |                                                                                                                                                        |
|                                     |                                                                                | Total current assets                                 |                                                                                                                                                   |                     38,092,554 |
|                                     |                                                                                |                                                 |                                                                                                                                                   |  |
| Deferred taxes                           |                                                                                | 125,186                                              |
|                                     |                                                                                |                                                      |
|                                     |                                                                                | Total assets                                         |                                                                                                                                                   | $                                 38,217,740 |
|                                     |                                                                                |                                                 |                                                                                                                                                   |  |
|                                     |                                                                                |                                                 |                                                                                                                                                   |   |   |   |
| **LIABILITIES AND SHAREHOLDERS' EQUITY** |                                                                                |                                                 |
| Current liabilities:                     |                                                                                |                                                 |
|                                     | Accounts payable and accrued expenses                                               |                                                 | $                                                         244,606 |
|                                     |                                                                                |                                                 |                                                                                                                                                        |
|                                     |                                                                                | Total current liabilities                            |                                                                                                                                                   | 244,606 |
|                                     |                                                                                |                                                 |                                                                                                                                                   |  |
| Commitments and contingencies (Note 8)   |                                                                                | -                                                    |
| Shareholders' equity                     |                                                                                |                                                 |
|                                     | Common stock, $0.01 par value, 9,900,000 shares                    authorized,      |                                                 |                                                                                                                                                   |
|                                     |                                                                                | 883,592 shares issued and outstanding                |                                                                                                                                                   | 8,836 |
|                                     | Series A participating preferred stock, $0.01 par value,                    100,000 |                                                 |                                                                                                                                                   |
|                                     |                                                                                | shares authorized, -0- shares issued and outstanding |                                                                                                                                                   | - |
|                                     | Additional paid-in capital                                                          |                                                 | 12,938,802                                                                                                                                             |
|                                     | Accumulated other comprehensive loss                                                |                                                 | (69,255)                                                                                                                                               |
|                                     | Retained earnings                                                                   |                                                 | 25,094,751                                                                                                                                             |
|                                     |                                                                                |                                                 |                                                                                                                                                        |
|                                     |                                                                                | Total shareholders' equity                           |                                                                                                                                                   | 37,973,134 |
|                                     |                                                                                |                                                 |                                                                                                                                                   |  |
|                                     |                                                                                | Total liabilities and shareholders' equity           |                                                                                                                                                   | $                               38,217,740 |
|                                     |                                                                                |                                                 |                                                                                                                                                   |  |
|                                          |                                                                                     |                                                      |                                                                                                                                                        |  |  |  |  |

 

 

See notes        to the condensed consolidated financial statements.

 

- 3        -

 

 

 

**BEXIL        CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF INCOME**

**(Unaudited)**

         

|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               | **Three Months Ended**                                                                           |                                                                                                                                                     | **Six Months Ended**                                                                                        |
|-------------------------------------------------------|-----------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------------------------------------------------------------------------------------------------|
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               | **June 30,**                                                                                     |                                                                                                                                                     | **June 30,**                                                                                                |
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               | **2007**                                                                                         |                                                                                                                                                     | **2006**                                                                                                    |   | **2007** |   | **2006** |
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                                  |                                                                                                                                                     |                                                                                                             |   |  |   |  |
| Revenues                                              |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                             |                                                                                                                                                     |                                                                                                        |   |
|                                                  | Consulting and other                    | $                                           - |                                                                                                        | $                  2,000 |                                                                                             | $                         - |                                                                                                        | $                                    5,000 |
|                                                  |                                    |                                                                                                                                                                  |                                                                                                        |                                                                                                                    |                                                                                             |                                                                                                                                                          |                                                                                                        |  |
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               | -                                                                                                |                                                                                                                                                     | 2,000                                                                                                       |   | - |   | 5,000 |
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                                  |                                                                                                                                                     |                                                                                                             |   |  |   |  |
| Expenses                                              |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                             |                                                                                                                                                     |                                                                                                        |   |
|                                                  | Compensation and benefits               | 200,391                                                                                                                                                          |                                                                                                        | 2,092,099                                                                                                          |                                                                                             | 412,469                                                                                                                                                  |                                                                                                        | 2,294,792 |
|                                                  | Professional                            | 90,882                                                                                                                                                           |                                                                                                        | 105,130                                                                                                            |                                                                                             | 325,840                                                                                                                                                  |                                                                                                        | 329,248 |
|                                                  | Occupancy                               | 25,930                                                                                                                                                           |                                                                                                        | 49,412                                                                                                             |                                                                                             | 49,412                                                                                                                                                   |                                                                                                        | 55,017 |
|                                                  | Communications                          | 14,315                                                                                                                                                           |                                                                                                        | 12,665                                                                                                             |                                                                                             | 21,892                                                                                                                                                   |                                                                                                        | 1,035 |
|                                                  |                                    |                                                                                                                                                                  |                                                                                                        |                                                                                                                    |                                                                                             |                                                                                                                                                          |                                                                                                        |  |
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               | 331,518                                                                                          |                                                                                                                                                     | 2,259,306                                                                                                   |   | 809,613 |   | 2,680,092 |
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                                  |                                                                                                                                                     |                                                                                                             |   |  |   |  |
| Other income                                          |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                             |                                                                                                                                                     |                                                                                                        |
|                                                  | Dividends and interest                  | 449,398                                                                                                                                                          |                                                                                                        | 435,827                                                                                                            |                                                                                             | 890,891                                                                                                                                                  |                                                                                                        | 571,256 |
|                                                  | Gain on sale of equity interest in York |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                             |                                                                                                                                                     |                                                                                                        |
|                                                  | Insurance Services Group, Inc.          | -                                                                                                                                                                |                                                                                                        | 37,471,143                                                                                                         |                                                                                             | -                                                                                                                                                        |                                                                                                        | 37,471,143 |
|                                                  |                                    |                                                                                                                                                                  |                                                                                                        |                                                                                                                    |                                                                                             |                                                                                                                                                          |                                                                                                        |  |
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               | 449,398                                                                                          |                                                                                                                                                     | 37,906,970                                                                                                  |   | 890,891 |   | 38,042,399 |
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                                  |                                                                                                                                                     |                                                                                                             |   |  |   |  |
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                             |                                                                                                                                                     |                                                                                                        |   |   |   |   |
| Income before income taxes and equity in loss         |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                             |                                                                                                                                                     |
| of York Insurance Services Group, Inc.                | 117,880                                 |                                                                                                                                                             | 35,699,076                                                                                                  |                                                                                                               | 81,278                                                                                           |                                                                                                                                                     | 35,367,307                                                                                                  |
| Income tax expense                                    | 42,743                                  |                                                                                                                                                             | 12,685,886                                                                                                  |                                                                                                               | 24,475                                                                                           |                                                                                                                                                     | 12,959,655                                                                                                  |
| Equity in loss of York Insurance Services Group, Inc. | -                                       |                                                                                                                                                             | (1,805,639)                                                                                                 |                                                                                                               | -                                                                                                |                                                                                                                                                     | (733,748)                                                                                                   |
|                                                  |                                         |                                                                                                                                                             |                                                                                                             |                                                                                                               |                                                                                                  |                                                                                                                                                     |                                                                                                             |
| Net income                                            |                                    | $            75,137                                                                                  |                                                                                                        | $     21,207,551                                                                          |                                                                                             | $            56,803                                                                          |                                                                                                        | $    21,673,904 |
|                                                  |                                    |                                                                                                                                                                  |                                                                                                        |                                                                                                                    |                                                                                             |                                                                                                                                                          |                                                                                                        |  |
|                                                  |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                             |                                                                                                                                                     |                                                                                                        |   |   |   |   |
| Per share net income:                                 |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                             |                                                                                                                                                     |                                                                                                        |
|                                                  | Basic                                   |                                                                                                                                                             | $                 0.08 |                                                                                                               | $               24.00 |                                                                                                                                                     | $                 0.06 |   | $               24.57 |
|                                                  | Diluted                                 |                                                                                                                                                             | $                 0.08 |                                                                                                               | $               23.06 |                                                                                                                                                     | $                 0.06 |   | $               23.49 |
| Average shares outstanding:                           |                                    |                                                                                                                                                             |                                                                                                        |                                                                                                               |                                                                                             |                                                                                                                                                     |                                                                                                        |
|                                                  | Basic                                   |                                                                                                                                                             | 885,603                                                                                                     |                                                                                                               | 883,592                                                                                          |                                                                                                                                                     | 884,669                                                                                                     |   | 882,001 |
|                                                  | Diluted                                 |                                                                                                                                                             | 934,631                                                                                                     |                                                                                                               | 919,848                                                                                          |                                                                                                                                                     | 933,785                                                                                                     |   | 922,783 |

 

 

See        notes to the condensed consolidated financial statements.

 

- 4        -

 

 

 

**BEXIL CORPORATION**

**CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’        EQUITY**

**(Unaudited)**

         

 

|                                                  |                                   |                                                                       |    |                                             |   |                                             |   |                                                                                                                                            |     | **Accumulated**                                                                                               |     |              |
|-------------------------------------------------------|----------------------------------------|----------------------------------------------------------------------------|---------|--------------------------------------------------|--------|--------------------------------------------------|--------|-------------------------------------------------------------------------------------------------------------------------------------------------|----------|---------------------------------------------------------------------------------------------------------------|----------|-------------------|
|                                                  |                                   |                                                                       |    |                                             |   | **Additional**                                   |   |                                                                                                                                            |     | **Other**                                                                                                     |     | **Total**         |
|                                                  |                                   |                                                                       |    | **Common**                                       |   | **Paid in**                                      |   | **Retained**                                                                                                                                    |     | **Comprehensive**                                                                                             |     | **Shareholders'** |
|                                                  |                                   |                                                                       |    | **Stock**                                        |   | **Capital**                                      |   | **Earnings**                                                                                                                                    |     | **Loss**                                                                                                      |     | **Equity**        |
|                                                  |                                   |                                                                       |    |                                                  |   |                                                  |   |                                                                                                                                                 |     |                                                                                                               |     |                   |
| Balance at December 31, 2006,                         |                                   |                                                                       |    |                                             |   |                                             |   |                                                                                                                                            |
|                                                  | 883,592 common shares                  | $      8,836                                 |    | $       12,863,641 |   | $       25,037,948 |   | $                                      (45,544)       |     | $                                 37,864,881 |
| Comprehensive income                                  |                                   |                                                                       |    |                                             |   |                                             |   |                                                                                                                                            |     |
|                                                  | Net income                             | -                                                                          |    | -                                                |   | 56,803                                           |   | -                                                                                                                                               |     | 56,803                                                                                                        |
|                                                  | Change in unrealized security holdings |                                                                       |    |                                             |   |                                             |   |
|                                                  |                                   | losses, net of taxes                                                       | -       |                                             | -      |                                             | -      |                                                                                                                                            | (23,711) |                                                                                                          | (23,711) |
|                                                  |                                   |                                                                       |    |                                             |   |                                             |   |                                                                                                                                            |     |                                                                                                          |          |
| Total comprehensive income                            |                                   |                                                                       |    |                                             |   |                                             |   |                                                                                                                                            | 33,092   |
|                                                  |                                   |                                                                       |    |                                             |   |                                             |   |                                                                                                                                            |          |
| 3,000 restricted common shares issued                 | 30                                     |                                                                       | 98,460  |                                             | -      |                                             | -      |                                                                                                                                            | 98,490   |
| 3,000 restricted common shares rescinded              | (30                                    | )                                                                          | (98,460 | )                                                | -      |                                             | -      |                                                                                                                                            | (98,490) |
| Stock-based compensation expense                      | 75,161                                 |                                                                       | -       |                                             | -      |                                             | 75,161 |
|                      
                      |                                        |                                                                       |         |                                             |        |                                             |        |
| Balance at June 30, 2007,                             |                                   |                                                                       |    |                                             |   |                                             |   |                                                                                                                                            |     |
|                                                  | 883,592 common shares                  | $                            8,836 |    | $       12,938,802 |   | $       25,094,751      |   | $                                       (69,255) |     | $                                37,973,134       |
|                                                  |                                   |                                                                            |    |                                                  |   |                                                  |   |                                                                                                                                                 |     |                                                                                                               |

 

 

 

 

See        notes to the condensed consolidated financial statements.

 

- 5        -

 

**BEXIL        CORPORATION**

**CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS**

**(Unaudited)**

         

|                                                                                |                                                                            |                                                 |                                                                                      |          |                                      | **Six Months Ended**                                                                                                  |
|-------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|------------------------------------------------------|-------------------------------------------------------------------------------------------|---------------|-------------------------------------------|-----------------------------------------------------------------------------------------------------------------------|
|                                                                                |                                                                            |                                                 |                                                                                      |          |                                      | **June 30,**                                                                                                          |
|                                                                                |                                                                            |                                                 |                                                                                      |          |                                      | **2007**                                                                                                              |   | **2006** |
|                                                                                |                                                                            |                                                 |                                                                                      |          |                                      |                                                                                                                       |   |  |
| **Cash flows from operating activities**                                            |                                                                            |                                                 |                                                                                      |          |
|                                                                                | Net income                                                                      |                                                 | $             56,803     |          | $     21,673,904 |
|                                                                                | Adjustments to reconcile net income to net cash                                 |                                                 |                                                                                      |          |                                      |
|                                                                                |                                                                            | provided by (used in) operating activities           |                                                                                      |          |                                      |                                                                                                                  |
|                                                                                |                                                                            |                                                 | Stock-based compensation                                                                  |          | 75,161                                    |                                                                                                                  | 67,145 |
|                                                                                |                                                                            |                                                 | Decrease in deferred taxes                                                                |          | 13,480                                    |                                                                                                                  | 1,102,448 |
|                                                                                |                                                                            |                                                 | Gain on sale of equity interest in York Insurance Services                    Group, Inc. | -             |                                      | (37,471,143)                                                                                                          |
|                                                                                |                                                                            |                                                 | Equity in loss of York Insurance Services Group, Inc.                                     | -             |                                      | 733,748                                                                                                               |
|                                                                                |                                                                            |                                                 | Accretion of discount on investment security                                              | -             |                                      | (377,930)                                                                                                             |
|                                                                                | Increase in refundable income taxes                                             |                                                 | (56,250)                                                                                  |          | (811,239)                                 |
|                                                                                | Decrease in other assets                                                        |                                                 | 28,776                                                                                    |          | -                                         |
|                                                                                | Increase (decrease) in accounts payable and accrued                    expenses |                                                 | 40,911                                                                                    |          | (376,898)                                 |
|                                                                                | Increase in income taxes payable                                                |                                                 | 5,995                                                                                     |          | 11,870,656                                |
|                                                                                |                                                                            |                                                 |                                                                                           |          |                                           |
|                                                                                |                                                                            | Net cash provided by (used in) operating activities  |                                                                                      | 164,876       |                                      | (3,589,309)                                                                                                           |
|                                                                                |                                                                            |                                                 |                                                                                      |               |                                      |                                                                                                                       |
| **Cash flows from investing activities**                                            |                                                                            |                                                 |                                                                                      |          |
| Purchase of investment security                                                     | -                                                                               |                                                 | (46,878,600)                                                                              |
| Proceeds from sale of equity interest in York Insurance                    Services |                                                                            |                                                 |                                                                                      |          |
|                                                                                | Group, Inc., net of transaction costs                                           |                                                 | -                                                                                         |          | 38,602,621                                |
|                                                                                |                                                                            |                                                 |                                                                                           |          |                                           |
|                                                                                |                                                                            | Net cash used in investing activities                |                                                                                      | -             |                                      | (8,275,979)                                                                                                           |
|                                                                                |                                                                            |                                                 |                                                                                      |               |                                      |                                                                                                                       |
| **Cash flows from financing activities**                                            |                                                                            |                                                 |                                                                                      |          |
| Dividend paid                                                                       | -                                                                               |                                                 | (883,592)                                                                                 |
| Proceeds from exercise of common stock options                                      |                                                                            | -                                                    |                                                                                      | 86,360        |
|                                                                                     |                                                                                 |                                                      |                                                                                           |               |                                           |                                                                                                                       |
|                                                                                |                                                                            | Net cash used in financing activities                |                                                                                      | -             |                                      |                   (797,232) |
|                                                                                |                                                                            | Net increase (decrease) in cash and cash equivalents |                                                                                      |  164,876 |                                      |  (12,662,520)                                                                                                    |
| **Cash and cash equivalents**                                                       |                                                                            |                                                 |                                                                                      |          |
|                                                                                | Beginning of period                                                             |                                                 | 458,032                                                                                   |          | 14,088,835                                |
|                                                                                |                                                                            |                                                 |                                                                                           |          |                                           |
|                                                                                | End of period                                                                   |                                                 | $          622,908                      |          | $ 1,426,315                               |
|                                                                                |                                                                            |                                                 |                                                                                           |          |                                           |
|                                                                                |                                                                            |                                                 |                                                                                      |          |                                      |                                                                                                                  |   |   |
| **Supplemental disclosure**                                                         |                                                                            |                                                 |                                                                                      |          |
|                                                                                | Income taxes paid                                                               |                                                 | $             61,250     |          | $ 797,790                                 |

 

 

See        notes to the condensed consolidated financial statements.

 

- 6        -

 

 

**BEXIL        CORPORATION**

**NOTES        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**

**June        30, 2007**

**(Unaudited)**

         

**1.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

 

**Nature        of Business and Organization**

Bexil        Corporation (the “Company”), a Maryland corporation, is a holding company. From        2002 until April 28, 2006, the Company’s primary holding was a fifty percent interest        in York Insurance Services Group, Inc. (“York”), an insurance services company.        On April 28, 2006, the Company consummated the sale of its fifty percent interest in York        to a newly formed entity controlled by a private equity fund and certain other investors        for approximately $39 million in cash. The Company has 11 employees, none of whom are        full-time.

 

The Company        was incorporated in 1996 under the laws of the State of Maryland as Bull & Bear U.S.        Government Securities Fund, Inc., a non-diversified closed end management investment        company registered under the Investment Company Act of 1940, as amended (the “1940        Act”). In October 1996, the Company’s predecessor, a series of shares of Bull        & Bear Funds II, Inc., an open end management investment company, transferred its net        assets to the Company in exchange for shares of the Company. The Company changed its name        to Bexil Corporation in 1999. In 2002, the Company filed an application with the Securities        and Exchange Commission (the “SEC”) to terminate its registration as an        investment company registered under the 1940 Act.

 

On January        6, 2004, the Company’s application with the SEC to terminate its registration as an        investment company was granted. As a result, the Company is subject to the reporting and        other requirements of the Securities Exchange Act of 1934, as amended (the “Exchange        Act”), and is no longer subject to regulation under the 1940 Act. The Company’s        shares are listed on the American Stock Exchange.

 

The        information furnished in this report reflects all adjustments which are, in the opinion of        management, necessary to a fair statement of the results of the period.

 

**Basis of        Presentation**

The        condensed consolidated financial statements are prepared in accordance with generally        accepted accounting principles in the United States of America. The condensed consolidated        financial statements include the accounts of the Company and its wholly owned subsidiary,        Specialty Hospital of Northeast Mississippi, Inc. (“Specialty”). Specialty,        from inception on November 27, 2006 to June 30, 2007, was inactive and had no assets,        liabilities, shareholders equity, revenues, or expenses. In 2006 and prior to the        consummation of the sale of York, the Company accounted for its fifty percent interest in        York using the equity method and, therefore, our financial results were not consolidated        with York’s.

 

The        unaudited interim financial information contained in these condensed consolidated financial        statements should be read in conjunction with the financial statements and notes thereto        for the year ended December 31, 2006, included in our Annual Report on Form 10-KSB filed        with the SEC.

 

**Cash and        Cash Equivalents**

Investments        in money market funds and short term investments and other marketable securities maturing        in 90 days or less are considered to be cash equivalents. At June 30, 2007, the Company        held approximately $620,000 in money market fund investments.

 

**Earnings        Per Share**

Basic earnings        per share is calculated by dividing net income by the weighted average number of common        shares outstanding during the period. Diluted earnings per share is calculated by dividing        net income by the weighted average number of common shares used in the basic earnings per        share calculation plus the dilutive effect of stock options. The dilutive effect of stock        options is determined using the treasury stock method, whereby exercise is assumed at the        beginning of the reporting period, the proceeds from such exercise are assumed to be used        to purchase common stock at the average market price during the period, and the incremental        shares (the difference between the number of shares assumed issued and the number of shares        assumed purchased) are included in the denominator of the diluted earnings        per share calculation.

 

- 7        -

 

The        following table sets forth the computation of basic and diluted earnings per:

 

|                                                                                                       | **Three Months Ended**                                                                                    |   | **Six Months Ended**                                                                 |
|------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------|
|                                                                                                       | **June 30,**                                                                                              |   | **June 30,**                                                                         |
|                                                                                                       | **2007**                                                                                                  |   | **2006**                                                                             |   | **2007** |   | **2006** |
|                                                                                                       |                                                                                                           |   |                                                                                      |   |  |   |  |
| Net income                                                                                                 | $                                 75,136 |   | $       21,207,551                                     |   | $                                 56,803 |   | $      21,673,904 |
|                                                                                                       |                                                                                                           |   |                                                                                      |   |  |   |  |
| Weighted average common shares outstanding:                                                                |                                                                                                      |   |                                                                                 |   |   |   |   |
| Weighted average shares used in per share calculation  -                    basic                     | 885,603                                                                                                   |   | 883,592                                                                              |   | 884,669 |   | 882,001 |
| Effect of dilutive securities:                                                                             |                                                                                                      |   |                                                                                 |   |   |   |   |
| Stock options                                                                                              | 49,028                                                                                                    |   | 36,256                                                                               |   | 49,116 |   | 40,782 |
|                                                                                                       |                                                                                                           |   |                                                                                      |   |  |   |  |
| Weighted average shares used in per share                    calculation     - diluted | 934,631                                                                                                   |   | 919,848                                                                              |   | 933,785 |   | 922,783 |
|                                                                                                       |                                                                                                           |   |                                                                                      |   |  |   |  |
| Per share net income:                                                                                      |                                                                                                      |   |                                                                                 |   |   |   |   |
| Basic                                                                                                      | $                0.08     |   | $             24.00 |   | $                0.06 |   | $             24.57 |
| Diluted                                                                                                    | $                0.08     |   | $             23.06 |   | $                0.06 |   | $             23.49 |

 

 

Stock        options will have a dilutive effect under the treasury method only when the average market        price of the common stock during the period exceeds the exercise price of the        option.

         

Stock        options outstanding with an exercise price higher than the average stock price for the        periods presented are excluded from the calculation of diluted net income per share since        the effect would have been anti-dilutive under the treasury stock method.

 

There        were no potentially dilutive stock options excluded from the computation of diluted        earnings per share for the three and six month periods ended June 30, 2007 and 2006,        respectively.

         

| **Income Taxes** |
|------------------|

The        Company's method of accounting for income taxes conforms to the Financial Accounting        Standards Board’s (“FASB”) Statement of Financial Accounting Standards        No. 109, “Accounting for Income Taxes” (“SFAS 109”). This method        requires the recognition of deferred tax assets and liabilities for the expected future tax        consequences of temporary differences between the financial reporting basis and the tax        basis of assets and liabilities.

 

**Investment Securities, Available-for-Sale**

Investment        securities, available-for-sale are carried at fair value. Realized gains and losses are        included in investment income based on specific identification. Unrealized gains and losses        are recorded net of tax as part of accumulated other comprehensive income until realized.        We regularly review investment securities for other-than-temporary impairment based on both        quantitative and qualitative criteria that include the extent to which cost exceeds market        value, the duration of that market decline, our intent and ability to hold to maturity or        until forecasted recovery, and the financial health of and specific prospects for the        issuer. Unrealized losses that are other-than-temporary are recognized in earnings. At June        30, 2007, substantially all of the value of the securities are invested in a US Treasury        Note.

 

**Reclassifications**

Certain        comparative amounts for the prior period have been reclassified to conform to the current        period condensed consolidated financial statement presentation. Such reclassifications        affected income before income taxes and equity in earnings of York.

 

**Reporting Segment**

The Company        accounts for its operations in accordance with FASB Statement of Financial Accounting        Standard No. 131, “Disclosures about Segments of an Enterprise and Related        Information.” No segment disclosures have been made as the Company considers its        business activities as a single segment.

         

 

- 8        -

 

**Stock-based Compensation**

The Company        accounts for stock based compensation in accordance with FASB Statement of Financial        Accounting Standards No. 123R “Share-Based Payment” (“SFAS 123R”).        Under SFAS 123R, stock based compensation expense reflects the fair value of stock based        awards measured at grant date, is recognized over the relevant service period, and is        adjusted each period for anticipated forfeitures. The compensation cost recorded for stock        based compensation, which includes stock options, is based on the grant date fair        value as required by SFAS 123R.

 

The Company        has issued stock options in accordance with its 2004 Incentive Compensation Plan. All stock        options granted have exercise prices equal to the market value of stock on the date of        grant. Accordingly, the Company records compensation expense based on the fair value of the        stock options using a Black-Scholes option pricing model. The Black-Scholes option pricing        model takes into account variables such as volatility, dividend yield, and the risk-free        interest rate. Although the initial fair value of stock options is not adjusted after the        grant date, changes in the Company’s assumptions may change the value and, therefore,        the expense related to future stock options.

 

**Use of        Estimates**

The        preparation of consolidated financial statements in conformity with accounting principles        generally accepted in the United States of America requires management to make estimates        and assumptions that affect certain items, including the reported amounts of assets and        liabilities, disclosure of contingent assets and liabilities at the date of the        consolidated financial statements and the reported amounts of revenues and expenses during        the reporting period. Estimates are primarily used in the determination of equity method        goodwill, investment impairment, valuation of stock-based compensation, and expenses        allocation. Actual results may differ from those estimates.

 

**Recent        Accounting Pronouncements**

In June        2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in        Income Taxes – an interpretation of FASB Statement 109” (“FIN 48”)        which clarifies the accounting for uncertainty in income taxes recognized in a        company’s financial statements in accordance with SFAS 109. FIN 48 requires the        Company to recognize in the financial statements, the impact of a tax position, if that        position is more likely than not to be sustained on audit, based on the technical merits of        the position. The provisions of FIN 48 are effective as of the beginning of our 2007 fiscal        year, with the cumulative effect of the change in accounting principle recorded as an        adjustment to opening retained earnings. The effect of FIN 48 had no impact on the        Company’s retained earnings or 2007 income from operations.

 

In        September 2006, the FASB issued Statement of Financial Accounting Standards No. 157,        “Fair Value Measurements” (“SFAS 157”) to address inconsistencies        in the definition and determination of fair value pursuant to generally accepted accounting        principals (“GAAP”). SFAS 157 provides a single definition of fair value,        establishes a framework for measuring fair value in GAAP and expands disclosures about fair        value measurements in an effort to increase comparability related to the recognition of        market-based assets and liabilities and their impact on earnings. SFAS 157 is effective for        interim financial statements issued during the fiscal year beginning after November 15,        2007.

 

**2. SALE        OF YORK INSURANCE SERVICES GROUP, INC.**

 

On April        27, 2006, the Company’s stockholders voted to approve the sale of its fifty percent        interest in York to a newly formed entity controlled by a private equity fund and certain        other investors; the sale was consummated on April 28, 2006. The Company recognized a gain        from the sale of $37,471,143 before taxes consisting of the cash proceeds paid by the buyer        of $38,864,121 plus a consulting fee and expense reimbursement received from York of        $138,500 less the Company’s carrying value in York of $1,131,478 and closing costs of        $400,000. Included in compensation and benefits were bonus award payments of        $1,909,228 paid to the Chief Executive Officer, Executive Chairman, and other employees        upon the consumation of the sale of York in 2006. Prior to the sale, the Company’s        fifty percent interest in York was accounted for using the equity method and, therefore,        York’s financial results were not consolidated with ours. Summarized unaudited        condensed financial information for York for the period January 1, 2006 to April 28, 2006        are as follows:

 

- 9        -

 

| **York Insurance Services Group, Inc.**        |   | **For the Period**     |
|------------------------------------------------|--------|------------------------|
| **Summarized Condensed Financial Information** |   | **January 1, 2006 to** |
| **(Unuadited)**                                |   |                   | **April 28, 2006** |
|                                           |
| Revenues                                       |   |                   |   | $                  30,345,914 |
| Expenses                                       |   |                   |   | $                  25,131,225 |
| Net income                                     |   |                   | $                 (1,467,496) |

 

 

The Company        earned fees of $3,000 from York for service on York’s board of directors for the        period January 1, 2006 to April 28, 2006.

 

In December        2005, the Company entered into an expense sharing agreement among York and the other fifty        percent stockholder of York for interest and other expenses related to a bank loan obtained        by and for use by York. The expense sharing agreement was limited in duration and ended in        April 2006. The Company incurred expenses of approximately $168,000 and 281,000 related to        the expense sharing agreement for the three and six month periods ended June 30,        2006.

 

**3.        RELATED PARTIES**

 

Certain        officers of the Company also serve as officers and/or directors of Winmill & Co.        Incorporated (“Winco”), Tuxis Corporation (“Tuxis”), and their        affiliates (collectively with Bexil, the “Affiliates”). At June 30, 2007,        Winco’s wholly owned subsidiary, Investor Service Center, Inc., owned 222,644 shares        of the Company and 234,665 shares of Tuxis, or 25% and 24%, respectively, of the        outstanding common stock. Winco’s wholly owned subsidiary, Midas Management        Corporation (“MMC”), acts as “master” payer of compensation and        benefits of Affiliateemployees. At June 30, 2007, the Company had a        reimbursement payable to MMC relating to compensation and benefit expenses of        $1,062.

 

Rent        expense of jointly used office space and overhead expense for various jointly used        administrative and support functions incurred by Winco are allocated to the Company and the        Affiliates. The Company incurred allocated rent and overhead costs of $22,053 and $24,999        for the three months ended June 30, 2007 and 2006, respectively, and $43,471 and $49,998        for the six months ended June 30, 2007 and 2006, respectively. At June 30, 2007, the        Company had a payable to Winco related to these costs of $6,724.

 

The Company        participates in a 401(k) retirement plan for substantially all of its qualified employees.        Company matching expense is based upon a percentage of contributions to the plan by        eligible employees and are accrued and funded on a current basis. In 2006 and through        January 31, 2007, the plan was sponsored by Winco. Matching expense to the Winco plan for        the three months ended June 30, 2007 and 2006 was $0 and $2,733, respectively, and $12,218        and $12,782 for the six months ended June 30, 2007 and 2006, respectively. Effective        February 1, 2007, the Company began participating in a non-affiliated 401(k) plan and        matching expense to the non-affiliated 401(k) plan for the three months ended        June 30, 2007 and 2006 was $4,524 and $0, respectively, and $8,523 and $0, for the six        months ended June 30, 2007 and 2006, respectively.

 

At June 30,        2007, the Company had $103,292 invested in Midas Dollar Reserves, Inc. (“MDR”),        a money market fund advised by MMC and $1,605 invested in Global Income Fund, Inc.        (“GIF”), a closed end investment company advised by CEF Advisers, Inc., a        wholly owned subsidiary of Winco. The Company earned dividends from MDR and GIF in the        aggregate of $1,049 and $25 for the three months ended June 30, 2007 and 2006,        respectively, and $2,109 and $50 for the six months ended June 30, 2007 and 2006,        respectively. Certain officers and directors of the Company are officers and/or directors        of MDR and GIF.

 

 

- 10        -

 

**4.        INVESTMENT IN SECURITIES**

 

Investment        securities at June 30, 2007, consisted of the following:

 

|                                     |                              |                                                              |   |                                                                                               |                                                                   |                                           | **Gross Unrealized**                                                                               |                                                              |                                                |
|------------------------------------------|-----------------------------------|-------------------------------------------------------------------|--------|----------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|------------------------------------------------|----------------------------------------------------------------------------------------------------|-------------------------------------------------------------------|------------------------------------------------|
|                                     |                              |                                                              |   |                                                                                               | **Amortized**                                                     |                                           |                                                                                                    |                                                              |  

**Fair**                               |
|                                     |                              |                                                              |   |                                                                                               | **Cost**                                                          |                                           | **Gains**                                                                                          |                                                              | **Losses**                                     |   | **Value** |
|                                     |                              |                                                              |   |                                                                                               |                                                                   |                                           |                                                                                                    |                                                              |                                                |   |  |
| Investment securites, available-for-sale |                              |                                                              |   |                                                                                               |                                                              |                                           |
|                                     | U.S.Treasury Note due August 2008 | $         36,551,108 |   | $                - |                                                              | $      (108,048) |                                                                                               | $         36,443,060 |
|                                     | Global Income Fund, Inc.          |                                                              | 1,605  |                                                                                               | -                                                                 |                                           | (162)                                                                                              |                                                              | 1,443                                          |
|                                     |                              |                                                              |        |                                                                                               |                                                                   |                                           |                                                                                                    |                                                              |                                                |
|                                     |                              |                                                              | Total  |                                                                                               | $         36,552,713 |                                           | $                - |                                                              | $      (108,210) |   | $         36,444,503 |
|                                     |                              |                                                              |   |                                                                                               |                                                                   |                                           |                                                                                                    |                                                              |                                                |   |  |

 

**5.        INCENTIVE COMPENSATION PLAN**

         

In 2004,        the Company’s shareholders approved the adoption of the 2004 Incentive Compensation        Plan (the “Plan”), which provides for the granting of a maximum of 175,918        options to purchase common stock to directors, officers and key employees of the Company or        its affiliates. The option price per share may not be less than the fair value of such        shares on the date the option is granted, and the maximum term of an option may not exceed        5 years. The vesting period is three years of service. Under certain conditions        participants have 3 months after the employment relationship ends to exercise all vested        options.

 

The Company        accounts for the cost of its stock options under SFAS No. 123R and began recognizing        compensation expense for its share-based payments based on the fair value of the awards.        Share-based payments include stock option grants under the Plan. SFAS 123R requires        share-based compensation expense recognized since January 1, 2006, to be based on the        following: a) grant date fair value estimated in accordance with the original provisions of        SFAS 123 for unvested options granted prior to the adoption date; and b) grant date fair        value estimated in accordance with the provisions of SFAS 123R for unvested options granted        subsequent to the adoption date. Under SFAS 123R forfeitures are estimated at the time of        valuation and reduce expense ratably over the vesting period. This estimate is adjusted        periodically based on the extent to which actual forfeitures differ, or are expected to        differ, from the previous estimate. SFAS 123R’s fair value method has resulted in        additional share-based expense (affecting compensation expenses and taxes) in the amount of        $44,481 and $28,540 related to stock options for the three months ended June 30, 2007 and        2006, respectively, and $75,161 and $67,144 for the six months ended June 30, 2007 and        2006, respectively. For the three months ended June 30, 2007 and 2006, this additional        share-based expense lowered pre-tax earnings by $44,481 and $28,540, respectively, lowered        net income by $28,468 and $15,697, respectively, and lowered basic earnings per share by        $0.03 and $0.02, respectively. For the six months ended June 30, 2007 and 2006, this        additional share-based expense lowered pre-tax earnings by $75,161 and $67,144,        respectively, lowered net income by $48,103 and $36,929, respectively, and lowered basic        earnings per share by $0.05 and $0.04, respectively.

 

The        following schedule shows all options granted, exercised, expired, and exchanged under the        Plan as of December 31, 2006.

 

|                       | **Shares Under** | **Weighted Average** |   | **Total** |
|----------------------------|------------------|----------------------|--------|-----------|
|                       | **Option**       | **Exercise Price**   |   | **Price** |
|                            |
| Balance, December 31, 2004 | 143,000          | $21.47               | $      | 3,070,210 |
| Granted                    | 8,000            | $21.19               | $      | 169,520   |
| Forfeited                  | (7,000)          | $21.59               | $      | (151,130) |
|                       |                  |                 |   |      |
| Balance, December 31, 2005 | 144,000          | $21.45               | $      | 3,088,800 |
| Granted                    | 3,000            | $27.90               | $      | 83,700    |
| Exercised                  | (4,000)          | $21.59               | $      | (86,360)  |
| Forfeited                  | (1,000)          | $21.59               | $      | (21,590)  |
|                       |                  |                 |   |      |
| Balance, December 31, 2006 | 142,000          | $21.58               | $      | 3,064,360 |
|                       |                  |                 |   |      |

 

 

- 11        -

A summary        of stock option activity since our most recent fiscal year end is as follows:

 

|                                          | **Shares                    Under** | **Weighted                    Average** |   | **Total**       |
|-----------------------------------------------|-------------------------------------|-----------------------------------------|---|-----------------|
|                                          | **Option**                          | **Exercise                    Price**   |   | **Price**       |
|                                               |
| Balance, December 31,                    2006 | 142,000                             | $ 21.58                                 | $ |  3,064,360 |
| Granted                                       | 4,000                               | $ 32.46                                 | $ |  129,820   |
|                                          |                                     |                                    |   |            |
| Balance, June 30,                    2007     | 146,000                             | $ 21.88                                 | $ |  3,194,273 |
|                                          |                                     |                                    |   |            |

 

 

The fair        value of each option grant is separately estimated for each grant date. The fair value of        each option is amortized into compensation expense on a straight-line basis between the        grant date for the award and each vesting date. The Company has estimated the fair value of        all stock option awards as of the date of the grant by applying the Black-Scholes option        pricing valuation model. The application of this valuation model involves assumptions that        are judgmental and highly sensitive in the determination of compensation expense. The        Company granted 4,000 options during the six months ended June 30, 2007. There were no        options granted during the six months ended June 30, 2006.

 

The key        assumptions used in determining the fair value of options granted by applying the        Black-Scholes option pricing valuation model in 2007 and a summary of the methodology        applied to develop each assumption are as follows:

         

|                                     | 35.7 – 35.9% |   |
|------------------------------------------|--------------------|--------|
| Expected price volatility                |
| Risk-free interest rate                  | 4.5 – 4.6%   |   |
| Weighted average expected lives in years | 4                  |   |
| Forfeiture rate                          | 10%                |   |
| Dividend yield                           | 0%                 |   |

         

*Expected        Price Volatility -*The Company estimates the volatility of its        common stock at the date of grant based solely on the historical volatility of its common        stock. The volatility factor used in the Black-Scholes option valuation model is based on        the Company’s historical stock prices over the most recent period commensurate with        the estimated expected life of the award.

 

*Risk-Free Interest Rate -*This is the U.S        Treasury yield in effect at the time of the grant having a term equal to the expected life        of the option. An increase in the risk-free interest rate will increase compensation        expense.

 

*Expected        Lives -*This is the period of time over which the options granted        are expected to remain outstanding giving consideration to vesting schedules and historical        exercise and forfeiture patterns. The Company uses the simplified method outlined in SEC        Staff Accounting Bulletin No. 107 to estimate expected lives for options granted during the        period. Options granted have a maximum term of 5 years. An increase in the expected life        will increase compensation expense.

 

*Forfeiture Rate -*This is the estimated        percentage of options granted that are expected to be forfeited or canceled before becoming        fully vested. This estimate is based on historical experience. An increase in the        forfeiture rate will decrease compensation expense.

 

*Expected        Dividend Yield -*Since the adoption of the Plan, the Company has        paid one special dividend, although at the time the options were granted management did not        anticipate paying a dividend in the foreseeable future. Consequently, the dividend yield        assumption was zero. The expected dividend yield is based on the Company’s current        dividend yield and the best estimate of projected dividend yields for future periods within        the expected life of the option.

 

 

- 12        -

 

The        following table summarizes information about stock options outstanding at June 30,        2007:

         

|                                                  |   |                         |   | **Weighted-**

**Average                    Remaining** |   | **Weighted-Average**                  |   |                                     |   |  

**Weighted-Average**                                 |
|-------------------------------------------------------|--------|------------------------------|--------|---------------------------------------------------------|--------|---------------------------------------|--------|------------------------------------------|--------|--------------------------------------------------------------|
| **Range of**

**Exercise                    Price**   |   | **Options**

**Outstanding** |   | **Contractual Life(in                    years)**       |   | **Exercise                    Price** |   | **Options**

**  Exercisable** |   | **Exercise Price of                    Exercisable Options** |
|                                                       |
|   $16.30 -                    $19.50   |        | 28,000                       |   | 2.49                                                    |   | $17.04                                |   | 21,000                                   |   | $ 16.37                                                      |
| $21.59 - $32.83                                       |        | 118,000                      |   | 1.95                                                    |   | $23.03                                |   | 101,738                                  |   | $ 22.57                                                      |
|                                                  |   |   146,000               |   | 2.05                                                    |   | $21.88                                |   |  122,738                            |   | $ 21.51                                                      |
|                                                  |   |                              |   |                                                    |   |                                  |   |                                          |   |                                                         |

         

At June 30,        2007, the aggregate intrinsic value of all outstanding options was $2,178,180 with a        weighted average remaining contractual term of 2 years. The total compensation cost related        to non-vested awards not yet recognized was $54,740 with an expense recognition period of        approximately 2 years.

 

**6.        INCOME TAXES**

 

| The income tax provision is comprised of the                    following: |
|----------------------------------------------------------------------------|

 

|                             |                                                                                                            |                                                                                                            | **Three Months Ended June 30,**                                                 |                                                                            | **Six Months Ended June 30,**                                                                     |
|----------------------------------|-----------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|---------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------|
|                             |                                                                                                            |                                                                                                            |                                                                                 |                                                                            |                                                                                                   |
|                             |                                                                                                            |                                                                                                            | **2007**                                                                        |                                                                            | **2006**                                                                                          |   | **2007** |   | **2006** |
|                             |                                                                                                            |                                                                                                            |                                                                                 |                                                                            |                                                                                                   |   |  |   |  |
| Current provision :              |                                                                                                            |                                                                                                            |                                                                            |                                                                            |                                                                                              |   |   |
|                             | Federal                                                                                                         | $                                  60,980 |                                                                            | $                            10,500,000 |                                                                                              | $                 5,995 |   | $                            10,500,000 |
|                             | State and local                                                                                                 | -                                                                                                               |                                                                            | 1,049,648                                                                       |                                                                                              | 5,000 |   | 1,357,207 |
|                             |                                                                                                            |                                                                                                                 |                                                                            |                                                                                 |                                                                                              |  |   |  |
|                             |                                                                                                            | Total current provision                                                                                         | 60,980                                                                          |                                                                            | 11,549,648                                                                                        |   | 10,995 |   | 11,857,207 |
|                             |                                                                                                            |                                                                                                            |                                                                                 |                                                                            |                                                                                                   |   |  |   |  |
| Deferred provision (benefit):    |                                                                                                            |                                                                                                            |                                                                            |                                                                            |                                                                                              |   |
|                             | Stock-based compensation expense                                                                                | (18,237)                                                                                                        |                                                                            | -                                                                               |                                                                                              | (37,574) |   | - |
|                             | Accrued expenses                                                                                                | -                                                                                                               |                                                                            | -                                                                               |                                                                                              | 51,054 |   | - |
|                             | Net operating loss and capital loss                                                                             | -                                                                                                               |                                                                            | 1,136,237                                                                       |                                                                                              | - |   | 1,102,448 |
|                             |                                                                                                            |                                                                                                                 |                                                                            |                                                                                 |                                                                                              |  |   |  |
|                             |                                                                                                            | Total deferred provision (benefit)                                                                              | (18,237)                                                                        |                                                                            | 1,136,237                                                                                         |   | 13,480 |   | 1,102,448 |
|                             |                                                                                                            |                                                                                                            |                                                                                 |                                                                            |                                                                                                   |   |  |   |  |
| Total provision for income taxes | $                                  42,743 |                                                                                                            | $                            12,685,885 |                                                                            | $               24,475 |   | $         12,959,655 |
|                             |                                                                                                                 |                                                                                                            |                                                                                 |                                                                            |                                                                                                   |   |  |

 

At June 30,        2007, deferred tax assets were $125,186 comprised unrealized losses on available-for-sale        investment securities of $38,955 and stock-based compensation expenses not deductible for        income tax purposes of $86,231.

 

The        difference between the U.S. federal statutory income tax rate and our effective rate is due        to state and local income taxes.

 

- 13        -

 

**7.        SHAREHOLDERS’ EQUITY**

 

**Stockholder Rights Plan**

The Board        of Directors has adopted a stockholder rights plan. To implement the rights plan, the Board        of Directors declared a dividend distribution of one right for each outstanding share of        Bexil common stock, par value $.01 per share, to holders of record of the shares of common        stock at the close of business on November 21, 2005. Each right entitles the registered        holder to purchase from Bexil one one-thousandth of a share of preferred stock, par value        $.01 per share. The rights were distributed as a non-taxable dividend and will expire on        November 21, 2015. The rights are evidenced by the underlying Bexil common stock, and no        separate preferred stock purchase rights certificates were distributed. The rights to        acquire preferred stock will become exercisable only if a person or group, other than        certain exempt persons, acquires or commences a tender offer for 10% or more of        Bexil’s common stock. If a person or group, other than certain exempt persons,        acquires or commences a tender offer for 10% or more of Bexil’s common stock, each        holder of a right, except the acquirer, will be entitled, subject to Bexil’s right to        redeem or exchange the right, to exercise, at an exercise price of $67.50, the right for        one one-thousandth of a share of Bexil’s newly-created Series A Participating        Preferred Stock, or the number of shares of Bexil common stock equal to the holder’s        number of rights multiplied by the exercise price and divided by 50% of the market price of        Bexil's common stock on the date of the occurrence of such an event. Bexil’s Board of        Directors may terminate the rights plan at any time or redeem the rights, for $0.01 per        right, at any time before a person acquires 10% or more of Bexil’s common        stock.

 

**Restricted Stock**

On June 26,        2007, the Board of Directors rescinded the grant of 3,000 shares of restricted common stock        previously awarded to the non-employee directors on March 28, 2007. The shares were        rescinded in order to comply with the Company's listing agreement with the American Stock        Exchange.  The awards were valued at the grant date fair value of $98,490, which was        the market price of the underlying common stock. In lieu of the restricted stock grant        awards,the Board of Directors approved a cash        bonus award to the non-employee directors totaling $98,490, which was the        fair value of the original stock grant award.

 

**8.        COMMITMENTS AND CONTINGENCIES**

 

At June 30,        2007, there were no contingent obligations or events occurring that could reasonably be        expected to have a material adverse impact on the Company’s consolidated financial        statements.

 

- 14        -

 

**Item        2.**  **Management’s        Discussion and Analysis or Plan of Operation**

 

***Forward Looking Information***

 

Information        or statements provided by or on behalf of the Company from time to time, including those        within this Quarterly Report on Form 10-QSB may contain certain “forward-looking        information,” including information relating to anticipated growth in revenues or        earnings per share. The Company cautions readers that any forward-looking information        provided by or on behalf of the Company is not a guarantee of future performance and that        actual results may differ materially from those in forward-looking information as a result        of various factors, including, but not limited to, those discussed below. Further, such        forward-looking statements speak only as of the date on which such statements are made, and        the Company undertakes no obligation to update any forward-looking statement to reflect        events or circumstances after the date on which such statement is made or to reflect the        occurrence of unanticipated events.

 

Certain        written and oral statements made or incorporated by reference from time to time by the        Company in this report, other reports, filings with the SEC, press releases, conferences,        or otherwise, contain “forward-looking information” and are        “forward-looking statements” within the meaning of the Private Securities        Litigation Reform Act of 1995. Forward-looking statements include, without limitation, any        statement that may predict, forecast, indicate or imply future results, performance or        achievements. Forward-looking statements may be identified, without limitation, by the use        of such words as “anticipates,” “estimates,” “expects,”        “intends,” “plans,” “predicts,” “projects,”        “believes,” or words or phrases of similar meaning. Forward-looking statements        include risks and uncertainties, which could cause actual results or outcomes to differ        materially from those expressed in the forward-looking statements.

 

Other        sections of this report may include reference to specific factors, which could adversely        impact the Company's business and financial performance. Moreover, the Company operates in        a very competitive and rapidly changing environment. New risk factors emerge from time to        time, and it is not possible for management to predict all such risk factors, nor can it        assess the impact of known risk factors on the Company business or the extent to which any        factor or combination of factors may cause actual results to differ materially from those        contained in any forward-looking statement. The Company undertakes no obligation to revise        or publicly release the results of any revisions to forward-looking statements or to        identify any new risk factors, which may arise. Given these risks and uncertainties,        investors should not place undue reliance on forward-looking statements as a prediction of        actual future results.

 

Investors        should also be aware that while the Company does, from time to time, communicate with        securities analysts, it is against the Company's policy to disclose to them any material,        non-public information. Accordingly, investors should not assume that the Company agrees        with any statement or report issued by any analyst irrespective of the content of the        statement or report. Furthermore, the Company has a policy against issuing or confirming        financial forecasts or projections issued by others. Thus, to the extent that the reports        issued by securities analysts contain any projections, forecasts, or opinions, such reports        are not the responsibility of the Company.

 

|   | ***Overview*** |
|--------|----------------|

 

Bexil        Corporation, a Maryland corporation, is a holding company. The Company was incorporated in        1996 under the laws of the State of Maryland as Bull & Bear U.S. Government Securities        Fund, Inc., a non-diversified closed end management investment company registered under        the 1940 Act. In October 1996, the Company’s predecessor, a series of shares of        Bull & Bear Funds II, Inc., an open end management investment company, transferred its        net assets to the Company in exchange for shares of the Company. The Company changed its        name to Bexil Corporation in 1999. In 2002, the Company filed an application with the SEC        to terminate its registration as an investment company registered under the 1940        Act.

 

On January        6, 2004, the Company’s application with the SEC to terminate its registration as an        investment company was granted. As a result, the Company is subject to the reporting and        other requirements of the Exchange Act, and is no longer subject to regulation under        the 1940 Act. The Company’s shares are listed on the American Stock        Exchange.

 

From 2002        until April 28, 2006, Bexil’s primary holding was its fifty percent interest in        privately held York Insurance Services Group, Inc., an insurance services company. The        Company’s fifty percent interest in York was accounted for using the equity method        and, therefore, York’s financial results were not consolidated with ours.

 

- 15        -

 

 

 

On April        28, 2006, the Company consummated the sale of its fifty percent interest in York to a newly        formed entity controlled by a private equity fund and certain other investors for        approximately $39 million in cash and realized a gain of approximately $37.5 million before        income taxes on such sale.

 

Since the        sale of the York shares, the Company has been operating to acquire and/or develop one or        more businesses. There are no limits on the types of businesses or fields in which the        Company may devote its assets. The Company has not agreed to acquire any business as of the        date of this report. Our primary source of revenue since the sale of York has been from        interest and dividend income earned from U.S. Treasury securities and money market funds.        We have no plans to dissolve and liquidate the Company. We are currently engaged in the        business of evaluating opportunities to develop and acquire long term acute care hospitals        and other enterprises.

 

|   | ***Acquisition Parameters*** |
|--------|------------------------------|

 

The        Company’s acquisition parameters for a public company and private business        are

 

|   | **•** | A proven track record with demonstrated earning                    power. |
|--------|------------|---------------------------------------------------------------------------|

|   | **•** | Sales between $10 million and $50 million. |
|--------|------------|--------------------------------------------|

|   | **•** | A seasoned business with solid customer relations. |
|--------|------------|----------------------------------------------------|

|   | **•** | Good return (at least 15%) on equity, little or no                    debt. |
|--------|------------|-----------------------------------------------------------------------------|

|   | **•** | Solid management must remain. Audited financials                    required. |
|--------|------------|-------------------------------------------------------------------------------|

|   | **•** | Particularly interested in a “spin-off” from a                    larger company. |
|--------|------------|-----------------------------------------------------------------------------------------------|

 

We        generally are not interested in acquiring (but we may develop) start-ups, turnarounds, or        high tech. We will sign a confidentiality agreement and will protect a broker’s sell        agreements. If the seller quotes a price, we will respond promptly.

 

|   | *Long Term Acute Care Hospitals* |
|--------|----------------------------------|

 

We are        currently evaluating opportunities to develop and acquire long-term acute care hospitals        (“LTACHs”). In the fourth quarter of 2006 we formed Specialty Hospital of        Northeast Mississippi, Inc., a Mississippi corporation, as a wholly owned subsidiary of the        Company to further our plans in this regard, although to date it is inactive and has no        assets, liabilities, shareholders equity, revenues, or expenses. We are seeking other        opportunities in the region. Patients in long term acute care hospitals typically suffer        from serious and often complex medical conditions that require a high degree of care. These        patients have specialized needs, and serious and often complex medical conditions such as        respiratory failure, neuromuscular disorders, traumatic brain and spinal cord injuries,        stroke, cardiac disorders, non-healing wounds, renal disorders and cancer. These patients        generally require a longer length of stay than patients in a general acute care hospital        and benefit from being treated in a specialty hospital that is designed to meet their        unique medical needs.

 

An LTACH        business involves a number of risks, some of which are beyond our control. The risk and        uncertainties described below are not the only ones we face. Additional risks and        uncertainties that we do not currently know or that we currently believe to be immaterial        may also adversely affect the LTACH business. Compliance with changes in federal        regulations applicable to long term acute care hospitals operated as “hospitals        within hospitals” or as “satellites” will result in increased capital        expenditures. Government implementation of proposed changes to Medicare’s method of        reimbursing long-term acute care hospitals may have an adverse effect on the        industry’s future net operating revenues and profitability.  If there are        changes in the rates or methods of government reimbursements for LTACH services, net        operating revenues and profitability could decline. LTACHs operate in a heavily regulated        industry, and changes in regulations or violations of regulations may result in increased        costs or sanctions that reduce net operating revenues and profitability. Future        acquisitions may use significant resources, may be unsuccessful and could expose us to        unforeseen liabilities.  If we fail to establish relationships with the physicians in        key markets, net operating revenues may be adversely affected. Shortages in qualified        nurses or therapists could increase LTACH operating costs significantly.  Competition        may limit our ability to acquire LTACHs and adversely affect our growth. Our future LTACH        operations, if any, could be significantly disrupted if we lose key members of our        management team. Significant legal actions as well as the cost and possible lack of        available insurance could subject us to substantial uninsured liabilities.

 

- 16        -

 

|   | ***Critical Accounting Policies and                    Estimates*** |
|--------|---------------------------------------------------------------------|

 

Management’s Discussion and Analysis or Plan of Operation is based        upon our condensed consolidated financial statements, which have been prepared in        accordance with accounting principles generally accepted in the United States of America.        The preparation of these financial statements requires management to make estimates and        assumptions that affect the reported amounts of assets, liabilities, revenue and expenses,        and related disclosures. Management bases its estimates on historical experience and on        various other assumptions that are believed to be reasonable under the circumstances, the        results of which form the basis for making judgments about the carrying values of assets        and liabilities that are not readily apparent from other sources. Actual results may differ        from these estimates under different assumptions or conditions.

 

A critical        accounting policy is one that is both important to the portrayal of the Company’s        financial condition or results of operations and requires significant judgment or complex        estimation process. The Company’s significant accounting policies are described in        Note 1 to the audited financial statements included in with the Company’s Annual        Report on Form 10-KSB for the fiscal year ended December 31, 2006. The Company believes the        following are critical accounting policies:

 

**Investment Securities, Available-for-Sale**

Investment        securities, available-for-sale are carried at fair value. Realized gains and losses are        included in investment income based on specific identification. Unrealized gains and losses        are recorded net of tax as part of accumulated other comprehensive income until realized.        We regularly review investment securities for other-than-temporary impairment based on both        quantitative and qualitative criteria that include the extent to which cost exceeds market        value, the duration of that market decline, our intent and ability to hold to maturity or        until forecasted recovery, and the financial health of and specific prospects for the        issuer. Unrealized losses that are other-than-temporary are recognized in earnings. At June        30, 2007, substantially all securities are comprised of a US Treasury Note.

         

**Stock-based Compensation**

The Company        accounts for stock option grants in accordance with Statement of Financial Accounting        Standards (“SFAS”) No. 123R “Share-Based Payment.” All stock        options granted have exercise prices equal to the market value of stock on the date of        grant. Accordingly, the Company records the fair value of these options using a        Black-Scholes option pricing model. The Black-Scholes option pricing model takes into        account variables such as volatility, dividend yield, and the risk-free interest rate.        Although the initial fair value of stock options is not adjusted after the grant date,        changes in the Company’s assumptions may change the value and therefore, the expense        related to future stock options. For example, increases or decreases in the assumed        volatility will cause the option to increase or decrease, respectively.

 

***Results of Operations***

 

**Revenue.**Revenue decreased $2,000 and $5,000        for the three months and six months ended June 30, 2007, respectively, compared to 2006. In        2006, revenue consisted of fees earned from York for board of directors meeting attendance        all of which ceased as a result of the sale of our fifty percent interest in York in April        2006.

 

**Expenses.**Total expenses decreased        approximately $1,928,000 and $1,870,000 for the three months and six months ended June 30,        2007, respectively, compared to 2006. The decrease in total expenses is attributable to a        decrease in compensation and benefits. Compensation and benefits decreased approximately        $1,892,000 and $1,882,000 for the three months and six months ended June 30, 2007, compared        to 2006. In 2006, bonus awards of approximately $1,909,000 were paid upon consummation of        the sale of York to the Chief Executive Officer, Executive Chairman, and other        employees.

 

**Interest        and dividend income.**Interest and dividend income increased        approximately $14,000 and $320,000 for the three months and six months ended June 30, 2007,        respectively, compared to 2006. The increase in interest and dividend for the six months        ended June 30, 2007, compared to 2006, was due to an increase in investment balances during        the period.

 

**York.**In 2006, the Company recognized a loss in        the earnings of York of approximately $734,000. This was attributable to expenses incurred        by York leading up to the sale transaction. The Company consummated the sale of its fifty        percent interest in York in April 2006 and realized a net after-tax gain of approximately        $23,000,000. The net after-tax gain consisted of proceeds of approximately $39,000,000 less        the Company’s carrying value in York of approximately $1,100,000, closing costs        including employee bonus awards of approximately $2,200,000, and income taxes of        approximately $13,000,000.

 

Net income        was $56,803 or $0.06 per share on a diluted basis in 2007 compared to net income of        $21,673,904 or $23.49 per share on a diluted basis in 2006.

 

- 17        -

 

 

|   | ***Recent Accounting Pronouncements*** |
|--------|----------------------------------------|

 

In June        2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in        Income Taxes – an interpretation of FASB Statement 109” (“FIN 48”)        which clarifies the accounting for uncertainty in income taxes recognized in a        company’s financial statements in accordance with SFAS 109. FIN 48 requires the        Company to recognize in the financial statements, the impact of a tax position, if that        position is more likely than not to be sustained on audit, based on the technical merits of        the position. The provisions of FIN 48 are effective as of the beginning of our 2007 fiscal        year, with the cumulative effect of the change in accounting principle recorded as an        adjustment to opening retained earnings. The effect of FIN 48 had no impact on the        Company’s retained earnings or 2007 income from operations.

 

In        September 2006, the FASB issued Statement of Financial Accounting Standards No. 157,        “Fair Value Measurements” (“SFAS 157”) to address inconsistencies        in the definition and determination of fair value pursuant to generally accepted accounting        principals (“GAAP”). SFAS 157 provides a single definition of fair value,        establishes a framework for measuring fair value in GAAP and expands disclosures about fair        value measurements in an effort to increase comparability related to the recognition of        market-based assets and liabilities and their impact on earnings. SFAS 157 is effective for        interim financial statements issued during the fiscal year beginning after November 15,        2007.

 

|   | ***Liquidity and Capital Resources*** |
|--------|---------------------------------------|

 

Historically, we have had adequate liquidity to fund our operations. In        management’s opinion, we should have adequate amounts of cash to meet our anticipated        obligations. At June 30, 2007, the Company had positive working capital of $37,847,948,        total assets of $38,217,740, no long term debt, and shareholders equity of        $37,973,134.

 

Management        knows of no contingencies that are reasonably likely to result in a material decrease in        the Company’s liquidity or that are likely to materially adversely affect the        Company’s capital resources.

 

**Item        3. Controls and Procedures** 

 

|   | ***Disclosure 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 filed under the Securities Exchange        Act of 1934is recorded, processed, summarized and reported within the time periods        specified in the SEC’s rules and forms, and that such information is accumulated and        communicated to the Company’s management, including its President and Chief Executive        Officer and Principal Financial Officer, or persons performing similar functions, as        appropriate, to allow timely decisions regarding required disclosure. Management        necessarily applied its judgment in assessing the costs and benefits of such controls and        procedures which, by their nature, can provide only reasonable assurance regarding        management’s control objectives. The Company has carried out an evaluation, under the        supervision and with the participation of the Company’s management, including the        Company’s President and Chief Executive Officer along with the Company’s        Principal Financial Officer, of the effectiveness of the design and operation of the        Company’s disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(b).        Based on that evaluation, management, including the Company’s President and Chief        Executive Officer along with the Company’s Principal Financial Officer, concluded        that the Company’s disclosure controls and procedures were effective as of June 30,        2007. However, on April 3, 2007, the Company filed an Amendment No. 1 on Form 10-KSB/A to        its Annual Report on Form 10-KSB for the fiscal year ended December 31, 2006, as filed with        the SEC on April 2, 2007, to amend Item 13 to update the exhibit list and to file as        Exhibit 23.1 the consent of Tait, Weller & Baker LLP which was omitted from the        original filing of the Annual Report on Form 10-KSB.

 

- 18        -

 

***Changes in Internal Controls***

 

In        connection with the evaluation of our internal controls during our last fiscal quarter, our        principal executive officer and principal financial officer have determined that there have        been no changes to our internal controls over financial reporting that has materially        affected, or is reasonably likely to materially affect, our internal controls over        financial reporting.

 

**Part        II. Other Information** 

 

**Item        1. Legal Proceedings**

 

None

 

**Item        2. Unregistered Sales of Equity Securities and Use of Proceeds**

 

None

 

**Item        3. Defaults Upon Senior Securities**

 

None

 

**Item        4. Submission of Matters to a Vote of Security Holders**

 

None

         

**Item        5. Other Information**

 

None

 

**Item        6.****Exhibits**

 

|  | 31.1 | Certification of the Principal Executive Officer of the Company                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
|--|------|------------------------------------------------------------------------------------------------------------------------------------------------|
|  | 31.2 | Certification of the Principal Financial Officer of the Company                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.* |
|  | 32.1 | Certification of the Principal Executive Officer of                the Company purusant to Section 906 of the Sarbanes-Oxley Act of 2002.*     |
|  | 32.2 | Certification of the Principal Financial Officer of                the Company pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*     |

 

- 19        -

 

**SIGNATURES**

 

Pursuant to        the requirements of Section 13 of the Securities Exchange Act of 1934, the Company has duly        caused this report to be signed on its behalf by the undersigned, thereunto duly        authorized.

 

 

**BEXIL CORPORATION**

 

 

| Dated: August 14, 2007 | By:/s/ Thomas                    O’Malley |
|------------------------|-------------------------------------------------|

Thomas O’Malley

Chief Financial Officer,

|   | Chief Accounting Officer |
|--------|--------------------------|