##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
    Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          ,          .   Commission file
    no. 1-10024
  BKF Capital Group,
    Inc.
 (Exact name of registrant as
    specified in its charter)
  DELAWARE

36-0767530(State or other jurisdiction of
    incorporation or organization)

(I.R.S. Employer Identification
    No.)   One Rockefeller Plaza
 New York, New York 10020
 (Address of principal executive
    offices)
  Telephone Number:
    (212) 332-8400
 (Registrants telephone
    number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Act:
    None
  Securities registered pursuant to Section 12(g) of the
    Act:
    Common Stock, par value $1.00 per share
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
  o o þ
  Rule 12b-2 o þ
      DOCUMENTS INCORPORATED BY REFERENCE:
  Form 10-K Form 10-K




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##### Table of Contents



Special
    Note Regarding Forward-Looking Statements
  Form 10-K, and/or and/or
  PART I
  Item 1.
    Business  Summary
    Backround
        
    Merging with, acquiring or commencing a business potentially
    being funded by a capital raising event; or
    Liquidating the Company and distributing a portion of the
    Companys remaining cash to stockholders.      Introduction
  broker-dealer,
 1




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##### Table of Contents



(212) 332-8400, www.bkfcapital.com. Form 10-K, Form 10-Q, Form 8-K,
  Services
          ASSETS
    UNDER MANAGEMENT
  December 31Assets

2005


2004


2003


2002($ in millions)Long Only AccountsInstitutional Accounts

$
1,450


$
2,964


$
2,953


$
2,562Sub-Advisory
    Accounts


325



2,641



2,306



1,861Non-Institutional Accounts


42



1,713



1,640



1,489Wrap Fee Accounts


1,853



2,319



2,502



2,982Total Long-Only


3,670



9,637



9,401



8,894Alternative
    InvestmentsActively Traded Long-Short Equity
    Accounts


665



792



434



18Small-Mid Cap Long-Short Equity
    Accounts


120



86



7



Other Private Investment Funds


47



99



60



72Event Driven Accounts






2,568



2,418



1,849Short Biased Accounts






422



340



452Total Alternative Strategies


832



3,967



3,259



2,391Total

$
4,502


$
13,604


$
12,660


$
11,285    2




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##### Table of Contents



Employees
    Regulation
      Item 1A.
    Risk
    Factors  Form 10-K,
  The
    ability of BKF to continue as an operating company and a going
    concern is dependent on its ability to consummate a merger or an
    acquisition
    and/or to
    raise additional capital.
    If we
    do complete a merger or other transaction you may not have basis
    on which to assess the merits of the acquired
    business.
   3




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##### Table of Contents



If the
    Company is liquidated, the stockholders of the Company may not
    receive cash proceeds equal to the current stock price or book
    value of the Company.
    BKFs
    ability to consider strategic alternatives and to make
    investments in new businesses will be limited by the terms of
    the Investment Company Act of 1940.
  Rule 3a-2 3a-2,
  BKFs
    Common Stock has been delisted from the New York Stock
    Exchange
  over-the-counter
  Item 1B.
    Unresolved
    Staff Comments    Item 2.
    Properties   4




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##### Table of Contents



Item 3.
    Legal
    Procedures    Item 4.
    Submission
    of Matters to a Vote of Security Holders    PART II
  Item 5.
    Market
    for the Registrants Common Equity, Related Stockholders
    Matters and Issuer Purchases of Equity Securities    mark-up,
  Stock Price Ranges/Bid Information


Dividend2006

High


Low


DeclaredFirst quarter

$
19.01


$
12.55Second quarter

$
10.94


$
5.96Third quarter

$
6.20


$
3.90Fourth quarter

$
4.10


$
3.302005First quarter

$
42.89


$
34.85


$
0.250
(a)Second quarter

$
40.50


$
30.97


$
0.925
(b)Third quarter

$
37.98


$
30.00


$
0.250
(c)Fourth quarter

$
30.99


$
16.40     (a)
    
    reflects quarterly dividends of $0.125 declared on
    January 18, 2005 and March 23, 2005.(b)
    
    special dividend.(c)
    
    reflects quarterly dividends of $0.125 declared on July 5,
    2005 and September 22, 2005.   5




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##### Table of Contents



ISSUER
    PURCHASES OF EQUITY SECURITIES
  (a)


(b)


(c)


(d)Total Number of


Maximum Number (orShares (or Units)


Approximate Dollar Value)Purchased as Part


of Shares (or Units) ThatTotal Number of





of Publicly


May Yet Be PurchasedShares (or Units)


Average Price


Announced Plans


Under the Plans orPeriod

Purchased


Paid Per Share


Or Programs


Program1/1/06 - 12/31/06


110,721


$
11.51



Not Applicable



Not ApplicableTotal


110,721


$
11.51  6




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##### Table of Contents



Item 6.  Selected
    Financial Data
  Form 10-K.
  Year Ended December 31,2006


2005


2004


2003


2002Revenues:Investments Management Fees (IMF):Advisory

$
2.4


$
22.1


$
25.4


$
24.8


$
29.0Wrap Accounts


3.5



8.0



9.3



10.2



16.4Event-Driven






22.1



28.9



18.7



12.7Long-Short


2.7



11.4



9.3



2.4Short-Biased






3.8



4.6



4.0



3.4Other Alternative Investments


0.6



2.1



0.8



0.2



0.3Total IMF Fees


9.2



69.5



78.3



60.3



61.8Incentive Fees and Allocations:Event-Driven


0.2



28.9



28.6



32.2



17.4Long-Short


8.6



13.8



8.8



5.2



0.1Short-Biased






0.1







(2.3
)


6.8Other






2.2



2.2



0.6



0.1Other Alternative Investments


1.3



2.2



1.3



0.6



0.2Total Incentive Fees


10.1



47.2



40.9



36.3



24.6Total Fees


19.3



116.7



119.2



96.6



86.4Commission Income and Other


1.6



0.7



1.5



2.0



2.9Total Revenues


20.9



117.4



120.7



98.6



89.3Expenses:Employee Compensation and Benefits


24.1



97.6



93.8



77.8



61.8Non-Compensation Expenses


45.9



22.3



19.7



25.7



20.6Total Expenses


70.0



119.9



113.5



103.5



82.4Income (loss) before interest,
    taxes and amortization


(49.1
)


(2.5
)


7.2



(4.9
)


6.9Net investment income


2.8



2.7



1.6



1.5



1.0Net investment income 
    consolidated affiliated partnerships (CAP)


0.5



3.2



1.2



2.6



(2.9
)Minority interest from CAP


(0.1
)


(1.3
)


(0.7
)


(1.7
)


3.3Amortization of intangibles


(1.1
)


(9.4
)


(7.0
)


(7.0
)


(7.0
)Income (loss) before taxes


(47.0
)


(7.3
)


2.3



(9.5
)


1.3Income tax expense (benefit)






8.6



4.1



(1.1
)


3.7Net income (loss)

$
(47.0
)

$
(15.9
)

$
(1.8
)

$
(8.4
)

$
(2.4
)Per share data:Basic:Net income (loss)

$
(5.71
)

$
(2.08
)

$
(0.25
)

$
(1.26
)

$
(0.37
)Diluted:Net income (loss)

$
(5.71
)

$
(2.08
)

$
(0.25
)

$
(1.26
)

$
(0.37
)Basic weighted average shares
    outstanding


8,233,175



7,631,580



6,949,031



6,673,371



6,624,313Diluted weighted average shares
    outstanding


8,233,175



7,631,580



6,949,031



6,673,371



6,624,313  7




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##### Table of Contents



Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Summary
    Backround
        
    Merging with, acquiring or commencing a business potentially
    being funded by a capital raising event; or
    Liquidating the Company and distributing a portion of the
    Companys remaining cash to stockholders.    Recent
    History: 2005 and 2006
           8




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##### Table of Contents



ASSETS
    UNDER MANAGEMENT
  2005


2004Long Only AccountsInstitutional Accounts

$
1,450


$
2,964Sub-Advisory
    Accounts


325



2,641Non-Institutional Accounts


42



1,713Wrap Fee Accounts


1,853



2,319Total Long-Only


3,670



9,637Alternative
    InvestmentsActively Traded Long-Short Equity
    Accounts


665



792Small-Mid Cap Long-Short Equity
    Accounts


120



86Other Private Investment Funds


47



99Event Driven Accounts






2,568Short Biased Accounts






422Total Alternative Strategies


832



3,967Total

$
4,502


$
13,604  9




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##### Table of Contents



Results
    of Operations
  Year
    Ended December 31, 2006 as Compared to Year Ended
    December 31, 2005
  Revenues
        Expenses
     10




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##### Table of Contents



10-year
  Year
    Ended December 31, 2005 as Compared to Year Ended
    December 31, 2004
  Revenues
              i.e.,
 11




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##### Table of Contents



Expenses
          10-year
      Operating
    Income (Loss)
    Income
    Taxes
     12




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##### Table of Contents



Liquidity
    and Capital Resources
            Off
    Balance Sheet Risk
    Contractual
    Obligations
    Payments Due by PeriodTotal


2007-2008


2009-2010


2011Office leases

$
11,677


$
4,855


$
4,963


$
1,859   Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    Item 8.
    Financial
    Statements and Supplemental Data  Form 10-K. page F-1.
  Item 9.
    Changes
    in and Disagreements with Accountants on Accounting and
    Financial Disclosure   13




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##### Table of Contents



Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
  Rule 13a-15(e)
  Changes
    in Internal Control Over Financial Reporting
    Item 9B.
    Other
    Information.    Part III
  Item 10, 11,
    12, 13 and 14
   14




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##### Table of Contents



PART IV
  Item 15.
    Exhibits
    and Financial Statement Schedules  The following documents are filed as part of this
    Form 10-K:
  Financial Statements
  Item 8-Financial
  PageNumberReport of Independent Registered
    Public Accounting Firm  Grant Thornton LLP


F-2Reports of Independent Registered
    Public Accounting Firm  Eisner LLP


F-3Consolidated Statements of
    Financial Condition at December 31, 2006 and 2005


F-8Consolidated Statements of
    Operations for the years ended December 31, 2006, 2005 and
    2004


F-9Consolidated Statements of Cash
    Flows for the years ended December 31, 2006, 2005 and 2004


F-10Consolidated Statements of Changes
    in Stockholders Equity for the years ended
    December 31, 2006, 2005 and 2004


F-11Notes to Consolidated Financial
    Statements


F-12   Financial Data Schedules
    Exhibits
  ExhibitNumber



Description3
.1



Restated Certificate of
    Incorporation of Registrant, as amended (incorporated by
    reference Exhibit 3.1 to Registrants Quarterly
    Reports on
    Form 10-Q
    for the periods ended June 30, 2000 June 30, 2001 and
    the December 31, 2005 10K.3
.2



Bylaws of Registrant (incorporated
    by reference to Exhibit 3(ii) to Registrants
    Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2001).4
.1



Specimen of Common Stock
    Certificate (incorporated by reference to Exhibit 4.1 of
    Registrants Annual Report on
    Form 10-K/A
    for the period ended December 31, 2000).10
.1



Amendment to Lease dated
    October 10, 2003 between Rockefeller Center Properties and
    John A. Levin, Inc. (incorporated by reference to
    Exhibit 10.1 of Registrants Annual Report on
    Form 10-K/A
    for the period ended December 31, 2003).10
.2



Lease dated December 20, 1993
    between Rockefeller Center Properties and John A.
    Levin & Co., Inc., as amended (incorporated by
    reference to Exhibit 10.1 of Registrants Annual
    Report on
    Form 10-K/A
    for the period ended December 31, 2000, Exhibit 10.2
    to Registrants Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2001, and Exhibit 10.2
    to Registrants Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2001).10
.3



Lease dated September 25,
    2002 between River Bend Executive Center, Inc. and Levin
    Management Co., Inc. (incorporated by reference to
    Exhibit 10.1 of Registrants Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2002).10
.4



Registrants 1998 Incentive
    Compensation Plan, as amended (incorporated by reference to
    Exhibit 10.1 to Registrants Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2001).10
.5



Registrants Deferred
    Compensation Plan (incorporated by reference to
    Exhibit 10.2 to Registrants Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2000).10
.6



Form of Stock Option Award
    Agreement (incorporated by reference to Exhibit 10.5 to
    Registrants Annual Report on
    Form 10-K/A
    for the period ended December 31, 2001). 15




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##### Table of Contents



ExhibitNumber



Description10
.7



Form of Deferred Stock Award
    Agreement (incorporated by reference to Exhibit 4.5 to the
    Registration Statement on
    Form S-8
    filed with the Commission on November 17, 2000).10
.8



Form of Restricted Stock Award
    Agreement (incorporated by reference to Exhibit 10.10 to the
    Registrants Annual Report on Form 10-K for the period
    ended December 31, 2005).10
.9



Letter Agreement between BKF and
    Levin Management Co., Inc. and each of Henry Levin and Frank
    Rango dated April 19, 2005 (incorporated by reference to
    Exhibit 10.1 of Registrants Report on
    Form 8-K
    dated April 22, 2005).10
.10



Change in Control Agreement
    between BKF, Levin Management Co., Inc. and Glenn A. Aigen dated
    June 1, 2005 (incorporated by reference to
    Exhibit 10.1 of Registrants Report on
    Form 8-K
    dated June 6, 2005).10
.11



Change in Control Agreement
    between BKF, Levin Management Co., Inc. and Norris Nissim dated
    June 1, 2005 (incorporated by reference to
    Exhibit 10.2 of Registrants Report on
    Form 8-K
    dated June 6, 2005).10
.12



Retention Agreement between BKF,
    Levin Management Co., Inc and Philip Friedman dated
    August 11, 2005 (incorporated by reference to
    Exhibit 10.1 of Registrants Report on
    Form 8-K
    dated August 16, 2005).10
.13



First Amendment to Retention
    Agreement between BKF and Philip Friedman dated
    November 15, 2005 (incorporated by reference to
    Exhibit 10.1 of Registrants Report on
    Form 8-K
    dated November 16, 2005).10
.14



Transition/Separation Agreement
    between BKF and John A. Levin dated as of August 23, 2005
    (incorporated by reference to Exhibit 10.1 of
    Registrants Report on
    Form 8-K
    dated August 24, 2005).10
.15



First Amendment to
    Transition/Separation Agreement between BKF and John A. Levin
    dated December 21, 2005 (incorporated by reference to
    Exhibit 10.1 of Registrants Report on
    Form 8-K
    dated December 28, 2005).10
.16



Employment Agreement between BKF
    and John C. Siciliano dated September 28, 2005
    (incorporated by reference to Exhibit 10.3 of
    Registrants Quarterly Report on
    Form 10-Q
    for the period ended September 30, 2005).10
.17



Letter Agreement, dated as of
    September 28, 2005, among BKF Capital Group, Inc., Levin
    Management Co., Inc. and Glenn A. Aigen (incorporated by
    reference to Exhibit 10.4 of Registrants Quarterly
    Report on
    Form 10-Q
    for the period ended September 30, 2005).10
.18



Letter Agreement, dated as of
    September 28, 2005, among BKF Capital Group, Inc., Levin
    Management Co., Inc. and Norris Nissim (incorporated by
    reference to Exhibit 10.5 of Registrants Quarterly
    Report on
    Form 10-Q
    for the period ended September 30, 2005).10
.19



Transition/Separation Agreement
    between BKF and Glenn A. Aigen dated December 20, 2005
    (incorporated by reference to Exhibit 10.6 of
    Registrants Report on
    Form 10-Q
    for the period ended September 30, 2005).10
.20



Separation Agreement and Release
    of All Claims between BKF and Henry Levin dated
    December 16, 2005 (incorporated by reference to
    Exhibit 10.1 of Registrants Report on
    Form 8-K
    dated December 22, 2005).10
.21



Employment Agreement between BKF
    and Clarke Gray dated as of January 4, 2006 (incorporated
    by reference to Exhibit 10.1 of Registrants Report on
    Form 8-K
    dated January 6, 2006).10
.22



Transition/Separation Agreement
    between BKF and Norris Nissim dated May 5, 2006
    (incorporated by reference to Exhibit 10.1 of Registrants
    Quarterly Report on
    Form 10-Q
    for the period ended March 31, 2006).10
.23



Separation Agreement between BKF
    and Philip Friedman dated July 24, 2006 (incorporated by
    reference to Exhibit 10.1 of Registrants Report on
    Form 8-K
    dated July 24, 2006).10
.24



Sublease Agreement between BKF and
    Daylight Forensics and Advisory LLC dated May 16, 2006
    (incorporated by reference to Exhibit 10.2 to Registrants
    Quarterly Report on
    Form 10-Q
    for the period ended June 30, 2006). 16




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##### Table of Contents



ExhibitNumber



Description10
.25



First Amendment to the Sublease
    Agreement between BKF and Daylight Forensics and Advisory LLC
    dated May 16, 2006 (incorporated by reference to Exhibit
    10.1 of the Registrants Quarterly Report on
    Form 10-Q
    for the period September 30, 2006).10
.26



Partial Surrender Agreement and
    Amendment between BKF and RCPI Landmark Properties, LLC dated
    November 22, 2006.*10
.27



Form of Indemnification Agreement
    (incorporated by reference to Exhibit 10.1 of the Companys
    Current Report on
    Form 8-K
    dated May 18, 2006).10
.28



Separation Agreement between BKF
    and John C. Siciliano dated October 31, 2006*10
.29



Separation Agreement between BKF
    and J. Clarke Gray dated October 31, 2006*14
.1



Registrants Code of Ethics
    (incorporated by Reference to Exhibit 14.1 of
    Registrants Annual Report on
    Form 10-K/A
    for the period ended December 31, 2003).21
.1



Subsidiaries of the Registrant
    (incorporated by reference to Exhibit 21.1 to the
    Registrants Annual Report on
    Form 10-K/A
    for the period ended December 31, 2000).23
.1



Consent of Grant Thornton LLP*23
.3



Consent of Eisner LLP*24
.1



Powers of Attorney (included on
    the Signature Pages hereto).*31
.1



Section 302 Certification of
    Chief Executive Officer*31
.2



Section 302 Certification of
    Chief Financial Officer*32
.1



Section 906 Certification of
    Chief Executive Officer*32
.2



Section 906 Certification of
    Chief Financial Officer*     *
    
    Filed herewith 17




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##### Table of Contents



SIGNATURES
    BKF Capital Group, Inc.
  By:
    /s/  J.
    Clarke Gray   Senior Vice President
 and Chief Financial Officer
    attorney-in-fact Form 10-K, attorney-in-fact
  Signature

Title

Date/s/  MARVIN
    OLSHANMarvin
    Olshan

Director, Chairman of the Board

March 1, 2007/s/  HARVEY
    J. BAZAARHarvey
    J. Bazaar

Director, Chief Executive Officer

March 1, 2007/s/  J.
    CLARKE GRAYJ.
    Clarke Gray

Senior Vice President and Chief
    Financial Officer (Principal Financial and Accounting Officer)

March 1, 2007/s/  RONALD
    LABOWRonald
    Labow

Director

March 1, 2007/s/  KEITH
    MEISTERKeith
    Meister

Director

March 1, 2007/s/  KURT
    N. SCHACHTKurt
    N. Schacht

Director

March 1, 2007  18




---



##### 



INDEX TO
    CONSOLIDATED FINANCIAL STATEMENTS
  PageNumberReport of
    Independent Registered Public Accounting Firm  Grant
    Thornton LLP


F-2Reports of
    Independent Registered Public Accounting Firm  Eisner
    LLP


F-3Consolidated
    Statements of Financial Condition at December 31, 2006 and
    2005


F-8Consolidated
    Statements of Operations for the years ended December 31,
    2006, 2005 and 2004


F-9Consolidated
    Statements of Cash Flows for the years ended December 31,
    2006, 2005 and 2004


F-10Consolidated
    Statements of Changes in Stockholders Equity for the years
    ended December 31, 2006, 2005 and 2004


F-11Notes to
    Consolidated Financial Statements


F-12EX-10.26: PARTIAL SURRENDER AGREEMENTEX-10.28: SEPARATION AGREEMENTEX-10.29: SEPARATION AGREEMENTEX-23.1: CONSENT OF GRANT THORNTON LLPEX-23.3: CONSENT OF EISNER LLPEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICAITONEX-32.2: CERTIFICATION   F-1




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM             GRANT
    THORNTON LLP
    F-2




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           
       F-3




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM           
    F-4




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
           
    F-5




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            
    F-6




---



##### Table of Contents



REPORT OF
    INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
            
       F-7




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##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF FINANCIAL CONDITION
 (Dollar
    amounts in thousands)
  December 31,


December 31,2006


2005AssetsCash and cash equivalents

$
3,689


$
14,432U.S. Treasury bills


27,430



42,384Investment advisory, incentive
    fees and other receivables


3,979



21,805Investments in securities, at
    value (cost $0 and $6,839, respectively)






7,685Investments in affiliated
    partnerships






7,696Prepaid expenses and other assets


1,698



2,373Fixed assets (net of accumulated
    depreciation of $254 and $8,000, respectively)


88



4,783Goodwill (net of accumulated
    amortization of $23,362 and $8,566)






14,796Investment advisory contracts (net
    of accumulated amortization)






1,107Consolidated affiliated
    partnerships:Due from broker






16,783Investments in securities, at
    value (cost $0 and $13,841, respectively)






14,578Total assets

$
36,884


$
148,422Liabilities, minority interest
    and stockholders equityAccrued expenses

$
1,444


$
5,638Accrued commissions and profit
    sharing


640



43,020Accrued restructuring expense


5,217



Accrued lease amendment expense


2,956



3,420Consolidated affiliated
    partnerships:Securities sold short, at value
    (proceeds of $0 and $6,878, respectively)






7,084Partner contributions received in
    advance






506Total liabilities


10,257



59,668Minority interest in consolidated
    affiliated partnerships






13,161Stockholders
    equityCommon stock, $1 par value,
    authorized  15,000,000 shares, issued and
    outstanding  7,976,341 and 8,180,057 shares,
    respectively

$
7,976



8,180Additional paid-in capital


75,883



88,887Accumulated deficit


(57,184
)


(10,168
)Unearned compensation 
    restricted stock and restricted stock units


(48
)


(11,306
)Total stockholders equity


26,627



75,593Total liabilities, minority
    interest and stockholders equity

$
36,884


$
148,422    F-8




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF OPERATIONS
 (Dollar
    amounts in thousands, except per share data)
  Year Ended December 31,2006


2005


2004Revenues:Investment advisory fees

$
9,248


$
69,492


$
78,324Incentive fees and allocations


10,078



47,164



40,925Commission income (net) and other


1,588



712



1,438Net realized and unrealized gain
    on investments


1,410



1,120



1,020Interest income


1,705



1,551



604From consolidated affiliated
    partnerships:Net realized and unrealized gain
    on investments


192



2,737



1,129Interest and dividend income


297



432



47Total revenues


24,518



123,208



123,487Expenses:Employee compensation and benefits


24,831



92,472



85,092Employee compensation relating to
    equity grants (redemptions)


(689
)


5,154



8,661Occupancy & equipment
    rental


4,574



6,655



5,990Other operating expenses


8,441



15,191



13,529Amortization of intangibles


1,107



9,406



7,009Interest expense


303



239



118Other operating expenses from
    consolidated affiliated partnerships


58



113



26Restructuring Expenses


32,778Total expenses


71,403



129,230



120,425Operating income (loss)


(46,885
)


(6,022
)


3,062Minority interest in consolidated
    affiliated partnerships


(131
)


(1,267
)


(749
)Income (loss) before taxes


(47,016
)


(7,289
)


2,313Income tax expense






8,576



4,078Net (loss)

$
(47,016
)

$
(15,865
)

$
(1,765
)(Loss) per share:Basic and Diluted

$
(5.71
)

$
(2.08
)

$
(0.25
)Weighted average shares
    outstanding Basic and Diluted


8,233,175



7,631,580



6,949,031    F-9




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Dollar amounts in
    thousands)
    (Unaudited)
  Year Ended December 31,2006


2005


2004Cash flows from operating
    activities:Net (loss)

$
(47,016
)

$
(15,865
)

$
(1,765
)Adjustments to reconcile net
    (loss) to net cash provided by operations:Depreciation and amortization


2,361



11,590



9,169Losses resulting from
    restructuring expenses


18,462Expense for vesting of restricted
    stock and stock units


(675
)


5,191



8,919Loss on disposal of fixed assets






309



Tax benefit related to employee
    compensation plans






878



4,432Change in deferred tax asset






8,391



275Unrealized (gain) on investments
    in securities






(484
)


(300
)Decrease (Increase) in
    U.S. treasury bills


14,954



(1,918
)


(7,971
)Decrease (Increase) in investment
    advisory and incentive fees receivable


17,826



18,204



(2,165
)Decrease (Increase) in prepaid
    expenses and other assets


675



4,675



(3,192
)Decrease in investments in
    affiliated investment partnerships


7,696



9,666



1,604Decrease (Increase) in investments
    in securities


7,685



(1,413
)


(1,109
)(Decrease) Increase in accrued
    expenses


(4,194
)


1,554



702(Decrease) Increase in accrued
    commissions and profit sharing


(42,380
)


334



2,958Increase in accrued restructuring
    expenses


5,217







(Decrease) in accrued lease
    amendment expense


(464
)


(423
)


(692
)Changes in operating assets and
    liabilities from consolidated affiliated partnerships:Minority interest in income


131



1,267



208Increase (Decrease) in due from
    broker


16,783



(15,831
)


(952
)Increase (Decrease) in securities


14,578



(8,061
)


(6,517
)(Decrease) Increase in securities
    sold short


(7,084
)


5,785



1,299Net cash provided by operating
    activities


4,555



23,849



4,903Cash flows from investing
    activities:Fixed asset additions


(225
)


(464
)


(2,234
)Net cash (used in) investing
    activities


(225
)


(464
)


(2,234
)Cash flows from financing
    activities:Issuance of common stock


(1,274
)


(5,897
)


(3,505
)Dividends paid to shareholders






(11,811
)


(2,799
)Consolidated affiliated
    partnerships:(Decrease) Increase in partner
    contributions received in advance


(506
)


506



Partner subscriptions


1,100



4,667



2,270Partner redemptions


(14,393
)






Net cash (used in) financing
    activities


(15,073
)


(12,535
)


(4,034
)Net (decrease) increase in cash
    and cash equivalents


(10,743
)


10,850



(1,365
)Cash and cash equivalents at the
    beginning of the year


14,432



3,582



4,947Cash and cash equivalents at the
    end of the period

$
3,689


$
14,432


$
3,582Supplemental disclosure of cash
    flow information:Cash paid for interest

$
15


$



$
118Cash paid for taxes

$
155


$
285


$
961    F-10




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  CONSOLIDATED
    STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
 Twelve Months Ended
    December 31, 2006
 (Amounts in thousands)
  AdditionalCommon


Paid-In


Retained


UnearnedStock


Capital


Earnings


Compensation


TotalBalance at December 31,
    2003

$
6,826


$
87,937


$
22,054


$
(14,209
)

$
102,608Grants of restricted stock and
    restricted stock units


65



(2,744
)






8,814



6,135Issuance of common stock


384



(1,167
)










(783
)Tax benefit related to employee
    compensation plans






4,432











4,432Dividend, net of compensation
    expense(1)










(2,781
)






(2,781
)Net (loss)










(1,765
)






(1,765
)Balance at December 31,
    2004

$
7,275


$
88,458


$
17,508


$
(5,395
)

$
107,846Grants of restricted stock units
    and restricted stock


388



5,965







(5,911
)


442Issuance of common stock


517



(6,414
)










(5,897
)Tax benefit related to employee
    compensation plans






878











878Dividends, net of compensation
    expense(1)










(11,811
)






(11,811
)Net (loss)










(15,865
)






(15,865
)Balance at December 31,
    2005

$
8,180


$
88,887


$
(10,168
)

$
(11,306
)

$
75,593Grants of restricted stock units
    and restricted stock  net of forfeitures(2)


(277
)


(9,309
)






10,856



1,270Issuance of common stock


73



(4,499
)






402



(4,024
)Grants of stock options






804











804Net (loss)









$
(47,016
)






(47,016
)Balance at December 31,
    2006

$
7,976


$
75,883


$
(57,184
)

$
(48
)

$
26,627     (1)
    
    compensation expense incurred relating to dividend of $313 in
    2005 and $18 in 2004(2)
    
    includes grants of $162 and forfeitures of $(439). F-11




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL STATEMENTS
  BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  1.
    Organization
    and Summary of Significant Accounting Policies  Organization
    and Basis of Presentation
      not-for-profit
    Consolidation
    Accounting Policies
   F-12




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Use of
    Estimates
    Revenue
    Recognition
        Revenue
    Recognition Policies for Consolidated Affiliated Partnerships
    (CAP)
          Cash,
    Cash Equivalents and United States Treasury Bills
    Investments
    in Affiliated Investment Partnerships
   F-13




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        Investments
    in Securities
    Income
    Taxes
      Long-Lived
    Assets
     F-14




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    Fixed
    Assets
  98-1,
      Leasehold ImprovementsFurniture, Fixtures

Term of Lease Greater

Term of Lease Less

Certain Internal Useand Equipment

Than Useful Life

Than Useful Life

Software CostsPlaced in service prior to
    January 1, 2004

Accelerated cost recovery over the
    useful life of the asset.

Straight-line over the useful life
    of the asset

Straight-line over the term of the
    lease

Accelerated cost recovery over the
    useful life of the assetPlaced in service
    on or after January 1, 2004

Straight-line over the useful life
    of the asset

Straight-line over the useful life
    of the asset

Straight-line over the term of the
    lease

Straight-line over the useful life
    of the asset       Intangible
    Assets
      Earnings
    Per Share
   F-15




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
      Year Ended December 31,2006


2005


2004Net (loss)

$
(47,016
)

$
(15,865
)

$
(1,765
)Basic weighted-average shares
    outstanding


8,233,175



7,631,580



6,949,031Diluted weighted-average shares
    outstanding


8,233,175



7,631,580



6,949,031Basic and diluted (loss) per share:Net (loss)

$
(5.71
)

$
(2.08
)

$
(0.25
)     Fair
    Values of Financial Instruments
    Business
    Segments
    Stock-Based
    Compensation
   F-16




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     2006


2005


2004Net (loss), as reported

$
(47,016
)

$
(15,865
)

$
(1,765
)Add: Stock-based employee
    compensation expense included in reported net loss net of
    related tax effects


(663
)


4,841



4,873Deduct: Total stock-based employee
    compensation expense determined under the fair value based
    method for all awards net of related tax effects


663



(5,336
)


(4,873
)Pro forma net (loss)

$
(47,016
)

$
(16,360
)

$
(1,765
)(Loss) per share:Basic and diluted  as
    reported

$
(5.71
)

$
(2.08
)

$
(0.25
)Basic and diluted  pro
    forma

$
(5.71
)

$
(2.14
)

$
(0.25
)     Expected dividend yield


0.00
%Expected volatility


38.20
%Risk-free interest


4.51
%Expected term


10 yearsFair value

$
10.86   Significant
    Accounting Policies of Consolidated Affiliated Partnerships
    (CAP)
    Minority
    Interest
   F-17




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Partner
    Contributions and Withdrawals
    Recent
    Accounting Developments
  Accounting for Uncertainty in Income
    Taxes  an interpretation of FASB Statement
    No. 109
  Fair Value
    Measurements
    ,
    Employers Accounting for Defined Benefit Pension and other
    Postretirement Plans,
  2.
    Off-Balance
    Sheet Risk    3.
    Investment
    Advisory Fees Receivable   F-18




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
    4.
    Consolidation
    of CAP       F-19




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     December 31, 2005BKF


CAP


Eliminations


ConsolidatedAssetsCash and cash equivalents

$
14,432


$



$



$
14,432U.S. Treasury bills


42,384











42,384Investment advisory and incentive
    fees receivable


21,805











21,805Investments in securities, at
    value (cost $6,839)


7,685











7,685Investments in affiliated
    partnerships


18,199







(10,503
)


7,696Prepaid expenses and other assets


2,338



35







2,373Fixed assets (net of accumulated
    depreciation of $8,000)


4,783











4,783Deferred tax asset














Goodwill (net of accumulated
    amortization of $8,566)


14,796











14,796Investment advisory contracts (net
    of accumulated amortization of $68,981)


1,107











1,107Consolidated affiliated
    partnerships:Due from broker






16,783







16,783Investments in securities, at
    value (cost $13,841)






14,578







14,578Total assets

$
127,529


$
31,396


$
(10,503
)

$
148,422Liabilities, minority interest
    and stockholders equityAccrued expenses

$
5,496


$
142


$



$
5,638Accrued bonuses


43,020











43,020Accrued lease amendment expense


3,420











3,420Consolidated affiliated
    partnerships:Securities sold short, at value
    (proceeds of $6,878)






7,084







7,084Partner contributions received in
    advance






506







506Total liabilities


51,936



7,732







59,668Minority interest in CAP










13,161



13,161 F-20




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
  December 31, 2005BKF


CAP


Eliminations


ConsolidatedStockholders
    equityCommon stock, $1 par value,
    authorized  15,000,000 shares, issued and
    outstanding  shares 8,180,057

$
8,180


$



$



$
8,180Additional paid-in capital


88,887











88,887Retained earnings


(10,168
)










(10,168
)Unearned compensation 
    restricted stock and restricted stock units


(11,306
)










(11,306
)Capital from consolidated
    affiliated partnerships






23,664



(23,664
)


Total stockholders equity


75,593



23,664



(23,664
)


75,593Total liabilities, minority
    interest and stockholders equity

$
127,529


$
31,396


$
(10,503
)

$
148,422   5.
    Fixed
    Assets    EstimatedUseful

December 31,Life  in Years

2006


2005Furniture and fixtures

5-7

$
28


$
2,140Computer hardware, software and
    other

3-5


314



6,189Leasehold improvements

Life of lease






4,454342



12,783Less accumulated depreciation and
    amortization




254



8,000Fixed assets, net



$
88


$
4,783       6.
    Intangible
    Assets   F-21




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   7.
    Significant
    Customers    8.
    Related
    Party Transactions  Investment
    Advisory Fees From Related Parties
    Investments
    in Affiliated Investment Partnerships and Related
    Revenue
    December 31,2006


2005Total AIP assets

$
0


$
253,264Total AIP liabilities


0



(95,482
)Total AIP capital balance


0



157,782AIP net earnings


(7
)


23,308Companys carrying value
    (including incentive allocations)


0



7,532Companys income on invested
    capital (excluding accrued incentive allocations)


0



316          F-22




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Commission
    Revenues
    9.
    Stockholders
    Equity      10.
    Commitment,
    Contractual Obligations and Contingencies  Commitment
    MinimumAnnualRental


SubleasePayments


Income


Net2007

$
2,337


$
(1,190
)

$
1,1472008


2,518



(1,581
)


9372009


2,483



(1,658
)


8252010


2,479



(1,659
)


8202011


1,860



(1,245
)


615Total minimum payments required

$
11,677


$
(7,333
)

$
4,344    F-23




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   Contractual
    Obligations
    Contingencies
    11.
    Employee
    Benefit Plans    12.
    Stock-Based
    Compensation Plans   F-24




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   A.
    Restricted
    Stock Units    RSUOutstanding balance at:December 31, 2003


1,719,357Delivered


(367,398
)Forfeited


(94,494
)December 31, 2004


1,257,465Delivered


(905,291
)Forfeited


(168,763
)December, 31, 2005


183,411Delivered


(183,411
)Forfeited


0December 31, 2006


0       B.
    Restricted
    Stock    RestrictedStockOutstanding balance at:December 31, 2004


65,268Granted  Employees


457,777Granted  Directors


10,800Granted  Other


4,491Forfeited


(53,185
)Restriction Lapse


(106,984
)December 31, 2005


378,167Granted  Employees


145,000Granted  Directors


4,592Granted  Other


12,500Delivered


(81,648
)Forfeited


(438,495
)December 31, 2006


20,116     2007


20,116  F-25




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
        2007

$
48,000   C.
    Non-Qualified
    Stock Options    SharesUnder


Weighted-Avg.Option


Exercise PriceOutstanding balance at:December 31, 2003


218,279


$
13.88Exercised


(194,883
)


13.74December 31, 2004


23,396


$
15.01Granted


250,000



18.95December 31, 2005


273,396


$
18.61Granted


50,000



13.75Forfeited


(23,396
)


(15.01
)December 31, 2006


300,000


$
18.08     Weighted-Avg.Shares





RemainingUnder


Weighted-Avg.


ContractualOption


Exercise Price


Life100,000


$
18.95



9.0025,000



13.75



9.00125,000


$
17.91



9.00     13.
    Non-Cash
    Transactions       F-26




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
       14.
    Income
    Taxes    Year Ended December 31,2006


2005


2004Current:Federal

$



$
8,576


$
1,433State and local










328Total current






8,576



1,761Deferred:Federal










1,276State and local










1,041Total deferred










2,317Total provision (benefit)

$



$
8,576


$
4,078   .
    S
 F-27




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
     Year EndedDecember 31,2006


2005Deferred tax assets:Compensation

$
360


$
4,359Depreciation






420Lease reserve


3,199



1,542Net operating loss carryforward


17,151



2,227Gross deferred tax asset

$
20,710


$
8,548Deferred tax liabilities:Deferred state income taxes


(319
)


(1,631
)Deferred revenues






(8
)Unrealized gains on investments






(94
)Gross deferred tax liabilities


(319
)


(1,733
)Net deferred tax asset


20,391



6,815Valuation reserve


(20,391
)


(6,815
)$



$
         Year Ended December 31,2006


2005


2004Expected income tax expense
    (benefit)

$
(16,456
)

$
(2,551
)

$
810Increase in income tax resulting
    from:State and local taxes, net


(4,321
)


380



890Non-deductible amortization


7,201



4,536



2,453Officers life insurance






77



105Other






30



21Valuation Reserve


13,576



6,815



Decrease in income tax resulting
    from:Dividend on employee equity awards






(711
)


(201
)Income tax expense

$



$
8,576


$
4,078    F-28




---



##### Table of Contents



BKF
    CAPITAL GROUP, INC. AND SUBSIDIARIES
  NOTES TO
    CONSOLIDATED FINANCIAL
    STATEMENTS  (Continued)
   15.
    Restructuring
    Expenses    Year Ended December 31, 2006Charged


Paid or


Remainingto Expense


Settled


LiabilityEmployee termination costs

$
6.8


$
5.7


$
1.1Lease and fixed asset costs


11.2



7.1



4.1Goodwill impairment


14.8



14.8



$
32.8


$
27.6


$
5.2     16.
    Selected
    Quarterly Financial Data (unaudited)    2006

Q1


Q2


Q3


Q4


TotalRevenues

$
19,830


$
1,172


$
2,179


$
1,337


$
24,518Operating income (loss)

$
(2,561
)

$
(20,650
)

$
(16,387
)

$
(7,287
)

$
(46,885
)Net income (loss)

$
(2,671
)

$
(20,671
)

$
(16,387
)

$
(7,287
)

$
(47,016
)Earnings (loss) per share:Basic

$
(0.32
)

$
(2.48
)

$
(1.99
)

$
(0.92
)

$
(5.71
)Weighted average shares
    outstanding basic


8,301,004



8,346,545



8,247,534



8,040,326



8,233,175Common stock price per share:High

$
19.01


$
10.94


$
6.20


$
4.10Low

$
12.55


$
5.96


$
3.90


$
3.30Close

$
13.00


$
6.25


$
3.90


$
3.35   2005

Q1


Q2


Q3


Q4


TotalRevenues

$
32,885


$
29,726


$
38,872


$
21,725


$
123,208Operating income (loss)

$
1,104


$
(2,034
)

$
835


$
(5,927
)

$
(6,022
)Net (loss)

$
(151
)

$
(2,177
)

$
(6,421
)

$
(7,116
)

$
(15,865
)(Loss) per share:Basic and diluted

$
(0.02
)

$
(0.29
)

$
(0.84
)

$
(0.90
)

$
(2.08
)Weighted average shares
    outstanding basic and diluted


7,444,477



7,529,850



7,603,292



7,943,712



7,631,580Common stock price per share:High

$
42.89


$
40.50


$
37.98


$
30.99Low

$
34.85


$
30.97


$
30.00


$
16.40Close

$
40.01


$
37.91


$
30.93


$
18.95  F-29