BKF CAPITAL GROUP INC - 10-Q Quarterly Report

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

FORM 10-Q

(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2003

OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER: 1-10024

BKF CAPITAL GROUP, INC.
(Exact name of registrant as specified in its charter)

DELAWARE 36-0767530
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

ONE ROCKEFELLER PLAZA, 10020
NEW YORK, NEW YORK (Zip Code)
(Address of principal executive offices)

(212) 332-8400
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [X] No [ ]

As of April 30, 2003, 6,646,602 shares of the registrant's common stock,
$1.00 par value, were outstanding.
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BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
(DOLLAR AMOUNTS IN THOUSANDS)

See accompanying notes
1

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)

See accompanying notes
2

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLAR AMOUNTS IN THOUSANDS)
(UNAUDITED)

See accompanying notes
3

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION AND BASIS OF PRESENTATION

The consolidated interim financial statements of BKF Capital Group, Inc.
(formerly Baker, Fentress & Company, hereto referred to as "BKF" or the
"Company") and its subsidiaries included herein have been prepared in accordance
with generally accepted accounting principles for interim financial information
and Rule 10-01 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting principles
for complete financial statements. These consolidated financial statements are
unaudited and should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2002. The Company follows the same
accounting policies in the preparation of interim reports. In the opinion of
management, the consolidated financial statements reflect all adjustments, which
are of a normal recurring nature, necessary for a fair presentation of the
financial condition, results of operations and cash flows of the Company for the
interim periods presented and are not necessarily indicative of a full year's
results.

In preparing the consolidated financial statements, management is required
to make estimates and assumptions that affect the amounts reported in the
financial statements. Actual results could differ from those estimates.

The Company operates through a wholly-owned subsidiary, Levin Management
Co., Inc. and its subsidiaries, all of which are referred to as "Levco". The
Company trades on the New York Stock Exchange, Inc. ("NYSE") under the symbol
"BKF".

The Consolidated Financial Statements of Levco include its wholly-owned
subsidiary, John A. Levin & Co., Inc. ("JALCO"), and JALCO's two wholly-owned
subsidiaries, Levco GP Inc. ("Levco GP") and LEVCO Securities, Inc. ("LEVCO
Securities"). All intercompany transactions have been eliminated in
consolidation.

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

REVENUE RECOGNITION

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

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

4

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

COMPREHENSIVE INCOME

The Company has not presented consolidated statements of comprehensive
income in accordance with SFAS No. 130 "Reporting Comprehensive Income," because
it does not have any items of "other comprehensive income".

INVESTMENTS IN AFFILIATED INVESTMENT PARTNERSHIPS

Levco GP serves as the managing general partner for several affiliated
investment partnerships ("AIP"), which primarily engage in the trading of
publicly traded equity securities, in the case of one partnership, distressed
corporate debt, or other non affiliated alternative investment funds (i.e., fund
of funds) which in turn invest primarily in publicly traded securities. The
financial condition and results of operations of the AIP are not included in the
Company's consolidated statements of financial condition with the exception of
Levco GP's equity ownership. The limited partners of the AIP have the right to
redeem their partnership interests at least quarterly. Additionally, the
unaffiliated limited partners of the AIP may terminate Levco GP as the general
partner of the AIP at any time. Levco GP does not maintain control over the AIP,
has not guaranteed any of the AIP obligations, nor does it have any contractual
commitments associated with them. Investments in AIP held through Levco GP, are
recorded based upon the equity method of accounting. This investment amount
equals the sum total of Levco GP's capital accounts, including incentive
allocations, in the AIP. Each AIP values their underlying investments in
accordance with policies as described in each of their audited financial
statements and underlying offering memoranda. It is the Company's general
practice to withdraw the incentive allocations earned from the AIP within three
months after the fiscal year end. Levco GP has general partner liability with
respect to its interest in each of the AIP and has no assets in the AIP other
than its interest in these partnerships.

INCOME TAXES

The Company accounts for income taxes under the liability method prescribed
by Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for
Income Taxes." Deferred tax assets and liabilities are recognized for the future
tax consequences attributable to the differences between the financial statement
carrying amount of existing assets and liabilities and their respective tax
basis. Future tax benefits are recognized only to the extent that realization of
such benefits is more likely than not to occur.

INTANGIBLE ASSETS

The cost in excess of net assets of Levco acquired by BKF in June 1996 is
reflected as goodwill, investment advisory contracts, and employment contracts
(which have been fully amortized) in the Consolidated Statements of Financial
Condition. Through December 31, 2001, goodwill was amortized straight line over
15 years. Effective January 1, 2002 the Company adopted SFAS No. 142, "Goodwill
and Other Intangible Assets". Under the new rules, goodwill will no longer be
amortized but is subject to an impairment test at least annually or when
indicators of potential impairment exist in accordance with SFAS No. 142. Other
intangible assets with finite lives will continue to be amortized over their
useful lives.

EARNINGS PER SHARE

Basic (loss) per share is calculated by dividing net (loss) by the weighted
average number of common shares outstanding during the period. Diluted (loss)
per share is computed by dividing net (loss) by the total of the weighted
average number of shares of common stock outstanding and common stock
equivalents. Diluted (loss) per share is computed using the treasury stock
method.

5

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

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

In calculating diluted (loss) per share for the three months ended March
31, 2003 and 2002, common stock equivalents of 2,068,311 and 1,490,922,
respectively, were excluded due to their anti-dilutive effect on the
calculations.

STOCK-BASED COMPENSATION

The Company follows SFAS No. 123, "Accounting for Stock-Based
Compensation," and has adopted the intrinsic value method under APB Opinion No.
25, "Accounting for Stock Issued to Employees," for all arrangements under which
employees receive shares of stock or other equity instruments of the Company, or
if the Company incurs liabilities to employees in amounts based on the price of
its stock. Under APB Opinion No. 25, no compensation costs were recognized
relating to the option grants because the exercise prices of the options awarded
were equal to the fair market price of the common stock on the dates of the
grants.

In December 2002, the FASB Issued SFAS No. 148, "Accounting for Stock-Based
Compensation -- Transition and Disclosure, an amendment of FASB Statement No.
123." SFAS No. 148 provides alternative methods of transition for a voluntary
change to the fair value based method of accounting for stock-based employee
compensation and amends the disclosure requirements of SFAS No. 123 to require
prominent disclosures about the method of accounting for stock-based
compensation. The Company has elected to apply the disclosure provisions of SFAS
No. 123. See note 6 for 2003 RSU activity.

6

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

The following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions of SFAS
No. 123 (dollar amounts in thousands, except per share amounts):

RECENT ACCOUNTING DEVELOPMENTS

Consolidation

In January 2003, the FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities." FIN No. 46 addresses the application of Accounting Research
Bulletin No. 51, "Consolidated Financial Statements," to variable interest
entities ("VIE"). The interpretation provides a framework for determining
whether an entity should be evaluated for consolidation based on voting
interests or significant financial support provided to the entity ("variable
interests"). FIN 46 generally would require that the assets, liabilities and
results of operations of a VIE be consolidated into the financial statements of
the enterprise that is the primary beneficiary.

An entity is classified as a VIE if total equity is not sufficient to (a)
permit the entity to finance its activities without additional subordinated
financial support or its equity investors lack the direct or indirect ability to
make decisions about an entity's activities through voting rights, (b) absorb
the expected losses of the entity if they occur or (c) receive the expected
residual returns of the entity if they occur. Once an entity is determined to be
a VIE, its assets, liabilities and results of operations should be consolidated
with those of its primary beneficiary. The primary beneficiary of a VIE is the
entity which either will absorb a majority of the VIE's expected losses or has
the right to receive a majority of the VIE's expected residual returns. The
expected losses and residual returns of a VIE include expected variability in
its net income or loss, fees to decision makers and fees to guarantors of
substantially all VIE assets or liabilities.

A public enterprise with a variable interest in a VIE created before
January 31, 2003, shall apply FIN No. 46 to that VIE as of the beginning of the
first interim or annual reporting period beginning after June 15, 2003.
Additionally, if it is reasonably possible that an enterprise will consolidate
or disclose information about a VIE when the guidance becomes effective, there
are several disclosure requirements effective for all financial statements
issued after January 31, 2003.

Management has not completed its assessment of this interpretation's impact
on its consolidated financial statements, but does not believe that the Company
is the primary beneficiary of any VIEs. However, once

7

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

management completes its assessment, if it is determined that the Company is the
primary beneficiary of these VIEs, the Company will be required to consolidate
the assets, liabilities, and results of operations, with minority interest
recorded for the ownership share applicable to other investors, of the entities
upon the adoption of FIN 46, and such presentation would have a significant
impact on the Company's consolidated financial statements. However, such
treatment would not change the results of operations.

2. OFF-BALANCE SHEET RISK

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

3. INVESTMENT ADVISORY AND INCENTIVE FEES RECEIVABLE

Included in investment advisory and incentive fees receivable are
approximately $4.5 million and $2.9 million of accrued incentive fees as of
March 31, 2003 and December 31, 2002, respectively, for which the full contract
measurement period has not been reached. The Company has provided for the
applicable expenses relating to this revenue. If the accrued incentive fees are
not ultimately realized, a substantial portion of the related accrued expenses
will be reversed.

4. INVESTMENTS IN AFFILIATED INVESTMENT PARTNERSHIPS AND RELATED REVENUE

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

Included in investments in AIP at March 31, 2003 are accrued but unearned
incentive allocations approximating $1.9 million and $7.5 million of earned
incentive allocations at December 31, 2002.

Included in the Company's incentive fees and general partner incentive
allocations are approximately $1.5 million and $0.8 million payable directly to
employee owned and controlled entities ("Employee Entities") for the three
months ended March 31, 2003 and 2002, respectively. These amounts are included
in the Company's carrying value of the AIP at the end of the applicable period.
These Employee Entities, which serve as non-managing general partners of several
AIP, also bear the liability for all compensation expense relating to the
allocated revenue, amounting to approximately $1.5 million and $0.8 million for
the three months ended March 31, 2003 and 2002, respectively. These amounts are
included in the Consolidated Statement of Operations.

8

BKF CAPITAL GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)

The Company accrued investment advisory fees and incentive allocations/fees
from affiliated domestic investment partnerships and affiliated offshore
investment vehicles of approximately $11.0 million and $5.5 million for the
three months ended March 31, 2003, and 2002, respectively.

Included in investment advisory and incentive fees receivable at March 31,
2003 and December 31, 2002 are $2.1 million and $2.7 million, respectively, of
advisory fees from AIP and sponsored offshore vehicles. Also included in
investment advisory and incentive fees receivable are $6.8 million and $13.1
million of incentive fees from sponsored offshore investment vehicles (similar
to several domestic AIP) at March 31, 2003 and December 31, 2002, respectively.

5. INCOME TAXES

The Company's provision for income taxes differs from the amount of income
tax determined by applying the applicable U.S. federal statutory income tax rate
principally due to state and local taxes and non-deductible amortization. The
Company has determined that the amortization expense on intangible assets is
non-deductible since the purchase method of accounting has been applied
retroactive to June 1996.

Deferred tax assets arise from the future tax benefit on deferred and
non-cash compensation, unrealized losses on investments, depreciation and
utilization of capital losses. Deferred tax liabilities arise from deferred
revenues, unrealized gains on investments, and state and local taxes.

6. NON-CASH TRANSACTIONS (INCLUDING RESTRICTED STOCK UNITS ("RSU") ACTIVITY)

On December 11, 2002 the Company issued a tender offer to exchange 333,308
outstanding options for RSU, on a three for one exchange basis. As of January
10, 2003 the tender offer was complete, with a total of 111,105 RSU being
granted in exchange for the options tendered. The RSU will vest in two annual
installments with fifty percent (50%) vesting on December 31, 2003 and fifty
percent (50%) vesting on December 31, 2004. The Company will recognize $2.0
million of compensation expense related to the RSU over the two-year vesting
period.

In January 2003, the Company granted 10,500 RSU to non-employee directors
of the Company with a value of approximately $192,000. This amount will be used
to reduce cash payments for Board of Directors and Committee meetings.

In addition, certain executive officers of the Company, who are subject to
performance based criteria with regard to their 2002 compensation, and several
employees were granted 347,365 RSU as of March 2003 with a value of
approximately $5.7 million.

After giving effect for the tender offer, director RSU grants, and the
March 2003 RSU grant the Company has approximately 390,000 shares available for
future grants under the Incentive Compensation plan.

In January 2002, the Company granted a total of $168,213 RSU to employees
with a value of approximately $4.7 million.

9

PART I. FINANCIAL INFORMATION

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INTRODUCTION

BKF Capital Group, Inc. ("BKF") operates entirely through John A. Levin &
Co., Inc., an investment adviser registered with the U.S. Securities and
Exchange Commission. The investment adviser is a wholly owned subsidiary of
Levin Management Co., Inc., which in turn is a wholly owned subsidiary of BKF.
Levin Management Co., Inc. and its subsidiaries are referred to collectively as
"Levco." Levco specializes in managing equity portfolios for institutional and
individual investors. Most accounts are managed pursuant to value equity
strategies; Levco also offers a range of alternative investment products as well
as other more specialized investment programs. Most clients are based in the
United States, though a significant portion of investors in the alternative
investment products are located outside the United States.

Levco acts as the managing general partner of a number of investment
partnerships and also acts as an adviser to private investment vehicles
organized outside the United States.

With respect to accounts managed pursuant to its value equity strategies,
Levco generally receives advisory fees based on a percentage of the market value
of assets under management, including market appreciation or depreciation and
client contributions and withdrawals. In some cases, Levco receives
performance-based fees from accounts pursuing value equity strategies. With
respect to private investment vehicles and separate accounts managed pursuant to
similar strategies, Levco is generally entitled to receive both a fixed
management fee based on a percentage of the assets under management and a share
of net profits.

Levco obtains some of its clients for its large cap value products through
wrap fee programs sponsored by major financial services companies. In these
programs, clients pay the sponsoring broker an asset-based fee that covers
brokerage commissions, advisory services, custodial fees, and other reporting
and administrative services. Investors are able to select Levco from among a
limited number of managers participating in the program, and Levco receives a
portion of the asset-based fee paid by the clients who select Levco to manage
their accounts through the program.

At March 31, 2003, assets under management were $10.65 billion, down from
$14.93 billion a year earlier. Following is a comparison of assets under
management (in millions) as defined by product and client type:

Levco also has a wholly-owned broker-dealer subsidiary that clears through
Correspondent Services Corporation, a UBS/PaineWebber company, on a fully
disclosed basis. Generally, the customers of the broker-dealer subsidiary are
advisory clients of Levco, and the trades executed through the broker-dealer are
generally placed by Levco in its capacity as investment adviser.

10

RISK FACTORS

The following risks, among others, sometimes have affected, and in the
future could affect, BKF's business, financial condition or results of
operations. The risks described below are not the only ones facing BKF.
Additional risks not presently known to BKF or that BKF currently deems
immaterial may also impact its business.

LEVCO IS DEPENDENT ON KEY PERSONNEL

Levco is largely dependent on the efforts of its senior investment
professionals managing the value equity strategies and the event driven and
short-biased products. Levco is also dependent on the efforts of Mr. John A.
Levin, the chairman and chief executive officer of BKF. The loss of the services
of key investment personnel, including Mr. Levin, could have a material adverse
effect on Levco because it could jeopardize its relationships with clients and
result in the loss of those accounts. Levco's key investment personnel,
including Mr. Levin, are not subject to employment contracts.

Levco's future success depends on its ability to retain and attract
qualified personnel to conduct its investment management business. To the extent
that Levco further diversifies its products and strategies, BKF anticipates that
it will be necessary for Levco to add portfolio managers and investment
analysts. No assurance can be given that Levco will succeed in its efforts to
recruit and retain the required personnel. Because of its relatively smaller
size, Levco may have relatively fewer resources with which to recruit and retain
personnel. The loss of key personnel or the inability to recruit and retain
qualified portfolio managers, business and marketing personnel could have a
material adverse effect on Levco's business.

In December 1998, BKF adopted an incentive compensation plan to give Levco
the ability to attract and retain talented professionals with equity-based and
cash compensation. Determinations with regard to the implementation of this plan
are made by the Compensation Committee of the board of directors of BKF on a
regular basis. Because BKF is a relatively small public company, the value of
the equity awards that may be offered to professionals may be limited relative
to what competitors may offer. If the price of BKF stock decreases, no assurance
can be given that the equity-based compensation will serve its purpose to
attract and retain talented professionals.

LEVCO IS DEPENDENT ON A LIMITED NUMBER OF INVESTMENT PRODUCTS

Levco currently derives most of its revenues from three particular
investment products -- a large cap value strategy, an event-driven alternative
investment product and a short-biased alternative investment product. While the
large cap value strategy and the short-biased alternative investment products
may often perform differently in a given investment environment, adverse
developments with regard to any of these products could have a material adverse
effect on Levco's business.

A DECLINE IN THE PERFORMANCE OF THE SECURITIES MARKETS COULD HAVE AN ADVERSE
EFFECT ON LEVCO'S REVENUES

Levco's operations are affected by many economic factors, including the
performance of the securities markets. Declines in the securities markets, in
general, and the equity markets, in particular, would likely reduce Levco's
assets under management and consequently reduce its revenues. In addition, any
continuing decline in the equity markets, failure of these markets to sustain
their prior rates of growth, or continued volatility in these markets could
result in investors' withdrawing from the equity markets or decreasing their
rate of investment, either of which would likely adversely affect Levco. Levco's
rates of growth in assets under management and revenues have varied from year to
year, and there can be no assurance that the growth rates sustained in the past
will continue. Levco is generally a "value" manager, and a general decline in
the performance of "value" securities could have an adverse effect on Levco's
revenues. After April 2000, the equity markets suffered their longest and most
significant decline since the 1973-1974 period.

11

POOR INVESTMENT PERFORMANCE COULD ADVERSELY AFFECT LEVCO'S FINANCIAL CONDITION

Success in the investment management industry depends largely on investment
performance. Good performance generally stimulates sales of services and
investment products and tends to keep withdrawals and redemptions low. This
generates higher management fees, which are based on the amount of assets under
management and sometimes on investment performance. If Levco experiences poor
performance, this will likely result in decreased sales, decreased assets under
management and the loss of accounts, with corresponding decreases in revenue.

Levco also offers event-driven and short-biased products and other
alternative investment strategies. The failure to implement these strategies
effectively could likewise impact Levco's revenues.

ADVERSE DEVELOPMENTS WITH REGARD TO SIGNIFICANT CUSTOMERS OR RELATIONSHIPS
COULD ADVERSELY AFFECT LEVCO'S REVENUES

As of March 31, 2003, Levco had approximately 300 customers (counting as
single customers each wrap fee program and related family and institutional
accounts and excluding proprietary pooled investment vehicles and other accounts
following alternative investment strategies), of which the ten largest customers
generated approximately $4.67 million of revenues for Levco in the first quarter
of 2003 (including incentive fees), or approximately 22% of BKF's total
revenues.

The five largest customers (excluding proprietary pooled investment
vehicles and other accounts following alternative investment strategies)
accounted for approximately 44% of all asset-based investment advisory fees
earned in the first quarter of 2003. The loss of any of these customers could
have an adverse effect on BKF's revenues.

In the institutional marketplace, consultants play a key role in selecting
investment managers for their clients. In the event that a consultant advising
current clients of Levco takes a negative view of Levco, Levco could lose a
number of accounts related to that consultant.

A DECREASE IN LEVCO'S MANAGEMENT FEES, THE CANCELLATION OF INVESTMENT
MANAGEMENT AGREEMENTS OR POOR INVESTMENT PERFORMANCE BY THE LEVCO PRIVATE
INVESTMENT FUNDS COULD ADVERSELY AFFECT LEVCO'S PROFITS

Management Fees. Some segments of the investment management industry have
experienced a trend toward lower management fees. Levco must maintain a level of
investment returns and service that is acceptable to clients given the fees they
pay. No assurance can be given that Levco will be able to maintain its current
fee structure or client base. Reduction of the fees for new or existing clients
could have an adverse impact on Levco's profits.

Cancellation of Investment Management Agreements. It is expected that
Levco will derive almost all of its revenue from investment management
agreements. For investment companies, a majority of the disinterested members of
each fund's board must approve these agreements at least annually and the
agreements are terminable without penalty on 60 days' notice. The agreements
with Levco's separately-managed account clients generally are subject to
termination by the client without penalty and with little or no notice. Any
failure to renew, or termination of, a significant number of these agreements
could have an adverse effect on Levco.

Poor Investment Performance of the Private Investment Funds. BKF derives
revenue from incentive fees and general partner incentive allocations earned
with respect to its proprietary unregistered investment funds. Stronger positive
performance by these funds generates higher incentive fees and incentive
allocations because those fees and allocations are based on the performance of
the assets under management. On the other hand, relatively poor performance will
result in lower or no incentive fees or allocations, and will tend to lead to
decreased assets under management and the loss of accounts, with corresponding
decreases in revenue.

12

LEVCO IS A RELATIVELY SMALL PUBLIC COMPANY IN A HIGHLY COMPETITIVE BUSINESS

Levco competes with a large number of domestic and foreign investment
management firms, commercial banks, insurance companies, broker-dealers and
other firms offering comparable investment services. Many of the financial
services companies with which Levco competes have greater resources and assets
under management than Levco does and offer a broader array of investment
products and services.

Management believes that the most important factors affecting Levco's
ability to attract and retain clients are the abilities, performance records and
reputations of its portfolio managers, the ability to hire and retain key
investment personnel, the attractiveness of investment strategies to potential
investors and competitive fees and investor service. Levco's ability to increase
and retain client assets could be adversely affected if client accounts
underperform client expectations or if key investment personnel leave Levco.
Levco's ability to compete with other investment management firms also depends,
in part, on the relative attractiveness of its investment philosophies and
methods under prevailing market conditions. The absence of significant barriers
to entry by new investment management firms in the institutional managed
accounts business increases competitive pressure. Since Levco is a relatively
smaller asset management company, changes in customers, personnel and products
and other business developments may have a greater impact on Levco than they
would have on larger, more diversified asset management companies.

LEVCO IS DEPENDENT ON INFORMATION SYSTEMS AND ADMINISTRATIVE, BACK-OFFICE AND
TRADE EXECUTION FUNCTIONS

Levco is highly dependent on information systems and technology and
depends, to a great extent, on third parties who are responsible for managing,
maintaining and updating these systems. No assurance can be given that Levco's
current systems will continue to be able to accommodate its growth or that the
costs of its outsourcing arrangements will not increase. The failure to
accommodate growth or an increase in costs could have an adverse effect on
Levco.

Success in the investment management industry also depends on the ability
of an investment manager, and third parties with whom the investment manager
contracts, to successfully perform administrative, back-office and trade
execution functions. A failure by Levco or a third party contracted by Levco to
perform such functions could adversely impact Levco's revenues.

CONFLICTS OF INTEREST MAY ARISE AND ADVERSELY AFFECT LEVCO

From time to time, Levco's officers, directors and employees may own
securities which one or more of its clients also own. Although Levco maintains
internal policies regarding individual investments by its officers, directors
and employees which require them to report securities transactions and restrict
certain transactions so as to minimize possible conflicts of interest, possible
conflicts of interest may arise that could have adverse effects on Levco.
Similarly, conflicting investment positions may develop among various investment
strategies managed by Levco. Although Levco has internal policies in place to
address such situations, such conflicts could have adverse effects on Levco.

GOVERNMENT REGULATIONS MAY ADVERSELY AFFECT LEVCO'S BUSINESS

Virtually all aspects of Levco's business are subject to various federal
and state laws and regulations. Levco is registered with the Securities and
Exchange Commission under the Investment Advisers Act of 1940, as amended. The
Investment Advisers Act imposes numerous obligations on registered investment
advisers, including fiduciary, recordkeeping, operational and disclosure
obligations. John A. Levin & Co. is also registered with the Commodity Futures
Trading Commission as a commodity trading advisor and a commodity pool operator,
and Levco GP, Inc. is registered with that agency as a commodity pool operator.
John A. Levin & Co. and Levco GP are members of the National Futures
Association. LEVCO Securities, Inc. is registered as a broker-dealer under the
Securities Exchange Act of 1934, is a member of the National Association of
Securities Dealers, Inc. and is a member of the Municipal Securities Rulemaking
Board. In addition, Levco is subject to the Employee Retirement Income Security
Act of 1974 and its regulations insofar as it is a "fiduciary" with respect to
certain clients.

13

These laws and regulations generally grant supervisory agencies and bodies
broad administrative powers, including the power to limit or restrict Levco from
conducting its business if it fails to comply with these laws and regulations.
If Levco fails to comply with these laws and regulations, these agencies may
impose sanctions, including the suspension of individual employees, limitations
on business activities for specified periods of time, revocation of
registration, and other censures and fines. Even if in compliance with all laws
and regulations, changes in these laws or regulations could adversely affect
Levco's profitability and operations and its ability to conduct certain
businesses in which it is currently engaged.

TERRORIST ATTACKS COULD ADVERSELY AFFECT OUR COMPANY

Terrorist attacks, including biological or chemical weapons attacks, and
the response to such terrorist attacks, could have a significant impact on New
York City, the local economy, the United States economy, the global economy, and
global financial markets. It is possible that the above factors could have a
material adverse effect on our business, especially given the fact that all
operations are conducted from a single location in New York City and BKF has
incurred lease obligations with regard to this location through September 2011.
BKF does have a business continuity facility in Stamford, Connecticut
encompassing approximately 5,000 square feet.

Certain statements under this caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" constitute "forward-looking
statements" under the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"). See "Part II -- Other Information."

RESULTS OF OPERATIONS

The following discussion and analysis of the results of operations is based
on the Consolidated Statements of Financial Condition and Consolidated
Statements of Operations for BKF Capital Group, Inc. and Subsidiaries.

THREE MONTHS ENDED MARCH 31, 2003 AS COMPARED TO THREE MONTHS ENDED MARCH 31,
2002

Revenues

Total revenues for the first quarter of 2003 were $21.21 million,
reflecting an increase of 0.3% from $21.13 million in revenues in the same
period in 2002. This increase was attributable to a 102.1% increase in incentive
fees and general partner incentive allocations to $6.87 million in the first
quarter of 2003 from $3.40 million in the same period in 2002. Incentive fees
and general partner allocations are accrued on a quarterly basis but are
primarily determined and billed or allocated, as the case may be, at the end of
the applicable contract year or upon investor withdrawal. Such accruals may be
reversed prior to being earned or allocated as the result of investment
performance. The increase in incentive fees and general partner incentive
allocations was primarily attributable to an increase in the performance and
assets under management of certain accounts following event-driven investment
strategies, which was partially offset by the reversal of an accrual made in
2002 with regard to an investment vehicle following a short-biased strategy. The
increase in incentive fees and general partner incentive allocations was mostly
offset by an 18.3% decrease in asset-based investment advisory fees to $13.85
million in the first quarter of 2003 from $16.96 million in the same period in
2002. This decrease in asset-based advisory fees is primarily attributable to
the decrease in assets managed (as the result of withdrawals and asset
depreciation) for value equity accounts.

Management believes that with regard to the value equity strategies, their
underperformance relative to their benchmarks in 2002 may adversely affect BKF's
ability to retain existing accounts and attract new accounts in 2003 with
respect to its value equity products. In the first quarter of 2003, a leadership
change was made with regard to the management of the value equity products. In
April 2003, Levco was notified that it would no longer be able to participate in
a wrap fee program following June 20, 2003, though clients could choose to
retain Levco following such date in a different program offered by the sponsor.
As of March 31, 2003, assets under management in such wrap fee program were
approximately $222 million, and Levco managed an additional $193 million in
accounts related to the same sponsor.

14

Net commission income generated by the broker-dealer business declined
36.8% to $493,000 in the first quarter of 2003 from $780,000 in the first
quarter of 2002, primarily as the result of a decrease in the number of accounts
at the broker-dealer and a decrease in commission rates.

Expenses

Total expenses for the first quarter of 2003 were $22.40 million,
reflecting an increase of 7.9% from $20.76 million in expenses in the same
period in 2002. Total expenses excluding amortization of finite life intangibles
were $20.65 million in the first quarter of 2003, reflecting an increase of 8.7%
from $19.00 million for the first quarter of 2002.

Compensation expense was $15.97 million, reflecting an increase of 10.3%
from $14.48 million in the first quarter of 2002. This increase in compensation
expense is primarily attributable to restricted stock units granted in 2002 and
2003 (including restricted stock units granted in exchange for options -- See
"Part II, Item 2 -- Changes in Securities and Use of Proceeds"), an increase in
the percentage of revenues attributable to alternative investment strategies,
and the expansion of the investment teams involved in managing alternative
investment strategies. Compensation with regard to alternative investment
products is determined on a different basis than compensation with regard to
value equity products. Compensation expense accruals were made in accordance
with compensation guidelines most recently approved by the board of directors in
2001, but in view of current market and business conditions, it is anticipated
that such compensation guidelines will be reviewed. Such review could result in
changes in the manner in which bonus compensation is determined in 2003.

Occupancy and equipment rental was $1.64 million in the first quarter of
2003, reflecting a 15.7% increase from $1.42 million in the same period in 2002.
This increase is attributable to (i) escalations in the lease for the facilities
at One Rockefeller Plaza, (ii) real estate tax increases, and (iii) the lease
for a business continuity facility in Stamford, Connecticut that commenced in
September 2002. In light of current conditions, BKF is currently seeking to
relieve itself of its obligations with respect to a portion of its facilities at
One Rockefeller Plaza. This may result in a significant loss based on the
difference between current rental obligations and current market rates.

Other operating expenses were $3.03 million in the first quarter of 2003,
reflecting a 2.1% decrease from $3.10 million in the same period in 2002. The
decrease was primarily attributable to decreases in technology and other
consulting fees and telecommunications and portfolio management software expense
(which decreases as the number of wrap accounts decrease). These decreases were
offset by increases in professional fees relating to third party marketers and
increased insurance premiums.

Operating Income/Loss

Operating loss for the first quarter of 2003 was $1.20 million, as compared
to operating income of $378,000 in the same period in 2002, as the increase in
expenses exceeded the slight increase in revenues. Operating income excluding
the amortization of finite life intangibles was $557,000 in the first quarter of
2003, reflecting a decrease of 73.8% from $2.13 million in the same period in
2002.

Gain (Loss) on Investments

In the first quarter of 2003, BKF had a net realized and unrealized gain on
investments of $213,000 primarily derived from its seed capital investments in a
range of long only and alternative investment strategies. BKF had a net realized
and unrealized gain on investments of $104,000 in the first quarter of 2002.

Interest and Dividend Income

Interest and dividend income in the first quarter of 2003 was $84,000,
reflecting a 45.8% decrease from $155,000 in the same period in 2002. This
decrease is primarily attributable to a decrease in interest rates.

Income Taxes

Total income tax expense was $391,000 in the first quarter of 2003,
reflecting a decrease of 62.7% from $1.05 million for the same period in 2002.
This decrease primarily reflects the decrease in income before taxes

15

(as determined without a deduction for the amortization of intangibles). An
effective tax rate of 45.8% (before amortization) was used to make the
determination with respect to the provision for taxes at March 31, 2003, while
an effective tax rate of 43.9% (before amortization) was used to calculate the
provision for taxes at March 31, 2002. The differential in tax rates is
primarily due to differences in state allocations.

LIQUIDITY AND CAPITAL RESOURCES

BKF's current assets as of March 31, 2003 consist primarily of cash, short
term investments and investment advisory and incentive fees receivable. While
BKF's daily business operations are not generally capital intensive, BKF
utilizes capital to develop and seed new investment products. The development of
new products is an important element in BKF's business plan, and such seed
capital investments may require substantial financial resources. Due to its
relatively small size, BKF may consider a number of options to obtain such seed
capital. BKF has historically met its cash and liquidity needs through cash
generated by operating activities. At March 31, 2003, BKF had cash and cash
equivalents of $36.10 million, compared to $39.10 million at December 31, 2002.
This decrease primarily reflects the payment of cash bonuses in 2003 which were
accrued in 2002, which payment was partially offset by the collection of
receivables and the annual withdrawal of general partner incentive allocations
from affiliated investment partnerships. The decrease in investment advisory and
incentive fees receivable from $24.18 million at December 31, 2002 to $16.21
million at March 31, 2003 primarily reflects the receipt of incentive fees
earned in 2002. The decrease in investments in affiliated investment
partnerships from $26.15 million at December 31, 2002 to $14.33 million at March
31, 2003 primarily reflects (i) the withdrawal of general partner incentive
allocations from the partnerships earned with respect to 2002, which was
partially offset by the accrual of incentive allocations for the three month
period ended March 31, 2003, and (ii) the termination of two alternative
investment vehicles in the first quarter of 2003. Incentive allocations
typically are withdrawn within three months following the end of the calendar
year to pay compensation and other expenses.

Accrued expenses were $3.07 million at March 31, 2003, as compared to $5.09
million at December 31, 2002. Such expenses were comprised primarily of accruals
for third party marketing fees. Such fees are based on a percentage of accrued
revenue, and such accruals may be reversed based on the subsequent investment
performance of the relevant accounts through the end of the applicable
performance measurement period. Expenses accrued during the first quarter were
offset primarily by the payment of accrued third party marketing fees.

Accrued bonuses were $10.32 million at March 31, 2003, as compared to
$31.51 million at December 31, 2002, reflecting the payment of 2002 bonuses and
the accrual for 2003 bonuses.

Based upon BKF's current level of operations and anticipated growth, BKF
expects that cash flows from operating activities will be sufficient to finance
its working capital needs for the foreseeable future. Except for its lease
commitments, which are discussed in Note 9 in the Notes to Consolidated
Financial Statements in BKF's Annual Report on Form 10-K for the year ended
December 31, 2002, BKF has no material commitments for capital expenditures. BKF
does anticipate incurring costs in connection with improving its facilities
currently under lease, which costs will be amortized over the life of the lease.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Since BKF's revenues are largely driven by the market value of Levco's
assets under management, these revenues are exposed to fluctuations in the
equity markets. Management fees for most accounts are determined based on the
market value of the account on the last day of the quarter, so any significant
increases or decreases in market value occurring on or shortly before the last
day of a quarter may materially impact revenues of the current quarter or the
following quarter (with regard to wrap program accounts). Furthermore, since
Levco manages most of its assets in a large cap value style, a general decline
in the performance of value stocks could have an adverse impact on Levco's
revenues. Similarly, a lack of opportunity to implement, or a failure to
successfully implement, Levco's event-driven and short-biased strategies could
reduce performance based incentive fees and allocations and thereby negatively
impact BKF's revenues. Because BKF is primarily in the asset management business
and manages equity portfolios, changes in interest rates, foreign currency

16

exchange rates, commodity prices or other market rates or prices impact BKF only
to the extent they are reflected in the equity markets.

ITEM 4. DISCLOSURE CONTROLS AND PROCEDURES

As of May 13, 2003, an evaluation was performed under the supervision and
with the participation of BKF's management, including the CEO and CFO, of the
effectiveness of the design and operation of BKF's disclosure controls and
procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities
Exchange Act of 1934, as amended). Based on that evaluation, BKF's management,
including the CEO and CFO, concluded that BKF's disclosure controls and
procedures were effective as of May 13, 2003. There have been no significant
changes in BKF's internal controls or in other factors that could significantly
affect internal controls since May 13, 2003.

It should be noted that any system of controls, however well designed and
operated, can provide only reasonable, and not absolute, assurance that the
objectives of the system are met. In addition, the design of any control system
is based in part upon certain assumptions about the likelihood of future events.
Because of these and other inherent limitations of control systems, there can be
no assurance that any design will succeed in achieving its stated goals under
all potential future conditions, regardless of how remote.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

On December 11, 2002, the Company made an offer (the "Offer") to allow
certain employees of the Company to exchange options to purchase shares of
common stock, par value $1.00 per share of the Company (the "Common Stock"), in
exchange for shares of deferred stock of the Company ("restricted stock units"),
upon the terms and subject to the conditions set forth in the Offer to Purchase,
dated December 11, 2002 (the "Offer to Purchase").

The Offer expired at 11:59 p.m., Eastern Standard Time, on January 10,
2003. On that date, the Company accepted for exchange options to purchase
333,308 shares of Common Stock, representing 100% of the options that were
eligible to be tendered in the Offer. Pursuant to the terms of the Offer, the
Company granted 111,105 restricted stock units in exchange for the tendered
options. No underwriters were involved in the Offer.

The restricted stock units are evidenced by Deferred Stock Award Agreements
between the holders and the Company and are subject to the BKF Capital Group,
Inc. 1998 Incentive Compensation Plan. Each restricted stock unit represents the
right to obtain one share of Common Stock.

So long as holders of restricted stock units remain employed with Company,
the restricted stock units will vest as follows: (a) 50% will vest on December
31, 2003, and (b) 50% will vest on December 31, 2004. Vesting will be
accelerated upon (a) the holder's death, (b) the holder's termination due to
"Disability" (as defined in the Deferred Stock Award Agreement), or (c) a Change
in Control (as defined in the Deferred Stock Award Agreement). Vesting will also
be accelerated upon the holder's termination without "Cause" (as defined in the
Deferred Stock Award Agreement).

Shares of Common Stock underlying the restricted stock units will be
deliverable at the earliest of (a) a Change in Control (as defined in the
Deferred Stock Award Agreement) (b) the holder's termination due to Disability
(as defined in the Deferred Stock Award Agreement), (c) the holder's death, (d)
December 31, 2004, and (e) any earlier date determined by the Company's
Compensation Committee. Pursuant to the BKF Capital Group, Inc., Deferred
Compensation Plan, recipients of restricted stock units have the option to defer
the scheduled delivery of shares of Common stock underlying restricted stock
units.

17

Unless the Company's Compensation Committee determines otherwise, any
unvested restricted stock units and any Common Stock underlying restricted stock
units that have vested, will be forfeited if, prior to the delivery date, (a)
the holder engages in conduct specified in Section 4(b) of the Deferred Stock
Award Agreement, or (b) the holder fails to provide the representations and
certifications required under the Deferred Stock Award Agreement.

In making and consummating the Offer, the Company relied upon the exemption
provided by Section 3(a)(9) of the Securities Act of 1933, as amended. The
restricted stock units were issued by the Company to its existing security
holders in exchange for the Company's existing securities and no commission or
other remuneration was paid or given directly or indirectly for soliciting such
exchange.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None

ITEM 5. OTHER INFORMATION

This Quarterly Report on Form 10-Q contains certain statements that are not
historical facts, including, most importantly, information concerning possible
or assumed future results of operations of BKF and statements preceded by,
followed by or that include the words "may," "believes," "expects,"
"anticipates," or the negation thereof, or similar expressions, which constitute
"forward-looking statements" within the meaning of the Reform Act. For those
statements, BKF claims the protection of the safe harbor for forward-looking
statements contained in the Reform Act. These forward-looking statements are
based on BKF's current expectations and are susceptible to a number of risks,
uncertainties and other factors, including the risks specifically enumerated in
"Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations," and BKF's actual results, performance and achievements may
differ materially from any future results, performance or achievements expressed
or implied by such forward-looking statements. Such factors include the
following: retention and ability of qualified personnel; the performance of the
securities markets and of value stocks in particular; the investment performance
of client accounts; the retention of significant client and/or distribution
relationships; competition; the existence or absence of adverse publicity;
changes in business strategy; quality of management; availability, terms and
deployment of capital; business abilities and judgment of personnel; labor and
employee benefit costs; changes in, or failure to comply with, government
regulations; the costs and other effects of legal and administrative
proceedings; and other risks and uncertainties referred to in this document and
in BKF's other current and periodic filings with the Securities and Exchange
Commission, all of which are difficult or impossible to predict accurately and
many of which are beyond BKF's control. BKF will not undertake and specifically
declines any obligation to publicly release the result of any revisions which
may be made to any forward-looking statements to reflect events or circumstances
after the date of such statements or to reflect the occurrence of anticipated or
unanticipated events. In addition, it is BKF's policy generally not to make any
specific projections as to future earnings, and BKF does not endorse any
projections regarding future performance that may be made by third parties.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

99.1 Section 906 Certification of Chief Executive Officer

99.2 Section 906 Certification of Chief Financial Officer

(b) Reports on Form 8-K

None.

18

SIGNATURES

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

BKF CAPITAL GROUP, INC.

By: /s/ JOHN A. LEVIN
------------------------------------
John A. Levin
Chairman, Chief Executive Officer
and President

By: /s/ GLENN A. AIGEN
------------------------------------
Glenn A. Aigen
Senior Vice President and
Chief Financial Officer

Date: May 15, 2003

19

CHIEF EXECUTIVE OFFICER CERTIFICATION

I, John A. Levin, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BKF Capital
Group, Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
in being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

/s/ JOHN A. LEVIN
--------------------------------------
John A. Levin
Chief Executive Officer

Date: May 15, 2003

20

CHIEF FINANCIAL OFFICER CERTIFICATION

I, Glenn A. Aigen, certify that:

1. I have reviewed this quarterly report on Form 10-Q of BKF Capital
Group, Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances
under which such statements were made, not misleading with respect to
the period covered by this quarterly report;

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the registrant as of, and for, the periods presented in
this quarterly report;

4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and
have:

a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
in being prepared;

b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing of this
quarterly report (the "Evaluation Date"); and

c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;

5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons
performing the equivalent functions):

a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and

b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and

6. The registrant's other certifying officers and I have indicated in this
quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

/s/ GLENN A. AIGEN
--------------------------------------
Glenn A. Aigen
Chief Financial Officer

Date: May 15, 2003

21